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Exam 3: Process Costing and Analysis

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Question 71

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Manufacturers that utilize process operations produce large quantities of identical products.

A) True
B) False

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Question 72

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Refer to the following information about the Finishing Department in the Davidson Factory for the month of June. Davidson Factory uses the FIFO method of inventory costing. Beginning Work in Process inventory: Physical units…………………………………………... 5,000 units % complete for materials………………………………. 70% % complete for labor and overhead……………………. 25% Materials cost from May……………………………….. $7,350 Labor and overhead cost from May……………………. $3,125 Product started and completed: Physical units…………………………………………… 40,000 units Ending Work in Process inventory: Physical units………………………………………….... 4,000 units % complete for materials………………………………. 40% % complete for labor and overhead……………………. 10% Manufacturing costs for June: Materials………………………………………………… $96,975 Labor and overhead……………………………………... $79,470 Compute equivalent units for direct materials, direct labor and overhead for June.

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Question 73

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When the final production department completes goods, the cost of the completed goods are transferred to ________.

Refer to the following information about the Shaping Department of the Minnesota Factory for the month of August. Minnesota 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.

In process costing, direct labor includes only the labor that is applied directly to individual units of product.

Following is a partial process cost summary for Mitchell Manufacturing's Canning Department. The total conversion costs transferred out of the Canning Department equals:

In a process costing system, factory overhead costs are allocated to production departments by using a predetermined overhead allocation rate.

The process cost summary presents calculations of the cost of units completed during the reporting period, but does not present any information about the ending Work in Process inventory.

Process and job order manufacturing operations both combine materials, labor, and overhead items in the process of producing products.

The Fabricating Department started the current month with a beginning Work in Process inventory of $10,000. During the month, it was assigned the following costs: direct materials, $76,000; direct labor, $24,000; and factory overhead, 50% of direct labor cost. Also, inventory with a cost of $109,000 was transferred out of the department to the next phase in the process. The ending balance of the Work in Process Inventory account for the Fabricating Department is:

The combined costs of direct labor and factory overhead per equivalent unit used by many businesses with process operations is called:

Bagger, Inc. uses a process costing system. The following operating and cost data occurred during October: October 1, Inventory: 30,000 units 100% complete for materials ($60,000) and 50% complete for direct labor ($7,500) and overhead ($15,000) October 31, Inventory: 20,000 units 100% complete for materials and 30% complete for direct labor and overhead Units started during Oct.: 40,000 units October production costs: Direct materials…………………… $110,100 Direct labor………………………… 28,900 Overhead…………………………… 57,800 Materials are added at the beginning of the process. Direct labor and overhead are incurred evenly throughout the process. Prepare the October process cost summary assuming the weighted average method of inventory costing.

If a department that applies process costing starts the reporting period with 40,000 physical units that were 80% complete with respect to direct materials and 50% complete with respect to direct labor, it must add 8,000 equivalent units of direct materials and 20,000 equivalent units of direct labor to complete them.

A process cost summary shows the cost of a particular job manufactured in the reporting period.

If a department that uses process costing starts the reporting period with 100,000 physical units that were 20% complete with respect to direct labor, the equivalent units of direct labor in beginning Work in Process are 20,000.

Sparky Corporation uses the weighted-average method of process costing. The following information is available for February in its Molding Department: Units: Beginning Inventory: 25,000 units, 100% complete as to materials and 55% complete as to conversion. Units started and completed: 110,000. Units completed and transferred out: 135,000. Ending Inventory: 30,000 units, 100% complete as to materials and 30% complete as to conversion. Costs: Costs in beginning Work in Process - Direct Materials: $43,000. Costs in beginning Work in Process - Conversion: $48,850. Costs incurred in February - Direct Materials: $287,000. Costs incurred in February - Conversion: $599,150. Calculate the equivalent units of materials.

During July, the production department of a process operations system completed and transferred to finished goods 10,000 units that were in process at the beginning of July and 76,000 that were started and completed in July. July's beginning inventory units were 100% complete with respect to materials and 30% complete with respect to labor. At the end of July, 15,000 additional units were in process in the production department and were 100% complete with respect to materials and 25% complete with respect to labor. The beginning inventory included labor cost of $52,100 and the production department incurred direct labor cost of $450,750 during July. Compute the direct labor cost per equivalent unit for the department using the weighted-average method.

A process cost summary usually does not include the number of equivalent units of production for the period.

In process costing, all indirect materials are charged directly to Work in Process Inventory.

Materials and labor costs that are clearly associated with a specific process or department are known as ________. Those costs that are not clearly associated with a specific process or department are called ________.