# 5.7: Summary

## Section Summaries

### 5.1 Compare and Contrast Job Order Costing and Process Costing

• The three categories of costs incurred in producing an item are direct material, direct labor, and manufacturing overhead.
• Process costing is the system of accumulating costs within each department for large-volume, mass-produced units.
• Process costing often groups direct labor and manufacturing overhead as conversion costs.
• Costs under GAAP are categorized as period costs when they are not related to production and instead cover a time period.
• Selling and administrative costs are period costs related to the sales of products and management of the company and are not directly tied to a specific product.
• Process costing determines the cost per unit through the use of equivalent units, or the number of units that would have been produced if production was sequential instead of in batches.

### 5.2 Explain and Identify Conversion Costs

• Conversion costs are the costs of direct labor and manufacturing overhead used to convert raw materials into a finished product.
• Materials are added during various stages of the manufacturing process, such as the beginning or end, while conversion of the product from raw material into finished goods is considered to occur uniformly through the process. Thus, it is possible for a product to have all of its materials and not be complete.
• Equivalent units for direct materials can be different than the equivalent units for conversion costs because materials are added in steps through the manufacturing process, while conversion costs are incurred evenly throughout the process.

### 5.3 Explain and Compute Equivalent Units and Total Cost of Production in an Initial Processing Stage

• Process costing has a work in process inventory account for each department.
• Equivalent units of production for materials may differ from the equivalent units for conversion costs.
• The total units to account for is the number of units in the beginning work in process inventory plus the number of units started into production; this total also represents the sum of the number of units completed and the number of units in the ending work in process inventory.
• The cost per equivalent unit for materials is the total of the material costs for the beginning work in process inventory and the total of material costs incurred during the period.
• The cost per equivalent unit for conversion costs is the total of the conversion costs for the beginning work in process inventory and the total of conversion costs incurred during the period.
• The cost of units transferred to the next department is the number of units transferred times the total of the cost per equivalent unit of material plus the cost per equivalent unit for conversion costs.

### 5.4 Explain and Compute Equivalent Units and Total Cost of Production in a Subsequent Processing Stage

• The total units to account for is the number of units in the beginning work in process inventory plus the number of units transferred from the prior department; this total also represents the number of units completed plus the number of units in the ending work in process inventory.
• The cost per equivalent units for materials is the total of the material costs for the beginning work in process inventory plus the cost of material transferred in to the department plus the total of material costs incurred during the period.
• The cost per equivalent unit for conversion costs is the total of the conversion costs for the beginning work in process inventory plus the conversion costs transferred in plus the total of conversion costs incurred during the period.

### 5.5 Prepare Journal Entries for a Process Costing System

• Traditional journal entries show the purchase of material and the incurring of overhead costs.
• Each department records the transfer of material from the storeroom into production, its direct labor costs, the application of overhead, and the transfer of goods to the next department or finished goods.
• The value of the inventory transferred to the next department or to finished goods equals the amount listed as transferred on the production cost report.

## Key Terms

conversion cost
total of labor and overhead for a product; the costs that “convert” the direct material into the finished product
equivalent units
number of units that would have been produced if the units were produced sequentially and in their entirety in a particular time period
expense recognition principle
(also, matching principle) matches expenses with associated revenues in the period in which the revenues were generated
manufacturing costs
(also, product costs) total of all costs expended in the manufacturing process; generally consists of direct material, direct labor, and manufacturing overhead
period costs
typically related to a particular time period instead of attached to the production of an asset; treated as an expense in the period incurred (examples include many sales and administrative expenses)
prime costs
direct material expenses and direct labor costs
process costing
costing system used when a standardized process is used to manufacture identical products and the direct material, direct labor, and manufacturing overhead cannot be traced to a specific unit
product costs
all expenses required to manufacture the product: direct materials, direct labor, and manufacturing overhead
production cost report
shows the costs used in the preparation of a product, including the cost per unit for materials and conversion costs and the amount of work in process and finished goods inventory
selling and administrative (S&A) expenses
period costs not directly assigned to the items produced or services provided; include costs of departments not directly associated with manufacturing but necessary to operate the business
spoilage
any units that are not fit for sale due to breakage or other imperfections

## Multiple Choice

1

LO 5.1Which of the following production characteristics is better suited for process costing and not job order costing?

