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Chapter 16: Q4DQ (page 743)

Are the journal entries that match cost flows to product flows in process costing primarily the same or much different than those in job order costing? Explain.

Short Answer

Expert verified

Thejournal entries that are made to match the cost flow to the product flow are similar for process costing and job order costing.

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01

Definition of Process Costing

The cost method used by the business entity that produces a higher number of products with similar specifications is known as process costing. Under this method, the total cost incurred by the business entity is allocated to each unit by dividing the total cost by the total units produced.

02

Difference between the journal entries made under process and job order costing

The difference between process costing and job order costing in respect of the journal entries made for matching the cost flow to product flow is that process costing uses more work-in-process inventory accounts than they used in job order costing.

03

Similarities between the journal entries made under process and job order costing

The journal entries made for matching the cost flow to product flow are similar for both processes costing and job order costing. Under both of these methods, the material flows to the production process or jobs, and the direct labor is charged to the product.

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Most popular questions from this chapter

Pro-Weave manufactures stadium blankets by passing the products through a weaving department and a sewing department. The following information is available regarding its June inventories:

Beginning inventory

Ending inventory

Raw material inventory

\(120,000

\)185,000

Work-in-process inventory – Weaving

300,000

330,000

Work-in-process inventory – sewing

570,000

700,000

Finished goods inventory

1,266,000

1,206,000

The following additional information describes the company’s manufacturing activities for June:

Raw material purchased (on credit)

\(500,000

Factory payroll cost (paid in cash)

3,060,000

Other factory overhead cost (Other accounts credited)

156,000

Material used:

Direct – Weaving

\)240,000

Direct – Sewing

75,000

Indirect

120,000

Labor used

Direct Weaving

\(1,200,000

Direct – Sewing

360,000

Indirect

1,500,000

Overhead rates as percent of direct labor

Weaving

80%

Sewing

150%

Sales (on credit)

\)4,000,000

Required

1. Compute the (a) cost of products transferred from weaving to sewing, (b) cost of products transferred from sewing to finished goods, and (c) cost of goods sold.

2. Prepare journal entries dated June 30 to record (a) goods transferred from weaving to sewing, (b) goods transferred from sewing to finished goods, and (c) sale of finished goods.

The following partially completed process cost summary describes the July production activities of Ashad Company. Its production output is sent to its warehouse for shipping. All direct materials are added to products when processing begins. Beginning work in process inventory is 20% complete with respect to conversion. Prepare its process cost summary using the weighted-average method.

Equivalent units of production

Direct material

Conversion

Units transferred out

32,000 EUP

32,000 EUP

Units of ending work-in-process

2,500 EUP

1,500 EUP

Equivalent units of production

34,500 EUP

33,500 EUP

Cost per EUP

Direct material

Conversion

Cost of beginning work-in-process

\(18,550

\)2,280

Cost incurred in this period

357,500

188,670

Total costs

\(376,050

\)190,950

Units in beginning work-in-process (all completed during July)

2,000

Units started this period

32,500

Units completed and transferred out

32,000

Units in ending work-in-process

2,500

Question: Label each statement below as either true (T) or false (F).

1. The cost per equivalent unit is computed as the total costs of a process divided by the number of equivalent units passing through that process.

2. Service companies are not able to use process costing.

3. Costs per job are computed in both job order and process costing systems.

4. Job order and process operations both combine materials, labor, and overhead in producing products or services.

The focus in a job order costing system is the job or batch.

Identify the main focus in process costing.

The computer workstation furniture manufacturing that Santana Rey started for Business Solutions is progressing well. Santana uses a job order costing system to account for the production costs of this product line. Santana is wondering whether process costing might be a better method for her to keep track of and monitor her production costs.

Required

  1. What are the features that distinguish job order costing from process costing?
  2. Should Santana continue to use job order costing or switch to process costing for her workstation furniture manufacturing? Explain.
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