Exam 20: Process Costing

Which of the following businesses is most likely to use a process costing system?

Delaware Company purchased raw materials worth $5,000 on account. The journal entry to record purchase of raw materials on account is:

The task of summarizing the flow of physical units is one of the four steps involved in the preparation of the production cost report.

In most organizations, managers are often rewarded based on how well they meet the budget.

LDR Manufacturing produces a pesticide chemical and uses process costing. There are three processing departments-Mixing, Refining, and Packaging. On January 1, 2014, the first department, Mixing, had no beginning inventory. During January, 40,000 fl. oz. of chemicals were started in production. Of these, 32,000 fl. oz. were completed and 8,000 fl. oz. remained in process. In the Mixing Department, all direct materials are added at the beginning of the production process and conversion costs are applied evenly through the process. At the end of January, the equivalent unit data for the Mixing Department were as follows: In addition to the above, the costs per equivalent unit were $1.20 for direct materials and $5.75 for conversion costs. Using this data, calculate the cost of the units that were transferred out of the Mixing Department and into the Refining Department.

The ________ account is credited to adjust for underallocated overhead costs.

Which of the following is recorded by debiting the Manufacturing Overhead account?

Jacob Company incurred $7,000 for indirect labor in Department III. The journal entry to record indirect labor utilized is:

A process costing system is most suitable for businesses that manufacture batches of unique products or provide specialized services.

Michael Paints has two processes-Coloring Department and Mixing Department. Michael sold 350 gallons on account at $110 per gallon. The total cost of processing was $385,000 for 5,500 gallons of paint. Throughout the year, Michael used a predetermined overhead allocation rate to allocate $75,000 and $65,000 of indirect costs to the Coloring Department and Mixing Department, respectively. The actual overhead cost incurred amounted to $150,000 at the end of the year. Record the necessary journal entries for the sale of goods and for adjustment of over/underallocated manufacturing overhead at the end of the year.

The Polishing Department of Wood Shiners had 15,000 units in process on June 1 and received 25,000 units from the Machining Department. During the month, it completed 32,000 units and transferred them to the Packaging Department. Prepare the production cost report for the Polishing Department for the whole units for the month of June. (Use the first-in, first-out method)

A production cost report helps managers identify the unnecessary costs that can be reduced in the production process.

The equivalent units of production for direct materials and conversion costs must be the same.

In a process costing system, which of the following are the four-steps of tracking product costs?

During September, the Filtering Department of Olive Company had beginning transferred in units of 500 units with costs of $125,000. During the month, it started and completed 700 units. It had 100 units in ending Work-in-Process Inventory. What is the number of equivalent units of production for transferred in units transferred to the Filtering Department in September under the first-in, first-out (FIFO)method?

A predetermined overhead allocation rate is used to allocate direct materials cost to various processes or departments.

Production cost reports prepared using the first-in, first-out (FIFO)method determines the cost of equivalent units of production by accounting for beginning inventory costs separately from current period costs.

If a business operates in an industry that experiences significant cost changes, it would be to its benefit to use the first-in, first-out (FIFO)method.

When finished products are sold, Sales Revenue is debited and Cost of Goods Sold is credited.

The cost per equivalent unit for transferred in units is calculated by dividing total transferred in costs by the equivalent units of production for transferred in.