Exam 17: Process Costing

Ford Motor Company is said to use a hybrid costing system. What is a hybrid costing system, and what would be the advantage to Ford of such a system?

Which of the following statement(s)concerning conversion costs is correct?

In a process-costing system, there is always a separate Work-in-Process account for each different process.

Answer the following questions using the information below: The Rest-a-Lot chair company manufacturers a standard recliner. During February, the firm's Assembly Department started production of 75,000 chairs. During the month, the firm completed 80,000 chairs, and transferred them to the Finishing Department. The firm ended the month with 10,000 chairs in ending inventory. There were 15,000 chairs in beginning inventory. All direct materials costs are added at the beginning of the production cycle and conversion costs are added uniformly throughout the production process. The FIFO method of process costing is used by Rest-a-Lot. Beginning work in process was 30% complete as to conversion costs, while ending work in process was 80% complete as to conversion costs. Beginning inventory: Manufacturing costs added during the accounting period: -How many of the units that were started during February were completed during February?

Answer the following questions using the information below: Lehman Pottery Company manufactures clay molded pottery on an assembly line. Its standard costing system uses two cost categories, direct materials and conversion costs. Each product must pass through the Assembly Department and the Finishing Department. Direct materials are added at the beginning of the production process. Conversion costs are allocated evenly throughout production. Data for the Assembly Department for August 2008 are: Costs for August: -Which of the following journal entries records the Assembly Department's conversion costs for the month, assuming conversion costs are 10% higher than expected?

Answer the following questions using the information below: The Daltry Tractor Company manufactures small garden tractors on a highly automated assembly line. Its costing system uses two cost categories, direct materials and conversion costs. Each tractor must pass through the Assembly Department and the Testing Department. Direct materials are added at the beginning of the production process. Conversion costs are allocated evenly throughout production. Daltry Tractor uses weighted-average costing. Data for the Assembly Department for April 2012 are: Costs for April 2012: -What amount of direct materials costs are assigned to the ending Work-in-Process account for April?

In order for a process-costing system to work, all units must be measured in the same denominations in all of the departments within the organization.

Operating income can differ materially between the results for the weighted-average and FIFO methods when:

Surf Products Company uses an automated process to clean and polish its souvenir items. For March, the company had the following activities: Direct materials are placed into production at the beginning of the process and conversion costs are incurred evenly throughout the process. Required: Prepare a production cost worksheet using the FIFO method.

Answer the following questions using the information below: The Cuckoo Clock Shop manufactures clocks on a highly automated assembly line. Its costing system uses two cost categories, direct materials and conversion costs. Each product must pass through the Assembly Department and the Testing Department. Direct materials are added at the beginning of the production process. Conversion costs are allocated evenly throughout production. Cuckoo Clock Shop uses weighted-average costing. Data for the Assembly Department for June 2013 are: Costs for June 2013: -What are the equivalent units for direct materials and conversion costs, respectively, for June?

In a process-costing system, the calculation of equivalent units is used for calculating:

Under the weighted-average method, the stage of completion of beginning work in process:

Standard costing is popular among companies that:

Examples of industries that would use process costing include the soft-drink bottling and oil industry.

General Fabricators assembles its product in several departments. It has two departments that process all units. During October, the beginning work in process in the cutting department was half completed as to conversion, and complete as to direct materials. The beginning inventory included $12,000 for materials and $3,000 for conversion costs. Ending work-in-process inventory in the cutting department was 40% complete. Direct materials are added at the beginning of the process. Beginning work in process in the finishing department was 75% complete as to conversion. Direct materials are added at the end of the process. Beginning inventories included $16,000 for transferred-in costs and $20,000 for conversion costs. Ending inventory was 25% complete. Additional information about the two departments follows: Required: Prepare a production cost worksheet using weighted-average for the cutting department and FIFO for the finishing department.

Answer the following questions using the information below: The Cuckoo Clock Shop manufactures clocks on a highly automated assembly line. Its costing system uses two cost categories, direct materials and conversion costs. Each product must pass through the Assembly Department and the Testing Department. Direct materials are added at the beginning of the production process. Conversion costs are allocated evenly throughout production. Cuckoo Clock Shop uses weighted-average costing. Data for the Assembly Department for June 2013 are: Costs for June 2013: -What is the direct materials cost per equivalent unit during June?

Transferred-in costs are treated as if they are:

Answer the following questions using the information below: Roosevelt Cabinetry, Inc., manufactures standard sized modular cabinet units for kitchens and other applications within the home. Its costing system utilizes two cost categories, direct materials and conversion costs. Each product must pass through the rough cut department and the finish department. Direct materials are added at the beginning of production. Conversion costs are allocated evenly throughout production. Data for Finish Department for March 2012 are: Costs for Finish department for March 2012 are: -What is the unit cost per equivalent unit of the beginning inventory in the Finishing Department?

Universal Industries operates a division in Brazil, a country with very high inflation rates. Traditionally, the company has used the same costing techniques in all countries to facilitate reporting to corporate headquarters. However, the financial accounting reports from Brazil never seem to match the actual unit results of the division. Management has studied the problem and it appears that beginning inventories may be the cause of the unmatched information. The reason for this is that the inventories have a different financial base because of the severe inflation. Required: How can process costing assist in addressing the problem facing Universal Industries?

Ampco Disk Company operates a computer disk manufacturing plant. Direct materials are added at the end of the process. The following data were for August 20X5: Transferred-in costs (100% complete) Direct materials (0% complete) Conversion costs (90% complete) Transferred-in costs (100% complete) Direct materials (0% complete) Conversion costs (65% complete) Calculate equivalent units for conversion costs using the FIFO method.