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Chapter 18: Q4RQ (page 1005)

Question: List ways in which job order costing systems are similar to process costing systems.

Short Answer

Expert verified

Answer:

The similarity of process costing and the job order costing system:

  1. Both system of costing have same goal of determing the product cost of direct material, direct labor and manufacturing overhead.
  2. Direct material, direct labor and manufacturing overhead are assigned to work in process inventory in each costing system.
  3. Both the system use predetermined overhead rates to apply the manufacturing overhead.

Step by step solution

01

Costing system

The costing system is used by the companies to determine the overall costing of the manufactured product.

02

The objective of job order costing system and the process costing is similar

The objective of both job order costing system and the process costing system is to determine the product cost of direct material, direct labor and manufacturing overhead through the three inventory account i.e. the WIP inventory account, finished goods inventory account and raw material account.

The production cost is assigned to the WIP inventory account and both the system compute the predetermined overhead rate for allocation of manufacturing overhead.

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Most popular questions from this chapter

Describe ways the production cost report can be used by management.

Miller Company sells several products. Sales reports show that the sales volume of its most popular product has increased the past three quarters while overall profits have decreased. How might production cost reports assist management in making decisions about this product?

Question: Department 4 has completed production on units that have a total cost of $15,000. The units are ready for sale. Give the journal entry.

Hartley Company has a production process that involves three processes. Units move through the processes in this order: cutting, stamping, and then polishing. The company had the following transactions in November:

1. Cost of units completed in the Cutting Department, \(17,000

2. Cost of units completed in the Stamping Department, \)30,000

3. Cost of units completed in the Polishing Department, \(35,000

4. Sales on account, \)50,000

5. Cost of goods sold is 80% of sales

Prepare the journal entries for Hartley Company.

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.
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