Chapter 18: Q1RQ (page 1005)
Question: What types of companies use job order costing systems?
Answer:
The companies that manufacture the specific or unique products in small quantities and provide specialized services to the customers or clients of the company uses the job order costing system.
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Smith Paper Co. produces the paper used by wallpaper manufacturers. Smith’s four-stage process includes mixing, cooking, rolling, and cutting. On March 1, the Mixing Department had 400 rolls in process. During March, the Mixing Department completed the mixing process for those 400 rolls and also started and completed the mixing process for an additional 4,100 rolls of paper. The department started but did not finish the mixing process for an additional 500 rolls, which were 20% complete with respect to both direct materials and conversion work at the end of March. Direct materials and conversion costs are incurred evenly throughout the mixing process. The Mixing Department compiled the following data for March:
Direct materials | Direct labor | Manufacturing overhead allocated | Total costs | |
Beginning inventory, Mar. 1 | \(475 | \)275 | \(300 | \)1,050 |
Costs added during March | 5,045 | 2,900 | 2,965 | 10,910 |
Total costs | \(5,520 | \)3,175 | \(3,265 | \)11,960 |
Requirements
1. Prepare a production cost report for the Mixing Department for March. The company uses the weighted-average method.
2. Journalize all transactions affecting the company’s mixing process during March. Assume labor costs are accrued and not yet paid.
Match each costing system characteristic to job order costing, process costing, or both.
1. Used by companies that manufacture identical items through a series of uniform production steps or processes
2. Transfers costs from Work-in-Process Inventory to Finished Goods Inventory to Cost of Goods Sold
3. Used by companies that manufacture unique products or provide specialized services
4. Has multiple Work-in-Process Inventory accounts
5. Tracks direct materials, direct labor, and manufacturing overhead costs
Refer to Short Exercise S18A-15. At Spring Fresh, water is added at the beginning of the filtration process. Conversion costs are added evenly throughout the process. Now assume that in February, 130,000 liters were completed and transferred out of the Filtration Department into the Bottling Department. The 70,000 liters remaining in Filtration’s ending Work-in-Process Inventory were 80% of the way through the filtration process. Recall that Spring Fresh has no beginning inventories.
Compute the equivalent units of production for direct materials and conversion
costs for the Filtration Department using the FIFO method.
Question: The Cutting Department has 6,500 units in process at the end of September that are 100% complete for direct materials and 85% complete for conversion costs. Calculate the equivalent units of production for direct materials and conversion costs.
Salish Craft Beers provides the following information for the Malting Department for the month of August 2018:
| UNITS | COSTS | |
Beginning Work-in-Process Inventory | 0 | \(0 |
Started in Production in August | 26,000 | 54,000* |
Total to Account For | 26,000 | \)54,000 |
Completed and Transferred to Packaging Department during August | 21,000 | ? |
Ending Work-in-Process Inventory (30% complete for direct materials and 60% complete for conversion work) | 5,000 | ? |
Total Accounted For | 26,000 | \(54,000 |
* Includes \)18,000 direct materials and $36,000 conversion costs |
Requirements
Complete a production cost report for the Malting Department for the month of August 2018 to determine the cost of the units completed and transferred out, and the cost of the ending Work-in-Process Inventory. Assume Salish Craft Beers uses the weighted average method.
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