Essentials of Investments, 8th Edition Bodie, Kane, Marcus
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CHAPTER 11: 11: PROCESS COSTING QUESTIONS 11-1 A company that should use a process costing system typically typical ly has homogenous products, which pass through a series of similar processes or departments. These firms usually engage in continuous mass production of a few products .
11-2 Proce Process ss costi costing ng is likely likely used used in indust industrie ries s such such as chem chemic ical als, s, oil refi refinin ning, g, textiles, paints, flour, canneries, rubber, steel, glass, food processing, mining, automobile production lines, electronics, plastics, drugs, paper, lumber, leather goods, metal products, sporting goods, cement, and watches.
11-3 Differences Differences between between job and process costing: !" accumulating accumulating costs by job #s. department, $" collecting cost data using the job cost sheet #s. the production cost report, and %" computing unit cost by job #s. department. &'ui#ale alent nt units units are the the numb number er of comp comple lete ted d unit units s that that could could ha#e ha#e been been 11-4 &'ui# produced gi#en the amount of work actually performed on both complete and partially completed units.
11-5 (f direct materials materials are added at the beginning of the process rather than uniformly throughout the process, we do not need to add any e'ui#alent units of direct materials to finish the work)in)process beginning in#entory.
11-6 A production cost report is a report, which summari*es the physical units and e'ui#alent units of a department, department, the costs incurred during the period, and costs assigned to both both finished goods and work)in)process work)in)process in#entories. in#entories. The fi#e key step steps s in prepar preparing ing a produc producti tion on cost cost report report are are analy analysis sis of physic physical al units units,, calcul calculat ation ion of e'ui# e'ui#ale alent nt units units,, determ determin inat ation ion of tota totall costs costs to accou account nt for for, computation of unit costs, and assignment of total costs.
11-7 The weighted)a#erage method e'ui#alent units include both the units placed into production in the current period and the units from the prior period that are still in production at the beginning of this period. +(+ method does not include the e'ui#alent units of the prior period that are still in production at the beginning of this this period. period. &'ui#a &'ui#alent lent units under the weighted weighted)a#er )a#erage age method method are larger larger than those under the +(+ method. They They are e'ual only if there is no beginning work)in)process in#entory.
11-8 The weighted)a#erage method would be inappropriate when a firm-s beginning and ending in#entories or manufacturing costs per unit change dramatically from period to period.
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11-1
11-9 The ad#antage of the weighted)a#erage method is its simplicity. 11-10 +rom the standpoint of cost control, the +(+ method is superior to weighted) a#erage because the cost per e'ui#alent unit under +(+ represents the cost for the current period-s efforts efforts only. (t is impossible to monitor monitor cost trends using the weighted)a#erage method because the costs of the prior period and the current period are mixed together.
11-11 Transferred)in costs are costs of work done in the prior department that are transferred into the current department.
11-12 ork)in)Process (n#entory )) /econd Department ork)in)Process (n#entory )) +irst Department
xxx xxx
11-13 0nder the +(+ method of handling units transferred out, beginning in#entory cost, the cost added in this period to complete the beginning in#entory, and the cost of units started and completed are considered separately.
11-14 0nder the weighted)a#erage method, it makes no difference when a product is started1 all units completed in the same period or in the ending in#entory of that that period period are are treat treated ed the the same same.. (n comp comput uting ing the the e'ui# e'ui#ale alent nt units, units, this this method looks at only the output of the production process. (n calculating the unit cost, this method considers both the beginning work)in)process cost and the current period cost. job costing. 2ournal 11-15 Process costing uses the same manufacturing accounts as job entries are essentially the same as in job costing. 3owe#er, instead of tracing product costs to specific jobs, process costing accumulates costs in production departments or cost centers.
11-16 peration costing is a hybrid costing system that uses job costing to assign direct materials materials costs, and uses process costing to assign con#ersion costs to products or ser#ices.
11-17 Automation will reduce the difference of unit costs between the weighted) a#erage cost method and the +(+ cost method.
