Concept explainers
- A. Name two principal types of cost accounting systems.
- B. Which system provides for a separate record of each particular quantity of product that passes through the factory?
- C. Which system accumulates the costs for each department or process within the factory?
(a)
Provide the two principal types of cost accounting systems.
Explanation of Solution
Cost accounting systems
It is a system which measures, record and report the product costs. In decision making process, managers use product cost for determining the prices of the product, controlling the operations of the business, and developing financial statements.
The two principal types of cost accounting systems are:
- 1. Job order cost system
- 2. Process cost system.
(b)
Provide the system that provides for a separate record of each particular quantity of product that passes through the factory.
Explanation of Solution
Job order cost system provides a separate record of each particular quantity of product that passes through the factory. Each quantity that is manufactured in the business is known as job.
(c)
Identify the system that accumulates the cost for each department or process within the factory.
Explanation of Solution
The process cost system accumulates the cost for each department or process within the factory. They are used by the companies which deal with manufacturing goods which are indistinguishable from each other and by using continuous manufacturing process.
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Chapter 2 Solutions
Managerial Accounting
- Assigning indirect costs to departments is completed by __________________________. applying the predetermined overhead rate debiting the manufacturing costs incurred applying the costs to manufacturing overhead applying the costs to work in process inventoryarrow_forwardDuring production, how are the costs in process costing accumulated? A. to cost of goods sold B. to each individual product C. to manufacturing overhead D. to each individual departmentarrow_forwardIn a process costing system, which account shows the overhead assigned to the department? A. cost of goods sold B. finished goods inventory C. raw material inventory D. work in process inventoryarrow_forward
- What criteria must be met for a unit of activity within the factory to qualify as a cost center?arrow_forwardAssigning indirect costs to specific jobs is completed by which of the following? applying the costs to manufacturing overhead using the predetermined overhead rate using the manufacturing costs incurred applying the indirect labor to the work in process inventoryarrow_forwardWhat is the function and use of each of the two types of factory overhead analysis spreadsheets?arrow_forward
- In a process cost system, factory depreciation expense incurred is debited to _____________________. finished goods inventory work in process inventory manufacturing overhead cost of goods soldarrow_forwardWhich of the following production characteristics is better suited for process costing and not job order costing? Each product batch is distinguishable from the prior batch. The costs are easily traced to a specific product. Costs are accumulated by department. The value of work in process is the direct material used, the direct labor incurred, and the overhead applied to the job in process.arrow_forwardWhich of the following product situations is better suited to job order costing than to process costing? A. Each product batch is exactly the same as the prior batch. B. The costs are easily traced to a specific product. C. Costs are accumulated by department. D. The value of work in process is based on assigning standard costs.arrow_forward
- The following items are associated with a traditional cost accounting information system, an activity-based cost accounting information system, or both (that is, some elements are common to the two systems): a. Usage of direct materials b. Direct materials cost assigned to products using direct tracing c. Direct labor cost incurrence d. Direct labor cost assigned to products using direct tracing e. Setup cost incurrence f. Setup cost assigned using number of setups as the activity driver g. Setup cost assigned using direct labor hours as the activity driver h. Cost accounting personnel i. Submission of a bid, using product cost plus 25 percent j. Purchasing cost incurrence k. Purchasing cost assigned to products using direct labor hours as the activity driver l. Purchasing cost assigned to products using number of orders as the activity driver m. Materials handling cost incurrence n. Materials handling cost assigned using the number of moves as the activity driver o. Materials handling cost assigned using direct labor hours as the activity driver p. Computer q. Costing out of products r. Decision to continue making a part rather than buying it s. Printer t. Customer service cost incurred u. Customer service cost assigned to products using number of complaints as the activity driver v. Report detailing individual product costs w. Commission cost x. Commission cost assigned to products using units sold as the activity driver y. Plant depreciation z. Plant depreciation assigned to products using direct labor hours Required: 1. For each cost system, classify the relevant items into one of the following categories: a. Interrelated parts b. Processes c. Objectives d. Inputs e. Outputs f. User actions 2. Explain the choices that differ between the two systems. Which system will provide the best support for the user actions? Explain. 3. Draw an operational model that illustrates each cost accounting systemwith the items that belong to the system used as examples for each component of the model. 4. Based on the operational models, comment on the relative costs and benefits of the two systems. Which system should be chosen?arrow_forwardWhich of the following statements is true? a. Job-order costing is used only in manufacturing firms. b. Process costing is used only for services. c. Job-order costing is simpler to use than process costing because the recordkeeping requirements are less. d. The job cost sheet is subsidiary to the work-in-process account. e. All of these.arrow_forwardIs it possible to close the total factory overhead to the individual producing departments with a single journal entry?arrow_forward
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