HDFChapter17Solutions12e - CHAPTER 17 PROCESS COSTING 17-1...

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PROCESS COSTING 17-1 Industries using process costing in their manufacturing area include chemical processing, oil refining, pharmaceuticals, plastics, brick and tile manufacturing, semiconductor chips, beverages, and breakfast cereals. 17-2 Process costing systems separate costs into cost categories according to the timing of when costs are introduced into the process. Often, only two cost classifications, direct materials and conversion costs, are necessary. Direct materials are frequently added at one point in time, often the start or the end of the process, and all conversion costs are added at about the same time, but in a pattern different from direct materials costs. 17-3 Equivalent units is a derived amount of output units that takes the quantity of each input (factor of production) in units completed or in incomplete units in work in process, and converts the quantity of input into the amount of completed output units that could be made with that quantity of input. Each equivalent unit is comprised of the physical quantities of direct materials or conversion costs inputs necessary to produce output of one fully completed unit. Equivalent unit measures are necessary since all physical units are not completed to the same extent at the same time. 17-7 The weighted-average process-costing method calculates the equivalent-unit cost of all the work done to date (regardless of the accounting period in which it was done), assigns this cost to equivalent units completed and transferred out of the process, and to equivalent units in ending work-in-process inventory. 17-8 FIFO computations are distinctive because they assign the cost of the previous accounting period’s equivalent units in beginning work-in-process inventory to the first units completed and transferred out of the process and assigns the cost of equivalent units worked on during the current period first to complete beginning inventory, next to start and complete new units, and finally to units in ending work-in-process inventory. In contrast, the weighted-average method costs units completed and transferred out and in ending work in process at the same average cost. 17-10 A major advantage of FIFO is that managers can judge the performance in the current period independently from the performance in the preceding period. 17-16 (25 min.) Equivalent units, zero beginning inventory. 1. Direct materials cost per unit ($720,000 ÷ 10,000) $ 72 Conversion cost per unit ($760,000 ÷ 10,000) 76 Assembly Department cost per unit $148 2a. Solution Exhibit 17-16A calculates the equivalent units of direct materials and conversion costs in the Assembly Department of International Electronics in February 2007. Solution Exhibit 17-16B computes equivalent unit costs.
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This note was uploaded on 08/11/2009 for the course ACCT 612 taught by Professor Jamesswanson during the Spring '09 term at Univ. of Massachusetts Med. School.

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HDFChapter17Solutions12e - CHAPTER 17 PROCESS COSTING 17-1...

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