Process costing

Question 1

Similarities Between Job-Order and Process Costing 1

Answer 1

Both systems assign material, labor, and overhead costs to products and they provide a mechanism for computing unit product costs.

Question 2

Similarities Between Job-Order and Process Costing 2*

Answer 2

Both systems use the same manufacturing accounts, including Manufacturing Overhead, Raw Materials, Work in Process, and Finished Goods.

Question 3

Similarities Between Job-Order and Process Costing 3

Answer 3

The flow of costs through the manufacturing accounts is basically the same in both systems.

Question 4

Differences Between Job-Order and Process Costing 1

Answer 4

Process Costing Is used when a single product is produced on a continuing basis or for a long period of time. Job-order costing is used when many different jobs having different production requirements are worked on each period.

Question 5

Differences Between Job-Order and Process Costing 2

Answer 5

Systems accumulate costs by department. Job-order costing systems accumulated costs by individual jobs.

Question 6

Differences Between Job-Order and Process Costing 3

Answer 6

Systems compute unit costs by department. Job-order costing systems compute unit costs by job on the job cost sheet.

Question 7

Processing Departments

Answer 7

Any unit in an organization where materials, labor, or overhead are added to the product.

Question 8

Processing Departments 2

Answer 8

The activities performed in a processing department are performed uniformly on all units of production. Furthermore, the output of a processing department must be homogeneous.

Products in a process costing environment typically flow in a sequence from one department to another.

Question 9

Equivalent Units of Production

Answer 9

Equivalent units are the product of the number of partially completed units and the percentage completion of those units

Question 10

Equivalent Units of Production 2

Answer 10

These partially completed units complicate the determination of a department’s output for a given period and the unit cost that should be assigned to that output.

Question 11

Two half completed products are

Answer 11

equivalent to one complete product.

Question 12

10,000 units 70% complete are equivalent to

Answer 12

7,000 complete units.

Question 13

Equivalent units can be calculated two ways

Answer 13

1) The First-In, First-Out Method – FIFO is covered in the appendix to this chapter.
2) The Weighted-Average Method – This method will be covered in the main portion of the chapter.

Question 14

The weighted-average method

Answer 14

1) Makes no distinction between work done in prior or current periods.
2) Blends together units and costs from prior and current periods.
3) Determines equivalent units of production for a department by adding together the number of units transferred out plus the equivalent units in ending Work in Process Inventory.

Question 15

in process cost systems

Answer 15

Direct labor costs may be small in comparison to other production costs.

Question 16

into one classification of product cost called conversion costs.

Answer 16

Direct labor and manufacturing overhead may be combined

Question 17

Equivalent units of production always equal:

Answer 17

Units completed and transferred + Equivalent units remaining in work in process

Question 18

Operation Costing

Answer 18

Operation cost is a hybrid of job-order and process costing because it possesses attributes of both approaches.

Question 19

Operation costing is commonly used when

Answer 19

batches of many different products pass through the same processing department

Question 20

cost accounted for 1

Answer 20

Cost of beginning work in process inventory
+
costs added to production during the period

Question 21

Cost accounted for 2

Answer 21

cost of ending work in process inventory
+
costs of units transferred out

Question 22

Cost per equivalent unit

Answer 22

Cost of beginning Work in Process Inventory + cost added during the period / equivalent units of production