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Chapter 18: Q.18-1SE (page 1007)

Question: Identify each costing system characteristic as job order costing or process costing.

a. One Work-in-Process Inventory account

b. Production cost reports

c. Cost accumulated by process

d. Job cost sheets

e. Manufactures homogenous products through a series of uniform steps

f. Multiple Work-in-Process Inventory accounts

g. Costs transferred at end of period

h. Manufactures batches of unique products or provides specialized services

Short Answer

Expert verified

Answer

S.No.

Particulars

Costing System

a

One Work-in-process account

Job order costing system

b

Production cost report

Process costing system

c

Cost accumulated by process

Process costing system

d

Job cost sheet

Job order costing system

e

Manufactures homogenous products through a series of uniform steps

Process costing system

f

Multiple work-in-process inventory accounts

Process costing system

g

Cost transferred at end of period

Process costing system

h

Manufactures batches of unique products or provides specialized services

Job order costing system

Step by step solution

01

Classification of costing system when there is one WIP account

When there is one WIP account, company use job order costing system. It is so because job order costing system has only one WIP inventory account. On the other hand, process costing has WIP account for each process.

02

Classification of costing system when company prepare production cost report

The company preparing the production report uses the process costing system. It is so because the production cost report is prepared in process costing system. While in job order costing system, job cost record is prepared.

03

Classification of costing system when company accumulates the cost by process.

Process costing system is used when the company accumulates the cost by process. It is so because process costing involve series of process in manufacturing of products.

04

Classification of costing system when company prepares the job cost sheet

The company preparing the job cost sheets use the job order costing system. It is so because the job cost records for each job is prepared in the job order costing system. While in process costing system, production cost report is prepared.

05

Classification of costing system when company manufacture the homogeneous products through a series of uniform steps.

Process costing system is used when the company is engaged in manufacturing the homogeneous (similar) products by following a series of uniform steps or processes.

06

Classification of costing system when there is multiple WIP inventory account

Process costing system is used when the company is maintaining multiple WIP inventory account for each process or department, it is so because it means the manufacturing of product is conducted through a series of multiple process.

07

Classification of costing system when company transfer the cost at end of period

Process costing system is used in the companies, in which the cost is transferred at the end of the accounting period. While in job order costing system, cost is transferred when each job is completed.

08

Classification of costing system when company manufactures the batch of unique products or provides specialized services

Job order costing system is used. It is so because the companies that are engaged in manufacturing the unique products, products on batches or providing the specialized services uses the job order costing system.

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Most popular questions from this chapter

Color Explosion prepares and packages paint products. Color Explosion has two departments: Blending and Packaging. Direct materials are added at the beginning of the blending process (dyes) and at the end of the packaging process (cans). Conversion costs are added evenly throughout each process. The company uses the weighted- average method. Data from the month of May for the Blending Department are as follows:

Gallons

Beginning work-in-process inventory

0 gallons

Started in production

8,500 gallon

Completed and transferred out to packaging in may

6,500 gallon

Ending work-in-process inventory (30% of the way through the blending process)

2,000 gallon

Costs

Beginning work-in-process inventory

\(0

Costs added during May:

  • Direct materials

5,525

  • Direct labor

1,500

  • Manufacturing overhead allocated

2,547

Total costs added during May

\)9,572

Requirements

1. Compute the Blending 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 Blending Department ending Work-in-Process Inventory.

The Finishing Department started the month with 500 units in process, received 2,000 units from the Assembly Department, and transferred 2,100 units to the finished goods storage area. All direct materials are added at the beginning of the process. The units in process at the end of the month are 45% complete concerning conversion costs. The department uses the weighted-average method. The Finishing Department incurred the following costs:

Beginning WIP

Added this month

Total

Transferred in

\(6,250

\)25,000

\(31,250

Direct materials

500

2,000

2,500

Conversion cost

1,250

5,590

6,840

Total

\)8,000

\(32,590

\)40,590

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

9. Compute the equivalent units of production for the Finishing Department.

10. Determine the cost per equivalent unit for transfer, direct materials, and conversion costs.

11. Determine the cost to be transferred to Finished Goods Inventory.

Salish Craft Beers provides the following information for the Malting Department for the month of August 2018:


UNITS
COSTS

Beginning Work-in-Process Inventory

0

\(0

Started in Production in August

26,000

54,000*

Total to Account For

26,000

\)54,000

Completed and Transferred to Packaging Department during August

21,000

?

Ending Work-in-Process Inventory (30% complete for direct materials and 60% complete for conversion work)

5,000

?

Total Accounted For

26,000

\(54,000

* Includes \)18,000 direct materials and $36,000 conversion costs

Requirements

Complete a production cost report for the Malting Department for the month of August 2018 to determine the cost of the units completed and transferred out, and the cost of the ending Work-in-Process Inventory. Assume Salish Craft Beers uses the weighted average method.

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?

Sea Worthy uses three processes to manufacture lifts for personal watercrafts: forming a lift鈥檚 parts from galvanized steel, assembling the lift, and testing the completed lift. The lifts are transferred to finished goods before shipment to marinas across the country. Sea Worthy鈥檚 Testing Department requires no direct materials. Conversion costs are incurred evenly throughout the testing process. Other information follows for October 2018:

UNITS

Beginning work-in-process inventory

2,300 units

Transferred in from assembling department during the period

6,800 units

Completed during the period

4,100 units

Ending work in process inventory (40% complete for conversion work)

5,000 units

COSTS

Beginning work in process inventory (transferred in costs, \(93,400, conversion costs, \)18,100)

$111,500

Transferred in from the assembly department during the period

671,000

Conversion cost added during the period

49,000

The cost transferred into Finished Goods Inventory is the cost of the lifts transferred out of the Testing Department. Sea Worthy uses weighted-average process costing.

Requirements

1. Prepare a production cost report for the Testing Department.

2. What is the cost per unit for lifts completed and transferred out to Finished Goods Inventory? Why would management be interested in this cost?
See all solutions

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