Exam 20: Process Cost Accounting

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.

A production department is an organizational unit that has the responsibility for at least partially processing a product.

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

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 units that were started and completed during August.

In process costing, factory overhead incurred does not usually equal that applied, which yields either ____________________ or ___________________ overhead.

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.

During March, the production department of a process manufacturing system completed a number of units of a product and transferred them to finished goods. Of the units transferred, 25,000 were in process at the beginning of March and 110,000 were started and completed in March. March's beginning inventory units were 100% complete with respect to materials and 55% complete with respect to labor. At the end of March, 30,000 additional units were in process in the production department and were 100% complete with respect to materials and 30% complete with respect to labor. The production department incurred direct labor cost of $578,900 and its beginning inventory included labor cost of $54,700. Compute the direct labor cost per equivalent unit for the department using the weighted-average method.

What is a hybrid costing system? When is a hybrid costing system appropriate for a manufacturer?

During March, the production department of a process manufacturing system completed a number of units of a product and transferred them to finished goods. Of the units transferred, 25,000 were in process at the beginning of March and 110,000 were started and completed in March. March's beginning inventory units were 100% complete with respect to materials and 55% complete with respect to labor. At the end of March, 30,000 additional units were in process in the production department and were 100% complete with respect to materials and 30% complete with respect to labor. Compute the number of equivalent units with respect to both materials and direct labor respectively for March using the FIFO method.

Which of the following characteristics does not usually apply to process manufacturing systems?

Match the following terms with the definitions.

After posting all actual factory overhead and applying factory overhead to production departments in a process costing system,

Once equivalent units are calculated for materials, this number will also be used for direct labor and factory overhead.

A system of accounting in which the costs of each process are accumulated and then assigned to the units of product that passed through the process is a:

In a process costing system, when manufacturing overhead costs are applied to the cost of production, they are debited to:

A company uses the weighted-average method for inventory costing. At the end of the period, 22,000 units were in the ending goods in process inventory and are 100% complete for materials and 75% complete for labor and overhead. The equivalent costs per unit are; materials, $2.65, labor, $2.15, and overhead, $3.20. Compute the cost that would be assigned to the ending goods in process inventory for the period.

Hybrid costing systems can only be applied to auto manufacturing.

Which of the following characteristics applies to process cost accounting but not to job order cost accounting?

Prepare journal entries to record the following production activities for Sherman Manufacturing. a. Incurred overhead costs of $79,000 (paid in cash). b. Applied overhead at 110% of direct labor costs which are $93,900. c. Transferred completed products with a cost of $258,200 to finished goods inventory. d. Sold $602,000 of product on credit. Cost is $271,000.

If Department Q uses $60,000 of direct materials and Department T uses $15,000 of direct materials, the following journal entry would be recorded by the process cost accounting system: