Ignoring the necessity to trace significant direct

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Financial and Managerial Accounting Using Excel for Success
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Chapter 18 / Exercise PR 18–4B
Financial and Managerial Accounting Using Excel for Success
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Ignoring the necessity to trace significant, direct costs to specific jobs in hybrid manu- facturing situations and thereby understating the cost of products containing high- cost components or materials and overstating the cost of products containing low-cost components or materials 4. Treating abnormal spoilage as normal spoilage and thereby inflating the cost of “good” units and not reporting the abnormal spoilage as a current period loss on the income statement Questions 1. What are the characteristics of a company that would be more likely to use process costing than job order costing? Ethics Chapter 6 Process Costing 241
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Financial and Managerial Accounting Using Excel for Success
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Chapter 18 / Exercise PR 18–4B
Financial and Managerial Accounting Using Excel for Success
Reeve/Warren
Expert Verified
242 Chapter 6 Process Costing 2. How do the weighted average and first-in, first-out methods of process costing differ in their treatment of beginning Work in Process Inventory units? 3. What is an “equivalent unit of production,” and why is it a necessary concept to employ in a process costing system? 4. Is one equivalent unit computation suffi cient for all cost components? Explain your answer. 5. What is meant by the phrase units started and completed ? Why is this phrase more closely associated with the first-in, first-out method of process costing than with the weighted average method? 6. What is meant by the term transferred-out cost ? Why does the transferred-out cost under the WA method include only one computation but the FIFO method includes multiple computations? 7. How is the cost of ending inventory calculated in a process costing system? 8. Which cost component can be found in a downstream department of a multidepart- ment production process that will not be present in the first upstream department? Discuss. 9. A company has two sequential processing departments. On the cost of production reports for the departments, will the cost per unit transferred out of the first depart- ment always be equal to the cost per unit transferred in to the second department? Explain. 10. Why does standard costing make process costing more clerically and computationally effi cient? 11. What is a hybrid costing system? In what circumstances are hybrid costing systems typically employed? 12. (Appendix 2) What is meant by the “method of neglect”? How does the use of this method affect cost of good production? 13. (Appendix 2) In a process costing system, how are normal and abnormal spoilage typi- cally treated? Why are normal and abnormal spoilage treated differently? Exercises

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