Exam 20: Process Cost Accounting

In a process cost accounting system, the entry to record cost of materials assigned to a production department requires a debit to the Raw Materials Inventory account and a credit to the Goods in Process Inventory account for that department.

During the year, RB Corp. introduced 132,000 units into production and 144,000 units were completed and transferred to finished goods. At the end of the year, the company had 13,600 units in process that were 80% complete. Determine how many units the company had in goods in process at the beginning of the year.

Since the process cost summary describes the activities of a production department for a specified reporting period, it does not present information about any costs incurred in prior periods.

A measure of the productivity of a process with respect to its use of direct materials, direct labor, or overhead, and an expression of the activity of a process as the number of units that would have been processed during a period if all effort had been applied to units that were started and finished during the period, is called:

Refer to the following information about the Dipping Department of the Indiana Factory for the month of August. Indiana Factory uses the FIFO method of inventory costing. The cost per equivalent unit of materials is $10.00, and the cost per equivalent unit of labor and overhead is $22.00. Compute the cost that should be assigned to the beginning units that were completed and transferred during August.

The fourth step in accounting for production activity in a period is to prepare a cost reconciliation, which reconciles _____________________ with the ___________________.

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

A company uses a process cost accounting system and the weighted average method for inventory costs. The following information is available regarding direct labor for the current year: (a) Calculate the equivalent units of production for direct labor for the year. (b) Calculate the average cost per equivalent unit for direct labor (round to the nearest cent).

When raw materials are purchased on account for use in a process costing system, the corresponding journal entry that should be recorded will include:

After all process cost accounting journal entries are recorded and posted for a reporting period, the Factory Payroll account should have a zero balance.

Briefly explain the conditions under which job order cost accounting systems and process cost accounting systems are commonly applied.

A materials consumption report is a source document that summarizes the materials used during a reporting period.

If the indirect materials cost for a reporting period was $37,500, the following journal entry would be recorded in the process cost accounting system:

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

If the predetermined overhead allocation rate is 350% of direct labor cost and the Painting Department's direct labor cost for the reporting period is $20,000, the following entry would record the allocation of overhead to the products processed in this department:

Refer to the following information about the Dipping Department of the Indiana Factory for the month of August. Indiana Factory uses the FIFO method of inventory costing. The cost per equivalent unit of materials is $10.00, and the cost per equivalent unit of labor and overhead is $22.00. Prepare a cost reconciliation for the month of August.

Refer to the following information about the Painting Department in the Richardson Factory for the month of June. Richardson Factory uses the FIFO method of inventory costing. Compute the total cost of all units that were completed and transferred to finished goods during June. Compute the total cost of the ending goods in process inventory.

The cost of units transferred from Goods in Process Inventory to Finished Goods Inventory is called the cost of goods manufactured.

A company uses the weighted average 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. Compute the number of equivalent units produced by the department.

To compute equivalent units of production, one must be able to reasonably estimate: