Exam 3: Process Cost Systems

Explain the concept of equivalent units. Give an example to validate your explanation.

Process manufacturers typically use large machines to process a continuous flow of raw materials into a finished state.

The following production data were taken from the records of the Finishing Department for June: Determine the number of conversion equivalent units of production in the June 30 Finishing Department inventory, assuming that the first-in, first-out method is used to cost inventories.

The Mountain Springs Water Company has two departments, Purifying and Bottling. The Bottling Department had 3,000 liters in beginning work in process inventory (30% complete). During the period 71,000 liters were completed. The ending work in process was 5,000 liters (70% completed). What are the total equivalent units for direct materials (using the FIFO method) if materials were added at the beginning of the process?

Which of the following best describes the effect on direct labor when management adopts a just-in-time environment?

Mocha Company manufactures a single product by a continuous process, involving three production departments. The records indicate that direct materials, direct labor, and applied factory overhead for Department 1 were $100,000, $125,000, and $150,000, respectively. The records further indicate that direct materials, direct labor, and applied factory overhead for Department 2 were $55,000, $65,000, and $80,000, respectively. In addition, work in process at the beginning of the period for Department 1 totaled $75,000, and work in process at the end of the period totaled $60,000. The journal entry to record the flow of costs into Department 2 during the period for direct materials is:

Department G had 3,600 units, 25% completed at the beginning of the period, 11,000 units were completed during the period, 3,000 units were one-fifth completed at the end of the period, and the following manufacturing costs were debited to the departmental work in process account during the period: Assuming that all direct materials are placed in process at the beginning of production and that the first-in, first-out method of inventory costing is used, what is the total cost of 3,600 units of beginning inventory which were completed during the period (round unit cost calculations to four decimal places)?

If a company uses average costing instead of FIFO they will still get the same unit costs.

Which of the following is not characteristic of a process cost system?

The cost system best suited to industries that manufacture a large number of identical units of commodities on a continuous basis is:

Which of the following measures would not help managers to control and improve operations?

If Department K had 2,000 units, 40% completed, in process at the beginning of the period, 12,000 units were completed during the period, and 1,200 units were 25% completed at the end of the period, what was the number of equivalent units of production for conversion costs for the period if the first-in, first-out method is used to cost inventories?

The closer a company moves towards Just in Time production, the differences in unit costs between average costing and FIFO will be reduced.

Department B had 3,000 units in Work in Process that were 25% completed at the beginning of the period at a cost of $12,500. 13,700 units of direct materials were added during the period at a cost of $28,700. 15,000 units were completed during the period, and 1,700 units were 95% completed at the end of the period. All materials are added at the beginning of the process. Direct labor was $32,450 and factory overhead was $18,710. The number of equivalent units of production for the period for materials if the first-in, first-out method is used to cost inventories was:

The cost of production report summarizes (1) the units for which the department is accountable and the units to be assigned costs and (2) the costs charged to the department and the allocation of those costs.

Department S had no work in process at the beginning of the period. 12,000 units of direct materials were added during the period at a cost of $84,000, 9,000 units were completed during the period, and 3,000 units were 30% completed as to labor and overhead at the end of the period. All materials are added at the beginning of the process. Direct labor was $49,500 and factory overhead was $9,900. The total cost of units completed during the period were:

Mocha Company manufactures a single product by a continuous process, involving three production departments. The records indicate that direct materials, direct labor, and applied factory overhead for Department 1 were $100,000, $125,000, and $150,000, respectively. The records further indicate that direct materials, direct labor, and applied factory overhead for Department 2 were $50,000, $60,000, and $70,000, respectively. Department 2 has transferred-in costs of $390,000 for the current period. In addition, work in process at the beginning of the period for Department 2 totaled $75,000, and work in process at the end of the period totaled $90,000. The journal entry to record the flow of costs into Department 3 during the period is:

In the manufacture of 10,000 units of a product, direct materials cost incurred was $145,800, direct labor cost incurred was $82,000, and applied factory overhead was $45,500. What is the total conversion cost?

Department W had 2,400 units, one-third completed at the beginning of the period, 16,000 units were transferred to Department X from Department W during the period, and 1,800 units were one-half completed at the end of the period. Assume the completion ratios apply to direct materials and conversion costs. What are the total gross number of units to be assigned cost on the cost of production report for Department W?

The two categories of cost comprising conversion costs are: