Warren%20SMChap18_03_.pdf - CHAPTER 18(FIN MAN CHAPTER...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
71 CHAPTER 18 (FIN MAN) CHAPTER 3 (MAN) PROCESS COST SYSTEMS EYE OPENERS 1. a. 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. b. 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. 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 process cost system would be best suited for a paper manufacturer be- cause the processes are continuous and the products are homogeneous. e. 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. 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 individ- ual production departments in which they occur. 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 department 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 assigned costs. (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 repre- sent the total number of units that would have been completed within a processing department as a result of the productive ef- forts during a period. They are the portion of the whole units that are completed with re- spect to material or conversion costs during the period. Equivalent units may be said to measure the productive activity for a given period. 7. The cost per equivalent unit is frequently determined separately for direct materials and conversion costs because these two costs are frequently incurred at different rates in the production process. For exam- ple, materials may be incurred entirely at the beginning of the process, while conversion costs are typically incurred evenly through- out the process. 8.
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 07/17/2011 for the course ACCT 102 taught by Professor Martinez during the Summer '11 term at Rio Hondo College.

Page1 / 72

Warren%20SMChap18_03_.pdf - CHAPTER 18(FIN MAN CHAPTER...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online