Exam 14: Process-Costing Systems

Banana Seat 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, Banana Seat Company purchased $6,000 of direct materials and incurred $3,300 in conversion cost to produce 40 units. The entry to eliminate the conversion cost variance includes a debit to:

Records of materials issued to particular jobs

Big Show 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. The equivalent units for conversion costs for May are:

Backflush costing has only two categories of costs: materials and conversion costs.

Transferred- in costs are combined with the direct materials added in a particular department.

Hot Flash Corporation manufactures sparkplugs. A backflush costing system is used and standard costs for a sparkplug are as follows: Direct materials \ 1.30 Conversion costs Total \ 3.40 Sparkplugs are scheduled for production only after orders are received and are shipped immediately upon completion. This results in product costs being charged directly to cost of goods sold. In December, 6,000 sparkplugs were produced and shipped. Materials were purchased at a cost of $7,800 and actual conversion costs of $12,600 were recorded. Required: Prepare journal entries to record December's costs for the production of the sparkplugs.

A debit to WIP Inventory is used to record:

A debit to Cost of Goods Sold is used to record:

Booker Company manufactures phones in a two- department process: Assembly and Finishing. Information on the Assembly department follows: Direct materials added \ 336,000 Direct labor 460,800 Factory overhead 230,200 Total costs to account for \1 ,027,200 There was no beginning inventory, and of the 80,000 units started in production, 67,200 were completed and transferred to the Finishing department, while 12,800 units were still in process. These units had all materials added but were only 75% complete as far as conversion costs. The equivalent units for materials are:

Broderick Company manufactures phones in a two- department process: Assembly and Finishing. Information on the first department, Assembly, follows: Direct materials added \ 336,000 Direct labor 460,800 Factory overhead Total costs to account for \ 1,027,200 There was no beginning inventory, and of the 80,000 units started in production, 67,200 were completed and transferred to the Finishing department, while 12,800 units were still in process. These units had all materials added but were only 75% complete as far as conversion costs. The entry to record the requisition of direct materials includes a debit to:

Conversion costs include all manufacturing costs other than direct materials.

What is the central product- costing problem in process costing?

"As data processing becomes more economical, more costs than just direct material and direct labor will be classified as direct costs wherever feasible." Give three examples of such 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 unit cost for conversion is:

Backflush costing is most useful for companies with low inventory levels and short production cycles.

For external reporting purposes, the costs incurred in the production and distribution phases of the value chain are:

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 conversion costs are:

Entries on the left of the "T" account are always increases.

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

Betty Company uses a job- order- cost system and had the following data available: Beginning dir ect - materials inventory \ 26,000 Beginning WIP inventory 64,000 Beginning fini shed-goods inventory 58,000 Direct material s purchased on account 148,000 Direct materials requisitioned 82,000 Direct-lab or 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 sale of all jobs would include a: