Lecture 4

Question 1

process costing system = ?

Answer 1

masses of identical or similar units of a product/service are being costed

Question 2

process costing service sector examples?

Answer 2

deposit processing
postal delivery

Question 3

process costing merchandising examples?

Answer 3

• grain dealing
• processing new magazine subscriptions

Question 4

process costing manufacturing examples?

Answer 4

• oil refining
• beverages production

Question 5

process costing synonym?

Answer 5

average costing

Question 6

when is process costing used?

Answer 6

in manufacturing processes where units are mass-produced identically

Question 7

instead of job cost records, what is used in process costing?

Answer 7

cost of production report

process control sheet

still 3 manufacturing costs: DM, DL, OH

DL & OH both come under conversion costs (C/C)

Question 8

when is it necessary to calculate equivalent units?

Answer 8

where partially completed units are on hand at the end of the accounting period

Question 9

conversion costs = ?

Answer 9

the combination of direct labour & overheads

Question 10

how is costs per unit calculated?

Answer 10

total costs of DM & CC / equivalent units of work done for DM & CC

cost per unit = cost per equivalent unit for DM + CC

Question 11

DM = ?

Answer 11

direct materials

Question 12

CC = ?

Answer 12

conversion costs

Question 13

WIP = ?

Answer 13

work-in-progress

Question 14

how does the job costing flow look?

Answer 14

direct materials & direct manufacturing labour go into direct costs

an indirect cost pool is usually manufacturing overhead, with an allocation base of either machine or labour hours - these go into indirect costs

indirect costs and direct costs make up the total cost of the cost object

Question 15

how are product costs calculated?

Answer 15

total costs of production / total units produced = cost per unit

Question 16

what complicates the costing process in process costing?

Answer 16

at the end/beginning of periods, units may be partially completed

Question 17

what is used instead of a job cost record for process costing?

Answer 17

cost of production report (process control sheet)

Question 18

what are the three manufacturing costs?

Answer 18

direct materials
direct labour
manufacturing overheads

Question 19

transferred-in costs = ?

Answer 19

costs that have been incurred in a prior department on units that have been moved into a subsequent department

normally include materials, direct labour & overheads

Question 20

when is the calculation of equivalent units necessary?

Answer 20

where partially completed units are on hand at the end of the accounting period

it converts the quantity of input into an equivalent output unit figure

Question 21

how are equivalent units calculated?

Answer 21

separately for each input

calculated for direct materials on its own, and for conversion costs on its own

Question 22

conversion costs = ?

Answer 22

all manufacturing costs other than direct material costs

includes manufacturing labour, indirect materials, energy, plant depreciation etc

Question 23

when are direct materials added during the process of product assembly?

Answer 23

at the beginning

Question 24

when are conversion costs added during the process of product assembly?

Answer 24

evenly throughout the process

Question 25

what is the 5 step process for process costing?

Answer 25

1. summarise the flow of physical units of output
2. compute output in terms of equivalent units
3. compute equivalent-unit costs
4. summarise total costs to account for
5. assign total costs to units completed and to units in closing work in progress

Question 26

weighted average process costing method?

Answer 26

calculates the equivalent-unit cost of the work done to date (regardless of the period in which it was done)

it then assigns this cost to equivalent units completed and transferred out of the process AND to equivalent units in closing work-in-progress stock

total of all costs entering the work in progress account (regardless of if it’s from the previous or current period)/ divided by total equivalent units of work done to date

Question 27

first in, first out (FIFO) process-costing method?

Answer 27

assigns the cost of the previous period’s equivalent units (in opening work-in-progress stock) to the first units completed & transferred out of the process

and then assigns the cost of equivalent units worked on during the current period first to complete beginning stock, then to started & completed new units

finally, units in closing work in progress stock are assigned costs from equivalent units worked on during the current period

Question 28

what does the FIFO method of process costing assume?

Answer 28

that the earliest equivalent units in the work in progress account are completed first

Question 29

what is a distinctive feature of the FIFO process costing method?

Answer 29

that work done on opening stock before the current period is kept separate from work done in the current period