ACCT 311 CH 16

A system that contains features of both process and job order operations is called a(n)

hybrid costing system

The journal entry to record the purchase of materials on account in process cost accounting is a(n):

increase in assets and an increase in liabilities

The journal entry to record the use of direct materials in process costing is a(n):

increase in one asset and a decrease in another asset.

The cost object in a job order system is the ___ and the cost object in a process costing system is the ___

job; process or department

Process operations is defined as a manufacturing process that includes: (Check all that apply.)

large volumes of similar products series of sequential processes

Common overhead allocation methods for companies with process operations includes ______ hours or _____ hours than labor hours to allocate overhead.

machine direct labor

Understanding the cost of partially completed goods allows the manufacturer to:

measure production activity for the period

A focus on customer orientation leads to improved

processes

Process operation is defined as a manufacturing process that includes:

series of sequential processes large volumes of similar products

In a process operation, each process has a separate department which will accumulate costs for each of the following:

direct materials overhead direct labor

The parts of the process cost report include: (Check all that apply.)

equivalent units of production. cost assignment and reconciliation. physical flow of units.

A department begins the month with 100 units at a cost of $7,500 in work in process. An additional 1,000 units are started during the month and additional costs incurred are $12,500. At the end of the month, there are 200 units still in process which are 50% complete. The ending balance in Work in Process Inventory is

$2000 Explanation: For computing the ending balance in Work in Process Inventory , first, we have to calculate the equivalent unit and the cost per equivalent unit which is shown below: = Additional units - beginning units + still in process units × completion percentage = 1,000 units - 100 units + 200 units × 50% = 900 units + 100 units = 1,000 units Now cost per equivalent unit would be = (Beginning cost + additional cost) ÷ (equivalent units) = ($7,500 + $12,500) ÷ (1,000 units) = $20,000 ÷ 1,000 units = $20 Now the ending inventory equals to = still in process units × completion percentage × cost per equivalent unit = 200 units × 50% × $20 = $2,000

Department D had materials costs of $10,000 in beginning work in process inventory and added an additional $50,000 in materials costs this period. If the department had 20,000 EUP for materials, the cost per equivalent unit of production is $

$3 Explanation: Cost per Equivalent Unit =Total materials costs/EUP Beginning Costs=10,000 Additional Costs=50,000 Total Costs=10,000+50000=$60,000 EUP=20,000 So $60,000/20,000=$3

Beginning work in process are 40,000 units and units started this period are 20,000 units. The total units to account for using the FIFO method are

Explanation: Since we are given the information that the beginning work in process are 40,000 units and units started this period are 20,000 units, then the total units to account for will be the addition of the beginning work in process and the units started this period. This will be: = 40000 + 20000 = 60000

Prepare journal entries to record the following production activities. Purchased $80,000 of raw materials on credit. Used $42,000 of direct materials in the Roasting department. Used $22,500 of indirect materials in production.

1. Purchased $80,000 of raw material on credit. Accounts titles and explanationDebitCreditRaw material Inventory$80,000... Accounts payable$80,000(To record the purchase of raw material on credit) 2. Used $42,000 of direct materials in production Accounts titles and explanationDebitCreditWork in process inventory$42,000... Raw material inventory$42,000(To record the used of direct materials) 3. Used of $22,500 of indirect material in production Accounts titles and explanationDebitCreditOverhead$22,500... Raw material inventory$22,500(To record the used indirect material)

[The following information applies to the questions displayed below.] The first production department in a process manufacturing system reports the following unit data. Beginning work in process inventory: 24,000units Units started and completed: 56,000units Units completed and transferred out: 80,000units Ending work in process inventory: 16,000units

1. All direct materials are added to products when processing begins. Units% MaterialsEUPGoods Completed80,000100%80,000Ending work in process16,000100%16,000Total96,00096,000 2. Beginning inventory is 40% complete as to direct material costs. Ending inventory is 75% complete as to direct material costs. Units% MaterialsEUPGoods Completed80,000100%80,000Ending work in process16,00075%12,000Total96,00092,000 3. Beginning inventory is 60% complete as to direct material costs. Ending inventory is 30% complete as to direct material costs. Units% MaterialsEUPGoods Completed80,000100%80,000Ending work in process16,00030%4,800Total96,00084,800

List the four steps involving analysis when accounting for a department's activity, with the first step listed on top.

