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Unformatted text preview: CHAPTER 5 QUESTIONS 1. The two basic systems of cost accounting are the job order cost system and the proc- ess cost system. The job order cost system may be used advantageously when goods are produced in lots of predetermined quan- tity usually based on customers' specifications. The process cost system may be used advantageously when goods are produced continuously as in the case of mass production industries. 2. Job Order Cost System items b, c, f Process Cost System items a, d, e, g, h 3. In a job order cost system, (a) costs are ac- cumulated by specific jobs or orders, and (b) unit costs are calculated at the time the job or order is finished. In a process cost sys- tem, (a) costs are accumulated by proc- esses or departments, and (b) unit costs are calculated at the end of a given period, usually a month, for each process or department. 4. The term &quot;unit cost&quot; refers to the average cost of producing each unit manufactured during a given period; the term &quot;job cost&quot; refers to the cost of producing each job completed or fully manufactured during a given period. A job may consist of any num- ber of units. 5. a. In accounting for materials under a job order cost system, the costs, as deter- mined from materials requisitions, are charged to specific jobs or to factory overhead. Under the process cost sys- tem, these costs are charged to the de- partments to which the materials were issued. b. The cost of labor under the job order cost system is charged to specific jobs worked on or to factory overhead as indicated on the labor-time records . The cost of labor under the process cost system is charged to the departments in which the work was done. c. The factory overhead charged to jobs is usually based on a predetermined rate under the job order cost system. Under the process cost system, these costs are gathered and distributed to departments, and a predetermined rate for each department is used to apply overhead to Work in Process. 6. The primary objective in accumulating costs by departments is to determine the amount of manufacturing expenses to be borne by the product as it passes through each de- partment or process. This facilitates better control by making available unit costs of production for each department, which can then be added together to determine the total unit cost of the product. 7. The term &quot;equivalent production&quot; is used to describe what the effect would have been in terms of finished units. For example, if 1,000 units are completed during the period and there are 500 units in process estimated to be one-half completed at the end of the period, equivalent production in whole units is 1,250 units [ 1,000 + (500 x .50) ]. 8. It is necessary to estimate the stage of completion of work in process at the end of the accounting period so that the costs incurred during the period may be properly allocated between the goods finished during the period and those in process at the end of the period....
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This note was uploaded on 07/10/2011 for the course BUSINESS 550 taught by Professor Backer during the Spring '11 term at Limestone.
- Spring '11
- Cost Accounting