Process costing differs from job order costing in the way costsare accounted for. Share your thoughts about the accountingdifferences in process costing versus job order costing, andexplain how manufacturing costs are accounted for in processcosting. Further explain why the cost per equivalent unit aredetermined separately for direct materials and for conversion costsunder different methods of determining the cost of completed andtransferred out units and the cost of ending work in processinventory. Additionally, discuss the type of production mostsuitable to employ a process costing system by providing anexample.
Process costing differs from job order costing in the way costsare accounted for. Share your thoughts about the accountingdifferences in process costing versus job order costing, andexplain how manufacturing costs are accounted for in processcosting. Further explain why the cost per equivalent unit aredetermined separately for direct materials and for conversion costsunder different methods of determining the cost of completed andtransferred out units and the cost of ending work in processinventory. Additionally, discuss the type of production mostsuitable to employ a process costing system by providing anexample.
Related questions
Work in Processââ¬âForming | |
| Beginninginventory, October 1 | 26,482 |
| Directmaterials | 169,798 |
| Conversioncosts | 162,400 |
| Endinginventory | ? |
The Forming Departmenthad 10,350 partially complete units in beginning work in processinventory. The department started work on 76,250 units during themonth and ended the month with 8,600 units still in work inprocess. These unfinished units were? 60% complete as to directmaterials but? 20% complete as to conversion work. The beginningbalance of $26,482 consisted of $21,470 of direct materials and$5,012 of conversion costs.
Requirement
Journalize the transfer of costs to the Finishing Department.?(Hint?: Complete the? five-step process costing procedureto determine how much cost to? transfer.)
We need to begin the? five-step process costing procedure byfirst summarizing the units to account for and computing theequivalent units.
Smithson Roping | |||
Forming Department | |||
Physical Flow of Units and Equivalent Units | |||
Flow of | Equivalent Units | ||
Physical | Direct | Conversion | |
Flow of Production | Units | Materials | Costs |
Units to account for: | |||
Units accounted for: | |||
Total equivalent units | |||
The next step is calculating the cost per equivalent unit.?(Round the cost per equivalent unit to the nearest?cen
Smithson Roping | |||
Forming Department | |||
Cost per Equivalent Unit | |||
Direct | Conversion | ||
Materials | Costs | Total | |
Cost per equivalent unit | |||
Now we can calculate the total cost of the units completed andtransferred out and the ending work in process. ?(Enterquantities? first, then the cost per equivalent unit amounts in thesame order as calculated in the preceding step. Round your answersto the nearest whole? dollar.)
Smithson Roping | |||||||||
Forming Department | |||||||||
Assignment of Costs | |||||||||
Assign costs: | Direct Materials | Conversion Costs | Total | ||||||
x ( | + | ) | |||||||
x | |||||||||
x | |||||||||
Total cost accounted for | |||||||||
After completing Steps? 1-4 of the process costing? procedure,Drumm ?Corp., arrived at the following equivalent units and costsper equivalent unit for its final production department for themonth of October?:
Requirement 1a. How much cost should be assigned to the unitscompleted and transferred out to finished goods inventory duringOctober question mark October?
Determine the costs that should be assigned to the unitscompleted and transferred out to finished goods inventory. Enterthe number of units completed and transferred out in the firstanswer? box, then enter the applicable cost? amounts, and finallycalculate the total cost. ?(Enter quantities? first, then the cost?amounts.)
??
Drumm Corp. | ||||||||||||
Assignment of Costs | ||||||||||||
Transferred-in | Direct | Conversion | ||||||||||
Assign costs: | Costs | Materials | Costs | Total | ||||||||
a. | x ( | + | + | ) | ||||||||
Requirement 1b. How much cost should be assigned to thepartially complete units still in ending work in process inventoryat the end of October question mark October?
Now determine the costs that should be assigned to the unitsstill in ending work in process inventory. For each category of?costs, enter the number of units in ending work in processinventory in the first answer? box, then enter the applicable cost?amount, and finally calculate the total cost.
??
Drumm Corp. | ||||||||||||
Assignment of Costs | ||||||||||||
Transferred-in | Direct | Conversion | ||||||||||
Assign costs: | Costs | Materials | Costs | Total | ||||||||
Units | Cost | Units | Cost | Units | Cost | |||||||
b. | ||||||||||||
x | ||||||||||||
x | ||||||||||||
x | ||||||||||||
Requirement 2. What was the Total Cost Accounted For duringOctober? What other important figure must this? match? What doesthis figure tell? you?
Calculate the total costs accounted? for: $ ?
The Total Costs Accounted For figure must match the ? ?
Total Costs to Account For Total Ending Work in ProcessInventory figure.In other? words, the company must assign ??
Requirement 2. What was the Total CostAccounted For during October ?
What other important figure must this? match? What does thisfigure tell? you?
Calculate the total costs accounted? for: ?$ ?
The Total Costs Accounted For figure must match the ?? figure.??
In other? words, the company must assign ??of the costs thatwere in the work in process account during the period to either
?1)
2)
Requirement 3. What is Drumm?'s average cost ofmaking each unit of its product from the first productiondepartment all the way through the final production? department??(Round your answer to the nearest? cent.)
Drumm ?Corp.'s cost of making each unit is $.......?
| Equivalent Units | ||||
| Transferred- | Direct | Conversion | ||
| In | Materials | Costs | ||
| Unitscompleted and transferred out | 72,000 | 72,000 | 72,000 | |
| Units inending work in process, October 31 | 13,500 | 9,000 | 7,500 | |
| Totalequivalent units | 85,500 | 81,000 | 79,500 | |
| Cost perequivalent unit | $4.20 | $0.15 | $2.00 | |
