Exam 18: Costing Systems- Process Costing

Use the following data from a company using a process costing system to answer the question(s)below. Beginning Work in Process Inventory on June 1 : 1,000 units - 100 percent complete as to direct materials 80 percent complete as to conversion costs Units Started During June: 6,500 units Ending Work in Process Inventory on June 30: 1,200 units - 100 percent complete as to direct materials 40 percent complete as to conversion costs The FIFO process costing method is used by the company. Units completed and transferred out of the department during the month totaled

Information for the current month for Process 5 is shown below. Direct Materials Conversion Costs Beginning work in process \ 4,600 \ 2,060 Current month's costs 46,400 42,375 Equivalent units based on the FIFO costing 58,000 56,500 method Units completed $-55,000$ Units in ending work in process-5,000 Direct materials are added at the beginning of the process.Beginning work in process is 40 percent complete as to conversion costs; ending work in process inventory is 60 percent complete.The cost of ending work in process inventory totaled

The basis used in computing unit cost for the process costing system is made up of certain specific jobs worked on during the fiscal year.

In process costing system,the average costing method assumes that cost flows do follow the logical physical flow of production.

The FIFO costing method is a costing method in which the cost flow follows the logical product flow.

Regardless of beginning inventory levels,the unit costs are determined by dividing the equivalent units by the total costs of the period.

A process costing system is used by companies that manufacture large amounts of similar products or liquid products.

Lopez Company uses the FIFO process costing method to determine the product unit cost.The company began the period with 1,800 units in beginning inventory.During the period,32,000 units were started and completed.There were 4,000 units in ending inventory at the end of the period.If all direct materials are added at the beginning of the process,the number of equivalent units for direct materials for the period is

Why are equivalent units of production used in process costing?

Average costing method disregards the previous period cost of units started last period.

Use the following information to perform the calculations requested below,assuming that the FIFO costing approach to a process costing system is being used. Beginning work in process inventory: 6,000 units,100 percent complete as to direct materials,75 percent complete as to conversion costs Ending work in process inventory: 18,000 units,100 percent complete as to direct materials,65 percent complete as to conversion costs Units started during the month: 44,000 a. Calculate units started and completed during the month. b. Calculate units to be accounted for during the month. c. Calculate equivalent units for conversion costs. d. Calculate equivalent units for direct materials.

In a process costing system,each product is assigned the same amount of costs.

Susan's Plastics,Inc.,manufactures a line of office desk accessories.The company's newest and most popular product is a plastic paper holder for holding the paper up while working at the computer.Production began on February 1,20xx.Plastic is poured into molds to form the product,and the entire process takes place in the Molding Department.After the liquid plastic is poured (signifying the beginning of the process),the molds must be cooled slowly before the paper holder is separated from the mold.Statistics for 20xx are shown below. Beginning inventory 0 Units started 77,000 Costs: Direct materials costs \ 246,400 Conversion costs \3 34,840 Units completed and transferred to the Packaging Department 72,500 Ending work in process inventory: All direct materials were added at the beginning of the process,and the average stage of completion of these units as to conversion costs is 80 percent. No units were lost or spoiled during the year. a. Prepare a process cost report using the FIFO costing method for the Molding Department using five steps. Include T accounts to recap both costs and units for the Work in Process Inventory account. b. Identify the amount to be transferred out of Work in Process Inventory and prepare the necessary entry in journal form to do so. a. b. Transfer $_________ to __________ and prepare the necessary journal entry in good form to make the transfer.

Under the average costing method in process costing system,the costs in beginning inventory are combined with current period costs to compute an average product unit cost.

In a process cost report,accounting for physical units excludes the physical units in beginning inventory to arrive at "units to be accounted for."

Bakersfield Company manufactures a variety of chips and utilizes a process costing system.The following information was provided by the accounting department as of May 31,20xx: a. Units started during the month of May totaled 35,000. b. Units partially complete as of May 31 equaled 8,400. c. Ending work in process inventory as of May 31, 20xx, was 75 percent complete. d. Direct materials are added at the beginning of the process, and conversion costs are incurred uniformly throughout the process. e. No units were in process on May 1, 20xx. Using the information provided, compute the equivalent units of production for direct materials and conversion costs for the month ended May 31, 20xx, assuming a FIFO costing flow.

The Taylor Company uses a process costing system.Assume that direct materials are added at the beginning of the period and that direct labor and overhead are added continuously throughout the process.The company uses the average costing method.The following data are available for one of its accounting periods: Units Beginning work in process 26,000 (70 percent complete for conversion costs) Units started 180,000 Units transferred out 191,000 Ending work in process 15,000 (60 percent complete for conversion costs) Assume that you have calculated a direct materials cost per unit of $5 and a conversion cost per unit of $8.Under this assumption,the ending balance for Work in Process Inventory would be

Separate equivalent units of production usually are calculated for materials and conversion costs.

The number of equivalent units of production may be larger than the number of completed units during the period.

Because process costing is normally associated with a continuous production flow,products that are in process at the beginning of the period are assumed to be the first products completed during the current period.