Blocher,Chen,Cokins,Lin: Cost Management 3e 3e 11-2
11-9 The ad#antage of the weighted)a#erage method is its simplicity. 11-10 +rom the standpoint of cost control, the +(+ method is superior to weighted) a#erage because the cost per e'ui#alent unit under +(+ represents the cost for the current period-s efforts efforts only. (t is impossible to monitor monitor cost trends using the weighted)a#erage method because the costs of the prior period and the current period are mixed together.
11-11 Transferred)in costs are costs of work done in the prior department that are transferred into the current department.
11-12 ork)in)Process (n#entory )) /econd Department ork)in)Process (n#entory )) +irst Department
xxx xxx
11-13 0nder the +(+ method of handling units transferred out, beginning in#entory cost, the cost added in this period to complete the beginning in#entory, and the cost of units started and completed are considered separately.
11-14 0nder the weighted)a#erage method, it makes no difference when a product is started1 all units completed in the same period or in the ending in#entory of that that period period are are treat treated ed the the same same.. (n comp comput uting ing the the e'ui# e'ui#ale alent nt units, units, this this method looks at only the output of the production process. (n calculating the unit cost, this method considers both the beginning work)in)process cost and the current period cost. job costing. 2ournal 11-15 Process costing uses the same manufacturing accounts as job entries are essentially the same as in job costing. 3owe#er, instead of tracing product costs to specific jobs, process costing accumulates costs in production departments or cost centers.
11-16 peration costing is a hybrid costing system that uses job costing to assign direct materials materials costs, and uses process costing to assign con#ersion costs to products or ser#ices.
11-17 Automation will reduce the difference of unit costs between the weighted) a#erage cost method and the +(+ cost method.
Blocher,Chen,Cokins,Lin: Cost Management 3e 3e 11-2
!. ork)in)process in#entory, $4! 0nits started Total Total units to account for 0nits completed ork)in)process in#entory, in#entory, $4$5
56,666 76,666 !86,666 9,666" 7,666
$. 0nits completed ork)in)process in#entory, in#entory, 74%6 Total Total units accounted for 0nits started ork)in)process (n#entory, 74!
5%,666 ,666 !%5,666 9,666" 7%,666
%. 0nits completed ork)in)process in#entory, ;4%6 Total units accounted for ork)in)process in#entory, in#entory, ;4! 0nits started
9,%66 %,866 !6,966 ,66" ,$66
8. ork)in)process in#entory, !!4! !!4! 8,666 0nits started 9,666 Total Total units to account for !6$,666 ork)in)process in#entory, in#entory, !!4%6 !!4%6 $%,666" 0nits completed 9;,666
!. ork)in)process in#entory, 4! 0nits started Total Total units to account for ork)in)process in#entory, in#entory, 4%! 0nits completed and transferred out
!,66 7,66 5,666 $,%66" ,966
$. &'ui#alent units )) eighted)A#erage Total Total e'ui#alent units
,966 !,!6 7,56
?on#ersion: 0nits completed ork)in)process in#entory, in#entory, 4%! $,%66 x %6= > Total Total e'ui#alent units
,966 7;6 7,%;6
Blocher,Chen,Cokins,Lin: Cost Management 3e 3e 11-%
@uantity /chedule (nput ork)in)process in#entory, !4! 0nits started Total units to account for
%6,666 !6,666 !56,666
utput 0nits completed ork in process in#entory, !$4%! Total units accounted for
!7,666 !,666 !56,666
&'ui#alent 0nits )) eighted)A#erage !6,66 Total e'ui#alent units !9,66 ?on#ersion: 0nits completed !7,666 ork)in)process in#entory,!$4%! !,666 x 76= > ;,666 Total e'ui#alent units !98,666
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11-#
11-21 E)*+"#,$% U$%s IO ,%h &25 '$(
@uantity /chedule not re'uired" (nput ork)in)process in#entory, ;4! 0nits started Total units to account for
%,666,666 8,56,666 9,56,666
utput 0nits completed ork)in)process in#entory, ;4%6 Total units accounted for
,86,666 $,866,666 9,56,666
&'ui#alent 0nits )) +(+
,86,666 $,866,666 x !66= > $,866,666 9,56,666 %,666,666 x !66= > %,666,666" 8,56,666
?on#ersion: 0nits completed ork)in)process in#entory;4%6", Total ork)in)process in#entory;4!", &'ui#alent units
,86,666 $,866,666 x 56= > !,;$6,666 9,%96,666 %,666,666 x $= > 96,666" 7,7$6,666
Physical Percent 0nits ?omplete ork)in)process !$4! $66 ;= 0nits started ;66 Total units to account !,!66 0nits completed by !$4%! 566 ork)in)process,!$4%! %66 Total units accounted !,!66 ess: e'ui#alent units in work)in)process, !$4! +(+ e'ui#alent units
Solutions Manual
!66= !$=
;=
11-'
&'ui#alent 0nits D< ?on#ersion
566 %66 !,!66
566 %7 5%7
$66 ;66
!5 5!5
11-23 E)*+"#,$% U$%s IO U$% Cs% &25 '$(
Physical Percent &'ui#alent 0nits 0nits ?omplete D< ?on#ersion (P, 2une ! %6,666 $6= 0nits started 6,666 Total units to account 56,666 0nits completed and transferred out 76,666 (P, 2une %6 $6,666 Total units accounted 56,666 Total ess: &0 in 2une ! (P +(+ e'ui#alent units
!. ork)in)Process (n#entory ) Department !
,666 ,666 !76,666 %86,666
$. ork)in)Process (n#entory ) Department $ 56,666 ork)in)Process (n#entory ) Department !
56,666
%. ork)in)Process (n#entory ) Department $
%$,666 %$6,666 $6,666
76$,666
8. +inished Coods (n#entory 986,666 ork)in)Process (n#entory ) Department $
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11-)
986,666
11-25 IO ,%h &25 '$(
!. &'ui#alent units eturns completed during !56 ) eturns in process, $4!: !66 x %6= > %6" +(+ e'ui#alent units !,%6 E !66 F !,%66 ) $66 > !,$66 $. ?ost per e'ui#alent unit B!85,66 4 !,%6 > B!!6 %. ?ost of completed returns +rom beginning in#entory, %4!: B %%6 Added to finish the beginning in#entory: B!!6 x !66 x ! ) %6=" > 9,966 Total first batch B 5,6%6 /econd batch))started and finished: B!!6 x !,$66 ) !66" > !$!,666 Total cost of completed returns B!$;,6%6 8. ?ost of returns in process on B!;,566
!. &'ui#alent units )) eighted)A#erage 8,666 ork)in)process, !!4%6 $,666 x !66= > $,666 Total e'ui#alent units 7,666 ?on#ersion: 0nits completed !,666 F %,666 > 8,666 ork)in)process, !!4%6 $,666 x $6= > 866 Total e'ui#alent units 8,866 $. &'ui#alent 0nits )) +(+ 8,666 ork)in)process, !!4%6 $,666 x !66= > $,666 Total 7,666 ork)in)process, !!4! !,666 x !66= > !,666" &'ui#alent units ,666 ?on#ersion: 0nits completed !,666 F %,666 > ork)in)process, !!4%6 $,666 x $6= > Total ork)in)process, !!4! !,666 x 76= > &'ui#alent units
Solutions Manual
11-11
8,666 866 8,866 766" %,566
PROES 1127 .,/h%,-A+,"/, ,%h &25-30 '$( !. @uantity /chedule not re'uired" (nput ork)in)process in#entory, %4! 0nits started Total units to account for
