Test bank accounting 25th chapter 20 process cost sy

Chapter 20 Process Cost Systems Student: _ Process cost systems use job order cost cards to accumulate cost data True False Both process and job order cost systems maintain perpetual inventory accounts with subsidiary ledgers True False If the principal products of a manufacturing process are identical, a process cost system is more appropriate than a job order cost system True False If the products of a manufacturing process are produced to customer specifications, a process cost system is more appropriate than a job order cost system True False Process manufacturers typically use large machines to process a continuous flow of raw materials into a finished state True False Industries that typically use process cost systems include chemicals, oil, metals, food, paper, and pharmaceuticals True False In a process cost system, product costs are accumulated by processing department rather than by job True False Conversion costs include materials, direct labor, and factory overhead True False The direct materials costs and direct labor costs incurred by a production department are referred to as conversion costs True False 10 The direct labor costs and factory overhead costs incurred by a production department are referred to as conversion costs True False 11 The first step in determining the cost of goods completed and ending inventory valuation using process costing is to calculate equivalent units of production True False 12 Conversion costs are usually incurred evenly throughout a process True False 13 Equivalent units of production are the number of units that could have been manufactured from start to finish during an accounting period True False 14 Both job order and process cost accounting use equivalent units of production to determine costs True False 15 If 30,000 units of materials enter production during the first year of operations, 25,000 of the units are finished, and 5,000 are 50% completed, the number of equivalent units of production would be 28,500 True False 16 If 16,000 units of materials enter production during the first year of operations, 12,000 of the units are finished, and 4,000 are 75% completed, the number of equivalent units of production would be 15,000 True False 17 If the costs for direct materials, direct labor, and factory overhead were $277,300, $52,600, and $61,000, respectively, for 14,000 equivalent units of production, the total conversion cost was $390,900 True False 18 If the costs for direct materials, direct labor, and factory overhead were $60,000, $35,000, and $25,000, respectively, for 20,000 equivalent units of production, the conversion cost per equivalent unit was $6 True False 19 If the costs for direct materials, direct labor, and factory overhead were $522,200, $82,700, and $45,300, respectively, for 16,000 equivalent units of production, the conversion cost per equivalent unit was $8.00 True False 20 If 10,000 units which were 50% completed are in process at November 1, 90,000 units were completed during November, and 20,000 were 20% completed at November 30, the number of equivalent units of production for November was 90,000 (Assume no loss of units in production and that inventories are costed by the first-in, first-out method.) True False 21 If 10,000 units which were 40% completed are in process at November 1, 80,000 units were completed during November, and 12,000 were 20% completed at November 30, the number of equivalent units of production for November was 75,600 (Assume no loss of units in production and that inventories are costed by the first-in, first-out method.) True False 22 In applying the first-in, first-out method of costing inventories, if 8,000 units which are 30% completed are in process at June 1, 28,000 units are completed during June, and 4,000 units were 75% completed at June 30, the number of equivalent units of production for June was 33,400 True False 23 In applying the first-in, first-out method of costing inventories, if 8,000 units which are 30% completed are in process at June 1, 28,000 units are completed during June, and 4,000 units were 80% completed at June 30, the number of equivalent units of production for June was 28,600 True False 24 The cost of production report reports the cost of the goods sold True False 25 The cost of production report reports the cost charged to production and the costs allocated to finished goods and work in process True False 26 The cost of production report summarizes (1) the units for which the department is accountable and the units to be assigned costs and (2) the costs charged to the department and the allocation of those costs True False 27 The amount journalized showing the cost added to finished goods is taken from the cost of production report True False 28 One of the differences in accounting for a process costing system compared to a job order system is that the amounts used to transfer goods from one department