Chapter 5, Problem 5.62ACT

Discussion Questions

1. 1. What characteristics of the product or manufacturing process would lead a company to use a process costing system? Give two examples of companies that are likely to be using process costing. What characteristics of the product or manufacturing process would lead a company to use a job costing system? Give two examples of companies that are likely to be using job costing.
2. 2. How are process costing and job costing similar? How are they different?
3. 3. What are conversion costs? In a job costing system, at least some conversion costs are assigned directly to products. Why do all conversion costs need to be assigned to processing departments in a process costing system?
4. 4. Why not assign all costs of production during a period to only the completed units? What happens if a company does this? Why are the costs of production in any period allocated between completed units and units in work in process? Is there any situation where a company can assign all costs of production during a period to the completed units? If so, when?
5. 5. What information generated by a process costing system can be used by management? How can management use this process costing information?
6. 6. Why are the equivalent units for direct materials often different from the equivalent units for conversion costs in the same period?
7. 7. Describe the flow of costs in a process costing system. List each type of journal entry that would be made and describe the purpose of that journal entry.
8. 8. If a company has very little or no inventory, what effect does that lack of inventory have on its process costing system? What other benefits result from having very little to no inventory?
9. 9. How does process costing differ between a first processing department and a second or later processing department?
10. 10. “Process costing is easier to use than job costing.” Do you agree or disagree with this statement? Explain your reasoning.
11. 11. Think of a business or an organization that would use process costing. What types of waste are likely to be generated during the manufacturing process? Are there ways to avoid this waste or minimize it? How might managerial accounting support the efforts to reduce waste in the production process?
12. 12. Provide an example of how a company may change its processes to make its manufacturing more efficient or environmentally sustainable. How will the company benefit?