1. Each product batch is distinguishable from the prior batch.
2. The costs are easily traced to a specific product.
3. Costs are accumulated by department.
4. The value of work in process is the direct material used, the direct labor incurred, and the overhead applied to the job in process.
2

LO 5.1A process costing system is most likely used by which of the following?

1. airplane manufacturing
2. a paper manufacturing company
3. an accounting firm specializing in tax returns
4. a hospital
3

LO 5.1Which of the following is a prime cost?

1. direct labor
2. work in process inventory
4. factory maintenance expenses
4

LO 5.1Which of the following is a conversion cost?

1. raw materials
2. direct labor
3. sales commissions
4. direct material used
5

LO 5.1During production, how are the costs in process costing accumulated?

1. to cost of goods sold
2. to each individual product
3. to manufacturing overhead
4. to each individual department
6

LO 5.2Which is not needed to compute equivalent units of production?

1. the percentage of completion for inventory still in process
2. the number of units transferred out
3. the number of units started and completed
4. the material cost per unit
7

LO 5.2What is the cost of direct labor if the conversion costs are $330,000 and manufacturing overhead is$275,000?

1. $55,000 2.$275,000
3. $330,000 4.$605,000
8

LO 5.2What is the conversion cost to manufacture insulated travel cups if the costs are: direct materials, $17,000; direct labor,$33,000; and manufacturing overhead, $70,000? 1.$16,000
2. $50,000 3.$103,000
4. $120,000 9 LO 5.2Which of the following lists contains only conversion costs for an inflatable raft manufacturing corporation? 1. vinyl for raft, machine operator, electricity, insurance 2. machine operator, electricity, depreciation, plastic for air valves 3. machine operator, electricity, depreciation, insurance 4. vinyl for raft, electricity, insurance, plastic for air valves 10 LO 5.3Direct material costs$3 per unit, direct labor costs $5 per unit, and overhead is applied at the rate of 100% of the direct labor cost. What is the value of the inventory transferred to the next department if beginning inventory was 2,000 units; 9,000 units were started; and 1,000 units were in ending inventory? 1.$1,000
2. $13,000 3.$130,000
4. $20,000 11 LO 5.3Beginning inventory and direct material cost added during the month total$55,000. What is the value of the ending work in process inventory if beginning inventory was 2,000 units; 9,000 units were started; and 1,000 units were in ending inventory?

1. $1,000 2.$5,000
3. $50,000 4.$55,000
12

LO 5.3The initial processing department had a beginning inventory of 750 units and an ending inventory of 1,350 units, and it started 9,500 units into production. How many were transferred out to the next department?

1. 750
2. 1,350
3. 8,900
4. 10,250
13

LO 5.3There were 1,000 units in ending inventory after transferring 16,000 units to finished goods inventory. If the beginning inventory was 2,000 units, how many units were started in process?

1. 1,000
2. 2,000
3. 15,000
4. 17,000
14

LO 5.4The costs to be accounted for consist of which of the following?

1. costs added during the period
2. costs of the units in ending inventory
3. costs started and transferred during the period
4. costs in the beginning inventory and costs added during the period
15

LO 5.4Which of the following is the step in which materials, labor, and overhead are detailed?

1. determining the units to which costs are assigned
2. determining the equivalent units of production
3. determining the cost per equivalent units
4. allocating the costs to the units transferred out and the units partially completed
16

LO 5.5The journal entry to record the $500 of work in process ending inventory that consists of$300 of direct materials, $50 of manufacturing overhead, and$150 od direct labor is which of the following?

1. 2. 3. 4. 17

LO 5.5Assigning indirect costs to departments is completed by ________.

1. applying the predetermined overhead rate
2. debiting the manufacturing costs incurred
3. applying the costs to manufacturing overhead
4. applying the costs to work in process inventory
18

LO 5.5In a process costing system, which account shows the overhead assigned to the department?

1. cost of goods sold
2. finished goods inventory
3. raw material inventory
4. work in process inventory
19

LO 5.5In a process cost system, factory depreciation expense incurred is debited to ________.

1. finished goods inventory
2. work in process inventory
4. cost of goods sold

## Questions

1

LO 5.1Explain how process costing differs from job order costing.

2

LO 5.1Would a pharmaceutical manufacturer use process or job order costing? Why?

3

LO 5.1Which costs are assigned using the weighted-average method?

4

LO 5.1What is the primary purpose of process costing?

5

LO 5.2What is the difference between prime costs and conversion costs?

6

LO 5.2Explain conversion costs using an example.

7

LO 5.2Why are there conversion costs in both job order costing and process costing?

8

LO 5.2What are equivalent units of production, and how are they used in process costing?

9

LO 5.2How can there be a different number of equivalent units for materials as compared to conversion costs?

10

LO 5.2Why is the number of equivalent units for materials only sometimes equal to the equivalent units for conversion?

11

LO 5.3What are the four steps involved in determining the cost of inventory transferred from one department to the next and the cost of work in process inventory?

12

LO 5.3What is the weighted-average method for computing the equivalent units of production?

13

LO 5.4How does process costing treat the costs transferred in from another department?

14

LO 5.4Why does each department have its own work in process inventory?

15

LO 5.5Match each term with its description.

 A. conversion costs i. total of direct material costs and direct labor costs B. cost of goods sold ii. manufacturing costs of the items sold C. cost of production report iii. number of units produced if each unit was produced sequentially D. cost per equivalent unit iv. total of direct labor costs, indirect labor costs, indirect material costs, and manufacturing overhead E. equivalent units of production v. where costs in a process cost system are reported before being applied to the product F. manufacturing department vi. detailed listing of the total costs of the product including the value of work in process G. prime costs vii. cost of materials or conversion for a specific department during production H. transferred out costs viii. product of the total cost per unit and the number of units completed and transferred during the time period
16

LO 5.5How is manufacturing overhead handled in a process cost system?

17

LO 5.5How are predetermined overhead rates used in process costing?

## Exercise Set A

EA1

LO 5.1How many units were started into production in a period if there were zero units of beginning work in process inventory, 1,100 units in ending work in process inventory, and 21,500 completed and transferred out units?

EA2

LO 5.1A company started a new product, and in the first month started 100,000 units. The ending work in process inventory was 20,000 units that were 100% complete with materials and 75% complete with conversion costs. There were 100,000 units to account for, and the equivalent units for materials was $6 per unit while the equivalent units for conversion was$8 per unit. What is the value of the inventory transferred out, using the weighted-average inventory method?

EA3

LO 5.3Given the following information, determine the equivalent units of ending work in process for materials and conversion under the weighted-average method:

• beginning inventory of 2,500 units is 100% complete with regard to materials and 60% complete with regard to conversion
• 18,000 units were started during the period
• 17,500 units were completed and transferred
• ending inventory is 100% complete with materials and 65% complete with conversion
EA4

LO 5.3There were 1,700 units in beginning inventory that were 40% complete with regard to conversion. During the month, 8,550 units were started and 9,000 were transferred to finished goods. The ending work in process was 60% complete with regard to conversion costs, and materials are added at the beginning of the process. What is the total amount of equivalent units for materials and conversion at the end of the month using the weighted-average method?

EA5

LO 5.3A company has 1,500 units in ending work in process that are 30% complete after transferring out 10,000 units. All materials are added at the beginning of the process. If the cost per unit is $4 for materials and$7 for conversion, what is the cost of units transferred out and in ending work in process inventory using the weighted-average method?

EA6

LO 5.3There were 2,400 units in ending work in process inventory that were 100% complete with regard to material and 25% complete with regard to conversion costs. Ending work in process inventory had a cost of $9,000 and a per-unit material cost of$2. What was the conversion cost per unit using the weighted-average method?

