Unit 3

Comfort Chair Company manufactures a standard recliner. During February, the firm's Assembly Department started production of 73,100 chairs. During the month, the firm completed 78,000 chairs, and transferred them to the Finishing Department. The firm ended the firm with 10,800 chairs in ending inventory. There were 15,700 chairs in beginning inventory. All direct material costs are added at the beginning of the production cycle and conversion costs are added uniformly throughout the production process. The FIFO method of process costing is used by Comfort. Beginning work in process was 30% complete as to conversion costs, while ending work in process was 75% complete as to conversion costs. Beginning inventory: Direct materials $24,800 Conversion costs $36,000 Manufacturing costs added during the accounting period: Direct materials $168,100 Conversion costs $278,800 What were the equivalent units for conversion costs during February? a) 81,390 b) 83,900 c) 73,100 d) 77,810

a) 81,390

Which of the following is an example of scrap? a) Wood shavings from woodworking operations b) Defective units of laptops detected after the production process but reworked before the units are sold as good products to customers c) Defective aluminum cans sold to aluminum manufacturers for remelting to produce other aluminum products d) Defective shirts, jeans, shoes, and carpeting sold as seconds

a) Wood shavings from woodworking operations

Which of the following statements best describes conversion costs? a) Conversion costs are all manufacturing and nonmanufacturing costs b) Conversion costs are all manufacturing costs other than direct materials costs c) Conversion costs are all nonmanufacturing costs including marketing costs d) Conversion costs are all nonmanufacturing costs other than fixed selling and distribution costs

b) Conversion costs are all manufacturing costs other than direct materials costs

Timekeeper Inc. manufactures clocks on a highly automated assembly line. Its costing system uses two cost categories, direct materials, and conversion costs. Each product must pass through the Assembly Department and the Testing Department. Direct materials are added at the beginning of the production process. Conversion costs are allocated evenly throughout production. Timekeeper Inc. uses weighted-average costing. Data for the Assembly Department for June 2017 are: WIP, beginning inventory (direct materials 100% complete, conversion costs 50% complete) - 390 units Units started during June - 1040 units WIP, ending inventory (direct materials 100% complete, conversion costs 85% complete) - 200 units Costs for June 2017: WIP, beginning inventory direct materials $92,500 WIP, beginning inventory conversion costs $138,500 Direct material costs added during June $603,000 Conversion costs added during June $403,500 What is the conversion cost per equivalent unit in June? a) $482.99 b) $659.27 c) $387.14 d) $354.51

c) $387.14

Samantha's Office Supplies manufactures desk organizers in its Processing Department. Direct materials are included at the inception of the production cycle and must be bundled in single kits for each unit. Conversion costs are incurred evenly throughout the production cycle. Inspection takes place as units are placed into production. After inspection, some units are spoiled due to nondetectable material defects. Normal spoilage generally constitutes 3% of the good units. Data provided for February 2018 are as follows: WIP, beginning inventory (direct materials 100% complete, conversion costs 50% complete) 51,000 units Started during February 170,000 units Completed and transferred out 180,000 units WIP, ending inventory (direct materials 100% complete, conversion costs 25% complete) 26,000 units Costs: WIP, beginning inventory direct materials $280,000 WIP, beginning inventory conversion costs $80,000 Direct materials added $408,000 Conversion costs added $264,000 What costs are allocated to the ending WIP inventory for direct materials and conversion costs, respectively, using the FIFO method of process costing? a) $66,500; $10,700 b) $60,000; $40,200 c) $62,400; $9750 d) $39,000; $15,600

c) $62,400; $9750

Samantha's Office Supplies manufactures desk organizers in its Processing Department. Direct materials are included at the inception of the production cycle and must be bundled in single kits for each unit. Conversion costs are incurred evenly throughout the production cycle. Inspection takes place as units are placed into production. After inspection, some units are spoiled due to nondetectable material defects. Normal spoilage generally constitutes 3% of the good units. Data provided for February 2018 are as follows: WIP, beginning inventory (direct materials 100% complete, conversion costs 50% complete) 51,000 units Started during February 170,000 units Completed and transferred out 180,000 units WIP, ending inventory (direct materials 100% complete, conversion costs 25% complete) 26,000 units Costs: WIP, beginning inventory direct materials $280,000 WIP, beginning inventory conversion costs $80,000 Direct materials added $408,000 Conversion costs added $264,000 What are the normal and abnormal spoilage units, respectively, for February when using FIFO? a) 2800 units; 2960 units b) 5100 units; 3280 units c) 5400 units; 9600 units d) 5400 units; 15,000 units

c) 5400 units; 9600 units

When a bakery transfers goods from the Mixing department to the Baking department, the accounting entry would be: a) Debit WIP - Mixing Department; Credit WIP - Baking Department b) Debit WIP - Baking Department; Credit Accounts Payable c) Debit WIP - Baking Department; Credit WIP - Mixing Department d) Debit WIP - Mixing Department; Credit Accounts Payable

c) Debit WIP - Baking Department; Credit WIP - Mixing Department

When the amount of scrap is immaterial, which of the following is the easiest accounting entry when recording scrap sold for cash? a) Debit: Sales of scrap; Credit: Cash b) Debit: Manufacturing Overhead Control; Credit: Cash c) Debit: Cash; Credit: Scrap Revenues d) Debit: Sales of Scrap; Credit: Accounts Receivable

c) Debit: Cash; Credit: Scrap Revenues

A major advantage of using the FIFO process-costing method is that: a) FIFO makes the unit cost calculations simpler b) in contrast with the weighted-average method, FIFO is considered GAAP c) FIFO provides managers with information about changes in the costs per unit from one period to the next d) in the period of rising prices, it leads to lower operating income and lower tax payments, saving the company cash and increasing the company's value

c) FIFO provides managers with information about changes in the costs per unit from one period to the next

If the rework is abnormal: a) it is debited to Wages Payable Control b) it is credited to Wages Payable Control c) it is credited to Loss from Abnormal Rework d) it is debited to Loss from Abnormal Rework

d) it is debited to Loss from Abnormal Rework