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Principles of Accounting, Volume 2: Managerial Accounting

Questions

Principles of Accounting, Volume 2: Managerial AccountingQuestions
1.

LO 5.1Explain how process costing differs from job order costing.

2.

LO 5.1Would a pharmaceutical manufacturer use process or job order costing? Why?

3.

LO 5.1Which costs are assigned using the weighted-average method?

4.

LO 5.1What is the primary purpose of process costing?

5.

LO 5.2What is the difference between prime costs and conversion costs?

6.

LO 5.2Explain conversion costs using an example.

7.

LO 5.2Why are there conversion costs in both job order costing and process costing?

8.

LO 5.2What are equivalent units of production, and how are they used in process costing?

9.

LO 5.2How can there be a different number of equivalent units for materials as compared to conversion costs?

10.

LO 5.2Why is the number of equivalent units for materials only sometimes equal to the equivalent units for conversion?

11.

LO 5.3What are the four steps involved in determining the cost of inventory transferred from one department to the next and the cost of work in process inventory?

12.

LO 5.3What is the weighted-average method for computing the equivalent units of production?

13.

LO 5.4How does process costing treat the costs transferred in from another department?

14.

LO 5.4Why does each department have its own work in process inventory?

15.

LO 5.5Match each term with its description.

A. conversion costs i. total of direct material costs and direct labor costs
B. cost of goods sold ii. manufacturing costs of the items sold
C. cost of production report iii. number of units produced if each unit was produced sequentially
D. cost per equivalent unit iv. total of direct labor costs, indirect labor costs, indirect material costs, and manufacturing overhead
E. equivalent units of production v. where costs in a process cost system are reported before being applied to the product
F. manufacturing department vi. detailed listing of the total costs of the product including the value of work in process
G. prime costs vii. cost of materials or conversion for a specific department during production
H. transferred out costs viii. product of the total cost per unit and the number of units completed and transferred during the time period
16.

LO 5.5How is manufacturing overhead handled in a process cost system?

17.

LO 5.5How are predetermined overhead rates used in process costing?

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