Cost Accounting CH6 HW#2

Calculations for standard process costing are identical to those for weighted average process costing. Select one: True False

FALSE

The numerator in the formula for equivalent units includes all beginning inventory costs when using the FIFO costing assumption. Select one: True False

False

BeGone manufactures spray cans of insect repellent. On August 1, the company had 15,680 units in the beginning WIP Inventory that were 100 percent complete as to canisters, 60 percent complete as to other materials, 40 percent complete as to direct labor, and 20 percent complete as to overhead. During August, BeGone started 130,400 units in the manufacturing process. Ending WIP Inventory included 7,360 units that were 100 percent complete as to canisters, 40 percent complete as to other materials, 20 percent complete as to direct labor, and 10 percent complete as to overhead. Cost information for the month is as follows: Beginning WIP Inventory Canisters $10,456 Other direct materials 8,644 Direct labor 8,950 Overhead 1,712 August costs Canisters $99,104 Other direct materials 138,869 Direct labor 114,836 Overhead 256,282 Prepare a schedule showing the BeGone August computation of FIFO equivalent units of production and cost per equivalent unit. Note: Round the cost per equivalent unit amounts to two decimal places. 1. FIFO equivalent units of production 2. Schedule of cost per equivalent units of production

Solution: 1. FIFO equivalent units of production Canisters Other Materials DL OH Beg. Inv. (0%, 40%, 60%, 80%) 0 6,272 9,408 12,544 Started & completed* 123,040 123,040 123,040 123,040 EI (100%, 40%, 20%, 10%) 7,360 2,944 1,472 736 EUP 130,400 132,256 133,920 136,320 * 130,400 - 7,360 = 123,040 2. Schedule of cost per equivalent units of production Canisters Other Materials DL OH Total Current period $99,104 $138,869 $114,836 $256,282 $609,091 Divided by EUP 130,400 132,256 133,920 136,320 Cost per EUP $0.76 $1.05 $0.86 $1.88 $4.55

In November, Lamb Co. computed its equivalent unit costs under FIFO process costing as follows: Direct material $29.50 Packaging 3.00 Direct labor 10.84 Overhead 7.68 Direct material and packaging are added at the start and end of processing, respectively. Beginning inventory cost was $616,086 and consisted of $473,424 direct material cost for 32,400 EUP. $55,117 direct labor cost for 9,720 EUP. $87,545 overhead cost for 11,340 EUP. Lamb Co. transferred a total of 222,000 units to finished goods during November and had 7,200 units in ending WIP Inventory. The ending inventory units were 30 percent complete as to direct labor and 55 percent complete as to overhead. a. What percentage complete were the beginning inventory units as to direct material? % What percentage complete were the beginning inventory units as to packaging? % What percentage complete were the beginning inventory units as to direct labor? % What percentage complete were the beginning inventory units as to overhead? % b. What was the total cost of the completed beginning inventory units? $ c. What was the cost of the units started and completed in November? $ d. What was the cost of November's ending inventory? $

Solution: a. Because direct material (other than packaging) is 100 percent complete at the start of production, the number of EUP shown for direct material is also the number of units in BI. Material: 32,400 / 32,400 = 100% Packaging: 0 / 32,400 = 0% Labor: 9,720 / 32,400 = 30% Overhead: 11,340 / 32,400 = 35% b. Beginning WIP Inventory: DM (other than packaging) $473,424.00 DL 55,117.20 Overhead 87,544.80 $616,086.00 Complete beginning WIP Inventory: Packaging 1 $97,200.00 DL 2 245,851.20 Overhead 3 161,740.80 504,792.00 Total cost to account for $1,120,878.00 1 32,400 x 100% x $3.00 = $97,200.00 2 32,400 x 70% x $10.84 = $245,851.20 3 32,400 x 65% x $7.68 = $161,740.80 c. # of units S&C = Units completed - Units in BI # of units S&C = 222,000 - 32,400 = 189,600 Cost of units S&C = 189,600 × ($29.50 + $3.00 + $10.84 + $7.68) = $9,673,392.00 d. DM (other than packaging): 7,200 x 100% x $29.50 = $212,400.00 Labor: 7,200 x 30% x $10.84 = 23,414.40 Overhead: 7,200 x 55% x $7.68 = 30,412.80 Total $266,227.20

Conversion costs include all manufacturing costs other than direct materials. Select one: True False

True

Costs of normal shrinkage and normal continuous losses in a process costing environment are handled by the method of neglect. Select one: True False

True

Keyser Corporation The following information is available for Keyser Corporation for the current year: Beginning Work in Process Cost of Beginning Work in Process: (75% complete) 14,500 units Material $25,100 Started 75,000 units Conversion 50,000 Ending Work in Process Current Costs: (60% complete) 16,000 units Material $120,000 Abnormal spoilage 2,500 units Conversion 300,000 Normal spoilage (continuous) 5,000 units Transferred out 66,000 units All materials are added at the start of production. Refer to Keyser Corporation. Using FIFO, what is the cost per equivalent unit for material? Select one: a. $1.71 b. $1.42 c. $1.66 d. $1.60

a. $1.71 FIFO: Materials Current Period $120,000 120,000 ÷ 70,000 units = $1.71 per unit The correct answer is: $1.71

The Baker Corporation makes wreaths in two departments: Forming and Decorating. Forming began the month with 500 wreaths in process that were 100 percent complete as to material and 40 percent complete as to conversion. During the month, 6,500 wreaths were started. At month end, Forming had 2,100 wreaths that were still in process that were 100 percent complete as to material and 50 percent complete as to conversion. Assume Forming uses the weighted average method of process costing. Costs in the Forming Department are as follows: Beginning Work in Process Costs: Material $1,000 Conversion 1,500 Current Costs: Material $3,200 Conversion 5,045 The Decorating Department had 600 wreaths in process at the beginning of the month that were 80 percent complete as to material and 90 percent complete as to conversion. The department had 300 units in ending Work in Process that were 50 percent complete as to material and 75 percent complete as to conversion. Decorating uses the FIFO method of process costing, and costs associated with Decorating are: Beginning WIP Inventory: Transferred In $1,170 Material 4,320 Conversion 6,210 Current Period: Transferred In ? Material $67,745 Conversion 95,820 Refer to Baker Corporation. Assume 8,000 units were transferred to Decorating. Compute the number of equivalent units as to costs in Decorating for the transferred- in cost component. Select one: a. 8,000 b. 8,600 c. 7,700 d. 7,400

a. 8,000 The transferred-in cost component is the 8,000 units that were transferred in. The correct answer is: 8,000

Weiss Company Weiss Company adds material at the start of production. The following production information is available for September: Beginning Work in Process Inventory (45% complete as to conversion) 10,000 units Started this period 120,000 units Ending Work in Process Inventory (80% complete as to conversion) 8,200 units Beginning Work in Process Inventory Costs: Material $24,500 Conversion 68,905 Current Period Costs: Material $75,600 Conversion 130,053 Refer to Weiss Company. What is the conversion cost per equivalent unit using the FIFO method? Select one: a. $1.61 b. $1.05 c. $0.95 d. $1.55

b. $1.05 Conversion Costs: Beginning (Ignored) Current Period $130,053 $130,053 ÷ 123,860 units= $1.05 per unit The correct answer is: $1.05

Jensen Corporation The following information is available for Jensen Corporation for the current month: Started this month 80,000 units Beginning WIP (40% complete) 7,500 units Normal Spoilage (discrete) 1,100 units Abnormal spoilage 900 units Ending WIP (70% complete) 13,000 units Transferred out 72,500 units Beginning Work in Process Costs: Material $10,400 Conversion 13,800 Current Costs: Material $120,000 Conversion 350,000 All materials are added at the start of production and the inspection point is at the end of the process. Refer to Jensen Corporation. What is the cost assigned to normal spoilage and how is it classified using weighted average? Select one: a. $6,193 assigned to loss account b. $6,424 assigned to units Transferred Out c. $6,424 allocated between WIP and Transferred Out d. $6,193 allocated between WIP and Transferred Out

b. $6,424 assigned to units Transferred Out AbnormalSpoiled UnitsPrice perEquivalent UnitTotal1,100$5.84$6,424 Transferred Out The correct answer is: $6,424 assigned to units Transferred Out

Jensen Corporation The following information is available for Jensen Corporation for the current month: Started this month 80,000 units Beginning WIP (40% complete) 7,500 units Normal Spoilage (discrete) 1,100 units Abnormal spoilage 900 units Ending WIP (70% complete) 13,000 units Transferred out 72,500 units Beginning Work in Process Costs: Material $10,400 Conversion 13,800 Current Costs: Material $120,000 Conversion 350,000 All materials are added at the start of production and the inspection point is at the end of the process. Refer to Jensen Corporation. What is cost per equivalent unit for conversion costs using FIFO? Select one: a. $4.38 b. $4.00 c. $4.34 d. $4.19

c. $4.34 FIFO: Conversion Current Period $350,000 $350,000 ÷ 80,600 units= $4.34 /unit The correct answer is: $4.34

Gibson Corporation has the following information for the current month: Units started 100,00 units Beginning Work in Process: (35% complete) 20,000 units Normal spoilage (discrete) 3,500 units Abnormal spoilage 5,000 units Ending Work in Process: (70% complete) 14,500 units Transferred out 97,000 units Beginning Work in process Costs: Material $15,000 Conversion 10,000 All materials are added at the start of the production process. Gibson Corporation inspects goods at 75 percent completion as to conversion. Refer to Gibson Corporation. What are equivalent units of production for conversion costs assuming weighted average is used? Select one: a. 114,400 b. 115,650 c. 113,525 d. 114,775

c. 113,525 Conversion: Weighted Average Beginning Work in Process 20,000 100% 20,000 + Units Started and Completed 77,000 100% 77,000 +Normal Spoilage--Discrete Materials 3,500 75% 2,625 +Abnormal Spoilage 5,000 75% 3,750 +Ending Work in Process 14,500 70% 10,150 Equivalent Units of Production 113,525 The correct answer is: 113,525

The FIFO method of process costing will produce the same cost of goods transferred out amount as the weighted average method when Select one: a. the goods produced are homogeneous. b. beginning and ending Work in Process Inventories are each 50 percent complete. c. there is no beginning Work in Process Inventory. d. there is no ending Work in Process Inventory.

c. there is no beginning Work in Process Inventory.

The cost of abnormal continuous losses is Select one: a. considered a product cost. b. absorbed by all units in ending inventory and transferred out on an equivalent unit basis. c. absorbed by all units past the inspection point. d. written off as a loss on an equivalent unit basis.

d. written off as a loss on an equivalent unit basis.

A process costing system Select one: a.Calculate average costper whole unitDetermines total units toaccount foryesyes b.Calculate average costper whole unitDetermines total units toaccount foryesno c.Calculate average costper whole unitDetermines total units toaccount fornono d.Calculate average costper whole unitDetermines total units toaccount fornoyes

d.Calculate average costper whole unitDetermines total units toaccount fornoyes The correct answer is: Calculate average cost per whole unit Determines total units to account for no yes