What are transferred-in costs?
INTRODUCTION
Let’s briefly recap our studies thus far: (1) We have learned about direct and indirect costs, (2) We have learned how to apply direct costs (specifically direct labor and direct materials) to products or projects, and (3) We have learned a few ways to assign overhead costs to products or projects. In Chapter 2, we applied (assigned) direct costs by using the job order cost method.
In Chapter 4, How is Process Costing Used to Track Production Costs?, we will learn about another way of assigning direct costs: Process Costing.
READING ASSIGNMENT
Chapter 4 very briefly returns to the topic of job order costing, focusing specifically on cost flows. The Chapter then introduces us to the process costing method and begins to compare the two methods and discuss the reasons why one method might be used rather than the other. Additional inventory accounts are discussed in order to describe how cost data is captured during certain manufacturing situations. Finally, an important management tool, the production cost report is introduced.
Chapter 4 End-Of-Chapter Questions
*Please scroll down to the bottom section of this page to see last week’s end-of-chapter answers.
The end-of-chapter questions give you an opportunity to self-assess your knowledge of what you have learned so far. Answers to these questions will be provided in a separate section on next week’s Reading Assignment page. Each week, you are highly encouraged to create a separate heading/section in your Learning Journal, label it “End-Of-Chapter Questions,” and write your answers to these questions under that heading. Your answers to the end-of-chapter questions will not count towards your final grade, but they are still part of the UoPeople learning process and it is expected that you will answer them to ensure understanding of the materials presented in the reading. Comparing your answers with the provided correct answers the following week, will help you understand the reading better, and also help you perform better on future Graded Quizzes and the Final Exam.
Question 1: What are transferred-in costs?
Question 2: Explain the difference between physical units and equivalent units.
Question 3: Explain the concept of equivalent units assuming the weighted average method is used.
Question 4: Explain why direct materials, direct labor, and overhead might be at different stages of completion at the end of a reporting period.
Question 5: Describe the basic cost flow equation and explain how it is used to reconcile units to be accounted for with units accounted for.
Question 6: Describe the basic cost flow equation and explain how it is used to reconcile costs to be accounted for with costs accounted for.
Question 7: How does a company determine the number of production cost reports to be prepared for each reporting period?
Question 8: What is a production cost report, and how is it used by management?
Question 9: Explain how the cost per equivalent unit might be misleading to managers, particularly when a significant change in production is anticipated.
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DISCUSSION ASSIGNMENT
What types of companies use job order costing? Please provide at least two examples. What types of companies would use process costing? Please provide another two examples. What are the similarities between job order costing and process costing? What are the differences?
You are encouraged to research outside sources and, of course, cite them. Do not, however, quote sources word-for-word, but rather, respond to the Discussion Forum Question in your own words.
ACCOUNTING ASSIGNMENT
Problem 22 (Chapter 4). Calculating Equivalent Units.
Complete the requirements for each item in the following.
Part 1. A university has 500 students enrolled in classes. Each student attends school on a part-time basis. On average, each student takes three-quarters of a full load of classes. Calculate the number of full-time equivalent students (i.e., calculate the number of equivalent units).
Answer template:
[___] full-time equivalent students = [__] students x [__]% of full load
Part 2. A total of 10,000 units of product remain in the Assembly department at the end of the year. Direct materials are 80 percent complete and direct labor is 40 percent complete. Calculate the equivalent units in the Assembly department for direct materials and direct labor.
Answer template:
[____] direct materials equivalent units = [____] physical units x [____]% complete
[____] direct labor equivalent units = [____] physical units x [____]% complete
Part 3. A local hospital has 60 nurses working on a part-time basis. On average, each nurse works two-thirds of a full load. Calculate the number of full-time equivalent nurses (i.e., calculate the number of equivalent units).
Answer template:
[____] full-time equivalent nurses = [____] nurses x [____] of full time
Part 4. A total of 6,000 units of product remain in the Quality Testing department at the end of the year. Direct materials are 75 percent complete and direct labor is 20 percent complete. Calculate the equivalent units in the Quality Testing department for direct materials and direct labor.
Answer template:
[____] direct material equivalent units = [____] physical units x [____]% complete
[____] direct labor equivalent units = [____] physical units x [____]% complete
LEARNING JOURNAL
The Learning Journal is a space where you should reflect upon what was learned during the week. How it applies to your daily life and will help you with your life (career) goals. For this week’s reflection, please write three complete and well composed paragraphs where you use, as an example, a company that operates where you live and describe how process costing would help the business owners manage their business.
Requirements: Please find an integrated solution.
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