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Chapter 16: Q5BTN (page 761)

Many companies acquire software to help them monitor and control their costs and as an aid to their accounting systems. One company that supplies such software is proDacapo (prodacapo.com). There are many other such vendors. Access proDacapo’s website, click on “Products,” then click on “Prodacapo Process Management,” and review the information displayed.

Required

How is process management software helpful to businesses? Explain with reference to costs, efficiency, and examples, if possible.

Short Answer

Expert verified

Process management softwareallows companiesto measureand improve the performance of their processes.

Step by step solution

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01

Meaning of Process Management Software

Business process management software is a program that helps customers streamline a company's operating processes and workflow to make them more effective and adaptable to changing market conditions.

02

Explaining how is process management software helps businesses

A firm can benefit from such software in several ways.

  1. Organizations can develop process maps using this software to examine and explain processes and workflows.
  2. It makes papers, reports, and analyses accessible through web browsers.
  3. It enables businesses to evaluate and enhance the efficiency of their procedures.
  4. It enables businesses to pinpoint, depict, and quantify issues with their processes and their potential for improvement to save time and money.

It includes a cost per process and activity computation.

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Most popular questions from this chapter

Switch Co. manufactures a single product in one department. Direct labor and overhead are added evenly throughout the process. Direct materials are added as needed. The company uses monthly reporting periods for its weighted-average process costing. During January, Switch completed and transferred 220,000 units of product to finished goods inventory. Its 10,000 units of beginning work in process consisted of \(7,500 of direct materials and \)49,850 of conversion. In process at month-end are 40,000 units (50% complete with respect to direct materials and 30% complete with respect to conversion). During the month, the company used direct materials of \(112,500 in production and incurred conversion costs of \)616,000.

Required

  1. Prepare the company’s process cost summary for January using the weighted-average method.
  2. Prepare the journal entry dated January 31 to transfer the cost of completed units to finished goods inventory.

Analysis Component

3. The cost accounting process depends on several estimates.

a. Identify two major estimates that affect the cost per equivalent unit.

b. In what direction might you anticipate a bias from management for each estimate in part 3a (assume that management compensation is based on maintaining low inventory amounts)? Explain your answer

This chapter’s opener featured Jeff Kearl and his company Stance.

Required

1. Sock makers like Stance typically use several different processes, including knitting, design imprinting, washing and drying, inspection, and packaging/shipping. What are some benefits of using separate process cost summary reports for each process?

2. Jeff tries to order raw materials just-in-time for their use in production. How does holding raw materials inventories increase costs? If the items are not used in production, how can they impact profits? Explain.

3. How can companies like Stance use yield to improve their production processes?

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.

Dream Toys Company manufactures video game consoles and accounts for product costs using process costing. The company uses a single processing department. The following information is available regarding its June inventories.

Beginning Inventory

Ending Inventory

Raw materials inventory

\( 72,000

\)110,000

Work in process inventory

156,000

250,000

Finished goods inventory

160,000

198,000

The following additional information describes the company’s production activities for June.

Raw materials purchases (on credit)

\( 200,000

Factory payroll cost (paid in cash

400,000

Other overhead cost (Other Accounts credited)

170,500

Materials used

Direct

\) 120,000

Indirect

42,000

Labor used

Direct

\( 350,000

Indirect

50,000

Overhead rate as a percent of direct labor

75%

Sales (on credit)

\)1,000,000

Required

  1. Compute the cost of (a) products transferred from production to finished goods and (b) goods sold.

2. Prepare journal entries dated June 30 to record the following production activities during June: (a) raw materials purchases, (b) direct materials usage, (c) indirect materials usage, (d) direct labor costs, (e) indirect labor costs, (f) payment of factory payroll, (g) other overhead costs, (h) overhead applied, (i) goods transferred from production to finished goods, and (j) sale of finished goods.

Question: Explain why equivalent units of production for both direct labor and overhead can be the same as, and why they can be different from, equivalent units for direct materials.
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