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Exam 3: Process Costing and Analysis

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Question 91

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Match the following terms with the definitions.

Premises

Responses

Hybrid costing system

Mass production of similar products in a continuous flow of sequential processes

Job order costing system

Costing system that measures costs per unit upon completion of a job.

Equivalent units of production

Number of units that could have been started and completed given the costs incurred during the period.

Process costing system

A manufacturing system that contains features of both process costing and job order costing systems.

Materials consumption report

Report of total costs charged to a department, describes its equivalent units of production achieved, and allocates costs among units worked on in the period.

Process operations

Document that summarizes the materials a department uses when inventory moves continuously through the manufacturing process during a reporting period; replaces materials requisition.

Process cost summary

System of measuring unit costs at the end of a period by combining costs per equivalent unit from each separate department.

Premises

Hybrid costing system

Job order costing system

Equivalent units of production

Process costing system

Materials consumption report

Process operations

Process cost summary

Responses

Mass production of similar products in a continuous flow of sequential processes

Costing system that measures costs per unit upon completion of a job.

Number of units that could have been started and completed given the costs incurred during the period.

A manufacturing system that contains features of both process costing and job order costing systems.

Report of total costs charged to a department, describes its equivalent units of production achieved, and allocates costs among units worked on in the period.

Document that summarizes the materials a department uses when inventory moves continuously through the manufacturing process during a reporting period; replaces materials requisition.

System of measuring unit costs at the end of a period by combining costs per equivalent unit from each separate department.

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Correct Answer

Premises

Responses

Hybrid costing system

Job order costing system

Equivalent units of production

Process costing system

Materials consumption report

Process operations

Process cost summary

Premises

Hybrid costing system

Job order costing system

Equivalent units of production

Process costing system

Materials consumption report

Process operations

Process cost summary

Responses

Question 92

Multiple Choice

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Wyman Corporation uses a process costing system. The company manufactured certain goods at a cost of $800 and sold them on credit to Percy Corporation for $1,075. The complete journal entry to be made by Wyman at the time of this sale is:

A) Debit Accounts Receivable $1,075; credit Sales $1,075; debit Cost of Goods Sold $800; credit Finished Goods Inventory $800.
B) Debit Accounts Receivable $1,075; credit Sales $275; credit Finished Goods Inventory $800.
C) Debit Cost of Goods Sold $1,075; credit Sales $1,075.
D) Debit Finished Goods Inventory $800; debit Sales $1,075; credit Accounts Receivable $1,075; credit Cost of Goods Sold $800.
E) Debit Accounts Receivable $1,075; debit Selling expense $800; credit Sales $1,075; credit Cost of Goods Sold $800.

F) A) and E)
G) None of the above

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Question 93

Multiple Choice

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During December, the production department of a process operations system completed and transferred to finished goods a total of 65,000 units of product. At the end of March, 15,000 additional units were in process in the production department and were 80% complete with respect to materials. The beginning inventory included materials cost of $57,500 and the production department incurred direct materials cost of $183,000 during December. Compute the direct materials cost per equivalent unit for the department using the weighted-average method.

Why is the Process Cost Summary important to management and how does the Process Cost Summary accomplish its purposes?

A company uses a process costing system and the weighted average method for inventory costs. The following information is available regarding conversion activities for the current year: Calculate the equivalent units of production for conversion costs for the year.

If a production department has 100 equivalent units of production with respect to direct materials in a given reporting period, the equivalent units of production with respect to direct labor must also be 100.

During January, the production department of a process operations system completed and transferred to finished goods a total of 78,000 units. At the end of January, 9,000 additional units were in process in the production department and were 65% complete with respect to labor. The beginning inventory included labor cost of $37,100 and the production department incurred direct labor cost of $294,300 during January. Compute the direct labor cost per equivalent unit for the department using the weighted-average method.

Prepare the required general journal entry to record the following transactions for the O'Harra Company. a. Used $78,000 of direct labor in the production department. b. Used $17,000 of indirect labor.

Briefly explain the conditions under which job order cost accounting systems and process costing systems are commonly applied.

Refer to the following information about the Finishing Department in the Davidson Factory for the month of June. Davidson Factory uses the FIFO method of inventory costing. Beginning Work in Process inventory: Physical units…………………………………………... 5,000 units % complete for materials………………………………. 70% % complete for labor and overhead……………………. 25% Materials cost from May……………………………….. $7,350 Labor and overhead cost from May……………………. $3,125 Product started and completed: Physical units…………………………………………… 40,000 units Ending Work in Process inventory: Physical units………………………………………….... 4,000 units % complete for materials………………………………. 40% % complete for labor and overhead……………………. 10% Manufacturing costs for June: Materials………………………………………………… $96,975 Labor and overhead……………………………………... $79,470 Compute the total cost of all units that were completed and transferred to finished goods during June. Compute the total cost of the ending Work in Process inventory.

Richards Corporation uses the weighted-average method of process costing. The following information is available for October in its Fabricating Department: Units: Beginning Inventory: 80,000 units, 60% complete as to materials and 20% complete as to conversion. Units started and completed: 250,000. Units completed and transferred out: 330,000. Ending Inventory: 30,000 units, 40% complete as to materials and 10% complete as to conversion. Costs: Costs in beginning Work in Process - Direct Materials: $37,200. Costs in beginning Work in Process - Conversion: $79,700. Costs incurred in October - Direct Materials: $646,800. Costs incurred in October - Conversion: $919,300. Calculate the equivalent units of materials.

A company's beginning Work in Process inventory consisted of 20,000 units that were 80% complete with respect to direct labor. A total of 90,000 were finished during the period and 25,000 remaining in Work in Process inventory were 40% complete with respect to direct labor at the end of the period. Using the weighted-average method, the equivalent units of production with regard to direct labor were:

Using conversion cost per equivalent unit is appropriate for many businesses that use process costing because:

Equivalent units of production are always the same as the total number of physical units finished during the period.

During March, the production department of a process operations system completed and transferred to finished goods 25,000 units that were in process at the beginning of March and 110,000 that were started and completed in March. March's beginning inventory units were 100% complete with respect to materials and 55% complete with respect to labor. At the end of March, 30,000 additional units were in process in the production department and were 100% complete with respect to materials and 30% complete with respect to labor. The production department incurred direct labor cost of $578,900 and its beginning inventory included labor cost of $54,700. Compute the direct labor cost per equivalent unit for the department using the weighted-average method.

In process costing there is never a balance remaining in Factory Overhead that needs to be closed at period end.

Refer to the following information about the Shaping Department of the Minnesota Factory for the month of August. Minnesota Factory uses the weighted average method of inventory costing. The cost per equivalent unit of materials is $10.00, and the cost per equivalent unit of labor and overhead is $22.00. Compute the cost that should be assigned to the units that were started and completed during August.

A process cost summary is a managerial accounting report that describes all but which of the following:

In a process costing system, with the exception of the first department, each department receives output from the prior department as a partially processed product.

Describe the flow of materials in a process costing system, including accounts used.