In: Accounting
Chapter 18
2.) What types of companied use process costing systems
4.) List ways in which job order costing systems are similar to process costing systems.
6.) What are equivalent units of production?
8.) What are conversion costs? Why do some companies using process costing systems use conversion costs?
10.) What are the four steps in preparing a production cost report?
12.) If a company began the month with 50 units in process, started another 600 units during the month, and ended the month with 75 units in process, how many units were completed?
14.) What is the weighted average method for process costing systems?
16.) What is the purpose of the costs accounted for section of the production cost report?
18.) Explain the additional journal entries required by process costing systems that are not needed in job order costing systems.
20.) Department 4 has completed production on units that have a total cost of $15,000. The units are ready for sale. Give journal entry.
22.) Describe how the FIFO method is different from the weighted average total.
24.) When might it be beneficial for a company to use the FIFO method? When is the weighted average method more practical?
2) The companies that use process costing are the ones which have mass production and homogenous in nature. The products are not customer order driven and can be easily sold in external market. They have standardised size and selling price
4) Job order costing and process order costing are similar in following ways
· Both involve costing of product and service
· Cost elements incurred are same direct material, direct labor and manufacturing overheads
· Manufacturing overheads is predetermined and applied to jobs and process
· Cost is accumulated
· Profit is determined for each period
6) Equivalent unit of production is the way of expressing the incomplete work in process in terms of completed units. The purpose of equivalent units is to help in calculating cost per equivalent unit
10) 4 steps in preparation of production cost report
· Physical units flow and reconciliation
· Equivalent units computation
· Calculation of cost per equivalent unit
· Reconciliation of cost to account for and cost accounted for
12) Opening units+ Units started – Closing units = units completed 50+ 600 – 75 =575 units
14) The weighted average method of process costing considers only units completed and transferred and closing work in process in cost per equivalent unit. It does not take into consideration the work completed on opening work in process during the period. It includes opening work in process cost with current period cost in calculating weighted average cost per equivalent unit
16) The purpose of cost accounted section is to calculate cost for completed and transferred units and cost of closing work in process
18) The additional journal entries are required for transfer of output from one process to another process for transferred in units and transferred out units
20) Journal entry
Finished goods account debit $15,000
Work in process account credit $15,000
22) The FIFO method of process costing considers the units completed and transferred out during the period into 2 parts – the work completed on unfinished opening work in process during the period and units started and completed during the period. Weighted average method considers only units completed and transferred out during the period
24) FIFO method is beneficial when the firm wants to compare the cost per equivalent unit from one period to another since it does not average out cost. Weighted average method is preferable when the firm is having not much opening work in process completed during the current period.