Exam 6: 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: 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 per equivalent unit for conversion costs was:

Conversion costs refer to the cost of direct labour and production overhead.

Conversion costs:

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. The number of equivalent units of material was:

Tong, Inc. is a manufacturing company that uses a process costing system. All direct material is added at the start of the process, and spoilage is discovered at the end. During the first period of operations 15,000 units of material were placed into production at a cost of $20 each (ignore conversion costs for this process). Ending work in process was 2,000 units, good units completed totalled 11,000 units, and normal spoilage is 15% of the units surviving inspection. Inspection takes place after the units are completed. The unit cost assigned to the abnormal spoilage is:

Beginning work in process consists of 7,000 units, 55% complete. 50,000 units were started and ending work in process is 5,000 units, 25% complete. Normal spoilage is equal to 10% of the units inspected. The inspection point occurs at the 20% point and 7,000 units were rejected. Direct materials are added at the 50% point, direct labour at 30% and overhead is applied uniformly. The costs per equivalent unit are: direct material $1.00; direct labour $1.50; overhead $2.00. The equivalent units of labour are:

Beginning work in process consists of 7,000 units, 55% complete. 50,000 units were started and ending work in process is 5,000 units, 25% complete. Normal spoilage is equal to 10% of the units inspected. The inspection point occurs at the 20% point and 7,000 units were rejected. Direct materials are added at the 50% point, direct labour at 30% and overhead is applied uniformly. The costs per equivalent unit are: direct material $1.00; direct labour $1.50; overhead $2.00. The number of units completed is:

Because the weighted average and FIFO methods treat beginning inventory differently, if a firm has beginning inventory in a process costing system and the FIFO method is used, it will:

Assume that conversion costs are $122,100 for the month, and the equivalent unit cost for conversion is $5.50. The ending work in process is 80% complete, and the beginning work in process consisted of 2,000 units, 40% complete. The company completed 17,000 units. What is the number of whole units in the ending work in process under the FIFO method?

Standard cost equivalent units are calculated the same way as FIFO equivalent units.

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 FIFO process costing, the equivalent units for direct materials for the month were:

Assume there were 6,000 units in beginning work in process, 60% complete. 20,000 units were completed during the month. Ending work in process is 40% complete, which is equivalent to 3,200 units for conversion costs. Materials are added at the beginning of the process. The standard cost method is used. The number of equivalent units of conversion costs is:

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: 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 FIFO method, the number of equivalent units of conversion costs was:

Gholson, Inc. employs a process costing system in which direct materials are added at the beginning of the process. Direct material costs from the prior period for beginning work in process are $1,250. The current period's direct material costs total $31,500. The company began the period with 500 units, 70% complete, started 10,500 units, and finished the period with 1,000 units, 40% complete. Using a FIFO system, the direct material cost per equivalent unit is:

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 direct material for the month were:

In a process costing system, normal spoilage is allocated to good units produced.

Miramar, Inc. uses a weighted-average process costing system which recognizes normal spoilage as 5% of good output. During the current period, 14,000 units were started and 10,000 units completed. Materials are added at the beginning of the process, conversion costs occur uniformly, and the inspection point is at the 70% point. Beginning work in process was 6,000 units, 40% complete, and ending work in process 9,000 units, 80% complete. The cost per equivalent unit for material was $1.00 and for conversion costs $3.00. The number of units in abnormal spoilage was:

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. The cost of the ending work in process 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 weighted average method, the cost of the ending work in process inventory was:

Managers can calculate costs per equivalent unit using the weighted average or the FIFO method.