Exam 20: Process Cost Systems

If 30,000 units of materials enter production during the first year of operations, 25,000 of the units are finished, and 5,000 are 50% completed, the number of equivalent units of production would be 28,500.

Which of the following is not a characteristic of a process cost system?

Job order manufacturing and process manufacturing are two major costing systems used in manufacturing. Briefly contrast the characteristics of these two systems.

The FIFO method of process costing is simpler than the Average cost method.

The Mountain Springs Water Company has two departments. Purifying and Bottling. The Bottling Department received 67,000 liters from the Purifying Department. During the period, the Bottling Department completed 65,000 liters, including 3,000 liters of work in process at the beginning of the period. The ending work in process was 5,000 liters. How many liters were started and completed during the period?

The following unit data were assembled for the assembly process of the Super Co. for the month of June. Direct materials are added at the beginning of the process. Conversion costs are added uniformly over the production process. The company uses the FIFO process. The number of equivalent units produced with respect to conversion costs is:

If a department that applies FIFO process costing starts the reporting period with 50,000 physical units that were 25% complete with respect to direct materials and 40% complete with respect to conversion, it must add 12,500 equivalent units of direct materials and 20,000 equivalent units to direct labor to complete them.

If a company uses average costing instead of FIFO they will still get the same unit costs.

Department A had 1,000 units in Work in Process that were 60% completed at the beginning of the period at a cost of $7,000. 4,000 units of direct materials were added during the period at a cost of $8,200. 4,500 units were completed during the period, and 500 units were 40% completed at the end of the period. All materials are added at the beginning of the process. Direct labor was $28,700 and factory overhead was $4,510. The cost of the 500 units in process at the end of the period if the first-in, first-out method is used to cost inventories was:

Costs of ending work in process inventory are included in the cost per equivalent unit computation.

The inventory at April 1, 2012, and the costs charged to Work in Process--Department B during April for Zarley Company are as follows: During April, all direct materials are transferred from Department A, the units in process at April 1 were completed, and of the 26,000 units entering the department, all were completed except 1,000 units which were 70% completed as to conversion costs. Inventories are costed by the first-in, first-out method. Prepare a cost of production report for April.

The closer a company moves towards Just in Time production, the differences in unit costs between average costing and FIFO will be reduced.

The cost of materials transferred into the Bottling Department of Mountain Springs Water Company is $32,400, with $26,000 from the Purifying Department, plus additional $6,400 from the materials storeroom. The conversion cost for the period in the Bottling Department is $8,750 ($3,750 factory applied and $5,000 direct labor.) The total costs transferred to finished goods for the period was $31,980. The Bottling Department had a beginning inventory of $1,860.

When a process cost accounting system records the purchase of materials, the Materials account is credited.

Department E had 4,000 units in Work in Process that were 40% completed at the beginning of the period at a cost of $12,500. 14,000 units of direct materials were added during the period at a cost of $28,700. 15,000 units were completed during the period, and 3,000 units were 75% completed at the end of the period. All materials are added at the beginning of the process. Direct labor was $32,450 and factory overhead was $18,710. The number of equivalent units of production for the period for conversion if the first-in, first-out method is used to cost inventories was:

The direct labor costs and factory overhead costs incurred by a production department are referred to as conversion costs.

Which of the following best describes the effect on direct labor when management adopts a just-in-time environment?

Department E had 4,000 units in Work in Process that were 40% completed at the beginning of the period at a cost of $12,500. Of the $12,500, $8,000 was for material and $4,500 was for conversion costs. 14,000 units of direct materials were added during the period at a cost of $28,700. 15,000 units were completed during the period, and 3,000 units were 75% completed at the end of the period. All materials are added at the beginning of the process. Direct labor was $32,450 and factory overhead was $18,710. If the average cost method is used the material cost per unit (to the nearest cent) would be:

If Department H had 600 units, 60% completed, in process at the beginning of the period, 6,000 units were completed during the period, and 700 units were 30% completed at the end of the period, what was the number of equivalent units of production for conversion costs for the period, if the first-in, first-out method is used to cost inventories?

Equivalent units of production are the number of units that could have been manufactured from start to finish during an accounting period.