Homework Solutions For Cost Accounting

Unformatted text preview: CHAPTER 17 PROCESS COSTING Homework Assignment: 17-2, 17-3, 17-4, 17-5, 17-6, 17-7 17-8, 17-9, 17-10 17-11, 17-12, 17- 13, 17-14 17-15 , 17-16 , 17-17, 17-18, 17-19 , 17-20 , 17-21 , 17-22 , 17-23 , 17-24 , 17-25 , 17-26 (BOLD numbers represent minimum requirement ) 17-2 Process costing systems separate costs into cost categories according to the timing of when costs are introduced into the process. Often, only two cost classifications, direct materials and conversion costs, are necessary. Direct materials are frequently added at one point in time, often the start or the end of the process, and all conversion costs are added at about the same time, but in a pattern different from direct materials costs. 17-3 Equivalent units is a derived amount of output units that takes the quantity of each input (factor of production) in units completed or in incomplete units in work in process, and converts the quantity of input into the amount of completed output units that could be made with that quantity of input. Each equivalent unit is comprised of the physical quantities of direct materials or conversion costs inputs necessary to produce output of one fully completed unit. Equivalent unit measures are necessary since all physical units are not completed to the same extent at the same time. 17-4 The accuracy of the estimates of completion depends on the care and skill of the estimator and the nature of the process. Semiconductor chips may differ substantially in the finishing necessary to obtain a final product. The amount of work necessary to finish a product may not always be easy to ascertain in advance. 17-5 The five key steps in process costing follow: Step 1: Summarize the flow of physical units of output. Step 2: Compute output in terms of equivalent units. Step 3: Summarize total costs to account for. Step 4: Compute cost per equivalent unit. Step 5: Assign total costs to units completed and to units in ending work in process. 17-6 Three inventory methods associated with process costing are: • Weighted average. • First-in, first-out. • Standard costing. 17-7 The weighted-average process-costing method calculates the equivalent-unit cost of all the work done to date (regardless of the accounting period in which it was done), assigns this cost to equivalent units completed and transferred out of the process, and to equivalent units in ending work-in-process inventory. 17-1 17-8 FIFO computations are distinctive because they assign the cost of the previous accounting period’s equivalent units in beginning work-in-process inventory to the first units completed and transferred out of the process and assigns the cost of equivalent units worked on during the current period first to complete beginning inventory, next to start and complete new units, and finally to units in ending work-in-process inventory. In contrast, the weighted-average method costs units completed and transferred out and in ending work in process at the same average cost....
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Unformatted text preview: Solutions Manual COST ACCOUNTING 1-1 CHAPTER 1 THE MANAGER AND MANAGEMENT ACCOUNTING See the front matter of this Solutions Manual for suggestions regarding your choices of assignment material for each chapter. 1-1 Management accounting measures, analyzes and reports financial and nonfinancial information that helps managers make decisions to fulfill the goals of an organization. It focuses on internal reporting and is not restricted by generally accepted accounting principles (GAAP). Financial accounting focuses on reporting to external parties such as investors, government agencies, and banks. It measures and records business transactions and provides financial statements that are based on generally accepted accounting principles (GAAP). Other differences include (1) management accounting emphasizes the future (not the past), and (2) management accounting influences the behavior of managers and other employees (rather than primarily reporting economic events). 1-2 Financial accounting is constrained by generally accepted accounting principles. Management accounting is not restricted to these principles. The result is that management accounting allows managers to charge interest on owners capital to help judge a divisions performance, even though such a charge is not allowed under GAAP, management accounting can include assets or liabilities (such as brand names developed internally) not recognized under GAAP, and management accounting can use asset or liability measurement rules (such as present values or resale prices) not permitted under GAAP. 1-3 Management accountants can help to formulate strategy by providing information about the sources of competitive advantagefor example, the cost, productivity, or efficiency advantage of their company relative to competitors or the premium prices a company can charge relative to the costs of adding features that make its products or services distinctive. 1-4 The business functions in the value chain are Research and development generating and experimenting with ideas related to new products, services, or processes. Design of products and processes the detailed planning, engineering, and testing of products and processes. Production procuring, transporting, storing and assembling resources to produce a product or deliver a service. Marketing promoting and selling products or services to customers or prospective customers. Distribution processing orders and shipping products or services to customers. Customer service providing after-sales service to customers. 1-2 1-5 Supply chain describes the flow of goods, services, and information from the initial sources of materials and services to the delivery of products to consumers, regardless of whether those activities occur in the same organization or in other organizations....
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