Cornerstones of Managerial Accounting Study Set 5

Business

Quiz 6 :

Process Costing

Quiz 6 :

Process Costing

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costs transferred from a prior process to a subsequent process are
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Identify correct option among the five:
Correct option is (c)
The costs transferred from a prior process to a subsequent process are referred to as the cost of goods transferred in (for the transferring department).
Explanation:
The cost transferred from prior process to subsequent process are referred to as the cost of goods transferred in for receiving process or transferring department and cost of goods transferred out for prior process or transferor department.

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record the transfer of costs from a prior process to a subsequent process, the following entry would be made:
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Identify correct option among the five:
Correct option is (d)
To record the transfer of cost from a prior process to a subsequent process, the following entry would be made debit Work in Process (subsequent department) and credit Work in Process (prior department).
Explanation:
Journal entry of transferring from prior process to subsequent process is follows:
Receiving process Debit
Giving process Credit
Answer is reflected only in option (d)

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Under the weighted average method, how are prior period costs and output treated? How are they treated under the FIFO method?
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Treatment of prior period cost and prior period output:
Treatment of prior period cost and prior period output under weighted average method and FIFO method are mentioned as follows:
Under weighted average method:
Under weighted average method, prior period cost and cost related to current period are combined. It is assumed that cost as well as output that are carried from the prior period is treated as they are related to the current period. Therefore, the inventory level at the beginning and the costs are combined with the work as well as costs related to current period. After including the prior period cost, the total cost is taken as if it is current periods manufacturing cost. Finally, per unit of an average cost is calculated and apportioned to both units that are transferred as well as the units that lie as the ending inventory.
Under First-in-First Out (FIFO) method:
Under First-in-First Out (FIFO) method, work as well as cost of prior period are kept separate from the work and cost related to the current period. Therefore to calculate the unit cost of the current period, the work as well as cost related to current period only is considered. The assumption is that units related to beginning period are finished first and then transferred. Units that are started in the current period are classified into two different categories that are units started and finished and units started and not finished. Units related to both of the categories are then valued as per the cost per equivalent unit of current period.

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would process costing for services differ from process costing for manufactured goods?
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are equivalent units? Why are they needed in a process-costing system?
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are the similarities in and differences between the manufacturing cost flows for joborder firms and process firms?
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mixing department incurred $46,000 of manufacturing costs during the month of September. The department transferred out 2,300 units and had 500 units in EWIP, 40% complete. There was no BWIP. The cost of goods transferred out is
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Job-order costing works well whenever
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Under what conditions will the weighted average and FIFO methods give the same results?
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Describe the differences between process costing and job-order costing.
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journal entry would be made as goods are transferred out from one department to another department? From the final department to the warehouse?
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During the month of May, the grinding department produced and transferred out 2,300 units. EWIP had 500 units, 40% complete. There was no BWIP. The equivalent units of output for May are
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Process costing works well whenever
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does the adoption of a JIT approach to manufacturing affect process costing?
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Describe the five steps in accounting for the manufacturing activity of a processing department, and explain how they interrelate.
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Sequential processing is characterized by
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During May, Kimbrell Manufacturing completed and transferred out 100,000 units. In EWIP, there were 25,000 units, 40% complete. Using the weighted average method, the equivalent units are
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mixing department incurred $46,000 of manufacturing costs during the month of September. The department transferred out 2,300 units and had 500 units in EWIP, 40% complete. There was no BWIP. The unit cost for the month of September is
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mixing department incurred $46,000 of manufacturing costs during the month of September. The department transferred out 2,300 units and had 500 units in EWIP, 40% complete. There was no BWIP. The cost of EWIP is
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Distinguish between sequential processing and parallel processing.
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