Q&A Hero

Q: The FIFO cost flow method separates work done on beginning inventory in the previous period from work done on it in the current period. a. True b. False

Q: The cost of production report shows the costs incurred by a department and the allocation of those costs between completed (transferred out) and partially completed units. a. True b. False

Q: In a process cost system, each process will have a work in process inventory account. a. True b. False

Q: In a process cost system, product costs are accumulated by processing department rather than by job. a. True b. False

Q: Once equivalent units are computed for materials, this number will also be used for direct labor and factory overhead. a. True b. False

Q: The direct labor costs and factory overhead costs incurred by a production department are referred to as conversion costs. a. True b. False

Q: Equivalent units should be computed separately for direct materials and conversion costs. a. True b. False

Q: Equivalent units are the sum of direct materials used and direct labor incurred. a. True b. False

Q: Gilbert Corporation had 25,000 finished units and 8,000 units 35% complete. The equivalent units totaled 30,200. a. True b. False

Q: Companies that use the average cost method for process costing have unit costs that include costs from more than one accounting period. a. True b. False

Q: Process cost systems use job cost sheets to accumulate cost data. a. True b. False

Q: The cost of production report reports the cost of the goods sold. a. True b. False

Q: If 30,000 units of materials enter production during the first year of operations, 25,000 of the units are finished, and 5,000 are 50% completed, the number of equivalent units of production would be 28,500. a. True b. False

Q: The cost of production report summarizes (1) the units for which the department is accountable and the disposition of those units and (2) the costs incurred by the department and the allocation of those costs. a. True b. False

Q: Companies recognizing the need to simultaneously produce products with high quality, low cost, and instant availability have adopted a lean manufacturing philosophy. a. True b. False

Q: Equivalent units of production are always the same as the total number of physical units finished during the period. a. True b. False

Q: All costs of the processes in a process cost system ultimately pass through the cost of goods sold account. a. True b. False

Q: Conversion and direct materials are generally both added at the end of the production process. a. True b. False

Q: In a process cost system, a separate work in process inventory account is maintained for each customer’s job. a. True b. False

Q: The first step in determining the cost of goods completed and ending inventory valuation using process costing is to compute equivalent units of production. a. True b. False

Q: One of the differences between process costing and job order costing is that the amounts used to transfer costs between accounts come from the cost of production report instead of job cost sheets. a. True b. False

Q: Equivalent units of production are the number of units that could have been manufactured from start to finish during an accounting period. a. True b. False

Q: Both process and job order cost systems use a perpetual inventory system for materials, work in process, and finished goods. a. True b. False

Q: A process cost accounting system records all actual factory overhead costs directly in the work in process account. a. True b. False

Q: Conversion costs include materials, direct labor, and factory overhead. a. True b. False

Q: In a process cost system, costs flow into finished goods inventory only from the work in process inventory of the last manufacturing process. a. True b. False

Q: In applying the first-in, first-out method of costing inventories, if 8,000 units that are 30% completed are in process on June 1, 28,000 units are completed during June, and 4,000 units are 75% completed on June 30, the number of equivalent units of production for June is 33,400. a. True b. False

Q: The FIFO method of process costing is simpler than the average cost method. a. True b. False

Q: Both job order and process cost accounting systems use equivalent units of production to determine costs. a. True b. False

Q: If the products of a manufacturing process are produced to customer specifications, a process cost system is more appropriate than a job order cost system. a. True b. False

Q: Process manufacturers typically use large machines to process a continuous flow of raw materials into a finished state. a. True b. False

Q: If the costs of direct materials, direct labor, and factory overhead were $277,300, $52,600, and $61,000, respectively, for 14,000 equivalent units of production, the total conversion cost was $390,900. a. True b. False

Q: With a process cost system, the amount journalized for the cost added to finished goods is taken from the cost of production report of the last processing department. a. True b. False

Q: Custom-made goods would be accounted for using a process cost system. a. True b. False

Q: In lean manufacturing, processing functions are combined into work centers, sometimes called departments. a. True b. False

Q: In a process cost system, indirect materials are charged to Work in Process. a. True b. False

Q: The last step in the preparation of a cost of production report is the computation of equivalent units of production. a. True b. False

Q: If 10,000 units that were 50% completed were in process on November 1, 90,000 units were completed during November, and 20,000 units were 20% completed on 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.) a. True b. False

