 My Dear Student

BELIEVE IT OR NOT WE ARE IN THE THIRD WEEK OF SCHOOL.

I hope you are doing well and on time for your study and be sure you studied the material for
week 3 very well.
Please read, study, and practice chapter 3 and 4 (excluding Appendix 4A) until you understand
the subject matter very well.

Below are the main points of week 3.

1. Explain the characteristics and purposes of cost accounting. Cost accounting involves the
procedures for measuring, recording, and reporting product costs. From the data
accumulated, the total cost and the unit cost of each product are determined. The two basic
types of cost accounting systems are job-order cost and process cost.

Job-Order Costing
2. Describe the flow of costs in a job-order cost accounting system. In job-order cost
accounting, manufacturing costs are first accumulated in three accounts: Raw Materials
Inventory, Factory Labour, and Manufacturing Overhead. The accumulated costs are then
assigned to Work in Process Inventory and eventually to Finished Goods Inventory and Cost
of Goods Sold.
A job cost sheet is a form used to record the costs that are chargeable to a specific job and to
determine the total and unit costs of the completed job. Job cost sheets make up the
subsidiary ledger for the Work in Process Inventory control account.
The predetermined overhead rate is based on the relationship between estimated annual
overhead costs and expected annual operating activity.
This is expressed in terms of a common activity base, such as direct labour cost. The rate is
used in assigning overhead costs to work in process and to specific jobs.
When jobs are completed, the cost is debited to Finished Goods Inventory and credited to
Work in Process Inventory. When a job is sold, the entries are as follows: (a) debit Cash or
Accounts Receivable and credit Sales for the selling price, and (b) debit Cost of Goods Sold
and credit Finished Goods Inventory for the cost of the goods.
3. Distinguish between under- and over-applied manufacturing overhead and discuss the
methods of adjusting overheads. Under-applied manufacturing overhead means that the
overhead assigned to work in process is less than the overhead incurred. Over-applied
 overhead means that the overhead assigned to work in process is greater than the overhead
incurred.
4. Please review this video:
http://video.wileyaccountingupdates.com/2011/08/23/job-order-costing/

Difference between Job-Order and Process Costing

5. Understand who uses process cost systems and explain the similarities and differences
between job-order cost and process cost systems. Process cost systems are used by
companies that mass-produce similar products in a continuous way. Once production
begins, it continues until the finished product emerges. Each unit of finished product is
identical to every other unit.
Job-order cost systems are similar to process cost systems in three ways: (1) Both systems
track the same cost elements—direct materials, direct labour, and manufacturing overhead.
(2) Costs are accumulated in the same accounts—Raw Materials Inventory, Factory Labour,
and Manufacturing Overhead. (3) Accumulated costs are assigned to the same accounts—
Work in Process, Finished Goods Inventory, and Cost of Goods Sold. However, the method
of assigning costs differs significantly.
There are four main differences between the two cost systems: (1) A process cost system
uses separate accounts for each production department or manufacturing process, rather
than the single work in process account used in a job-order cost system. (2) In a process cost
system, costs are summarized in a production cost report for each department; in a job-order
cost system, costs are charged to individual jobs and summarized in a job cost sheet. (3)
Costs are totalled at the end of a time period in a process cost system and at the completion
of a job in a job-order cost system. (4) In a process cost system, the unit cost is calculated as
follows: total manufacturing costs for the period divided by the units produced during the
period. In a job-order cost system, the calculation of the unit cost is as follows: total cost per
job divided by the number of units produced.
Process Costing

6. Explain the flow and assignment of manufacturing costs in a process cost system.
Manufacturing costs for raw materials, labour, and overhead are assigned to work in process
accounts for various departments or manufacturing processes, and the costs of units
completed in a department are transferred from one department to another as those units
move through the manufacturing process. The costs of completed work are transferred to
Finished Goods Inventory. When inventory is sold, costs are transferred to Cost of Goods
Sold.
Entries to assign the costs of raw materials, labour, and overhead consist of a credit to Raw
 Materials Inventory, Factory Labour, and Manufacturing Overhead, and a debit to Work in
Process for each of the departments that are doing the processing.
Entries to record the cost of goods transferred to another department are a credit to Work in
Process for the department whose work is finished and a debit for the department that the
goods are transferred to.
The entry to record the units completed and transferred to the warehouse is a credit for the
department whose work is finished and a debit to Finished Goods Inventory.
Finally, the entry to record the sale of goods is a credit to Finished Goods Inventory and a
debit to Cost of Goods Sold.
7. Calculate equivalent units using the weighted-average method. Equivalent units of
production measure the work done during a period, expressed in fully completed units. This
concept is used to determine the cost per unit of completed product. Equivalent units are the
sum of units completed and transferred out plus equivalent units of ending work in process.
8. Explain the four necessary steps to prepare a production cost report. The four steps to
complete a production cost report are as follows: (1) Calculate the physical unit flow; that
is, the total units to be accounted for. (2) Calculate the equivalent units of production. (3)
Calculate the unit production costs, expressed in equivalent units of production. (4) Prepare
a cost reconciliation schedule, which shows that the total costs accounted for equal the total
costs to be accounted for.
The production cost report contains both quantity and cost data for a production department.
There are four sections in the report: (1) the number of physical units, (2) the equivalent
units determination, (3) the unit costs, and (4) the cost reconciliation schedule.
In this setting, goods are transferred from one department to another. Such a sequential
process requires the use of an additional cost component called “transferred in.” This cost
component has a percentage of completion factor of 100%. The transferred-in cost
component is treated the same way as any other cost component in the calculations of the
equivalent units of production and the cost per equivalent unit of production.
 WEEK 3 PRACTICE
Dear Student

