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5.E: Process Costing (Exercises)

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    Multiple Choice

    1. Which 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.
    Answer:

    c

    1. A 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
    2. Which of the following is a prime cost?
      1. direct labor
      2. work in process inventory
      3. administrative labor
      4. factory maintenance expenses
    Answer:

    a

    1. Which of the following is a conversion cost?
      1. raw materials
      2. direct labor
      3. sales commissions
      4. direct material used
    2. During 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
    Answer:

    d

    1. Which 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
    2. What 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. \(\$605,000\)
    Answer:

    a

    1. What 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. \(\$120,000\)
    2. Which 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
    Answer:

    c

    1. Direct 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. \(\$20,000\)
    2. Beginning 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. \(\$55,000\)
    Answer:

    b

    1. The 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. \(10,250\)
    2. There 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. \(17,000\)
    Answer:

    c

    1. The 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
    2. Which 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
    Answer:

    c

    1. The 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. Debit Work in Process Inventory, Credit Accounts Payable 500 (When added to the process).
      2. Debit work in Process Inventory 500, credit Materials Inventory 300, Labor Payable 150, Manufacturing Overhead 50 (As incurred or applied).
      3. Debit Cost of Goods Sold and debit Work in Process Inventory 500 (When transferred).
      4. Debit Accounts Payable and credit Work in Process Inventory 500 (When added to the process).
    2. Assigning 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
    Answer:

    c

    1. In 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
    2. In a process cost system, factory depreciation expense incurred is debited to ________.
      1. finished goods inventory
      2. work in process inventory
      3. manufacturing overhead
      4. cost of goods sold
    Answer:

    c

    Questions

    1. Explain how process costing differs from job order costing.
    Answer:

    Answers will vary but should include the following:

    Area Process Job Order
    Types of jobs Identical Custom order
    Quantity within each job Large volume Small volume
    Cost accumulation In each department In each job
    1. Would a pharmaceutical manufacturer use process or job order costing? Why?
    2. Which costs are assigned using the weighted-average method?
    Answer:

    The weighted-average method assigns the beginning inventory and the costs added during the period. The weighted-average method does not differentiate between the beginning inventory and the units started in production. This is different from the FIFO method that accounts for the beginning inventory differently and separately from current period costs.

    1. What is the primary purpose of process costing?
    2. What is the difference between prime costs and conversion costs?
    Answer:

    Prime costs and conversion costs both include labor. Prime costs are the direct costs, other than equipment, used in manufacturing and therefore are direct material and direct labor. Conversion costs are the costs involved in converting the direct material into the product and therefore are direct labor and manufacturing overhead.

    1. Explain conversion costs using an example.
    2. Why are there conversion costs in both job order costing and process costing?
    Answer:

    Job order costing and process costing are the accounting systems used to record the costs expended to produce a product. Conversion costs are the direct labor and manufacturing overhead involved in the production process and exist regardless of the accounting system used.

    1. What are equivalent units of production, and how are they used in process costing?
    2. How can there be a different number of equivalent units for materials as compared to conversion costs?
    Answer:

    While conversion typically occurs evenly throughout the process, materials are not typically added evenly, so the ending work in process can be different. For example, when materials are added at the beginning of the process, materials can be 100% complete and conversion can be 50% complete. Different completion percentages result in different equivalent units.

    1. Why is the number of equivalent units for materials only sometimes equal to the equivalent units for conversion?
    2. What 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?
    Answer:
    • Step 1: Determine the units to which costs are assigned.
    • Step 2: Compute the equivalent units of production.
    • Step 3: Determine the cost per equivalent unit.
    • Step 4: Allocate the costs to the units transferred out and the units partially completed.
    1. What is the weighted-average method for computing the equivalent units of production?
    2. How does process costing treat the costs transferred in from another department?
    Answer:

    The costs transferred in are treated in the same way as direct material that is added to production at the beginning of the process.

    1. Why does each department have its own work in process inventory?
    2. Match 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
    Answer:

    a. iv; b. ii; c. vi; d. vii; e. iii; f. v; g. i; h. viii.

    1. How is manufacturing overhead handled in a process cost system?
    2. How are predetermined overhead rates used in process costing?
    Answer:

    Prior to the new year, a company computes the estimates of the annual overhead per department divided by the estimated driver for that department. A driver is the measure that increases the cost of overhead and is commonly direct labor hours, direct labor cost, or machine hours. The result is the predetermined overhead rate. Costs are accumulated in an account called manufacturing overhead. At the end of each period, the overhead is removed from the overhead account and applied to the department.

    Exercise Set A

    1. How 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?
    2. A 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?
    3. Given 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
    4. There 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?
    5. A 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?
    6. There 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?
    7. How 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?
    8. How 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?
    9. Using 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.
    10. Using 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.
    11. Mazomanie 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?
    12. What 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 (\(\$1,156,696\))?
    13. A 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?
    14. A 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?
    15. Production 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?
    16. Overhead 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.
    17. Prepare 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.
    18. Prepare 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 \(\$5.50\).
    19. Prepare 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

    1. Given 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.
    2. There 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?
    3. A 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?
    4. There 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?
    5. Using 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.
    6. What 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 (\(\$62,500\))?
    7. A 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?
    8. A 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?
    9. Production 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?
    10. Overhead 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.
    11. Prepare 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.
    12. Prepare 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 \(\$5\).
    13. Prepare the journal entry to record the sale of \(700\) units that cost \(\$5\) per unit and sold for \(\$15\) per unit.

