Exam 17: Process Costing

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

FIFO Aluminum processes a single type of aluminum. During the current period the following information was given: All materials are added at the beginning of the production process. The beginning inventory was 35% complete as to conversion, while the ending inventory was 40% completed for conversion purposes. FIFO Aluminum uses the first-in, first-out system of process costing. What were the costs assigned to the units transferred out this period (Round intermediary calculations to the nearest cent)?

The weighted-average cost is the total of all costs entering the Work-in-Process account (whether they are from beginning work-in-process or from work started during the current period) divided by total equivalent units of work done to date.

High Universal Industries operates a division in Brazil, a country with very high inflation rates. Traditionally, the company has used the same costing techniques in all countries to facilitate reporting to corporate headquarters. However, the financial accounting reports from Brazil never seem to match the actual unit results of the division. Management has studied the problem and it appears that beginning inventories may be the cause of the unmatched information. The reason for this is that the inventories have a different financial base because of the severe inflation. Required: How can process costing assist in addressing the problem facing Universal Industries?

In companies that produce masses of identical or similar units of output and consequently use process-costing systems, it is relatively easy to set standards and use a standard cost as the cost per equivalent unit.

Stefan Ceramics is in the business of selling ceramic vases. It has two departments - molding and finishing. Molding department purchases tungsten carbide and produces ceramic vases out of it. Ceramic Vases are then transferred to finishing department, which designs it as per the requirement of the customers. During the month of July, molding department purchased 720 kgs of tungsten carbide at $280 per kg. It started manufacture of 4200 vases and completed and transferred 3800 vases during the month. It has 400 vases in the process at the end of the month. It incurred direct labor charges of $1500 and other manufacturing costs of $1300, which included electricity costs of $300. Stefan had no inventory of tungsten carbide at the end of the month. It also had no beginning inventory of vases. The ending inventory was 50% complete in respect of conversion costs. Which of the following journal entry would record the tungsten carbide purchased and used in production during July?

In a process-costing system average unit costs are calculated ________.

Morgan Clay Products manufactures clay molded pottery on an assembly line. Its standard costing system uses two cost categories, direct materials and conversion costs. Each product must pass through the Molding Department and the Finishing Department. Direct materials are added at the beginning of the production process. Conversion costs are allocated evenly throughout production. What is the balance in ending work-in-process inventory?

The journal entry for transfer from Department B to finished goods is: Debit: Work in Process-Department B Credit: Finished Goods Control

In a period of rising prices, the weighted-average method will result in higher tax payments.

Equivalent units is a derived measure of output calculated by converting the quantity of inputs into the amount of completed output that could be produced with that quantity of input.

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

In a process-costing system, there is always a separate Work-in-Process account for each different process. or department in the process.

Partially completed units in ending work in process are 100 percent complete with regard to their direct materials costs if the direct materials are introduced at the beginning of the process.

If manufacturing labor costs are added to the process at a different time compared to other conversion costs, an additional cost category-direct manufacturing labor costs-would be needed to assign these costs to products.

Which if the following are not conversion costs?

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

The Esther Valve Corporation was recently formed to produce a brass valve that forms an essential part of a compressor manufactured by a major corporation. The direct materials are added at the start of the production process while conversion costs are added uniformly throughout the production process. September is Parson's first month of operations, and therefore, there was no beginning inventory. Direct materials cost for the month totaled $2,800,000, while conversion costs equaled $3,600,000. Accounting records indicate that 1,600,000 valves were started in September and 1,400,000 valves were completed. Ending inventory was 20% complete as to conversion costs. Required: a.What is the total manufacturing cost per valve for September? b.Allocate the total costs between the completed valves and the valves in ending inventory.

Why do we need to accumulate and calculate unit costs in process costing (and also job costing)?

The weighted-average process-costing method calculates the equivalent units by ________.