CHAPTER 4

PROCESS COST ACCOUNTING

SUMMARY OF QUESTION TYPES BY LEARNING OBJECTIVE, BLOOM’S TAXONOMY, LEVEL OF DIFFICULTY, AACSB CODES, AND CPA CODES

Bloom’s: AN = Analysis AP = Application C = Comprehension E = Evaluation

K = Knowledge

LOD: E = Easy M = Medium H = Hard

AACSB: AN = Analytic E = Ethics

CPA: MA = Management Accounting

^*This topic is dealt with in an Appendix to the chapter

SUMMARY OF QUESTION TYPES BY LEARNING OBJECTIVE, BLOOM’S TAXONOMY, LEVEL OF DIFFICULTY, AACSB CODES, AND CPA CODES (CONT’D)

Bloom’s: AN = Analysis AP = Application C = Comprehension E = Evaluation

K = Knowledge

LOD: E = Easy M = Medium H = Hard

AACSB: AN = Analytic E = Ethics

CPA: MA = Management Accounting

^*This topic is dealt with in an Appendix to the chapter

SUMMARY OF LEARNING OBJECTIVES BY QUESTION TYPE

Note: TF = True-False C = Completion BE = Brief Exercise

MC = Multiple Choice Ex = Exercise SAE = Short-Answer Essay

Ma = Matching MP = Multi-Part

^*This topic is dealt with in an Appendix to the chapter

CHAPTER LEARNING OBJECTIVES

1. Understand who uses process cost systems and explain the similarities and differences between job-order cost and process cost systems.

Process cost systems are used by companies that mass-produce similar products in a continuous way. Once production begins, it continues until the finished product emerges. Each unit of finished product is identical to every other unit.

Job-order cost systems and process cost systems are similar in three ways: (1) Both systems track the same cost components—direct materials, direct labour, and manufacturing overhead. (2) Costs are accumulated in the same accounts—Raw Materials Inventory, Factory Labour, and Manufacturing Overhead. (3) Accumulated costs are assigned to the same accounts—Work in Process Inventory, Finished Goods Inventory, and Cost of Goods Sold. However, the method of assigning costs differs significantly.

There are four main differences between the two cost systems: (1) A process cost system uses separate work in process inventory accounts for each production department or manufacturing process, rather than the single work in process inventory account used in a job-order cost system. (2) In a process cost system, costs are summarized in a production cost report for each department; in a job-order cost system, costs are charged to individual jobs and summarized in a job cost sheet. (3) Costs are totalled at the end of a time period in a process cost system and at the completion of a job in a job-order cost system. (4) In a process cost system, the unit cost is calculated as follows: Total manufacturing costs for the period ÷ Equivalent units of production during the period. In a job-order cost system, the calculation of the unit cost is as follows: Total cost per job ÷ Number of units produced.

2. Explain the flow and assignment of manufacturing costs in a process cost system. Manufacturing costs for raw materials, labour, and overhead are assigned to work in process inventory accounts for various departments or manufacturing processes, and the costs of units completed in a department are transferred from one department to another as those units move through the manufacturing process. The costs of completed work are transferred to Finished Goods Inventory. When inventory is sold, costs are transferred to Cost of Goods Sold.

Entries to assign the direct materials, direct labour, and manufacturing overhead consist of a credit to Raw Materials Inventory, Factory Labour, and Manufacturing Overhead, and a debit to Work in Process Inventory for each of the departments that are doing the processing.

Entries to record the cost of goods transferred to another department are a credit to Work in Process Inventory, for the department whose work is finished and a debit to the Work In Process Inventory accounts for each department that the goods are transferred to.

The entry to record the units completed and transferred to the warehouse is a credit to Work In Process Inventory for the department whose work is finished and a debit to Finished Goods Inventory.

Finally, the entry to record the sale of goods is a credit to Finished Goods Inventory and a debit to Cost of Goods Sold.

3. Calculate equivalent units of production using the weighted-average method.

Equivalent units of production measure the work done during a period, expressed in fully completed units. This concept is used to determine the cost per unit of completed product. Equivalent units of production are the sum of units completed and transferred out plus equivalent units of ending work in process inventory.

4. Explain the four necessary steps to prepare a production cost report.

The four steps to complete a production cost report are as follows: (1) Calculate the physical unit flow; that is, the total units to be accounted for. (2) Calculate the equivalent units of production. (3) Calculate the unit production costs, per equivalent units of production. (4) Prepare a cost reconciliation schedule, which shows that the total costs accounted for equal the total costs to be accounted for.

The production cost report contains both quantity and cost data for a production department over a specified period. There are four sections in the report: (1) the flow of physical units, (2) the equivalent units determination, (3) the unit costs, and (4) the cost reconciliation schedule.

In this setting, goods are transferred from one department to another. Such a sequential process requires the use of an additional cost component called “transferred in.” This cost component has a percentage of completion factor of 100%. The transferred-in cost component is treated the same way as any other cost component in the calculations of the equivalent units of production and the cost per equivalent unit of production.

5. Calculate equivalent units of production using the FIFO method (Appendix 4A).

Equivalent units under the FIFO method are the sum of the work performed to (1) finish the units from the beginning work in process inventory, if any; (2) complete the units started into production during the period; and (3) start, but only partially complete, the units in ending work in process inventory.

TRUE-FALSE STATEMENTS

1. In a process cost system, direct labour and overhead can be added in any production department; however, direct materials are only added in the first department.

2. Companies often use a combination of a process cost and a job-order cost system, called job process costing.

3. In process manufacturing, units are mass produced in a continuous fashion.

4. A primary driver of overhead costs in continuous manufacturing operations is direct labour hours.

5. The flow of costs in a process costing system requires that direct materials, direct labour, and overhead be added in equal amounts in each process or department involved to complete the product.

6. When goods are completed, the entry to record the transfer of the goods out of the last department includes a debit to Cost of Goods Sold.

7. Beginning Work in Process Inventory is added to units completed and transferred out to determine equivalent units of production under the weighted-average method.

8. Under the weighted-average method, the physical units in a department are the actual units in a department regardless of the degree of any work performed.

9. When material costs and conversion costs do not occur in the same process at the same time, the weighted-average method cannot be used effectively.

10. Conversion cost is another name for manufacturing overhead.

11. A production cost report is an internal document for management that shows production quantity and cost data for a particular production department.

*12. When comparing the FIFO with the weighted-average method, the FIFO method provides current cost information.

*13. There are no units in ending Work in Process Inventory at the end of the period under the FIFO method.

*14. Since the FIFO method of determining equivalent units of production provides current cost information, companies using this approach have more accurate pricing strategies.

ANSWERS TO TRUE-FALSE STATEMENTS

MULTIPLE CHOICE QUESTIONS

15. In process costing,

a) accounting focuses on the process involved in manufacturing products that are very unique in nature.

b) the system is used to apply costs to merchandise inventory.

c) costs are summarized in a product cost report by department.

d) total costs are determinable at any point in time by examining the account balances.

16. Which of the following statements is true?

a) Both job-order cost and process cost systems track direct materials and direct labour, but only job-order cost systems track manufacturing overhead.

b) Both job-order cost and process cost systems track direct materials and direct labour, but only process cost systems track manufacturing overhead.

c) Both job-order cost and process cost systems track direct materials, direct labour and manufacturing overhead.

d) Only manufacturing overhead costs are tracked in both job-order cost and process cost systems.

17. Which of the following items is not a characteristic of a process cost system?

a) Once production begins, it continues until the finished product emerges.

b) The products produced are heterogeneous in nature.

c) The focus is on continually producing similar products.

d) When the finished product emerges, all units have exactly the same amount of direct materials, direct labour, and overhead.

18. When is a process cost accounting system most appropriate?

a) when mass-produced products are manufactured that are very similar in nature

b) when a company produces multiple jobs within the same accounting period

c) when companies produce uniquely different products

d) when a variety of different products are produced, each one requiring different types of direct material, direct labour, and overhead

19. Which of the following is a characteristic of products that are mass produced in a continuous fashion?

a) They are grouped in batches.

b) They are produced all in one process.

c) Each batch of costs is accumulated in a separate Cost of Goods Sold account.

d) The products are identical or very similar in nature.

20. For which one of the following would a process cost system most likely be used?

a) custom furniture

b) potato chips

c) motion pictures

d) cruise ships

21. Which of the following is true of a process cost system?

a) There is a separate Work in Process Inventory account for each process.

b) A subsidiary ledger tracks the costs of each job.

c) There is a separate Work in Process Inventory account for each product.

d) Direct materials are added at the beginning process, and conversion costs are added at the end.

22. Which one of the following is a difference between a job-order cost and a process cost system?

a) The manufacturing cost components are different.

b) Costs are totalled at different points in the manufacturing process.

c) The costs flow through the accounts differently.

d) Three primary costs make up the costs of products in a job-order system, while only two costs are used in process costing.

23. Which one of the following is a true statement about process cost systems?

a) In process cost systems, costs are accumulated and assigned.

b) A process cost system has one Work in Process Inventory account for each job.

c) In process cost systems, costs are summarized by batch.

d) Unit costs are ignored in process cost systems because they are identical.

24. Which of the following is correct concerning the number of Work in Process Inventory accounts used by job-order and process cost systems?

a) job-order = several; process cost = one

b) job-order = one control account for each job; process cost = one for each process

c) job-order = one control account; process cost = one for each process

d) job-order = none; process cost = several

25. Which group of the following manufacturing cost components occurs in a process cost system?

a) direct labour and conversion costs

b) direct labour and direct material

c) manufacturing overhead and conversion costs

d) direct materials, direct labour, and manufacturing overhead

26. Which statement is true concerning process cost systems?

a) Each Work in Process Inventory account represents the cost of a different product.

b) The cost of each unit of product is determined after each unit is produced.

c) Product costs are determined when the products are sold.

d) Product costs are summarized on production cost reports.

27. Which of the following is considered a difference between a job-order cost system and a process cost system?

a) the accumulation of the costs of direct materials, direct labour, and overhead

b) the flow of costs

c) the manufacturing cost components

d) unit cost computations

28. Which of the following best reflects a distinguishing factor between a job-order cost system and a process cost system?

a) the detail to which the costs under each method are calculated

b) the time period in which each method covers

c) the number of Work in Process Inventory accounts used in each method

d) the manufacturing cost components each method includes

29. Which of the following are characteristics of process cost systems?

a) They used by companies that mass-produce similar products in a continuous fashion.

b) They are best utilized when tracking costs by department is not important.

c) They are focused on tracking job cost information.

d) They help determine inventory amounts but not cost of goods.

30. A major difference between process costing and job-order costing is that

a) costs are calculated at each step in a job-order costing system while only calculated at the end of a process costing system.

b) costing of material components is more sensitive in a process costing system.

c) job-order costing is focused on each specific job while process costing focuses on departmental activity.

d) process costing uses only one work-in-progress account while job-order costing uses many work-in-progress accounts.

31. Which of the following companies would be most likely to use process costing?

a) a car manufacturer

b) a spa

c) a cement plant

d) an airplane manufacturer

32. A major difference between process costing and job-order costing is that

a) costs are easy to trace to specific jobs in a job-order system but impossible to trace to products in a process costing system.

b) costing of material components is more sensitive to materials purchased in a process costing system.

c) process costing has fewer overall purchase requisitions than in a job-order costing system.

d) controls over material acquisitions is generally not as stringent in a process costing system.

33. A company should use process costing instead of job-order costing when

a) products are manufactured to customers’ specifications.

b) there is a wide variety of products manufactured.

c) most of the products are similar and can be mass produced.

d) the product requires several different manufacturing processes to be completed.

34. Which of the following statements about the Work in Process Inventory account is true?

a) Both job-order cost and process cost systems use only one Work in Process Inventory account.

b) Both job-order cost and process cost systems use several Work in Process Inventory accounts.

c) Job-order cost systems use several Work in Process Inventory accounts, but process cost systems use only one.

d) Job-order cost systems use only one Work in Process Inventory account, but process cost systems use several.

35. Swick Industries uses a process cost system. The company assigned manufacturing overhead costs to production. What transaction was recognized?

a) Finished Goods Inventory account was increased.

b) Cost of Goods Sold was increased.

c) A Manufacturing Overhead account was reduced.

d) The Work in Process Inventory account was reduced.

36. A product requires processing in two departments, Department 22 and then Department 23, before it is completed. What happens to costs completed and transferred out of Department 22?

a) They are debited to Finished Goods Inventory.

b) They are transferred to Cost of Goods Sold.

c) They are debited to Work in Process Inventory—Department 23.

d) They are credited to Manufacturing Overhead.

37. Which one of the following will appear as a credit in the Work in Process Inventory account of a first department in a two stage production process?

a) direct materials used

b) overhead applied

c) cost of goods sold

d) cost of products transferred into the second department

38. Why are materials requisition forms used less frequently in process costing?

a) Materials are rarely used in production.

b) Requisitions are for larger quantities so fewer orders are needed.

c) Direct materials are only added at the beginning of production.

d) There are no materials inventories because process costing uses a just-in-time system.

39. Which one of the following is used most frequently to allocate overhead costs in continuous manufacturing operations?

a) direct labour dollars

b) direct labour hours

c) machine hours

d) machine maintenance dollars

40. Macor Manufacturing assigns overhead based on machine hours. Department R records 500 machine hours, while Department W records 400 machine hours for the period. The overhead rate is $7 per machine hour. What will the entry to assign overhead include?

a) a debit to Manufacturing Overhead for $6,300

b) a credit to Work in Process Inventory—Department R for $3,500

c) a debit to Work in Process Inventory—Department W for $2,800

d) a credit to Manufacturing Overhead for $6,300

41. When inventory is sold, where are the related costs transferred to?

a) Work in Process Inventory

b) Cost of Goods Sold

c) Finished Goods Inventory

d) Manufacturing Overhead

42. Conversion costs are typically comprised of what two types of items?

a) management’s discretion of certain production expenses

b) direct labour and indirect labour

c) manufacturing overhead and direct materials

d) direct labour and manufacturing overhead

43. Which of the following only applies to process costing?

a) product cost averaging

b) predetermined overhead rates

c) equivalent units of production

d) individual job activity

44. Which of the following is not correct?

a) Equivalent units of production are used to determine the cost per unit of all products, whether completed or not.

b) The equivalent units of production of ten units that are 20% complete is two full units.

c) Equivalent units of production is an expression of the number of units that would have been started and finished if all of the effort were directed at that purpose.

d) The weighted-average method of computing equivalent units of production assumes that products are at the same point of completion for both direct materials and conversion costs.

45. There are no units in process at the beginning of the period, 500 units in process at the end of the period that are 30% complete, and 3,000 units transferred out during the period. Based on this information, how many units were started during the period under the weighted-average method?

a) 2,500

b) 3,500

c) 3,150

d) 3,000

46. In the Carter Company, there are 15,000 units in beginning Work in Process Inventory, 30,000 units started into production, and 7,000 units in ending Work in Process Inventory 60% completed. How many physical units are to be accounted for?

a) 45,000

b) 38,000

c) 52,000

d) 27,000

47. Hace, Inc. began March with 650 units in beginning Work in Process Inventory, 11,400 units started into production, and 500 units in ending Work in Process Inventory that are 30% completed. How many physical units are to be accounted for?

a) 11,550

b) 12,050

c) 11,900

d) 11,250

48. Zargus Company began the month of June with 1,650 units in beginning Work in Process Inventory, 11,400 units started into production, and 500 units in ending Work in Process Inventory that are 30% completed. How many units were transferred out during June?

a) 12,550

b) 12,050

c) 11,550

d) 11,250

49. How many units were started during the period?

a) 27,000

b) 25,000

c) 23,000

d) 17,000

50. Under the weighted-average method, what are the equivalent units of production for direct materials?

a) 32,050

b) 29,500

c) 25,000

d) 4,500

51. Myrna’s Manufacturing has 6,000 units in beginning Work in Process Inventory, 15% complete as to conversion costs, 15,000 units transferred out to Finished Goods Inventory, and 2,000 units in ending Work in Process Inventory 10% complete as to conversion costs. Direct materials are fully added at the beginning of the process. How much are equivalent units of production for direct materials if the weighted-average method is used?

a) 11,000

b) 17,000

c) 21,000

d) 23,000

52. Myrna’s Manufacturing has 6,000 units in beginning Work in Process Inventory, 15% complete as to conversion costs, 15,000 units transferred out to Finished Goods Inventory, and 2,000 units in ending Work in Process Inventory 10% complete as to conversion costs. Direct materials are fully added at the beginning of the process. How much are equivalent units of production for conversion costs if the weighted-average method is used?

a) 15,700

b) 15,200

c) 14,300

d) 13,900

53. What are physical units?

a) the actual units to be accounted for during a period

b) the pro-rata portion of units completed during the period

c) units in process at the end of the period

d) the total units completed and transferred out during the period

54. 2,000 units are in a process that is 75% complete for conversion costs. How are these units referred to?

a) 1,500 equivalent units of production

b) 500 process units

c) 2,000 completed units

d) 1,500 physical units of production

55. A process with no beginning Work in Process Inventory, completed and transferred out 12,000 units during a period and had 1,000 units in the ending Work in Process Inventory that were 30% complete. Direct materials are added at the beginning of the process and conversion costs are added equally throughout the process. How much is the equivalent units of production for the period for conversion costs if the weighted-average method is used?

a) 13,000 equivalent units of production

b) 11,000 equivalent units of production

c) 12,000 equivalent units of production

d) 12,300 equivalent units of production

56. What were the equivalent units of production for direct materials for the month of January?

a) 8,400 equivalent units of production

b) 14,000 equivalent units of production

c) 10,000 equivalent units of production

d) 4,000 equivalent units of production

57. What were the equivalent units of production for conversion costs for the month of January?

a) 8,400 equivalent units of production

b) 14,000 equivalent units of production

c) 10,000 equivalent units of production

d) 12,400 equivalent units of production

58. Wind Mill Company had the following department data:

Work in process inventory, physical units, August 1 72,000

Completed and transferred out physical units 106,000

Work in process inventory, physical units, August 31 74,000

Direct materials are added at the beginning of the process. What is the total number of equivalent units of production for direct materials in August if the weighted-average method is used?

a) 104,000

b) 108,000

c) 180,000

d) 252,000

59. Cyrprano Company had the following department data:

Work in process inventory, physical units, beginning -0-

Units started 25,000

Completed and transferred out physical units 20,000

Work in process inventory, physical units, ending 5,000

Direct materials are added at the beginning of the process. Conversion costs are added evenly throughout the process. The incomplete units are 40% completed as to conversion costs. What is the total number of equivalent units of production for direct materials during the period if the weighted-average method is used?

a) 25,000

b) 15,000

c) 22,000

d) 23,000

60. Special J Company had the following department information about physical units and percentage of completion:

Physical Units

Work in process inventory, May 1 (60%) 14,400

Units Completed and transferred out 26,000

Work in process inventory, May 31 (50%) 12,000

Direct materials are added at the beginning of the production process. Conversion costs are added equally throughout production. What is the total number of equivalent units of production during May for conversion costs if the weighted-average method is used?

a) 52,400

b) 32,000

c) 23,360

d) 31,760

61. How are equivalent units of production calculated?

a) multiplying the percentage of work done by the physical units

b) dividing physical units by the percentage of work done

c) multiplying the percentage of work done by the equivalent units of production of output

d) dividing equivalent units of production by the percentage of work done

62. Why is it necessary to calculate equivalent units of production in a department?

a) A physical count of units is impossible.

b) A company may transfer numerous batches out during the year.

c) The physical units in the department are always 100% complete.

d) Some units worked on in the department are not fully complete.

Use the following information to answer questions 63–65.

In the month of March, a department had 8,000 units in beginning Work in Process Inventory that were 75% complete. During March, 30,000 units were transferred into production from another department. At the end of March there were 2,000 units in ending Work in Process Inventory that were 75% complete. Direct materials are added at the beginning of the process while conversion costs are incurred uniformly throughout the process. The weighted-average method is used.

63. How many units were transferred out of the process in March?

a) 36,000 units

b) 32,000 units

c) 21,000 units

d) 30,000 units

64. How much are equivalent units of production for direct materials for March?

a) 42,000 equivalent units of production

b) 28,500 equivalent units of production

c) 37,500 equivalent units of production

d) 38,000 equivalent units of production

65. How much is the equivalent units of production for conversion costs for March?

a) 38,000 equivalent units of production

b) 28,500 equivalent units of production

c) 37,500 equivalent units of production

d) 30,000 equivalent units of production

66. What situation is created if there are no units in process at the beginning of the period?

a) The company must be using a job-order cost system.

b) The units to be accounted for will equal the units transferred out plus the units in process at the end of the period.

c) The units started into production will equal the number of units transferred out.

d) Equivalent units of production for direct materials and conversion costs will be the same.

67. Snapps, Inc. uses a process cost system with a weighted-average method. What amount will always be the same as the number of units to be accounted for in a department?

a) number of units started or transferred into the department

b) number of equivalent units of production for conversion costs

c) ending inventory plus the units started or transferred into the department

d) units in the beginning inventory plus the units started or transferred into the department

68. Which statement is true?

a) Total units accounted for = beginning Work in Process inventory – units transferred out

b) Beginning Work in process inventory + ending Work in Process inventory = total units accounted for

c) Total units accounted for = units in ending Work in Process inventory + units transferred out

d) Ending Work in Process inventory – equivalent units of production = total units accounted for

Use the following information to answer questions 69–70.

Department T45 of a two department-production process has the following units:

Beginning Work in Process inventory 15,000 units

Ending Work in Process inventory 17,000 units

Total units to be accounted for 75,000 units

69. How many units were started into production in Department T45?

a) 92,000

b) 90,000

c) 58,000

d) 60,000

70. How many units were transferred out from Department T45?

a) 56,000

b) 58,000

c) 62,000

d) 75,000

71. The Finishing Department has the following information:

Beginning Work in Process inventory 14,000 units

Ending Work in Process inventory 17,000 units

Units Transferred Out 25,000 units

How many total units were started by the Finishing Department?

a) 42,000

b) 11,000

c) 28,000

d) 36,000

72. Which equation is correct?

a) Total units to be accounted for − units in beginning Work in Process inventory = units started into production

b) Total units to be accounted for = beginning Work in Process inventory − units in ending Work in Process inventory

c) Total units accounted for = units in beginning Work in Process inventory + units in ending Work in Process inventory

d) Total units to be accounted for = equivalent units of production + units in ending Work in Process inventory

73. The last department in a production process has the following information at the end of the period:

Beginning Work in Process inventory 2,000 units

Started into Production 24,000 units

Ending Work in Process inventory 16,000 units

How many units have been transferred out to Finished Goods Inventory during the period?

a) 10,000

b) 24,000

c) 28,000

d) 16,000

74. A process began the month with 2,000 units in the beginning Work in Process inventory and ended the month with 800 units in the ending Work in Process inventory. If 3,600 units were completed and transferred out of the process during the month, how many units were started into production during the month?

a) 3,200 units

b) 2,400 units

c) 3,600 units

d) 2,000 units

75. If 20,000 units are started into production and 12,000 units are in process at the end of the period, how many units were completed and transferred out if there was no beginning Work in Process inventory?

a) 20,000

b) 12,000

c) 8,000

d) 42,000

76. If 20,000 units are transferred out of a department, there is no beginning inventory, and there are 6,000 units still in process at the end of a period, how many units were started into production during the period?

a) 36,000

b) 30,000

c) 26,000

d) 6,000

77. A department had the following information for the month:

Total direct materials costs $90,000

Conversion cost per unit $3.00

Total manufacturing cost per unit $5.00

What are the equivalent units of production for direct materials if the weighted-average method is used?

a) 30,000

b) 11,250

c) 45,000

d) cannot be determined

78. Harms Company enters direct materials at the beginning of the process. On January 1, there was no beginning Work in Process, but there were 100 units in ending Work in Process inventory. What is the ‘number of units completed’ equal to?

a) the same as the number of units started

b) the number of units started less 100

c) the number of units started plus 100

d) the same as the number of equivalent units of production

79. Tivoli-Ng Company’s Assembly Department started 14,000 units and completed 16,000 units. If beginning Work in Process inventory was 2,600 units, how many units are in ending Work in Process inventory?

a) 600

b) 2,000

c) 11,400

d) 13,400

80. A process with no beginning Work in Process inventory, completed and transferred out 10,000 units during a period and had 5,000 units in the ending Work in Process inventory that were 50% complete. How much is equivalent units of production for the period for conversion costs if the weighted-average method is used?

a) 12,500 equivalent units of production

b) 15,000 equivalent units of production

c) 17,500 equivalent units of production

d) 7,500 equivalent units of production

81. In a process with 800 units of beginning Work in Process inventory, the company completed and transferred out 10,000 units during a period. There were 5,000 units in the ending Work in Process inventory that were 50% complete as to conversion costs. Direct materials are added: 80% at the beginning of the process and 20% when the units are 90% complete. How much is equivalent units of production for the period for material costs if the weighted-average method is used?

a) 12,000 equivalent units of production

b) 15,000 equivalent units of production

c) 11,000 equivalent units of production

d) 14,000 equivalent units of production

82. Hanker Company had the following department data on physical units:

Work in process inventory, beginning 7,000

Completed and transferred out 12,000

Work in process inventory, ending 9,000

Direct materials are added at the beginning of the process. What is the total number of equivalent units of production for direct materials during the period if the weighted-average method is used?

a) 14,000

b) 19,000

c) 21,000

d) 28,000

83. Gloria Company had no beginning Work in Process inventory. During the period, 5,000 units were completed, and there were 500 units of ending Work in Process inventory. How many units were started into production?

a) 5,500

b) 5,000

c) 4,500

d) 500

84. Cohen Manufacturing is trying to determine the equivalent units of production for conversion costs with 2,000 units of ending Work in Process inventory at 80% completion and 14,000 physical units that are 100% complete related to direct materials. There are no beginning units in the department. Direct materials are added at the beginning of the process, and conversion costs occur evenly throughout the entire production period. What are the equivalent units of production for conversion costs for the current period if the weighted-average method is used?

a) 16,000

b) 15,600

c) 1,600

d) 13,600

85. In order to arrive at equivalent units of production, what adjustments are made to physical units?

a) the percent the units are complete

b) the cost incurred during the year

c) an arbitrary factor

d) manufacturing overhead

86. If beginning Work in Process inventory is 2,000 units, ending Work in Process inventory is 1,000 units, and the units accounted for equals 5,000 units, how many units were started into production?

a) 7,000

b) 6,000

c) 3,000

d) 4,000

87. Equivalent units of production for direct materials total 9,000. There were 7,000 units completed and transferred out. Equivalent units of production for conversion costs equal 8,000. How much are the physical units for conversion costs if ending Work in Process inventory is 25% complete?

a) 3,750

b) 11,000

c) 8,000

d) 1,750

88. If equivalent units of production are 6,000 for conversion costs and units transferred out equals 4,000, what stage of completion should the ending Work in Process inventory be for the 8,000 units remaining?

a) 75%

b) 25%

c) 10%

d) 20%

89. When using the weighted-average method, equivalent units of production are

a) the number of units completed in a period.

b) the number of units completed in a period plus the number of units in process at the end of the period multiplied by the percentage of which the units have been completed.

c) the number of units in beginning inventory plus the number of units completed in a period.

d) the number of units produced in a period less the number of units in process at the end of the period.

90. The Dolly Company began the period with no units in process or in Finished Goods Inventory. During the period it began 96,000 units and completed 80,000 units. If equivalent units of production for the period totalled 90,000, then the units in process were what percent complete? (rounded)

a) 62.5%

b) 83.3%

c) 88.9%

d) 75%

91. Under the weighted-average process cost method, we ignore

a) when costs are actually incurred.

b) whether costs are material costs or conversion costs.

c) equivalent units of production.

d) factory labour costs.

92. The Winston Company began the period with no units in process and 80,000 units in Finished Goods Inventory. During the period it sold 280,000 units and had the following at the end of the period:

Finished goods (units) 40,000

Work in Process inventory (50% conversion complete) 12,000

Equivalent units of production for the period totalled

a) 314,000.

b) 280,000.

c) 240,000.

d) 246,000.

93. Halston Company has no beginning Work in Process inventory; 5,000 units are transferred out and 1,000 units in ending Work in Process inventory are 25% finished related to conversion costs and fully complete related to direct materials cost. If direct materials added and beginning Work in Process inventory direct materials cost total $18,000, how much is the direct materials cost per unit if the weighted-average method is used?

a) $3.00

b) $3.43

c) $3.13

d) There is not enough information provided.

94. What is a production cost report used for?

a) It is an external report provided to shareholders.

b) It shows costs charged to a department and costs accounted for.

c) It shows equivalent units of production but not physical units.

d) It shows the basis on which overhead is allocated.

95. Schiller Company has unit costs of $6 for direct materials and $15 for conversion costs. There are 4,200 units in ending Work in Process inventory that are 25% complete related to conversion costs, and fully complete related to direct materials cost. How much is the total cost assigned to the ending Work in Process inventory if the weighted-average method is used?

a) $40,950

b) $88,200

c) $25,200

d) $15,750

96. What document is used to summarize costs in process cost accounting?

a) job-order cost sheet

b) process order cost sheet

c) production cost report

d) manufacturing cost sheet

97. Which one of the following is not a necessary step in preparing a production cost report?

a) Prepare the job-order cost sheet.

b) Calculate the physical unit flow.

c) Calculate the equivalent units of production.

d) Prepare a cost reconciliation schedule.

98. A department adds direct materials at the beginning of the process and incurs conversion costs uniformly throughout the process. For the month of May, there was no beginning Work in Process inventory; 50,000 units were completed and transferred out; and there were 14,000 units in the ending Work in Process inventory that were 10% complete. During May, $96,000 direct materials costs and $102,800 conversion costs were charged to the department. How much are unit production costs for direct materials and conversion costs for May if the weighted-average method is used, rounded to the nearest whole cent?

Direct Materials Conversion Costs

a) $3.11 $2.80

b) $1.87 $2.00

c) $1.66 $1.61

d) $1.50 $2.00

99. The following department data are available:

Total direct materials costs $140,000

Equivalent units of production of direct materials 20,000 units

Total conversion costs $70,000

Equivalent units of production of conversion costs 10,000 units

How much is the total manufacturing cost per unit?

a) $6.00

b) $7.00

c) $14.00

d) $11.00

100. Cinder Company had the following department information for the month:

Total direct materials costs $ 80,000

Equivalent units of production of direct materials 10,000

Total conversion costs 120,000

Equivalent units of production of conversion costs 20,000

How much is the total manufacturing cost per unit?

a) $14.00

b) $6.67

c) $6.00

d) $8.00

101. What was the total amount of manufacturing costs assigned to those units that were completed and transferred out of the process in September if the weighted-average method is used?

a) $184,000

b) $483,000

c) $414,200

d) $195,200

102. What was the total amount of manufacturing costs assigned to the 8,000 units in the ending Work in Process inventory if the weighted-average method is used?

a) $24,000

b) $34,000

c) $13,600

d) $31,200

103. Which statement is true concerning production cost reports in a process cost system?

a) They are created only for the first processing department.

b) One is created for each processing department.

c) One is created which contains all the processing departments in total.

d) Only companies that use a just-in-time inventory method use production cost reports.

104. Which statement is true concerning a production cost report?

a) One is prepared for each product.

b) One is prepared for each job.

c) It will show quantity and cost data for a production department.

d) It will not identify a specific department if more than one department is involved in the production process.

105. Which of the following is correct concerning information on the production cost report?

a) The total equivalent units of production accounted for equals the costs accounted for.

b) Physical units accounted for equals the units transferred out.

c) Total costs charged equals the units completed times the cost per unit.

d) Costs accounted for equals the costs of the units transferred out plus the cost of units in ending inventory.

106. Cardly Company determined its total physical units to be accounted for. What does this total equal?

a) units transferred out plus the units in ending Work in Process inventory

b) units started or transferred in less the units in beginning Work in Process inventory

c) units completed and transferred out

d) units started or transferred into production

107. David Katz’ Assembly Department has direct materials cost at $3 per unit and conversion cost at $6 per unit. There are 9,000 units in ending Work in Process inventory, all of which are 70% complete related to conversion costs and fully complete related to direct materials. How much are total costs to be assigned to inventory if the weighted-average method is used?

a) $37,800

b) $64,800

c) $56,700

d) $81,000

108. A production cost report shows units and costs. Which one of the following sections is not shown under costs?

a) unit costs

b) costs to be accounted for

c) costs started into production

d) units transferred out

109. Byrd Manufacturing decided to analyze certain costs for June of the current year. Units started into production equalled 14,000 and ending Work in Process inventory equalled 2,000 units. With no beginning Work in Process inventory, how much is the conversion cost per unit if ending Work in Process inventory was 25% complete and total conversion costs equalled $50,000 and if the weighted-average method is used?

a) $3.13

b) $12.50

c) $4.00

d) $2.00

110. Which of the following statements regarding the production cost report is correct?

a) Calculating the physical unit flow is the first step in the process.

b) Calculating the unit production costs is the fourth step in the process.

c) Direct materials are always added at the start of the process; therefore, you do not need to calculate equivalent units of production for direct materials.

d) One production cost report summarizes the production and cost data for the entire company.

111. Super-Tech Industries had the following department information about physical units and percentage of completion:

Physical Units

Work in process inventory, June 1 (75%) 2,000

Completed and transferred out 4,500

Work in process inventory, June 30 (50%) 3,000

If direct materials are added at the beginning of the production process, what is the total number of equivalent units of production during June for conversion costs if the weighted-average method is used?

a) 3,750

b) 7,500

c) 8,000

d) 6,000

112. Reed Manufacturing has recently tried to improve its analysis for its manufacturing process. Units started into production equalled 2,300 and ending Work in Process inventory equalled 900 units. Reed had no beginning Work in Process inventory. Conversion costs are applied equally throughout production, and direct materials are applied at the beginning of the process. How much is the material cost per unit if ending Work in Process inventory was 15% complete and total material costs equalled $11,500 if the weighted-average method is used? Rounded to the nearest cent.

a) $5.00

b) $8.21

c) $23.96

d) $33.33

113. Conversion cost per unit equals $6.00. Total direct materials cost equals $40,000. Equivalent units of production for direct direct materials are 20,000. How much is the total manufacturing cost per unit?

a) $8.00

b) $6.00

c) $10.00

d) $2.00

114. Physical units are 40,000. Total conversion costs are $197,500. There are 2,000 units in ending inventory that are 50% complete related to conversion costs. How much are conversion costs per unit if the weighted-average method is used?

a) $5.06

b) $4.93

c) $9.88

d) $5.19

115. Madison Industries has equivalent units of production of 2,000 for direct materials and for conversion costs. Total manufacturing costs are $200,000. Total material costs are $150,000. How much is the conversion cost per unit?

a) $10.00

b) $25.00

c) $100.00

d) $20.00

116. Under what situation are ‘units started’ equal to ‘units completed’ in production?

a) when beginning Work in Process inventory equals ending Work in Process inventory

b) when physical units equals equivalent units of production

c) when beginning Work in Process inventory equals zero and units started in production equals the total of ending Work in Process inventory and units transferred out

d) when beginning inventory equals zero

117. Knarley Inc. manufactures snowboarding pants. The pants pass from the cutting department to the sewing department. The sewing department had the following data on physical units during the month:

Work in process inventory, beginning 14,000

Units transferred from cutting department 26,000

Units completed and transferred out 31,000

What is the number of units in ending Work in Process inventory at month end?

a) 26,000

b) 31,000

c) 40,000

d) 9,000

118. Spinning Tops Corp. manufactures whimsical toys for children. The toys pass from the forming department to the painting department. The painting department had the following data on physical units during the month:

Units transferred from forming department 800

Units completed and transferred out 150

Work in process inventory, beginning 400

What is the number of units in ending Work in Process inventory?

a) 1,200

b) 800

c) 1,050

d) 400

119. Which of the following is not a step in preparing a process costing report?

a) tracing direct materials cost back to individual jobs

b) tracking the physical flow

c) computing equivalent units of production

d) collecting costs to be allocated

*120. The mixing department of a company’s output during the period consists of 25,000 units completed and transferred out, and 15,000 units in ending Work in Process inventory that were 30% complete related to direct materials and conversion costs. Beginning inventory was 17,000 units that were 15% complete related to direct materials and conversion costs. Under the FIFO method, what are the equivalent units of production for direct materials?

a) 32,050

b) 26,950

c) 22,450

d) 17,950

BRIEF EXERCISES

Brief Exercise 128

Identify three similarities between job-order and process costing systems.

Solution 128

1. The manufacturing cost elements.

2. The accumulation of the costs of direct materials, direct labour, and overhead.

3. The flow of costs.

Brief Exercise 129

Identify four differences between job-order and process costing systems.

Solution 129

1. In a job-order cost system, only one work in process account is used. In a process cost system, several work in process accounts are used.

2. In a job-order cost system, costs are charged to individual

jobs and summarized in a job cost sheet. In a process cost system, costs are summarized

in a production cost report for each department.

3. In a job-order cost system, the total cost is determined when the job is completed. In a process cost system, the total cost is determined at the end of a period of time.

4. In a job-order cost system, the unit cost is the total cost per job divided by the units produced for that job. In a process cost system, the unit cost is total manufacturing cost for the period divided by the units produced during the period.

Brief Exercise 130

Assume a company issues $40,000 and $55,000 of raw material for production use in its Mixing department and Packaging department, respectively. Prepare the journal entries for each department.

Solution 130

Work in Process Inventory– Mixing 40,000

Work in Process Inventory– Packaging 55,000

Raw Materials Inventory 95,000

Brief Exercise 131

ABC company needs to record the cost of goods completed and transferred from the Mixing department into the Packaging department. The cost of the goods is $112,300. Prepare the journal entry for the transfer.

Solution 131

Work in Process – Mixing 112,300

Work in Process – Packaging 112,300

Brief Exercise 132

Apoly Manufacturing Company has the following production data for January:

Calculate the physical units for January using the weighted-average method.

Solution 132

Beginning Work in Process inventory -0-

Started into production 3,000

Total units to be accounted for 3,000

Transferred out 2,875

Ending Work in Process inventory 125

Total units accounted for 3,000

Brief Exercise 133

Sandusky Widget Company has the following production data for March:

Calculate the physical units for March using the weighted-average method.

Solution 133

Beginning Work in Process inventory 500

Started into production 7,000

Total units to be accounted for 7,500

Transferred out 7,200

Ending Work in Process inventory 300

Total units accounted for 7,500

Brief Exercise 134

Sequal Company has the following production data for June: units transferred out 73,000, and ending Work in Process inventory 9,000 units that are 100% complete for direct materials and 20% complete for conversion costs. Unit direct materials cost are $7.50 and unit conversion cost is $16. Determine the costs to be assigned to the units transferred out and the units in ending Work in Process inventory.

Solution 134

Work in process inventory, June 30

Direct materials (9,000 × $7.50) $67,500

Conversion costs (9,000 × 20% × $16) 28,800

Total cost of Work in Process inventory $96,300

Units transferred out (73,000 x $23.50) $1,715,500

Brief Exercise 135

Peter Puck Company has the following production data for June:

• Beginning Work in Process inventory, 0 units
• Units transferred out, 87,000
• Units in ending Work in Process inventory, 23,000, which are 40% complete for conversion costs

Direct materials are added only at the beginning of the process. Calculate equivalent units of production for both direct materials and conversion costs using the weighted-average method.

Solution 135

Equivalent units of production

QUANTITIES Physical Units Direct Materials Conversion Costs

Units to be accounted for

Work in process inventory, Jun 1 0

Started into production 110,000

Total units to be accounted for 110,000

Units accounted for

Transferred out 87,000 87,000 87,000

Work in process inventory, Jun 30 23,000 23,000 9,200 (23,000 × 40%)

Total units accounted for 110,000 110,000 96,200

Brief Exercise 136

Pinto Products makes suspension components for a large car manufacturer. In its Assembly Department for the month of September, the following information regarding its suspension systems is available:

Percent Complete

# of units Direct Materials Conversion

WIP, Sep 1 5,000 65% 30%

Started into production 65,000

WIP, Sep 30 3,000 35% 25%

Calculate the equivalent units of production for direct materials using the weighted-average method.

Solution 136

67,000 (units transferred out) + 1,050 (ending inventory) = 68,050

Brief Exercise 137

General Company had total material costs totalling $105,000 and total conversion costs of $37,000. Equivalent units of production are 12,000 for direct materials and 5,000 for conversion costs. Calculate the unit costs for direct materials, conversion costs, and total manufacturing costs using the weighted-average method.

Solution 137

Unit costs Direct Materials Conversion Costs Total

Costs $105,000 $37,000 $142,000

Equivalent units of production 12,000 5,000

Unit costs $8.75 $7.40 $16.15

Brief Exercise 138

Kels Company has the following production data for April:

• Beginning Work in Process inventory, 4,000 units
• Units transferred out, 85,000
• Units in ending Work in Process inventory, 12,000, which are 90% complete for conversion costs

Direct materials are added only at the beginning of the process. Calculate equivalent units of production for both direct materials and conversion costs using the weighted-average method.

Solution 138

Equivalent units of production

QUANTITIES Physical Units Direct Materials Conversion Costs

Units to be accounted for

Work in process inventory, Apr 1 4,000

Started into production 93,000

Total units to be accounted for 97,000

Units accounted for

Transferred out 85,000 85,000 85,000

Work in process inventory, Apr 30 12,000 12,000 10,800 (12,000 × 90%)

Total units accounted for 97,000 97,000 95,800

Brief Exercise 139

White Supplies’ total material costs are $75,000 and total conversion costs are $37,000. Equivalent units of production for direct materials are 18,750, and 4,625 for conversion costs. Calculate the unit costs for material, conversion costs, and total manufacturing costs for the month using the weighted-average method.

Solution 139

COSTS

Unit costs Direct Materials Conversion Costs Total

Costs incurred $75,000 $37,000 $112,000

Equivalent units of production 18,750 4,625

Unit costs $4.00 $ 8.00 $12.00

Brief Exercise 140

Dirt Cleaners, Inc. has the following production data for January:

Transferred out 50,000 units

Ending Work in Process inventory 6,000 units

The units in ending Work in Process inventory are 100% complete for direct materials and 60% complete for conversion costs. There is no beginning Work in Process inventory. Direct materials cost is $10 per unit and conversion costs are $11 per unit. Determine the costs to be assigned to the units transferred out and the units in ending Work in Process inventory.

Solution 140

Cost Reconciliation Schedule

Costs accounted for

Transferred out (50,000 × $21.00) $1,050,000

Work in process inventory, Jun 30

Direct materials (6,000 × $10) $ 60,000

Conversion costs (3,600* × $11) 39,600 99,600

Total costs accounted for $1,149,600

*(6,000 x 60%)

Brief Exercise 141

Production costs chargeable to the Sanding Department in July for Joyful Art are $12,500 for direct materials, $26,000 for direct labour, and $10,000 for manufacturing overhead. Equivalent units of production are 25,000 for direct materials and 18,000 for conversion costs.

Calculate the unit costs for direct materials and conversion costs.

Solution 141

COSTS

Unit costs Direct Materials Conversion Cost Total

Costs in Jul $12,500 $36,000 $48,500

Equivalent units of production 25,000 18,000

Unit costs $0.50 $2.00 $2.50

Brief Exercise 142

The Kirkland Department of Delta Manufacturing began the month of December with beginning Work in Process inventory of 4,000 units that are 100% complete related to direct materials and 30% complete related to conversion costs. Units transferred out are 10,000 units. Ending Work in Process inventory contains 1,000 units that are 100% complete related to direct materials and 60% complete related to conversion costs.

Calculate the equivalent units of production for direct materials and conversion costs for the month of December using the weighted-average method.

Solution 142

Equivalent units of production

QUANTITIES Physical Units Direct Materials Conversion Costs

Units to be accounted for

Work in process inventory, Dec 4,000

Started into production 7,000

Total units to be accounted for 11,000

Units accounted for

Transferred out 10,000 10,000 10,000

Work in process inventory, Dec 31 1,000 1,000 600(1,000 × 60%)

Total units accounted for 11,000 11,000 10,600

*Brief Exercise 143

Tomlinson Company has the following production data for May:

• Beginning Work in Process inventory, 0 units
• Units started, 94,000
• Ending Work in Process inventory, 17,000 units that are 100% complete for direct materials and 50% complete for conversion costs
• Unit direct materials cost, $6
• Unit conversion cost, $12
• Total costs to be assigned, $618,000

Tomlinson uses the FIFO method to calculate equivalent units of production. Determine the costs to be assigned to the units transferred out and the units in ending Work in Process inventory.

*Solution 143

Work in process inventory, May 31

Direct materials (17,000 × $6) $102,000

Conversion costs (17,000 × 50% × $12) 102,000

Total cost of Work in Process inventory $204,000

Units transferred out (77,000 x $18) $1,386,000

*Brief Exercise 144

Tip Top Painting Company has the following production data for March:

• Beginning Work in Process inventory, 2,000 units, which are 30% complete for conversion costs
• Units transferred out, 42,000
• Units in ending Work in Process inventory, 6,000, which are 80% complete for conversion costs

Direct materials are added only at the beginning of the process. Calculate equivalent units of production for both direct materials and conversion costs using the FIFO method.