Q: When the purchase of materials is journalized in a process cost accounting system, the materials account is credited. a. True b. False

Q: The journal entry to transfer goods in process from Department X to Department Y includes a debit to Work in Process—Department X. a. True b. False

Q: In a process cost system, the cost per equivalent unit is computed before computing equivalent units. a. True b. False

Q: A process manufacturer will have a separate work in process account for each process or department. a. True b. False

Q: If a company uses average costing instead of FIFO, it will still get the same unit costs. a. True b. False

Q: Direct materials, direct labor, and factory overhead are assigned to each manufacturing process in a process cost system. a. True b. False

Q: The closer a company moves toward lean manufacturing, the more differences in unit costs between average costing and FIFO will be reduced. a. True b. False

Q: Process manufacturing usually reflects a manufacturer that produces small quantities of unique items. a. True b. False

Q: Conversion costs are generally added evenly throughout the process. a. True b. False

Q: If the principal products of a manufacturing process are identical, a process cost system is more appropriate than a job order cost system. a. True b. False

Q: . If the costs of direct materials, direct labor, and factory overhead were $60,000, $35,000, and $25,000, respectively, for 20,000 equivalent units of production, the conversion cost per equivalent unit was $6. a. True b. False

Q: Yield measures the ratio of the materials output quantity to the materials input quantity. a. True b. False

Q: If a department that applies the FIFO cost flow method starts the reporting period with 50,000 physical units that were 25% complete with respect to direct materials and 40% complete with respect to conversion, it must add 12,500 equivalent units of direct materials and 20,000 equivalent units of direct labor to complete them. a. True b. False

Q: One of the primary uses of a cost of production report is to assist management in controlling production costs. a. True b. False

Q: Costs of ending inventory in process are included in the cost per equivalent unit computation on the cost of production report by the FIFO method. a. True b. False

Q: Conversion costs are usually incurred evenly throughout a process. a. True b. False

Q: If 16,000 units of materials enter production during the first year of operations, 12,000 of the units are finished, and 4,000 are 75% completed, the number of equivalent units of production would be 15,000. a. True b. False

Q: The direct materials costs and direct labor costs incurred by a production department are referred to as conversion costs. a. True b. False

Q: Industries that typically use process cost systems include chemicals, oil, metals, food, paper, and pharmaceuticals. a. True b. False

Q: The cost of direct materials transferred into the Bottling Department of 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 the nearest cent.

Q: The cost per equivalent unit of direct materials and conversion in the Bottling Department of Mountain Springs Water Company is $0.45 and $0.12, respectively. The equivalent units to be assigned costs are as follows: Direct MaterialsConversionInventory in process, beginning of period03,500Started and completed during the period57,00057,000Transferred out of Bottling (completed)57,00060,500Inventory in process, end of period 3,500 1,800Total units and costs to be assigned60,50062,300The beginning work in process inventory had a cost of $2,200. Determine the cost of completed and transferred-out production and the ending work in process inventory.

Q: Stevens Company's inventory on March 1 and the costs charged to Work in Process—Department B during March are as follows:Beginning work in process, 12,000 units, 60% complete$ 62,400From Department A, 55,000 units started this period Direct materials added 115,500Direct labor incurred384,915Factory overhead incurred138,000During March, all direct materials were transferred in from Department A; the units in process at March 1 were completed and transferred to finished goods; and of the 55,000 units entering the department, all were completed except 6,000 units that were 70% completed. Stevens uses the first-in, first-out cost flow method.Prepare a cost of production report for March. Round unit cost data to four decimal places and total cost to the nearest dollar.

Q: Nichols Manufacturing Company has one processing department with information for the month of May as follows:May 1 WIP, 800 units, 70% completed$5,010Units started, 14,000 units​Direct materials57,400Direct labor20,049Factory overhead30,073All direct materials are added at the beginning of the process. During May, the units in process on May 1 were completed. Of the 10,000 units started, all were completed except 1,500 units that were 30% completed as to conversion costs. Inventories are costed by the first-in, first-out method.Prepare a cost of production report for May.

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

Q: The estimated total factory overhead cost and total machine hours for Department 40 for the current year are $250,000 and 56,250, respectively. During January, the first month of the current year, actual machine hours used totaled 5,100 and factory overhead cost incurred totaled $22,000.a. Compute the predetermined factory overhead rate based on machine hours. Round to the nearest cent.b. Journalize the entry to apply factory overhead to production in Department 40 for January.c. Determine the balance of Factory Overhead—Department 40 at January 31.d. Does the balance of Factory Overhead—Department 40 at January 31 represent over- or underapplied factory overhead?

