Exam 14: Process-Costing Systems

Identify which one of the following statements regarding backflush costing is false.

In job- order costing, the denominator is small when arriving at a unit cost.

The chemical and glass industries normally use job costing.

Hallelujah Company uses a job- order- cost system and had the following data available: Beginningdirect-materialsinventory \ 26,000 BeginningWIP inventory 64,000 Beginningfinished-goods inventory 58,000 Direct materialspurchased on account 148,000 Direct materialsrequisitioned 82,000 Direct- labor cost incurred 130,000 Factory overhead incurred 146,000 Cost of goods completed 292,000 Cost of goods sold 256,000 Overhead application rate 125\% (as a percent of direct- labor cost) The journal entry to record the purchase of direct materials would include a:

Identify which of the following industries is most likely not to use a job- order costing system.

would be part of the entry to record the cost of goods completed.

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 total cost of goods transferred out of the Printing department is:

The record of the time a particular direct laborer spends on each job

Barney Company uses a job- order- cost system and had the following data available: Beginningdirect- materials inventory \ 26,000 Beginning WIP inventory 64,000 Beginningfinished-goods inventory 58,000 Direct materials purchased on account 148,000 Direct materials requisitioned 82,000 Direct- labor cost incurred 130,000 Factoryoverhead incurred 146,000 Cost of goods completed 292,000 Cost of goods sold 256,000 Overhead application rate 125\% (as a percent of direct- labor cost) The ending inventory of direct materials is:

is not a step in process costing.

Choosing direct labor cost rather than direct labor hours as a cost driver for overhead implies that:

Spiral Company manufactures generic notebooks. 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 June follow: Work-in-process inventory, June 1 Units 15,000 units Direct materials ( 100\% complete) \ 34,000 Conversioncosts (30\% complete) \ 14,000 Units started in June 65,000 units Units completed in June 62,000 units Work-in-process inventory,June 30 18,000 units ( 100\% complete as to materials and 60\% complete as to conversioncosts) Direct materials added in June \ 285,000 Conversioncostsadded in June \ 210,000 The total cost of the ending work- in- process inventory is:

Road Warriors Company manufactures tape dispensers. Its Assembly department had the following output and costs: Units started and completed 70,000 Started and in process 10,000 These units had all materials added but were only 60% completed for conversion costs. Direct materials costs were $480,000; conversion costs were $240,000. The total cost of ending Work- in- process inventory is:

Job- order costing can be used only in manufacturing environments.

would be part of the entry to record application of factory costs.

Identify which of the following statements regarding job- order costing is true.

Nicholson Company produces plastic cups in a one- department process. The following information is available: Work-in-process inventory, beginning -0- Units started 60,000 Units completed and transferred out 48,000 Work-in-process inventory, ending 12,000 The units still in process are 100% complete with respect to direct materials and 60% complete with respect to conversion costs. The equivalent units for conversion costs are:

Mercy Hospital uses a job- cost system for all patients who have surgery. In January, the pre- operating room (PRE- OP) and operating room (OR) had budgeted allocation bases of 2,000 nursing hours and 1,000 nursing hours, respectively. The budgeted nursing overhead charges for each department for the month were $84,000 and $66,000, respectively. The hospital floor for surgery patients had budgeted overhead costs of $600,000 and 7,500 nursing hours for the month. For patient Jesse Johnson, actual hours incurred were eight and four hours, respectively, in the PRE- OP and OR rooms. Jesse Johnson was in the hospital for 4 days (96 hours). Other costs related to Jesse Johnson were: PRE- OP OR In- room Patient medicine \ 100 \ 250 \ 1,200 Direct nursing time 2,400 3,500 5,400 The hospital uses a budgeted overhead rate for applying overhead to patient stays. The budgeted nursing overhead rate for PRE- OP cost is:

Some backflush systems eliminate the finished- goods inventory accounts.

Principal Corporation makes a variety of chemicals. Materials are added at the beginning of the process. Conversion costs are added evenly throughout the process. Its Mixing department had the following information regarding costs and output: Units: Started and completed 8,000 Units: started and still in process (30\% completed) 2,500 Units: Costs: Direct materials \1 26,000 Direct labor \3 1,250 Factory overhead \3 0,000 Required: Compute the cost of work completed and the cost of the ending WIP inventory using the weighted- average method.