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Exam 17: Process Costing

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Question 61

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Answer the following questions using the information below: Timekeeper Inc. manufactures clocks on a highly automated assembly line. Its costing system uses two cost categories, direct materials and conversion costs. Each product must pass through the Assembly Department and the Testing Department. Direct materials are added at the beginning of the production process. Conversion costs are allocated evenly throughout production. Timekeeper Inc. uses weighted-average costing. $\begin{array}{ll}\text { Data for the Assembly Depatment for June } 2015 \text { are: }\\\text { Work in process, beginuning inventory }&300 \text { units }\\\text { Direct materials ( } 100 \% \text { complete) }\\\text { Conversion costs ( } 50 \% \text { complete) }\\\text { Units started during June } & 950 \text { units } \\\text { Work in process, ending inventory: } & 150 \text { units } \\\text { Direct materials ( } 100 \% \text { complete) } & \\\text { Conversion costs ( } 75 \% \text { complete) } &\\\\\text { Costs for June 2015: }\\\text { Work in process, beginuning inventory: }\\\text { Direct materials } & \$ 90,000 \\\text { Conversion costs } & \$ 135,000 \\\text { Direct materials costs added during June } & \$ 600,000 \\\text { Conversion costs ad ded during June } & \$ 400,000\end{array}$ -What is the conversion cost per equivalent unit in June?

A) $552.00
B) $541.24
C) $441.24
D) $428.00

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Question 62

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A major advantage of using the FIFO process-costing method is that ________.

A) FIFO makes the unit cost calculations simpler
B) in contrast with the weighted-average method, FIFO is considered GAAP
C) FIFO provides managers with information about changes in the costs per unit from one period to the next
D) in the period of rising prices, it leads to lower operating income and lower tax payments, saving the company cash and increasing the company's value

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Question 63

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Answer the following questions using the information below: Stefan Ceramics is in the business of selling ceramic vases. It has two departments - molding and finishing. Molding department purchases tungsten carbide and produces ceramic vases out of it. Ceramic Vases are then transferred to finishing department, which designs it as per the requirement of the customers. During the month of July, molding department purchased 500 kgs of tungsten carbide at $60 per kg. It started manufacture of 4,000 vases and completed and transferred 3,200 vases during the month. It has 800 vases in the process at the end of the month. It incurred direct labor charges of $1,000 and other manufacturing costs of $500, which included electricity costs of $200. Stefan had no inventory of tungsten carbide at the end of the month. It also had no beginning inventory of vases. The ending inventory was 50% complete in respect of conversion costs. -What is the total conversion costs for the month of July?

Weighted-average cost per equivalent unit is obtained by dividing the sum of costs for beginning work in process plus costs for work done in the current period by total equivalent units of work done to date.

A production cost worksheet is used to summarize total costs to account for,compute cost per equivalent unit,and assign total costs to units completed and to units in ending work-in-process.

Process costing should be used to assign costs to products when ________.

Weighty Steel processes a single type of steel.For the current period the following information is given: $\begin{array} { | l | l | l | l | } \hline & \text { Units } & \text { Material Costs } & \text { Conversion Costs } \\\hline \text { Beginning Inventory } & 3,000 & \$ 4,500 & \$ 5,400 \\\hline \text { Started During the Current Period } & 20,000 & 32,000 & 78,200 \\\hline \text { Ending Inventory } & 2,500 & & \\\hline\end{array}$ All materials are added at the beginning of the production process.The beginning inventory was 40% complete as to conversion,while the ending inventory was 30% completed for conversion purposes. Weighty uses the weighted-average costing method. What is the total cost assigned to the units completed and transferred this period?

In calculating cost per equivalent unit,the FIFO method of process costing merges the work and the costs of the beginning inventory with the work and the costs done during the current period.

Transferred-in costs are costs incurred in previous departments that are carried forward as the product's cost when it moves to a subsequent process in the production cycle.

Process-costing systems using standard costs record standard direct material costs in Direct Materials Control and standard conversion costs in Conversion Costs Control.

From an accounting standpoint,favorable cost variances are debit entries,while unfavorable ones are credits.

Answer the following questions using the information below: Morgan Clay Products manufactures clay molded pottery on an assembly line. Its standard costing system uses two cost categories, direct materials and conversion costs. Each product must pass through the Molding Department and the Finishing Department. Direct materials are added at the beginning of the production process. Conversion costs are allocated evenly throughout production. $\begin{array} { l } \text {Data for the Assembly Department for August 2015 are: }\\ \text {Work in process, beginuning inventory: }&1,200 \text { units } \\\text {Direct materials ( 100 \% complete) }\\\text {Conversion costs ( \( 40 \% \) complete) }\\\\ \text {Units started during August }&675 \text { units } \\\\ \text {Work in process, ending inventory: }&450 \text { units } \\\text {Direct materials ( \( 100 \% \) complete) }\\\text {Conversion costs ( \( 60 \% \) complete) }\\\\ \text {Costs for August: } \\ \text {Standard costs for Asæmbly: } \\ \text {Direct materials }& \$ 15 \text { per unit }\\ \text { Conversion costs }&\$ 27.50 \text { per unit } \\\\ \text {Work in process, beginning inventory:} \\ \text {Direct materials }&\$11,000 \\ \text { Conversion costs}&\$8,250 \\\end{array}$ -Which of the following journal entries records the Molding Department's conversion costs for the month,assuming conversion costs are 10% higher than expected?

Estimating the degree of completion for the calculation of equivalent units is usually easier for conversion costs than it is for direct materials.

Job-costing systems separate costs into cost categories according to when costs are introduced into the process of manufacture.

Transferred-in costs are always 100 percent complete at the beginning of the process in the new department.

Answer the following questions using the information below: Timekeeper Inc. manufactures clocks on a highly automated assembly line. Its costing system uses two cost categories, direct materials and conversion costs. Each product must pass through the Assembly Department and the Testing Department. Direct materials are added at the beginning of the production process. Conversion costs are allocated evenly throughout production. Timekeeper Inc. uses weighted-average costing. $\begin{array}{ll}\text { Data for the Assembly Depatment for June } 2015 \text { are: }\\\text { Work in process, beginuning inventory }&300 \text { units }\\\text { Direct materials ( } 100 \% \text { complete) }\\\text { Conversion costs ( } 50 \% \text { complete) }\\\text { Units started during June } & 950 \text { units } \\\text { Work in process, ending inventory: } & 150 \text { units } \\\text { Direct materials ( } 100 \% \text { complete) } & \\\text { Conversion costs ( } 75 \% \text { complete) } &\\\\\text { Costs for June 2015: }\\\text { Work in process, beginuning inventory: }\\\text { Direct materials } & \$ 90,000 \\\text { Conversion costs } & \$ 135,000 \\\text { Direct materials costs added during June } & \$ 600,000 \\\text { Conversion costs ad ded during June } & \$ 400,000\end{array}$ -What is the total amount debited to the Work-in-Process account during the month of June?

Otylia Manufacturing Company assembles its product in several departments.It has two departments that process all units.During February,the beginning work in process in the cutting department was half completed as to conversion,and complete as to direct materials.The beginning inventory included $12,000 for materials and $3,000 for conversion costs.Ending work-in-process inventory in the cutting department was 40% complete.Direct materials are added at the beginning of the process. Beginning work in process in the finishing department was 75% complete as to conversion.Beginning inventories included $16,000 for transferred-in costs and $20,000 for conversion costs.Ending inventory was 25% complete.Additional information about the two departments follows: $\begin{array} { | l | r | r | } \hline & { \text { Cutting } } & \text { Finishing } \\\hline \text { Beginning work-in-process units } & 20,000 & 20,000 \\\hline \text { Units started this period } & 40,000 & 50,000 \\\hline \text { Units transferred this period } & 50,000 & \\\hline \text { Ending work-in-process units } & 10,000 & 20,000 \\\hline \text { Material costs added } & \$ 42,000 & \$ 28,000 \\\hline \text { Direct manufacturing labor } & \$ 18,700 & \$ 40,000 \\\hline \text { Other conversioncosts } & \$ 21,500 & \$ 24,000 \\\hline\end{array}$ Required: Prepare a production cost worksheet using weighted-average for the cutting department.

Which of the following is true of weighted-average process-costing?

An operation-costing system is a hybrid-costing system applied to batches of similar,but NOT identical,products.

The first-in,first-out process-costing method assumes that the earliest equivalent units in work in process are completed first.