Q: A firm produces its products by a continuous process involving three production departments, 1 through 3. Journalize the following selected transactions related to production during August:a. Materials purchased on account, $120,000.b. Material requisitioned for use in Department 1, $125,700, of which $124,200 entered directly into the product.c. Labor cost incurred in Department 1, $195,400, of which $174,000 was used directly in the manufacture of the product.d. Factory overhead costs for Department 1 incurred on account, $54,700.e. Depreciation on machinery in Department 1, $29,200.f. Expiration of prepaid insurance chargeable to Department 1, $7,000.g. Factory overhead applied to production in Department 1, $106,300.h. Output of Department 1 transferred to Department 2, $362,700.

Q: Mountain Springs Water Company has two departments, Purifying and Bottling. The Bottling Department received 67,000 liters from the Purifying Department. During the period, the Bottling Department completed 65,000 liters, including 3,000 liters of work in process at the beginning of the period. The ending work in process had 5,000 liters. How many liters were started and completed during the period?

Q: The cost of materials transferred into the Bottling Department of Mountain Springs Water Company is $32,400, with $26,000 from the Purifying Department, plus an additional $6,400 from the materials storeroom. The conversion cost for the period in the Bottling Department is $8,750 ($3,750 factory applied and $5,000 direct labor). The total cost transferred to finished goods for the period is $31,980. The Bottling Department had a beginning inventory of $1,860.a. Journalize the cost of transferred-in materials, conversion costs, and the cost transferred out to finished goods.b. Determine the balance of Work in Process—Bottling at the end of the period.

Q: Erin Company's inventory at December 1 and the costs charged to Work in Process—Department B during December are as follows:1,200 units, 40% completed$ 47,800From Department A, 26,000 units845,000Direct labor312,000Factory overhead176,770During December, all direct materials are transferred from Department A, the units in process at December 1 were completed during the period and transferred to finished goods, and of the 26,000 units that entered the department, all were completed during the period except 1,000 units that were 70% complete as to conversion costs. Inventories are costed by the first-in, first-out method. Prepare a cost of production report for December.

Q: Job order and process cost systems are both used by manufacturers. Briefly contrast the characteristics of the two types of manufacturers likely to use these systems.

Q: Everett Company's inventory at December 31 and the costs charged to Work in Process—Department B during December are as follows:Dec. 1 WIP, 500 units, 60% completed$ 3,460From Department A, 10,000 units36,300Direct labor7,960Factory overhead12,500​During December, all direct materials were transferred in from Department A, and the units in process at December 1 were completed during the period and transferred to finished goods. Of the 10,000 units entering the department, all were completed except 1,200 units that were 25% completed as to conversion costs. Inventories are costed by the first-in, first-out method.​Prepare a cost of production report for December.

Q: The cost of energy consumed in producing good units in the Bottling Department of Mountain Springs Water Company was $36,850 and $39,060 for June and July, respectively. The number of equivalent units produced in June and July was 55,000 and 62,000 liters, respectively. Evaluate the change in the cost of energy between the two months.

Q: The Brass Works is in the process of determining manufacturing overhead. Journalize events (a) through (d) to Factory Overhead, Administrative Expenses, or Selling Expenses, or allocate between the three as appropriate. Next, compute the predetermined factory overhead rate and apply overhead to Work in Process.a. Brass Works purchases an insurance policy for $4,000. It has been determined that 80% of the value of the policy protects production, and the balance protects the administrative offices. Brass Works charges insurance initially to expense. b. The electric bill shows an amount due of $1,200. This meter is utilized only by production, as the office spaces have their own meter. c. Payroll reports that the sales manager’s salary for the period is $3,500 and that production supervisors' wages for the period are $5,500. d. The stockroom reports that $2,575 in materials were purchased for the Maintenance Department. e. If the driver for the application of overhead is drop-forge strokes and there are expected to be 1,000 strokes in this period, what is the rate per stroke? Round to three decimal places. f. Assuming that there are 1,150 drop-forge strokes in this period, apply factory overhead to Work in Process. Round to the nearest dollar.

