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Exam 18: Process Cost Systems

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Question 41

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The two categories of cost comprising conversion costs are:

A) direct labor and indirect labor
B) direct labor and factory overhead
C) factory overhead and direct materials
D) direct labor and direct materials

E) All of the above
F) A) and C)

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Question 42

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If the costs for direct materials, direct labor, and factory overhead were $522,200, $82,700, and $45,300, respectively, for 16,000 equivalent units of production, the conversion cost per equivalent unit was $8.00.

A) True
B) False

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Question 43

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The debits to Work in Process--Assembly Department for April, together with data concerning production, are as follows: All direct materials are placed in process at the beginning of the process and the average cost method is used to cost inventories. The materials cost per equivalent unit (to the nearest cent) for April is:

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:

Equivalent units of production are the number of units that could have been manufactured from start to finish during an accounting period.

Department J had no work in process at the beginning of the period, 18,000 units were completed during the period, 2,000 units were 30% completed at the end of the period, and the following manufacturing costs were debited to the departmental work in process account during the period (Assuming the company uses FIFO and rounds average cost per unit to two decimal places) : Assuming that all direct materials are placed in process at the beginning of production, what is the total cost of the departmental work in process inventory at the end of the period?

The following unit data were assembled for the assembly process of the Super Co. for the month of June. Direct materials are added at the beginning of the process. Conversion costs are added uniformly over the production process. The company uses the FIFO process. The number of equivalent units produced with respect to conversion costs is:

If a company uses average costing instead of FIFO they will still get the same unit costs.

In a process cost system, product costs are accumulated by processing department rather than by job.

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

Tough Hardware purchases raw materials and processes those purchases through a receiving/inspection process prior to stocking for production. Tough places 3 purchase orders for materials for production and receives the goods that day. The first PO is for 2,500 1/2"´ 96" milling blanks at $2.75 each. The second is for 4,000 pieces of 48" ´ 96" ´ 1" sheet steel at $15.55 each. The third PO is for five 55 gallon drums of Milling Lubrication Oil at $475.00 per barrel. The receiving/inspection process is completed and the goods are transferred from Receiving Inventory to Raw Materials. The Receiving/Inspection Department assigns manufacturing overhead of $55.00 per purchase order as well as $2.75 per piece on metal goods and $35.00 per container on fluids. All labor is allocated through overhead. (a) Write the journal entry to purchase and receive these items to Receiving Inventory on account. (b) Assign overhead to the metal goods. (c) Assign overhead to the fluid goods. (d) Transfer all goods to Raw Materials Inventory.

Kamin Company's mixing department had a beginning inventory of 4,000 units which had accumulated conversion costs of $55,000. During the period, the mixing department accumulated conversion costs of $92,000 and started 8,000 new units. Ending inventory was 2,500 units which were 40% complete with respect to conversion costs. Kamin uses the average cost method to cost inventories. Required: Calculate the cost per equivalent unit for conversion costs in the mixing department.

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.

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 2 during the period for direct materials is:

Companies that use the average costing method for process costing have unit costs that include costs from more that one accounting period.

The inventory at May 1 and the costs charged to Work in Process--Department B during May for Stella Company are as follows: During May, all direct materials are transferred from Department A, the units in process at May 1 were completed, and of the 55,000 units entering the department, all were completed except 6,000 units which were 70% completed. Inventories are costed by the first-in, first-out method. Prepare a cost of production report for May. Round unit cost data to four decimal places and total cost to nearest cent.

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. Of the $12,500, $8,000 was for material and $4,500 was for conversion costs. 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. If the average cost method is used the material cost per unit (to the nearest cent) would be:

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.

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

One of the primary uses of a cost of production report is to assist management in controlling production costs.