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Exam 20: Process Costing

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Question 41

True/False

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Equivalent units of production is an engineering term used to describe the process by which one company attempts to manufacture units of a product that are equivalent to the product manufactured by a competitor.

A) True
B) False

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Question 42

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Following is a partial process cost summary for Mitchell Manufacturing's Canning Department. - If the units completed were transferred to the Labeling Department, what is the appropriate journal entry to transfer the direct materials?

A) Work in Process-Labeling $135,500; Work in Process-Canning $135,500.
B) Finished Goods $136,000; Work in Process $136,000.
C) Work in Process-Labeling $176,500; Finished Goods-Canning $176,500.
D) Finished Goods-Labeling $135,500; Finished Goods-Canning $135,500.
E) Work in Process-Labeling $176,500; Work in Process-Canning $176,500.

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

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Question 43

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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 equivalent units of materials.

In a process costing system, the purchase of raw materials is credited to the Raw Materials Inventory.

A company uses a process costing system and the weighted average method for inventory costs. The following information is available regarding conversion activities for the current year: $\begin{array}{ll}\text { Work in Process, January } 1 & 5,500 \text { units, } 80 \% \text { complete } \\\text { Work in Process, December } 31 & 7,800 \text { units, } 50 \% \text { complete }\end{array}$ Units completed and transferred to finished goods 46,900 units Calculate the equivalent units of production for direct labor for the year.

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 cost per equivalent unit of conversion.

Process costing systems are commonly used by companies that manufacture standardized products by passing them through a series of manufacturing steps.

A system of accounting in which costs are accumulated and then measured per unit at the end of a period by combining costs per equivalent unit from various departments is a:

The following journal entry would be made to record the use of $6,100 of direct labor in a production department during the reporting period: $\begin{array}{llr} \text { Factory Payroll.} &6,100\\ \text { Goods in Process Inventory } &&6,100\\\end{array}$

The following refers to units processed by a breakfast cereal maker in August. Compute the total equivalent units of production with respect to conversion for August using the weighted-average inventory method. $\begin{array} { l c c } & \begin{array} { c } \text { Units of } \\\text { Product }\end{array} & \begin{array} { c } \text { Percent of } \\\text { Conversion Added }\end{array} \\\text { Beginning Work in Process } & 230,000 & 60 \% \\\text { Units started } & 570,000 & 100 \% \\\text { Units completed } & 620,000 & 100 \% \\\text { Ending Work in Process } & 180,000 & 70 \%\end{array}$

The Finishing Department transferred out completed units with a cost of $74,000. This transfer should be recorded with the following entry:

A process cost summary shows the cost of a particular job manufactured in the reporting period.

Wilturner Company incurs $74,000 of labor related directly to the product in the Assembly Department, $23,000 of labor not directly related to the product but related to the Assembly Department as a whole, and $10,000 of labor for services that help production in both the Assembly and Finishing departments. The journal entries to record the labor would include:

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

Direct labor and indirect labor are recorded, respectively, to:

Refer to the following information about the Finishing Department in the Davidson Factory for the month of June. Davidson Factory uses the FIFO method of inventory costing. Compute the total cost of all units that were completed and transferred to finished goods during June. Compute the total cost of the ending Work in Process inventory.

The following data is available for Donaldson Corp. for the current year: Beginning inventory of Work in Process 12,000 units, 60% completed Ending inventory of Work in Process 18,000 units, 30% completed Units completed and transferred to finished goods during the year 144,000 units Calculate the equivalent units of production for the year using the weighted average method.

During the year, LT Corp. introduced 132,000 units into production and 144,000 units were completed and transferred to finished goods. At the end of the year, the company had 13,600 units in process that were 80% complete. Determine how many units the company had in Work in Process at the beginning of the year.

Richards Corporation uses the weighted-average 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 materials.

In a process operation, the direct labor of a production department includes: