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
2. The main focus in process costing is the production department (process).
3. Yes, services can be delivered by processes. For example, Federal Express delivers
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
5. A materials consumption report is an alternative control document.
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”
8. A process cost accounting system treats labor that is used entirely within one
production department as direct labor. The labor may include the software engineer
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9. Direct labor costs flow first from the Factory Payroll account to the Work in Process
10. At the end of the accounting period the Factory Overhead account should have a
zero balance.
11. Yes, it is possible to have either underapplied or overapplied overhead in a process
12. 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
13. The four steps in accounting for production activity (for process operations) are: 1)
14. The process cost summary serves at least three purposes: (a) to help department
managers control their departments; (b) to help factory managers evaluate
15. 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)
Quick Study 20-2 (5 minutes)
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Chapter 20 – Process Costing
Quick Study 20-3 (10 minutes)
Quick Study 20-4 (10 minutes)
Units
Units in beginning inventory 150,000
+ Units started 310,000
Quick Study 20-5 (10 minutes)
Equivalent units under the weighted-average method
Equivalent
EUP for conversion—Weighted average Units
Units completed and transferred out (340,000 x 100%).……………….. 340,000
Quick Study 20-6 (10 minutes)
Equivalent units under the FIFO method
Equivalent
EUP for conversion—FIFO Units
Equivalent units to complete beginning WIP (150,000 x 20%)......... 30,000
Equivalent units started and completed*………………..…………………… 190,000
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Chapter 20 – Process Costing
340,000 – 150,000 = 190,000
Quick Study 20-7 (5 minutes)
Cost per equivalent unit of production–weighted-average method
Beginning inventory cost + Current production costs = $394,900 + $907,500
Equivalent units of production 740,000
= $1,302,400 = $1.76 per EUP
740,000
Quick Study 20-8 (10 minutes)
Equivalent units under the weighted-average method
Equivalent
EUP for conversion—Weighted average Units
Quick Study 20-9 (15 minutes)
Equivalent units under the FIFO method
Equivalent
EUP for conversion—FIFO Units
* Units completed – Units in beginning work in process = Units started and completed
680,000 – 320,000 = 360,000
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Chapter 20 – Process Costing
Equivalent units of production—Weighted
average
Materials Conversion
Units completed & transferred out (9,000 x 100%)...............9,000 9,000
Units of ending work in process
Quick Study 20-11 (25 minutes)
Cost per equivalent unit—Weighted average
Direct
Materials Conversion
Costs of beginning work in process………………………...$ 996 $ 585
Costs incurred this period…………………………………….… 10,404 12,285
Quick Study 20-12 (10 minutes)
Cost assignment—Weighted average
Direct
Materials Conversion
Costs of units transferred out
Direct materials (9,000 EUP* x $1.00 per EUP)......... $9,000
Conversion (9,000 EUP* x $1.30 per EUP)…............. 11,700
Total costs transferred out……………………..……………… $20,700
Costs of ending work in process
*EUP from QS 20-10
**Equals costs to account for of $24,270, computed as $1,581 + $10,404 + $12,285
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Chapter 20 – Process Costing
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
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