to the next comes from the cost of production report instead of job cost cards True False 29 One of the primary uses of a cost of production report is to assist management in controlling production costs True False 30 Yield measures the ratio of the materials output quantity to the materials input quantity True False 31 Companies recognizing the need to simultaneously produce products with high quality, low cost, and instant availability have adopted a just-in-time processing philosophy True False 32 In a just-in-time system, processing functions are combined into work centers, sometimes called departments True False 33 The FIFO method of process costing is simpler than the Average cost method True False 34 Companies that use the average costing method for process costing have unit costs that include costs from more that one accounting period True False 35 If a company uses average costing instead of FIFO they will still get the same unit costs True False 36 The closer a company moves towards Just in Time production, the differences in unit costs between average costing and FIFO will be reduced True False 37 Custom-made goods would be accounted for using a process costing system True False 38 In a process costing system, a separate work in process inventory account is maintained for each customer’s job True False 39 Direct materials, direct labor, and factory overhead are assigned to each manufacturing process in a process costing system True False 40 In a process costing system, costs flow into finished goods inventory only from the work in process inventory of the last manufacturing process True False 41 Equivalent units are the sum of direct materials used and direct labor incurred True False 42 Conversion costs are generally added evenly throughout the process True False 43 Equivalent units should be computed separately for direct materials and conversion costs True False 44 Costs are transferred, along with the units, from one work in process inventory account to the next in a process costing system True False 45 In a process costing system, each process will have a work in process inventory account True False 46 In a process costing system, the cost per equivalent unit is computed before computing equivalent units True False 47 Costs of ending work in process inventory are included in the cost per equivalent unit computation True False 48 Conversion and direct materials are generally both added at the end of the production process True False 49 Gilbert Corporation had 25,000 finished units and 8,000 units were 35% complete The equivalent units totaled 30,200 True False 50 The entry to transfer goods in process from Department X to Department Y includes a debit to Work in Process-Department X True False 51 Process manufacturing usually reflects a manufacturer that produces small quantities of unique items True False 52 Equivalent units of production are always the same as the total number of physical units finished during the period True False 53 The last step in the accounting procedure for process costing is the calculation of equivalent units of production True False 54 The FIFO method separates work done on beginning inventory in the previous period from work done on it in the current period True False 55 When a process cost accounting system records the purchase of materials, the Materials account is credited True False 56 In a process costing system, indirect materials are charged to Work in Process True False 57 A process cost accounting system records all actual factory overhead costs directly in the Work in Process account True False 58 Once equivalent units are calculated for materials, this number will also be used for direct labor and factory overhead True False 59 If a department that applies FIFO process costing starts the reporting period with 50,000 physical units that were 25% complete with respect to direct materials and 40% complete with respect to conversion, it must add 12,500 equivalent units of direct materials and 20,000 equivalent units to direct labor to complete them True False 60 All costs of the processes in a process costing system ultimately pass through the Cost of Goods Sold account True False 61 For which of the following businesses would a process cost system be appropriate? A Auto repair service B Paint manufacturer C Specialty printer D Custom furniture manufacturer 62 Which of the following is NOT a way in which process and job order cost systems are similar? A Both accumulate product costs direct materials, direct labor, and factory overhead B Both allocate product cost to units produced C Both maintain perpetual inventories D Both use job order cost cards 63 The cost system best suited to industries that manufacture a large number of identical units of commodities on a continuous basis is: A process B departmental C first-in, first-out D job order 64 In a process cost system, the amount of work in process inventory is valued by: A finding