Exam 20: Process Cost Accounting

The number of equivalent units of production assigned to ending goods in process inventory should be equal to or less than the number of physical units in ending goods in process inventory.

A company uses the FIFO method for inventory costing. During a period, a production department had 20,000 units in beginning goods in process inventory which were 40% complete; the department completed and transferred 165,000 units. At the end of the period, 22,000 units were in the ending goods in process inventory and are 75% complete. All of these are with respect to labor. The production department had labor costs in the beginning goods is process inventory of $99,000 and total labor costs added during the period are $726,825. Compute the equivalent cost per unit for labor.

Lipinski Company completed and transferred 90,000 units during the current period. Based on the following information, determine the cost of the goods completed during the current reporting period and journalize the transfer.

A hybrid costing system would be most appropriate when:

Equivalent units of production are equal to:

Process cost accounting systems are used only by companies that manufacture physical products; meaning that companies and other organizations that provide services to their customers do not use process cost accounting.

Aniston Enterprises manufactures stylish hats for sophisticated women. All materials are introduced at the beginning of the manufacturing process in the Cutting Department. Conversion costs are incurred uniformly throughout the manufacturing process. As the cutting of material is completed, the pieces are immediately transferred to the Sewing Department. Information for the Cutting Department for the month of May follows. Goods in Process, May 1 (50,000 units, 100% complete for direct materials, 40% complete with respect to direct labor and overhead (conversion costs); includes $70,500 of direct material cost; $34,050 of conversion costs). Goods in Process, May 31 (75,000 units, 100% complete for direct materials; 20% complete for conversion costs). If Aniston Enterprises uses the FIFO method of process costing, compute the cost per equivalent unit for direct materials and conversion costs respectively for May.

Embark produces mulch for landscaping use. The following information summarizes production operations and sales activities for June. The journal entry to record June sales is:

Companies that use a series of repetitive manufacturing processes to produce standardized products should use a process cost accounting system.

Iolaus Company provides the following data for the current year: Required: a. Calculate the predetermined overhead allocation rate based on direct labor. b. Determine the amount of overhead applied to production. c. Prepare the journal entry to apply factory overhead to goods in process.

In process cost accounting, the classification of materials as direct or indirect depends on whether they are clearly linked with a specific process.

Nano Company uses a weighted average process cost system. The department started and finished 149,000 units during the current period. The ending inventory consists of 60,000 units that are 75% complete with respect to direct labor and overhead. All direct materials are added at the beginning of the process. The department incurred direct labor costs of $262,500 and overhead costs of $126,000. (a) Compute the equivalent cost per unit for direct labor. (b) Compute the equivalent cost per unit for overhead.

The following table of cost information is available for the Messier Company for the month of November: Based on the table of cost information above, prepare the general journal entry required to record the: a. Transfer of goods from the molding department to the finished goods inventory. b. Cost of goods sold for November.

A process cost summary for a production department accounts for all costs assigned to that department during the period plus costs that were in the department's Goods in Process Inventory account at the beginning of the period.