No.

8 ID: 645740011-6
Maneejan Leebumrung

CM017812 Managerial Accounting Y23 Sec.01

Assignment 04

Questions
1. Under what conditions would it be appropriate to use a process costing
system?
Process costing is suitable for companies that produce a continuous mass
of like units through series of operations or process. Also, when a single order
has little impact on the manufacturing process and there is process and product
standardization. A process costing system, on the other hand, would not offer
enough product-cost information if there are considerable variances in the costs
of multiple products. Costing is normally used in such industries such as
petroleum, coal mining, chemicals, textiles, paper, plastic, glass, food, banks,
courier, cement, and soap.

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

1. Job-order costing and process costing provide the same fundamental
functions: assigning materials, labor, and overhead costs to products and
providing a technique for calculating unit product costs.
2. The cost flows are the same in both the job and process cost systems.
Accountants track production in separate accounts for material, labor, and
overhead. The expenses are then transferred to a Work in Process
Inventory account.
3. To apply overhead, both job and process cost systems apply
predetermined overhead rates.
4. In both costing methods, the mechanism for dealing with over or under
absorbed overheads is nearly same. Because there are no separate batches
in process costing, the expenses are distributed consistently. Job order
costing applies the same method to assigning overheads to individual
tasks that the process costing system use to assign overheads to an entire
manufacturing process.
5. The t-accounts, also known as manufacturing accounts, that are
maintained in both job order costing and process costing, such as direct
material, direct labor, and production overheads, are likewise maintained
in both costing systems.
 No. 8 ID: 645740011-6
Maneejan Leebumrung

6. The essential information gathered to arrive at the unit cost, which is

computed in both costing systems, is almost same and useful for both.
internal management of the business. This data is utilized by the
management of the business for decision-making purposes.

3. Why is cost accumulation simpler in a process costing system than it is in a

job-order costing system?
Process costing makes cost buildup easier since costs are attributed to
departments rather than jobs. A corporation often has a modest number of
processing divisions, despite the fact that there are so many jobs.

4. How many Work in Process accounts are maintained in a company that

uses process costing?
In firms that implement process costing, each processing department has
its own Work in Process account. If the company have many departments the
Work in Process account will be as much as the department.

5. Assume that a company has two processing departments – Mixing and

Firing. Prepare a journal entry to show a transfer of work in process from the
Mixing Department to the Firing Department.
The journal entry to show a transfer of work in process :
Dr. Work in Process – Firing Department XXX
Cr. Work in Process – Mixing Department XXX
 No. 8 ID: 645740011-6
Maneejan Leebumrung

Exercises
Exercise 4 - 4 Applying Costs to Units -Weighted -Average Method
Data concerning a recent period’s activity in the Prep Department, the
first processing department in a company that uses process costing, appear
below:

Labor Overhead
Equivalent unit of production in ending work in 2,000 800
process
Cost per equivalent unit $13.86 &4.43

A total of 20,100 units were complete and transferred to the next

processing department during the period.
Required:
Compute the cost of the units transferred to the next department during
the period and the cost of ending work in process inventory.

Units Labor Overhead

Units Completed 20,100 20,100 20,100
Ending Work in Process,
2000 800
Equivalent Units
Equivalent Units 22,100 20,900
Cost per Equivalent Unit $ 13.86 $ 4.43
Cost of Equivalent Unit 306,306 92,587

The cost of the units transferred to the next department during the period is :

$306,306 + $92,587 = $398,893

The cost of ending work in process inventory is :

Labor Overhead
Ending Work in Process, Equivalent Units 2000 800
Cost per Equivalent Unit $ 13.86 $ 4.43
Cost of Ending Work in Process 27,720 3,544

Total Cost of Ending Work in Process $27,720 + $3,544 = $31,264

 No. 8 ID: 645740011-6
Maneejan Leebumrung

Exercise 4-5 Cost Reconciliation Report – Weighted – Average Method

Maria Am Corporation uses a process costing system. The Baking
Department is one of the processing departments in its strudel manufacturing
facility. In June in the Baking Department, the cost of beginning work in
process inventory was $3,570, the cost of ending work in process inventory was
$2,860 and added to production was $43,120.
Required:
Prepare a cost reconciliation report for the Baking Department for June.

The Baking Department

Cost Reconciliation
Costs to be account for :
Cost of Beginning work in process, June 1 $ 3,570
Cost added to production during the period 43,120
Total Cost to be account for 46,690

Costs to be account for :

Cost of Ending work in process, June 30 $ 43,830
Cost of Units transferred out 2,860
Total Cost to be account for 46,690