Q: Welber Corporation had inventory at June 1 and costs charged to Work in Process—Department 60 during June as follows: Inventory, June 1 (3,800 units, 80% completed)$ 60,400Direct materials added, 32,000 units368,000Direct labor244,000Factory overhead applied 188,000 Total$860,400During June, 32,000 units were placed into production and 31,200 units were completed and transferred to finished goods, including those in inventory on June 1. On June 30, the inventory of work in process consisted of 4,600 units that were 40% completed. Inventories are costed by the average cost method, and all materials are added at the beginning of the process.Prepare a cost of production report for Department 60 for June, using the average cost method. Round the cost per equivalent unit to four decimal places.

Q: Eagle Co. manufactures bentwood chairs and tables. Wood for both products is steam-bent in the same process, but different types of wood are used for each product. Thus, materials cost is identified separately to each product. One production cycle uses 20 board feet. Labor cost is identified to the process as a whole, as is overhead cost. Data for the month of July follow: ChairsTablesDirect material cost per board foot$3.60$4.20Number of parts formed per production cycle (20 board feet)​10​8Actual operating hours in July120380Parts produced during July4,0009,000 Budgeted annual conversion cost: Labor $150,000 Utilities 125,000 Depreciation 65,000 Other overhead 50,000 Total $390,000 Budgeted annual operating hours for steam-bending ​ 5,200​a Compute July's predetermined rate for the steam-bending processb. Compute July's direct material costs for chairs and tablesc. Compute conversion costs to be applied to chairs and tables in Julyd. Journalize the following entries: (1) Assignment of direct materials to chairs and tables (2) Application of conversion costs to chairs and tables (3) The transfer of completed chairs and tables to the Finishing Department. All of July's production was completed in July.

Q: The inventory on June 1 and costs charged to Work in Process—Department A during June are as follows:3,800 units, 60% completed$ 60,400Direct materials, 32,000 units378,000Direct labor274,000Factory overhead 168,000 Total$880,400During June, 32,000 units were placed into production and 31,200 units were completed, including those in inventory on June 1. On June 30, the inventory of work in process consisted of 4,600 units which were 85% completed. All materials are added at the beginning of the process, and the first-in, first-out cost flow method is used.Determine the following (round unit cost data to four decimal places to minimize rounding differences):a. Conversion equivalent units of productionb. Conversion cost per equivalent unitc. Total and unit cost of finished goods started in prior period and completed in the current periodd. Total and unit cost of finished goods started and completed in the current periode. Total cost of work in process inventory, June 30

Q: Describe the flow of materials in a process cost accounting system.

Q: Kramer Company started its production operations on August 1. During August, the Printing Department completed 17,600 units. There were 4,400 units in ending inventory that were 80% complete with respect to materials and 10% complete with respect to conversion costs. During August, the department had accumulated materials costs of $45,408 and conversion costs of $76,670.​a. Compute the cost of the goods transferred out.b. Determine the value of the Printing Department’s ending inventory in process.

Q: Discuss how the equivalent units of production are computed under the average cost method.

Q: Austin Co. manufactures a product called Aster in a three-process series. All materials are added at the beginning of the first process, and Austin uses the first-in, first-out cost flow method. Unit and cost data for the first process (Department A) for the month of December follow: UnitsCompletionCostWork in process inventory: December 112,00060%$140,400 December 31 5,00040%?Started in December:14,000 Direct materials cost 106,400 Conversion cost 70,310Completed in December 21,000 ?Prepare Austin's Department A cost of production report for December.

Q: The Bottling Department of Mountain Springs Water Company had 5,000 liters in beginning work in process that were 20% complete. During the period, 58,000 liters were completed. The ending work in process inventory had 3,000 liters that were 90% complete. Assume that Mountain Springs uses the FIFO cost flow method and that materials are added at the beginning of the process. What are the conversion equivalent units of production for the period?

Q: Zang Co. manufactures its products in a continuous process involving two departments, Machining and Assembly. Journalize the following transactions related to production during June:a. Materials purchased on account, $180,000.b. Materials requisitioned by: Machining, $73,000 direct and $9,000 indirect materials; Assembly, $4,900 indirect materials.c. Direct labor used by Machining, $23,000; Assembly, $47,000.d. Depreciation expenses: Machining, $4,500; Assembly, $7,800.e. Factory overhead applied: Machining, $9,700; Assembly, $11,300.f. Machining Department transferred $98,300 to Assembly Department; Assembly Department transferred $83,400 to finished goods.g. Sold goods on account, $100,000; cost of goods sold, $68,000.