AFM102 Chapter Notes - Chapter 5: Expense, Income Statement, Finished Good

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OC2146671

27 Jan 2018

School

University of Waterloo

Department

Accounting & Financial Management

Course

AFM102

Professor

Catherine Wong

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Document Summary

Absorption costing, aka full costing all manufacturing costs, fixed and variable, are assigned to units of production, units fully absorb manufacturing costs. Source data gets posted on a computerized system and can be posted to job cost sheets. Ra(cid:449) materials i(cid:374)(cid:448)e(cid:374)tor(cid:455) (cid:894)+a(cid:895) (cid:454)(cid:454)(cid:454: labour cost. Salaries a(cid:374)d wages pa(cid:455)a(cid:271)le (cid:894)+l(cid:895) (cid:454)(cid:454)(cid:454: only direct labour is added to the work in process account, direct labour costs are added to work in process and the individual job cost sheets. Labour costs added to manufacturing overhead represent indirect labour costs: manufacturing overhead costs, directly entered into the manufacturing overhead account as they are incurred. A(cid:272)(cid:272)ou(cid:374)ts pa(cid:455)a(cid:271)le (cid:894)+l(cid:895) (cid:454)(cid:454)(cid:454: all manufacturing overhead costs are directly recorded as they are incurred day by day throughout the period. The application of manufacturing overhead: the manufacturing overhead account operates as a clearing account, at certain intervals over the year, overhead cost gets transferred from the manufacturing.

Related Questions

Identify each statement as true or false. If false, indicate howto correct the statement.

1. Process cost systems are used to apply costs to similarproducts that are mass-produced in a continuous fashion.
2. A process cost system is used when each finished unit isindistinguishable from another.
3. Companies that produce soft drinks, motion pictures, andcomputers chips would all use process cost accounting.
4. In a process cost system, costs are tracked by individualjobs.
5. Job order costing and process costing track differentmanufacturing costs elements.
6. Both job order costing and process costing account for directmaterials, direct labor, and manufacturing overhead.
7. Costs flow through the accounts in the same basic way for bothjob order costing and process costing.
8. In a process cost system, only one work in process account isused.
9. In a process cost system, costs are summarized in a job costsheet.
10. In a process cost system, the unit cost is total manufacturingcosts for the period divided by the units produced during theperiod.

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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.

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Process Cost Accounting & Cost-Volume-Profit Analysis

This module focuses on measuring costs in process production companies. We explain process production, describe how to assign costs to processes, and compute and analyze cost per equivalent unit. Discuss two of the three topics:

What is meant by equivalent units of production, and why are they important when a process costing system is used?

What are the four steps in accounting for production activity in a period?

Job order costing and process costing are two major costing systems used in manufacturing. Briefly contrast the characteristics of these two systems.

AFM102 Chapter Notes - Chapter 5: Expense, Income Statement, Finished Good

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