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Exam 20: Process Cost Accounting

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Question 91

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A unique feature of process costing systems is the use of a single Goods in Process Inventory control account when more than one production department exists.

A) True
B) False

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Question 92

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A process cost summary is an accounting report that describes the costs charged to a department, the equivalent units of production by the department, and how the costs were assigned to the output.

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B) False

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Question 93

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Prepare the required general journal entries to record the following transactions for the Bell Company. a. Purchased $40,000 of raw materials on account. b. Used $12,000 of direct materials in the production department. c. Used $5,000 of indirect materials.

Prepare the required general journal entry to record the following transactions for the Flaherty Company. a. Incurred $95,000 of factory labor cost which is paid in cash. b. Used $78,000 of direct labor in the production department. c. Used $17,000 of indirect labor.

The first step in accounting for production activity in a period, ______________, is a reconciliation of the physical units started in a period with the physical units completed in that period.

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.

Harbor Manufacturing Company uses a process cost accounting system. Materials are added at the beginning of the process. Direct labor and overhead are added evenly throughout the process. The company uses monthly reporting periods for its weighted-average process cost accounting. The following are the operating and cost data information for October. The October 1 beginning Goods in Process Inventory consisted of 20,000 units. The costs for this inventory are $82,500 of direct materials, $24,400 of direct labor, and $48,800 of factory overhead. Factory overhead is applied at 200% of direct labor cost. In addition to the beginning inventory costs, the company issued the following costs into Goods in Process Inventory; direct materials, $240,000; direct labor, $68,000; factory overhead, $136,000. During October, the company completed and transferred 60,000 units of its product to finished goods. At the end of the month, the goods in process inventory consisted of 15,000 units that were 40% complete with respect to direct labor and factory overhead and 100% complete with respect to materials. Prepare the company's process cost summary for October using the weighted average method.

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 weighted-average method.

Which of the following is the best explanation for why it is necessary to calculate equivalent units of production in a process costing environment?

Process cost accounting systems are commonly used by companies that manufacture standardized products by passing them through a series of manufacturing steps.

In the same time period, it is possible that a production department can produce 1,000 equivalent finished units with respect to direct materials and 1,200 equivalent finished units with respect to direct labor.

In process cost accounting, direct labor includes only the labor that is applied directly to the products.