ACCT 002 Lecture Notes - Lecture 14: Finished Good, Income Statement

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blackpig616

19 Aug 2020

School

College of The Sequoias

Department

Accounting (ACCT)

Course

ACCT 002

Professor

cooper

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Document Summary

Much of what you learned in the previous chapter about costing and cost flows applies equally well to process costing in this chapter. We are not throwing out all that we have learned about costing and starting from scratch with a whole new system. Overhead, raw materials, work in process, and finished goods: the flow of costs through the manufacturing accounts is basically the same in both systems. There are three differences between job-order and process costing. First, process costing is used when a company produces a continuous flow of units that are indistinguishable from one another. Job-order costing is used when a company produces many different jobs that have unique production requirements. Accordingly, process costing accumulates costs by department (rather than by order) and assigns these costs uniformly to all units that pass through the department during a period. Job cost sheets (which we used for job-order costing) are not used to accumulate costs.

Related Questions

Identify each statement as true or false. If false, indicate howto correct the statement.

1. Process cost systems are used to apply costs to similarproducts that are mass-produced in a continuous fashion.
2. A process cost system is used when each finished unit isindistinguishable from another.
3. Companies that produce soft drinks, motion pictures, andcomputers chips would all use process cost accounting.
4. In a process cost system, costs are tracked by individualjobs.
5. Job order costing and process costing track differentmanufacturing costs elements.
6. Both job order costing and process costing account for directmaterials, direct labor, and manufacturing overhead.
7. Costs flow through the accounts in the same basic way for bothjob order costing and process costing.
8. In a process cost system, only one work in process account isused.
9. In a process cost system, costs are summarized in a job costsheet.
10. In a process cost system, the unit cost is total manufacturingcosts for the period divided by the units produced during theperiod.

byzantiumpanda529

Valport Company, a manufacturer of fiber optic communications equipment, uses a job-order costing system. Since the production process is heavily automated, manufacturing overhead is allocated on the basis of machine hours using a predetermined overhead rate. The current annual rate of $15 per machine hour is based on budgeted manufacturing overhead costs of $1,200,000 and a budgeted activity level of 80,000 machine hours. Operations for year 20xx have been completed, and all of the accounting entries have been made for the year except the allocation of manufacturing overhead to the jobs worked on during December, the transfer of costs from Work in Process to Finished Goods for the jobs completed in December, and the transfer of costs from Finished Goods to Cost of Goods Sold for the jobs that have been sold during December. Summarized data as of November 30, 20xx and for December 20xx are presented in the following table. Jobs T11-007, N11-013, and N11-015 were completed during December. All completed jobs except Job N11-013 had been turned over to customers by the close of business on December 31, 20xx.

Work-in-Process December 20xx Activity

Balance Direct Direct Machine

Job No. 11/30/xx Material Labor Hours

T11-007 $ 87,000 $ 1,500 . $ 4,500 300

N11-013 55,000 4,000 12,000 1,000

N11-015 -0- 25,600 26,700 1,400

D12-002 -0- 37,900 20,000 2,500

D12-00 . -0- 26,000 16,800 800

________ _______ ______ _______

Total $142,000 $95,000 $80,000 6,000

Activity December

through 20xx

11/30/xx Activity

Actual manufacturing overhead incurred:

Indirect material . . . . . . . . . . . . . . . . . . . . . . . . $125,000 . . . . . . . . $ 9,000

Indirect labor. . . . . . . . . . . . . . . . . . . . . . . . . . . 345,000 . . . . . . . . 30,000

Utilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 245,000 . . . . . . . . 22,000

Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . 385,000 . . . . . . . . 35,000

Total overhead . . . . . . . . . . . . . . . . . . . . . . . . . $1,100,000 . . . . . . . $96,000

Other items:

Raw-material purchases* . . . . . . . . . . . . . . . . . $ 965,000 . . . . . . . $98,000

Direct-labor costs . . . . . . . . . . . . . . . . . . . . . . $ 845,000 . . . . . . . . 80,000

Machine hours . . . . . . . . . . . . . . . . . . . . . . . . . 73,000 . . . . . . . . 6,000

Account Balances at Beginning of Year 1/1/xx

Raw-materials inventory* . . . . . . . . . . . . . . . . . . . . $105,000

Work-in-process inventory . . . . . . . . . . . . . . . . . . . 60,000

Finished-goods inventory . . . . . . . . . . . . . . . . . . . 125,000

*Raw-material purchases and raw-materials inventory consist of both direct and indirect materials. The balance of the Raw-Materials Inventory account as of December 31, 20xx is $85,000.

REQUIRED:

How much manufacturing overhead would Valport have allocated to jobs through November 30, 20xx?

How much manufacturing overhead would be allocated to jobs by Valport during December 20xx?

Determine the amount by which the manufacturing overhead is overallocated or underallocated as of December 31, 20xx?

Determine the balance in Valport Company's Finished-Goods Inventory account on December 31, 20xx? (Hint: which completed job(s) are still in the finished goods warehouse as of December 31, 20xx?)

Determine the balance in Valport Company's Work-in-process Inventory account on December 31, 20xx? (Hint: which incomplete job(s) are still in the factory as of December 31, 20xx?)

Prepare a Schedule of Cost of Goods Manufactured for Valport Company for the year 20xx. (Hint: In computing the cost of direct material used, remember that Valport includes both direct and indirect material in its Raw-Materials Inventory account i.e.

Raw materials used in 20xx = Direct materials used in 20xx + Indirect materials used in 20xx)

copperporcupine291

1. Total assets turnover measures the ability of a firm to:

a. Generate profits on sales

b. Generates sales through the use of assets

C. Buy new Assets

D. Move inventory

E. Cover long term debt.

2.Managerial accounting :

a. focuses only on historical data

b. is govern by GAAP

c. focuses primarily on the needs of personnel within theorganization.

d. provides information for parties external to theorganization

e. focuses on the financial statement and other financialreports.

3. which of the following statement about similarities betweenprocess costing and job costing are true.

I. Both systems assign production costs to unit of output.

II. Both system require extensive knowledge of financialaccounting.

III. The flow of costs through the manaufacturing accopunts isessentially the same.

A. I only

B. I and III

C. II and III

D. III only

E. I,II, and III

4. The comprehensive set of budget that serves as a companyoverall financial plan si commonly known as:

A. Integrated budget

B. a Pro-forma budget

C. Master budget

D. a master budget

E. a rolling budget

5. A flexible budget:

A. classifies budget request by activity and estimates thebenefits arising from each activity.

B. presents a statement of expectations for a period of time butdoes not present a firm committment.

C. presents the plan for only one level of activity and does notadjust to changes in the level of activity.

D presents the plan for a range of activity so that the plan canbe adjust for changes in the activity level.

6. Which of the following is the correct method to calculate apredetermined overhead rate?

A. Budgeted total manufacturing cost budgeted amount of costdriver.

B. Budgeted overhead cost budgeted amount of cost driver

C. Budgeted amount of cost driver budgeted overhead cost

D. Actual overhead cost budgeted amount of cost driver

E. Actual overhead cost actual amount of cost driver.

7.Which of the following statements about joint-cost allocationis FALSE?

A. Joint cost allocation is useful in deciding whether tofurther process a product after split-off

B. Joint cost allocation is useful in making a profitdetermination about individual joint products

C. Joint cost allocation is helpful in inventory valuation

D. Joint cost allocation can be based on the number of unitsproduced.

E. Joint cost allocation can be accompanied by using differentmethods that focus on sale value and product worth.

8.The total production cost of a job is composed of:

A. Direct material and direct labor

B. direct material, direct labor, manufacturing overhead, andoutlays for selling costs.

C. direct material. direct labor, manufacturing overhead,andoutlays for both selling and administration costs.

D. direct materiaL, direct labor,and applied manufacturingoverhead

E. direct material, direct labor, and selling expenses.

9.What will cause the variable overhead efficiency variance?

A. Efficient or inefficient use of a specific component ofvariable overhead(e.g. electricity)

B. Full or partial utilization of major equipment resources

C. Production of unit in excess of the number of units sold.

D. Efficient or inefficient use of cost driver(e.g. machinehours) for variable overhead

E. Changes in the salary cost of manufacturing supervisors.

10. Which of the following is classified as an inventoryshortage cost?

A. Purchase order preparation

B. Production disruption

C. Lost sales and lost customers.

D. Spoilage

E. Production disruption, lost sales and lost customers.

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ACCT 002 Lecture Notes - Lecture 14: Finished Good, Income Statement

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