Concept explainers
Concept introduction:
Process cost summary is known as a production report which displays departmental expenses, the number of units produced, and the cost associated with the production units. In a nutshell, the process cost is the cost of all the production activities of the department.
Requirement 1:
Benefits of maintaining separate process cost summary reports for each process.
Concept introduction:
Just-in-time (JIT) stock system is a trick that producers make use to lift effectiveness and reduce waste by accepting goods only as they are required in the manufacturing process, thereby dipping the cost of inventory.
Requirement 2:
To explain:
Discuss reasons for cost increment while holding large units in inventory.
Concept introduction:
A hybrid costing system implements the elements of
Requirement 3:
To explain:
Reasons for implementing hybrid costing system to customize the final products.
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MANAGERIAL ACCOUNTING FUND. W/CONNECT
- The Chocolate Baker specializes in chocolate baked goods. The firm has long assessed the profitability of a product line by comparing revenues to the cost of goods sold. However, Barry White, the firms new accountant, wants to use an activity-based costing system that takes into consideration the cost of the delivery person. Following are activity and cost information relating to two of Chocolate Bakers major products: Using activity-based costing, which of the following statements is correct? a. The muffins are 2,000 more profitable. b. The cheesecakes are 75 more profitable. c. The muffins are 1,925 more profitable. d. The muffins have a higher profitability as a percentage of sales and, therefore, are more advantageous.arrow_forwardWojtek Nakowski has prepared the following list of statements about process cost accounting. Identify each statement as true or false. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. Process cost systems are used to apply costs to similar products that are mass-produced in a continuous fashion. A process cost system is used when each finished unit is indistinguishable from another. Companies that produce soft drinks, motion pictures, and computer chips would all use process cost accounting. In a process cost system, costs are tracked by individual jobs. Job-order costing and process costing track different manufacturing cost components. Both job-order costing and process costing account for direct materials, direct labour, and manufacturing overhead. Costs flow through the accounts in the same basic way for both job-order costing and process costing. In a process cost system, only one work in process inventory account is used. In a process cost system, costs are summarized in a job cost sheet. In a…arrow_forwardAPPLY THE CONCEPTS: Determine the total fixed cost Costs that are not tied to changes in production level across the relevant range are known as "fixed costs." These costs are indirectly assigned to units of production, and many factory overhead costs fall into this category. The business must ensure that all costs are assigned to the product. By assigning fixed costs, business costs are not directly tied to any one unit of production. This is important because it affects both pricing and profits. A machine on the production line at an auto company requires a periodic retooling that costs $150,000 annually. Calculate the total fixed cost per unit at different levels along the relevant range of 100,000 to 400,000 units. If required, round the per unit amounts to two decimal places. I tried using $150,000 in each place but that didn't work Number of Units Produced Fixed Cost per unit 100,000 $________ 200,000 $________ 300,000 $________ 400,000 $________arrow_forward
- APPLY THE CONCEPTS: Determine the total fixed cost Costs that are not tied to changes in production level across the relevant range are known as "fixed costs." These costs are indirectly assigned to units of production, and many factory overhead costs fall into this category. The business must ensure that all costs are assigned to the product. By assigning fixed costs, business costs are not directly tied to any one unit of production. This is important because it affects both pricing and profits. A machine on the production line at an auto company requires a periodic retooling that costs $150,000 annually. Calculate the total fixed cost per unit at different levels along the relevant range of 100,000 to 400,000 units. If required, round the per unit amounts to two decimal places. Number of Units Produced Fixed Cost per unit 100,000 $ 200,000 $ 300,000 $ 400,000 $ What is the activity base for each business and its associated costs? The first one is completed as an…arrow_forwardWhat I Know Before we begin this lesson, let us check first your prior knowledge on this module. After taking and checking this short test, take note of the items that you are not able to answer correctly and look for the right answer as you go through this module. Direction: Encircle the letter of the correct answer. 