Exam 3: Process Costing and Analysis

A company uses the weighted average method for inventory costing. At the start of a period the production department had 20,000 units in beginning Work in Process inventory which were 40% complete; the department completed and transferred 165,000 units. At the end of the period, 22,000 units were in the ending Work in Process inventory and are 75% complete. The production department had conversion costs in the beginning goods is process inventory of $99,000 and total conversion costs added during the period are $726,825. Compute the conversion cost per equivalent unit.

Richards Corporation uses the FIFO method of process costing. The following information is available for October in its Fabricating Department: Units: Beginning Inventory: 80,000 units, 60% complete as to materials and 20% complete as to conversion. Units started and completed: 250,000. Units completed and transferred out: 330,000. Ending Inventory: 30,000 units, 40% complete as to materials and 10% complete as to conversion. Costs: Costs in beginning Work in Process - Direct Materials: $37,200. Costs in beginning Work in Process - Conversion: $79,700. Costs incurred in October - Direct Materials: $646,800. Costs incurred in October - Conversion: $919,300. Calculate the cost per equivalent unit of conversion.

Process costing systems consider overhead costs to include those costs that cannot be traced to a specific process.

A company's beginning Work in Process inventory consisted of 20,000 units that were 20% complete with respect to direct labor. These beginning units were completed and another 90,000 units were started during the current period. Of those started, 60,000 were finished and the remaining 30,000 were 40% complete at the end of the period. Using the weighted-average method, the equivalent units of production with regard to direct labor were:

A company uses a process costing system and the weighted average method for inventory costs. The following information is available regarding direct labor for the current year: Ending Work in Process 5,300 units, 50% complete Units completed and transferred to finished goods 28,700 units Direct labor costs during the year $199,300 Calculate the average cost per equivalent unit for direct labor (round to the nearest cent).

Grayson Company had 8,700 units in beginning inventory with accumulated costs for direct materials of $17,900, $16,500 direct labor, and $13,200 of overhead. During July, the company completed and transferred 50,000 units to finished goods. Costs incurred in the current period included $45,000 of direct materials, $58,500 of direct labor, and $46,800 of factory overhead. Ending inventory consisted of 12,000 units which were 90% complete with respect to materials and 50% complete with respect to labor and overhead. Compute the value assigned to ending inventory based on the weighted average method of inventory costing.

The term "process costing system" is used in reference to the number of trained individuals and computers required to process the collected cost information.

In process costing, the cost object is the process and in job costing, the cost object is a job.

During December, the production department of a process operations system completed and transferred to finished goods a total of 65,000 units of product. At the end of March, 15,000 additional units were in process in the production department and were 80% complete with respect to materials. The beginning inventory included materials cost of $57,500 and the production department incurred direct materials cost of $183,000 during December. Compute the direct materials cost per equivalent unit for the department using the weighted-average method.

To compute equivalent units of production, one must be able to reasonably estimate:

If a department that uses process costing starts the reporting period with 100,000 physical units that were 20% complete with respect to direct labor, the equivalent units of direct labor in beginning Work in Process are 20,000.

Pitt Enterprises manufactures jeans. All materials are introduced at the beginning of the manufacturing process in the Cutting Department. Conversion costs are incurred uniformly throughout the manufacturing process. As the cutting of material is completed, the pieces are immediately transferred to the Sewing Department. Information for the Cutting Department for the month of May follows. Work in Process, May 1 (50,000 units, 100% complete for direct materials, 40% complete with respect to conversion costs; includes $70,500 of direct material cost; $34,050 of conversion costs). Work in Process, May 31 (75,000 units, 100% complete for direct materials; 20% complete for conversion costs). If Pitt Enterprises uses the FIFO method of process costing, compute the cost per equivalent unit for direct materials and conversion costs respectively for May.

Refer to the following information about the Finishing Department in the Davidson Factory for the month of June. Davidson Factory uses the FIFO method of inventory costing. Beginning Work in Process inventory: Physical units 5,000 units % complete for materials 70% % complete for labor and overhead 25% Materials cost from May $7,350 Labor and overhead cost from May $3,125 Product started and completed: Physical units 40,000 units Ending Work in Process inventory: Physical units 4,000 units % complete for materials 40% % complete for labor and overhead 10% Manufacturing costs for June: Materials $96,975 Labor and overhead $79,470 Compute the equivalent cost per unit for direct materials, direct labor and overhead for June.

Giga Company uses a weighted average process cost system. The department started and finished 129,000 units during the current period. The ending inventory consists of 60,000 units that are 75% complete with respect to direct labor and overhead. All direct materials are added at the beginning of the process. The department incurred direct labor costs of $262,500 and overhead costs of $126,000. (a) Compute the equivalent cost per unit for direct labor. (b) Compute the equivalent cost per unit for overhead.

Refer to the following information about the Shaping Department of the Minnesota Factory for the month of August. Minnesota Factory uses the FIFO method of inventory costing. The cost per equivalent unit of materials is $10.00, and the cost per equivalent unit of labor and overhead is $22.00.Prepare a cost reconciliation for the month of August.

Metaline Corp. uses the weighted average method for inventory costs and had the following information available for the year. The number of units transferred to finished goods during the year is:

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

A hybrid costing system would be most appropriate when:

Process costing is applied to operations with repetitive production and noncustomized products.

If Department C uses $10,000 of direct materials and Department D uses $15,000 of direct materials, the following journal entry would be recorded by the process costing system: