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Exam 16: Process Costing

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Question 41

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A company uses a process cost accounting system and the weighted-averaage inventory valuation method.Its Assembly Department's beginning inventory consisted of 50,000 units,three-fourths complete with respect to direct labor and overhead.The department started and finished 127,500 units this period.The ending inventory consists of 40,000 units that are one-fourth complete with respect to direct labor and overhead.All direct materials are added at the beginning of the process.Goods in Process included direct labor costs of $30,000 and overhead costs of $40,000 for the period.The overhead cost per equivalent unit is:

A) $0.126
B) $0.160
C) $0.178
D) $0.213
E) $0.373

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Question 42

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________ distinct groups of units must be considered in determining the equivalent units of production under the FIFO method of process costing.

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Question 43

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Match the following definitions with the appropriate terms

During a period,Department A finished and transferred 50,000 units to Department B.Of the 50,000 units,20,000 were one-fifth complete with respect to direct labor at the beginning of the period and 30,000 were started and completed during the period.Also,during the period,10,000 units were started but brought only to a stage of being htree-fifths completed.Using the FIFO inventory valuation method,the number of equivalent units produced by Department A during the period was:

A department had 65 units which were 20% complete in beginning Goods in Process Inventory.During the current period,77 units were transferred out.Ending Goods in Process Inventory was 30 units which were 20% complete.Using the weighted-average method,what are the equivalent units produced if all direct material and direct labor are added uniformly throughout the process?

A company uses a process cost accounting system.Its Sewing Department's beginning inventory consisted of 50,000 units (1/4 complete with respect to direct labor and overhead) .The Sewing Department started and finished 120,000 units this period.Its ending inventory consists of 40,000 units (1/4 complete with respect to direct labor and overhead) .All direct materials are added at the beginning of the process.Under FIFO what are the equivalent units of production for the Sewing Department for direct materials and for direct labor and overhead,respectively?

If Department G uses $53,000 of direct labor and Department H uses $21,000 of direct labor,the following journal entry would be recorded by the process cost accounting system: $\begin{array}{llr} \text {Goods in Process Inventory, Department G } &53,000\\ \text { Goods in Process Inventory, Department H } &21,000\\ \text { Factory Payroll} &&74,000\end{array}$

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 goods in process inventory.

If Department A uses $10,000 of direct materials and Department B uses $15,000 of direct materials,the following journal entry would be recorded by the process cost accounting system: $\begin{array}{llr} \text { Goods in Process Inventory, Department A } &10,000\\ \text { Goods in Process Inventory, Department B } &15,000\\ \text { Raw Materials Inventory } &25,000\end{array}$

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.

The FIFO method of process costing computes equivalent units of production in a slightly different manner than the computation used in the weighted-average method of process costing.

Accountants use the term "process cost accounting system" because these systems use a number of trained individuals and computers to process the collected cost information.

After all process cost accounting journal entries are recorded and posted for a reporting period,the Factory Payroll account should have a zero balance.

Bimrose Manufacturing uses process cost accounting and FIFO for its three-department operation.Direct materials are added at the beginning of the Department 1 process,at the halfway point of the Department 2 process,and at the beginning of the Department 3 process.Direct labor and overhead are incurred evenly throughout all departments' processes.The following information is available for September: $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$$\text { Department }$ $\begin{array}{lccc}&\underline{1}&\underline{2}&\underline{3}\\\text { Beginning in process inventory: } & & & \\\text { Units } & 2,500 & 5,500 & 1,500 \\\text { Percent complete } & 60 \% & 40 \% & 80 \% \\\text { Ending goods in process } & & &\\\text { inventory: } & \\\text { Units } & 3,500 & 4,200 & 6,500\\\text { Percent complete } & 30 \% & 60 \% & 70 \%\\\text { Units completed } &14,500 & 15,800 & 10,800\end{array}$ (a) Determine the number of units started and completed in Department 1,and the number of units transferred into and completed in Departments 2 and 3. (b) Determine the equivalent units of production for direct materials,direct labor,and overhead for each department.

Which of the following is not one of the four steps in accounting for production activity in a period?

The managers of process manufacturing systems focus on the series of processes needed to complete the production of products.

Which of the following journal entries correctly records the current month's activity where $60,000 of direct material and $17,000 of indirect materials were used in the production process?

The following data are available for a company's manufacturing activities: $\begin{array}{ll}\text { Beginning goods in process inventory } & 5,000 \text { units, } 1 / 4 \text { of the labor added this } \\& \text { period } \\\text { Units started and completed } & 15,000\\\text { Ending goods in process inventory}& 6,000 \quad 6,000 \text { units, 1 / 2 of the labor added this }\\&\text { period}\end{array}$ Assume the company uses the weighted-average inventory method.If materials are added when the production process begins and direct labor is applied uniformly throughout the process,what are the equivalent units for direct materials and for direct labor,respectively?

A process cost accounting system records all factory overhead costs directly in the Goods in Process Inventory accounts.

The use of process costing is of little benefit to a service type of operation.