Chapter 4: Process Cost Accounting Flashcards
Who typically uses process cost systems?
Companies mass-producing similar products continuously, like Refresco, Apotex, Saputo, and Agropur.
What is the main similarity between job-order and process cost systems?
Both track three manufacturing cost components: direct materials, direct labour, and manufacturing overhead.
How does the flow of costs differ between job-order and process cost systems?
In job-order, costs are assigned to individual jobs, while in process costing, they’re tracked through connected processes or departments.
What is a significant difference in work in process inventory accounts between the two systems?
Job-order uses one, process costing uses multiple.
How do unit cost calculations differ between job-order and process cost systems?
Job-order divides total cost per job by units produced; process costing divides total costs by equivalent units of production.
What is operations costing?
Operations costing is a hybrid cost system combining aspects of both process costing and job-order costing systems.
How is operations costing similar to process costing?
Operations costing is similar to process costing as both use standardized methods to manufacture a product.
Why might a company like Ford Motor Company of Canada use operations costing?
Operations costing allows for the use of the same assembly line for different materials and products, which is beneficial for manufacturing various vehicles.
What key decision tool is mentioned for costing systems?
Cost-benefit analysis is a decision tool that helps managers decide which costing system to use.
What is a major drawback of implementing a job-order cost system?
The major drawback is the high cost of accounting for each job individually.
When should job-order costing be used according to the action plan?
Job-order costing should be used when unit costs are high, volume is low, and products are unique.
When is process costing appropriate to use?
Process costing is appropriate when there is a large volume of relatively homogeneous products.
What are the three types of manufacturing costs assigned in a process cost system?
The three types of manufacturing costs are raw materials, factory labor, and manufacturing overhead.
How does the flow of costs in a process cost system work?
Costs are assigned to Work in Process Inventory for each department, then transferred to Finished Goods Inventory, and finally to Cost of Goods Sold upon sale.
How does the assignment of manufacturing costs in a process cost system differ from a job-order cost system?
In a process cost system, costs are assigned to processes rather than to specific jobs, and fewer requisitions are generally used because materials are used for processes rather than for specific jobs.
When are materials added in a process cost system?
Materials are usually added at the beginning of the process, but subsequent processes might add more materials at various points.
What is the major driver of overhead costs in continuous manufacturing operations?
Machine time used is a major driver of overhead costs in continuous manufacturing operations, not direct labor.
How are labor costs assigned in a process cost system?
Labor costs are assigned based on time tickets from payroll summaries or department’s payroll, and are allocated to the Work in Process Inventory of the respective departments.
What is the entry to record the transfer of completed units to finished goods?
The entry debits Finished Goods Inventory and credits Work in Process Inventory—Assembly for the cost of the completed units.
What is the journal entry for recording the cost of goods sold upon sale of finished goods?
The journal entry debits Cost of Goods Sold and credits Finished Goods Inventory for the recorded cost of the units sold.
What is the purpose of calculating equivalent units of production in a process cost system?
The purpose is to calculate the cost of partially completed goods by converting them into the amount of completed goods they represent.
How do you calculate the cost per full-time equivalent student?
The cost per full-time equivalent student is calculated by dividing the total cost of instruction by the number of full-time equivalent students.
What is the weighted-average method in the context of equivalent units of production?
The weighted-average method calculates equivalent units of production by considering the degree of completion of units completed and transferred out and the ending work in process inventory.
What does the equivalent unit of production formula account for?
The formula accounts for both the units completed and transferred out, and the work in process inventory at the end of a period.
