Exam 17: Process Costing

In calculating cost per equivalent unit,the FIFO method of process costing merges the work and the costs of the beginning inventory with the work and the costs done during the current period.

Direct Disk Drive Company operates a computer disk manufacturing plant.Direct materials are added at the end of the process.The following data were for August 2017: Transferred-in costs (100% complete) Direct materials (0% complete) Conversion costs (80% complete) Transferred-in costs (100% complete) Direct materials (0% complete) Conversion costs (55% complete) Calculate equivalent units for conversion costs using the FIFO method.

Process costing would most likely be used to assign costs to products produced by which of these companies?

Assembly department of Zahra Technologies had 200 units as work in process at the beginning of the month.These units were 45% complete.It has 300 units which are 25% complete at the end of the month.During the month,it completed and transferred 600 units.Direct materials are added at the beginning of production.Conversion costs are allocated evenly throughout production.Zahra uses weighted-average process-costing method.What is the number of equivalent units of work done during the month with regards to direct materials?

Audrey Auto Accessories manufactures plastic moldings for car seats.Its costing system uses two cost categories,direct materials and conversion costs.Each product must pass through Department A and Department B.Direct materials are added at the beginning of production.Conversion costs are allocated evenly throughout production. Data for Department A for February 2017 are: Costs for the Department A for February 2017 are: What were the equivalent units of direct materials and conversion costs,respectively,at the end of February? Assume Audrey uses the weighted-average process costing method.

Jane Industries manufactures plastic toys.During October,Jane's Fabrication Department started work on 10,200 models.During the month,the company completed 11,200 models,and transferred them to the Distribution Department.The company ended the month with 2500 models in ending inventory.There were 3500 models in beginning inventory.All direct materials costs are added at the beginning of the production cycle and conversion costs are added uniformly throughout the production process.The FIFO method of process costing is being followed.Beginning work in process was 30% complete as to conversion costs,while ending work in process was 55% complete as to conversion costs. Beginning inventory: Manufacturing costs added during the accounting period: What is the cost assigned to ending inventory during October? (Round intermediary calculations to the nearest cent. )

In a period of falling prices,the lower cost of goods sold under the FIFO method leads to higher operating income and higher tax payments.

Which of the following statements is true of process costing?

In the weighted-average costing method,the costs of direct materials in beginning inventory are NOT included in the cost per unit calculation since direct materials are almost always added at the start of the production process.

Shiffon Electronics manufactures music player.Its costing system uses two cost categories,direct materials and conversion costs.Each product must pass through the Assembly Department,the Programming department,and the Testing Department.Direct materials are added at the beginning of the production process.Conversion costs are allocated evenly throughout production.Shiffon Electronics uses weighted-average costing. The following information is available for the month of March 2017 for the Assembly department. The cost details for the month of March are as follows: Work in process,beginning inventory: What is the conversion cost per equivalent unit in March? (Round to the nearest cent)

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.

The weighted average method of process costing assigns the cost of equivalent units worked on during the current period first to complete beginning inventory,next to start and complete new units,and finally to units in ending work-in-process inventory.

Marv and Vicki own and operate a vegetable canning plant.In recent years,their business has grown tremendously and,at any point in time,they may have 30 to 35 different vegetables being processed.Also,during the peak summer months there are several thousand bushels of vegetables in some stage of processing at any one time.With the company's growth during the past few years,the owners decided to employ an accountant to provide cost estimations on each vegetable category and prepare monthly financial statements.Although the accountant is doing exactly as instructed,Marv and Vicki are confused about the monthly operating costs.Although they process an average of 50,000 canned units a month,the monthly production report fluctuates wildly. Required: Explain how the production report can fluctuate wildly if they process a constant amount of vegetables each month.

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 500 kgs of tungsten carbide at $60 per kg.It started manufacture of 4000 vases and completed and transferred 3900 vases during the month.It has 100 vases in the process at the end of the month.It incurred direct labor charges of $1400 and other manufacturing costs of $600,which included electricity costs of $500.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 55% complete in respect of conversion costs. Which of the following journal entries would be correct to record direct labor for July?

Timekeeper Inc.manufactures clocks on a highly automated assembly line.Its costing system uses two cost categories,direct materials and conversion costs.Each product must pass through the Assembly Department and the Testing Department.Direct materials are added at the beginning of the production process.Conversion costs are allocated evenly throughout production.Timekeeper Inc.uses weighted-average costing. Data for the Assembly Department for June 2017 are: Costs for June 2017: What amount of conversion costs is assigned to the ending Work-in-Process account for June? (Round any intermediary calculations to the nearest cent. )

The purpose of the equivalent-unit computation is to ________.

In a series of interdepartmental transfers,each department is regarded as separate and distinct for accounting purposes.

Transferred-in costs are treated as if they are ________.

The cost of units completed can differ materially between the weighted average and the FIFO methods of process costing.

Big Bernard Corporation was recently formed to produce a semiconductor chip that forms an essential part of the personal computer 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.June is Big Bernard's first month of operations,and therefore,there was no beginning inventory.Direct materials cost for the month totaled $950,000,while conversion costs equaled $4,625,000.Accounting records indicate that 475,000 chips were started in June and 425,000 chips were completed. Ending inventory was 50% complete as to conversion costs. Required: a.What is the total manufacturing cost per chip for June? b.Allocate the total costs between the completed chips and the chips in ending inventory.