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Exam 17: Process Costing

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Question 21

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Answer the following questions using the information below: Shiffon Electronics manufactures music player. Its costing system uses two cost categories, direct materials and conversion costs. Each product must pass through the Assembly Department, the Programming department, and the Testing Department. Direct materials are added at the beginning of the production process. Conversion costs are allocated evenly throughout production. Shiffon Electronics uses weighted-average costing. The following information is available for the month of March 2015 for the Assembly department. $\begin{array}{ll}\text { Work in process, beginning inventory } & 300 \text { units } \\\text { Conversion costs ( } 30 \% \text { complete) } & \\\text { Units started during April } & 800 \text { units } \\\text { Work in process, ending inventory: } & 100 \text { units }\\\text { Conversion costs ( } 50 \% \text { complete) }\\\\\text { The cost details for the month of March are as follows: }\\\text { Work in process, beginuing inventory: }\\\text { Direct materials } & \$ 345,000 \\\text { Conversion costs } & \$ 360,000 \\\text { Direct materials costs added during April } & \$ 700,000 \\\text { Conversion costs added during April } & \$ 1,120,000\end{array}$ -What amount of direct materials costs is assigned to the ending Work-in-Process account for March?

A) $31,363
B) $63,636
C) $75,075
D) $95,000

E) B) and C)
F) A) and D)

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Question 22

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Which of the following statements is true of conversion costs?

A) In process costing, they include all the factors of production.
B) They include all manufacturing costs including direct materials, direct labor, and other direct and indirect manufacturing costs.
C) In process costing, they are usually considered to be added evenly throughout the production process.
D) They include only direct materials and excludes all other manufacturing and non-manufacturing costs.

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

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Question 23

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An example of a business which would have no beginning or ending inventory but which could use process costing to compute unit costs would be a ________.

In a series of interdepartmental transfers,each department is regarded as separate and distinct for accounting purposes.

The president of the Gulf Coast Refining Corporation wants to know why his golfing partner,who is the chief financial officer of a large construction company,calculates his costs by the job,but his own corporation calculates costs by large units rather than by individual barrel of oil.

A disadvantage of the weighted-average method compared to the FIFO process-costing method is that ________.

The cost of units completed can differ materially between the weighted average and the FIFO methods of process costing.

Direct Disk Drive Company operates a computer disk manufacturing plant.Direct materials are added at the end of the process.The following data were for August 20X5: Work in process, beginuing inventory $\quad\quad 150,000$ units Transferred-in costs ( $100 \%$ complete) Direct materials ( $0 \%$ complete) Conversion costs ( $90 \%$ complete) $\begin{array}{ll}\text { Transferred in during current period } & 450,000 \text { units } \\\text { Completed and transferred out } & 400,000 \text { units }\end{array}$ Work in process, ending inventory $\quad\quad\quad\quad 200,000$ units Transferred-in costs ( $100 \%$ complete) Direct materials ( $0 \%$ complete) Conversion costs ( $65 \%$ complete) Calculate equivalent units for conversion costs using the FIFO method.

The accuracy of the completion estimate of conversion costs depends on the care,skill,and experience of the estimator and also the nature of the conversion process.

Conversion costs include direct materials and direct labor but excludes all other manufacturing and non-manufacturing costs.

Transferred-in costs are treated as if they are ________.

When calculating the equivalent units,we should only focus on dollar amounts of inventory.

Which of the following companies is most likely to use process costing?

Answer the following questions using the information below: Comfort chair company manufacturers a standard recliner. During February, the firm's Assembly Department started production of 73,000 chairs. During the month, the firm completed 78,000 chairs, and transferred them to the Finishing Department. The firm ended the month with 10,000 chairs in ending inventory. There were 15,000 chairs in beginning inventory. All direct materials costs are added at the beginning of the production cycle and conversion costs are added uniformly throughout the production process. The FIFO method of process costing is used by Comfort. Beginning work in process was 30% complete as to conversion costs, while ending work in process was 80% complete as to conversion costs. Beginning inventory: $\begin{array} { l l } \text { Direct materials } & \$ 24,000 \\ \text { Conversion costs } & \$ 35,000 \end{array}$ Manufacturing costs added auring the œcounting period: Direct materials $\quad \$ 168,000$ Conversion costs $\quad \$ 278,000$ -What is the amount of direct materials cost assigned to ending work-in-process inventory at the end of February?

When a company has no opening or ending inventory during the month,the cost per unit is calculated by dividing the total costs incurred in the period by the total units produced during the period.

In a period of rising prices,the weighted-average method will result in higher tax payments.

Answer the following questions using the information below: Timekeeper Inc. manufactures clocks on a highly automated assembly line. Its costing system uses two cost categories, direct materials and conversion costs. Each product must pass through the Assembly Department and the Testing Department. Direct materials are added at the beginning of the production process. Conversion costs are allocated evenly throughout production. Timekeeper Inc. uses weighted-average costing. $\begin{array}{ll}\text { Data for the Assembly Depatment for June } 2015 \text { are: }\\\text { Work in process, beginuning inventory }&300 \text { units }\\\text { Direct materials ( } 100 \% \text { complete) }\\\text { Conversion costs ( } 50 \% \text { complete) }\\\text { Units started during June } & 950 \text { units } \\\text { Work in process, ending inventory: } & 150 \text { units } \\\text { Direct materials ( } 100 \% \text { complete) } & \\\text { Conversion costs ( } 75 \% \text { complete) } &\\\\\text { Costs for June 2015: }\\\text { Work in process, beginuning inventory: }\\\text { Direct materials } & \$ 90,000 \\\text { Conversion costs } & \$ 135,000 \\\text { Direct materials costs added during June } & \$ 600,000 \\\text { Conversion costs ad ded during June } & \$ 400,000\end{array}$ -What are the equivalent units for direct materials and conversion costs,respectively,for June?

The equivalent unit concept is a means by which a process costing system can compare partially completed work done in each of the various process categories to obtain a total measure of work done.

Answer the following questions using the information below: Emerging Dock Company manufactures boat docks on an assembly line. Its standard costing system uses two cost categories, direct materials and conversion costs. Each product must pass through the Assembly Department and the Finishing Department. Direct materials are added at the beginning of the production process. Conversion costs are allocated evenly throughout production. Data for the Assembly Depatment for May $20 X 5$ are: Work in process, beginuning inventory: $\quad\quad\quad70 \text { units }$ Direct materials (100\% complete) Conversion costs ( $25 \%$ complete) $\text { Units started during May }$$\quad\quad\quad40 \text { units }$ Work in process, ending inventory: $\quad\quad\quad40 \text { units }$ Direct materials ( $100 \%$ complete) Conversion costs ( $50 \%$ complete) Costs for May: Standard costs for Assembly: Direct materials $\quad\quad\quad\quad\quad\quad\quad\$ 8,000 \text { per unit }$ Conversion costs $\quad\quad\quad\quad\quad\quad\quad\$ 32,000 \text { per unit }$ Work in process, beginning inventory: $\quad\quad\quad \$280,000$ Direct materials Conversion costs $\quad\quad\quad\quad \$520,000$ -Which of the following journal entries records the total conversion costs variances of the Assembly Department,assuming that conversion costs are 20% higher than expected?

In companies that produce masses of identical or similar units of output and consequently use process-costing systems,it is relatively easy to set standards and use a standard cost as the cost per equivalent unit.