utput 0nits completed ork)in)process in#entory, %4%! Total units accounted for
6 $,666 $,666 $%,666 $,666 $,666
&'ui#alent 0nits )) eighted)A#erage Total e'ui#alent units ?on#ersion: 0nits completed ork)in)process in#entory, %4%! $,666 x 76= > Total e'ui#alent units
$%,666 $,666 $,666 $%,666 !,$66 $8,$66
?osts per e'ui#alent unit: ?osts Direct 0nit cost B7.6 B.6 B!$.66 $. ?ost of units completed and transferred out: B!$ x $%,666 > B$97,666 %. ?ost of ending work)in)process: Direct materials B7.6 x $,666 > B !%,666 ?on#ersion B.6 x !,$66 > 7,766 B !;,766
)))))This Dept))))) Trans)in
eighted A#erage ?ost per &0 +(+ ?ost per &0
B $9.$66 B %8.$57
11-29 IO ,%h &20 '$( &s,, "+,(
Solutions Manual
11-1$
B B
$.!5; $8.%59
Total 97,666 8$;,666 6,666 B B
$.%5; 5.79%
11-30 .,/h%,-A+,"/, ,%h &30-40 '$(
!. @uantity /chedule not re'uired" (nput ork)in)process in#entory, 54! 0nits started Total units to account for
$9,666 76,666 59,666
utput 0nits completed ork)in)process in#entory, 54%! Total units accounted for
96,666 !9,666 59,666
&'ui#alent 0nits: !9,666 Total e'ui#alent units 59,666 Total e'ui#alent units ?on#ersion 0nits completed ork)in)process in#entory, 54%! !9,666 x 86= > Total e'ui#alent units
96,666 6 96,666 96,666 7,566 97,566
$. ?osts per e'ui#alent unit: ?osts
P#,' 11-30: &C$%$*,( Blocher,Chen,Cokins,Lin: Cost Management 3e 11-1%
%. ?ost of units transferred out: B$.6 F B%.$ F B.6" x 96,666 > B959,66 8. ?ost of ending work)in)process in#entory: B 8$,66 %9,866 B 9;,;66
Solutions Manual
11-1#
11-31 IO ,%h -- &40 '$( !. @uantity schedule 0nits (nput: ork)in)process in#entory,
0nits completed ork)in)process, ?G 8,666 x 76= > Total ess: &0 in (P, ?G %,666 x 86= > +(+ e'ui#alent units ?ost added during 0nit cost
>75,666 L %,666"
&'ui#alent 0nits Direct
9$,666 %,666" 7;,666 B !9$,66 7;,666 B$.6
!,$66" 7;,$66 B$$8,;66E 7;,$66 B%.$
E ?ost of units transferred out B%;%,866 ess: ?ost of (P, !7$,66" ?on#ersion cost of units completed B $!9,!66 B$!9,!66 4 %,666 x 76= F 7,666" > B%.$ 0nit con#ersion cost B%.$ x 7;,$66 > B$$8,;66 ?on#ersion cost added during
$. ?ost reconciliation: Blocher,Chen,Cokins,Lin: Cost Management 3e 11-1&
?ost (ncurred ork)in)process in#entory,
B !%,566 %;9,866E B8!!,$66
E B!9$,66 F B$$8,;66 > B%;9,866 ?ost Assignment ?ost of units completed: ork)in)process in#entory, ,56 /tarted and completed units: 7,666 x B$.6 F B%.$" > %9%,96 B %;%,866 ?ost of work)in)process in#entory, B!6,666 ?on#ersion 8,666 x 76= x B%.$ > 9,566 !9,566 Total cost accounted for B8!!,$66
Solutions Manual
11-1'
11-32 .,/h%,-A+,"/, ,%h &30 '$(
!. &'ui#alent units: Direct !;;,666 ?on#ersion: !9,666 F %6,666 x 86=" > !59,666 $. ?ost per e'ui#alent unit: Direct %.;58; renminbi ?on#ersion: 8,666 renminbi F !,6;8,;6 renminbi" 4 !59,666 > 7.6;7 renminbi Total unit costs: %.;58; F 7.6;7 > !6.656; renminbi %. ?ost of goods completed and transferred out: !6.656; x !9,666 > !,978,!9.6 renminbi 8. ?ost of work)in)process, !64%!: Direct ;,7%9.76 renminbi ?on#ersion: 7.6;7 x %6,666 x 86= > 9%,!$.66 renminbi Total: ;,7%9.76 F 9%,!$.66 > !75,95;.76 renminbi . &xchange rate depends on a particular date, which an instructor selected. The exchange rate as on April 9, $66% was B! 0/ > 5.$97$9 ?GH