Chapter 4 Foundation Exercises Pre-work Questions

1 Under what conditions would it be appropriate to use a process costing

. system? (1 mark)
Process costing is used when there is mass production of similar
products. Essentially it is the cost of each product produced is assumed
to be the same as the cost of every other product. Some Examples
include oil refining and food production.
2 In what ways are job-order and process costing different? (3 marks)
.
The unit costs are computed by departments rather than by jobs, and
the computations are made on the production report
Costs are incurred by departments rather than by jobs
Single product is produced on a steady basis which every unit
produced is essentially the same
3 Why is cost accumulation easier in a process costing system than it is in
. a job-order costing system? (2 marks)
Less effort is usually required to use a process costing system than a
job-order costing system. The costs incurred only need to be traced to
a few processing departments in a process costing system, rather than
to many individual jobs(job-order costing system)
4 How many Work in Process accounts are maintained in a company that
. uses process costing? (1 mark)
In a process costing system, a Work in Process account is
maintained for each processing department.
5 Assume that a company has two processing departments Mixing
. followed by Firing. Explain what costs might be added to the Firing
Departments Work in Process account during a period. (4 marks)
costs transferred in from the Mixing Department
materials costs added in the Firing Department
labor costs added in the Firing Department
overhead costs added in the Firing Department

6 What is meant by the term equivalent units of production when the

. weighted-average method is used? (2 marks)
Under the weighted-average method, equivalent units of production
consist of units transferred to the next department such as finished
goods. In addition, during the period, it is also transferred to the
equivalent units in the department's ending work in process inventory.
7 Suppose there are 5,000 full-time students and 1,250 part-time
. students (taking approximately half of the regular class load) in the
Faculty of Management at Westly University. Using the concept of
equivalent units, how many full-time equivalent students are enrolled
in the faculty of Management? (2 marks)

Full Time Equivalent Students = 1250 Part-time * 50% = 625 Students Full Time Equivalent
students
625 + 5000 = 5625 Total Equivalent students taking full time course