the sum of all open job costs B allocating departmental costs between completed and partially completed units C multiplying units in ending inventory by the direct materials cost per unit D all of the above 65 In process cost accounting, the costs of direct materials and direct labor are charged directly to: A service departments B processing departments C customer accounts receivable D job orders 66 The two categories of cost comprising conversion costs are: A direct labor and indirect labor B direct labor and factory overhead C factory overhead and direct materials D direct labor and direct materials 67 In a process cost system, the cost of completed production in Department A is transferred to Department B by which of the following entries? A Debit Work in Process Dept B; credit Work in Process Dept A B Debit Work in Process Dept B; credit Finished Goods Dept A C Debit Work in Process Dept B; credit Cost of Goods Sold Dept A D Debit Finished Goods; credit Work in Process Dept B 68 The three categories of manufacturing costs comprising the cost of work in process are direct labor, direct materials, and: A office expenses B direct expenses C sales salaries expense D factory overhead 69 For which of the following businesses would a process cost system be appropriate? A An oil refinery B Yacht builder C Specialty furniture company D Custom electronics manufacturer 70 Which of the following is not characteristic of a process cost system? A The system may use several work in process inventory accounts B Manufacturing costs are grouped by department rather than by jobs C The system accumulates costs per job D The system emphasizes time periods rather than the time it takes to complete a job 71 Which of the following entities would probably use a process costing system? A A custom boat builder B A custom furniture manufacturer C A one of a kind jewelry creator D An oil refinery 72 Which of the following is not a characteristic of a process cost system? A Manufacturing costs are grouped by departments B The system may use several Work-in-Process accounts C The system measures costs for each completed job D The system allocates costs between completed and partially completed units within a department 73 If a company uses a process costing system to account for the costs in its four production departments, how many Work-in-Process will it use? A B C D 74 The four steps necessary to determine the cost of goods completed and the ending inventory valuation in a process cost system are: allocate costs to transferred and partially completed units determine the units to be assigned costs determine the cost per equivalent unit calculate equivalent units of production The correct ordering of the steps is: A 2, 4, 3, B 4, 2, 3, C 2, 3, 4, D 2, 3, 1, 75 Which of the following costs incurred by a paper manufacturer would be included in the group of costs referred to as conversion costs? A Advertising costs B Raw lumber (direct materials) C Machine operator's wages (direct labor) D Sales salaries 76 Which of the following costs incurred by a paper manufacturer would NOT be included in the group of costs referred to as conversion costs? A Factory supervisor's salary B Machine operator's wages (direct labor) C Raw lumber (direct materials) D Factory maintenance personnel supplies 168 The inventory at April 1, 2012, and the costs charged to Work in Process Department B during April for Hawk Company are as follows: 500 units, 60% completed From Department A, 10,000 units Direct labor Factory overhead $ 3,460 36,300 7,960 12,500 During April, all direct materials are transferred from Department A, the units in process at April were completed, and of the 10,000 units entering the department, all were completed except 1,200 units which were 25% completed as to conversion costs Inventories are costed by the first-in, firstout method Prepare a cost of production report for April Hawk Company Cost of Production Report Department B For the Month Ended April 30, 2012 UNITS Units charged to production: Inventory in process, April Received from Department A Total units accounted for by Dept B Units to be assigned costs: Inventory in process, April (60% completed) Started and completed in April Transferred to finished goods in April Inventory in process, April 30 (25% complete) Total units to be assigned costs COSTS Units costs: Total costs for April in Dept B Total equivalent units Cost per equivalent unit Costs charged to production: Inventory in process, April Costs incurred in April Total costs accounted for by Department B Costs allocated to completed and partially completed units: Inventory in process, April 1, bal To complete inventory in process, April Started and completed in April Transferred to finished goods in April Inventory in process, April 30 Total costs assigned by Dept B Equivalent Units Direct Materials Conversion 500 8,800 9,300 8,800 8,800 200 8,800 9,000 1,200 10,500 1,200 10,000 300 9,300 Costs Direct Materials Conversion Total Costs $36,300 ÷ 10,000 $ 3.63 $20,460 ÷ 9,300 $ 2.20 Whole Units 500 10,000 10,500 $ 3,460 56,760 $60,220 $ 3,460 $ 31,944 $ 440 19,360 440 51,304 4,356 660 55,204 5,016 $60,220 169 Information for the Sandy Manufacturing Company for the month of July 2012 is as follows: Beginning work in process: Units - 800 Direct materials = 100% complete Conversion costs = 70% complete Cost of Inventory at process, July Units started in July = 14,000 Ending work in process inventory: Units = 1,500 Direct materials = 100% complete Conversion costs = 30% complete $5,010 Costs charged to Work in Process during July: Direct materials costs = $57,400 Direct labor costs = 20,049 Factory overhead costs = 30,073 Prepare a cost of production report for the month of July, using the FIFO method Sandy Manufacturing Company Cost of Production Report For the Month Ended July 31, 2012 _ Beginning work in process (70% complete) Units started & completed (14,000 started - 1,500 ending) Ending work in process (30% complete) Units Equivalent Units Material Conversion Equivalent Equivalent Units Units 800 -0- 240 12,500 12,500 12,500 1,500 14,800 1,500 14,000 450 13,190 Costs COSTS Direct Materials _Conversion Total Costs Units costs; Total cost for July $ $50,122* 7, 0 Total Equivalent units (from above) ¸ ¸13,190 4, 0 Costs per equivalent unit $ $ 3.80 $7.90 Costs charged to production: Inventory in process, July Cost incurred in July Total costs accounted for in July $ 5,010 107,522 $112,532 * ($20,049 + $30,073) Direct Materials Conversion _Total Costs Costs allocated to completed and partially completed units: Inventory in process, July - balance To complete inventory in process, July $ Started and completed in July 51,250 (b) Transferred to finished goods in July $104,672 Inventory in process July 31 6,150 (d) Total costs accounted for in July $112,532 (a) 240 ´ $3.80 (e) 450 ´ $3.80 (b) 12,500 ´ $4.10 (c) 12,500 ´ $3.80 $ 912 (a) 47,500 (c) 1,710 (e) $ 5,010 912 98,750 7,860 (d) 1,500 ´ $4.10 170 Eagle Co manufactures bentwood chairs and tables Wood for both products is steam-bent in the same process, but different types of wood are used for each product Thus, materials cost is identified separately to each product One production cycle uses 20 board feet Labor cost is identified to the process as a whole, as is overhead cost Data for the month of July follow: Direct material cost per board foot Number of parts formed per production cycle (20 board feet) Actual operating hours in July Parts produced during July Budgeted annual conversion cost: Labor Utilities Depreciation Other overhead Total Budgeted annual operating hours for steam-bending (a) (b) (c) (d) Chairs $ 3.60 10 120 4,000 Tables $ 4.20 380 9,000 $150,000 125,000 65,000 50,000 $390,000 5,200 Compute July's predetermined rate for the steam-bending process Compute July's direct material costs for chairs and tables Compute conversion costs to be applied to chairs and tables in July Journalize the following entries: (1) Assignment of direct materials to chairs and tables (2) Application of conversion costs to chairs and tables (3) The transfer of completed chairs and tables to the Finishing Department All of July's production was completed in July (a) Steam-bending conversion cost per hour = $390,000/5,200 hrs = $75 per hour (b) Direct Chairs material cost per unit: ($3.60/ft ´ 20 ft per cycle) 10 $7.20 parts per cycle ($4.20/ft ´ 20 ft per cycle) parts per cycle $10.50 Total direct materials cost: (4,000 $28,800 units ´ $7.20/u.) (9,000 units ´ $10.50/u.) (c) Tables $94,500 Conversio n cost per unit: ($75/hr ´ 120 hrs./mo.) 4,000 2.25 units ($75/hr ´ 380 hrs./mo.) 9,000 units 3.17 (rounded) Total conversio n cost: (4,000 $ 9,000 units ´$2.25/u.) (9,000 units ´ $3.17/u.) (d) (1) (2) (3) $28,530 Work in Process Chairs Work in Process Tables Materials 28,800 94,500 Work in Process Chairs Work in Process Tables Conversion Costs Applied 9,000 28,530 Finished Goods Chairs Finished Goods Tables Work in Process Chairs 37,800 123,030 123,300 37,530 37,800 Work in Process Tables 123,030 171 Tough Hardware purchases raw materials and processes those purchases through a receiving/inspection process prior to stocking for production Tough places purchase orders for materials for production and receives the goods that day The first PO is for 2,500 1/2”´ 96” milling blanks at $2.75 each The second is for 4,000 pieces of 48” ´ 96” ´ 1” sheet steel at $15.55 each The third PO is for five 55 gallon drums of Milling Lubrication Oil at $475.00 per barrel The receiving/inspection process is completed and the goods are transferred from Receiving Inventory to Raw Materials The Receiving/Inspection Department assigns manufacturing overhead of $55.00 per purchase order as well as $2.75 per piece on metal goods and $35.00 per container on fluids All labor is allocated through overhead (a) Write the journal entry to purchase and receive these items