Exam 4: How Is Process Costing Used to Track Production Costs

Diaz Company uses process costing in its two processing departments Assembly and Finishing.If completed goods with a cost of $62,000 are sold,which one of the following journal entries would be made to record this transaction? a. Cost of Goods Sold 62,000 Finished Goods Inventory 62,000 b. Cost of Goods Sold 62,000 Sales Revenue 62,000 c. WIP Inventory - Assembly 62,000 WIP Inventory - Finishing 62,000 d. Finished Goods Inventory 62,000 Cost of Goods Sold 62,000 e. $\text {None of the answer choices is correct.}$

Using a process costing system,the journal entry to record the requisition of direct materials to be used in production includes:

Because direct materials,direct labor,and overhead may enter a process at varying stages,equivalent units in Work-in-Process Inventory may be different for each of these components of production.

The production cost report is often prepared using computerized software to minimize math errors and to speed up the process.

Using a process costing system,the journal entry to record the cost of completed goods when sold includes:

Frost Company produces cupcakes in large batches.Three departments are involved in the production process -- Mixing,Baking,and Packaging.Frost uses a process costing system.If products with a cost of $10,000 are transferred from the Mixing Department to the Baking Department for further processing,which of the following journal entries is needed to record this transaction? a. Finished Inventory - Mixing 10,000 Finished Inventory - Baking 10,000 b. WIP Inventory - Baking 10,000 WIP Inventory - Mixing 10,000 c. WIP Inventory - Mixing 10,000 WIP Inventory - Baking 10,000 d. Finished Inventory - Baking 10,000 Finished Inventory - Mixing 10,000 e. $\text {None of the answer choices is correct.}$

Frost Company produces cupcakes in large batches.Three departments are involved in the production process -- Mixing,Baking,and Packaging.Frost uses a process costing system.If the Mixing Department requisitioned direct materials to be used in production totaling $3,500,which of the following journal entries is needed to record this transaction? a. Raw Materials Inventory 3,500 WIP Inventory - Mixing 3,500 b. Finished Goods Inventory 3,500 Raw Materials Inventory 3,500 c. WIP Inventory - Mixing 3,500 Mixing Manufacturing Overhead 3,500 d. WIP Inventory - Mixing 3,500 Raw Materials Inventory 3,500 e. $\text { None of the answer choices is correct.}$

The Molding Department at Miley Corporation had 10,000 units in process on July 1 and 6,000 units in process on July 31.During July,it started 46,000 units.The cost per equivalent unit produced in July was $2.50.If the equivalent units produced in July were 48,000,what were the costs incurred during the month?

Alloy Manufacturing produces aluminum products in three processing departments -- Molding,Cutting,and Packaging.Transactions for the month of March are shown below: Prepare journal entries to record transactions (1)through (7).

A bike repair shop would most likely use a process costing system.

Diaz Company uses process costing in its two processing departments Assembly and Finishing.If the direct labor costs incurred for the Assembly Department totaling $15,000 are to be paid next month,which one of the following journal entries would be made to record this transaction? a. Wages Payable 15,000 Wages Expense 15,000 b. WIP Inventory - Assembly 15,000 Wages Payable 15,000 c. Wages Payable 15,000 WIP Inventory - Assembly 15,000 d. Wages Expense 15,000 WIP Inventory - Assembly 15,000 e. $\text { None of the answer choices is correct.}$

Calculate the number of equivalent units for each of the following independent cases. (1) A trade school has 1,000 students enrolled in classes during the current term. The dean is interested in knowing the number of full-time equivalent students enrolled. The average student takes $40 \%$ of a full load of classes. What is the number of full-time equivalent students? (2) A total of 8,500 units of product remain in the Finishing Department at the end of the year. Direct materials are 60 percent complete and direct labor is 50 percent complete. What amount of equivalent units remain in the Finishing Department for direct materials and direct labor at year end? (3) The natal care unit of a Hope Hospital has 50 nurses working on a part-time basis, with the average nurse working $70 \%$ of a full load. What is the number of full-time equivalent nurses employed by the hospital? (4) A total of 3,000 units of product remain in the Fabricating Department at the end of the year. These products are $45 \%$ complete with respect to direct materials and $20 \%$ complete in terms of direct labor. What is the equivalent units remaining in the Fabrication Department for direct materials and direct labor at year end?.

Exhibit 4-1 Silva Coporation uses the weighted average process costing method.The Mixing Department at Silva had 17,000 units in beginning inventory.These units contained $70,000 in direct materials,$80,000 in direct labor,and $60,000 in overhead.During the period,the department incurred costs of $320,000 in direct materials,$400,000 in direct labor and $200,000 in overhead and started 80,000 units.Ending inventory consisted of 6,000 units which were 100% complete with respect to direct materials and 50% complete with respect to direct labor and overhead. -Refer to Exhibit 4-1.What is the cost per equivalent unit for overhead (rounded to the nearest cent)?

Both process costing and job costing typically include three product costs direct materials,direct labor,and manufacturing overhead.

A company producing the following product will likely not use process costing?

When using process costing,only one companywide Work-in-Process account is allowed for tracking product costs.

Holder Incorporated uses the weighted average method for its process costing system.The Assembly Department at began March with 24,000 units in Work in Process (WIP)Inventory,all of which were completed and transferred out during March.An additional 32,000 units were started during the month,12,000 of which were completed and transferred out during March.A total of 20,000 units remained in Work in Process Inventory at the end of March,and were at varying levels of completion as follows: Direct materials: 80 percent complete Direct labor: 60 percent complete Overhead: 70 percent complete A. Determine the units to be accounted for and units accounted for. B. Calculate the equivalent units for direct materials, direct labor, and overhead.

Exhibit 4-2 Chem Company makes chemicals and uses the weighted average process costing method.The company has two processing departments - Mixing and Packaging.They had no beginning inventories for April and the percentages of completion were 50% for direct materials,direct labor,and overhead. Gallons of chemical completed during April 90,000 90,000 Gallons of chemical on hand at April 30 (50\% complete) 8,000 0 Production costs incurred \ 47,000 \ 153,000 -Refer to Exhibit 4-2.What is the cost per gallon for the mixing process?

The ending WIP Inventory in the Assembly Department contains 800 units that are 100% complete with respect to direct materials and 80% complete with respect to direct labor and overhead.The cost per equivalent unit for inventory is $3.00,which consists of $2.00 for materials,$0.80 for labor,and $0.20 for overhead.What dollar value is assigned to the ending WIP Inventory?

The Packaging Department at Vail Incorporated had 51,000 units in beginning inventory.These units contained $105,000 in direct materials,$120,000 in direct labor,and $90,000 in overhead.During the period,the department incurred costs of $480,000 in direct materials,$600,000 in direct labor and $300,000 in overhead and started 240,000 units.Ending inventory consisted of 18,000 units which were 100% complete with respect to direct materials and 70% complete with respect to direct labor and overhead.How many units were transferred out?