MITCH T.

MINGLANA
BSA 301

MANAGERIAL ACCOUNTING: ACTIVITY

4–1 Under what conditions would it be appropriate to use a process costing system?

ANSWER:
A process costing system should be used in situations where a homogeneous product is
produced on a continuous basis.

4–2 In what ways are job-order and process costing similar?

ANSWER:
The Job-order and process costing have common similarities such as:
 Both job and process cost systems have the same goal: to determine the cost of
products.
 Both job and process cost systems have the same cost flows. Accountants record
production in separate accounts for materials inventory, labor, and overhead.
Then, they transfer the costs to a Work in Process Inventory account.
 Both job and process cost systems use predetermined overhead rates to apply
overhead.

4–3 Why is cost accumulation simpler in a process costing system than it is in a job-
order costing system?

ANSWER:
Cost accumulation is simpler under process costing because costs only need to be
assigned to departments—not individual jobs.
4–4 How many Work in Process accounts are maintained in a company that uses
process costing?

ANSWER:
A separate Work in Process account is maintained for each processing department.
Therefore, it depends on how many department a company have.

4–5 Assume that a company has two processing departments—Mixing followed by

Firing. Prepare a journal entry to show a transfer of work in process from the Mixing
Department to the Firing Department.
ANSWER:
Work In Process (Mixing) xxx
Work In Process (Firing) xxx

4–6 Assume that a company has two processing departments—Mixing followed by

Firing. Explain what costs might be added to the Firing Department’s Work in Process
account during a period.
ANSWER:
Costs that might be added to the Firing Department’s Work in Process account during a
period are:

a. costs transferred in from the Mixing Department;

b. materials costs added in the Firing Department;
c. labor costs added in the Firing Department; and
d. Overhead costs added in the Firing Department.
4–7 What is meant by the term equivalent units of production when the weighted-
average method is used?

ANSWER:
Under the weighted-average method, equivalent units of production consist of units
transferred to the next department (or to finished goods) during the period plus the
equivalent units in the department's ending work in process inventory.

4–8 Watkins Trophies, Inc., produces thousands of medallions made of bronze, silver,
and gold. The medallions are identical except for the materials used in their
manufacture. What costing system would you advise the company to use?
ANSWER:
Process costing would be advised as Watkins Trophies Inc produces thousands of
medallions which is a single type of product. Although, there are differences in material
being bronze, silver and gold, the final product will remain the same. In this case, the
company produces identical products of medals therefore process costing is preferred.
Process costing would make it easy to track the costs as the same products are being
produced and company does not have to keep record of separate set of data. The
manufacturing costs can be easily identified and assigned to each product in process
costing. Since there are different types of metals, they will be separate in each batch.