Exam 20: Process Cost Systems

The direct materials costs and direct labor costs incurred by a production department are referred to as conversion costs.

Equivalent units are the sum of direct materials used and direct labor incurred.

The FIFO method separates work done on beginning inventory in the previous period from work done on it in the current period.

Penny, Inc. employs a process costing system. Direct materials are added at the beginning of the process. Here is information about July's activities: Using the FIFO method, the cost per equivalent unit for materials used during July was

Yield measures the ratio of the materials output quantity to the materials input quantity.

The entry to transfer goods in process from Department X to Department Y includes a debit to Work in Process-Department X.

The first step in determining the cost of goods completed and ending inventory valuation using process costing is to calculate equivalent units of production.

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 1 during the period for direct labor is:

The cost of direct materials transferred into the Bottling Department of the Mountain Springs Water Company is $27,225. The conversion cost for the period in the Bottling Department is $7,596. The total equivalent units for direct materials and conversion are 60,500 and 63,300 respectively. Determine the direct materials and conversion cost per equivalent unit. Round answers to nearest cent.

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

The Bottling Department of Mountain Springs Water Company had 4,000 liters in beginning work in process inventory (40% complete). During the period, 66,000 liters were completed. The ending work in process inventory was 3,000 liters (70% complete). What are the equivalent units for conversion costs, using the FIFO method?

Department R had 5,000 units in work in process that were 75% completed as to labor and overhead at the beginning of the period, 30,000 units of direct materials were added during the period, 32,000 units were completed during the period, and 3,000 units were 40% completed as to labor and overhead at the end of the period. All materials are added at the beginning of the process. The first-in, first-out method is used to cost inventories. The number of equivalent units of production for conversion costs for the period was:

In a process costing system, indirect materials are charged to Work in Process.

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?

For which of the following businesses would a process cost system be appropriate?

Department E had 4,000 units in Work in Process that were 40% completed at the beginning of the period at a cost of $12,500. 14,000 units of direct materials were added during the period at a cost of $28,700. 15,000 units were completed during the period, and 3,000 units were 75% 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 average cost method is used to cost inventories was:

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 from Department 1 into Department 2 during the period is:

If 10,000 units which were 50% completed are in process at November 1, 90,000 units were completed during November, and 20,000 were 20% completed at November 30, the number of equivalent units of production for November was 90,000. (Assume no loss of units in production and that inventories are costed by the first-in, first-out method.)

Both job order and process cost accounting use equivalent units of production to determine costs.

One of the differences in accounting for a process costing system compared to a job order system is that the amounts used to transfer goods from one department to the next comes from the cost of production report instead of job cost cards.