Exam 17: Process Costing

In process costing the end of period journal entry to record $10,000 of ending inventory requires a debit to the ending inventory account and a credit to work-in-process inventory.

In the weighted-average costing method,the costs of direct materials in beginning inventory are not included in the cost per unit calculation since direct materials are almost always added at the start of the production process.

Which of the following is an assumption implicit in process-costing?

The cost of units completed can differ materially between the weighted average and the FIFO methods of process costing.

Operation-costing captures the non-financial impact of the control of physical processes.

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. -What were the Rest-a-Lot company equivalent units for conversion costs during February?

Use the information below to answer the following question(s). Father Time Clock Shop manufactures clocks on an automated assembly line.It 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,while conversion costs are allocated evenly throughout production,and the company uses weighted-average costing. Data for the Assembly Department are: -What are the equivalent units for direct materials and conversion costs at Father Time Clock Shop,respectively?

Scarborough Chemical placed 440,000 litres of direct materials into the mixing process.At the end of the month,20,000 litres were still in process,30 percent converted as to labour and factory overhead.All direct materials are placed in mixing at the beginning of the process and conversion costs occur evenly during the process.Scarborough Chemical uses weighted-average costing. Required: a.Determine the equivalent units in process for direct materials and conversion costs assuming there was no beginning inventory. b.Determine the equivalent units in process for direct materials and conversion costs assuming that a beginning inventory of 24,000 litres of chemicals were 40 percent complete as to conversion costs prior to the addition of the 440,000 litres.

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?

Answer the following questions using the information below: The Townsend 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.Townsend Tractor uses weighted-average costing. -What amount of conversion costs are assigned to the Townsend Company ending Work-in-Process account for April?

Discuss some typical products which would likely use process costing.

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?

The weighted-average process costing method distinguishes between units started in the previous period but completed during the current period and units started and completed during the current period.

Answer the following questions using the information below: Dustin Plastics,Inc. ,manufactures plastic moldings for car seats.Its costing system uses 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 2015 are: Costs for the Department A for February 2015 are: -What is the conversion cost per equivalent unit in Department A?

The first-in,first-out process-costing method assumes that units in beginning inventory are completed during the current accounting period.

Excalibur Ltd.began operations on October 1 of the current year.Its production requires that direct materials are added at the beginning of the process and conversion costs are incurred uniformly.Direct materials costs for October were $380,000 and conversion costs were $1,750,000.There were 80,000 units started during the month.The ending inventory was 25,000 units which were 60% complete.The cost per equivalent unit for direct materials was

Compare and contrast process costing and job order costing.

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

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.

The president of Sampson Ltd.has approached the controller for the company with concerns over the projected year end results.The company needs to present its financial statements to the bank to renew its loan and the president is concerned that the loan may either be denied,or the renewal terms will impose a much higher interest rate.The following summarizes the conversation between the president and the controller: President: I am very concerned about the upcoming loan renewal.Our cash position is low and our operating results for the year were not as strong as expected.Our unit cost of production has come in at $1,800 based on equivalent units of production of 2,590.I know that currently we have 600 units in ending work in process that are only 15% complete.If we were to reclassify these as 80% complete,we would increase our equivalent units of production by 390.Since all of our 2,500 completed units were sold,this reclassification would lower our unit costs,reduce cost of goods sold and increase our ending work in process inventory which could be used as collateral.This would improve our financial position and allow us to renew our loan and keep our current rate of interest. Controller: I think this is risky.It would be easy to determine that the units are not 80% complete. President: I don't see how.By the time we are audited,the units will have long since been completed and shipped to customers. Required: Assume you are the controller for Sampson Ltd.and that you hold a professional accounting designation.a.Determine the impact of the president's proposal on the financial results for Sampson Ltd. b.Referring back to the standards of ethical conduct,what should you do as controller?