ACCT - SMARTBOOK #3

What is the journal entry to record the transfer of partially completed products from Processing Department #1 to Processing Department #2?

Debit Work in Process (Department #2) and credit Work in Process (Department #1).

Recording the transfer of partially completed products from one processing department to another requires a debit and a credit to the _______ accounts of both of the processing departments.

Work in Process Inventory

A production report prepared using FIFO costing ______.

Work in Process Inventory (Dept. #1) and credit Salary or Wages Payable

When goods are sold, ______.

a journal entry to record the sale and a journal entry to record the cost of goods sold must be made

When using process costing, ______.

a separate production report is prepared for each process

Under FIFO costing, partially completed units in beginning inventory are _______.

assumed to be completed first

The formula to reconcile the number of physical units is Units in ___________ Inventory + Units Started = Units Completed + Units in ________ inventory.

beginning / ending

The formula to reconcile the number of physical units the company worked on during the period is units in ______

beginning inventory + units started = units completed + units in ending inventory

A production report presents ______.

both costs to be accounted for and costs accounted for.

A production report includes ______.

both unit and cost information

When customers purchase products, the manufacturing costs associated with the products are transferred to ______.

cost of goods sold

When products are sold, manufacturing costs are transferred to ______.

cost of goods sold

Issuing raw materials into production requires a ______ to the Raw Materials account.

credit

The correct journal entry to apply manufacturing overhead costs Process #1 would be to ________ MOH __________ work in process inventory (process#1)c

credit ; debit

The journal entry to record the transfer of completed units to finished goods is _________ finished goods inventory and _________work in process inventory.

debit ; credit

The purchase of raw materials is recorded with a ______ to Raw Materials Inventory and a ___________ to accounts payable

debit; credit

For a juice maker, grapes would be considered a(n)

direct material

Calculating the number of physical units worked on during the period is ______.

done the same way under FIFO as under the weighted-average method

In order to track the cost of partially completed units, they must be converted into a(n) __________ number of fully completed units.

equivalent

When using process costing, nonmanufacturing costs are ______.

expensed during the period incurred

The key difference between the weighted-average method and the FIFO method is how they deal with units and costs ______.

in beginning Work in Process Inventory

Under FIFO costing, the cost of beginning inventory ______.

is automatically transferred out of Work in Process Inventory with units completed

When computing equivalent units using the weighted-average method, ______.

only partially completed units in ending inventory are part of the calculation

An equivalent unit is a measure used to convert _________ completed units into the equivalent of a full unit.

partial

A journal entry debiting Work in Process Inventory and crediting Raw Materials Inventory records ______.

placing materials into production

Information about the number of units and costs that flow through a manufacturing process during an accounting period is provided on the _________ report.

production

The foundation of a process costing system is the ______.

production report

The first step in preparing a weighted-average production report is ______.

reconcile the number of physical units

Units completed - units in beginning inventory = units ______.

started and completed

The number of units both started and completed during the period must be computed when using ______.

the FIFO method

Costs that are moved from one production process to another are called ___________-_____________ costs

transferred in

What is a key difference between process and job order costing?

under process costing it makes no sense to try to identify materials, labor and overhead costs with a particular customer order

When production is completed in the last processing department, the units are transferred to the ____________ __________ inventory account.

Finished goods

Once production is completed, total manufacturing costs are transferred to ______.

Finished goods inventory

JVL Inc. adds all direct materials at the start of the production process. For a given period they had 100 units in beginning inventory that were 60% complete as to conversion costs. During the period, 1,500 units were started and completed. Ending inventory contained 200 units that were 30% complete as to conversion costs. Compute the equivalent units for conversion costs using the FIFO method.

1,600 units Reason: Since the beginning inventory is 60% complete, 40% is required to finish it. (100 × 40%) 40 in beginning inventory + 1,500 started and completed + (200 × 30%) 60 in ending inventory = 1,600

Given the following, compute the conversion cost per equivalent unit using the weighted-average method. Conversion costs in beginning inventory $5,000. Conversion costs added in the current period $40,000. A total of 1,000 units were completed and transferred out during the period. The 500 units in ending inventory are 50% complete.

$36 Reason: ($5,000 + $40,000) ÷ (1,000 + 500 × 50%) = $36

Using the FIFO method, what is the cost per equivalent unit if cost in beginning inventory is $3,000, current costs are $6,000, and there are 75 equivalent units of production?

$80 Reason: $6,000 ÷ 75 = $80.

Which of the following statements are true?

- Under the weighted-average method, beginning inventory costs are treated just like costs added during the current period. - Costs that move from one process to another are called transferred-in costs.

Conversion costs include ______.

- direct labor and manufacturing overhead

The total cost of Work in Process Inventory ______.

- is divided between ending inventory and costs transferred to the next process or Finished Goods - includes beginning Work in Process plus current costs

Equivalent units of production are needed to ______.

- properly prepare GAAP-based financial statements - determine the cost of partially completed units

Given 100 units in beginning inventory, 1,500 units started, and 200 units in ending inventory, the number of units started and completed equals ______.

1,300 Reason: 1,500 - 200 = 1,300. The other 100 units transferred out were in beginning inventory.

Given 100 units in beginning inventory, 1,500 units started, and 200 units in ending inventory, the number of units completed equals ______.

1,400 Reason: 100 + 1,500 - 200 = 1,400

JVL Inc. adds all direct materials at the start of the production process. For a given period they had 100 units in beginning inventory that were 40% complete as to conversion costs. During the period, 1,500 units were started and completed. Ending inventory contained 200 units that were 30% complete as to conversion costs. Compute the equivalent units for direct materials using the FIFO method.

1,700 units Reason: 0 in beginning inventory + 1,500 started and completed + 200 in ending inventory = 1,700.

A FIFO costing process had 400 units in beginning inventory. If 2,000 units were started and 600 units are in ending inventory, ______________ units were completed during the period.

1,800

Place the steps in order as needed to prepare a production report using the weighted average method

1. Reconcile the number of physical units 2. Convert physical units into equivalent units 3. calculate cost per equivalent units 4. reconcile the total cost of Work in process inventory 5. prepare the report

Reconciling the total cost of Work in Process Inventory is the ______ step in preparing a production report using the weighted-average method.

4th

How many physical units are in ending inventory if 300 units were in beginning inventory, a total of 1,500 were started, and 1,300 were completed?

500 Reason: 300 + 1,500 = 1,300 + Units in Ending Inventory

Given $40,000 of current costs, $3,000 of costs in beginning inventory, and 500 equivalent units, the cost per equivalent unit using the weighted-average method is $

86

Which of the following statements is true regarding process costing?

A separate production report is prepared for each major process.

Which of the following products would be more suitable for process costing than job order costing?

Breakfast cereal Gasoline Sunscreen

The entry to record the sale of finished goods to customers is to debit ______.

Cost of Goods Sold and credit Finished Goods Inventory

The journal entry to record labor costs for Process #1 is to _________Salaries or Wages Payable and ___________ work in process Inventory.

Credit; debit

Cost per equivalent unit under FIFO costing is equal to ______.

Current Costs ÷ Equivalent Units

When using process costing, major material inputs used in production that can be traced to the product are ______.

Direct materials

Under the FIFO method, which of the following inventory balances are used in the calculation of equivalent units?

Ending work in process inventory Beginning Work in process inventory

Which of the following is included in computing equivalent units under the FIFO method, but not under the weighted-average method?

Equivalent units to complete beginning work in process

True or false: Process costing can only be used by manufacturing firms.

FALSE

Which method calculates cost per equivalent unit using only costs incurred by the processing department in the current period?

FIFO

The journal entry to record the transfer of completed units to finished goods is debit ______.

Finished Goods Inventory and credit Work in Process Inventory

Which of the following is not a method that can be used to prepare process costing production reports?

LIFO

To record the purchase of raw materials, debit ______.

Raw Materials Inventory and credit Accounts Payable

True or false: A production report prepared using the weighted-average method is structured very similarly to a production report using the FIFO method.

TRUE

True or false: The equivalent units of production computed under the weighted-average method does not take into account the percentage completed of the beginning inventory.

TRUE

True or false: When using process costing, direct labor costs are often combined with manufacturing overhead into a single cost category.

TRUE

True or false: When using the FIFO method, the number of units both started and completed during the period must be calculated.

TRUE

How are manufacturing overhead costs distributed in each process?

The costs are distributed based on a predetermined overhead rate.