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CHAPTER 17 (FIN MAN); CHAPTER 2 (MAN) PROCESS COST SYSTEMS CLASS DISCUSSION QUESTIONS 1. a. A job order cost system is best suited for a custom jewelry manufacturer be- cause most of the production consists of job orders, and costs can be reasonably identified with each job. b. A process cost system would be best suited for a paper manufacturer be- cause the processes are continuous and the products are homogeneous. c. A job order cost system is best suited for an automobile repair shop because costs can be reasonably identified with each job. d. A job order cost system would be used by a building contractor to accumulate the costs for each individual building be- cause the costs can be identified with each job without great difficulty. e. An assembly-type industry using mass production methods, such as TV as- sembly, would use the process cost sys- tem because the products are some- what standard and lose their identities as individual items. In such industries, it is neither practical nor necessary to identify output by jobs. 2. Since all goods produced in a process cost system are identical units, it is not neces- sary to classify production costs into job or- ders. 3. In a process cost system, the direct labor and factory overhead applied are debited to the work in process accounts of the individu- al production departments in which they oc- cur. The reason is that all products pro- duced by the department are similar. Thus, there is no need to charge these costs to in- dividual jobs. For the process manufacturer, the direct materials and the conversion costs are charged to the department and di- vided by the completed production of the de- partment to determine a cost per unit. 4. Transferred-out materials are materials that are completed in one department and trans- ferred to another department or to finished goods. 5. (1) Determine the units to be costed. (2) Calculate the equivalent units of produc- tion. (3) Determine the cost per equivalent unit. (4) Allocate costs to completed and partially completed units. 6. Equivalent units is the term used to repres- ent the total number of units that would have been completed within a processing depart- ment as a result of the productive efforts during a period had there been no work in process at the beginning or end of the peri- od. Equivalent units may be said to measure the productive activity for a given period. 7. The cost per equivalent unit is frequently de- termined separately for direct materials and conversion costs because these two costs are frequently incurred at different rates in the production process. For example, mater- ials may be incurred at the beginning of the process and conversion costs incurred evenly throughout the process. 8.
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This note was uploaded on 05/03/2008 for the course ACCT 1B taught by Professor Llorente during the Spring '08 term at CSU Fullerton.

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