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Exam 20: Process Costing

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Question 101

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Yamada Company applies factory overhead to its production departments on the basis of 90% of direct labor costs. In the Assembly Department, Yamada had $125,000 of direct labor cost, and in the Finishing Department, Yamada had $35,000 of direct labor cost. The entry to apply overhead to these production departments is:

A) Debit Factory Overhead $144,000; credit Work in Process Inventory-Assembly $112,500; credit Work in Process-Finishing $31,500.
B) Debit Factory Overhead-Assembly $112,500; debit Factory Overhead-Finishing $31,500; credit Work in Process Inventory $144,000.
C) Debit Factory Payroll $144,000; credit Cash $144,000.
D) Debit Factory Overhead $144,000; credit Factory Payroll $144,000.
E) Debit Work in Process Inventory-Assembly $112,500; debit Work in Process Inventory -Finishing $31,500; credit Factory Overhead $144,000.

F) C) and D)
G) A) and B)

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Question 102

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In a process costing system, factory labor costs incurred in a reporting period are presented on the income statement as Factory Labor Expense.

A) True
B) False

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Question 103

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Metaline Corp. uses the weighted average method for inventory costs and had the following information available for the year. The number of units transferred to finished goods during the year is: $\begin{array} { l r r } \text { Beginning Work in Process } ( 40 \% \text { complete, } \$ 1,100 ) & 200 & \text { units } \\\text { Ending inventory of Work in Process } ( 80 \% \text { complete) } & 400 & \text { units } \\\text { Total units started during the year } & 320 & \text { units }\end{array}$

Conversion cost per equivalent unit is the combined costs of direct labor and factory overhead.

In process costing, the classification of materials as direct or indirect depends on whether or not they are clearly linked with a specific process or department.

The cost of units transferred from Work in Process Inventory to Finished Goods Inventory is called the cost of goods manufactured.

Pitt Enterprises manufactures jeans. All materials are introduced at the beginning of the manufacturing process in the Cutting Department. Conversion costs are incurred uniformly throughout the manufacturing process. As the cutting of material is completed, the pieces are immediately transferred to the Sewing Department. Information for the Cutting Department for the month of May follows. Work in Process, May 1 (50,000 units, 100% complete for direct materials, 40% complete with respect to conversion costs; includes $70,500 of direct material cost; $34,050 of conversion costs) . $\begin{array}{llr} \text { Units started in May} &225,000\\ \text { Units completed in May } &200,000\\\end{array}$ Work in Process, May 31 (75,000 units, 100% complete for direct materials; 20% complete for conversion costs) . Costs incurred in May Direct materials $ 342,000 Conversion costs $ 352,950 - If Pitt Enterprises uses the FIFO method of process costing, compute the equivalent units for direct materials and conversion respectively for May.

In a process operation, all labor that is used exclusively by a single production department is considered to be direct labor.

If a process has ________ or ________ inventory of partially completed production, equivalent units must be calculated so that total costs incurred during the period are assigned to all units worked on.

One section of the process cost summary describes the equivalent units of production for the department during the reporting period and presents the calculations of the direct materials and conversion costs per equivalent unit.

The FIFO method of computing equivalent units focuses on production activity in the current period only.

Andrews Corporation uses the weighted-average method of process costing. The following information is available for February in its Polishing Department: $\begin{array}{lr}\text { Equivalent units of production-direct materials } & 110,000 \mathrm{EUP} \\\text { Equivalent units of production conversion } & 95,000 \mathrm{EUP}\\\text { Costs in beginning Work in Process-direct materials } & \$ 49,000 \\\text { Costs in beginning Work in Process conversion } & \$ 36,000 \\\text { Costs incurred in February-direct materials } & \$ 414,000 \\\text { Costs incurred in Febuary-conversion } & 520.000\end{array}$ - The cost per equivalent unit of production for direct materials is:

In a process costing system, companies typically end each period with only Finished Goods Inventory.

In a process costing accounting system, factory wages are debited to ________, when direct labor is used. When indirect labor is used, the ________ account is debited. In both cases the ________ is credited.

A process cost summary usually does not include the number of equivalent units of production for the period.

Sparky Corporation uses the FIFO 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 cost per equivalent unit of conversion.

The number of equivalent units of production assigned to ending Work in Process inventory should be equal to or less than the number of physical units in ending Work in Process inventory.

Process operations, also called process manufacturing or process production, is the ________ production of similar products in a ________ flow of sequential steps.

During November, the production department of a process operations system completed and transferred to finished goods 35,000 units that were in process at the beginning of November and 110,000 that were started and completed in November. November's beginning inventory units were 100% complete with respect to materials and 55% complete with respect to conversion. At the end of November, 40,000 additional units were in process in the production department and were 100% complete with respect to materials and 30% complete with respect to conversion. -Compute the number of equivalent units with respect to conversion for November using the weighted-average method.

The following table of cost information is available for the Renaldo Company for the month of November: $\begin{array} { l | l | l | l } & \begin{array} { l } \text { Goods in } \\\text { Process } \\\text { Inventory- } \\\text { Mixing }\end{array} & \begin{array} { l } \text { Goods in } \\\text { Process } \\\text { Inventory- } \\\text { Molding }\end{array} & \begin{array} { l } \text { Finithed } \\\text { Goods } \\\text { Inventory }\end{array} \\\hline \text { Begining Inventory } & \$ 12,000 & \$ 15,000 & \$ 24,000 \\\hline \text { Costs incurred: } & & & \\\hline \text { Direct materials } & 22,000 & 14,000 & \\\hline \text { Direct labor } & 32,000 & 17,000 & \\\hline \text { Overhead applied } & 47,000 & 24,500 & \\\hline \text { Costs transferred out } & ( 100,000 ) & ( 152,000 ) & \\\hline \text { Costs transferred in } & & 100,000 & 152,000 \\\hline \text { Cost f goods sold } & & & ( 149,000 ) \\\hline \text { Ending inventory } & 13,000 & 18,500 & 27,000\end{array}$ Based on the table of cost information above, prepare the general journal entry required to record the: a. Transfer of goods from the molding department to the finished goods inventory. b. Cost of goods sold for November.