Exam 4: Process Costing and Hybrid Product-Costing Systems

Anderson Corporation, which uses a process-costing system, transfers completed production from Department A to Department B for further work. Which of the following best describes the account that would be credited to record this transfer?

Which of the following choice of rows correctly depicts the companies that would likely use a process-costing system? Row Chemical Producer 1 Yes Yes Yes 2 Yes No No 3 No Yes No 4 No Yes Yes 5 No No Yes

When computing the conversion cost per equivalent unit under the weighted-average method of process costing, all of the following information would be needed except:

Cochrane Limited, which uses a process-costing system, adds all material at the beginning of production and incurs conversion costs evenly throughout manufacturing process. The information that follows relates to the period just ended: Units started and completed: 75,000 Units in ending work-in-process inventory: 15,000, 60% complete Which of the following choices correctly expresses the total equivalent units of production with respect to material and conversion cost? Material Conversion 1 75,000 75.000 2 84.000 84.000 3 90,000 81.000 4 90,000 84.000 5 90.000 90.000

Operation costing:

St. Lawrence River Chemical manufactures a product called Spec. Direct materials are added at the beginning of the process, and conversion activity occurs uniformly throughout production. The beginning work-in-process inventory is 80% complete with respect to conversion; the ending work-in-process inventory is 30% complete. The following data pertain to March: Work in process, March 1 20,000 Units started during March 70,000 Units completed and transferred out 73,000 Work in process, March 31 17,000 Direct Conversion Total Materials Costs Costs: Work in process, March 1 \ 50,283 \ 23,400 \ 26,883 Costs incurred during March 234,900 72,000 162,900 Totals \ 285,183 \ 95,400 \ 189,783 Using the weighted-average method of process costing, the total costs remaining in work in process on March 31 are:

Chen Corporation, a new company, adds material at the beginning of its production process; conversion costs, in contrast, are incurred evenly throughout the manufacturing process. During May, the firm completed 15,000 units and had ending work in process of 2,000 units, 60% complete. Equivalent-unit costs were: materials, $15; conversion, $22. The cost of Chen's completed production is:

Marcus Corporation, which uses the weighted-average method of process costing, reported the following as of February 1: Work in process, Feb. 1: Direct material \ 42,000 Conversion 20,000 February production costs: Direct material 470,000 Conversion 280,000 Conversations with the production supervisor revealed that materials are introduced at the start of the process and conversion costs are incurred evenly throughout the manufacturing process. The company started 29,000 units during the month. Goods in process at the beginning and end of February totalled 3,000 units and 5,000 units, respectively, the latter batch being 60% complete. Just prior to leaving on vacation, a trusted staff assistant was asked to compute the cost of February's ending work-in-process inventory. Her calculations showed a huge rise in unit cost when compared with the February 1 figures, soaring to $250 [($470,000 + $280,000) ÷ 3,000 units (5,000 units x 60%)]. Required: A. Did the staff assistant make any errors in her calculations? Explain. B. Analyze the company's production volume and determine the proper equivalent-unit figures for February. C. Calculate the proper unit costs for February. D. Calculate the cost of the February 28 work-in-process inventory.

Which of the following choice of rows correctly shows how costs are accumulated in a process-costing system? Row By Time Period 1 Yes Yes Yes 2 Yes Yes No 3 No Yes No 4 No Yes Yes 5 No No Yes

St. Lawrence River Chemical manufactures a product called Spec. Direct materials are added at the beginning of the process, and conversion activity occurs uniformly throughout production. The beginning work-in-process inventory is 80% complete with respect to conversion; the ending work-in-process inventory is 30% complete. The following data pertain to March: Work in process, March 1 20,000 Units started during March 70,000 Units completed and transferred out 73,000 Work in process, March 31 17,000 Direct Conversion Total Materials Costs Costs: Work in process, March 1 \ 50,283 \ 23,400 \ 26,883 Costs incurred during March 234,900 72,000 162,900 Totals \ 285,183 \ 95,400 \ 189,783 Using the weighted-average method of process costing, the cost per unit of direct materials is:

Unit costs in a process-costing system are derived by using:

A considerable portion of the text's process-costing presentation illustrated the proper way to allocate manufacturing costs to the units completed during the period and the ending work-in-process inventory. For companies that have a single manufacturing department, the journal entry to recognize completed production involves a debit to Finished-Goods Inventory and a credit to Work-in-Process Inventory. What journal entry, if any, is needed for these same companies to properly account for ending work in process?

