Deck 17: Process Costing

Question 1

When a bakery transfers goods from the Baking Department to the Decorating Department, the accounting entry is

A)

B)

C)

D)

E)

Answer 1

Question 2

Excalibur Ltd. began operations on October 1 of the current year. Its production requires that direct materials are added at the beginning of the process and conversion costs are incurred uniformly. Direct materials costs for October were $380,000 and conversion costs were $1,750,000. There were 80,000 units started during the month. The ending inventory was 25,000 units which were 60% complete. The cost per equivalent unit for conversion was

A) $25.00.
B) $21.88.
C) $70.00.
D) $116.67.
E) $16.67.

Answer 2

$25.00.

Question 3

The Zygon 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 Zygon's first month of operations, and therefore, there was no beginning inventory. Direct materials cost for the month totaled $895,000, while conversion costs equaled $4,225,000. 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.

Answer 3

a.
Equivalent unit for conversion costs =
425,000 completed + (50,000 × 0.5 completed) =
425,000 + 25,000 = 450,000
b.
Completed units = $11.27 × 425,000 = $4,789,750
Ending work in process = Direct materials = 50,000 × $1.88 = $94,000
Conversion costs = 25,000 × $9.39 = 234,750
Total $328,750

Question 4

Treated Lumber Company specializes in processing treated wood. All direct materials are included at the inception of the sawing process and conversion is applied at the end of the process. For December there was no beginning inventory in the sawmill. Direct materials totalled $399,750 for the month and conversion costs totalled $165,000. work-in-process records revealed that 75,000 boardmetres were started in December and that 55,000 boardmetres were completed. Ending work-in-process units are complete only in respect to direct materials costs.
Required:
a. What is the total manufacturing cost per equivalent unit (boardmetres) for December?
b. What are the costs assigned to completed boardmetres in December?
c. What are the costs transferred out during December?
d. What are the amounts assigned to December's ending work-in-process inventory?

Question 5

The Parson Valve Corporation was recently formed to produce a brass valve that forms an essential part of a compressor 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. September is Parson's first month of operations, and therefore, there was no beginning inventory. Direct materials cost for the month totaled $1,400,000, while conversion costs equaled $1,800,000. Accounting records indicate that 800,000 valves were started in September and 700,000 valves were completed.
Ending inventory was 20% complete as to conversion costs.
Required:
a. What is the total manufacturing cost per valve for September?
b. Allocate the total costs between the completed valves and the valves in ending inventory.

Question 6

Cedar Rapids Chemical placed 220,000 liters of direct materials into the mixing process. At the end of the month, 10,000 liters were still in process, 30% converted as to labour and factory overhead. All direct materials are placed in mixing at the beginning of the process and conversion costs occur evenly during the process. Cedar Rapids Chemical uses weighted-average costing.
Required:
Determine the equivalent units in process for direct materials and conversion costs, assuming there was no beginning inventory.

Question 7

Use the information below to answer the following question(s).
Plastic Molding, Inc.'s costing system utilizes 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 production. Conversion costs are allocated evenly throughout production. Data for the Assembly Department for March are:


-What is the unit cost for February in the Assembly Department?

A) $1,000
B) $1,750
C) $3,500
D) $3,750
E) $3,900

Question 8

Use the information below to answer the following question(s).
Plastic Molding, Inc.'s costing system utilizes 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 production. Conversion costs are allocated evenly throughout production. Data for the Assembly Department for March are:


-Which of the following journal entries correctly reflects the transfer of goods completed from the Assembly Department to the Testing Department?

A)

B)

C)

D)

E)

Question 9

Use the information below to answer the following question(s).
Father Time Clock Shop manufactures clocks on an automated assembly line. It utilizes 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 production, while conversion costs are allocated evenly throughout production, and the company uses weighted-average costing.
Data for the Assembly Department are:


-What is the total amount debited to the work-in-process account during the month of June at Father Time Clock Shop?

A) $450,000
B) $2,000,000
C) $2,270,000
D) $2,450,000
E) $3,250,000

Question 10

Use the information below to answer the following question(s).
Father Time Clock Shop manufactures clocks on an automated assembly line. It utilizes 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 production, while conversion costs are allocated evenly throughout production, and the company uses weighted-average costing.
Data for the Assembly Department are:


-What is the direct materials cost per equivalent unit during June at Father Time Clock Shop?

A) $982.92
B) $1,226.61
C) $952.38
D) $1,123.81
E) $1,000.00

Question 11

Use the information below to answer the following question(s).
Father Time Clock Shop manufactures clocks on an automated assembly line. It utilizes 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 production, while conversion costs are allocated evenly throughout production, and the company uses weighted-average costing.
Data for the Assembly Department are:


-What is the conversion cost per equivalent unit in June at Father Time Clock Shop?

A) $1,254.32
B) $1,430.99
C) $987.65
D) $1,282.83
E) $1,320.17

Question 12

Use the information below to answer the following question(s).
Father Time Clock Shop manufactures clocks on an automated assembly line. It utilizes 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 production, while conversion costs are allocated evenly throughout production, and the company uses weighted-average costing.
Data for the Assembly Department are:


-What amount of conversion costs are assigned to ending work-in-process for June at Father Time Clock Shop?

A) $160,986.38
B) $137,993.63
C) $141,111.00
D) $188,148.00
E) $111,110.63

Question 13

Answer the following questions using the information below:
The Townsend Tractor Company manufactures small garden tractors on a highly automated assembly line. Its' costing system uses two cost categories, direct materials and conversion costs. Each tractor 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. Townsend Tractor uses weighted-average costing.


-What are the Townsend Company equivalent units for direct materials and conversion costs, respectively, for April?

A) 1,350 units; 1,350 units
B) 1,850 units; 1,690 units
C) 1,600 units; 1,550 units
D) 250 units; 200 units
E) 1,600 units; 1,350 units

Question 14

Answer the following questions using the information below:
The Townsend Tractor Company manufactures small garden tractors on a highly automated assembly line. Its' costing system uses two cost categories, direct materials and conversion costs. Each tractor 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. Townsend Tractor uses weighted-average costing.


-What is the total amount credited to the Townsend Company Work-in-Process account during the month of April?

A) $1,875,000.00
B) $2,370,000.00
C) $1,999,687.50
D) $2,295,937.50
E) $450,000.00

Question 15

Answer the following questions using the information below:
The Townsend Tractor Company manufactures small garden tractors on a highly automated assembly line. Its' costing system uses two cost categories, direct materials and conversion costs. Each tractor 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. Townsend Tractor uses weighted-average costing.


-What is the Townsend Company direct materials cost per equivalent unit during April?

A) $1,250.00
B) $1,241.94
C) $575.00
D) $581.25
E) $900.00

Question 16

Answer the following questions using the information below:
The Townsend Tractor Company manufactures small garden tractors on a highly automated assembly line. Its' costing system uses two cost categories, direct materials and conversion costs. Each tractor 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. Townsend Tractor uses weighted-average costing.


-What is the Townsend Company conversion cost per equivalent unit in April?

A) $1,250.00
B) $900.00
C) $575.00
D) $581.25
E) $1,241.94

Question 17

Weighty Steel processes a single type of steel. For the current period the following information is given:
All materials are added at the beginning of the production process. The beginning inventory was 40% complete as to conversion, while the ending inventory was 30% completed for conversion purposes.
Weighty uses the weighted-average costing method.
What is the total cost assigned to the units completed and transferred this period?

A) $107,010
B) $109,440
C) $113,160
D) $120,100

Question 18

Answer the following questions using the information below:
Dustin Plastics, Inc., 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.


-What is the material cost per equivalent unit in Department A?

A) $2,000
B) $2,750
C) $3,667
D) $2,500
E) $3,143

Question 19

Answer the following questions using the information below:
Dustin Plastics, Inc., 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.


-What is the conversion cost per equivalent unit in Department A?

A) $5,400
B) $3,425
C) $3,571
D) $3,699
E) 3,857

Question 20

Answer the following questions using the information below:
Dustin Plastics, Inc., 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.


-What is the total amount transferred to Department B in February?

A) $4,112,500
B) $4,450,000
C) $5,200,000
D) $6,346,900
E) $4,514,300

Question 21

Answer the following questions using the information below:
Dustin Plastics, Inc., 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.


-What is the total amount of the work-in-process ending inventory for Department A at the end of February?