1. Determine the physical flow of units 2. Compute equivalent units of production 3. Compute cost per equivalent unit of production 4. Assign and reconcile costs

Beginning work in process are 25,000 units and units started this period are 75,000 units. The total units to account for using the FIFO method are

100,000 Explanation: adding the 25,000 beginning wip to new current period 75,000 units. this is because you are continuing to maintain the prior units just adding new ones from this period. 25000+75000= 100000

Department B had a beginning inventory balance of 150 units. During the accounting period, the department started an additional 950 units, and 975 units were completed and transfered out. Department B had an ending balance of

125

Department X started 550 units during the accounting period, completed and transferred out 500 units and had an ending balance of 200 units ___ units were in beginning goods in process inventory for the department

150 units Units started= 550 Transferred units, UT= 500 Ending balance, UE= 200 Beginning balance = units transferred - units started + ending balance: 500-500+200=150 units

The mass production of products in a continuous flow of steps is the definition of:

Process operations

A company completes 21,000 units this month and has ending goods in process inventory of 3,000 units which are estimated to be 40% complete. Direct materials cost per EUP is $5.00 and Conversion cost per EUP is $1.50. The cost transferred to Finished Goods Inventory is

According to the scenario, the given data are as follows: Complete units = 21,000 units Direct material cost per EUP = $5.00 So, direct material cost = 21,000 × $5 = $105,000 Conversion cost per EUP = $1.50 So, conversion cost = 21,000 × $1.50 = $31,500 So, we can calculate the cost transferred to finished goods by using the following formula: The cost transferred to finished goods = Direct material Cost + Conversion Cost = $105,000 + $31,500 = $136,500 Hence, the cost transferred to finished goods is $136,500.

For each of the following products and services, indicate whether it is more likely produced in a process operation or in a job order operation.

Beach Towels: Process Bolts and Nuts: Process Lawn Chairs: Process Headphones: Process Custom Patio: Job order Door hardware: Process Financial statement analysis: Job order Paint cans: Process Customer home: Job order

Continuous processing

Continuous Processing In some companies, like Pepsi Bottling, materials move continuously through the manufacturing process. In these cases, a materials consumption report summarizes the materials used and replaces materials requisitions.

Pro Power makes a protein powder in several processes. Packaging, the last department in the company's production process, reports the following: Compute the cost per completed unit for both the current month and the prior month. Does the change in the cost per completed unit indicate better or worse control of costs in the current month?

Costs transferred to finished goods$ 168,000$ 165,750Units transferred to finished goods21,00019,500Units sold20,00019,200 This month: 168,000/21,000=8 Last month: 165,750/19,5000=8.5 Better cost control

The journal entry to record the transfer of units from Process 1 to the Process 2 in process costing is:

Debit - work in process inventory 2 and Credit - work in process inventory 1. What is work in process? Work in process is the accounting method of costing which is used in manufacturing where units are continuously produced in large quantities through one or more processes. It keeps the track of the number of units passing through the production process during a given period of time. Basically, work-in-progress (WIP) refers to the goods that are partially completed.

A company completes 21,000 units this month and has ending work in process inventory of 3,000 units which are estimated to be 40% complete. Total production costs are $666,000. The cost of ending Work in Process Inventory is $

Explanation: First calculate the Equivalent Units of Production; = 21,000 + (3,000 * 40%) = 21,000 + 1,200 = 22,200 units Then find the cost of each units. = Total production cost/ Equivalent units of production = 666,000/22,200 = $30 per unit Then the cost of ending Goods in Process Inventory is: = Equivalent ending process inventory units * cost per unit = 1,200 * 30 = $36,000

Select each of the items with the best description of its purpose.

