Cost Accounting CH6 HW#1

Discrete production losses are assumed to occur throughout the process. Select one: True False

False

The FIFO method combines beginning inventory and current production to compute cost per unit of production. Select one: True False

False

The weighted average method separates beginning inventory and current production to compute cost per unit of production. Select one: True False

False

When a standard costing system is used with process costing, Work in Process inventory is recorded using actual costs. Select one: True False

False

Compute equivalent units of production for the period for each of the following separate scenarios. In your calculations, simply calculate work done during the period, ignoring the application of any particular costing method. Scenario The company had 96,000 units in ending inventory that had 40% of materials added and were 30% complete as to conversion costs. The company worked on 780,000 units, 600,000 of which are fully completed and 180,000 which are 80 percent complete at the end of the period for materials and conversion costs. The company worked on 211,200 units which are now in ending inventory. Materials are added at the end of the process and the process is 60 percent complete as to labor and overhead. The company finished work on the 92,400 units that were in its beginning inventory of the period. These units had 70 percent of materials added and were 35 percent complete as to labor and overhead at the start of the production period. The company started and completed 60,000 units and completed 12,000 units of its beginning inventory that had all of its materials but were only 15 percent complete as to labor and overhead at the start of the production period.

Solution: 1 EU for materials = 96,000 x 40% = 38,400 EU for conversion = 96,000 x 30% = 28,800 2 EU for materials = 600,000 + ( 80% x 180,000 ) = 744,000 EU for conversion = 600,000 + ( 80% x 180,000 ) = 744,000 3 EU for materials = 211,200 x 0% = - EU for conversion = 211,200 x 60% = 126,720 4 EU for materials = 92,400 x 30% = 27,720 EU for conversion = 92,400 x 65% = 60,060 5 EU for materials = 60,000 x 100% = 60,000 EU for conversion = 60,000 + ( 85% x 12,000 ) = 70,200

WrapAround makes one-size-fits-most capes. Each cape goes through the same conversion process, but three types of fabric (Dacron, denim, and cotton) are available. The company uses a standard costing system, and standard costs for each type of cape follow. Dacron Denim Cotton Material (2 yards) $10.00 $8.00 $12.00 Direct labor (1 hour) 9.00 9.00 9.00 Overhead (based on 1.5 machine hours) 6.00 6.00 6.00 Total $25.00 $23.00 $27.00 Material is added at the start of production. In March, there was no beginning WIP Inventory and 1,000 capes were started into production. Of these, 120 were Dacron, 200 were denim, and 680 were cotton. At the end of March, 40 capes ( 20 Dacron, 8 denim, and 12 cotton) were not yet complete. The stage of completion for each cost component for the 40 unfinished capes is as follows: Material 100% complete Direct labor 25% complete Overhead 35% complete a. Determine the total cost of the capes completed and transferred to Finished Goods Inventory. $ b. Determine the total cost of the capes in the ending WIP Inventory. $

Solution: a. Material Labor Overhead Started and completed 960 960 960 Ending WIP Inventory (100%, 25%, 35%) 40 10 14 EUP 1,000 970 974 Cost of goods transferred out Direct material: Dacron $1,000 = 100 x $10.00 Denim 1,536 = 192 x $8.00 Cotton 8,016 = 668 x $12.00 Direct labor 8,640 = 960 x $9.00 Overhead 5,760 = 960 x $6.00 Total $24,952 b. Cost of ending WIP Inventory Direct material: Dacron $200 = 20 x $10.00 Denim 64 = 8 x $8.00 Cotton 144 = 12 x $12.00 Direct labor 90 = 10 x $9.00 Overhead 84 = 14 x $6.00 Total $582

Angerstein Inc. produces calendars in a two-process, two-department operation. In the Printing Department, calendars are printed and cut. In the Assembly Department, the material received from Printing is assembled into individual calendars and bound. Each department maintains its own Work in Process Inventory, and costs are assigned using FIFO process costing. In Assembly, conversion costs are incurred evenly throughout the process; direct material is added at the end of the process. For September, the following production and cost information is available for the Assembly Department: Beginning WIP Inventory: 6,000 calendars (30 percent complete as to conversion); transferred in cost, $9,060; conversion cost, $1,312 Transferred in during September: 96,000 calendars Current period costs: transferred in, $96,000; direct material, $12,324; conversion, $16,789 Ending WIP Inventory: 7,200 calendars (80 percent complete as to conversion) For the Assembly Department, compute the following: a. Equivalent units of production for each cost component b. Cost per EUP for each cost component Note: Round your answers to two decimal places. c. Cost transferred to Finished Goods Inventory Note: Round your final answer to the nearest whole dollar. Note: Use the rounded rates from part (b) in your calculations. d. Cost of ending WIP Inventory Note: Round your final answer to the nearest whole dollar. Note: Use the rounded rates from part (b) in your calculations.

Solution: a. Units Trans. In Material Conversion Beginning WIP Inventory (0%, 100%, 70%) 6,000 0 6,000 4,200 Started & completed 88,800 88,800 88,800 88,800 Ending WIP Inventory (100%, 0%, 80%) 7,200 7,200 0 5,760 EUP (WA) 102,000 96,000 94,800 98,760 * 96,000 - 7,200 = 88,800 b. Costs Total Trans. In Material Conversion Beginning WIP Inventory $10,372 Current period $125,113 $96,000 $12,324 $16,789 Total cost to account for $135,485 Divided by EUP 96,000 94,800 98,760 Cost per EUP $1.30 $1.00 $0.13 $0.17 c. Beginning WIP costs $10,372 Cost to complete: DM1 $780 CC2 714 11,866 Started and completed3 115,440 Cost transferred out $127,306 1 6,000 x $0.13 = $780 2 4,200 x $0.17 = $714 3 88,800 x $1.30 = $115,440 d. Transferred in 7,200 x $1.00 $7,200.00 Conversion 5,760 x $0.17 979.20 Total ending WIP cost $8,179 (rounded)

In October, Pedraza Corp.'s production was 75,040 equivalent units for direct material, 68,320 equivalent units for direct labor, and 58,800 equivalent units for overhead. During October, direct material, conversion, and overhead costs incurred were as follows: Direct material $222,163 Conversion 265,507 Overhead 119,280 Beginning WIP Inventory costs for October were $36,725 for direct material, $27,306 for direct labor, and $28,896 for overhead. a. How much did Pedraza Corp. spend on direct labor in October? $ b. What was the October weighted average cost per equivalent unit for direct material, direct labor, and overhead? Note: Round your answers to two decimal places. DM cost per EU $Answer DL cost per EU $Answer OH cost per EU $

Solution: a. DL cost = Conversion cost - OH cost DL cost = $265,507 - $119,280 = $146,227 b. DM DL Overhead Beginning WIP Inventory $36,725 $27,306 $28,896 Current period 222,163 146,227 119,280 Total costs $258,888 $173,533 $148,176 Divided by EUP 75,040 68,320 58,800 Cost per EUP $3.45 $2.54 $2.52

In manufacturing its products, Trevano Corp. adds all direct material at the beginning of the production process. The company's direct labor and overhead are considered to be continuously at the same degree of completion. September production information is as follows: Beginning WIP Inventory 20,000 pounds Started during September 50,000 pounds Completed during September 64,000 pounds As of September 1, the beginning WIP Inventory was 30 percent complete as to labor and overhead. On September 30, the ending WIP Inventory was 80 percent complete as to conversion. a. Determine the total number of pounds to account for if Trevano uses the weighted average process costing method. pounds b. Determine the equivalent units of production for direct material. pounds c. Determine the equivalent units of production for direct labor and overhead. pounds

Solution: a. 20,000 + 50,000 = 70,000 pounds b. & c. Units DM CC Beginning WIP Inventory 20,000 20,000 20,000 Started & completed* 44,000 44,000 44,000 Ending WIP Inventory (80%) 6,000 6,000 4,800 EUP 70,000 70,000 68,800 *Started and completed = 50,000 - ( 70,000 - 64,000) = 44,000 pounds

In manufacturing its products, Trevano Corp. adds all direct material at the beginning of the production process. The company's direct labor and overhead are considered to be continuously at the same degree of completion. The company uses the FIFO method of process costing. September production information is as follows: Beginning WIP Inventory 16,000 pounds Started during September 40,000 pounds Completed during September 51,200 pounds As of September 1, the beginning WIP Inventory was 30 percent complete as to labor and overhead. On September 30, the ending WIP Inventory was 80 percent complete as to conversion. a. What proportion of work needs to be performed on the beginning inventory units to complete them? % b. What are the equivalent units of production for direct material?pounds c. What are the equivalent units of production for conversion? pounds

Solution: a. Work to be performed = 100% - 30% = 70% for conversion costs only b. & c. Beginning WIP Inventory 16,000 Started 40,000 Accountable for 56,000 Completed (51,200) Ending WIP Inventory 4,800 Units DM CC Beginning WIP Inventory (70%) 16,000 0 11,200 Started & completed* 35,200 35,200 35,200 Ending WIP Inventory (80%) 4,800 4,800 3,840 EUP 56,000 40,000 50,240 *Started and completed = 40,000 - ( 56,000 - 51,200) = 35,200 pounds

A hybrid costing system would be appropriate for a company that manufactures several varieties of jam. Select one: True False

True

Stone Corporation adds material at the start to its production process and has the following information available for August: Beginning Work in Process Inventory (40% complete as to conversion) 7,000 units Started this period 32,000 units Ending Work in Process Inventory (25% complete as to conversion) 2,500 units Transferred out ? Refer to Stone Corporation. Calculate equivalent units of production for material using weighted average. Select one: a. 39,000 b. 37,125 c. 32,000 d. 34,325

a. 39,000 Equivalent Units for ConversionBeginning Inventory (7,000 units)7,000Started this period (32,000)32,000 39,000eq. units The correct answer is: 39,000

A process costing system is used by a company that Select one: a. produces homogeneous products. b. produces heterogeneous products. c. accumulates costs by job. d. produces items by special request of customers.

a. produces homogeneous products.

Watson Corporation has the following information for the current month: Units started 95,000 units Beginning Work in Process: (30% complete) 15,000 units Normal spoilage (discrete) 3,000 units Abnormal spoilage 4,000 units Ending Work in Process: (75% complete) 15,000 units Transferred out 88,000 units Beginning Work in Process Costs: Material $18,000 Conversion 14,000 All materials are added at the start of the production process. Watson Corporation inspects goods at 75 percent completion as to conversion. Refer to Watson Corporation. Assume that the costs per EUP for material and conversion are $2.00 and $2.25, respectively. Using FIFO, what is the total cost assigned to the transferred-out units (rounded to the nearest dollar)? Select one: a. $365,875 b. $376,938 c. $344,938 d. $378,625

b. $376,938 Transferred Out Units: FIFO Beginning Work in Process $32,000 + Completion of Beginning Inventory (15,000 * 70%) 10,500 $2.25 23,625 + Units Started and Completed 73,000 4.25 310,250 +Normal Spoilage-- Discrete-Materials 3,000 2.00 6,000 +Normal Spoilage-- Discrete-Conversion (3,000 * 75%) 2,250 2.25 5,063 Total Costs Assigned to Transferred Units $376,938 The correct answer is: $376,938

Campbell Corporation Beginning inventory (30% complete as to Material B and 60% complete for conversion) 700 units Started this cycle 2,000 units Ending inventory (50% complete as to Material B and 80% complete for conversion) 500 units Beginning inventory costs: Material A $14,270 Material B 5,950 Conversion 5,640 Current Period costs: Material A $40,000 Material B 70,000 Conversion 98,100 Material A is added at the start of production, while Material B is added uniformly throughout the process. Refer to Campbell Corporation. Assuming a FIFO method of process costing, compute the average cost per EUP for conversion. Select one: a. $45.50 b. $43.03 c. $45.00 d. $47.59

c. $45.00 Conversion Costs (Current Period) Equivalent Units Average Cost per EUP $98,100 2,180 $45.00 (.40*700=280)+(1,500)+(.80*500=400)=2,180 The correct answer is: $45.00