Exam 17: Process Costing

FIFO Aluminum processes a single type of aluminum. During the current period the following information was given: All materials are added at the beginning of the production process. The beginning inventory was 30% complete as to conversion, while the ending inventory was 40% completed for conversion purposes. FIFO Aluminum uses the first-in, first-out system of process costing. What were the costs assigned to the units transferred out this period (round equivalent unit cost to the nearest penny)?

List and describe the five steps in process costing.

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: -What is the amount of direct materials cost assigned to ending work-in-process inventory at the end of February?

The president of the Gulf Coast Refining Corporation wants to know why his golfing partner, who is the chief financial officer of a large construction company, calculates his costs by the job, but his own corporation calculates costs by large units rather than by individual barrel of oil.

Pet Products Company uses an automated process to manufacture its pet replica products. For June, 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: Dustin Plastics, Inc., manufactures plastic moldings for car seats. Its costing system utilizes two cost categories, direct materials and conversion costs. Each product must pass through Department A and Department B. Direct materials are added at the beginning of production. Conversion costs are allocated evenly throughout production. Data for Department A for February 2012 are: Costs for Department A for February 2012 are: -How many units were completed and transferred out of Department A during February?

Marv and Vicki own and operate a vegetable canning plant. In recent years, their business has grown tremendously and, at any point in time, they may have 30 to 35 different vegetables being processed. Also, during the peak summer months there are several thousand bushels of vegetables in some stage of processing at any one time. With the company's growth during the past few years, the owners decided to employ an accountant to provide cost estimations on each vegetable category and prepare monthly financial statements. Although the accountant is doing exactly as instructed, Marv and Vicki are confused about the monthly operating costs. Although they process an average of 50,000 canned units a month, the monthly production report fluctuates wildly. Required: Explain how the production report can fluctuate wildly if they process a constant amount of vegetables each month.

When there are multiple support departments within an organization, it is common to use journal entries to transfer-in costs from one department to another. What are some of the points to remember about these costs?

Companies that use process-costing systems will incur variances if they do NOT incorporate the use of the standard-costing 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 amount of conversion costs are assigned to the ending Work-in-Process account for June?

Transferred-in costs are treated as if they are a separate type of direct material added at the beginning of the process.

In a process-costing system average unit costs are calculated

The first-in, first-out process-costing method assumes that the earliest equivalent units in work in process are completed first.

Transferred-in costs are incurred in previous departments that are carried forward as the product's cost as it moves to a subsequent process in the production cycle.

Process-costing systems separate costs into cost categories according to the timing of when costs are introduced into the process.

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: -How many units were completed and transferred out of the Finishing Department during March?

The accounting entry to record the transfer of rolls from the assembly department to the finishing department is: Work in Process-Assembly Department

Equivalent units in beginning work in process PLUS equivalent units of work done in the current period MINUS equivalent units completed and transferred out in the current period EQUALS equivalent units in ending work in process.

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 conversion cost per equivalent unit in June?

The weighted average method of process costing assigns the cost of equivalent units worked on during the current period first to complete beginning inventory, next to start and complete new units, and finally to units in ending work-in-process inventory.