Acct 505 Mid Term Essay

inventory using the cost method and did not change the method used during the current

“Companies can choose to use the accounting job order costing method when they have a single product line or numerous products to manufacture. However, it is less costly and less time-consuming if they elect to use process costing when calculating the manufacturing of a single product line. With similarities

Profit: $686,670 ($225*$5,000= $1,125,000 (Revenue); $75*4,000=$300,000 + $50,000/4,000= $87.50 (Unit Cost); $87.50*4,000= $350,000 + $83,330= $433,330

Compute the equivalent units of production and the cost per equivalent units for materials and for conversion costs.

If the "by-product" units (400s) are considered a joint product, the average cost is $.40 per unit ($200,000 ÷ 500,000 units).

Calculate the total cost of the 24,000 units in beginning work in process using the FIFO process costing method.

15) Which of the following companies is most likely to use a process costing system. A) a manufacturer of breakfast cereal B) a manufacturer of large commercial aircraft C) a custom jewelry manufacturer D) a law firm Answer: A Diff: 1 Terms: process costing Objective: 2 AACSB: Reflective thinking

9. Assuming that the company uses the weighted-average cost method, what are the equivalent units of production for conversion costs for the Blending Department for the month?

12. Using the average cost method of process costing, the computation of manufacturing cost per equivalent

ABC should be distinguished from the traditional costing method. The traditional costing method (particularly the absorption costing) allocates direct costs to the corresponding products while the overhead costs for each set of products are allocated proportionately according to the proportion of chosen cost driver (Vazakidis & Karagiannis, 2011). By using the product cost systems, such as process costing, job costing, and activity base costing, managers can have well understanding about the cost allocation for their productions, so that they can make better decisions. Therefore, managers need to proper choice the product costing

Solution Exhibit 18-18 calculates the costs per equivalent unit for direct materials and conversion costs, summarizes total costs to account for, and assigns these costs to units completed and transferred out (including normal spoilage), to abnormal spoilage, and to units in ending work in process.

1a) Activity based costing is a relatively new type of procedure that can be used as an inventory valuation method. The technique was developed to provide more accurate product costs. This improved accuracy is accomplished by tracing costs to products through activities. In other words, costs are traced to activities (activity costing) and then these costs are traced, in a second stage, to the products that use the activities. Another way to express the idea is to say that activities consume resources and products consume activities. Essentially, an attempt is made to treat all costs as variable, recognizing that all costs vary with something, whether it is production volume or some non-production volume related phenomenon. Both

Process costing refers to a manufacturing costing system that measure and record the net costs involved in a production process in terms of recording and adding up all direct costs and assigning indirect costs of the production process (K. Langfield-Smith, Thorne, & Hilton, 2012). As majority of production processes include more than one step, similar measurements are made for each step in order to get the average unit cost for the overall manufacturing system (K. Langfield-Smith et al., 2009). It needs to obtain direct costs of a manufacturing system such as costs of materials. It also needs to obtain indirect costs that are not directly accountable to the production such as labour and directors salary.

3) These standard costs were allocated for manufacturing overhead for determining the companies’ revenue and profit margins based off the final product and sales. These allocated cost were then measured by accounting, with primary focus on the utilization capacity of the manufacturing plant. The conventional quantities, for example labor utilization, selling price variance, production proficiencies, amongst other manufacturing identities procedures. These types of processes lead to a factory that produces large amounts of scrap, poor quality products, increased shipping costs, customer dissatisfaction, shortages, etc. These issues are common in factories however, can be avoided if Lean processes can be applied. Ideally this would incorporate understanding the necessary resources and unnecessary procedures.

The cost of each process is thus made up to cost brought forward from the previous process and net cost of material, labour and overhead added in that process after reducing the sales value of scrap. The net cost of the finished process is transferred to the finished goods account. The net cost is divided by the number of units produced to determine the average cost per unit in that process.