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Exam 20: Process Costing

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Question 81

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The FIFO method of computing equivalent units includes the beginning inventory costs in computing the cost per equivalent unit for the current period.

A) True
B) False

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Question 82

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Match the following terms with the definitions

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Responses

Equivalent units of production

Costing system that measures costs per unit upon completion of a job.

Job order costing system

Document that summarizes the materials a department uses when inventory moves continuously through the manufacturing process during a reporting period; replaces materials requisition.

Hybrid costing system

Report of total costs charged to a department, describes its equivalent units of production achieved, and allocates costs among units worked on in the period.

Process operations

A manufacturing system that contains features of both process costing and job order costing systems.

Process costing system

Number of units that could have been started and completed given the costs incurred during the period.

Materials consumption report

System of measuring unit costs at the end of a period by combining costs per equivalent unit from each separate department.

Process cost summary

Mass production of similar products in a continuous flow of sequential processes.

Premises

Equivalent units of production

Job order costing system

Hybrid costing system

Process operations

Process costing system

Materials consumption report

Process cost summary

Responses

Costing system that measures costs per unit upon completion of a job.

Document that summarizes the materials a department uses when inventory moves continuously through the manufacturing process during a reporting period; replaces materials requisition.

Report of total costs charged to a department, describes its equivalent units of production achieved, and allocates costs among units worked on in the period.

A manufacturing system that contains features of both process costing and job order costing systems.

Number of units that could have been started and completed given the costs incurred during the period.

System of measuring unit costs at the end of a period by combining costs per equivalent unit from each separate department.

Mass production of similar products in a continuous flow of sequential processes.

Show Answer

Correct Answer

Premises

Responses

Equivalent units of production

Job order costing system

Hybrid costing system

Process operations

Process costing system

Materials consumption report

Process cost summary

Premises

Equivalent units of production

Job order costing system

Hybrid costing system

Process operations

Process costing system

Materials consumption report

Process cost summary

Responses

Question 83

Multiple Choice

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Sparky Corporation uses the weighted-average method of process costing. The following information is available for February in its Molding Department: Units: Beginning Inventory: 25,000 units, 100% complete as to materials and 55% complete as to conversion. Units started and completed: 110,000. Units completed and transferred out: 135,000. Ending Inventory: 30,000 units, 100% complete as to materials and 30% complete as to conversion. Costs: Costs in beginning Work in Process - Direct Materials: $43,000. Costs in beginning Work in Process - Conversion: $48,850. Costs incurred in February - Direct Materials: $287,000. Costs incurred in February - Conversion: $599,150. - Calculate the equivalent units of conversion.

Port Manufacturing Company uses a process costing system. Materials are added at the beginning of the process. Direct labor and overhead are added evenly throughout the process. The company uses monthly reporting periods for its weighted-average process costing. The following are the operating and cost data information for October. The October 1 beginning Work in Process Inventory consisted of 20,000 units. The costs for this inventory are $82,500 of direct materials, $24,400 of direct labor, and $48,800 of factory overhead. Factory overhead is applied at 200% of direct labor cost. In addition to the beginning inventory costs, the company issued the following costs into Work in Process Inventory; direct materials, $240,000; direct labor, $68,000; factory overhead, $136,000. During October, the company completed and transferred 60,000 units of its product to finished goods. At the end of the month, the Work in Process inventory consisted of 15,000 units that were 40% complete with respect to direct labor and factory overhead and 100% complete with respect to materials. Prepare the company's process cost summary for October using the weighted average method.

A company that applies process costing is most frequently characterized by:

When raw materials are purchased on account for use in a process costing system, the corresponding journal entry that should be recorded will include:

To compute equivalent units of production, one must be able to reasonably estimate:

A company's beginning Work in Process inventory consisted of 20,000 units that were 20% complete with respect to direct labor. These beginning units were completed and another 90,000 units were started during the current period. Of those started, 60,000 were finished and the remaining 30,000 were 40% complete at the end of the period. Using the weighted-average method, the equivalent units of production with regard to direct labor were:

A company uses a process costing system and the weighted average method for inventory costs. The following information is available regarding direct $\begin{array} { l c } \text { Work in Process, January } 1 & 5,500 \text { units, } 80 \% \text { complete } \\\text { Work in Process, December } 31 & 8,800 \text { units, } 40 \% \text { complete } \\\text { Units completed and transferred to } & \\\text { finished goods } & 46,900 \text { units } \\\text { Direct labor costs during the year } & \$ 266,300\end{array}$ (a) Calculate the equivalent units of production for direct labor for the year. (b) Calculate the average cost per equivalent unit for direct labor (round to the nearest cent).

At the beginning of the month, the Forming Department of Martin Manufacturing had 10,000 units in inventory, 30% complete as to materials, and 10% complete as to conversion. During the month the department started 60,000 units and transferred 62,000 units to the next manufacturing department. At the end of the month, the department had 8,000 units in inventory, 80% complete as to materials and 60% complete as to conversion. - How many units did the Forming Department start and complete in the current month?

Refer to the following information about the Shaping Department of the Minnesota Factory for the month of August. Minnesota Factory uses the FIFO method of inventory costing. $\begin{array} { l | l | l } & \begin{array} { l } \text { Equivalent } \\\text { Units }\end{array} & \begin{array} { l } \text { Total } \\\text { Cost }\end{array} \\\hline \text { Beginning Work in Process: } & & \\\hline \text { Costs from prior month } & & \$ 7,000 \\\hline \text { Materials added } & 300 & \\\hline \text { Labor and overhead added } & 375 & \\\hline \text { Started and completed goods: } & & \\\hline \text { Materials added } & 2,000 & \\\hline \text { Labor and overhead added } & 2,000 & \\\hline \text { Ending Work in Procest: } & & \\\hline \text { Materials added } & 320 & \\\hline \text { Labor and overhead added } & 360 &\end{array}$ The cost per equivalent unit of materials is $10.00, and the cost per equivalent unit of labor and overhead is $22.00. Compute the cost that should be assigned to the ending Work in Process inventory for August.

The process cost summary presents calculations of the cost of units completed during the reporting period, but does not present any information about the ending Work in Process inventory.

If a production department has 100 equivalent units of production with respect to direct materials in a given reporting period, the equivalent units of production with respect to direct labor must also be 100.

Dazzle, Inc. produces beads for jewelry making use. The following information summarizes production operations for June. The journal entry to record June production activities for goods transferred from production to finished goods is: $\begin{array} { | l | r | } \hline \text { Direct materials used } & \$ 87,000 \\\hline \text { Direct labor used } & 160,000 \\\hline \text { Predetermined overhead rate (based on direct labor) } & 155 \% \\\hline \text { Goods transferred to finished goods } & 432,000 \\\hline \text { Cost of goods sold } & 444,000 \\\hline \text { Credit sales } & 810,000 \\\hline\end{array}$

Process costing typically uses only one Work in Process Inventory account, while job order costing typically uses a separate Work in Process Inventory account for each department.

Refer to the following information about the Shaping Department of the Minnesota Factory for the month of August. Minnesota Factory uses the FIFO method of inventory costing. $\begin{array} { l | l | l } & \begin{array} { l } \text { Equivalent } \\\text { Units }\end{array} & \begin{array} { l } \text { Total } \\\text { Cost }\end{array} \\\hline \text { Beginning Work in Process: } & & \\\hline \text { Costs from prior month } & & \$ 7,000 \\\hline \text { Materials added } & 300 & \\\hline \text { Labor and overhead added } & 375 & \\\hline \text { Started and completed goods: } & & \\\hline \text { Materials added } & 2,000 & \\\hline \text { Labor and overhead added } & 2,000 & \\\hline \text { Ending Work in Process: } & & \\\hline \text { Materials added } & 320 & \\\hline \text { Labor and overhead added } & 360 &\end{array}$ The cost per equivalent unit of materials is $10.00, and the cost per equivalent unit of labor and overhead is $22.00. Compute the cost that should be assigned to the beginning units that were completed and transferred during August.

A company uses a process costing system. Its Assembly Department's beginning inventory consisted of 30,000 units, 75% complete with respect to direct labor and overhead. The department completed and transferred out 127,500 units this period. The ending inventory consists of 20,000 units that are 25% complete with respect to direct labor and overhead. All direct materials are added at the beginning of the process. The department incurred direct labor costs of $24,000 and overhead costs of $32,000 for the period. Assuming the weighted average method, the direct labor cost per equivalent unit (rounded to the nearest cent) is:

At the beginning of the month, the Forming Department of Martin Manufacturing had 10,000 units in inventory, 30% complete as to materials, and 10% complete as to conversion. During the month the department started 60,000 units and transferred 62,000 units to the next manufacturing department. At the end of the month, the department had 8,000 units in inventory, 80% complete as to materials and 60% complete as to conversion. If Martin Manufacturing uses the weighted average method of process costing, compute the equivalent units for materials and conversion respectively for the Forming Department.

Wilturner Company incurs $97,000 of labor related directly to the product in the Assembly Department, and $10,000 of labor for services that help production in both the Assembly and Finishing departments. The amount of direct labor and factory overhead respectively are:

Grayson Company had 8,700 units in beginning inventory with accumulated costs for direct materials of $17,900, $16,500 direct labor, and $13,200 of overhead. During July, the company completed and transferred 50,000 units to finished goods. Costs incurred in the current period included $45,000 of direct materials, $58,500 of direct labor, and $46,800 of factory overhead. Ending inventory consisted of 12,000 units which were 90% complete with respect to materials and 50% complete with respect to labor and overhead. Compute the value assigned to ending inventory based on the weighted average method of inventory costing.