Chapter 20: Process Cost Accounting Flashcards Preview

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Flashcards in Chapter 20: Process Cost Accounting Deck (35):

What is process operations?

Also called process manufacturing or process production, is the mass production of products in a continuous flow of steps. Meaning products pass through a series of sequential processes.


What is the first step in process manufacturing?

To decide when to produce a product.


Who determines the types and quantities of materials and labor needed?

Management, they schedule the work and forecast the demand expected for their products.


How are process and job order operations similar?

They combine materials, labor and OH in process of producing products. Regardless of the measurement focus, we are ultimately interest in determining the cost per unit of product (or service) resulting from either service.


How are process and job operations different?

In how they are organized and managed. It's on the individual process in a process costing system.


How does a job order system measure cost per unit upon completion of a job?

By dividing the total cost for that job by the number of units in that job.


How does a process costing system measure unit costs at the end of a period?

By dividing the total costs for that process by the number of units passing through that process to determine the cost per equivalent unit.


Like job order operations, process cost accounting uses what concepts?

Of direct and indirect costs.


If a cost can be traced to the cost object?

It is direct. Materials and labor that can be traced to specific processes are assigned to those processes as direct costs.


If a cost can't be traced to the cost object?

It is indirect. Materials and labor that cannot be traced to a specific process are indirect costs and are assigned to overhead.


Summary entry for receipts of raw materials?

Raw Materials Inventory - $11,095
Accounts Payable $11,095


The entry to record the use of direct materials by GenX's production department in April.

Goods In Process Inventory $9,900

Raw Materials Inventory $9,900


The entry records the cost of indirect materials. They are not clearly linked with any specific production process or department but are used to support overall production activity.

Factory overhead $1,195
Raw Materials Inventory $1,195


How to record factory payroll?

Factory Payroll $8,920
Cash $8,920


The following entry transfers direct labor costs from the Factory payroll account to the goods in process inventory account.

Goods in Process Inventory $5,700
Factory Payroll $5,700


The following entry charges these indirect labor costs (order materials, deliver them to the factory floor, repair equipment, operate and program computers in production) to factory overhead.

Factory overhead $3,220
Factory Payroll $3,220


The following entry records overhead costs.

Factory overhead $2,425
Prepaid Insurance $180
Utilities Payable $645
Cash $750
AD- Factory Equipment $850


How do you calculate overhead applied?

Direct labor x Predetermined rate


How do you record applied overhead?

Goods in Process Inventory $6,840
Factory overhead $6,840


If a process has a beginning or ending inventory of partially processed units (or both)?

Then the total cost assgned to the process must be allocated to all completed and incomplete units worked on during the period.


What is equivalent units of production (or EUP)?

Denominator must measure the entire production activity of the process for the period. It refers to the number of units that could have been started and completed given the cost incurred during a period. This measure is then used to compute the cost per equivalent unit and assign costs to finished goods and goods in process inventory.


Example of job order?

Wedding invitations, customized home and tax returns.


Example of process?

Soft Drinks, chocolate chip cookies and oil changes.


The entry to record the use of direct materials in process cost accounting?

Increase in one asset and a decrease in another asset.


How to record factory utilities?

Factory overhead
Utilities Payable


At the end of the account period, the overapplied or underapplied balance in Factory overhead is closed to?



To record the insurance on factory equipment?

Factory overhead
Prepaid insurance


A company completes 21,000 units and has ending goods in process inventory of 3,000 units which are estimated to be 40% complete. Total production costs are $666,000. The cost of ending goods in process inventory is?



The cost of units transferred from Goods in Process Inventory to Finished Goods Inventory is called?

Cost of Goods Manufactured.


The process cos summary is prepared for the following reasons?

Help department managers control and monitor their departments

Help factory managers evaluate department mangers' performance

Provide cost information for financial statements.


Transferred out 450 units and had ending goods in process inventory of 60 units. The ending inventory is 20% complete for materials and 60% complete for labor and overhead. The equivalent units of production for labor and overhead is ?

486 units.

450 x 100% + 60 x 60%


List the four steps involving analysis when accounting for a department's activity?

Physical flow, equivalent units, cost per equivalent unit and cost assignment and reconciliation.


What is process design?

Reorganize production processes to improve. efficiency


What is just-in-time production?

Raw materials inventory and finished goods inventory accounts are not needed.


What is automation?

Combines labor with overhead, so the focus is on conversion costs per equivalent units.