    Problem Set A

    1. The 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?
    2. The 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?
    3. Pant 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:
    Units to account for: (Units, Materials, Conversion, respectively): Beginning WIP inventory 500, 500, 250; Started 20,500, ?, ?; To account for 21,000, ? , ?

    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?

    1. During 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?
    2. Materials 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.
    Costs to Account for: Beginning inventory materials $10,000, Beginning inventory conversion 19,000, Direct material 50,000, Direct labor 75,000, Applied overhead 37,248 equals Total costs to account for $191,248. Units to Account for: Beginning WIP 5,000, Units started into production 20,000, Transferred out 19,000.
    1. Narwhal 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?
    2. The 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.
    Quarter, Beginning WIP, Started, Transferred Out, and Conversion percent (respectively): 1, –, 134,250, 133,250, 25; 2, 523, 132,593, 132,541, 24; 3, 338, 133,245, 133,443, 20; 4, 489, 134,843, 134,232, 23.
    1. The 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?
    2. The 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?
    3. Production information shows these costs and units for the smoothing department in August.
    Work in process Cost: Beginning Balance, materials $1,550, Beginning Balance, conversion 2,500, Materials 7,411, Labor 14,520, Overhead 7,930. Units: Beginning Units 650, Transferred in units 1,780, Transferred out units 1,810.

    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?

    1. Given 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.
    Costs to Account for: Beginning inventory materials $5,000, Beginning inventory conversion 1,000, Direct material 24,170, Direct labor 44,500, Applied overhead 12,400, Transferred in materials 8,000, Transferred in conversion 10,200 equals Total costs to account for $105,270 Units to Account for: Beginning WIP 3,500, Units started into production 85,000, Transferred out 84,000.
    1. Complete this production cost report:
    Beginning inventory 20,000, Started during the month 75,000, Total units to account for ?; Completed and transferred out 70,000, Ending WIP ?, Total units accounted for ?; Total units, 100% Materials Units, 25% Conversion Units respectively: Completed and transferred out 70,000, 70,000, 70,000; Ending WIP ?, ?, ?; Total units accounted for ?, ?, ?. Costs to account for: Beginning WIP $19,500, 3,500, 16,000; Transferred in ?, ?, ?; Incurred during the period $70,000, 25,000, 45,000; Total costs to account for ?, ?, ?; Equivalent units –, ?, ?; Cost per equivalent unit for dep’t –, ?, ?; Transferred out costs ?; End WIP: materials?; End WIP: conversion ?; EndWIP total ?; Costs to account for ?
    1. Selected information from Skylar Studios shows the following:
    Raw materials purchased $5,000, Direct materials $1,500, Direct labor $11,000, Factory depreciation $2,000, Total manufacturing overhead incurred $15,000, Machine hours per month 28,000, Unit cost for material $2, Unit cost of conversion $8, Number units transferred 15,000.

    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
    1. Loanstar 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

    1. The 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?
    2. The 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?
    3. Vexar manufactures nails. Manufacturing is a one-step process where the nails are forged. This is the information related to this year’s production:
    Units to account for: (Units, Materials, Conversion, respectively): Beginning WIP inventory 1,000, 1,000, 500; Started 41,000, ?, ?; To account for 42,000, ?, ?.

    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.

    1. During 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.
    2. Ardt-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.
    3. The 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.
    Quarter, Beginning WIP, Started, Transferred Out, and Conversion percent (respectively): 1, –, 255,000, 235,000, 50; 2, 2,500, 275,000, 250,000, 40; 3, 3,600, 290,000, 275,000, 45; 4, 6,500, 300,000, 280,000, 60.
    1. The 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.
    Quarter, Beginning WIP, Started, Transferred Out, and Conversion percent (respectively): 1, –, 134,250, 133,250, 25; 2, 523, 132,593, 132,541, 24; 3, 338, 133,245, 133,443, 20; 4, 489, 134,843, 134,232, 23.
    1. The 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.
    Quarter, Beginning WIP, Started, Transferred Out, and Conversion percent (respectively): 1, –, 255,000, 235,000, 50; 2, 2,500, 275,000, 250,000, 40; 3, 3,600, 290,000, 275,000, 45; 4, 6,500, 300,000, 280,000, 60.
    1. The 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?
    2. The 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?
    3. Production information shows these costs and units for the smoothing department in August.
    Work in process Cost: Beginning Balance, materials $5,213, Beginning Balance, conversion 8,321, Materials 10,403, Labor 16,000, Overhead 13,475. Units: Beginning Units 1,100, Transferred in units 24,500, Transferred out units 1,300.

    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?

    1. Given 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.
    Costs to Account for: Beginning inventory materials $25,000, Beginning inventory conversion 30,500, Direct material 2,000, Direct labor 45,000, Applied overhead 11,840, Transferred in materials 12,015, Transferred in conversion 33,500 equals Total costs to account for $159,855 Units to Account for: Beginning WIP 4,000, Units started into production 9,500, Transferred out 9,600.
    1. Selected information from Hernandez Corporation shows the following:
    Raw materials purchased $12,000, Direct materials $3,500, Direct labor $14,000, Factory depreciation $4,200, Total manufacturing overhead incurred $18,500, Machine hours per month 34,000, Unit cost for material $2.75, Unit cost of conversion $5.95, Number units transferred 16,500.

    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
    1. Rexar 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

    1. How would process costing exist in a service industry?
    2. Why are labor and manufacturing overhead grouped together as conversion costs?
    3. How is process costing for a single manufacturing department different from a manufacturing company with multiple departments?
    4. What is different between the journal entries for process costing and that of job order costing?

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