O'Farrell Manufacturing Inc. uses a weighted-average process-costing system and has one production department. All materials are introduced at the start of manufacturing; in contrast, conversion costs are incurred uniformly throughout production. The company had respective work-in-process inventories on July 1 and July 31 of 80,000 units and 90,000 units, the latter of which was 50% complete. The production supervisor noted that O'Farrell completed 120,000 units during the month. Costs in the July 1 work-in-process inventory were subdivided as follows: materials, $50,000; conversion, $30,000. During July, O'Farrell charged production with $460,000 of material and $810,000 of conversion, resulting in a material cost per equivalent unit of $2. Required: A. Determine the number of units that O'Farrell started during July. B. Compute the number of equivalent units with respect to conversion cost. C. Determine the conversion cost per equivalent unit. D. Compute the cost of the July 31 work-in-process inventory. E. What account would have been credited to record O'Farrell's completed production?

Grace Incorporated, which uses an operation-costing system, has three processing departments. All units pass through Department No. 1; upon completion, 60% of the goods are sent to Department No. 2 and 40% are sent to Department No. 3. Additional data follow. Fifty thousand units were manufactured during the year. Conversion costs in each department were: No. 1, $400,000; No. 2, $216,000; and No. 3, $170,000. Batch No. A535, which consisted of 700 units, was sent to Department No. 3 for its additional processing. Direct materials of $24,500 and $12,900 were introduced to this batch in Department Nos. 1 and 3, respectively. Grace assigns conversion costs to goods manufactured on the basis of units produced. Required: A. Determine the conversion cost per unit in Department no. 1, Department no. 2, and Department no. 3. B. Compute the total cost of batch no. A535. C. Operation costing is sometimes referred to as a hybrid costing system. Briefly explain.

On May 1, Dandy Company had a work-in-process inventory of 10,000 units. The units were 100% complete for direct materials and 30% complete for conversion, with respective costs of $30,000 and $1,850. During the month, 150,000 units were completed and transferred to finished goods. The May 31 ending work-in-process inventory consisted of 10,000 units that were 100% complete with respect to materials and 80% complete with respect to conversion. Costs added during the month were $330,000 for materials and $503,750 for conversion. Required: Using the weighted-average method, calculate: A. total equivalent units for material and conversion. B. the cost per equivalent unit for material and conversion. C. the cost transferred to finished goods. D. the cost of ending work in process.

Process costing is used to account for:

Abnormal spoilage is considered to be.

Lackey Manufacturing Company uses a weighted-average process-costing system. Material A is added at the start of production; packaging material is introduced at the end. Conversion costs are incurred evenly throughout the manufacturing process. The following selected data were extracted from the company's production report: $\begin{array}{lr}\text { Units completed } & 15,000 \\\text { Ending work in process (units) } & 6,000 \\\text { Equivalent units: conversion cost } & 16,800 \\\text { Equivalent-unit cost material A (\$) } & 5 \\\text { Equivalent-unit cost: packaging (\$) } & 2 \\\text { Total conversion cost }(\$) & 134,400\end{array}$ Required: A. Compute the equivalent-unit cost for conversion cost. B. How far into the manufacturing process is the ending work-in-process inventory? C. Would the total equivalent units for Material A and the packaging material be the same? Why? D. Compute the cost of goods completed during the period. E. Compute the cost of the ending work-in-process inventory.

Portal Manufacturing, which began business in 2011, uses a weighted-average process-costing system. The following figures pertain to July: $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$$\underline {\text { Physical }}$ $\quad$ $\quad$$\underline {\text { Equivalent Tonts }}$ Units completed 120,000 120,000 120,000 Ending work in process 40,000 40,000 18,000 All materials are introduced at the start of the process, and conversion costs are incurred evenly throughout production. The company used direct materials that cost $640,000; conversion amounted to $8 per equivalent unit. Required: A. Calculate the direct materials cost per equivalent unit. B. Calculate the cost of units completed and transferred. C. What percentage of conversion work will be performed on the 40,000-unit ending work-in-process inventory during August? D. In all likelihood, were all of the 120,000 completed units begun in July? Explain.

St. Lawrence River Chemical manufactures a product called Spec. Direct materials are added at the beginning of the process, and conversion activity occurs uniformly throughout production. The beginning work-in-process inventory is 80% complete with respect to conversion; the ending work-in-process inventory is 30% complete. The following data pertain to March: Work in process, March 1 20,000 Units started during March 70,000 Units completed and transferred out 73,000 Work in process, March 31 17,000 Direct Conversion Total Materials Costs Costs: Work in process, March 1 \ 50,283 \ 23,400 \ 26,883 Costs incurred during March 234,900 72,000 162,900 Totals \ 285,183 \ 95,400 \ 189,783 Using the weighted-average method of process costing, the cost of goods completed and transferred during March is: