Chapter 18 Process Costing

On a regular basis, managers use information provided by process costing systems to:

set selling prices. evaluate the efficiency of manufacturing departments. value inventories and measure the cost of goods sold. forecast future manufacturing costs.

Process costing systems are used to

value a company's inventory reported in its balance sheet. compute a company's cost of goods sold reported in its income statement. measure a company's cost of goods manufactured.

True or false: When direct labor and direct materials costs are incurred uniformly at the same rate in a process costing system, they often are combined and referred to as conversion costs.

False

Which of the following is/are needed in order to determine the flow of physical goods through a production department within a process costing system?

The ending work in process of the department. The number of units transferred out of the department during the period. The number of units started in the department during the period. The beginning work in process of the department.

poration uses a process costing system with 2 Work in Process accounts, Department A and Department B. During the current period, manufacturing costs totaling $20,000 were charged to Department A, including: Direct materials = $5,000 Direct labor = $4,000 Manufacturing overhead = $11,000 The journal entry to transfer these costs to Department B will include0

$20,000 credit to Work in Process: Department A. $20,000 debit to Work in Process: Department B.

Thompson Manufacturing uses a process costing system with multiple production departments. At the start of the current period, $80,000 in costs had been carried forward and assigned to partially completed inventory in Department A. Resources totaling $72,000 were consumed in the current period to complete those units. An additional 17,000 units were started and completed during the current period at a cost of $18 per equivalent unit. The summary journal entry required to transfer completed units

$458,000 credit to Work in Process: Department A. $458,000 debit to Work in Process: Department B.

A company's process costing production report for a particular department reveals 4,000 units of beginning inventory that were 30% complete with respect to conversion costs. The report also shows 90,000 units that were started and completed during the period, as well as 8,000 units in ending inventory that are 40% complete with respect to conversion costs. If conversion costs for the period totaled $480,000, the process costing production report will reveal conversion costs of

$5.00 per equivalent unit

Montgomery Corporation uses a process costing system with multiple production departments. At the start of the current period, $100,000 in costs had been carried forward and assigned to partially completed inventory in Department A. Resources totaling $90,000 were consumed in the current period to complete those units. An additional 25,000 units were started and completed during the current period at a cost of $30 per equivalent unit. The summary journal entry required to transfer completed unit

$940,000 debit to Work in Process: Department B. $940,000 credit to Work in Process: Department A.

In a process costing system, manufacturing costs flow in which of the following sequences?

(1) through multiple Work in Process Inventories; (2) to Finished Goods Inventory; and (3) to Cost of Goods Sold

Process costing environments are often characterized by

- the allocation of costs to specific processes as opposed to unique jobs. - production involving a series of identifiable steps. - the mass production of identical products.

Which of the following statements is/are true regarding the recording of costs in a process costing system?

-Journal entries to record direct materials used are recorded throughout the period. -Journal entries to apply manufacturing overhead to production are usually recorded at the end of the period.

Jenkins Corporation uses a process costing system with multiple production departments. During the current period, the following equivalent units of resources were used in Department B: (1) Transferred-in units from Department A totaled 18,000 equivalent units costing $72,000. (2) Materials added in Department B totaled 24,000 equivalent units costing $120,000. (3) Conversion added in Department B totaled 20,000 equivalent units costing $180,000. The cost per equivalent unit of new units started

18

A company's process costing production report for a particular department reveals a beginning inventory of 3,000 units and new units started during the period totaling 82,000. The report shows that by the end of the period, 80,000 units had been transferred to the next department. How many units does the process costing production report show remaining in inventory at the end of the period?

5,000 units

A company's process costing production report for a particular department reveals 4,000 units of beginning inventory that were 30% complete with respect to conversion costs. The report also shows 60,000 units that were started and completed during the period, as well as 8,000 units in ending inventory that are 40% complete with respect to conversion costs. How many equivalent units of conversion resources does the report show were used during the period?

66,000 equivalent units

A company's process costing production report for a particular department reveals a beginning inventory of 3,000 units and new units started during the period totaling 82,000. The report shows that by the end of the period, 80,000 units had been transferred to the next department. How many units does the process costing production report show as being started and completed during the current period?

77,000 units

Nelson Manufacturing uses a process costing system with 2 departments, Assembly and Packaging. Units in process in the Assembly Department at the beginning of the period totaled 2,000. During the period, an additional 15,000 units were started, and by the end of the period, only 6,000 unfinished units remained. (1) During the period, BLANK 1 unit must have been transferred to the Packaging Department. (2) Units started and completed during the period in the Assembly Department must have totaled

Blank 1: 11,000 Blank 2: 9,000

Salter Enterprises uses a process costing system with multiple production departments. Its beginning inventory in Department A was carried forward at a total cost of $180,000, and it comprised 5,000 equivalent units of direct materials (carried forward at $80,000) and 4,000 equivalent units of conversion (carried forward at $100,000). During the current period, the company used 60,000 equivalent units of direct materials costing $960,000 and 50,000 equivalent units of conversion costing $1.25 mi

Blank 1: 16 Blank 2: 16 Blank 3: 25 Blank 4: 25

Hammes Corporation uses a process costing system with multiple production departments. Its beginning inventory in Department A was carried forward at a total cost of $115,000, and it comprised 3,000 equivalent units of direct materials (carried forward at $75,000) and 2,000 equivalent units of conversion (carried forward at $40,000). During the current period, the company used 90,000 equivalent units of direct materials costing $2.16 million, and 70,000 equivalent units of conversion costing $1.

Blank 1: 25 Blank 2: 24 Blank 3: 20 Blank 4: 22

Process costing keeps separate Inventory accounts to track the flow of physical goods and their related costs throughout all stages of production.

Blank 1: Work Blank 2: In Blank 3: Process

In a production cost report, costs transferred from one production department to the next are composed of the costs associated with current input resources and costs associated with a department's beginning Blank 1 Blank 2 Blank 3

Blank 1: Work or W Blank 2: in or I Blank 3: Process or P

When direct labor and overhead costs are incurred uniformly at the same rate in a process costing system, they often are combined and referred to as .

Blank 1: conversion Blank 2: costs

Process costing and job order costing are two examples of systems.

Blank 1: cost Blank 2: accounting

In the income statement, process costing is used to measure the Blank 1 Blank 2 Blank 3 Blank 4

Blank 1: cost Blank 2: of Blank 3: goods Blank 4: sold

When transferring costs from one production department to another, the Work in Process account of the receiving department is (debited/credited) and the Work in Process account of the transferring department is (debited/credited) .

Blank 1: debited Blank 2: credited

In a process costing system, conversion costs are composed of and costs.

Blank 1: direct Blank 2: labor Blank 3: overhead

Equivalent units of resource inputs for a particular accounting period include those used to Blank 1 beginning Work in Process, those needed to start and Blank 2 units transferred out during the period, and those needed to start, but Blank 3 complete new units.

Blank 1: finish Blank 2: complete Blank 3: not

Companies that engage in mass production typically use costing rather than costing systems.

Blank 1: process Blank 2: job Blank 3: order

Companies that mass produce identical products are most likely to use costing systems, whereas companies that provide unique products or services for their customers typically use costing systems.

Blank 1: process Blank 2: job Blank 3: order

The cost per equivalent unit of production is computed by dividing the cost accumulated for each resource in a given period by the associated Blank 1 Blank 2 Blank 3 of each resource.

Blank 1: total Blank 2: equivalent Blank 3: units or unit

Which of the following is not part of a typical production cost report?

Estimated costs per equivalent unit of input resources for the upcoming period.

Which of the following types of businesses would be most likely to use a process costing system?

a dog food manufacturer

Which of the following businesses would be most likely to use a process costing system?

a soft drink company a candy bar company an automobile manufacturer

The parts of a typical production cost report include:

an assignment of costs between those transferred out during the period and those remaining in inventory at the end of the period. a determination of the number of equivalent units of input resources used during the period. an accounting of the flow of physical goods during the period. a breakdown of the cost per equivalent unit of input resources used during the period.

A company's production cost report for a particular department reveals that total units to be accounted for were 80,000 and that 76,000 units were started during the period. 78,000 units were completed by the end of the period. (1) The number of units in the department's beginning Work in Process Inventory account was BLANK 1 units. (2) The number of units in the department's ending Work in Process Inventory account was BLANK 2 units.

blank 1: 4,000 blank 2: 2,000

A production cost report keeps track of a particular department's:

cost per equivalent unit of conversion used in the current period. total cost per equivalent unit of resources used in the current period. cost per equivalent unit of direct materials used in the current period.

A production cost report function to:

determine the cost per equivalent unit of input resources used during the period. match cost flows in and out during a period. trace the physical flow of equivalent units during a period.

When evaluating the efficiency of a particular process costing department, management considers the

direct materials costs incurred by that department. conversion costs incurred by that department.

Process costing production reports reveal specific information about a department's

equivalent units of resource inputs during the period. costs per equivalent unit of materials and conversion during the period. physical flow of goods during the period.

Wescott Manufacturing uses a process costing system with multiple production departments. Its beginning inventory in Department A was carried forward at a total cost of $54,000, and it comprised 4,000 equivalent units of direct materials (carried forward at $24,000) and 3,000 equivalent units of conversion (carried forward at $30,000). During the current period, the company used 60,000 equivalent units of direct materials costing $375,000 and 40,000 equivalent units of conversion costing $392,00

the cost per equivalent unit of direct materials used in the current period was higher than it was in the prior period. the cost per equivalent unit of conversion used in the current period was lower than it was in the prior period.