A) $ 385,970
B) $619,900
C) $ 315,571
D) $ 276,157
E) $315,571

Question 22

Scarborough Chemical placed 440,000 litres of direct materials into the mixing process. At the end of the month, 20,000 litres were still in process, 30 percent converted as to labour and factory overhead. All direct materials are placed in mixing at the beginning of the process and conversion costs occur evenly during the process. Scarborough Chemical uses weighted-average costing.
Required:
a. Determine the equivalent units in process for direct materials and conversion costs assuming there was no beginning inventory.
b. Determine the equivalent units in process for direct materials and conversion costs assuming that a beginning inventory of 24,000 litres of chemicals were 40 percent complete as to conversion costs prior to the addition of the 440,000 litres.

Question 23

Calendar Time Company prints calendars. All direct materials are included at the inception of the printing process. There were 20,000 units in beginning inventory with a direct material cost of $1,000 in March. Direct materials totalled $26,000 for the month. work-in-process records revealed that 160,000 calendars were started in March and that a total of 144,000 were completed. Ending work-in-process units are complete in respect to direct materials costs and contain no labour and overhead costs. The weighted-average method is used by Calendar Time.
Required:
a. Determine the equivalent units of materials.
b. What are the material costs assigned to completed calendars?
c. What amount of materials is assigned to the ending work-in-process inventory?

Question 24

Amana Woolens is a manufacturer of wool cloth. The information for March is as follows:
Beginning work in process was half converted as to labour and overhead. Direct materials are added at the beginning of the process. All conversion costs are incurred evenly throughout the process. Ending work in process was 60% complete.
Required:
Prepare a production cost worksheet using the weighted-average method. Include any necessary supporting schedules.

Question 25

Jordana Woolens is a manufacturer of wool cloth. The information for March is as follows:
Beginning work in process was half converted as to labour and overhead. Direct materials are added at the beginning of the process. All conversion costs are incurred evenly throughout the process. Ending work in process was 60% complete.
Required:
Prepare a production cost worksheet using the weighted-average method. Include any necessary supporting schedules.

Question 26

Four Seasons Company makes snow blowers. Materials are added at the beginning of the process and conversion costs are uniformly incurred. At the beginning of September the work-in-process is 40 percent complete and at the end of the month it is 60 percent complete. Other data for the month include:

Required:
a. Using the weighted-average method determine the assignment of costs to units transferred-out and ending inventory.
b. Prepare journal entries to record transferring of material and conversion costs to work-in-process; and, the cost of the units completed and transferred from processing to finished goods.

Question 27

Creative Colors Paint Company placed 315,000 litres of direct materials into the mixing process. All direct materials are placed in mixing at the beginning of the process and conversion costs occur evenly during the process. Creative Colors uses weighted-average costing. The initial forecast for the end of the month was to have 75,000 litres still in process, 15% converted as to labour and factory overhead.
Required:
a. Determine the total equivalent units (in process and transferred out) for direct materials and for conversion costs, assuming there was no beginning inventory.
b. With the installation of a new paint processing filtration device, the forecast for the end of the month was to have 50,000 litres still in process, 70% converted as to labour and factory overhead. In this event, determine the equivalent units (in process and transferred out) for direct materials and for conversion costs, assuming there was no beginning inventory.

Question 28

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 being processed 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 income can fluctuate when sales are relatively stable.

Question 29

Use the information below to answer the following question(s).
Hollywood North Magic, a cosmetic manufacturer, began operations in January. During the first month of operations, $60,000 was incurred for direct materials and $80,000 was incurred for conversion costs. During January, 30,000 litres of cosmetics were started and 6,000 litres were unfinished at the end of the month. Ending work-in-process was 45% completed. All inputs are added evenly throughout the production process.

-What is the materials cost per unit in January using the FIFO method?

A) $2.00
B) $1.67
C) $2.25
D) $2.50
E) $3.00

Question 30

Use the information below to answer the following question(s).
Hollywood North Magic, a cosmetic manufacturer, began operations in January. During the first month of operations, $60,000 was incurred for direct materials and $80,000 was incurred for conversion costs. During January, 30,000 litres of cosmetics were started and 6,000 litres were unfinished at the end of the month. Ending work-in-process was 45% completed. All inputs are added evenly throughout the production process.

-Bag Company had a beginning inventory of 4,000 bags with costs of $18,000 on January 1. The direct materials were complete and all overhead had been assigned; however, only 40 percent of direct manufacturing labour was added in the prior period. Another 20,000 units were started and completed during the current period. Bag Company uses FIFO process-costing and calculated equivalent unit costs as follows: materials, $8.00; labour, $9.00; and overhead, $5.00.
What is the total cost of goods transferred out using the FIFO method?

A) $440,000
B) $468,000
C) $470,000
D) $491,600
E) $519,500

Question 31

Use the information below to answer the following question(s).
Canadian Oil Company manufactures cooking oils. All direct materials are added at the beginning of the production process. The company currently uses the FIFO method. Data for the month of July is listed below.


-How many units were started and completed with respect to direct materials during the month?

A) 170,000 units
B) 200,000 units
C) 270,000 units
D) 300,000 units
E) 330,000 units

Question 32

Use the information below to answer the following question(s).
Canadian Oil Company manufactures cooking oils. All direct materials are added at the beginning of the production process. The company currently uses the FIFO method. Data for the month of July is listed below.


-What is the amount of goods transferred-out during the month assuming no labour or conversion costs?

A) $398,950
B) $383,400
C) $378,000
D) $357,000
E) $391,000

Question 33

Unit costs of the weighted-average and FIFO methods will differ significantly when

A) direct materials or conversion costs per unit vary little from period to period.
B) physical inventory levels of work-in-process are small in relation to the number of units transferred out.
C) direct materials or conversion cost per unit vary greatly and physical inventory levels of work-in-process are large relative to the number of units transferred out.
D) conversion costs per unit vary greatly and physical inventory levels of work-in-process are small relative to the number of units transferred out.
E) direct materials or conversion costs per unit are similar and physical inventory of work-in-process are small relative to the number of units transferred in.

Question 34

Use the information below to answer the following question(s).
Apex Disk Company operates a computer disk manufacturing plant. Direct materials are added at the end of the process. The following data were presented for August:


-Calculate equivalent units for conversion costs using the FIFO method.

A) 401,500 units
B) 350,000 units
C) 300,000 units
D) 292,500 units
E) 170,000 units

Question 35

Use the information below to answer the following question(s).
Apex Disk Company operates a computer disk manufacturing plant. Direct materials are added at the end of the process. The following data were presented for August:


-Calculate equivalent units for direct materials using the FIFO method.

A) 100,000 units
B) 350,000 units
C) 400,000 units
D) 450,000 units
E) 515,000 units

Question 36

Use the information below to answer the following question(s).
Reynolds Dock Company manufactures boat docks on an assembly line. Its standard costing system utilizes two cost categories; direct materials and conversion costs. Each product must pass through the Assembly Department and the Finishing Department. Direct materials are added at the beginning of the production process. Conversion costs are allocated evenly throughout production. Data for the Assembly Department for October 2016 are:


-What is the balance in ending work-in-process inventory?

A) $82,000
B) $120,000
C) $200,000
D) $170,000
E) $174,000

Question 37

Smithers Ltd. uses the FIFO method for its production costing. On June 1, it had 35,000 units in beginning work in process that were 60% complete with respect to conversion costs. During the month it completed 80,000 units and on June 30, there were 16,000 units in ending work in process. These units were 35% complete with respect to conversion. Direct materials are added at the beginning of the process and no units are lost during production. The costs associated with the beginning inventory were $83,300 for direct materials and $66,780 for conversion. During the month, Smithers issued $146,400 of direct materials and incurred $206,720 of conversion costs.
Required:
Prepare a production cost worksheet using the FIFO method.

Question 38

Marvin Ltd. uses an automated process in its manufacturing operations. On November 1, the company had 25,000 units in beginning work in process which were 80% complete with respect to conversion. During the month of November, it started 120,000 into production. On November 30, there were 20,000 units in process, which were 40% complete with respect to conversion. Direct materials are added at the beginning of the process, and no units are spoiled in production.
The beginning inventory had direct materials costs of $105,750 and conversion costs of $45,500. During the month, the company issues $510,000 of direct materials and incurred $203,400 of conversion costs.
Required:
Prepare a production cost worksheet using the FIFO method.

Question 39

Jackson Ltd. uses an automated process in its manufacturing operations. On September 1, the company had 15,000 units in beginning work in process which were 60% complete with respect to conversion. During the month of September, it started 100,000 into production. On September 30, there were 20,000 units in process, which were 30% complete with respect to conversion. Direct materials are added at the beginning of the process, and no units are spoiled in production.
The beginning inventory had direct materials costs of $135,900 and conversion costs of $38,500. During the month, the company issues $620,000 of direct materials and incurred $199,400 of conversion costs.
Required:
Prepare a production cost worksheet using the FIFO method. Round equivalent unit costs to the nearest cent.

Question 40

Lehman Pottery Company manufactures clay molded pottery on an assembly line. Its standard costing system uses two cost categories, direct materials and conversion costs. Each product must pass through the Assembly Department and the Finishing Department. Direct materials are added at the beginning of the production process. Conversion costs are allocated evenly throughout production.

Required:
Prepare general journal entries to record:
1. The actual Assembly Department's conversion costs for the month assuming conversion costs are 10 percent higher than expected.
2. The assignment of conversion costs to work-in-process inventory, and the conversion-cost variances of the Assembly Department assuming that conversion costs are 10 percent higher than expected.
3. The direct materials requisitions for the work-in-process inventory and direct materials variances assuming that the Assembly department used 10 percent less materials than expected.

Question 41

Vita-Heath Company manufactures three different types of vitamins: vitamin C, vitamin B, and vitamin D. The company uses four operations to manufacture the vitamins: mixing, tabletting, encapsulating, and bottling. Vitamins C and B are produced in tablet form (in the tabletting department) and vitamin D is produced in capsule form (in the encapsulating department). Each bottle contains 80 vitamins, regardless of the product.
Conversion costs are applied based on the number of bottles in the tabletting and encapsulating departments. Conversion costs are applied based on direct labour hours in the mixing department. It takes two minutes to mix ingredients for a 80-unit bottle for each product. Conversion costs are applied based on machine hours in the bottling department. It takes one-tenth of a minute of machine time to fill a 80-unit bottle, regardless of product.
Vita-Health Company uses operation costing.
The company is planning to complete one batch of each type of vitamin in March. The budgeted number of bottles and expected direct material cost for each type of vitamin is as follows:

The budgeted conversion costs for March are as follows:

Required:
1. Calculate the conversion cost rates for each department.
2. Calculate the budgeted cost of goods manufactured for vitamin C, vitamin B, and vitamin D for the month of March.
3. Calculate the cost per 80-unit bottle for each type of vitamin for the month of July.

Question 42

Universal Industries operates a division in Brazil, a country with very high inflation rates. Traditionally, the company has used the same costing techniques in all countries so as to facilitate reporting to corporate headquarters. However, the financial accounting reports from Brazil never seem to match the actual unit results of the division. Management has studied the problem and it appears that beginning inventories may be the cause of the unmatched information. The reason is that the inventories have a different financial base because of the severe inflation.
Required:How can process costing assist in addressing the problem facing Universal Industries?

Question 43

BIG Manufacturing Products has been using FIFO process costing for tracking the costs of its manufacturing activities. However, in recent months the system has become somewhat bogged down with details. It seems that when the company purchased Brown Electronics last year its product lines increased six fold. This has caused both the accountants and the suppliers of the information, the line managers, great difficulty in keeping the costs of each product line separate. Likewise, the estimation of the completion of ending work-in-process inventories and the associated costs has become very cumbersome. The chief financial officer of the company is looking for ways to improve the reporting system of product costs.
Required:
What can you recommend to improve the situation?

Question 44

Which of the following is false concerning an operations-costing system?

A) It has characteristics of a job-costing system and of a process-costing system.
B) Within each operation, all product-units are treated exactly alike with respect to conversion costs.
C) Direct materials that are unique to different work orders, are specifically identified with the appropriate work order, as in job-costing.
D) Work orders are used to specify direct materials and step-by-step operations.
E) A separate conversion cost is calculated for each work order, as in job costing.

Question 45

The Leather Factory has two departments that process all of its production, the Tanning Department and the Finishing Department. Production begins in the Tanning Department, then the units are transferred to the Finishing Department. Conversion costs are added evenly throughout the process, no additional materials are added in the Finishing Department.
Beginning work-in-process in the finishing department was 60 percent complete as to conversion; ending inventory was 30 percent complete. Additional information about the Finishing Department follows:

Required:
Using the weighted-average method determine the assignment of costs to units transferred-out and ending inventory for the Finishing Department. Round costs per equivalent unit to the nearest cent.

