ACCT 212 Chapter 5: Process Costing

Sneaker Styles Company manufactures a wide variety of sneakers. Which of the following systems is most suitable for Sneaker Styles? a) Job-Order Costing b) Process Costing c) Operation Costing d) Variable Costing

c) Operation Costing

When computing the cost per equivalent unit, the weighted-average method of process costing considers: a) costs incurred during the current period b) costs incurred during the current period plus cost of ending work in process inventory c) costs incurred during the current period plus cost of beginning work in process inventory d) costs incurred during the current period less cost of beginning work in process inventory

c) costs incurred during the current period plus cost of beginning work in process inventory

Equivalent Units of Production (Weighted-Average Method)

The units transferred to the next department (or to finished goods) during the period plus the equivalent units in the department's ending work in process inventory.

Equivalent Units

The product of the number of partially completed units and their percentage of completion with respect to a particular cost. Equivalent units are the number of complete whole units that could be obtained from the materials and effort contained in partially completed units.

*What is the cost per equivalent unit for conversion? a) $1.50 b) $1.67 c) $2.20 d) $2.25

d) $2.25

Conversion cost is composed of ______. a) direct labor cost and manufacturing overhead cost b) direct material cost and manufacturing overhead cost c) all costs included in ending inventory d) manufacturing overhead

a) direct labor cost and manufacturing overhead cost

Assume the same facts are above in Concept Check3. Also, assume that $9,900 of material costs and $14,880 of conversion costs were in beginning inventory and $180,080 of materials and $409,200 of conversion costs were added to production during the period. What is the total cost per equivalent unit using the weighted-average method? a) $268.60 b) $267.85 c) $280.00 d) $265.00

a

For each of the five transactions described below, use the dropdown boxes to indicate which account should be debited and which account should be credited. 1) Raw materials worth $12,000 were issued for use in the Cutting Department 2) Manufacturing overhead was applied to the Shaping Department, $10,000 3) Unshaped, cut snowboards worth $60,000 were transferred from the Cutting Department to the Shaping Department 4) Finished snowboards worth $80,000 were transferred from the Shaping Department to the finished goods warehouse 5) Finished snowboards that cost $100,000 were sold to customers

1) Debit: Work in Process - Cutting Credit: Raw Materials 2) Debit: Work in Process - Shaping Credit: Manufacturing Overhead 3) Debit: Work in Process - Shaping Credit: Work in Process - Cutting 4) Debit: Finished Goods Credit: Work in Process - Shaping 5) Debit: Cost of Goods Sold Credit: Finished Goods

Process Costing

A costing method used when homogenous products are produced on a continuous basis.

Operation Costing

A hybrid costing system used when products have some common characteristics and some individual characteristics

FIFO Method

A process costing method that calculates unit costs based solely on the costs and outputs from the current period.

Weighted-Average Method

A process costing method that calculates unit costs by combining costs and outputs from the current and prior periods.

Processing Department

An organizational unit where work is performed on a product and where materials, labor, or overhead costs are added to the product.

Conversion Cost

Direct labor cost plus manufacturing overhead cost.

*When computing the cost per equivalent unit for conversion, what is the total cost that will be included in the numerator of that calculation? a) $3,735 b) $2,255 c) $5,640 d) $6,240

a) $3,735

Daffy Taffy uses the weighted-average method in its process costing system. The company provided the following information: Mixing Department: i) Beginning work in process inventory ii) Units started into production during the period iii) Units transferred out during the period iv) Ending work in process inventory Units: i) 200 ii) 3,000 iii) 2,600 iv) 600 Percentage Complete: Materials: i) 55% iv) 25% Conversion: i) 60% iv) 40% What is the number of equivalent units of production with respect to materials during the period? a) 2,750 b) 2,860 c) 3,150 d) 3,200

a) 2,750

**What is the Bottling Department's cost of ending work in process inventory? a) $9,100 b) $9,500 c) $9,900 d) $10,500

c) $9,900

Beginning work in process includes 400 units that are 20% complete with respect to conversion and 30% complete with respect to materials. If 2,000 units were started during the period, what are the equivalent units of production for the period according to the weighted-average method? a) Conversion equivalent units = 2,280 units; Material equivalent units = 2,100 units b) Conversion equivalent units = 1,980 units; Material equivalent units = 2,080 units c) Conversion equivalent units = 2,480 units; Material equivalent units = 1,980 units d) Conversion equivalent units = 2,280 units; Material equivalent units = 2,300 units

d

Which of the following statements is true? (You may select more than one answer.) a) Job-order costing and process costing systems both use the same basic manufacturing accounts, including Manufacturing Overhead, Raw Materials, Work in Process, and Finished Goods b) Process costing is used when a company produces a continuous flow of units that are indistinguishable from one another c) Process costing systems accumulate costs by customer order rather than by department d) Job-order costing and process costing systems both provide a mechanism for computing unit product costs

a, b, and d

Which of the following statements is false? (You may select more than one answer.) a) The activity in a processing department is performed uniformly on all units passing through the department b) The output of a processing department is heterogenous; in other words, all of the units produced are distinct from one another c) Equivalent units are calculated by taking the number of partially completed units on hand and multiplying those units by their percentage of completion d) The weighted-average method of computing the cost per equivalent unit averages together units and costs from the current and prior periods

b

**What is the cost of the units transferred out of the Bottling Department during May? a) $34,000 b) $59,500 c) $60,800 d) $61,000

b) $59,500

Equivalent units is computed using which of the following formulas? a) Equivalent units = Number of completed units x Percentage completion b) Equivalent units = Number of partially completed units x Percentage completion c) Equivalent units = Number of completed units x (100% - Percentage completion) d) Equivalent units = Number of partially completed units x (100% / Percentage completion)

b) Equivalent units = Number of partially completed units x Percentage completion

Which of the following statements about companies that use processing costing is false? a) A processing department is an organizational unit where work is performed on a product and where materials, labor, or overhead costs are added to the product b) Costs are accumulated by department c) Raw material costs are added only to the first processing department d) A separate Work in Process account is maintained for each processing department

c) Raw material costs are added only to the first processing department

A company has three processing departments: Mixing, Baking, and Packaging. The Baking Department transfers 500 units to the Packaging Department. How will the Packaging Department account for the costs of those 500 units? a) Finished goods b) Cost of input materials c) Costs transferred in d) Costs transferred out

c) Costs transferred in

The cost of beginning work in process inventory plus the costs added to production during the period equals the _______. a) cost of ending work in process inventory b) cost of units transferred out c) total cost to be accounted for d) cost of units started during the period

c) total cost to be accounted for

Which of the following statements about processing costing is false? a) Process costing accumulates costs by department b) Process costing assigns departmental costs uniformly to all identical units that pass through the department during a period c) Process costing systems compute unit costs by department d) Process costing is used when a company produces a continuous flow of units that are distinguishable from one another

d) Process costing is used when a company produces a continuous flow of units that are distinguishable from one another