Chapter 4:process cost accounting

Question 1

Describe Process cost accounting

Answer 1

involves mass producing products

- used to apply costs to similar products that are mass produced

Question 2

How are manufacturing costs applied in process costing

Answer 2

applied on a departmental basis rather than on a job basis

Question 3

When would a service company use a process costing

Answer 3

repetitive routine tasks

• Mr lube - routine aspects of car care
• H&R block - routine aspects of basic tax practice
• Large Law firm - routine legal services, such as uncomplicated divorces

Question 4

How job order costing and process costing similar?

Answer 4

1 manufacturing cost elements track dir labour, dir materials and moh

2. the accumulation of the costs of material, labour and overhead (use same journal entries)
3. the flow of costs

Question 5

What are the differences between job order and process costing

Answer 5

1. the number of WIP accounts used
2. Documents used
3. the point at which costs are totalled
   (job order - when complete, process - at end of period)
4. unit of cost calculation
   job order - total cost/job / units produced
   process - total man. cost for the period / the units produced in the period

Question 6

What is operations costing

Answer 6

combination of process costing and job order costing

• also called a hybrid
• similar to process costing but have customized, individual features that require job order costing

Question 7

What would the journal entry be to transfer from one WIP department to another

Answer 7

WIP - assembly xx

WIP - machining xx

Question 8

What are the two method of calculating Equivalent units

Answer 8

1. weighted average method

2. FIFO method

Question 9

what is the document used in process costing

Answer 9

Production cost report for each department

Question 10

what are the steps in the production cost report

Answer 10

1. Calculate physical units
2. Calculate equivalent units of production
3. Calculate the unit production costs
   (material cost, conversion cost, total MAn cost
4. Prepare a cost reconciliation report