Chapter 4 Solution

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Chapter 4 Process Costing

Chapter 4
Process Costing
Solutions to Questions
4-1 A process costing system should be used in situations where a homogeneous product is produced on a continuous basis.

4-2 Job-order and processing costing are similar in the following ways: 1. Job-order costing and process costing have the same basic purposes—to assign materials, labor, and overhead cost to products and to provide a mechanism for computing unit product costs. 2. Both systems use the same basic manufacturing accounts. 3. Costs flow through the accounts in basically the same way in both systems. 4-3 Cost accumulation is simpler under process costing because costs only need to be assigned to departments—not individual jobs. A company usually has a small number of processing departments, whereas a job-order costing system often must keep track of the costs of hundreds or even thousands of jobs. 4-4 4-5 In a process costing system, a Work in Process account is maintained for each processing department. The journal entry to record the transfer of work in process from the Mixing Department to the Firing Department is: Work in Process, Firing ....................................... XXXX Work in Process, Mixing................................ XXXX 4-6 The costs that might be added in the Firing Department include: (1) costs transferred in from the Mixing Department; (2) materials costs added in the Firing Department; (3) labor costs added in the Firing Department; and (4) overhead costs added in the Firing De partment. 4-7 Under the weighted-average method, equivalent units of production consist of units transferred to the next department (or to finished goods) during the period plus the equivalent units in the department’s ending work in process inventory. 4-8 The company will want to distinguish between the costs of the metals used to make the medallions, but the medals are otherwise identical and go through the same production processes. Thus, operation costing is ideally suited for the company’s needs.

4-1

Chapter 4 Process Costing

Exercise 4-1 (20 minutes) a. To record issuing raw materials for use in production: Work in Process—Molding Department......... 28,000 Work in Process—Firing Department ............ 5,000 Raw Materials ..................................... b. To record direct labor costs incurred: Work in Process—Molding Department......... Work in Process—Firing Department ............ Wages Payable .................................... 18,000 5,000

33,000

23,000

4-2

Chapter 4 Process Costing

c. To record applying manufacturing overhead: Work in Process—Molding Department......... Work in Process—Firing Department ............ Manufacturing Overhead ......................

24,000 37,000 61,000

d. To record transfer of unfired, molded bricks from the Molding Department to the Firing Department: Work in Process—Firing Department ............ 67,000 Work in Process—Molding Department .. 67,000 e. To record transfer of finished bricks from the Firing Department to the finished goods warehouse: Finished Goods .......................................... 108,000 Work in Process—Firing Department...... 108,000 f. To record Cost of Goods Sold: Cost of Goods Sold .................................... Finished Goods.................................... 106,000 106,000

4-3

Chapter 4 Process Costing

Exercise 4-2 (10 minutes) Weighted-Average Method

Units transferred out ................................... Work in process, ending: 30,000 units × 70% .................................. 30,000 units × 50% .................................. Equivalent units of production .......................

Equivalent Units Materials Conversion
410,000 21,000 431,000

410,000 15,000 425,000

4-4

Chapter 4 Process Costing

Exercise 4-3 (10 minutes) Weighted-Average Method 1. Cost of beginning work in process inventory.................................. Cost added during the period........ Total...
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