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12e_GNB_CH04_Solutions_Manual - Chapter 4 Systems Design...

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Sheet1 Page 1 Chapter 4 Systems Design: Process Costing Solutions to Questions 4-1 A process costing system should be used in situations where a homogeneous prod- uct is produced on a continuous basis. d and to provide a mechanism for computing unit product costs. 2. Both systems use the same basic manufacturing accounts. 3. Costs flow through the accounts in basically the same way in both systems. 4-3 Cost accumulation is simpler under process costing because costs only need to be assigned to departments“ not separate o company usually has a small number of processing departments, whereas a job-order costing system often must keep track o f costs of hundreds or even thousands of jobs. 4-4 In a process costing system, a Work in Process account is maintained for each separate processing department. 4-5 The journal entry would be: Work in Process, Firing . ..................................... XXXX Work in Process, Mixing . ............................. XXXX 4-6 The costs that might be added in the Firing Department include: (1) costs transferred in from the Mixing Department costs added in the Firing Department costs added in the Firing Department overhead costs added in the Firing Department.
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Sheet1 Page 2 4-7 Under the weighted-average method, equivalent units of production consist of units transferred to the next department (or to fi- nished goods) during the period plus the equiva- lent units in the department“ s ending work in process inventory. 4-8 The company will want to distinguish between the costs of the metals used to make the medallions, but the medals are otherwise identical and go through the same production processes. Thus, operation costing is ideally suited for the company& s needs. 4-9 Under the weighted-average method, each unit transferred out of the department is counted as one equivalent unit& regardless of in what period the work was done to complete the units. Under the FIFO method, only the work done in the current period is counted. Units transferred out are divided into two parts. One part consists of the units in the beginning inven- tory. Only the work needed to complete these units is shown as part of the equivalent units for the current period. The other part of the units transferred out consists of the units started and completed during the current period. 4-10 The weighted-average method mixes costs from the current period with costs from the prior period. Thus, under the weighted- average method, the department& s apparent performance in the current period is influenced to some extent by what happened in a prior pe- riod. In contrast, the FIFO method cleanly sepa- rates the costs and work of the current period from those of the prior period. This makes the FIFO method superior to the weighted-average method for cost control because current perfor- mance should be measured in relation to costs of the current period only. 4-11 Operating departments are the units in
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12e_GNB_CH04_Solutions_Manual - Chapter 4 Systems Design...

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