Chapter 16: Quick Study

Here’s a summary of how to approach each Quick Study (QS) question and the required calculations or classification. Process vs. Job Order Operations (QS 16-1, QS 16-3) Identify if each product or service is more likely to be produced in a process operation (standardized products in continuous flow) or job order operation (customized items or services): 1. QS 16-1 Examples o Tennis courts: Job Order o Organic juice: Process o Audit of financial statements: Job Order o Luxury yachts: Job Order o Ice cream: Process o Tennis balls: Process o House painting: Job Order o Granola bars: Process o Backpacks: Process 2. QS 16-3 Examples o Beach toys: Process o Custom swimming pool: Job Order o Smartphones: Process o Wedding reception: Job Order o Custom suits: Job Order o Juice: Process o Tattoos: Job Order o Guitar picks: Process o Solar panels: Process True or False Statements on Process vs. Job Order Costing (QS 16-2) Determine the truth of each statement: 1. Cost per unit is computed by combining costs per unit across separate processes: True 2. Service companies cannot use process costing: False (e.g., banks often use process costing for processing transactions) 3. Costs per job are computed in both job order and process costing systems: False (only job order costing tracks individual job costs) 4. Both job order and process operations combine materials, labor, and overhead in producing products: True Equivalent Units of Production & Cost Calculations (QS 16-4 to QS 16-29) Each question from QS 16-4 onward involves specific costing techniques. Here’s an outline of each problem type: 1. Physical Unit Flow Reconciliation (QS 16-4) o Track units from beginning inventory, units started, completed, and ending inventory to reconcile physical flow of units. 2. Weighted Average Method: Computing Equivalent Units (QS 16-5) o For conversion costs, calculate EUP by adding completed units to partial completion of ending WIP units (e.g., if ending WIP is 50% complete, use half of those units for EUP). 3. FIFO Method: Computing Equivalent Units (QS 16-6A, QS 16-9A, QS 16-14A, QS 16-15A) o FIFO considers only the costs and activities for the current period. Calculate units started and completed separately, and account for beginning WIP’s completion separately from units started this period. 4. Cost per Equivalent Unit of Production (QS 16-7, QS 16-18, QS 16-21A) o Calculate cost per EUP by dividing total costs by EUP for materials or conversion using either Weighted Average or FIFO methods. 5. Assigning Costs to Output (QS 16-12, QS 16-16A, QS 16-19, QS 16-22A) o Apply the calculated cost per EUP to units transferred out and to ending WIP. 6. Journal Entries for Cost Transfers (QS 16-13, QS 16-17A, QS 16-23 to QS 16-26) o For material purchases and requisitions, labor, and overhead application, record entries using standard accounts:  Debit Work in Process Inventory accounts for direct costs  Apply overhead using the predetermined rate and credit Factory Overhead 7. Cost per Unit and Gross Profit (QS 16-27) o Calculate unit cost and gross profit:  Cost per unit = Total production costs / Units produced  Gross profit = (Selling price - Cost per unit) × Units sold 8. Hybrid Costing System (QS 16-28) o Calculate costs per unit for hybrid products (combining job order and process elements) and use markup percentage to find the target selling price. 9. Process Yield Calculation (QS 16-29) o Yield = (Actual output / Expected output) × 100%. For example, if 50,000 gallons should yield but only 47,000 gallons were produced, yield = (47,000 / 50,000) × 100% = 94%. Each QS question involves applying either process costing techniques (Weighted Average or FIFO) or job order operations for accurate classification and cost tracking.