managerial-account--(4)

©TheMcGraw-HillCompanies,Inc.,2006.Allrightsreserved.SolutionsManual,Chapter4143Chapter4SystemsDesign:ProcessCostingSolutionstoQuestions4-1Aprocesscostingsystemshouldbeusedinsituationswhereahomogeneousprod-uctisproducedonacontinuousbasis.4-21.Job-ordercostingandprocesscostinghavethesamebasicpurposes—toassignmateri-als,labor,andoverheadcosttoproductsandtoprovideamechanismforcomputingunitproductcosts.2.Bothsystemsusethesamebasicmanufac-turingaccounts.3.Costsflowthroughtheaccountsinbasicallythesamewayinbothsystems.4-3Costsareaccumulatedbydepartmentinaprocesscostingsystem.4-4Inaprocesscostingsystem,theactivityperformedinadepartmentmustbeperformeduniformlyonallunitsmovingthroughitandtheoutputofthedepartmentmustbehomogeneous.4-5Costaccumulationissimplerunderpro-cesscostingbecausecostsonlyneedtobeas-signedtodepartments—notseparatejobs.Acompanyusuallyhasasmallnumberofpro-cessingdepartments,whereasajob-ordercost-ingsystemoftenmustkeeptrackofthecostsofhundredsoreventhousandsofjobs.4-6Inaprocesscostingsystem,aWorkinProcessaccountismaintainedforeachseparateprocessingdepartment.4-7Thejournalentrywouldbe:WorkinProcess,Firing......................................XXXXWorkinProcess,Mixing..............................XXXX4-8ThecoststhatmightbeaddedintheFiringDepartmentinclude:(1)coststransferredinfromtheMixingDepartment;(2)materialscostsaddedintheFiringDepartment;(3)laborcostsaddedintheFiringDepartment;and(4)overheadcostsaddedintheFiringDepartment.4-9Undertheweighted-averagemethod,equivalentunitsofproductionconsistofunitstransferredtothenextdepartment(ortofin-ishedgoods)duringtheperiodplustheequiva-lentunitsinthedepartment’sendingworkinprocessinventory.4-10Aquantityschedulesummarizesthephysicalflowofunitsthroughadepartmentdur-ingaperiod.Itservesseveralpurposes.First,itprovidesinformationaboutactivityinthede-partmentandalsoshowsthestageofcomple-tionofanyin-processunits.Second,itprovidesdataforcomputingtheequivalentunitsandforpreparingtheotherpartsoftheproductionre-port.4-11Inprocesscostingaunitofproductac-cumulatescostineachdepartmentthatitpass-esthrough,withthecostsofonedepartmentaddedtothecostsoftheprecedingdepartmentinasnowballingfashion.4-12Thecompanywillwanttodistinguishbetweenthecostsofthemetalsusedtomakethemedallions,butthemedalsareotherwiseidenticalandgothroughthesameproductionprocesses.Thus,operationcostingisideallysuitedforthecompany’sneeds.4-13Anycompanythatmanufacturesprod-uctsthathavesomecommoncharacteristicsandsomeindividualcharacteristicsmaywanttouseoperationcosting.Examplesincludetextiles,shoes,electronicparts,andclothing.©TheMcGraw-HillCompanies,Inc.,2006.Allrightsreserved.144ManagerialAccounting,11thEdition4-14UndertheFIFOmethod,unitstrans-ferredoutaredividedintotwoparts.Onepartconsistsoftheunitsinthebeginninginventory.Onlytheworkneededtocompletetheseunitsisshownaspartoftheequivalentunitsforthecurrentperiod.Theotherpartoftheunitstrans-ferredoutconsistsoftheunitsstartedandcom-pletedduringthecurrentperiod;theseunitsareshownasaseparateamountintheequivalentunitscomputationundertheFIFOmethod.4-15UndertheFIFOmethod,unitstrans-ferredoutaredividedintotwogroups.Thefirstgroupconsistsofunitsfromthebeginningworkinprocessinventory.Thesecondgroupconsistsofunitsstartedandcompletedduringtheperiod.4-16TheFIFOmethodissuperiortotheweighted-averagemethodforcostcontrolbe-causecurrentperformanceshouldbemeasuredinrelationtocostsofthecurrentperiodonly,andtheweighted-averagemethodmixesthesecostsinwithcostsofthepriorperiod.Thus,un-dertheweighted-averagemethod,thedepart-ment’sapparentperformanceinthecurrentpe-riodisinfluencedtosomeextentbywhathap-penedinapriorperiod.©TheMcGraw-HillCompanies,Inc.,2006.Allrightsreserved.SolutionsManual,Chapter4145Exercise4-1(20minutes)a.Torecordissuingrawmaterialsforuseinproduction:WorkinProcess—MoldingDepartment.........23,000WorkinProcess—FiringDepartment.............8,000RawMaterials.......................................31,000b.Torecorddirectlaborcostsincurred:WorkinProcess—MoldingDepartment.........12,000WorkinProcess—FiringDepartment.............7,000WagesPayable.....................................19,000c.Torecordapplyingmanufacturingoverhead:WorkinProcess—MoldingDepartment.........25,000WorkinProcess—FiringDepartment.............37,000ManufacturingOverhead.......................62,000d.Torecordtransferofunfired,moldedbricksfromtheMoldingDepart-menttotheFiringDepartment:WorkinProcess—FiringDepartment.............57,000WorkinProcess—MoldingDepartment...57,000e.TorecordtransferoffinishedbricksfromtheFiringDepartmenttothefinishedbrickswarehouse:FinishedGoods............................................103,000WorkinProcess—FiringDepartment......103,000f.TorecordCostofGoodsSold:CostofGoodsSold......................................101,000FinishedGoods.....................................101,000©TheMcGraw-HillCompanies,Inc.,2006.Allrightsreserved.146ManagerialAccounting,11thEditionExercise4-2(10minutes)Weighted-AverageMethodEquivalentUnits(EU)MaterialsConversionUnitstransferredout.......................