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Exam 20: Process Costing

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Question 61

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Luker Corporation uses a process costing system. The company had $160,500 of beginning Finished Goods Inventory on October 1. It transferred in $837,000 of units completed during the period. The ending Finished Goods Inventory balance on October 31 was $158,200. -The entry to account for the cost of goods sold in October is:

A) Debit Finished Goods Inventory $837,000; credit Work in Process Inventory $837,000.
B) Debit Cost of Goods Sold $839,300; credit Finished Goods Inventory $839,300.
C) Debit Finished Goods Inventory $158,200; credit Cost of Goods Sold $158,200.
D) Debit Cost of Goods Sold $837,000; credit Finished Goods Inventory $837,000.
E) Debit Cost of Goods Sold $839,300; credit Work in Process Inventory $839,300.

F) A) and E)
G) A) and B)

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Question 62

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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.Prepare a cost reconciliation for the month of August.

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Question 63

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Luker Corporation uses a process costing system. The company had $160,500 of beginning Finished Goods Inventory on October 1. It transferred in $837,000 of units completed during the period. The ending Finished Goods Inventory balance on October 31 was $158,200. -The entry to account for the cost of goods manufactured during October is:

A company uses the weighted-average method for inventory costing. At the end of the period, 22,000 units were in the ending Work in Process inventory and are 100% complete for materials and 75% complete for conversion. The equivalent costs per unit are materials, $2.65 and conversion $5.35. Compute the cost that would be assigned to the ending Work in Process inventory for the period.

Hybrid costing systems can only be applied to manufacturing.

If a department that applies process costing starts the reporting period with 40,000 physical units that were 80% complete with respect to direct materials and 50% complete with respect to direct labor, it must add 8,000 equivalent units of direct materials and 20,000 equivalent units of direct labor to complete them.

The process cost summary is an important managerial accounting report produced by a process costing system.

Giga Company uses a weighted average process cost system. The department started and finished 129,000 units during the current period. The ending inventory consists of 60,000 units that are 75% 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 $262,500 and overhead costs of $126,000. (a) Compute the equivalent cost per unit for direct labor. (b) Compute the equivalent cost per unit for overhead.

Clarksen Company uses a process costing system. The company requisitioned $93,000 of materials for Department A and $67,000 of materials for Department D. The entry to record the use of the direct materials by these two departments is:

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 cost per equivalent unit for direct materials and conversion costs respectively for May.

Which of the following characteristics applies to process costing but not to job order cost accounting?

A ________ contains features of both process and job order costing systems.

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 materials.

During December, the production department of a process operations system completed and transferred to finished goods a total of 65,000 units of product. At the end of March, 15,000 additional units were in process in the production department and were 80% complete with respect to materials. The beginning inventory included materials cost of $57,500 and the production department incurred direct materials cost of $183,000 during December. Compute the direct materials cost per equivalent unit for the department using the weighted-average method.

A process cost summary for a production department accounts for all costs assigned to that department during the period plus costs that were in the department's Work in Process Inventory account at the beginning of the period.

The combined costs of direct labor and factory overhead per equivalent unit used by many businesses with process operations is called:

If the predetermined overhead allocation rate is 75% of direct labor cost, and the Assembly Department's direct labor cost for the reporting period is $20,000, the following entry would be made to record the allocation of overhead to the products processed in this department: $\begin{array}{llr} \text { Factory Overhead} &15,000\\ \text { Wock in Process Inventory Assembly Dept } &&15,000\\\end{array}$

The use of process costing is of little benefit to a service type of operation.

Richards Corporation uses the FIFO method of process costing. The following information is available for October in its Fabricating Department: Units: Beginning Inventory: 80,000 units, 60% complete as to materials and 20% complete as to conversion. Units started and completed: 250,000. Units completed and transferred out: 330,000. Ending Inventory: 30,000 units, 40% complete as to materials and 10% complete as to conversion. Costs: Costs in beginning Work in Process - Direct Materials: $37,200. Costs in beginning Work in Process - Conversion: $79,700. Costs incurred in October - Direct Materials: $646,800. Costs incurred in October - Conversion: $919,300. - Calculate the equivalent units of conversion.

In the same time period, it is possible that a production department can produce 1,000 equivalent finished units with respect to direct materials and 1,200 equivalent finished units with respect to direct labor.