to Receiving Inventory on account (b) Assign overhead to the metal goods (c) Assign overhead to the fluid goods (d) Transfer all goods to Raw Materials Inventory (a) Receiving Inventory Accounts Payable PO - 2,500 pieces ´ $2.75 each = PO - 4,000 pieces ´ $15.55 each = PO - pieces ´ $475.00 each = Total 71,450 71,450 $ 6,875 62,200 2,375 $ 71,450 (b) Assign overhead to the metal goods Receiving Inventory Factory Overhead 17,985 PO - 2,500 pieces ´ $2.75 each = PO - PO overhead PO - 4,000 pieces ´ $2.75 each = PO - PO overhead Total $6,875 55 11,000 55 $17,985 (c) Assign overhead to the fluid goods Receiving Inventory Factory Overhead PO - pieces ´ $35.00 each = PO - PO overhead Total 17,985 230 230 $175 55 $230 (d) Transfer all goods to Raw Materials Inventory Raw Material Inventory 89,665 Receiving Inventory 89,665 172 The Brass Works is in the process of determining manufacturing overhead Journalize events (a) - (d) to Factory Overhead, Miscellaneous Expense, or allocated between the two as appropriate All items were paid in cash at the time of acquisition Next calculate the overhead application rate and apply overhead to Work-inProcess (a) Brass Works purchases an insurance policy for $4,000 It is computed that 80% of the value of the policy protects production, the balance protects the administrative offices (b) The electric bill is received showing an amount due of $1,200 This meter is utilized only by production as the office spaces have their own meter (c) Payroll reports that the sales manager’s salary for the period is $3,500 and that production supervisors wages for the period are $5,500 (d) The stockroom reports that $2,575 in materials were purchased for the production maintenance department (e) If the driver for the application of overhead is drop-forge strokes and there are expected to be 1,000 strokes in this period, what is the rate per stroke? Do not round your answer (f) Assuming that there are 1,150 drop-forge strokes in this period, apply factory overhead to Work In Process Round your answers to nearest dollar Round overhead rate to four decimal places and total cost to nearest dollar (a) Factory Overhead ($4,000 x 80%) Miscellaneous Expense ($4,000 x 20%) Cash 3,200 800 4,000 (b) Factory Overhead Cash 1,200 (c) Miscellaneous Expense Factory Overhead Cash 3,500 5,500 (d) Factory Overhead Cash (e) Factory Overhead Factory Overhead Factory Overhead Factory Overhead Total 1,200 9,000 2,575 2,575 $3,200 1,200 5,500 2,575 $12,475 Drop-forge stroke rate = $12,475 / 1,000 strokes = $12.475 per stroke (f) Work In Process Manufacturing Overhead 14,346 14,346 173 The estimated total factory overhead cost and total machine hours for Department 40 for the current year are $250,000 and 56,250 respectively During January, the first month of the current year, actual machine hours used totaled 5,100 and factory overhead cost incurred totaled $22,000 (a) (b) (c) (d) Determine the factory overhead rate based on machine hours Present the entry to apply factory overhead to production in Department 40 for January What is the balance of Factory Overhead - Department 40 at January 31? Does the balance of Factory Overhead - Department 40 at January 31 represent overapplied or underapplied factory overhead? Round total cost to nearest dollar value (a) $250,000/56,250 = $4.44 per machine hour (b) Work in Process Department 40 (5,100 ´ $4.44) Factory Overhead Department 40 (c) $644 credit (d) overapplied factory overhead 22,644 22,644 174 A firm produces its products by a continuous process involving three production departments, through Present entries to record the following selected transactions related to production during August: (a) (b) (c) (d) (e) (f) (g) (h) Materials purchased on account, $120,000 Material requisitioned for use in Department 1, $125,700, of which $124,200 entered directly into the product Labor cost incurred in Department 1, $195,400, of which $174,000 was used directly in the manufacture of the product Factory overhead costs for Department incurred on account, $54,700 Depreciation on machinery in Department 1, $29,200 Expiration of prepaid insurance chargeable to Department 1, $7,000 Factory overhead applied to production, $106,300 Output of Department transferred to Department 2, $362,700 (a) (b) (c) (d) (e) (f) (g) (h) Materials Accounts Payable 120,000 Factory Overhead Department Work in Process Department Materials 1,500 124,200 Factory Overhead Department Work in Process Department Wages Payable 21,400 174,000 Factory Overhead Department Accounts Payable 54,700 Factory Overhead Department Accumulated Depreciation Machinery 29,200 Factory Overhead Department Prepaid Insurance 7,000 Work in Process Department Factory Overhead 106,300 Work in Process Department Work in Process Department 362,700 120,000 125,700 195,400 54,700 29,200 7,000 106,300 362,700 175 Fast-Flow Paints produces mixer base paint through a two stage process, Mixing and Packaging The following events depict the movement of value into and out of production Journalize each event if appropriate, if not, provide a short narrative reason as to why you choose not to journalize that action Bob, the Production Manager, accepts an order to continue processing the current run of mixer base paint (a) $27,000.00 worth of materials are withdrawn from Raw Materials inventory Of this amount, $25,500.00 will be issued to the Mixing Department and the balance will be issued to the Maintenance Department to be used on production line machines (b) Bob calculates that labor for the period is $12,500.00 Of this value $1,750.00 is for maintenance and indirect labor The remainder is directly associated with mixing (c) Bob, who is paid a salary but earns about $35.00 / hour, spends hour inspecting the production line (d) The manufacturing overhead drivers for Mixing are (1) hours of mixer time at $575.00 per hour, and material movements from Raw Materials at $125.00 per movement An inspection of the machine timers reveals that a total of hours has been consumed in making this product An inspection of “Stocking Orders” indicates that only one material movement was utilized to “load” the raw materials (Note: All values have been journalized to Factory Overhead, you need only apply it to the production run.) (e) Within Fast-Flow items are transferred between departments at a standard cost or value This production run has created 4,015 gallons of mixer base paint This paint is transferred to Packaging at a standard cost of $10.05 per gallon (f) Packaging draws $755.00 in raw materials for packaging of this production run (g) Packaging documents that 12 hours of direct labor at $10.25 per hour were consumed in the packaging of this production run (h) Packaging uses a driver of direct labor hours to allocate manufacturing overhead at the rate of $25.00 per hour (i) Packaging transfers these 4,015 gallons of packaged goods to Finished Goods Inventory at a standard cost of $10.34 per gallon Round total cost to nearest dollar value (a) Work In Process - Mixing Factory Overhead Raw Materials 25,500 1,500 (b) Work In Process - Mixing Factory Overhead Wages Payable 10,750 1,750 27,000 12,500 (c) Bob’s inspection of the assembly line is not directly chargeable to production As a manager of a production unit it will be incorporated in the cost of production through the allocation of overhead (d) Work In Process - Mixing Factory Overhead (e) Work In Process - Packaging Work In Process - Mixing 4,725 4,725 40,351 40,351 (f) Work In Process - Packaging Raw Materials 755 (g) Work In Process - Packaging Wages Payable 123 (h) Work In Process - Packaging Factory Overhead 300 (i) Finished Goods Inventory Work In Process - Packaging 755 123 300 41,515 41,515 176 Zang Co manufacturers its products in a continuous process involving two departments, Machining and Assembly Present entries to record the following selected transactions related to production during June: (a) (b) (c) (d) (e) (f) (g) Materials purchased on account, $180,000 Materials requisitioned by: Machining, $73,000 direct and $9,000 indirect materials; Assembly, $4,900 indirect materials Direct labor used by Machining, $23,000, Assembly, $47,000 Depreciation expenses: Machining, $4,500; Assembly, $7,800 Factory overhead applied: Machining, $9,700; Assembly, $11,300 Machining Department transferred $98,300 to Assembly Department; Assembly Department transferred $83,400 to finished goods Sold goods on account, $100,000 Cost of goods sold, $68,000 (a) (b) (c) (d) (e) (f) (g) Materials Accounts Payable 180,000 Work in Process Machining Factory Overhead Machining Factory Overhead Assembly Materials 73,000 9,000 4,900 Work in Process Machining Work in Process Assembly Wages Payable 23,000 47,000 Factory Overhead Machining Factory Overhead Assembly Accumulated Depreciation 4,500 7,800 Work in Process Machining Work in Process Assembly Factory Overhead Machining Factory Overhead-Assembly 9,700 11,300 Work in Process Assembly Work in Process Machining 98,300 Finished Goods Work in Process Assembly 83,400 180,000 86,900 70,000 12,300 9,700 11,300 98,300 83,400 Accounts Receivable Sales Cost of Goods Sold Finished Goods 100,000 100,000 68,000 68,000 177 The inventory at June and costs charged to Work in Process - Department 60 during June are as follows: 3,800 units, 80% completed ($25,000 Materials, $35,400 conversion) Direct materials, 32,000 units Direct labor Factory overhead Total cost to be accounted for $ 60,400 368,000 244,000 188,000 $860,400 During June, 32,000 units were placed into production and 31,200 units were completed, including those in inventory on June On June 30, the inventory of work in process consisted of 4,600 units which were 40% completed Inventories are costed by the average cost method and all materials are added at the beginning of the process Determine the following, presenting your computations: (a) (b) (c) (d) equivalent units of production