1. What type of cost includes product ingredients and materials? а. fixed b. revenue с. total d. variable 2. What type of cost includes the rental of space? а. fixed b. revenue c. total d. variable 3. What type of cost is the product of the price and the quantity sold? а. fixed b. revenue с. total d. variable 4. What concept is being described when the business will neither earn a profit nor suffer a loss? а. break-even b. loss с. profit d. summit 5. What type of analysis shows equal revenue and total cost? а. break-even b. cost of variable c. profit-loss d. volume of salesarrow_forwardCost Classification Match each cost to the appropriate cost behavior pattern shown in graphs (a) through (l). Any graph can fit two or more patterns. The cost of lumber used to manufacture wooden kitchen tables. The cost of order fillers in a warehouse. When demand increases significantly, the number of order fillers is increased, and when demand falls off significantly, the number is decreased. The salary of the plant’s quality control inspector, who inspects each batch of products. The cost of water and sewer service to the manufacturing plant. The local municipality charges a fixed rate per gallon for usage up to 10,000 gallons and a higher charge per gallon for usage above that point. The cost of an internet connection of $23 per month. The cost of an internet connection of $10 per month plus $2 per hour of usage above 10 hours. The cost to make copies of a given document at a printing shop, where the per-copy charge is reduced for customers who make more than…arrow_forward
- The computer workstation furniture manufacturing that Santana Rey started for Business Solutions is progressing well. Santana uses a job order costing system to account for the production costs of this product line. Santana is wondering whether process costing might be a better method for her to keep track of and monitor her production costs. Required 1. What are the features that distinguish job order costing from process costing? 2. Should Santana continue to use job order costing or switch to process costing for her workstation furniture manufacturing? Explain.arrow_forwardTrue or False "Setup costs should not be allocated directly to products via machine hours." The answer is True. The company should allocate setup costs to the batch of products that will run after the setup occurs. My question: Are setup costs allocated indirectly to products via machine hours? Please explain the answer thoroughly with examples.arrow_forwardIn a manufacturing company, overhead allocations are made for three reasons: (1) to determine the full cost of a product; (2) to encourage efficient resource usage; and (3) to compare alternative courses of action for management purposes. 1. Why must overhead be considered a product cost under generally accepted accounting principles? 2. Ayam Company makes plastic dog carriers. The manufacturing process is highly automated and the machine time needed to make any size crate is approximately the same. Ayam’s management decides to begin producing plastic lawn furniture and, to do so, two additional pieces of automated equipment are acquired. Annual depreciation on the new pieces of equipment is P38,000. Should the new overhead cost be allocated over all products manufactured by Ayam? Explain.arrow_forward
- Which of the following is/are true for the cost flow process? (check all that apply) Cost of goods sold is what leaves work in process When a company buys raw materials, the raw materials purchased will be recorded as an expense on the income statement at the time of purchase. A company doesn't need to have balances greater than $0 in all three accounts: raw materials, work in process, finished goods O Work in process, raw materials, and finished goods are all under 'inventory' in the asset section on the balance sheet Question 9 Assume Tsoi Company has the following sales and production budget for a line of shoes: January March 5,000 pair of shoes 6,500 pair of shoes 5,200 pair of shoes 6,700 pair of shoes Sales Production February 7,000 pair of shoes 7,400 pair of shoes Assume Tsoi Company uses 3 feet of string for laces per pair of shoes. Tsoi Company wants to have direct materials on hand at the end of each month equal to 7% of the following month's production needs. How many feet…arrow_forwardAssume that a company has recently switched to JIT manufacturing. Each manufacturing cell produces a single product or major subassembly. Cell workers have been trained to perform a variety of tasks. Additionally, many services have been decentralized. Costs are assigned to products using direct tracing, driver tracing, and allocation. For each cost listed, indicate the most likely product cost assignment method used before JIT and after JIT. Set up a table with three columns: Cost Item, Before JIT, and After JIT. You may assume that direct tracing is used whenever possible, followed by driver tracing, with allocation being the method of last resort. Inspection costs Power to heat, light, and cool plant Minor repairs on production equipment Salary of production supervisor (department/cell) Oil to lubricate machinery Salary of plant supervisor Costs to set up machinery Salaries of janitors Power to operate production equipment Taxes on plant and equipment Depreciation on production…arrow_forward1. Explain the role of activity drivers in assigning costs to products. 2. Why are the accounting requirements for job order costing more demanding than those of process costing? 3. Folio Glass produces custom glass platters. For one job, the trainee assigned to cut the glass set the template incorrectly into the computer. This template was unusable and had to be discarded; another template was cut to the correct dimensions. How is the cost of the spoiled template handled?arrow_forward
- Managerial AccountingAccountingISBN:9781337912020Author:Carl Warren, Ph.d. Cma William B. TaylerPublisher:South-Western College PubFinancial And Managerial AccountingAccountingISBN:9781337902663Author:WARREN, Carl S.Publisher:Cengage Learning,