EA7

LO 5.3How many units must be in ending inventory if beginning inventory was 15,000 units, 55,000 units were started, and 57,000 units were completed and transferred out?

EA8

LO 5.3How many units must have been completed and transferred if beginning inventory was 75,000 units, ending inventory was 72,000 units, and 290,000 units were started?

EA9

LO 5.3Using the weighted-average method, compute the equivalent units of production if the beginning inventory consisted of 20,000 units; 55,000 units were started in production; and 57,000 units were completed and transferred to finished goods inventory. For this process, materials are added at the beginning of the process, and the units are 35% complete with respect to conversion.

EA10

LO 5.3Using the weighted-average method, compute the equivalent units of production for a new company that started 85,000 units into production and transferred 67,000 to the second department. Assume that beginning inventory was 0. Conversion is considered to occur evenly throughout the process, while materials are added at the beginning of the process. The ending inventory for Equivalent Units: Conversion is 9,000 units.

EA11

LO 5.3Mazomanie Farm completed 20,000 units during the quarter and has 2,500 units still in process. The units are 100% complete with regard to materials and 55% complete with regard to conversion costs. What are the equivalent units for materials and conversion?

EA12

LO 5.3What are the total costs to account for if a company’s beginning inventory had $231,432 in materials,$186,450 in conversion costs, and added direct material costs ($4,231,392), direct labor ($2,313,392), and manufacturing overhead ($1,156,696)? EA13 LO 5.3A company started the month with 8,329 units in work in process inventory. It started 23,142 units and had an ending inventory of 9,321. The units were 100% complete to materials and 67% complete with conversion. How many units were transferred out during the period? EA14 LO 5.4A production department within a company received materials of$10,000 and conversion costs of $10,000 from the prior department. It added material of$27,200 and conversion costs of $53,000. The equivalent units are 20,000 for material and 18,000 for conversion. What is the unit cost for materials and conversion? EA15 LO 5.4Production data show 35,920 units were transferred out of a stage of production and 6,150 units remained in ending WIP inventory that was 100% complete to material and 35% complete to conversion. The unit material cost is$5 for material and $8 for conversion. What is the amount of inventory transferred out and remaining in ending work in process inventory? EA16 LO 5.5Overhead is assigned to the manufacturing department at the rate of$10 per machine hour. There were 3,500 machine hours during October in the shaping department and 2,500 in the packaging department. Prepare the journal entry to apply overhead to the manufacturing departments.

EA17

LO 5.5Prepare the journal entry to record the factory wages of $28,000 incurred for a single production department assuming payment will be made in the next pay period. EA18 LO 5.5Prepare the journal entry to record the transfer of 3,000 units from the packaging department to finished goods if the material cost per unit is$4 and the conversion cost per unit is $5.50. EA19 LO 5.5Prepare the journal entry to record the sale of 2,000 units that cost$8 per unit and sold for $15 per unit. ## Exercise Set B EB1 LO 5.3Given the following information, determine the equivalent units of ending work in process for materials and conversion using the weighted-average method: • Beginning inventory of 750 units is 100% complete with regard to materials and 30% complete with regard to conversion. • 9,500 units were started during the period. • 8,900 units were completed and transferred. • Ending inventory is 100% complete with regard to materials and 68% complete with regard to conversion. EB2 LO 5.3There were 2,000 units in beginning inventory that were 70% complete with regard to conversion. During the month, 15,000 units were started, and 16,000 were transferred to finished goods. The ending work in process was 55% complete with regard to conversion costs, and materials are added at the beginning of the process. What is the total amount of equivalent units for materials and conversion at the end of the month using the weighted-average method? EB3 LO 5.3A company has 100 units in ending work in process that are 40% complete after transferring out 750 units. If the cost per unit is$5 for materials and $2.50 for conversion, what is the cost of units transferred out and in ending work in process inventory using the weighted-average method? EB4 LO 5.3There were 1,500 units in ending work in process inventory that were 100% complete with regard to material and 60% complete with regard to conversion costs. Ending work in process inventory had a cost of$7,200 and a per-unit material cost of $3. What was the conversion cost per unit using the weighted-average method? EB5 LO 5.3Using the weighted-average method, compute the equivalent units of production if the beginning inventory consisted of 20,000 units, 55,000 units were started in production, and 57,000 units were completed and transferred to finished goods inventory. For this process, materials are 70% complete and the units are 30% complete with respect to conversion. EB6 LO 5.3What are the total costs to account for if a company’s beginning inventory had$23,432 in materials and $18,450 in conversion costs, and added direct material costs ($41,392), direct labor ($23,192), and manufacturing overhead ($62,500)?

EB7

LO 5.3A company started the month with 4,519 units in work in process inventory. It started 15,295 units and had an ending inventory of 4,936. The units were 100% complete to materials and 30% complete with conversion. How many units were transferred out during the period?

EB8

LO 5.4A production department within a company received materials of $7,000 and conversion costs of$5,000 from the prior department. It added material of $78,400 and conversion costs of$47,000. The equivalent units are 5,000 for material and 4,000 for conversion. What is the unit cost for materials and conversion?

EB9

LO 5.4Production data show 15,200 units were transferred out of a stage of production and 3,500 units remained in ending WIP inventory that was 100% complete to material and 60% complete to conversion. The unit material cost is $9 for material and$4 for conversion. What is the amount of inventory transferred out and remaining in ending work in process inventory?

EB10

LO 5.5Overhead is assigned to the manufacturing department at the rate of $5 per machine hour. There were 3,000 machine hours used in the molding department. Prepare the journal entry to apply overhead to the manufacturing department. EB11 LO 5.5Prepare the journal entry to record the factory wages of$25,000 incurred in the processing department and $15,000 incurred in the production department assuming payment will be made in the next pay period. EB12 LO 5.5Prepare the journal entry to record the transfer of 3,500 units from the separation department to the mash department if the material cost per unit is$2 and the conversion cost per unit is $5. EB13 LO 5.5Prepare the journal entry to record the sale of 700 units that cost$5 per unit and sold for $15 per unit. ## Problem Set A PA1 LO 5.1The following product costs are available for Haworth Company on the production of chairs: direct materials,$15,500; direct labor, $22,000; manufacturing overhead,$16,500; selling expenses, $6,900; and administrative expenses,$15,200.

1. What are the prime costs?
2. What are the conversion costs?
3. What is the total product cost?
4. What is the total period cost?
5. If 7,750 equivalent units are produced, what is the equivalent material cost per unit?
6. If 22,000 equivalent units are produced, what is the equivalent conversion cost per unit?
PA2

LO 5.1The following product costs are available for Arrez Company on the production of DVD cases: direct materials, $1,450; direct labor,$15.50; manufacturing overhead, applied at 150% of direct labor cost; selling expenses, $1,550; and administrative expenses,$950. The direct labor hours worked for the month are 90 hours.

1. What are the prime costs?
2. What are the conversion costs?
3. What is the total product cost?
4. What is the total period cost?
5. If 1,450 equivalent units are produced, what is the equivalent material cost per unit?
6. What is the equivalent conversion cost per unit?
PA3

LO 5.3Pant Risers manufactures bands for self-dressing assistive devices for mobility-impaired individuals. Manufacturing is a one-step process where the bands are cut and sewn. This is the information related to this year’s production: Ending inventory was 100% complete as to materials and 70% complete as to conversion, and the total materials cost is $57,540 and the total conversion cost is$36,036. Using the weighted-average method, what are the unit costs if the company transferred out 17,000 units? What is the value of the inventory transferred out and the value of the ending WIP inventory?

PA4

LO 5.3During March, the following costs were charged to the manufacturing department: $14,886 for materials;$14,656 for labor; and $13,820 for manufacturing overhead. The records show that 30,680 units were completed and transferred, while 2,400 remained in ending inventory. There were 33,080 equivalent units of material and 31,640 of conversion costs. Using the weighted-average method, what is the cost of inventory transferred and the balance in work in process inventory? PA5 LO 5.3Materials are added at the beginning of a production process, and ending work in process inventory is 30% complete with respect to conversion costs. Use the information provided to complete a production cost report using the weighted-average method. PA6 LO 5.3Narwhal Swimwear has a beginning work in process inventory of 13,500 units and transferred in 130,000 units before ending the month with 14,000 units that were 100% complete with regard to materials and 30% complete with regard to conversion costs. The cost per unit of material is$5.80 and the cost per unit for conversion is $8.20 per unit. Using the weighted-average method, what is the amount of material and conversion costs assigned to the department for the month? PA7 LO 5.3The following data show the units in beginning work in process inventory, the number of units started, the number of units transferred, and the percent completion of the ending work in process for conversion. Given that materials are added at the beginning of the process, what are the equivalent units for material and conversion costs for each quarter using the weighted-average method? Assume that the quarters are independent. PA8 LO 5.4The finishing department started the month with 700 units in WIP inventory. It received 2,200 units from the molding department and transferred out 2,150 units. How many units were in process at the end of the month? PA9 LO 5.4The packaging department began the month with 500 units that were 100% complete with regard to material and 85% complete with regard to conversion. It received 9,500 units from the processing department and ended the month with 750 units that were 100% complete with regard to materials and 30% complete with regard to conversion. With a$5 per unit cost for conversion and a $5 per unit cost for materials, what is the cost of the units transferred out and remaining in ending inventory? PA10 LO 5.4Production information shows these costs and units for the smoothing department in August. All materials are added at the beginning of the period. The ending work in process is 30% complete as to conversion. What is the value of the inventory transferred to finished goods and the value of the WIP inventory at the end of the month? PA11 LO 5.4Given the following information, prepare a production report with materials added at the beginning and ending work in process inventory being 25% complete with regard to conversion costs. PA12 LO 5.4Complete this production cost report: PA13 LO 5.5Selected information from Skylar Studios shows the following: Prepare journal entries to record the following: 1. raw material purchased 2. direct labor incurred 3. depreciation expense (hint: this is part of manufacturing overhead) 4. raw materials used 5. overhead applied on the basis of$0.50 per machine hour
6. the transfer from department 1 to department 2
PA14

LO 5.5Loanstar had 100 units in beginning inventory before starting 950 units and completing 800 units. The beginning work in process inventory consisted of $2,000 in materials and$5,000 in conversion costs before $8,500 of materials and$11,200 of conversion costs were added during the month. The ending WIP inventory was 100% complete with regard to materials and 40% complete with regard to conversion costs. Prepare the journal entry to record the transfer of inventory from the manufacturing department to the finished goods department.

## Problem Set B

PB1

LO 5.3The following product costs are available for Stellis Company on the production of erasers: direct materials, $22,000; direct labor,$35,000; manufacturing overhead, $17,500; selling expenses,$17,600; and administrative expenses; $13,400. 1. What are the prime costs? 2. What are the conversion costs? 3. What is the total product cost? 4. What is the total period cost? 5. If 13,750 equivalent units are produced, what is the equivalent material cost per unit? 6. If 17,500 equivalent units are produced, what is the equivalent conversion cost per unit? PB2 LO 5.3The following product costs are available for Kellee Company on the production of eyeglass frames: direct materials,$32,125; direct labor, $23.50; manufacturing overhead, applied at 225% of direct labor cost; selling expenses,$22,225; and administrative expenses, $31,125. The direct labor hours worked for the month are 3,200 hours. 1. What are the prime costs? 2. What are the conversion costs? 3. What is the total product cost? 4. What is the total period cost? 5. If 6,425 equivalent units are produced, what is the equivalent material cost per unit? 6. What is the equivalent conversion cost per unit? PB3 LO 5.3Vexar manufactures nails. Manufacturing is a one-step process where the nails are forged. This is the information related to this year’s production: Ending inventory was 100% complete as to materials and 70% complete as to conversion, and the total materials cost is$115,080 and the total conversion cost is $72,072. Using the weighted-average method, what are the unit costs if the company transferred out 34,000 units? Using the weighted-average method, prepare the company’s process cost summary for the month. PB4 LO 5.3During March, the following costs were charged to the manufacturing department:$22,500 for materials; $45,625 for labor; and$50,000 for manufacturing overhead. The records show that 40,000 units were completed and transferred, while 10,000 remained in ending inventory. There were 45,000 equivalent units of material and 42,500 units of conversion costs. Using the weighted-average method, prepare the company’s process cost summary for the month.

