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Exam 4: Cost Accounting Systems: Process Costing

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Question 31

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Leiby Inc's accountant prepared the following product cost report for the Baking Department, the first and only department of its manufacturing process, for the month of April: *Note: The "started and finished" amount of $158,419 includes a rounding adjustment. a. Prepare the journal entry to record the raw materials used in production during April. b. Prepare the journal entry(ies) related to conversion costs incurred during April, assuming that 50% is direct labor and 50% is indirect labor. c. Prepare the journal entry to transfer product to finished goods inventory at the end of April. d. Prepare the journal entry to record sales and cost of goods sold assuming all of the completed inventory is sold immediately for $200,000.

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Question 32

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The following information summarizes the activities in the Sewing Department for the month of October. Assume that the company uses the weighted average method and that during October, the equivalent units completed with respect to materials is 92,000, and the equivalent units completed with respect to conversion costs is 82,400. How many units were started and completed?

A) 68,000
B) 70,000
C) 76,000
D) 84,000
E) None of the above

F) A) and B)
G) A) and D)

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Question 33

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Use the following information to complete Exercises below: Gomez Carpet Manufacturing Inc. uses a process costing system and calculates per-unit costs using the weighted average method. The company has two sequential production departments, Extrusion and Weaving. The following data relates to production for both departments for its Rayon carpet brand for the month of January. Note that since carpet is sold by the square yard, each "unit" refers to a square yard of carpet: Extrusion department: • Beginning Work in Process Inventory: 600 units, 40% complete with respect to conversion • Ending Work in Process Inventory: 500 units, 20% complete with respect to conversion Weaving department: • Beginning Work in Process Inventory: 400 units, 30% complete with respect to conversion • Ending Work in Process Inventory: 800 units, 35% complete with respect to conversion All direct materials are added at the beginning of the extrusion process, and conversion costs are assumed to be incurred uniformly. No new materials are added in the weaving process-just additional conversion costs. In the Extrusion Department, the cost of direct materials in beginning Work in Process Inventory was $15,250, and the conversion costs in beginning Work in Process were $11,000. During January, $188,875 of direct materials and $83,350 of conversion costs were added in the Extrusion Department. Over the course of the month, 11,000 units were completed and transferred out to the Weaving Department. In the Weaving Department, the beginning Work in Process Inventory account included transferred-in costs of $13,350 and conversion costs of $4,200 on January 1. Additional conversion costs added during January were $18,648. NOTE: Round all per-unit costs (based on equivalent units) to the nearest penny. -How many equivalent units of transferred-in costs were produced in the Weaving Department during January?

In a process-costing system, per-unit costs are generally calculated on a monthly basis.

Calegari Corporation makes cleaning products in two sequential departments, Mixing and Packaging. Materials are added at the beginning of the process in the Mixing Department. Conversion costs are added evenly throughout each process. Calegari uses the weighted average method of process costing. In the Mixing Department for the month of May, the beginning work in process was 70% processed, 37,000 pounds were started in process, 35,000 pounds transferred out, and ending work in process was 60% processed. Assume that during May the equivalent units completed with respect to materials is 40,000 and the equivalent units completed with respect to conversion costs is 38,000. How many pounds were in beginning inventory?

Use the following information to complete Exercises : Porter Carpet Manufacturing Inc. uses a process costing system and calculates per-unit costs using the weighted average method. The following data relates to the first production department (the Weaving Department) of its Rayon carpet brand for the month of November. Note that since carpet is sold by the square yard, each "unit" refers to a square yard of carpet: • Beginning Work in Process Inventory: 600 units, 40% complete with respect to conversion. • Ending Work in Process Inventory: 800 units, 25% complete with respect to conversion. All direct materials are added at the beginning of the process, and conversion costs are assumed to be incurred uniformly throughout production. The cost of direct materials in beginning Work in Process Inventory was $21,200, and conversion costs in beginning Work in Process were $4,900. During the month, $110,800 of direct materials were added to production. Direct labor for the period was $23,120. Overhead is allocated on at 25% of direct labor costs. Over the course of the month, 10,200 units were completed and transferred out of the Weaving Department to the Finishing Department. NOTE: Round all per-unit costs to the nearest penny -What is the average cost per equivalent unit of direct materials during November?

Use the following information to complete Exercises : Porter Carpet Manufacturing Inc. uses a process costing system and calculates per-unit costs using the weighted average method. The following data relates to the first production department (the Weaving Department) of its Rayon carpet brand for the month of November. Note that since carpet is sold by the square yard, each "unit" refers to a square yard of carpet: • Beginning Work in Process Inventory: 600 units, 40% complete with respect to conversion. • Ending Work in Process Inventory: 800 units, 25% complete with respect to conversion. All direct materials are added at the beginning of the process, and conversion costs are assumed to be incurred uniformly throughout production. The cost of direct materials in beginning Work in Process Inventory was $21,200, and conversion costs in beginning Work in Process were $4,900. During the month, $110,800 of direct materials were added to production. Direct labor for the period was $23,120. Overhead is allocated on at 25% of direct labor costs. Over the course of the month, 10,200 units were completed and transferred out of the Weaving Department to the Finishing Department. NOTE: Round all per-unit costs to the nearest penny -What is the ending Work in Process Inventory for the Weaving Department at the end of the month of November?

What do products have in common in situations where process costing is appropriate?

Use the following information for Multiple Choice Questions below: The following information summarizes the activities in the Sewing Department for the month of August. Material is added at the beginning of the process and conversion costs are incurred evenly throughout the process. -Calculate the equivalent units completed with respect to materials during the month of August using the FIFO method.

Use the following information to complete Exercises below: Gomez Carpet Manufacturing Inc. uses a process costing system and calculates per-unit costs using the weighted average method. The company has two sequential production departments, Extrusion and Weaving. The following data relates to production for both departments for its Rayon carpet brand for the month of January. Note that since carpet is sold by the square yard, each "unit" refers to a square yard of carpet: Extrusion department: • Beginning Work in Process Inventory: 600 units, 40% complete with respect to conversion • Ending Work in Process Inventory: 500 units, 20% complete with respect to conversion Weaving department: • Beginning Work in Process Inventory: 400 units, 30% complete with respect to conversion • Ending Work in Process Inventory: 800 units, 35% complete with respect to conversion All direct materials are added at the beginning of the extrusion process, and conversion costs are assumed to be incurred uniformly. No new materials are added in the weaving process-just additional conversion costs. In the Extrusion Department, the cost of direct materials in beginning Work in Process Inventory was $15,250, and the conversion costs in beginning Work in Process were $11,000. During January, $188,875 of direct materials and $83,350 of conversion costs were added in the Extrusion Department. Over the course of the month, 11,000 units were completed and transferred out to the Weaving Department. In the Weaving Department, the beginning Work in Process Inventory account included transferred-in costs of $13,350 and conversion costs of $4,200 on January 1. Additional conversion costs added during January were $18,648. NOTE: Round all per-unit costs (based on equivalent units) to the nearest penny. -What is the ending Work in Process Inventory for the Extrusion Department at the end of the month of January?

Safe Inc. is a service firm that sells home security systems, which it installs and maintains. After the sales force makes initial contact with a new customer and completes the sale, setting up the new service requires two processes: (1) a home visit where the equipment is physically installed and (2) the remote connection from off-site at corporate headquarters. Given the different levels of skill and work required, Safe Inc. tracks costs separately for the Installation and Connection processes. Nevertheless, given the relative simplicity of these processes, Safe Inc. tracks them both on a single product cost report with one direct materials category for the equipment and two conversion cost categories for installation and connection services. Assume that all home installations are completed the same day they are started. After installation, there is sometimes a delay of up to two days before the remote connection is completed. However, in the ideal situation, both the home installation and connection are completed on the same day. $\bullet$ At the beginning of July, Safe Inc. had 190 incomplete sales contracts. Of these incomplete contracts, 184 were awaiting both installation and connection and 6 had been installed but were still awaiting connection. $\bullet$ At the end of July, Safe Inc. had 240 incomplete sales contracts. Of these incomplete contracts, 228 jobs were awaiting both installation and connection and 12 jobs had been installed but were still awaiting connection. $\bullet$ The sales team closed 4,100 new security contracts during July. $\bullet$ Safe Inc. pays its suppliers $400, on average, to purchase one security system. However, the price experiences some variation due to fluctuations in suppliers cost of raw materials. $\bullet$ On average, the installation of each system requires approximately 3 labor hours and establishing and testing the connection requires 2 labor hours. However, Safe Inc. does encounter some variation across employees. $\bullet$ Labor and overhead costs for installation is approximately $20/hour. $\bullet$ Labor and overhead costs for connection costs approximately $35/hour. $\bullet$ Assume that the contracts outstanding at the beginning of July include $1,206 for equipment and $179 of installation costs. $\bullet$ Also assume that Safe Inc. actually incurs $816,270 for new equipment installed during July plus $119,652 of installation costs and $147,825 of connection-related costs. $\bullet$ Round calculations for equivalent units to whole numbers. What is Safe Inc.'s ending Cost of Contracts Completed and Incomplete Contracts for July, assuming it uses the FIFO costing method?

Use the following information for Multiple Choice Questions below: Assume Towery Company uses a process costing system based on the weighted average method. Towery's accountant produces the following equivalent unit calculations for the month of July for the first department: Also assume that current costs included $34,998 of materials and $97,412 of conversion costs. Finally, assume that during the month of July, the average cost per equivalent unit of materials and conversion costs were $6.64 and $19.40, respectively. -Calculate the dollar amount accumulated in the beginning inventory for conversion costs from the prior period.

When would direct materials be tracked separately only in the first of several sequential production departments?

Use the following information to complete Exercises : Porter Carpet Manufacturing Inc. uses a process costing system and calculates per-unit costs using the weighted average method. The following data relates to the first production department (the Weaving Department) of its Rayon carpet brand for the month of November. Note that since carpet is sold by the square yard, each "unit" refers to a square yard of carpet: • Beginning Work in Process Inventory: 600 units, 40% complete with respect to conversion. • Ending Work in Process Inventory: 800 units, 25% complete with respect to conversion. All direct materials are added at the beginning of the process, and conversion costs are assumed to be incurred uniformly throughout production. The cost of direct materials in beginning Work in Process Inventory was $21,200, and conversion costs in beginning Work in Process were $4,900. During the month, $110,800 of direct materials were added to production. Direct labor for the period was $23,120. Overhead is allocated on at 25% of direct labor costs. Over the course of the month, 10,200 units were completed and transferred out of the Weaving Department to the Finishing Department. NOTE: Round all per-unit costs to the nearest penny -What is the journal entry to record the Cost of Goods Manufactured for the Weaving Department in the month of November?

Chapman Manufacturing Company uses the FIFO method for process costing. Chapman produces processed food products that pass through three sequential departments. The costs for Department 1 for February 20X5 were as follows: Cost of beginning inventory: Material 8,750 Conversion 9,490 $18,240 Costs added in Department 1 during February: Direct material $219,600 Direct labor 320,350 Manufacturing overhead 197,402 $737,352 Department 2 handled the following units during February: Units in process, February 1 2,000 Units started in Department 1 45,000 Units transferred out to Department 2 46,000 Units in process, February 28 1,000 On average, the February 1 units were 40% complete, and the February 28 units were 70% complete. Materials are added at the beginning of the process and conversion costs occur evenly throughout the process in Department 1. Prepare the product cost report for February for Department 1.

What are the five steps in the process costing procedure under the FIFO method?

What is parallel product processing?

Safe Inc. is a service firm that sells home security systems, which it installs and maintains. After the sales force makes initial contact with a new customer and completes the sale, setting up the new service requires two processes: (1) a home visit where the equipment is physically installed, and (2) the remote connection from off-site at corporate headquarters. Given the different levels of skill and work required, Safe Inc. tracks costs separately for the Installation and Connection processes. Nevertheless, given the relative simplicity of these processes, Safe Inc. tracks them both on a single product cost report with one direct materials category for the equipment and two conversion cost categories for installation and connection services. Assume that all home installations are completed the same day they are started. After installation, there is sometimes a delay of up to two days before the remote connection is completed. However, in the ideal situation, both the home installation and connection are completed on the same day. $\bullet$ At the beginning of July, Safe Inc. had 190 incomplete sales contracts. Of these incomplete contracts, 184 were awaiting both installation and connection and 6 had been installed but were still awaiting connection. $\bullet$ At the end of July, Safe Inc. had 240 incomplete sales contracts. Of these incomplete contracts, 228 jobs were awaiting both installation and connection and 12 jobs had been installed but were still awaiting connection. $\bullet$ The sales team closed 4,100 new security contracts during July. $\bullet$ Safe Inc. pays its suppliers $400, on average, to purchase one security system. However, the price experiences some variation due to fluctuations in suppliers cost of raw materials. $\bullet$ On average, the installation of each system requires approximately 3 labor hours and establishing and testing the connection requires 2 labor hours. However, Safe Inc. does encounter some variation across employees. $\bullet$ Labor and overhead costs for installation is approximately $20/hour. $\bullet$ Labor and overhead costs for connection costs approximately $35/hour. $\bullet$ Assume that the contracts outstanding at the beginning of July include $1,206 for equipment and $179 of installation costs. $\bullet$ Also assume that Safe Inc. actually incurs $807,132 for new equipment installed during July plus $127,774 of installation costs and $148,230 of connection-related costs. What is Safe Inc.'s ending Cost of Contracts Completed and Incomplete Contracts for July, assuming it uses the weighted average costing method?

Use the following information to complete Exercises below: Utility Utensils (UU) manufactures cutlery and silverware. UU uses a process costing system and calculates per-unit costs using the First-in, First-out (FIFO) method. The company has two sequential production departments, Molding and Finishing. The following data was available for the Molding Department (the first production department) during the month of April for the production of the Collector's Spoon Set: Molding department: • Beginning Work in Process Inventory: 400 units, 40% complete with respect to conversion • Ending Work in Process Inventory: 200 units, 75% complete with respect to conversion All direct materials are added at the beginning of the Molding process, and conversion costs are assumed to be incurred uniformly throughout production. For the Molding Department, the cost of direct materials in beginning Work in Process incurred during March was $1,000, and the conversion costs in beginning Work in Process amounted to $3,000. During April, $61,750 of direct materials were added to production. Conversion costs in the Molding Department during April were $33,915. Over the course of the month, 4,000 units were completed and transferred out of the Molding Department to the Finishing Department. NOTE: Round all per-unit costs (based on equivalent units) to the nearest penny (in intermediate calculations as well). -How much did UU spend on conversion costs to complete the beginning Work in Process Inventory in the Molding Department during April?

Demere Manufacturing Corporation produces chemical products using a continual process. Demere uses the weighted average method for process costing. All manufacturing is accomplished in one department. Materials are added at the beginning of the process while conversion costs are incurred evenly throughout the process. The work in process inventory at the beginning of February 20X5 consisted of 9,000 gallons that were 20% complete. The work in process at the end of February consisted of 15,000 gallons that were 40% complete. During February 205,000 gallons were transferred to finished goods. The beginning inventory contained $90,000 of materials and $29,640 of conversion costs. Product costs incurred during February consisted of $2,008,800 of materials and $3,186,000 of conversion costs. Calculate equivalent units, cost per equivalent unit, and prepare the product cost report for Demere Manufacturing Corporation for the month of February.