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Exam 20: Process Costing

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Question 1

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

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Job order cost accounting systems are co...

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Question 2

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In a process costing system, the entry to record cost of materials assigned to a production department requires a debit to the Raw Materials Inventory account and a credit to the Work in Process Inventory account for that department.

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In process costing, all indirect materials are charged directly to Work in Process Inventory.

Dazzle, Inc. produces beads for jewelry making use. The following information summarizes production operations for June. The journal entry to record June production activities for direct labor usage is: $\begin{array} { | l | r | } \hline \text { Direct materials used } & \$ 87,000 \\\hline \text { Direct labor used } & 160,000 \\\hline \text { Predetermined overhead rate (based on direct labor) } & 155 \% \\\hline \text { Goods transferred to finished goods } & 432,000 \\\hline \text { Cost of goods sold } & 444,000 \\\hline \text { Credit sales } & 810,000 \\\hline\end{array}$

The second step in accounting for production activity in a period, after determining the physical flow of units, is to compute ________.

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:

When the final production department completes goods, the cost of the completed goods are transferred to ________.

A materials consumption report is used instead of materials requisitions in companies where materials move continuously through the manufacturing process.

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.

Process costing systems are commonly used by companies that produce a large volume of standardized units on a continuous basis.

At the beginning of the recent period, there were 900 units of product in a department, 35% completed. These units were finished and an additional 5,000 units were started and completed during the period. 800 units were still in process at the end of the period, 25% completed. Using the weighted average method, the equivalent units produced by the department were:

When direct labor and overhead enter the production process at different rates, it is appropriate to use a conversion cost per equivalent unit.

A key idea in process costing that refers to the number of units that could have been started and completed given the costs incurred during the period is known as:

If the predetermined overhead allocation rate is 245% of direct labor cost, and the Baking Department's direct labor cost for the reporting period is $10,000, the following entry would be made to record the allocation of overhead to the products processed in this department: $\begin{array}{llr} \text { Work in Process Inventory, Baking Dept. } &24,500\\ \text { Factory Overhead} &&24,500\\\end{array}$

Richards Corporation uses the FIFO 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 cost per equivalent unit of materials.

A company uses the FIFO method for inventory costing. At the start of the period the production department had 20,000 units in beginning Work in Process inventory which were 40% complete; the department completed and transferred 165,000 units. At the end of the period, 22,000 units were in the ending Work in Process inventory and are 75% complete. The production department had labor costs in the beginning goods is process inventory of $99,000 and total labor costs added during the period are $726,825. Compute the equivalent cost per unit for labor.

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

In a process costing system, factory overhead costs are allocated to production departments by using a predetermined overhead allocation rate.

When direct labor and overhead enter the production process at the same rates, it is appropriate to use a conversion cost per equivalent unit.

Sparky Corporation uses the weighted-average method of process costing. The following information is available for February in its Molding Department: Units: Beginning Inventory: 25,000 units, 100% complete as to materials and 55% complete as to conversion. Units started and completed: 110,000. Units completed and transferred out: 135,000. Ending Inventory: 30,000 units, 100% complete as to materials and 30% complete as to conversion. Costs: Costs in beginning Work in Process - Direct Materials: $43,000. Costs in beginning Work in Process - Conversion: $48,850. Costs incurred in February - Direct Materials: $287,000. Costs incurred in February - Conversion: $599,150. - Calculate the cost per equivalent unit of conversion.