I would like for you to do well in this course. So, please read the following carefully and
take it as a guideline for your week 3 studying. Keep yourself motivated and aim to have A+
under any challenges.

Please review the following on the COMM 305 Moodle All Sections site:

1. PPT Lecture 3
2. Do the posted exams for any question that deals with week 3 content. Note that process
costing under the FIFO method is no longer covered in the course.

Please review the following at WileyPLUS:

Related to job-order costing:

3. Audio Review Chapter 3

 Applied Skills Videos

 Applied Skills Video: How to Prepare a Job Cost Sheet and Record Entries in a Job
Order Cost System
 Applied Skills Video: How to Compute Predetermined Overhead Rates, Apply
Overhead, and Calculate Under- or Overapplied Overhead

4. Flash Cards Chapter 03 you will select Glossary or Cards or Quiz with MC questions
5. Walkthrough Videos

 Solution Walkthrough Video: Like Exercise 3.17

 Solution Walkthrough Video: Like Exercise 3.19
 Solution Walkthrough Video: Like Exercise 3.20
 Solution Walkthrough Video: Like Exercise 3.21
 Solution Walkthrough Video: Like Exercise 3.22
 Solution Walkthrough Video: Like Exercise 3.23
 Solution Walkthrough Video: Like Exercise 3.24
 Solution Walkthrough Video: Like Exercise 3.25
 Solution Walkthrough Video: Like Exercise 3.26
 Solution Walkthrough Video: Like Exercise 3.29
 Solution Walkthrough Video: Like Problem 3.32A
 Solution Walkthrough Video: Like Problem 3.33A
 Solution Walkthrough Video: Like Problem 3.36A
 6. Interactivity Activities:
Interactivity: Journal Entries
Interactivity: Journal Entries for Job Costing
Interactive Demonstration Problem: Job Order Cost Accounting
7. ORION a fun place to practice and build your proficiency on chapter 3
8. Chapter 03 Practice Assignment: it has MC questions and Do it Review practice.
9. Now you can work the selected exercises and problems from the course outline. Please
do not look at the provided solutions until you do them first to learn from your mistakes
if you have any.

Related to process costing:

10. PowerPoint Review Chapter 4
11. Audio Review Chapter 4
 Applied Skills Videos
 Applied Skills Video: How to Compute Equivalent Units and Prepare a Production Cost
Report

12. Flash Cards Chapter 04 you will select Glossary or Cards or Quiz with MC questions
13. Walkthrough Videos

 Solution Walkthrough Video: Similar to Exercise 4.18

 Solution Walkthrough Video: Similar to Exercise 4.19
 Solution Walkthrough Video: Similar to Exercise 4.20
 Solution Walkthrough Video: Similar to Exercise 4.21
 Solution Walkthrough Video: Similar to Exercise 4.22
 Solution Walkthrough Video: Similar to Exercise 4.23
 Solution Walkthrough Video: Similar to Exercise 4.28
 Solution Walkthrough Video: Similar to Problem 4.37A
 Solution Walkthrough Video: Similar to Problem 4.39A
 Solution Walkthrough Video: Similar to Problem 4.41A

14. ORION a fun place to practice and build your proficiency on chapter 4
15. Chapter 04 Practice Assignment: it has 20 MC questions and five Do it Review practice.
16. Now you can work the selected exercises and problems from the course outline. Please
do not look at the provided solutions until you do them first to learn from your mistakes
if you have any.

Excellent. You studied, practiced, and reviewed the material for week 3. Now you will be ready
to do the weekly WileyPLUS assignment. Check the course outline for the due date.

I wish you the best and keep hope alive.

Dr. Aly