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Comm 305: Managerial Accounting > chapter 4 from the book: process costing > Flashcards

chapter 4 from the book: process costing Flashcards

1
Q

why do companies use the process cost system?

A

to apply costs to similar products that are mass produced in a continuous way

used when there is a large volume of uniform, relatively homogenous product to produce

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2
Q

in the process cost system, is there the same amount of of overhead, material and labor for the entire run?

A

ye bruv

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3
Q

how are costs assigned in the process cost system?

A

they are tracked through a series of connected manufacturing processes or departments

no by individual jobs

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4
Q

what is the process cost flow?

A

DM + DL + MOH –> WIP department A

WIP department A –> WIP department B

WIP department B –> finished goods inventory

finished goods inventory –> COGS

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5
Q

what are the three ways that the job order costing and process costing are similar?

A
  1. the manufacturing cost elements (MOH, DL, DM)
  2. the accumulation of costs of material, labour, and overhead
  3. the flow of costs
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6
Q

explain the accumulation of costs of material, labour, and overhead that unites job order and process systems

A

raw materials are debited to raw material inventory

factory labour is debited to Factory Labor

manufacturing overhead costs are debited to Manufacturing Overhead

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7
Q

explain how the flow of costs are similar for the job order cost and process cost system

A

all raw material, factory labour, and overhead costs are assigned to the same accounts

what is mad different, are the methods of assigning costs

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8
Q

what are the main differences between job order costing and process costing?

A

the number of WIP accounts used

documents used to track costs

the point at which costs are controlled

unit cost calculations

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9
Q

how is the number of WIP different for job order costing and process costing?

A

In a job order cost system, only one WIP account is used

in the process costing system, several WIP accounts are used

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10
Q

how are the documents used to track costs different for job order costing and process costing?

A

In a job order cost system, costs are charged to individual costs and summarized in a job costs sheet

In the process cost system, costs are summarized in a production cost report for each department

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11
Q

how is the point at which costs are controlled different for job order costing and process costing?

A

In a job order cost system, the total cost is determined when the job is completed

in the process cost system, the total cost is determined at the end of a period time

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12
Q

how are unit cost calculations different for job order costing and process costing?

A

In a job order cost system, unit cost = total cost per job divided units produced for that job

in the process cost system, total manufacturing cost for the period divided by units produced in that period

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13
Q

operation costing

A

hybrid of process cost and job order cost system

the methods of manufacturing product remains the same

product could also be customized needing the job order cost system

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14
Q

journalize a purchase of raw materials

A

raw materials be debited to raw material inventory

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15
Q

journalize labour costs being incurred

A

debit to Factory Labour

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16
Q

journalize manufacturing overhead costs being incurred

A

debit to Manufacturing Overhead

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17
Q

can material requisition slips be used too in process cost system? to what extent and why?

A

yeee boyyy

used much less tho

used only for process instead of each job

so requisitions are for large quantities instead of large amounts of material

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18
Q

how do you journalize materials used?

A

WIP department A (debit)
WIP department B (etc) (debit)

                                  raw materials inventory (credit)
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19
Q

how do you journalize factory labour costs when they are assigned to production?

A

WIP department A (debit)
WIP department B (etc)(debit)

Factory Labor (credit)

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20
Q

how do you journalize overhead costs when they are assigned to production?

A

WIP department A (debit)
WIP department B (etc) (debit)

manufacturing overhead (credit)

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21
Q

what is a major difference with job order costing when allocating overhead and with finding a predetermined overhead rate?

A

in job order costing, mostly assigned to direct labor costs

in process costing, mostly assigned to machine hours

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22
Q

how do you journalize a transfer to the next department?

A

WIP department B (debit)

WIP department A (credit)

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23
Q

how do you journalize a transfer to the finished goods?

A

Finished goods inventory (debit)

WIP department B (credit)

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24
Q

how do you journalize a sale?

A

COGS (debit)

Finished goods inventory (credit)

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25
Q

what do equivalent units of production measure?

A

measure the work done during the period

expressed fully in completed units

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26
Q

why use equivalent units of production?

A

to determine the cost per unit of completed product

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27
Q

weighted average method of calculating equivalent units of production

A

considers the degree of completion (weighing ) of the units completed and transferred out of ending WIP

28
Q

conversation costs

A

sum of labor costs and overhead costs

29
Q

refined equivalent units of production - materials formula

A

units completed and transferred out (materials) + equivalent units of ending work in process (materials)

30
Q

refined equivalent units of production - conversion costs formula

A

units completed and transferred out (conversion costs) + equivalent units of ending work in process (conversion costs)

31
Q

how many production cost reports are reported under the process cost system?

A

one for each department

32
Q

a production cost report

A

the key document that management uses to understand the activities in a department

shows production quantity and cost data for that department

33
Q

what are the 4 steps to BE READY to complete a production cost report?

A
  1. calculate the physical unit flow
  2. calculate the equivalent units of production
  3. calculate the unit production costs
  4. prepare cost reconciliation schedule
34
Q

physical units

A

the actual units accounted for during the period, regardless of any work performed

35
Q

to keep track of the physical units during a period ¡, what is absolutely necessary?

A

to add the units started (or transferred) into production to the units in process at the beginning of the period

this amount is called units to be accounted for

36
Q

total units TO BE accounted for

A

adding the units started (or transferred) into production to the units in process at the beginning of the period

37
Q

total units accounted for

A

units transferred out during the period and and units in production at the end of the period

38
Q

what must be done after the physical flow is determined?

A

it is necessary to measure the equivalent units of the same department

39
Q

(this is a maybe)

what are the two calculations of equivalent units required?

A

for materials and for conversion costs

40
Q

what is ignored when calculation the equivalent units of. production using the weighted average method?

A

the beginning work in process

41
Q

what must be done after calculating the equivalent units production?

A

we can calculate the unit production costs

42
Q

unit production costs

A

cost expressed in form of equivalent units of production

43
Q

what are the unit costs calculated when equivalent units of production are different for materials and conversion costs?

A

three unit costs are calculated

  1. material costs
  2. conversion costs
  3. total manufacturing costs
44
Q

unit material cost calculation (weighted average)

A

(total material costs) / (equivalent units of material)

= Unit material costs

45
Q

unit conversion cost calculation (weighted average)

A

(total conversion costs) / (equivalent units of conversion)

= Unit conversion cost

46
Q

total manufacturing cost per unit (weighted average)

A

Unit material costs + Unit conversion cost

= total manufacturing cost per unit

47
Q

what is shown in the cost reconciliation schedule?

A

you plug in the total manufacturing cost per unit for the amount of units in the total costs accounted for

you will then see that the ending amount is the same as the total costs TO BE accounted for

48
Q

what are the 4 steps to complete a production cost report?

A
  1. prepare the physical unit schedule
  2. calculate the equivalent units
  3. calculate the unit costs
  4. prepare a cost reconciliation report
49
Q

how do production cost reports help managers evaluate overall profitability?

A

because you compare it to previous periods

compare it with competitors

compare it with expected selling price

50
Q

sequential processing facilities

A

goods are transferred from one department to another in sequence

requires an additional cost component called “transferred in”

51
Q

what is the completion factor of the transferred in cost component?

A

completion factor of always 100%

52
Q

how is the transferred-in cost component treated?

A

treated the same way as any other cost component in the calculations of the equivalent units of production and the cost per equivalent unit of production

53
Q

why do some companies prefer the fifo method of calculating equivalent units?

A

the fifo cost assumption usually matches the actual physical flow of goods

it is assumed that the beginning work in process is completed before new work is started

54
Q

under the fifo method, what is the sum of the equivalent units?

A
  1. work done to finish the units from the beginning work in process inventory
  2. work done to complete the units started into production during the period (units started and completed)
  3. work done, but only partially complete, in the units ending in work in process inventory
55
Q

how do you find the units started and completed under fifo?

A

units transferred out during the period - units in the beginning workmen process

56
Q

how do you find the work that needs to be done in order to finish the beginning work in process inventory?

A

you look at how many units have yet to be completed and that is the equivalent units of the beginning work in process

57
Q

how do you find the equivalent units of the ending work in process?

A

you find the equivalent units by looking at the percentage of units completed in the ending work in process

58
Q

are materials always added at the beginning of the production process?

A

nah boy

59
Q

what are the there unit costs calculated under the fifo method to find the unit production costs?

A

material costs

conversion costs

total manufacturing costs

60
Q

under the fifo method, the unit costs of production are based entirely on what?

A

on the production costs incurred in the month

this makes the costs at the beginning work in process not relevant

61
Q

why are the costs at the beginning work in process not relevant under fifo?

A

the unit costs of production are based entirely on the production costs incurred in the month

62
Q

unit material cost calculation (fifo)

A

(total material costs) / (equivalent units of materials)

= unit material costs

63
Q

unit conversion cost calculation (fifo)

A

(total conversion costs) / (equivalent units of conversion costs)

= unit conversion costs

64
Q

total manufacturing cost per unit (fifo)

A

unit material costs + unit conversion costs

65
Q

why is, conceptually, the fifo method better than the wighted average one?

A

because you can measure performances with that shit

provides current cost information

can establish more accurate pricing strategies

Comm 305: Managerial Accounting (32 decks)

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