Exam 4: Process Costing and Hybrid Product-Costing Systems

Professor Jones is concerned that her students do not understand the concept of equivalent units. She has therefore prepared the following questions, to appear on an upcoming examination: Equivalent units are used in a process-costing accounting system. A. Explain the need for equivalent units and why separate equivalent-unit totals are calculated for direct materials and conversion cost. B. If an examination of goods in production at the end of the period revealed 12,000 units that are, on average, 75% complete, would it be correct to say that 9,000 units were finished during the period? Why? Required: Prepare a complete answer key that can be used in grading the examination questions.

Operation costing tends to parallel job-order costing with respect to the treatment of conversion cost.

Southern Lake Chemical manufactures a product called Zubek. Direct materials are added at the beginning of the process, and conversion activity occurs uniformly throughout production. The beginning work-in-process inventory is 60% complete with respect to conversion; the ending work-in-process inventory is 20% complete. The following data pertain to May: Units Work in process, May 1 15,000 Units started during May 60,000 Units completed and transferred out 68,000 Work in process, May 31 7,000 Direct Conversion Total Materials Costs Work in process, May 1 \ 41,250 \ 16,500 \ 24,750 Costs incurred during May Totals Using the weighted-average method of process costing, the cost per unit of direct materials is:

Which of the following is true concerning cost drivers for the predetermined overhead rate in a process-costing system?

Unit costs in a process-costing system are derived by using:

Marcellus Corporation, which uses the weighted-average method of process costing, reported the following as of February 1: Conversations with the production supervisor revealed that materials are introduced at the start of the process and conversion cost is incurred evenly throughout manufacturing. The company started 29,000 units during the month. Goods in process at the beginning and end of February totaled 3,000 units and 5,000 units, respectively, the latter batch being 60% complete. Just prior to leaving on vacation, a trusted staff assistant was asked to compute the cost of February's ending work-in-process inventory. Her calculations showed a huge rise in unit cost when compared with the February 1 figures, soaring to $250 [($470,000 + $280,000) ÷ 3,000 units (5,000 units × 60%)]. Required: A. Did the staff assistant make any errors in her calculations? Explain. B. Analyze the company's production volume and determine the proper equivalent-unit figures for February. C. Calculate the proper unit costs for February. D. Calculate the cost of the February 28 work-in-process inventory.

Southern Lake Chemical manufactures a product called Zubek. Direct materials are added at the beginning of the process, and conversion activity occurs uniformly throughout production. The beginning work-in-process inventory is 60% complete with respect to conversion; the ending work-in-process inventory is 20% complete. The following data pertain to May: Units Work in process, May 1 15,000 Units started during May 60,000 Units completed and transferred out 68,000 Work in process, May 31 7,000 Direct Conversion Total Materials Costs Work in process, May 1 \ 41,250 \ 16,500 \ 24,750 Costs incurred during May Totals Using the weighted-average method of process costing, the cost of goods completed and transferred during May is:

Haskins Textile Co. manufactures a variety of fabrics. All materials are introduced at the beginning of production; conversion cost is incurred evenly through manufacturing. The Weaving Department had 2,000 units of work in process on April 1 that were 30% complete as to conversion costs. During April, 9,000 units were completed and on April 30, 4,000 units remained in production, 40% complete with respect to conversion costs. The equivalent units of conversion for April total:

Which of the following statements is false?

Which of the following choices correctly shows how costs are accumulated in a process-costing system?

Which of the following statements about similarities between process costing and job-order costing are true? I. Both systems assign production costs to units of output. II. Both systems require extensive knowledge of financial accounting. III. The flow of costs through the manufacturing accounts is essentially the same.

Fiero Corporation adds all materials at the beginning of production and incurs conversion cost evenly throughout manufacturing. The company completed 70,000 units during the year and had 12,000 units in process at year end, 20% complete with respect to conversion cost. Equivalent units for the year total:

A considerable portion of the text's process-costing presentation illustrated the proper way to allocate manufacturing costs to the units completed during the period and the ending work-in-process inventory. For companies that have a single manufacturing department, the journal entry to recognize completed production involves a debit to Finished-Goods Inventory and a credit to Work-in-Process Inventory. What journal entry, if any, is needed for these same companies to properly account for ending work in process?

Tesla Corporation, which adds materials at the beginning of production, uses a weighted-average process-costing system. Consider the data that follow. Number of Units Cost of Materials Beginning work in process 40,000 \ 80,600 Started in June 60,000 124,400 Production completed 75,000 Ending work in process 25,000 The company's cost per equivalent unit for materials is:

Southern Lake Chemical manufactures a product called Zubek. Direct materials are added at the beginning of the process, and conversion activity occurs uniformly throughout production. The beginning work-in-process inventory is 60% complete with respect to conversion; the ending work-in-process inventory is 20% complete. The following data pertain to May: Units Work in process, May 1 15,000 Units started during May 60,000 Units completed and transferred out 68,000 Work in process, May 31 7,000 Direct Conversion Total Materials Costs Work in process, May 1 \ 41,250 \ 16,500 \ 24,750 Costs incurred during May Totals Using the weighted-average method of process costing, the cost per unit of conversion activity is:

Muhares, which uses a process-costing system, adds material at the beginning of production and incurs conversion cost evenly throughout manufacturing. The following selected information was taken from the company's accounting records: Total equivalent units of materials: 8,000 Total equivalent units of conversion: 7,400 Units started and completed during the period: 6,500 On the basis of this information, the ending work-in-process inventory's stage of completion is:

Operation costing:

Michaella, Inc. uses a process-costing system. A newly-hired accountant identified the following procedures that must be performed by the close of business on Friday: 1-Calculation of equivalent units 2-Analysis of physical flows of units 3-Assignment of costs to completed units and units still in process 4-Calculation of unit costs Which of the following choices correctly expresses the proper order of the preceding tasks?

Xin Co., had 3,000 units of work in process on April 1 that were 60% complete. During April, 10,000 units were completed and as of April 30, 4,000 units that were 40% complete remained in production. How many units were started during April?

Peach Company uses a weighted-average process-costing system. Company records disclosed that the firm completed 40,000 units during the month and had 10,000 units in process at month-end, 20% complete. Conversion costs associated with the beginning work-in-process inventory amounted to $231,000, and amounts that relate to the current month totaled $966,000. If conversion is incurred uniformly throughout manufacturing, Peach's equivalent-unit cost is: