Exam 17: Process Costing

Calculate the equivalent units for conversion costs in January using the FIFO method.

Transferred in costs are costs which have been incurred in a preceding department.

The first step in process costing is to calculate cost per equivalent unit.

Use the information below to answer the following question(s). Apex Disk Company operates a computer disk manufacturing plant. Direct materials are added at the end of the process. The following data were presented for August -Calculate equivalent units for conversion costs using the FIFO method.

The Parson Valve Corporation was recently formed to produce a brass valve that forms an essential part of a compressor manufactured by a major corporation. The direct materials are added at the start of the production process while conversion costs are added uniformly throughout the production process. September is Parson's first month of operations, and therefore, there was no beginning inventory. Direct materials cost for the month totaled $1,400,000, while conversion costs equaled $1,800,000. Accounting records indicate that 800,000 valves were started in September and 700,000 valves were completed. Ending inventory was 20% complete as to conversion costs. Required: a. What is the total manufacturing cost per valve for September? b. Allocate the total costs between the completed valves and the valves in ending inventory.

Surf Products Company uses an automated process to clean and polish its souvenir items. Direct materials are placed into production at the beginning of the process and conversion costs are incurred evenly throughout the process. The following data pertain to March. Required: Using the first-in, first-out method determine the assignment of costs to units transferred-out and ending inventory.

Which of the following items is not a component of "total costs to be accounted for in a given department's operations?"

Process costing is extremely useful when there are a variety of products produced, as compared to the production of a single product.

Which of the following manufactured products should use process costing?

Which of the following is NOT one of the procedures in process costing?

When a bakery transfers goods from the Baking Department to the Decorating Department, the accounting entry is:

BIG Manufacturing Products has been using FIFO process costing for tracking the costs of its manufacturing activities. However, in recent months the system has become somewhat bogged down with details. It seems that when the company purchased Brown Electronics last year its product lines increased sixfold. This has caused both the accountants and the suppliers of the information, the line managers, great difficulty in keeping the costs of each product line separate. Likewise, the estimation of the completion of ending work-in-process inventories and the associated costs has become very cumbersome. The chief financial officer of the company is looking for ways to improve the reporting system of product costs. Required: What can you recommend to improve the situation?

Use the information below to answer the following question(s). Plastic Molding, Inc.'s costing system utilizes 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 production. Conversion costs are allocated evenly throughout production. Data for the Assembly Department for March are: -What is the unit cost for February in the Assembly Department?

Select the true statement regarding process costing.

Brampton Ltd. uses an automated process to manufacture key chains. For September, 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. There is no spoilage. Required: Prepare a production cost worksheet using the FIFO method.

Process-costing journal entries and job-costing journal entries are similar with respect to direct materials and conversion costs.

Production costs are divided into three classifications: administrative costs, direct materials, and conversion costs in process costing.

Use the information below to answer the following question(s). Reynold's Dock Company manufactures boat docks on an assembly line. Its standard costing system utilizes 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 October 20x1 are: -What is the balance in ending work-in-process inventory?

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 being processed 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 income can fluctuate when sales are relatively stable.

Examples of industries that would use process costing include the pharmaceutical and semiconductor industry.