Chapter 20 – Process Costing
Chapter 20
Process Costing
QUESTIONS
1. The main deciding factor in choosing between a job order costing system or a
process costing system is the type of product or service. Examples where a
3. Yes, services can be delivered by processes. For example, Federal Express
4. The journal entries to match cost flows with product flows are primarily the same
for both process costing and job order costing. In process costing, the materials
6. The computation of equivalent units of production focuses on converting partially
completed units to a measure in terms of completed units. We need to use EUP
7. The two main methods of process costing are the weighted-average and the first-in,
first-out (FIFO) methods. The weighted-average method considers “average flow”
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Chapter 20 – Process Costing
A process cost accounting system treats labor that is used entirely within one
8. Direct labor costs flow first from the Factory Payroll account to the Work in Process
10. Yes, it is possible to have either under applied or over applied overhead in a process
11. Equivalent units for direct materials differ from that for direct labor (and overhead) if
direct materials and direct labor (and overhead) are added at different stages in the
12. The four steps in accounting for production activity (for process operations) are: 1)
13. The process cost summary serves at least three purposes: (a) to help department
managers control their departments; (b) to help factory managers evaluate
14. Yes. Google might use process costing to determine the cost of manufacturing
16. Likely processing steps for digital televisions include making the frame and
assembly of components such as the circuit board, wiring, and picture tube.
Additional processing departments likely include testing, quality inspection, and
preparing the televisions for shipping.
QUICK STUDIES
Quick Study 20-1 (5 minutes)
1. Job order operation 4. Job order operation
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Education.
Chapter 20 – Process Costing
Quick Study 20-2 (5 minutes)
Quick Study 20-3 (10 minutes)
1. Process operation. 5. Job order operation.
Quick Study 20-4 (10 minutes)
Units
Units in beginning inventory 150,000
Units completed and transferred out 340,000
Quick Study 20-5 (10 minutes)
Equivalent units under the weighted-average method
Equivalent
EUP for conversion—Weighted average Units
Quick Study 20-6 (10 minutes)
Equivalent units under the FIFO method
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Chapter 20 – Process Costing
Equivalent
EUP for conversion—FIFO Units
Equivalent units to complete beginning WIP (150,000 x 20%)……… 30,000
* Units completed – Units in beginning work in process = Units started and completed
Quick Study 20-7 (5 minutes)
Cost per equivalent unit of production–weighted-average method
Quick Study 20-8 (10 minutes)
Equivalent units under the weighted-average method
Equivalent
EUP for conversion—Weighted average Units
Units completed and transferred out (680,000 x 100%)……………….. 680,000
Units of ending work in process
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Education.
Chapter 20 – Process Costing
Quick Study 20-9 (15 minutes)
Equivalent units under the FIFO method
Equivalent
EUP for conversion—FIFO Units
Equivalent units to complete beginning WIP (320,000 x 75%)……… 240,000
Quick Study 20-10 (15 minutes)
Equivalent units of production—Weighted
average
Direct
Materials Conversion
Units completed & transferred out (9,000 x 100%)……………9,000 9,000
Quick Study 20-11 (25 minutes)
Cost per equivalent unit—Weighted average
Direct
Materials Conversion
Costs of beginning work in process……………………….. $ 996 $ 585
EUP
EUP
Quick Study 20-12 (10 minutes)
Cost assignment—Weighted average
Direct
Materials Conversion
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Education.
Chapter 20 – Process Costing
Costs of units transferred out
Direct materials (9,000 EUP* x $1.00 per EUP)……… $9,000
*EUP from QS 20-10
Quick Study 20-13 (5 minutes)
Work in Process Inventory—Painting…………………….20,700
Quick Study 20-14 (15 minutes)
Equivalent units of production—FIFO
Direct
Materials Conversion
Units to complete beginning work in process
Direct materials (2,000 x 40%)……………………………………..
800
1,200
Quick Study 20-15 (5 minutes)
Cost per equivalent unit – FIFO
Direct
Materials Conversion
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Education.
Chapter 20 – Process Costing
Costs incurred this period……………………………………… $10,404 $12,285
EUP
EUP
Quick Study 20-16 (20 minutes)
Assignment of costs to output of department—FIFO
Costs of units transferred out
Cost of beginning work in process inventory……….. $ 1,581
Costs to complete beginning work in process
*Equals costs to account for of $24,270, computed as $1,581 + $10,404 + $12,285 (from QS 20-10).
Quick Study 20-17 (5 minutes)
Work in Process Inventory—Painting…………………….20,607
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Education.
Chapter 20 – Process Costing
Quick Study 20-18 (10 minutes)
a)
Equivalent units of production—Weighted average
Direct
Materials
Units completed & transferred out (17,000 x 100%)………….17,000
b)
Cost per equivalent unit—Weighted average
Direct
Materials
Costs of beginning work in process……………………….. $ 1,200
EUP
Quick Study 20-19 (10 minutes)
Cost assignment—Weighted average
Direct
Materials
Costs of units transferred out
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Education.