*Solution 144

Equivalent units of production

QUANTITIES Physical Units Direct Materials Conversion Costs

Units to be accounted for

Work in process inventory, Mar 1 2,000

Started into production 46,000

Total units accounted for 48,000

Units accounted for

Work in process inventory, Mar 1 2,000 0 1,400 (2,000 x 70%)

Transferred out 40,000 40,000 40,000

Work in process inventory, Mar 31 6,000 6,000 4,800 (6,000 × 80%)

Total units to be accounted for 48,000 46,000 46,200

*Brief Exercise 145

The Kirkland Department of Delta Manufacturing began the month of December with beginning Work in Process inventory of 4,000 units that are 100% complete related to direct materials and 20% complete related to conversion costs. Units transferred out are 10,000 units. Ending Work in Process inventory contains 1,000 units that are 100% complete related to direct materials and 60% complete related to conversion costs.

Calculate the equivalent units of production for direct materials and conversion costs for the month of December using the FIFO method.

*Solution 145

Equivalent units of production

QUANTITIES Physical Units Direct Materials Conversion Costs

Units to be accounted for

Work in process inventory, December 1 4,000

Started into production 7,000

Total units to be accounted for 11,000

Units accounted for

Work in process inventory, December 1 4,000 0 3,200 (4,000 x 80%)

Transferred out 6,000 6,000 6,000

Work in process inventory, December 31 1,000 1,000 600 (1,000 × 60%)

Total units accounted for 11,000 7,000 9,800

*Brief Exercise 146

Pinto Products makes suspension components for a large car manufacturer. In its Assembly Department for the month of September, the following information regarding its suspension systems is available:

Percent Complete

# of units Direct Materials Conversion

WIP, Sep 1 5,000 65% 30%

Started into production 65,000

WIP, Sep 30 3,000 35% 25%

Calculate the equivalent units of production for conversion costs using the FIFO method.

*Solution 146

Equivalent units of production to complete = Opening Inventory + Units started and completed + Equivalent units of production in ending inventory:

3,500 + 62,000 + 750 = 66,250

Exercises

Exercise 147

Cromer Manufacturing Company produces a product in two departments: (1) Production and (2) Assembly. The company uses a process cost accounting system.

1. Purchased raw materials for $95,000 on account.

2. Raw materials requisitioned for production were:

Direct materials

Production department $45,000

Assembly department 12,500

3. Incurred direct labour costs of $51,000.

4. Factory labour used:

Production department $28,000

Assembly department 23,000

5. Manufacturing overhead is applied to the product based on machine hours used in each department:

Production department—140 machine hours at $25 per machine hour.

Assembly department—600 machine hours at $15 per machine hour.

6. Units costing $63,000 were completed in the Production department and were transferred to the Assembly department.

7. Units costing $68,000 were completed in the Assembly department and were transferred to Finished Goods.

8. Finished Goods costing $37,500 were sold on account for $80,000.

Instructions

Prepare the journal entries to record the preceding transactions for Cromer Manufacturing Company.

Solution 147 (12–15 min.)

1. Raw Materials Inventory 95,000

Accounts Payable 95,000

(purchase of raw materials on account)

2. Work in Process Inventory—Production 45,000

Work in Process Inventory—Assembly 12,500

Raw Materials Inventory 57,500

(to record materials used in production)

3. Factory Labour 51,000

Wages Payable 51,000

(to record payroll liability)

4. Work in Process Inventory—Production 28,000

Work in Process Inventory—Assembly 23,000

Factory Labour 51,000

(to assign factory direct labour to production)

5. Work in Process Inventory—Production (140 × $25) 3,500

Work in Process Inventory—Assembly (600 × $15) 9,000

Manufacturing Overhead 12,500

(to assign overhead to processes)

6. Work in Process Inventory—Assembly 63,000

Work in Process Inventory—Production 63,000

(to record transfer of units to the Finishing Department)

7. Finished Goods Inventory 68,000

Work in Process Inventory—Assembly 68,000

(to record transfer of units to Finished Goods)

8. Accounts Receivable 80,000

Sales 80,000

(to record sale of Finished Goods on account)

Cost of Goods Sold 37,500

Finished Goods Inventory 37,500

(to record cost of goods sold)

Exercise 148

Jagdish Company has two production departments: Piercing and Finishing. Beginning inventories are: Raw Materials, $0, Work in Process inventory —Piercing, $7,950; Work in Process inventory —Finishing, $5,625; and Finished Goods, $7,300. During the month the following transactions occurred:

1. Purchased $43,250 of raw materials on account.

2. Incurred $51,000 of factory labour. Wages are unpaid.

3. Incurred $60,000 of manufacturing overhead; $32,000 was paid and the remainder is unpaid.

4. Requisitioned direct materials for Piercing, $15,000 and Finishing, $7,500.

5. Used factory labour for Finishing, $28,000 and Piercing, $23,000.

6. Applied $60,000 of overhead based on machine hours used in each department. The Finishing Department used twice as many machine hours as the Piercing department did.

7. Units costing $60,000 were completed in Piercing and were transferred to Finishing.

8. Units costing $125,000 were completed in Finishing and were transferred to Finished Goods.

Instructions

a) Journalize the transactions for the month.

b) Calculate the inventory balances for the end of the month.

Solution 148 (12–15 min.)

a) Journal entries:

1. Raw Materials Inventory 43,250

Accounts Payable 43,250

2. Factory Labour 51,000

Wages Payable 51,000

3. Manufacturing Overhead 60,000

Accounts Payable 28,000

Cash 32,000

4. Work in Process Inventory—Piercing 15,000

Work in Process Inventory—Finishing 7,500

Raw Materials Inventory 22,500

5. Work in Process Inventory—Piercing 23,000

Work in Process Inventory—Finishing 28,000

Factory Labour 51,000

6. Work in Process Inventory—Piercing 20,000

Work in Process Inventory—Finishing 40,000

Manufacturing Overhead 60,000

7. Work in Process Inventory—Finishing 60,000

Work in Process Inventory—Piercing 60,000

8. Finished Goods Inventory 125,000

Work in Process Inventory—Finishing 125,000

b) Raw materials = $0 + $43,250 – $22,500 = $20,750

Work in Process Inventory—Piercing = $7,950 + $15,000 + $23,000 + 20,000 – $60,000 = $5,950

Work in Process Inventory—Finishing = $5,625 + $7,500 + $28,000 + $40,000 +60,000 – $125,000 = $16,125

Finished Goods = $7,300 + $125,000 = $132,300

Exercise 149

Datil Pepper Company manufactures hot sauces through two production departments: Mild and Hot. For the month of March, the Work in Process Inventory accounts show the following debits:

Mild Hot

Beginning Work in Process Inventory $ -0- $ 6,000

Direct materials 30,000 21,000

Direct labour 20,000 9,000

Overhead 35,000 19,000

Costs transferred in 55,000

Instructions

Journalize the March transactions that involved the Work in Process Inventory accounts.

Solution 149 (7–8 min.)

Work in Process Inventory—Mild 30,000

Work in Process Inventory—Hot 21,000

Raw Materials Inventory 51,000

Work in Process Inventory—Mild 20,000

Work in Process Inventory—Hot 9,000

Factory Labour 29,000

Work in Process Inventory—Mild 35,000

Work in Process Inventory—Hot 19,000

Manufacturing Overhead 54,000

Work in Process Inventory—Hot 55,000

Work in Process Inventory—Mild 55,000

Exercise 150

Ade Industries uses a process cost system. Products are processed first by Department 12, second by Department 14, and then they are transferred to the Finished Goods warehouse. Shown below is the cost information for Department 14 during the month of September:

Costs of units transferred in $175,000

Manufacturing costs added in Department 14:

Direct materials $56,000

Direct labour 7,500

Manufacturing overhead 12,000 75,500

Total costs charged to Department 14 in Sep $250,500

The cost of Work in Process inventory in Department 14 at September 1 is $52,000, and the cost of Work in Process inventory at September 30 is $33,000.

Instructions

Prepare journal entries to record for the month of September:

a) The transfer of production from Department 12 to 14.

b) The manufacturing costs incurred by Department 14.

c) The transfer of completed units from Department 14 to the Finished Goods warehouse.

Solution 150 (7–8 min.)

a) Work in Process Inventory—Dept. 14 175,000

Work in Process Inventory—Dept. 12 175,000

b) Work in Process Inventory—Dept. 14 75,500

Factory Labour 7,500

Raw Materials Inventory 56,000

Manufacturing Overhead 12,000

c) Finished Goods Inventory ($52,000 + $250,500 – $33,000) 269,500

Work in Process Inventory—Dept. 14 269,500

Exercise 151

Warrington Company manufactures a single product using a continuous process involving two production departments. The records indicate that $115,000 of direct materials were issued to and $65,000 of direct labour was incurred by Department 1 in the manufacture of the product. The factory overhead rate is $15 per machine hour; machine hours were 7,500 in Department 1. Work in Process inventory in the department at the beginning of the period totalled $34,500, and Work in Process inventory at the end of the period totalled $29,000.

Instructions

Prepare entries to record:

a) The flow of costs into Department 1 for

1. direct materials

2. direct labour

3. overhead

b) The transfer of production costs to Department 2.

Solution 151 (4–5 min.)

a) 1. Work in Process Inventory—Dept. 1 115,000

Raw Materials Inventory 115,000

2. Work in Process Inventory—Dept. 1 65,000

Factory Labour 65,000

3. Work in Process Inventory—Dept. 1 112,500

Manufacturing Overhead (7,500 × $15) 112,500

b) Work in Process Inventory—Dept. 2 298,000*

Work in Process Inventory—Dept. 1 298,000

*$34,500 + $115,000 + $65,000 + $112,500 – $29,000 = $298,000

Exercise 152

Ryland Company adds direct materials at the beginning of the process and conversion costs are incurred uniformly throughout the process.

Instructions

Complete the following calculation of equivalent units of production for direct materials and conversion costs:

Equivalent units of production

Physical Units Direct Materials Conversion Costs

Completed and transferred out 30,000

Ending Work in Process Inventory

Direct materials

Conversion costs, 75% complete 3,000

Total units

Solution 152 (4–7 min.)

Equivalent units of production

Physical Units Direct Materials Conversion Costs

Completed and transferred out 30,000 30,000 30,000

Ending Work in Process inventory

Direct materials 4,000* 4,000*

Conversion costs—75% complete 3,000

Total units 34,000 33,000

*3,000 ÷.75

Exercise 153

Snibel Company is a new production facility that manufactures identical bathtubs in a fully automated production line. The ending September 30 Work in Process inventory is comprised of direct labour and overhead and is approximately 60% complete. All direct materials are assumed to be 100% complete. Finished Goods Inventory at September 1 was zero. Total raw materials acquired during the period totalled $860,000. Raw materials inventory at September 1 was $100,000. A production cost report appears below:

SNIBEL COMPANY

Snibing Department

Production Cost Report

For the Month Ended September 30, 2022

Equivalent units of production

QUANTITIES Physical Units Materials Conversion Costs

Units to be accounted for

Work in process inventory, Sep 1 300

Started into production 800

Total units to be accounted for 1,100

Units accounted for

Completed and transferred out 900 900 900

Work in process inventory, Sep 30 200 200 120

Total units accounted for 1,100 1,100 1,020

COSTS

Unit costs Direct Materials Conversion Costs Total

Costs in September $880,000 $204,000 $1,084,000

Equivalent units of production 1,100 1,020

Unit costs $800.00 $ 200.00 $ 1,000.00

Cost Reconciliation Schedule

Costs to be accounted for

Work in process inventory, Sep 1 $ 239,400

Started into production 844,600

Total costs to be accounted for $1,084,000

Costs accounted for

Completed and transferred out (900 × $1000) $900,000

Work in process inventory, Sep

Direct materials (200 × $800) $ 160,000

Conversion costs (120 × $200) 24,000 184,000

Total costs accounted for $1,084,000

Instructions

Answer the following questions using the production cost report.

a) How many units were completed during September?

b) If 850 units were sold during September, how many units would remain in Finished Goods Inventory? How many would be in Cost of Goods Sold?

c) Show the amounts of each inventory account at September 30, 2022.

d) Explain how operations costing might be useful if the company decided to add customization of the bathtubs in the production line, such as jets and no slip surfaces.

Solution 153 (10–12 min.)

a) 900 units

b) Finished Goods: 900 – 850 = 50 units

Cost of Goods Sold: 850 units

c) Raw Materials ending: $100,000 + $860,000 – $880,000 = $80,000

Finished Goods ending: $0 + $900,000 – $850,000 = $50,000

Work in Process inventory = $184,000

Total inventory = $80,000 + $184,000 + $50,000 = $314,000

d) Operations costing is a hybrid costing system useful for a standardized production process which has customizable product features. Operations costing uses a combination of process costing and job-order costing.

Exercise 154

Boop Company uses a process cost system. The Finishing Department adds direct materials at the beginning of the process and conversion costs are incurred uniformly throughout the process. Work in Process inventory on June 1 was 60% complete and Work in Process inventory on June 30 was 25% complete.

Instructions

Complete the Production Cost Report for the Finishing Department for the month of June using the information provided.

BOOP MANUFACTURING COMPANY

Finishing Department

Production Cost Report

For the Month Ended June 30, 2022

Equivalent units of production

QUANTITIES Physical Units Direct Materials Conversion Costs

Units to be accounted for

Work in process inventory, Jun 1 10,000

Started into production 35,000

Total units to be accounted for 45,000

Units accounted for

Completed and transferred out

Work in Process inventory, Jun 30 9,000

Total units accounted for

COSTS

Unit costs Direct Materials Conversion Costs Total

Costs in Jun $171,000 $91,800 $262,800

Equivalent units of production

Unit costs $ $ $

Cost Reconciliation Schedule

Costs to be accounted for

Work in process inventory, Jun 1 $ 52,800

Started into production 210,000

Total costs to be accounted for $262,800

Costs accounted for

Completed and transferred out $

Work in process inventory, Jun 30

Direct materials

Conversion costs

Total costs accounted for $262,800

Solution 154 (10–12 min.)

BOOP MANUFACTURING COMPANY

Finishing Department

Production Cost Report

For the Month Ended June 30, 2022

Equivalent units of production

QUANTITIES Physical Units Direct Materials Conversion Costs

Units to be accounted for

Work in process inventory, Jun 1 10,000

Started into production 35,000

Total units to be accounted for 45,000

Units accounted for

Completed and transferred out 36,000 36,000 36,000

Work in process inventory, Jun 30 9,000 9,000 2,250 (9,000 × 25%)

Total units accounted for 45,000 45,000 38,250

COSTS

Unit costs Direct Materials Conversion Costs Total

Costs in Jun $171,000 $91,800 $262,800

Equivalent units of production 45,000 38,250

Unit costs $ 3.80 $ 2.40 $ 6.20

Cost Reconciliation Schedule

Costs to be accounted for

Work in process inventory, Jun 1 $ 52,800

Started into production 210,000

Total costs to be accounted for $262,800

Costs accounted for

Completed and transferred out (36,000 × $6.20) $223,200

Work in process inventory, Jun 30

Direct materials (9,000 × $3.80) $ 34,200

Conversion costs (2,250 × $2.40) 5,400 39,600

Total costs accounted for $262,800

Exercise 155

At Oxley Company, direct materials are entered at the beginning of each process. The company uses the weighted-average method for process costing. Work in Process inventories, with the percentage of work done on conversion, and production data for its Finishing Department for March are as follows:

Beginning Work in Process inventory Ending Work in Process inventory

Percentage Units Completed Percentage

Month Units Completed and Transferred Out Units Completed

March -0- — 11,000 500 90%

Instructions

a) Calculate the physical units for March.

b) Calculate the equivalent units of production for direct materials and conversion costs for March.

Solution 155 (7–9 min.)

a) Computation of Physical Units

Beginning Work in Process inventory -0-

Started into production 11,500

Total units to be accounted for 11,500

Completed and transferred out 11,000

Ending Work in Process inventory 500

Total units accounted for 11,500

b) Computation of Equivalent units of production

Equivalent units of production

Units accounted for Physical Units Direct Materials Conversion Costs

Completed and transferred out 11,000 11,000 11,000

Work in process inventory, Mar 30 500 500 450 (500 ×.90)

Total equivalent units of production 11,500 11,500 11,450

Exercise 156

The general ledger of Schwam Company has the following costs in the Work in Process account:

Work in Process Inventory—Finishing

7/1 Balance 8,000 7/31 Transferred out ?

7/31 Direct materials 1,800

7/31 Direct labour 2,600

7/31 Overhead 2,680

7/31 Balance ?

Production records show that there were 3,000 units in beginning inventory, 50% complete; 4,000 units started, and 4,500 units transferred out. The beginning Work in Process inventory had conversion costs of $3,300. The units in ending inventory were 60% complete. Direct materials are added at the beginning of the process. The company employs the weighted-average method of process costing.

Instructions

Answer the following questions:

a) How many units are in process at July 31?

b) What is the unit conversion cost for July?

c) What is the conversion cost in the July 31 inventory?

Solution 156 (8–10 min.)

a) Work in process inventory, July 1 3,000

Started into production 4,000

Units to be accounted for 7,000

Less: Completed and transferred out 4,500

Work in process inventory, July 31 2,500

b) Conversion costs Physical Units Equivalent units of production

Completed and transferred out 4,500 4,500

Work in process inventory, July 31 2,500 1,500 (2,500 ×.60)

Total 7,000 6,000

Unit conversion cost = ($3,300 + $2,680 + 2,600) ÷ 6,000 = $1.43

c) Conversion cost in July 31 inventory: 2,500 ×.6 × $1.43 = $2,145

Exercise 157

The Assembly Department uses a process cost accounting system. The department adds direct materials at the beginning of the process and incurs conversion costs uniformly throughout the process. During May, $200,000 of direct materials costs and $95,000 in conversion costs were charged to the department. The beginning Work in Process inventory was $63,000 on May 1, comprised of $40,000 of direct materials costs and $23,000 of conversion costs. The company employs the weighted-average method of process costing.

Other data for the month of May are as follows:

Beginning Work in Process inventory, 5/1 25,000 units (40% complete)

Units completed and transferred out 50,000 units

Ending Work in Process inventory, 5/31 30,000 units (30% complete)

Instructions

Answer the following questions and show computations to support your answers.

a) How many physical units have to be accounted for in May?

b) What are the equivalent units of production for direct materials and for conversion costs for the month of May?

c) What is the total cost assigned to the 50,000 units that were transferred out of the process in May?

d) What is the total cost of the May 31 inventory?

Solution 157 (10–12 min.)

a) Units completed and transferred out 50,000

Work in process inventory, May 31 30,000

Units accounted for 80,000

b) Equivalent units of production:

Equivalent units of production

Physical Units Direct Materials Conversion Costs

Completed and transferred out 50,000 50,000 50,000

Work in process inventory, May 31 30,000 30,000 9,000*

Total 80,000 80,000 59,000

*(30,000 ×.30)

c) Direct materials cost per unit = $3 ($240,000* ÷ 80,000 units)

Conversion cost per unit = $2 ($118,000** ÷ 59,000 units)

Total unit cost $5

*($40,000 + $200,000)

**($23,000 + $95,000)

Total cost assigned to units completed and transferred out: 50,000 × $5 = $250,000

d) Total cost of May 31 inventory: (30,000 × $3) + (9,000 × $2) = $108,000

Exercise 158

Taco Ranch uses a process cost system and the weighted-average cost flow assumption. Production begins in the Crafting Department where direct materials are added at the beginning of the process and conversion costs are incurred uniformly throughout the process. On November 1, the beginning Work in Process inventory consisted of 10,000 units that were 60% complete and had a cost of $190,000, $100,000 of which were direct materials costs. During November, the following occurred:

Direct materials added $225,000

Conversion costs incurred $45,000

Units completed and transferred out in November 40,000

Units in ending Work in Process inventory November 30 (20% complete) 25,000

Instructions

Answer the following questions and show the computations that support your answers.

a) What are the equivalent units of production for direct materials and conversion costs in the Crafting Department for the month of November?

b) What are the costs assigned to the ending Work in Process inventory on November 30?

c) What are the costs assigned to units completed and transferred out during November?

Solution 158 (10–12 min.)

a) Equivalent units of production:

Equivalent units of production

Physical Units Direct Materials Conversion Costs

Completed and transferred out 40,000 40,000 40,000

Work in process inventory, November 30 25,000 25,000 5,000*

Total 65,000 65,000 45,000

*(25,000 ×.20)

b) Direct materials unit cost $5 ($325,000* ÷ 65,000 units)

Conversion unit cost 3 ($135,000** ÷ 45,000 units)

Total unit cost $8

*($100,000 + $225,000) **[($190,000 – $100,000) + $45,000]

Costs assigned to Work in process inventory, November 30

Direct materials costs $125,000 (25,000 units × $5)

Conversion costs 15,000 (5,000 units × $3)

Total $140,000

c) Costs assigned to units completed and transferred out: 40,000 × $8 = $320,000

Exercise 159

Given below are the production data for Cherokee Traders for the first month of operations:

Costs charged to Cherokee Traders:

Direct materials $18,000

Direct labour 3,400

Overhead 19,000

During this first month of operations, 3,000 units were started into production; 2,500 units were completed and transferred out; and the remaining 500 units are 100% completed with respect to direct materials and 60% complete with respect to conversion costs. The company uses the weighted-average method of process costing.

Instructions

Calculate the following:

a) Unit direct materials cost

b) Equivalent units of production conversion costs

c) Unit conversion cost

d) Total cost of 500 units in process at end of month

e) Total cost of 2,500 units completed and transferred out

Solution 159 (7–8 min.)

a) Unit direct materials cost: $18,000 ÷ 3,000 equivalent units of production for direct materials = $6.00

b) Equivalent units of production conversion costs: 2,500 completed + (60% × 500) = 2,800 equivalent units of production conversion costs.

c) Unit conversion cost: ($3,400 + $19,000) ÷ 2,800 equivalent units of production = $8.00

d) Total cost of 500 units in Work in Process inventory

Direct materials, 500 × $6.00 = $3,000

Conversion costs, 300 × $8.00 = 2,400

Total $5,400

e) Total cost of 2,500 completed and transferred out units: 2,500 × ($6.00 + $8.00) = $35,000

Exercise 160

Par Manufacturing Company uses a process cost system. The Fabrication Department adds direct materials at the beginning of the process and conversion costs are incurred uniformly throughout the process. Work in process inventory on June 1 was 75% complete and Work in Process inventory on June 30 was 50% complete. The company uses the weighted-average method of process costing.

Instructions

Complete the Production Cost Report for the Fabrication Department for the month of June using the above information and the information below.

PAR MANUFACTURING COMPANY

Fabrication Department

Production Cost Report

For the Month Ended June 30, 2022

Equivalent units of production

QUANTITIES Physical Units Direct Materials Conversion Costs

Units to be accounted for

Work in process inventory, Jun 1 10,000

Started into production 20,000

Total units to be accounted for 30,000

Units accounted for

Completed and transferred out 25,000

Work in process inventory, Jun 30 5,000

Total units accounted for 30,000

COSTS

Unit costs Direct Materials Conversion Costs Total

Costs in June $150,000 $110,000 $260,000

Equivalent units of production

Unit costs $ $ $

Cost Reconciliation Schedule

Costs to be accounted for

Work in process inventory, Jun 1 $ 80,000

Started into production 180,000

Total costs to be accounted for $260,000

Costs accounted for

Completed and transferred out $

Work in process inventory, Jun 30

Direct materials $

Conversion costs

Total costs accounted for $260,000

Solution 160 (7–10 min.)

PAR MANUFACTURING COMPANY

Fabrication Department

Production Cost Report

For the Month Ended June 30, 2022

Equivalent units of production

QUANTITIES Physical Units Direct Materials Conversion Costs

Units to be accounted for

Work in process inventory, Jun 1 10,000

Started into production 20,000

Total units to be accounted for 30,000

Units accounted for

Completed and transferred out 25,000 25,000 25,000

Work in process inventory, Jun 30 5,000 5,000 2,500 (5,000 × 50%)

Total units accounted for 30,000 30,000 27,500

COSTS

Unit costs Direct Materials Conversion Costs Total

Costs in June $150,000 $110,000 $260,000

Equivalent units of production 30,000 27,500

Unit costs $5.00 $ 4.00 $9.00

Cost Reconciliation Schedule

Costs to be accounted for

Work in process inventory, Jun 1 $ 80,000

Started into production 180,000

Total costs to be accounted for $260,000

Costs accounted for

Completed and transferred out (25,000 × $9.00) $225,000

Work in process inventory, Jun 30

Direct materials (5,000 × $5) $ 25,000

Conversion costs (2,500 × $4) 10,000 35,000

Total costs accounted for $260,000

Exercise 161

Erin Enterprises uses the weighted-average method of process costing. The following data has been recorded for the mixing department for October:

Work in process inventory, beginning:

Units in process 500

Stage of completion with respect to direct materials 40%

Stage of completion with respect to conversion 15%

Costs in the beginning inventory

Material costs $1,027

Conversion costs $1,982

Units started into production during October 29,000

Units completed and transferred out 28,900

Costs added to production during October

Material costs $35,057

Conversion costs $122,982

Work in process inventory, ending:

Units in process 600

Stage of completion with respect to direct materials 50%

Stage of completion with respect to conversion 20%

Instructions

Prepare a production report for the Division using the weighted-average method.

Solution 161 (6–8 min.)

ERIN ENTERPRISES

Mixing Department-Production Cost Report

For the Month Ended October 31, 2022

_Equivalent units of production_

Physical Units Direct Materials Conversion Costs

Quantities

Units to be accounted for

Work in process inventory, Oct 1 500

Started into production 29,000

Total units to be accounted for 29,500

Units accounted for

Completed and transferred out 28,900 28,900 28,900

Work in process inventory, Oct 31 600 300 120

Total units accounted for 29,500 29,200 29,020

Costs

Direct Materials Conversion Costs Total

Work in process inventory, Oct 1 $ 1,027 $ 1,982

Costs added in Oct 35,057 122,982

Total costs 36,084 124,964 161,048

Equivalent units of production 29,200 29,020

Unit costs $ 1.24 $ 4.31 $ 5.55

Cost Reconciliation Schedule

Costs to be accounted for

Work in process inventory, Oct 1 $ 3,009

Started into production 158,039

Total costs to be accounted for $161,048

Costs accounted for

Completed and transferred out (28,890 x $5.55) $160,340

Work in process inventory, Oct 31

Direct materials (300 x $1.24) $372

Conversion costs (120 x $4.31) 517 889

Total costs accounted for $161,229*

*Difference between total costs to be accounted for and cost reconciliation is due to rounding. Students may choose to round to a higher number of decimals, which will increase accuracy.

Exercise 162

Nick’s Nuts and Bolts Inc. reported the following data for the month of September:

Conversion

Units Percentage Complete

Work in process inventory, September 1 2,500 60%

Units started 7,000

Completed and transferred out 7,500

Work in process inventory, September 30 2,000 10%

Costs for September Direct Materials Conversion

Work in process inventory, September 1 $37,875 $17,800

Costs Added in September $50,000 $90,000

Nick’s uses the weighted-average method of process costing, and all direct materials are added at the start of the process. Each unit contains 100 bolts.

Instructions

Prepare a production cost report for September using the weighted-average method of process costing.

Solution 162 (12–16 min.)

NICK’S NUTS AND BOLTS INC.

Production Cost Report

For the Month Ended September 30, 2022

Equivalent units of production

Physical Units Direct Materials Conversion Costs

QUANTITIES

Units to be accounted for

Work in process inventory, Sep 1 2,500

Started into production 7,000

Total units to be accounted for 9,500

Units accounted for

Completed and transferred out 7,500 7,500 7,500

Work in process inventory, Sep 30 2,000 2,000 200

Total units accounted for 9,500 9,500 7,700

COSTS

Unit costs Direct Materials Conversion Costs Total

Costs in Sep $87,875 $107,800 $195,675

Equivalent units of production 9,500 7,700

Unit costs $9.25 $14.00 $23.25

Cost Reconciliation Schedule

Costs to be accounted for

Work in process inventory, Sep 1 $ 55,675

Started into production 140,000

Total costs to be accounted for $195,675

Costs accounted for

Completed and transferred out (7,500 × $23.25) $174,375

Work in process inventory, Sep 30

Direct materials (2,000 × $9.25) 18,500

Conversion Costs (200 × $14.00) 2,800 21,300

Total costs accounted for $195,675

Exercise 163

The excerpt below is from the February 2022 production report for Dubious Brothers Company and shows direct materials and conversion unit costs.

Unit costs Direct Materials Conversion Costs Total

Costs in February $300,000 $128,000 $428,000

Equivalent units of production, Units transferred out 12,000 12,000

Equivalent units of production, Work in Process inventory Feb 29 8,000 4,000

Total equivalent units of production 20,000 16,000

Unit costs $ 15.00 $ 8.00 $ 23.00

Instructions

a) Why were the equivalent units of production under conversion costs not the same as for direct materials?

b) How much would the total costs reflected on monthly production cost report be? Show a condensed section of the production cost report that would calculate this.

Solution 163 (6-7 min.)

a) Direct materials are usually added at the beginning of the process and conversion costs are usually added throughout. There still has to be work done on the products, however, it appears that a substantial part of the direct materials may have been added already.

b) Cost Reconciliation Schedule

Costs accounted for

Completed and transferred out (12,000× $23.00) $276,000

Work in process inventory, Feb 29

Direct materials (8,000 × $15) $120,000

Conversion costs (4,000 × $8) 32,000 152,000

Total costs $428,000

Exercise 164

The Finishing Department of Cale Manufacturing has the following production and cost data for its first month of production, July 2022:

1. Completed and transferred out, 2,000 units

2. Ending Work in Process inventory, 1,000 units (30% complete as of July 31)

3. Direct materials added, $30,000; conversion costs incurred, $18,400

Direct materials are entered at the beginning of the process. Conversion costs are incurred uniformly during the process. There was no beginning Work in Process inventory. The company uses the weighted-average method of process costing.

Instructions

a) Calculate the equivalent units of production for direct materials and conversion costs for the month of July.

b) Calculate unit costs and prepare a cost reconciliation schedule.

Solution 164 (8–10 min.)

a) Equivalent units of production

Physical Units Direct Materials Conversion Costs

Completed and transferred Out 2,000 2,000 2,000

Work in Process inventory, Jul 31 1,000 1,000 300*

Total 3,000 3,000 2,300

*(1,000 ×.30)

b) Direct materials cost per unit = $10.00 ($30,000 ÷ 3,000 units)

Conversion cost per unit = 8.00 ($18,400 ÷ 2,300 units)

$18.00

Cost Reconciliation Schedule

Costs accounted for

Completed and transferred out (2,000 × $18) $36,000

Work in process, Jul 31

Direct materials (1,000 × $10.00) $10,000

Conversion costs (300 × $8.00) 2,400 $12,400

Total costs accounted for $48,400

*Exercise 165

Frannie Company adds direct materials at the beginning of the process so no additional direct materials costs are required to complete the beginning work in process inventory. In addition, 100% of the direct materials costs have been incurred on the ending work in process inventory. In terms of conversion, 75% of the beginning work in process inventory is complete while 40% of the ending work in process inventory is complete.

Instructions

Complete the following table of physical units and equivalent units of production for direct materials and conversion costs:

Equivalent units of production

Physical Units Direct Materials Conversion Costs

Completed and transferred out

Work in Process Inventory, beginning 300

Started and completed 6,900

Work in Process inventory, ending ?

Total units accounted for 7,800

*Solution 165 (5–7 min.)

Equivalent units of production

Physical Units Direct Materials Conversion Costs

Completed and transferred out

Work in Process Inventory, beginning 300 0 75

Started and completed 6,900 6,900 6,900

Work in Process inventory, ending 600 600 240

Total units accounted for 7,800 7,500 7,215

*Exercise 166

At Oxley Company, direct materials are entered at the beginning of each process. The company uses the FIFO method for process costing. Work in Process inventories, with the percentage of work done on conversion, and production data for its Finishing Department for March are as follows:

Beginning Work in Process inventory Ending Work in Process inventory

Percentage Units Completed Percentage

Month Units Completed and Transferred Out Units Completed

March 1,400 60% 11,000 500 90%

Instructions

a) Calculate the physical units for March.

b) Calculate the equivalent units of production for direct materials and conversion costs for March.

*Solution 166 (5–7 min.)

a) Computation of Physical Units

Beginning Work in Process inventory 1,400

Started into production 10,100

Total units to be accounted for 11,500

Completed and transferred out 11,000

Ending Work in Process inventory 500

Total units accounted for 11,500

b) Computation of Equivalent units of production

Equivalent units of production

Units accounted for Physical Units Direct Materials Conversion Costs

Work in process inventory, Mar 1 1,400 0 560 (1,400 x.40)

Completed and transferred out 9,600 9,600 9,600

Work in process inventory, Mar 30 500 500 450 (500 ×.90)

Total equivalent units of production 11,500 10,100 10,610

*Exercise 167

The Assembly Department uses a process cost accounting system. The department adds direct materials and incurs conversion costs uniformly throughout the process. During May, $200,000 of direct materials costs and $95,000 in conversion costs were charged to the department. The beginning Work in Process inventory was $63,000 on May 1, comprised of $40,000 of direct materials costs and $23,000 of conversion costs. The company employs the FIFO method of process costing.

Other data for the month of May are as follows:

Beginning Work in Process inventory, 5/1 25,000 units (40% complete)

Units completed and transferred out 50,000 units

Ending Work in Process inventory, 5/31 30,000 units (30% complete)

Instructions

Answer the following questions and show computations to support your answers.

a) How many physical units have to be accounted for in May?

b) What are the equivalent units of production for direct materials and for conversion costs for the month of May?

c) What is the total cost assigned to the 50,000 units that were completed and transferred out of the process in May?

d) What is the total cost of the May 31 inventory?

*Solution 167 (10–12 min.)

a) Work in process inventory, May 1 25,000

Units started in production 55,000

Units accounted for 80,000

Units completed and transferred out 50,000

Work in process inventory, May 31 30,000

Units accounted for 80,000

b) Equivalent units of production: Equivalent units of production

Physical Units Direct Materials Conversion Costs

Work in process inventory, May 1 25,000 15,000 15,000 (25,000 x.60)

Completed and transferred out 25,000 25,000 25,000

Work in process inventory, May 31 30,000 9,000 9,000 (30,000 x.30)

Total 80,000 49,000 49,000

c) Direct materials cost per unit = $4.08 ($200,000 ÷ 49,000 units)

Conversion cost per unit = 1.94 ($95,000 ÷ 49,000 units)

Total unit cost $6.02

Total cost assigned to units completed and transferred out:

Work in process inventory, May 1 $ 63,000

Costs to complete beginning Work in Process inventory:

15,000 x $6.02 = 90,300

Total 153,300

Units started and completed (25,000 x $6.02) 150,500

Total costs completed and transferred out $303,800

d) Work in process inventory, May 31

Direct materials (9,000 × $4.08) $36,720

Conversion costs (9,000 × $1.94) 17,460

Total costs $54,180

*Exercise 168

Taco Ranch uses a process cost system and the FIFO cost flow assumption. Production begins in the Crafting Department where direct materials are added at the beginning of the process and conversion costs are incurred uniformly throughout the process. On November 1, the beginning Work in Process inventory consisted of 10,000 units which were 60% complete and had a cost of $190,000, $100,000 of which were direct materials costs. During November, the following occurred:

Direct materials added $225,000

Conversion costs incurred $45,000

Units completed and transferred out in November 40,000

Units in ending Work in Process inventory November 30 (20% complete) 25,000

Instructions

Answer the following questions and show the computations that support your answers.

a) What are the equivalent units of production for direct materials and conversion costs in the Crafting Department for the month of November?

b) What are the costs assigned to the ending Work in Process inventory on November 30?

c) What are the costs assigned to units completed and transferred out during November?

*Solution 168 (10–12 min.)

a) Equivalent units of production:

Equivalent units of production

Physical Units Direct Materials Conversion Costs

Work in process inventory, Nov 1 10,000 0 4,000 (10,000 x.40)

Completed and transferred out 30,000 30,000 30,000

Work in process inventory, Nov 30 25,000 25,000 5,000 (25,000 x.20)

Total 65,000 55,000 39,000

b) Direct materials unit cost $4.09 ($225,000 ÷ 55,000 units)

Conversion unit cost 1.15 ($45,000 ÷ 39,000 units)

Total unit cost $5.24

Costs to be accounted for

Work in process inventory, Nov 1 $190,000

Started in production 270,000

Total costs to be accounted for $460,000

Costs assigned to Work in Process inventory, November 30

Direct materials costs $102,250 (25,000 units × $4.09)

Conversion costs 5,750 (5,000 units × $1.15)

Total $108,000

c) Costs assigned to units completed and transferred out:

Completed and Transferred out

Work in process inventory, Nov 1 $190,000

Cost to complete beginning Work in Process inventory (4,000 x $1.15) 4,600

Total costs $194,600

Units started and completed (30,000 x $5.24) 157,200

Total costs completed and transferred out $351,800

*Exercise 169

Prime Industries manufactures plastic tubing and uses the FIFO method of calculating its inventory. It has the following information about its process for the period:

Beginning WIP inventory 8,000 units

Units completed and transferred out 19,000 units

Ending WIP inventory 6,000 units

Equivalent production 2,800 units

Direct materials and costs were added evenly throughout the period.

Instructions

Determine the number of units that were started during this period.

*Solution 169 (3–5 min.)

19,000 (units out) – 8,000 (opening inventory) + 6,000 (ending inventory) = 17,000

*Exercise 170

Cerex Company makes ceramic tiles. It has the following information about its process for the period:

Beginning inventory 500 units

Started and complete 2,250 units

Ending inventory 1,500 units, 30% complete

Equivalent units of production 2,800 units

Cerex uses the FIFO method for its inventory.

Instructions

Calculate the percentage of completion of the beginning inventory.

*Solution 170 (5–8 min.)

Equivalent units of production = Units completed and transferred out from Opening WIP + Units started and completed + Equivalent units of production in ending inventory

X + 2,250 + 450 = 2,800

X = 100 equivalent units of production.

Opening WIP was therefore 80% complete

COMPLETION STATEMENTS

171. Process cost systems are used to apply costs to similar products that are ___ in a ___ fashion.

172. Separate ___ accounts are maintained for each production department or manufacturing process in a process cost system.

173. In a process cost system, manufacturing costs are summarized in a ___ report for each department.

174. A primary driver of overhead costs in continuous manufacturing operations is ___.

175. Equivalent units of production measure the work done during the period, expressed in fully ___ units.

176. ___ processing refers to the specific manner of processing required for products requiring work in multiple departments, passing from one processing department to another in a linear fashion.

177. Manufacturing costs always follow the ___ flow of goods.

178. The costs of completed units from the first processing department are treated as ___ material costs in the second processing department once they are transferred in.

179. In calculating equivalent units of production in a sequential process setting, the transferred-in costs are treated as a separate cost component and will be assigned a percentage completion factor of ___.

ANSWERS TO COMPLETION STATEMENTS

171. mass produced, continuous

172. Work in Process Inventory

173. production cost

174. machine hours

175. completed

176. sequential

177. physical

178. input

179. 100%

MATCHING

180. Match the items in the two columns below by entering the appropriate code letter in the space provided.

A. Total manufacturing cost per unit E. Cost reconciliation schedule

B. Equivalent units of production F. Units completed and transferred out

C. Total units accounted for G. Physical units

D. Production cost report H. Unit production costs

___ 1. A summary of both production quantity and cost data for a production department.

___ 2. Shows that the total costs accounted for equal the total costs to be accounted for.

___ 3. Work done during a period expressed in fully completed units.

___ 4. Actual units to be accounted for during a period, irrespective of any work performed.

___ 5. Units completed and transferred out during the period plus units in ending Work in Process Inventory

___ 6. Unit direct materials cost plus unit conversion cost.

___ 7. Total units accounted for minus units in ending Work in Process Inventory.

___ 8. Costs expressed in terms of equivalent units of production.

ANSWERS TO MATCHING

1. D

2. E

3. B

4. G

5. C

6. H

7. F

8. A

SHORT-ANSWER ESSAY QUESTIONS

SAE 181

The FIFO method is conceptually superior to the weighted-average method. Explain by comparing the two methods.

Solution 181

Conceptually, the FIFO method is better than the weighted-average method because current performance is measured using only costs incurred in the current period. Therefore, managers are not held responsible for costs from prior periods that they may have had no control over. In addition, the FIFO method provides current cost information, which can be used to establish more accurate pricing strategies for goods that are manufactured and sold in the current period.

SAE 182

Why do some companies need a cost accounting system while others do not? What are the determining characteristics or factors that influence the type of cost accounting system that is appropriate for a company?

Solution 182

Companies need a cost accounting system only if they need to measure, record, and report the costs of manufacturing products. The two basic types of cost accounting systems are job-order costing and process costing. A job-order cost system is appropriate when production consists of batches of unique products (jobs). A process cost system is used to apply costs to similar products that are mass produced in a continuous fashion.

SAE 183

Dolly's Dream Homes, Inc. manufactures doll houses in a continuous process. Various customizing features and furnishings are added at the end of the process to create the various models that are sold. The basic design and floor plans of all the houses are identical.

During the most recent month, the wood used to construct the houses was inadvertently recorded as Factory Supplies Expense. At month end, when the error was discovered, Susan Long, the accountant, was told by the accounting manager, Tina Barr, not to bother with correcting the error, because the doll houses were already sold. Susan believes that the cost of the products should be correct to enable management to make better pricing decisions. She wonders whether she would be committing an unethical act if she were to make the changes anyway, despite her superior telling her not to.

Instructions

a) Who are the stakeholders in this situation?

b) Was it unethical for the company to ask that the error not be corrected? Explain briefly.

c) Would it be unethical for Susan to correct the error? Explain briefly.

Solution 183

a) The stakeholders include:

• Susan Long and Tina Barr
• Dolly's Dream Homes
• possibly the present customer, or future customers

b) Asking to ignore an error is not ethical because the intention appears to be an effort to try to cover up something. Lumber appears to be a major material used in the houses and should be recorded as raw materials. However, all product costs appear either in Raw Materials, Work in Process Inventory, Finished Goods, or Cost of Goods Sold. By the end of the accounting period, the cost of materials used should be removed from the Raw Materials account so that the assets are not overstated.

c) Susan should tell her boss what effect omitting the error correction will have on assets so that her boss agrees with the correction.

SAE 184

The production cost report summarizes the activities that have taken place in a department or process over a period of time. Identify the major types of information found on a production cost report, and indicate who in the business organization uses this type of information and for what purpose the information is used.

Solution 184

The types of information found in a production cost report are units to be accounted for and units accounted for, unit costs, and costs to be accounted for and costs accounted for. Production cost reports provide a basis for evaluating the productivity of a department and are used by production managers. In addition, the cost data can be used by middle management to assess whether unit costs and total costs are reasonable. When the quantity and cost data are compared with predetermined goals, top management can also determine whether current performance is meeting planned objectives. Of course, the information in the report is also used for recordkeeping and income determination by the accounting department.

MULTI-PART QUESTIONS

*185. Synchromatic Industries manufactures tiles for sale in the home renovation industry. It uses the weighted-average method for its two divisions. Division A performs the first process in the production process and Division B performs the second.

Following is information for Division B for the month of September:

Physical Units

WIP, Sep 1 2,600 (30% complete)

Completed and transferred in from Division A 12,000 units

WIP, Sep 30 3,000 (10% complete)

September 1 Costs Added

WIP in September Total

Transferred in $25,740 $120,000 $145,740

Direct materials 8,190 48,000 56,190

Direct labour 20,904 300,240 321,144

Overhead 6,864 100,080 106,944

$61,698 $568,320 $630,018

In Division B, direct materials are added at the beginning of the process and conversion costs are incurred uniformly throughout the process. There is no spoilage of the products.

Instructions

a) Calculate the total cost of the units completed and transferred out of Division B in September (rounded) using the weighted-average method.

b) Calculate the total cost of the units completed and transferred out of Division B in September (rounded) using the FIFO method.

*Solution 185 (20–25 min.)

a) Completed and Transferred Direct Conversion

In Costs Direct Materials Costs

Costs $145,740 $56,190 $428,088

Equivalent units of production

Units completed and transferred out 11,600 11,600 11,600

Ending inventory:

3,000 x 100% 3,000

3,000 x 100% 3,000

3,000 x 10% 300

14,600 14,600 11,900

Cost per unit $9.98 $3.85 $35.97

Total cost per unit: $49.80

Cost of units transferred out: 11,600 x $49.80 = $577,680

b) Completed and Transferred Direct Conversion

In Costs Direct Materials Costs

Costs $120,000 $48,000 $400,320

Equivalent units of production

Beginning inventory: 0 0 1,820 (2600 x 70%)

Units completed and transferred out 9,000 9,000 9,000

Ending inventory:

3,000 x 100% 3,000

3,000 x 100% 3,000

3,000 x 10% 300

12,000 12,000 11,120

Cost per unit $10.00 $4.00 $36.00

Total cost per unit: $50.00

Cost of units completed and transferred out:

Beginning WIP Costs = $61,698

Costs to complete BWIP:

1,820 x $36 = $65,520

Started and Completed:

9000 x $50 = $450,000

Total $577,218

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