ACTG 2020 Chapter Notes - Chapter 3: Finished Good

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16 Mar 2014

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Chapter 4 notes: process costing is used in industries that produce homogeneous products such as bricks, flour, and cement. This computation is made on the department production report: a processing department is any work center where work is performed on a product and where materials, labour, or overhead costs are added. Processing departments in a process costing system have two common features. First, the activity carried out in the department is performed uniformly on all units passing through it. A separate work in process account is maintained for each processing department. Materials, labour, and overhead costs are entered directly into each processing departments work in process account: separate computations are made within each processing department for each cost category. The cost categories may include: costs of prior departments associated with units transferred into the department, materials costs added in the department, direct labour costs added in the department, manufacturing overhead costs applied in the department.

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 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.

2. The expense of operating a shipping department would likely beclassified in which cost behavior category?
A. Fixed
B. Mixed
C. Variable

3. Property tax on an office building would likely be classified inwhich cost behavior category?
A. Fixed
B. Mixed
C. Variable

4. Inventoriable costs eventually appear as expenses on an incomestatement as part of:
A. the cost of goods sold
B. selling expenses
C. administrative expenses

5. Which of the following would one be able to find on a job costsheet in a typical job cost system?
Actual direct material cost Actual manufacturing overheadcost
A. Yes Yes
B. Yes No
C. No Yes
D. No No

6. Which of the following enterprises would be more likely to useprocess costing rather than job-order costing?
A. A manufacturer of yachts
B. A small appliance repair shop
C. A tire manufacturer

7. A predetermined overhead rate is based on direct labor-hours toapply manufacturing overhead to jobs. For a particular month,manufacturing overhead cost was estimated to be $30,000; directlabor-hours were estimated to be based 10,000. Actual overhead was$32,500; actual direct labor-hours were 11,000. By how much wasoverhead overapplied or underapplied?
A. $2,500 overaplied
B. $2,500 underapplied
C. $500 overapplied
D. $500 underapplied

8. In job order costing, the different between total manufacturingcosts and the cost of goods manufactured is:
A. the change in work-in-process inventory over the relatedperiod
B. work-in-process inventory at the end of the related period
C. Zero as total manufacturing costs and the cost of goodsmanufactured are the same thing

9. In process costing, a separate work in process account is keptfor each:
A. processing department
B. individual order
C. equivalent unit

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ACTG 2020 Chapter Notes - Chapter 3: Finished Good

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