Question

1) What cost system is best suited to industries that manufacture a large number of identical units on a continuous basis ?

2) Describe the purpose of a factory overhead production report

3) Describe the purpose of a manufacturing cost report

4) Describe the purpose of a cost of production report

5) Why would a firm adopt a just-in-time operating system ?

6) Refer to #5. What are the disadvantages of this system ?

7) Refer to the following industries. Which industry would use a process cost system ? Which industry would use a job order cost system ? Explain your answers.

a) Business Consulting

b) Chemicals

c) Food

d) Movies

e) Soap

f) Cosmetics

g) Web Designer

Answer 1

1) Cost system which is best suited to industries that manufacture a large number of identical units on a continuous basis is Process Costing.
Process costing is a term used in cost accounting to describe one method for collecting and assigning manufacturing costs to the units produced. A processing cost system is used when nearly identical units are mass produced.

2)  This report shows all the direct expenses other than the direct materials and direct labor used to produce your merchandise. It depicts expenses per unit of production. It helps in controlling expenses if they are seem to be high or unreasonable.

3) The Manufacturing cost report summarizes the production and cost activity within a department for a reporting period. This report shows all manufacturing costs and manufacturing costs per unit. It also helps in controlling expenses if they are seem to be high or unreasonable.

4) Cost of Production Report also called Process Cost Sheet is the key document. At the end of costing period, generally a month, a Cost of Production Report is prepared. It summarizes the data of quantity produced and cost incurred by each producing department. It also serves as a source document for passing accounting entries at the end of costing period.