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Chapter 18: Q17E (page 1010)

For each of the following products or services, indicate if the cost would most likely be determined using a job order costing system or a process costing system.

a. Soft drinks

b. Automobile repairs

c. Customized furniture

d. Aluminum foil

e. Lawn chairs

f. Chocolate candy bars

g. Hospital surgery

h. Pencils

Short Answer

Expert verified

S.No.

Particulars

Classification of costing system

A

Soft drinks

Process costing system

B

Automobile repairs

Job order costing system

C

Customized furniture

Job order costing system

D

Aluminium foil

Process costing system

E

Lawn chairs

Process costing system

F

Chocolate candy bars

Process costing system

G

Hospital surgery

Job order costing system

H

Pencils

Process costing system

Step by step solution

01

Step-by-Step Solution:Step 1: Costing System

Manufacturing companies use a costing system to determine the total cost incurred by the company. The costing of products is done either by the process or job order costing system.

02

Classify the costing system used by the soft drinks manufacturer

The companies engaged in making soft drinks use a process costing system. It is so because the production of soft drinks passes through several cycles and is produced in large quantities.

03

Classify the costing system used for the Automobile repairs

The automobile repairer uses a job order costing system to determine the cost of the repairing work because their work is based on a job basis and as per the customer's requirement.

04

Classify the costing system used by the manufacturer of the customized furniture

Job order costing system used by the customized furniture manufacturer as they work as per the customer's requirement. They manufacture the furniture in small size as per the customer's demand.

05

Classify the costing system used by the manufacturer of Aluminium foil

The aluminum foil manufacturing companies use a process costing system because the foils are manufactured in mass quantities by passing through more than one process.

06

Classify the costing system used by the manufacturer of Lawn chairs

The lawn chairs manufacturer uses the process costing system for determining the cost of production. It is so because they are engaged in single-line products produced in large quantities.

07

Classify the costing system used by the manufacturer of chocolate candy bars

The chocolate candy bars manufacturer uses a process costing system for computing the total manufacturing cost. It is so because the candy bars are manufactured in large quantities.

08

Classify the costing system used by the hospitals for surgeries

The cost of surgeries is determined by using the job order costing system because the cost of different surgeries is different. Also, it is service providing business. Hence, a job order costing system is used.

09

Classify the costing system used by the manufacturer of pencils

The manufacturer of pencils uses the process costing system while determining the cost of production. It is so because the manufacturer of pencils produced pencils in mass quantities by passing through various processes.

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Most popular questions from this chapter

Refer to your answers from Exercise E18-21.

Requirements

1. Prepare the journal entries to record the assignment of direct materials and direct labor and the allocation of manufacturing overhead to the Blending Department. Also, prepare the journal entry to record the costs of the gallons completed and transferred out to the Packaging Department. Assume labor costs are accrued and not yet paid.

2. Post the journal entries to the Work-in-Process Inventory鈥擝lending T-account.

What is the ending balance?

3. What is the average cost per gallon transferred out of the Blending Department

into the Packaging Department? Why would the company managers want to

know this cost?

Bishop Company uses the FIFO method in its process costing system. The Mixing Department started the month with 500 units in a process that was 20% complete, started in the production of 2,000 units, and transferred 2,100 units to the finished goods storage area. All materials are added at the beginning of the process, and conversion costs occur evenly. The units in process at the end of the month are 45% complete concerning conversion costs. The department incurred the following costs:

Beginning WIP

Added this month

Total

Direct materials

\(500

\)2,000

\(2,500

Conversion cost

1,250

5,450

6,700

Total

\)1,750

\(7,450

\)9,200

14A. How many units are still in process at the end of the month?

15A. Compute the equivalent production units for the Mixing Department for the current month.

16A. Determine the cost per equivalent unit for the current period for direct materials and conversion costs.

17A. Determine the cost to be transferred to the next department.

Complete the missing amounts and labels in the T-accounts.

Work-in-process inventory 鈥� Cutting

Balance, May 1

0

Transferred out to

(A)

Direct materials

57,000

Direct labor

5,000

Manufacturing overhead

39,000

Balance, May 31

16,000

Work-in-process inventory 鈥� Finishing

Balance, May 1

11,000

Transferred out to

80,000

Transferred in from

(B)

Direct materials

21,000

Direct labor

(C )

Manufacturing overhead

18,000

Balance, May 31

68,000

Work-in-process inventory 鈥� Packaging

Balance, May 1

4,000

Transferred out to

(D)

Transferred in from

(E )

Direct material

1,000

Direct labor

9,000

Manufacturing overhead

14,000

Balance, May 31

8,000

Finished goods inventory

Balance, May 1

0

Transferred out to

(F)

Transferred in from

(G)

Balance, May 31

2,000

Cost of goods sold

Balance, May 1

0

Transferred in from

(H)

Balance, May 31

(I)

Cheerful Colors manufactures crayons in a three-step process: mixing, molding, and packaging. The Mixing Department combines the direct materials of paraffin wax and pigments. The heated mixture is pumped to the Molding Department, where it is poured into molds. After the molds cool, the crayons are removed from the molds and are transferred to the Packaging Department, where paper wrappers are added and the crayons are boxed.

In the Mixing Department, the direct materials are added at the beginning of the

process and the conversion costs are incurred evenly throughout the process. Work in process of the Mixing Department on March 1, 2018, consisted of 800 batches of crayons that were 10% of the way through the production process. The beginning balance in Work-in-Process Inventory鈥擬ixing was \(32,800, which consisted of \)14,000 in direct materials costs and $18,800 in conversion costs. During March, 5,200 batches were started in production. The Mixing Department transferred 3,000 batches to the Molding Department in March, and 3,000 were still in process on March 31. This ending inventory was 80% of the way through the mixing process. Cheerful Colors uses FIFO process costing.

At March 31, before recording the transfer of costs from the Mixing Department

to the Molding Department, the Cheerful Colors general ledger included the following account:

Work-in-process inventory 鈥� Mixing

Balance, March 1

32,800

Direct materials

42,000

Direct labor

24,610

Manufacturing overhead

65,830

Requirements

1. Prepare a production cost report for the Mixing Department for March. Round

equivalent unit of production costs to four decimal places. Round all other costs to the nearest whole dollar.

2. Journalize all transactions affecting the Mixing Department during March, including the entries that have already been posted. Assume labor costs are accrued and not yet paid.

Shea Winery in Pleasant Valley, New York, has two departments: Fermenting and Packaging. Direct materials are added at the beginning of the fermenting process (grapes) and at the end of the packaging process (bottles). Conversion costs are added evenly throughout each process. The company uses the weighted-average method. Data from the month of March for the Fermenting Department are as follows:

Gallons

Beginning work-in-process inventory

500 gallons

Started in production

8,600 gallon

Completed and transferred out to packaging in march

7,900 gallon

Ending work-in-process inventory (80% of the way through the blending process)

1,200 gallon

Costs

Beginning work-in-process inventory

  • Direct materials

\(540

  • Direct labor

195

  • Manufacturing overhead allocated

210

Cost added during march

  • Direct materials

9,288

  • Direct labor

3,305

  • Manufacturing overhead allocated

3,378

Total cost added during march

\)15,971

Requirements

1. Compute the Fermenting Department鈥檚 equivalent units of production for direct

materials and for conversion costs.

2. Compute the total costs of the units (gallons)

a. completed and transferred out to the Packaging Department.

b. in the Fermenting Department ending Work-in-Process Inventory.
See all solutions

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