Exam 5: Process Costing and Operation Costing

Heara Ltd manufactures metal sheets, and uses the weighted average method process costing. On 1 May the Rolling Department had 3000 units work in progress, which were 50 per cent completed as to conversion costs. During May 8000 units were completed and transferred out. The remaining work in progress on 30 May was 2000 units, at 50 per cent complete in terms of conversion rate. What is the equivalent unit of conversion?

Briefly explain the four steps in process costing with work in process inventories.

For a firm, which produces its product through two processes, the costs in opening work in process for Process 2 are best described as

Discuss why management would elect to use predetermined overhead and conversion costs.

Collins Chemicals produces a compound through two processes. For its second process for a particular period, Collins had an opening WIP inventory of 100 units halfway through the process; 2300 units completed in the period; and a closing WIP inventory of 400 units three-quarters of the way through the process. Materials are added at the beginning of the process and conversion costs are incurred uniformly. Calculate the equivalent units for transferred in costs for the period if the firm used weighted average costing.

Which of the following firms are more likely to use operational costing techniques? i. Oil refineries ii. Food processors iii. Large scale clothing manufacturers iv. Tourist operators

Explain the term 'normal spoilage' and why management is unable to eliminate this production cost.

Inventory valuation in operation costing requires

Rebex Chemical Company manufactures Compound 2 in two sequential departments. On June 1, Department 2 had 3000 units, which were 50 per cent complete as to conversion cost. During June, 15 000 units were completed and transferred from Department 1. On June 30, Department 2 had 4000 units, which were 20 per cent complete as to conversion costs. How many units were completed and transferred from Department 2 during the month of June?

South River Chemicals Pty Ltd manufactures a product called Zybek. Direct materials are added at the beginning of the process and conversion activity occurs uniformly throughout the process. The following data pertains to the month of May. Using the weighted average method of process costing, calculate the equivalent units of direct materials and conversion costs for the month of May.

Process costing is only suitable for products that are

Raphael's Refining uses a FIFO process costing system. For a particular period, its opening inventory consisted of 100 items (60 per cent complete as to conversion costs) whose costs were $1600 made up of material $300 and conversion cost $1300. During the month, 1000 items were started and 950 were completed. Ending inventory of WIP was one-third complete. There was no spoilage. Costs placed in process during the month were materials $1785 and conversion costs $13 865. Materials are added at the halfway point. What is the amount of cost that would be allocated to goods completed in the period?

Abnormal spoilage is identified to assist managers in tracking the costs of wasted resources.

Operation costing is just another name for process costing as both systems trace all production costs to processes or departments.

Assume material is added at the beginning of a process, and the beginning WIP inventory is 30 per cent complete as to conversion costs. Using the weighted average method of costing, the total equivalent units for material for this process during this period is equal to

Process costing and operation costing are consistent with the concepts of responsibility accounting.

A company starts work on 1000 physical units and completes 75 per cent of conversion activity. The costs are $1500 for conversion and $5000 for direct material. What is the cost per equivalent unit for conversion?

Abnormal spoilage costs assist management to

Softcloth Textile Pty Ltd manufactures a variety of fabrics. The Weaving Department had 1000 units in work in process on April 1, which were 20 per cent complete as to conversion costs. During April, 8000 units were completed and transferred. On April 30, 4000 units remained in work in process 50 per cent complete as to conversion costs. Using the FIFO method of process costing, calculate the equivalent units of conversion for the month of April.

Which of the following are needed to calculate ending work in process under process costing?