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Chapter 18: Q3RQ (page 1006)

Question: What are the primary differences between job order costing systems and process costing systems?

Short Answer

Expert verified

Answer:

The primary difference between the job order costing system and the process costing is:

In job costing, cost is calculated for each job and in process costing, the cost is calculated for the complete production at different process stage.

Step by step solution

01

Job costing system

The job costing system is used when the company calculate the cost of each job on different jobs basis.

02

Process costing system

The process costing system is used by the companies when the similar product is manufactured through various processing system. It helps in calculating the cost at each processing stage.

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Most popular questions from this chapter

Describe the three groups of units that must be accounted for when using the FIFO method.

Roan Paper Co. produces the paper used by wallpaper manufacturers. Roan’s four-stage process includes mixing, cooking, rolling, and cutting. On March 1, the Mixing Department had 300 rolls of paper in process. During March, the Mixing Department completed the mixing process for those 300 rolls and also started and completed the mixing process for an additional 4,200 rolls of paper. The department started but did not finish the mixing process for an additional 500 rolls, which were 20% complete with respect to both direct materials and conversion work at the end of March. Direct materials and conversion costs are

incurred evenly throughout the mixing process.

The Mixing Department compiledthe following data for March:

Direct materials

Direct labor

Manufacturing overhead allocated

Total costs

Beginning inventory, Mar. 1

\(350

\)245

\(200

\)795

Costs added during March

4,940

3,000

3,225

11,165

Total costs

\(5,290

\)3,245

\(3,425

\)11,960

Requirements

1. Prepare a production cost report for the Mixing Department for March. The company uses the weighted-average method.

2. Journalize all transactions affecting the company’s mixing process during March. Assume labor costs are accrued and not yet paid.

Salish Craft Beers provides the following information for the Malting Department for the month of August 2018:


UNITS
COSTS

Beginning Work-in-Process Inventory

0

\(0

Started in Production in August

26,000

54,000*

Total to Account For

26,000

\)54,000

Completed and Transferred to Packaging Department during August

21,000

?

Ending Work-in-Process Inventory (30% complete for direct materials and 60% complete for conversion work)

5,000

?

Total Accounted For

26,000

\(54,000

* Includes \)18,000 direct materials and $36,000 conversion costs

Requirements

Complete a production cost report for the Malting Department for the month of August 2018 to determine the cost of the units completed and transferred out, and the cost of the ending Work-in-Process Inventory. Assume Salish Craft Beers uses the weighted average method.

Bergeron’s Exteriors produces exterior siding for homes. The Preparation Department begins with wood, which is chopped into small bits. At the end of the process, an adhesive is added. Then the wood/adhesive mixture goes on to the Compression Department, where the wood is compressed into sheets. Conversion costs are added evenly throughout the preparation process. January data for the Preparation Department are as follows:

UNITS

Beginning work-in-process inventory

0 sheets

Started in production

3,900 sheets

Completed and transferred out to compression in January

2,700 sheets

Ending work-in-process inventory (25% of the way through the preparation process)

1,200 sheets

COSTS

Beginning work-in-process inventory

\(0

Costs added during January

Wood

3,120

Adhesive

1,836

Direct labor

990

Manufacturing overhead allocated

2,100

Total costs

\)8,046

Requirements

1. Prepare a production cost report for the Preparation Department for January. The company uses the weighted-average method. (Hint: Each direct material added at a different point in the production process requires its own equivalent unit of production computation.)

2. Prepare the journal entry to record the cost of the sheets completed and

transferred out to the Compression Department.

3. Post the journal entries to the Work-in-Process Inventory—Preparation T-account. What is the ending balance?

Question: List ways in which job order costing systems are similar to process costing systems.
See all solutions

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