PB5

LO 5.3Ardt-Barger has a beginning work in process inventory of 5,500 units and transferred in 25,000 units before ending the month with 3,000 units that were 100% complete with regard to materials and 80% complete with regard to conversion costs. The cost per unit of material is $5.45, and the cost per unit for conversion is$6.20 per unit. Using the weighted-average method, prepare the company’s process cost summary for the month.

PB6

LO 5.3The following data show the units in beginning work in process inventory, the number of units started, the number of units transferred, and the percent completion of the ending work in process for conversion. Given that materials are added at the beginning of the process, what are the equivalent units for material and conversion costs for each quarter using the weighted-average method? Assume that the quarters are independent. PB7

LO 5.3The following data show the units in beginning work in process inventory, the number of units started, the number of units transferred, and the percent completion of the ending work in process for conversion. Given that materials are added 50% at the beginning of the process and 50% at the end of the process, what are the equivalent units for material and conversion costs for each quarter using the weighted-average method? Assume that the quarters are independent. PB8

LO 5.3The following data show the units in beginning work in process inventory, the number of units started, the number of units transferred, and the percent completion of the ending work in process for conversion. Given that materials are added 50% at the beginning of the process and 50% at the end of the process, what are the equivalent units for material and conversion costs for each quarter using the weighted-average method? Assume that the quarters are independent. PB9

LO 5.4The finishing department started the month with 600 units in WIP inventory. It received 1,500 units from the molding department and ended the month with 550 units still in process. How many units were transferred out?

PB10

LO 5.4The packaging department began the month with 750 units that were 100% complete with regard to material and 25% complete with regard to conversion. It received 9,500 units from the processing department and ended the month with 500 units that were 100% complete with regard to materials and 75% complete with regard to conversion. With a $7 per unit material cost and a$4 per unit cost for conversion, what is the cost of the units transferred out and remaining in ending inventory?

PB11

LO 5.4Production information shows these costs and units for the smoothing department in August. What is the value of the inventory transferred out to finished goods and the value of the WIP inventory at the end of the month, assuming conversion costs are 30% complete?

PB12

LO 5.4Given the following information, prepare a production report with materials added at the beginning and ending work in process inventory being 80% complete with regard to conversion costs. PB13

LO 5.5Selected information from Hernandez Corporation shows the following: Prepare journal entries to record the following:

1. raw material purchased
2. direct labor incurred
3. depreciation expense (hint: this is part of manufacturing overhead)
4. raw materials used
5. overhead applied on the basis of $0.50 per machine hour 6. the transfer from department 1 to department 2 PB14 LO 5.5Rexar had 1,000 units in beginning inventory before starting 9,500 units and completing 8,000 units. The beginning work in process inventory consisted of$5,000 in materials and $8,500 in conversion costs before$16,000 of materials and \$18,500 of conversion costs were added during the month. The ending WIP inventory was 100% complete with regard to materials and 40% complete with regard to conversion costs. Prepare the journal entry to record the transfer of inventory from the manufacturing department to the finished goods department.

## Thought Provokers

TP1

LO 5.1How would process costing exist in a service industry?

TP2

LO 5.2Why are labor and manufacturing overhead grouped together as conversion costs?

TP3

LO 5.4How is process costing for a single manufacturing department different from a manufacturing company with multiple departments?

TP4

LO 5.5What is different between the journal entries for process costing and that of job order costing?