chapter 4 product and service costing - job shop production (individual and batch) (job costing and machine hour costing) and multi stage process costing (for mass and variant)

Question 1

in the third step of cost center accounting we have allocation of overhead costs, how do we use this for product and service costing ?

Answer 1

we use ovrehead cost and their percentages (rates, and we use direct costs from cost type accounting and add the correct overhead rate money amount to find the cost of the object in the end

Question 2

what three purposes product and service soting have that are similair to the purpose of cost accounting but without one thing

Answer 2

planning control documentation (without monitoring)

Question 3

example of how to use product costing for planning

Answer 3

plan production program, procurement decisions, sales prices

Question 4

how is control used in product costing

Answer 4

cost control, performance review (did the planned performance happend)

Question 5

how does documentation relate to product costing

Answer 5

inventory valuation , how valuable is the inventors

Question 6

what is the task of product and service costing

Answer 6

costs from production process are recorded and allocated to companys products.

Question 7

4 types of sales costing in industrial companeis

Answer 7

cash sales price = total costs + prfoit markup
target sales price cash sales price + discount
net list sales price = target sales price + rebate
gross list sales price = net list sales price + sales tax

Question 8

4 classification of cost objects

Answer 8

production stage (final or middle)
purpose ( to be sold or used by company)
production related connection ( non.- connected or joint or byproducts)
type of good ( tangible or intangible)

Question 9

which costing methods are used for individual and batch prodcutION?

Answer 9

job costing, machine hour costing

Question 10

what costing methods are used for variant and mass production?

Answer 10

process costing, equivalnece number method

Question 11

what is the difference in calucation procedure to find unit costs between invidual/series and variant/mass production

Answer 11

unit costs = job costs/ order volume for individual /series

unit costs = sum of costs per production department / production quantity for variant/mass

Question 12

for what type of production does job shop production apply ?

Answer 12

individual and batch

Question 13

what are the 4 methods for product and service costing for mass and batch production?

Answer 13

single stage process costing, multi stage process costing, equivalence method, joint and byproduct methods

Question 14

what is a job shop ?

Answer 14

small manufacturing system that handles custom / semi custom manufacuring process for small to medium size customer orders or batch jobs.
a job shop may have many different kinds of machines, allowing for flexibility for the type of job

Question 15

difference between job costing and process costing

Answer 15

Job costing involves the detailed accumulation of production costs attributable to specific units or groups of units. … Process costing involves the accumulation of costs for lengthy production runs involving products that are indistinguishable from each other

Question 16

how does single stage process costing work

Answer 16

total cost per unit = total costs of the period / produced quantity

(total costs being wages, operating materals, deprecations, SGA)

Question 17

when do you do multi stage process costing?

Answer 17

if manufacturing process meets different quality standards, (so at each production stage x amount get rejected) stock changes occur to varying degree or the products degree or completion differ (different levels of completion, like not put together but used all materials)

Question 18

what are primary step costs in the multi stage process costing?

Answer 18

those are the material, labor, material overhead, labor overhead costs for a single stage so production 1 or 2 or 3 or packaging stage

Question 19

what are costs of preliminary products in multi stage process costing?

Answer 19

those are the stage related unit costs per 1000 m squared (of the previous production stage) x the input quantity of this production stage

Question 20

how do you calculate the stage related unit costs in the second production step ?

Answer 20

you add the costs of the preliminary products and the primary step costs which gives you the total cost per stage.
then you divide the total costs per stage by the output quantity.

Question 21

how do unfinished intermediate products affect stage related unit costs ?

Answer 21

all subsequent production stages are affected

Question 22

do material costs or production costs change is the product is unfinished?

Answer 22

the material costs and production costs themselves do not change. you just adjust the quantity, having instead of 10 finished quantities 7 “equivalent quantities” if 10 products are unfinished at a 70% degree of completion.
so for material costs you have 10 total units, and for production costs you have 10 total equivalent units

Question 23

if you add the material and production costs to get the total costs if some are unfinished what changes?

Answer 23

for material costs you allocate the costs to 270 units and the production costs to 267 units ( 3 less because 10 are 70% finished making it 7 equivalent finished units so 260 + 7)

so the costs per equivalent unit are based on the “equivalent unit calculated because of the degree of completion”

Question 24

how do the stage related unit costs change is instead of 270 finished products you have 267 equivalent unit costs ?

Answer 24

the unit costs increase bc lower denominator.

Question 25

what is the total cost ( material and production) for the 10 unfinished products ? (given 830 material cost per equivalent unit) (and given 1688.76 production costs per equivalent unit)

Answer 25

830 x 10 (10 are unfinished in production not in material) + 1688.76 x 7 ( because they are 70% finished in the production so that the equivalent units) = 20,121.32 which is the total cost for the unfinished products

Question 26

what are two ways to find a single overhead rate ?

Answer 26

overhead rate in volume terms=
production hourly rate ( $/h) ( annual total overhead costs / annual production time in hours)
overhead costs = production hourly rate x hours in use

overhead rate in value terms = ( annual total overhead rate / annual direct costs)
overhead costs = rate x direct labor

Question 27

can each cost center have their own overhead rate and use this for a more exact allocation ?

Answer 27

yes

Question 28

two types of overhead rates

Answer 28

cost rate per unit (volume) overhead rate on material costs (percentage)

Question 29

what are some allocation bases for manufacturing ?

Answer 29

machine hours, production hours, quantity of output, direct labout

Question 30

how to find good allocation base?

Answer 30

find what is cost driver

Question 31

what are 5 cost centers the overhead costs can be broken down into

Answer 31

material, fork production, assembly, admin, selling and shipping

Question 32

explain how product costing using many overhead rates work

Answer 32

1. amount of overhead for some cost centers
2. chose good allocation base for each cost center
3. find an overhead rate (percent/value or amount $/h)
4. for each overhead instance in the total costs calculation use the overhead rates and multiply them by the fitting thing ( use direct material used for bikes to multiply material overhead percentage by to find material overhead amount

Question 33

list the 8 things that make up total costs (three are special)

Answer 33

DM, OM,
DL, PO, Special DP/MC
admin O
SSO
Special DSS cost/overhead

Question 34

how many overhead are there in the calculation of total costs

Answer 34

normally material O, manufacuring O, admin O, Selling and shipping O

but in the example they broke manufacturing into two parts with fork production and assembly

Question 35

what do you base admin O and SS O on normally?

Answer 35

TAKE OVERHEAD OF BOTH centers AND BASE THEM ON MANUFACTURING COTS

Question 36

why choose machine costing?

Answer 36

more automation, install flexible manufacuring systems, computer integrated production

Question 37

is machine hour costing a specific from of job costing?

Answer 37

yes

Question 38

does indirect cost allocation become more exact with machine hour costing?

Answer 38

yes

Question 39

what are some thing that go into machine related overhead

Answer 39

depreciation, imputed interest, mainenance cost, romm utilization costs, electricity cost, operating cost

Question 40

when you have all machine overhead how do you get the machine hour rate ? which allocation base ?

Answer 40

allocation base is how many hours the machine was used int the year

Question 41

so what do you include in the final manufacturing overhead if you have rate dependant on the machine hours and the overhead rate not dependant on the machine hours(but chose kg to be the allocation base)

Answer 41

so take both rates and mulitpyl them by how many hours the machine is used for this job, and take the other rate and multiply it by how many kg the machine lifts (that is the chosen allocation base), and the addition of both is the total overhead amount

Question 42

what are the four approaches to calculate the total costs of the job ?

Answer 42

production time as allocation base in volume terms (single overhead rate)(from annual data) ,

direct labor as allocation base in value terms (single overhead rate) (from annual data),

individual allocation bases for each cost center (calculate those 5 rates for each center that has an overhead need in total costs)

machine hour costing ( same as individual allocation bases for each center ( but now with manufacturing overhead not just overhead of manu. center/ one base) but finding all machine related overhead / annual hours machine was used