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Chapter 18: Q2RQ (page 1005)
Question: What types of companies use process costing systems?
Answer:
The companies that produce the goods in large quantity or are engaged in producing similar products, use the process costing system.
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Smith Paper Co. produces the paper used by wallpaper manufacturers. Smith鈥檚 four-stage process includes mixing, cooking, rolling, and cutting. On March 1, the Mixing Department had 400 rolls in process. During March, the Mixing Department completed the mixing process for those 400 rolls and also started and completed the mixing process for an additional 4,100 rolls of paper. The department started but did not finish the mixing process for an additional 500 rolls, which were 20% complete with respect to both direct materials and conversion work at the end of March. Direct materials and conversion costs are incurred evenly throughout the mixing process. The Mixing Department compiled the following data for March:
Direct materials | Direct labor | Manufacturing overhead allocated | Total costs | |
Beginning inventory, Mar. 1 | \(475 | \)275 | \(300 | \)1,050 |
Costs added during March | 5,045 | 2,900 | 2,965 | 10,910 |
Total costs | \(5,520 | \)3,175 | \(3,265 | \)11,960 |
Requirements
1. Prepare a production cost report for the Mixing Department for March. The company uses the weighted-average method.
2. Journalize all transactions affecting the company鈥檚 mixing process during March. Assume labor costs are accrued and not yet paid.
Question: What are equivalent units of production?
What is the purpose of the Costs Accounted For section of the production cost report?
Question: What are the primary differences between job order costing systems and process costing systems?
The Finishing Department reports the following data for the month:
Equivalent unit of production:
Transferred in | 3,000 |
Direct materials | 3,000 |
Conversion cost | 2,250 |
Costs: | Beginning WIP | Added this month | Total |
Transferred in | \(7,500 | \)15,000 | \(22,500 |
Direct materials | 3,250 | 6,500 | 9,750 |
Conversion costs | 6,125 | 13,000 | 19,125 |
Total | \)16,875 | \(34,500 | \)51,375 |
Calculate the cost per equivalent units of production for each input. The company
uses the weighted-average method.
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