Question 46

Lexington Company produces baseball bats and cricket paddles. It has two departments that process all products. During July, the beginning work in process in the cutting department was half completed as to conversion, and complete as to direct materials. The beginning inventory included $40,000 for materials and $60,000 for conversion costs. Ending work-in-process inventory in the cutting department was 40% complete. Direct materials are added at the beginning of the process.
Beginning work in process in the finishing department was 80% complete as to conversion. Direct materials for finishing the units are added near the end of the process. Beginning inventories included $24,000 for transferred-in costs and $28,000 for conversion costs. Ending inventory was 30% complete. Additional information about the two departments follows:
Required:
Prepare a production cost worksheet, using FIFO for the finishing department.

Question 47

General Fabricators assembles its product in several departments. It has two departments that process all units. During October, the beginning work in process in the cutting department was half completed as to conversion, and complete as to direct materials. The beginning inventory included $12,000 for materials and $3,000 for conversion costs. Ending work-in-process inventory in the cutting department was 40% complete. Direct materials are added at the beginning of the process.
Beginning work in process in the finishing department was 75% complete as to conversion. Direct materials are added at the end of the process. Beginning inventories included $16,000 for transferred-in costs and $20,000 for conversion costs. Ending inventory was 25% complete. Additional information about the two departments follows:

Required:
Prepare a production cost worksheet using weighted-average for the cutting department and FIFO for the finishing department.

Question 48

Caulfield Ltd. has two production departments in the manufacturing of its products. In the first department, Fabricating, component parts are manufactured. In the second department, Assembly, the components are assembled and finished. Direct materials are added at the start of production in Fabricating and at the 90% point of the process in Assembly. During July the beginning work-in-process of 50,000 units in the Fabricating Department was 40% complete with respect to conversion. The Assembly Department had 38,000 units in beginning work in process; these units were 85% complete with respect to conversion. On July 31, the ending work-in-process inventory was 20% complete in the Fabricating Department and 40% complete in the Assembly Department. Conversion costs are added evenly throughout both departments.
Beginning work-in-process in the Fabricating Department had costs assigned of $290,000 for direct materials and $52,000 for conversion. In the Assembly Department, the beginning work in process included $318,440 for transferred-in costs and $8,550 for conversion costs. Additional information about the two departments follows:
‪

Required:
Determine the assignment of costs to units transferred-out and ending inventory , using weighted-average for the Assembly Department and FIFO for the Finishing Department.

Question 49

The president of Sampson Ltd. has approached the controller for the company with concerns over the projected year end results. The company needs to present its financial statements to the bank to renew its loan and the president is concerned that the loan may either be denied, or the renewal terms will impose a much higher interest rate. The following summarizes the conversation between the president and the controller:
President: I am very concerned about the upcoming loan renewal. Our cash position is low and our operating results for the year were not as strong as expected. Our unit cost of production has come in at $1,800 based on equivalent units of production of 2,590. I know that currently we have 600 units in ending work in process that are only 15% complete. If we were to reclassify these as 80% complete, we would increase our equivalent units of production by 390. Since all of our 2,500 completed units were sold, this reclassification would lower our unit costs, reduce cost of goods sold and increase our ending work in process inventory which could be used as collateral. This would improve our financial position and allow us to renew our loan and keep our current rate of interest.
Controller: I think this is risky. It would be easy to determine that the units are not 80% complete.
President: I don't see how. By the time we are audited, the units will have long since been completed and shipped to customers.
Required:
Assume you are the controller for Sampson Ltd. and that you hold a professional accounting designation. a. Determine the impact of the president's proposal on the financial results for Sampson Ltd.
b. Referring back to the standards of ethical conduct, what should you do as controller?

Question 50

The Laramie Factory produces expensive boots. It has two departments that process all the items. During January, the beginning work in process in the tanning department was 40% complete as to conversion and 100% complete as to direct materials. The beginning inventory included $6,000 for materials and $18,000 for conversion costs. Ending work-in-process inventory in the tanning department was 40% complete. Direct materials are added at the beginning of the process.
Beginning work in process in the finishing department was 60% complete as to conversion. Beginning inventories included $7,000 for transferred-in costs and $10,000 for conversion costs. Ending inventory was 30% complete.
Additional information about the two departments follows:
Required:
Prepare a production cost worksheet using weighted-average costing for the finishing department.