DISCUSSION QUESTIONS
1. a. An assembly-type
industry using mass production methods, such as TV assembly, would use the
process cost system because the products are somewhat standard and lose their
identities as individual items. In such industries, it is neither practical nor
necessary to identify output by jobs.
b. A job order cost system would be used by a
building contractor to accumulate the costs for each individual building
because the costs can be identified with each job without great difficulty.
c. A job order cost system is best suited for
an automobile repair shop because costs can be reasonably identified with each
job.
d. A process cost system would be best suited
for a paper manufacturer because the processes are continuous and the products
are homogeneous.
e. A job order cost system is best suited for
a custom jewelry manufacturer because most of the production consists of job
orders and costs can be reasonably identified with each job.
2. Because all goods produced in a process
cost system are identical units, it is not necessary to classify production
costs into job orders.
3. In a process cost system, the direct labor
and factory overhead applied are debited to the work in process accounts of the
individual production departments in which they occur. The reason is that all
products produced by the department are similar. Thus, there is no need to
charge these costs to individual jobs. For the process manufacturer, the direct
materials and conversion costs are charged to the department and divided by the
completed production of the department to determine a cost per unit.
4. The cost per equivalent unit is frequently
determined separately for direct materials and conversion costs because these
two costs are frequently added at different rates in the production process.
For example, materials may be incurred entirely at the beginning of the
process, while conversion costs are typically incurred evenly throughout the
process.
5. The cost per equivalent unit is used to
allocate direct materials and conversion costs between completed and partially
completed units.
6. The transferred-in cost from Blending to
Filling includes the materials costs, direct labor, and applied factory overhead
incurred to complete units in Blending.
7. The most important purpose of the cost of
production report is to assist in the control of costs. This is accomplished by
holding each department head responsible for the costs incurred in the
department.
8. Cost of production reports can provide
detailed data about the process. The reports can provide information on the
department by individual cost elements. This can enable management to
investigate problems and opportunities.
Download Managerial Accounting 15th Edition Solutions Manual By Warren. Check out the sample chapter below!
https://easytestbanks.com/product/managerial-accounting-15th-edition-solutions-manual-by-warren/
