Exam 6: Process Costing

Normal spoilage is:

Abnormal spoilage is:

Assume a company's beginning work in process consists of 20,000 units, 40% complete. Materials are added at the beginning of the process. During the month, 90,000 units are transferred in. The ending work in process consists of 10,000 units, 50% complete. Under the standard cost method, the equivalent units of production are: $\text { Transferred In\quad Materials\quad Conversion Costs }$ a) $\quad90,000 \quad\quad\quad {90,000} \quad\quad\quad {97,000}$ b) 110,000 100,000 105,000 c) $\quad110,000 \quad\quad\quad 92,000 \quad\quad 105,000$ d) $\quad90,000 \quad\quad\quad 100,000 \quad\quad 105,000$

Equivalent units measure the resources used in partially completed units relative to the resources needed to complete the units.

When using weighted average process costing:

Hendrix, Inc. employs a process costing system. Direct materials are added at the beginning of the process. Here is information about July's activities: On July 1: Beginning inventories $=750$ units, $60 \%$ complete Direct materials cost $=\$ 5,925$ Conversion costs $=\$ 4,095$ During July: $\quad 15,000$ units started Direct materials added $=\$ 150,000$ Conversion costs added $=\$ 83,520$ On July 31: Ending inventories $=1,500$ units, $40 \%$ complete Using the weighted average method, the cost of the goods completed and transferred out was:

On September 1, Kelita Company had 20,000 units in process, which were 30% completed. Materials are added at the beginning of the process. During the month 160,000 units were started and 170,000 completed. Ending work in process was 50% complete. By what amount would the equivalent units of materials differ if weighted average were used instead of FIFO?

Assume a company's beginning work in process consists of 20,000 units, 40% complete. Materials are added at the beginning of the process. During the month, 90,000 units are transferred in. The ending work in process consists of 10,000 units, 50% complete. Using the FIFO method, the equivalent units of production are: $\text { Transferred In\quad Materials\quad Conversion Costs }$ a) $\quad90,000 \quad\quad\quad {90,000} \quad\quad\quad {97,000}$ b) 110,000 100,000 105,000 c) $\quad110,000 \quad\quad\quad 92,000 \quad\quad 105,000$ d) $\quad90,000 \quad\quad\quad 100,000 \quad\quad 105,000$

Macey Company uses a weighted-average process costing system. Beginning inventory consists of 6,000 units, 40% complete. Units started are 14,000, completed are 10,000, and ending inventories are 9,000 units, 70% complete. Normal spoilage is 5% of the units inspected. Direct material is added at the 75% point and spoilage inspection occurs at the 80% point. The cost per equivalent unit for materials was $1.00 and $3.00 for conversion costs. Assume actual spoilage was 500 units and ending work in process was 9,500 units. The equivalent units of conversion costs would be:

Process costing information is useful for measuring and monitoring production processes.

Zuniga, Inc. uses a process costing system. During May, 1,200 units were transferred into Department 2 at a cost of $38,040. Direct materials are added at the beginning of the process. Additionally: On May 1: Beginning inventories $=250$ units, $40 \%$ complete Direct materials costs $=\$ 1,250$ Conversion costs $=\$ 1,356$ Transferred-in costs $=\$ 2,560$ During May: Direct materials costs incurred $=\$ 6,000$ Conversion costs incurred $=\$ 17,013$ On May 31: Ending Inventories $=350$ units, $20 \%$ complete Using the weighted average method, the cost of the units transferred out was:

When an organization uses a long-term procurement contract, direct labour costs are normally stable over long periods of time.

Kelly, Inc. uses a weighted-average process costing system that calculates normal rework as 2% of the units passing inspection. The inspection point is at the 75% point and units failing inspection are returned to the 40% point. During the current period, 52,000 units were started; 62,000 units inspected; and 52,000 units completed. Direct material is added at the 50% point and conversion costs occur uniformly. Beginning work in process was 10,000 units, 55% complete and ending work in process was 8,000 units, 85% complete. Costs per equivalent unit for material were $1.00 and $3.00 for conversion costs. The cost of the goods completed was:

Zuniga, Inc. uses a process costing system. During May, 1,200 units were transferred into Department 2 at a cost of $38,040. Direct materials are added at the beginning of the process. Additionally: On May 1: Beginning inventories $=250$ units, $40 \%$ complete Direct materials costs $=\$ 1,250$ Conversion costs $=\$ 1,356$ Transferred-in costs $=\$ 2,560$ During May: Direct materials costs incurred $=\$ 6,000$ Conversion costs incurred $=\$ 17,013$ On May 31: Ending Inventories $=350$ units, $20 \%$ complete Using the FIFO method, the cost per equivalent unit for transferred-in units was:

Zuniga, Inc. uses a process costing system. During May, 1,200 units were transferred into Department 2 at a cost of $38,040. Direct materials are added at the beginning of the process. Additionally: On May 1: Beginning inventories $=250$ units, $40 \%$ complete Direct materials costs $=\$ 1,250$ Conversion costs $=\$ 1,356$ Transferred-in costs $=\$ 2,560$ During May: Direct materials costs incurred $=\$ 6,000$ Conversion costs incurred $=\$ 17,013$ On May 31: Ending Inventories $=350$ units, $20 \%$ complete Using the FIFO method, the cost of the beginning work in process units transferred out was:

In FIFO costing, the costs of units in beginning work in process are merged with current period costs to calculate the cost per equivalent unit.

Equivalent units are calculated for work in process and finished goods inventory.

Salmon Manufacturing Company uses a process costing system. Direct materials are added at the beginning of the process. During January, Department Q had a beginning inventory of 2,000 units, 25% complete for conversion costs. During the month 14,000 units were started and there were 1,000 units in ending inventory, 60% complete for conversion costs. Using weighted average process costing, the equivalent units for conversion costs for the month were:

Process costing is most likely to be used by which of the following companies?

When using the weighted average method to calculate cost per equivalent unit, the cost is calculated as current period costs / equivalent units for total work.