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North County - Accounting Questions

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Assume that during the current month, $ 200,000 in manufacturing costs ( including direct materials, direct labor, and overhead) were charged to the Cutting Department. Assume also that this department cut enough material to manufacture 10,000 units of product, and that the cut materials were transferred to the Assembly Department. At month- end, the following journal entry would be made to summarize the transfer of cut materials during the month:

Work in Process: Assembly Department . . . . . . . . . . . . . . . . . . . . . . . . . 200,000

Work in Process: Cutting Department. . . . . . . . . . . . . . . . . . . . . . . . 200,000

To transfer cost of processed units from the Cutting Department to the Assembly Department. Cutting cost per unit, $ 20 ($ 200,000 10,000 units).


Job Order Costing Product characteristics:

Use different amounts of direct labor

Use different amounts of direct materials

Tend to be unique

Are typically low volume

Are often custom- ordered

Process Costing Product characteristics:

Are high volume

Are identical

Use identical amounts of direct materials

Use identical amounts of direct labor

Are created with repetitive operations

Chapter 19

activity- based management ( p. 854) The process of using activity- based costs to help reduce and eliminate non- value-added activities.

cycle time ( p. 863) The length of time for a product to pass completely through a specific manufacturing process or the manufacturing process viewed as a whole. Used as a measure of efficiency in JIT systems. just- in- time ( JIT)

manufacturing system ( p. 862) An approach to manufacturing that reduces or eliminates non- value-added activities, such as maintenance of inventories. Focuses on both efficiency and product quality.

life- cycle costing ( p. 861) The consideration of all potential resources consumed by the product over its entire life. It is an teams estimate all potential costs to the consumer over the product's life.

manufacturing efficiency ratio ( p. 863) Processing time stated as a percentage of cycle time. Used as a measure of efficiency in JIT systems.

non- value- added activity ( p. 852) An activity within the value chain that does not make the product or service more valuable to the customer.

target costing ( p. 857) A business process aimed at the earliest stages of new product and service development, before creation and design of production methods. It is a process driven by the customer, focused on design, and encompassing the entire life of the product.

total quality management ( TQM) ( p. 863) An approach to eliminating wasteful activities and improving quality throughout the value chain by assigning quality management responsibility, monitoring quality costs, and rewarding low- cost, high- quality results.important part of the target costing process where target costing.

Exercise 18.7 is an extension of Exercise 18.6. Assume that on January 31 the Finishing Department of Ogden Office Outfitters had 1,000 partially trimmed and assembled executive desks in ending inventory. These units were, of course, 100 percent complete with respect to components transferred in from the Cutting Department, but only 20 percent complete with respect to direct trim materials, and



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