for conversion cost conversion cost per equivalent unit and material cost per equivalent unit total and unit cost of finished goods completed in the current period total cost of work in process inventory at June 30 (a) Equivalent units of production: Transferred out To process units in inventory on June 30: 4,600 ´ 40% = Equivalent units of production for conversion cost (b) (c) (d) Conversion cost per equivalent unit of production: Conversion costs: from beginning inventory Direct labor Factory overhead 31,200 1,840 33,040 Unit conversion cost, $467,400 ÷ 33,040 $ 35,400 $244,000 188,000 $467,400 $ 14.15 Material cost per equivalent unit: From beginning inventory Added during the period Total $25,000 368,000 393,000 Units (3,800+32,000) Material cost per unit 35,800 $10.98 Total and unit cost of finished goods completed in the current period Unit cost of finished goods completed: Material costs per unit Conversion costs per unit Total cost per unit $ 10.98 14.15 $ 25.13 Total costs of goods completed during the period: 31,200 ´ $25.13 784,056 Cost of work in process inventory at June 30: Direct materials, 4,600 units at $10.98 Conversion costs, 1,840 units at $14.15 Total cost $50,508 26,036 $76,544 178 On August 1, Jones Corporation’s packaging department had Work in Process inventory of 8,000 units that were 75% complete with respect to materials and 30% complete with respect to conversion costs The cost of these units was $99,525 ($62,000 transferred-in from previous departments, $28,775 in materials, and $8,750 in labor and overhead) During August, 125,000 units were transferred into the department These units had accumulated costs in previous departments of $1,418,560 The packaging department incurred costs of $799,225 for materials and $498,010 for conversion costs in August and transferred 131,000 units out of the department The 2,000 units remaining in ending inventory are 50% complete with respect to materials and 20% complete with respect to conversion costs Jones Corporation uses the average cost method to cost its inventories Required a Calculate the cost per equivalent unit for transferred-in costs, materials, and conversion costs b Calculate the cost of the units transferred out of the department c Calculate the cost of the ending inventory a Cost per equivalent unit: Transferred-in costs = ($62,000 + $1,418,560) / 133,000 = $11.13 Materials = ($28,775 + $799,225) / (131,000 + 1,000) = $6.27 Conversion costs = ($8,750 + $498,010) / (131,000 + 400) = $3.86 b c Units transferred out = ($11.13 + $6.27 + $3.86) * 131,000 = $2,785,060 Ending inventory = (2,000 * $11.13) + (2,000 * 50 * $6.27) + (2,000 * 20 * $3.86) = $30,074 179 Explain the concept of equivalent units Give an example to validate your explanation Equivalent units are a measure of the amount of work done during a production period, expressed in terms of fully completed units of output If 40,000 units were started and completed, then the equivalent units would equal 40,000 units However, if those same 40,000 units were started and only 50% complete, then the equivalent units would be 40,000 X 50% = 20,000 units 180 Discuss how equivalent units are computed under the average cost method Under average costing, equivalent units equal: a) all work done to date on units transferred out irregardless of whether work was completed in prior period or current period and b) work done to start ending inventory 181 Job order manufacturing and process manufacturing are two major costing systems used in manufacturing Briefly contrast the characteristics of these two systems Job Order System Custom orders Heterogeneous product Low production volume Low to medium standardization Process System Repetitive production Homogeneous product High production volume High standardization 182 Describe the flow of materials in a process cost accounting system When raw materials are purchased they are debited to the Materials account When direct materials are needed in a production department, a materials requisition report is used to move the materials from the storeroom to the production department Direct materials used are recorded with a debit to Work in Process Inventory for that department and a credit to Materials Indirect materials used in a department are recorded with a debit to Factory Overhead and a credit to Materials ... manufacturing process in a process costing system True False 40 In a process costing system, costs flow into finished goods inventory only from the work in process inventory of the last manufacturing process. .. in process inventory account to the next in a process costing system True False 45 In a process costing system, each process will have a work in process inventory account True False 46 In a process. .. process costing is simpler than the Average cost method True False 34 Companies that use the average costing method for process costing have unit costs that include costs from more that one accounting