Ethics Challenge — BTN 20-3
MEMORANDUM
TO:
FROM:
DATE:
SUBJECT:
expanding one’s knowledge about a particular industry, product, and
process—students are likely to have additional insights.
(1) First, the professional should read a quality trade journal in the selected
industry. Another useful part of this first step is to access company
and other related websites for further introductory information.
This would include spending time on the shop floor and become
involved as a team member of, for example, product development.
Communicating in Practice — BTN 20-4
MEMORANDUM
TO:
FROM:
source of confusion. In addition to the memorandum’s content, the
instructor should look for a student’s ability to be diplomatic in the
communication.
Points the memorandum should make include:
1. The reason for the assistant’s confusion. Given the assistant’s
2. Since your company does not limit production to specific batches of
3. It is important to recognize that the cost object is the process, not the
job. If costs are traceable to the cost object, they are direct costs.
4. In job order cost accounting, materials and labor used exclusively on
specific jobs are charged to the jobs as direct costs. Materials and
5. A process cost accounting system uses the concepts of direct and
6. Some costs classified as manufacturing overhead in a job order system
can be classified as direct costs in process cost accounting. For
example, depreciation of a machine used exclusively by one process is
a direct cost of that process.
Taking It to the Net — BTN 20-5
There are several ways that such software is helpful to a business.
This software allows companies to create process maps so they can
analyze and communicate processes and workflows.
Teamwork in Action — BTN 20-6
Each member of the team should participate in the activity to improve and
reinforce his/her understanding of the entries that correspond to Exhibit
20.14. (Note: The entries below are pro forma entries since information for
amounts are not provided in this activity.)
1. Raw Materials Inventory……………………..……………..…..#
Accounts Payable…………………………………………….. #
Purchased materials on credit.
Teamwork in Action (concluded)
4. No journal entry required
5. Work in Process Inventory……………………....…………….#
Factory Payroll Payable………………………………..….. #
To assign costs of direct labor used
in production.
9a. Work in Process Inventory-Blending…………..…….......#
Work in Process Inventory-Roasting..……….......... #
To record the transfer of partially complete
goods across processing departments.
9b. Finished Goods Inventory………………………………..…….#
Work in Process Inventory-Blending………............ #
To record the transfer of completed
goods from blending to finished
goods inventory.
To record cost of goods sold.
Entrepreneurial Decision — BTN 20-7
1. Using separate process cost summary reports for each process
enables managers to better understand costs and make decisions. For
example, Kar’s Nuts adds nuts in its first process and other
ingredients (e.g. chocolate pieces) in its second process. Separate
2. If a business unnecessarily holds materials, it will be less profitable
than a company that maintains appropriate raw materials inventory
levels. First, the inventory requires costs for storage space. Second,
when inventory is perishable, additional costs must be incurred to
keep it fresh. Third, perishable items can spoil or lose their quality
become less profitable in the long run.
3. A hybrid system combines features of both process and job order
operations. Kar’s Nuts resembles a process operation in that each
Hitting The Road — BTN 20-8
Instructor note: This assignment is designed to help students identify
specific costs in a service process costing system. The answers are likely
to be unique for each student. Below are a few suggestions. This problem
is also a review of cost classifications.
Cost
Description
Direct
Material
Direct
Labor Overhead
Variable
Cost
Fixed
Cost
Sorting
equipment
X X
Rentals X X
Overhead allocation suggestions:
Not all components should be allocated the same. Some examples:
Heating cost can be allocated on square footage.
Rent cost on the value of floor space occupied.
Global Decision — BTN 20-9
1. Ratio of Cost of Goods Sold to Total Expenses
( billions)₩Current Year Prior Year
Samsung………………..... ₩137,696.3 /
₩191,907.6
= 71.8%
₩126,651.9 /
₩172,054.2
= 73.6%
(From BTN 20-2)
2. As a percentage of total expenses, Apple spends less on selling and
administrative expenses (and more on cost of goods sold) than does