Exam 14: Process-Costing Systems

Savage Clothing had 40,000 shirts in process at May 31 (50% converted). All direct materials are added at the beginning of the production process. During the month, 140,000 shirts were transferred to Finished Goods Inventory. There was no beginning inventory. were started during May.

Process costing can be used for:

Sabbath Company produces plastic cups in a one- department process. The following information is available: Work-in- process inventory, beginning 0 Unitsstarted 60,000 Units complete and transferred out 48,000 Work-in- process inventory,ending 12,000 Direct materials added \2 40,000 Direct labor \1 65,600 Factory overhead \8 2,800 The units still in process are 100% complete with respect to direct materials and 60% complete with respect to conversion costs. The total cost of units completed and transferred is:

is a job- cost source document.

Tearjerkers Company manufactures generic greeting cards. Material is introduced at the beginning of the process in the Printing department. Conversion costs are applied uniformly throughout the process. The weighted- average method of product costing is used. Data for the Printing department for the month of September follow: $\text { Work-in-process inventory, September } 1$ Units $\quad$ 22,500 units Directmaterials(100\% complete) $\quad \mathbf{\$ 5 1 , 0 0 0}$ Conversion costs ( $30 \%$ complete) $\quad \$ 20,472$ Units started inSeptember $\quad$ 127,500 units Units completed in September $\quad$ 123,000 units Work-in-process inventory September 30 $\quad$$\quad$ 27,000 units ( $\mathbf{1 0 0} \%$ complete as to materials and $60 \%$ complete as to conversion costs) Directmaterialsadded in September $\quad\quad\$ 427,500$ Conversioncosts added in September $\quad\quad \$ 315,000$ The unit cost for materials is:

A debit to Finished- Goods Inventory is used to record:

Stone Cold Company manufactures potato chips in a two- department process: Cutting and Frying. In the Cutting department 10,000 pounds were started in production and 8,400 pounds were completed and transferred to the Frying department, while 1,600 pounds were still in process. These pounds were only 75% complete as far as conversion costs. The equivalent units for materials are:

An accounting system that applies costs to products only when the production is complete

A company does not use estimates to determine equivalent units.

Unlike job- order costing, process costing requires only one work- in- process account.

The entry to record the completion of units in process would include a debit to Finished Goods Inventory.

would be part of the entry to record the incurrence of direct labor costs.

Tearjerkers Company manufactures generic greeting cards. Material is introduced at the beginning of the process in the Printing department. Conversion costs are applied uniformly throughout the process. The weighted- average method of product costing is used. Data for the Printing department for the month of September follow: $\text { Work-in-process inventory, September } 1$ Units $\quad$ 22,500 units Directmaterials(100\% complete) $\quad \mathbf{\$ 5 1 , 0 0 0}$ Conversion costs ( $30 \%$ complete) $\quad \$ 20,472$ Units started inSeptember $\quad$ 127,500 units Units completed in September $\quad$ 123,000 units Work-in-process inventory September 30 $\quad$$\quad$ 27,000 units ( $\mathbf{1 0 0} \%$ complete as to materials and $60 \%$ complete as to conversion costs) Directmaterialsadded in September $\quad\quad\$ 427,500$ Conversioncosts added in September $\quad\quad \$ 315,000$ The equivalent units for materials are:

The degree of completion for conversion costs depends on what proportion of the total effort needed to complete one unit or one batch has been devoted to units still in process.

The number of completed units that could have been produced from the inputs applied

Backflush costing has no WIP account

In nonprofit organizations, the product is usually called a program or a class of service.

Wheels Company uses a backflush- costing system to produce bicycles. Bicycles are scheduled for production only after orders are recorded and products are shipped to customers immediately upon completion. No finished goods inventory is maintained and product costs are applied directly to cost of goods sold. Standard cost for materials and conversion is $150 and $75, respectively. During the current month, Wheels purchased $6,000 of direct materials and incurred $3,300 in conversion cost to produce 40 units. The entry to record the purchase of materials includes a debit to:

The last step in calculating the cost of goods sold report is to apply costs to units completed and to units in the ending work in process.

Except for WIP, all of the journal entries for process costing are the same as job costing.