Accounting 202 - Chapter 5.1

The costing system used by a company making computer chips would be process costing. Process costing is used when products are produced in a continuous flow, such as in a manufacturing process. In this case, computer chips are likely produced in large quantities using a standardized production process. Process costing allows for the allocation of costs to each stage of the production process, providing a more accurate measure of the cost of each unit produced. Job costing, on the other hand, is used when products are produced individually or in small batches, which is not typically the case for computer chips. Equivalent units costing and conversion cost costing are not commonly used costing systems in this context.

Process costing is the correct answer because it is a system used to assign costs to products that are made in a continuous process. This system is commonly used in industries such as chemical manufacturing, oil refining, and food processing, where products are produced in large quantities and go through multiple stages of production. Process costing involves dividing the total costs incurred in a specific period by the total number of units produced during that period to determine the cost per unit. This allows for a more accurate allocation of costs to each unit produced in the continuous process.

When the ping pong balls are completely finished, their cost should be transferred to the Work-in-Progress (WIP) inventory for finishing. This is because the finishing process is the last step in the sequential process of producing the balls. Once the balls have been finished, they are ready to be sold or transferred to the finished goods inventory. Therefore, the cost of the finished balls should be recorded in the WIP inventory for finishing before they are moved to the next stage or transferred to the finished goods inventory.

The costing system used by a company producing custom window treatments would be job costing. Job costing is a costing method that is used when each product or service is unique and produced separately. In this case, since the company is producing custom window treatments, each job would be different and require separate cost calculations. Job costing allows for accurate tracking of costs for each specific job, which is necessary for pricing and profitability analysis.

In a process costing system, manufacturing costs are usually combined into two categories: direct materials and conversion costs. Direct materials include the cost of raw materials that are directly used in the production process. Conversion costs, on the other hand, include the cost of labor and manufacturing overhead required to convert the raw materials into finished goods. Therefore, the correct answer is direct materials and conversion costs.

If all direct materials are added at the beginning of the production process and the units have made it 50% of the way through the production process, it means that all the materials required for production have already been added. Therefore, the percentage completion for direct materials is 100%.

Process costing is the correct answer because it is the product costing system that is typically used for goods that are mass produced. In process costing, costs are assigned to each production department or process, and then averaged out over the total number of units produced. This method is suitable for industries where products go through multiple stages of production and are indistinguishable from each other. It allows for a more accurate allocation of costs and helps in determining the cost per unit of production.

If conversion costs are added evenly throughout the production process, and the units have made it 50% of the way through the production process, then the percentage completion for conversion costs would also be 50%. This is because if the costs are evenly distributed, then at the halfway point of the production process, the units would have incurred 50% of the total conversion costs. Therefore, the correct answer is 50%.

Equivalent units refers to the number of complete units of output that could have been produced given the amount of work done on partially completed units. This measure takes into account the degree of completion of the units and is used in process costing to determine the total amount of work done and the cost per equivalent unit. It helps in comparing the costs of different production processes and is important for accurate cost allocation and decision-making.

If all direct materials are added at the end of the production process, it means that none of the direct materials have been added yet at the 50% completion point. Therefore, the percentage completion for direct materials is 0%.

Direct labor and manufacturing overhead are typically incurred evenly throughout the process in a process system. This means that these costs are spread out and allocated over the entire production process rather than being concentrated at the beginning or end. This method ensures that the costs are distributed fairly and accurately reflects the expenses associated with each unit of production. By incurring these costs evenly throughout the process, it allows for a more accurate determination of the total cost of production and helps in making informed decisions regarding pricing and profitability.

Conversion costs refer to the direct labor costs and manufacturing overhead costs incurred in converting raw materials into finished products. This includes wages, benefits, and other expenses related to the labor required for production, as well as the indirect costs such as utilities, rent, and depreciation of machinery used in the manufacturing process. Prime costs, on the other hand, only include the direct materials and direct labor costs. Therefore, the correct answer is conversion costs, as it encompasses both direct labor and manufacturing overhead costs.

When units are moved from one processing department to the next, the cost associated with those units must also be moved from one WIP account to the next. This process is known as transferring costs.

If conversion costs are added evenly throughout the production process, it means that these costs are incurred at a constant rate as the units progress through the production process. Since the units have made it 50% of the way through the production process, it implies that they have already incurred 50% of the conversion costs. However, the question is asking for the percentage completion for direct material, not conversion costs. Therefore, the answer is "none of the above" as the given information does not provide any indication of the percentage completion for direct material.