Explanation: 1. Notifies the materials manager to send materials to a production department: Materials requisition. 2. Holds costs of indirect materials, indirect labor, and similar costs until assigned to production: Factory overhead account. 3. Holds costs of direct materials, direct labor, and applied overhead until products are transferred from production to finished goods (or another department): Work in the process inventory account. 4. Standardizes partially completed units into equivalent completed units: Equivalent units of production. 5. Holds costs of finished products until sold to customers: Finished goods inventory account. 6. Describes the activity and output of a production department for a period: Process cost summary. (production cost report) 7. Holds costs of materials until they are used in production or as factor overhead: Raw materials inventory account.

If beginning work in process inventory for conversion was 25% complete and these units were fully completed during the current period, what additional percentage was applied to these units during the current period?

Explanation: For this company, the beginning direct materials were 25% complete. This implies that 75% (100% - 25%) will be applied during the current period. The equivalent units of production calculations help to ascertain the units completed during each period, especially for inventories of work in process. They also help to allocate the costs of production to the beginning and ending inventories and the units started and completed during the current period.

In process operations, costs are accumulated in each process. In the final process, cost are transferred to:

Finished goods

Customer Orientation

Focus on customer orientation leads to improved processes. A manufacturer of control devices improved quality and reduced production time by forming teams to study processes and suggest improvements. An ice cream maker studied customer tastes to develop a more pleasing ice cream texture.

A system which uses both a process costing system and a job order system will most likely use which type system?

Hybrid

Identify each of the following production features as applying more to job order operations, to process operations, or to both job order and process operations.

Identification of Features Applying More to Job Order Operations, Process Operations, or Both: Features 1. Cost object is a process.: Process Operations 2. Measures unit costs only at period-end: Process Operations 3. Uses indirect costs: Both 4. Transfers costs between Work in Process Inventory accounts: Process Operations 5. Uses only one Work in Process account: Job Operations 6. Uses materials, labor, and overhead costs: Both Explanation: The main difference between the two operations is the manner costs are accumulated. Job operations accumulate costs for different jobs that are not similar. Process operations accumulate costs to show the process a product passes through. The product of a process operation is not unique like the product of a job operation.

Just in time production

Just-in-Time Production With a just-in-time production system, inventory levels can be minimal. If raw materials are not ordered or received until needed, a Raw Materials Inventory account might be unnecessary. Instead, direct materials cost is immediately debited to Work in Process Inventory. Similarly, a Finished Goods Inventory account may not be needed. Instead, cost of goods manufactured might be immediately debited to Cost of Goods Sold.

Process Design

Process Design Concerns with production efficiency can lead companies to reorganize production processes. For example, instead of producing different types of computers in a series of departments, a separate work center for each computer type can be set up in one department. The process cost system is then changed to account for each work center's costs.

Beginning work in process inventory related to conversion was 75% complete for 25,000 units. 50,000 units were started and completed and ending inventory consisted of 10,000 units that were 10% complete. Calculate the equivalent units of production for the conversion costs using the FIFO method.

Reason: (25,000 x .25) + (50,000 x 1) + (10,000 x .10) = 57,250 EUP.

The first production department in a process manufacturing system reports the following unit data. Beginning work in process inventory24,000unitsUnits started and completed56,000unitsUnits completed and transferred out80,000unitsEnding work in process inventory16,000units

Requirements between 1 And 3 are given below : Equivalent Units of Production (EUP)—Weighted Average Method Req 1: Direct Material Percent Complete EUP Completed and transferred out 80,000 100% 80,000 Ending work in process 16,000 100% 16,000 Total 96,000 96,000 Req 2: Direct Material Percent Complete EUP Completed and transferred out 80,000 100% 80,000 Ending work in process 16,000 75% 12,000 Total 96,000 92,000 Req 3: Direct Material Percent Complete EUP Completed and transferred out 80,000 100% 80,000 Ending work in process 16,000 30% 4,800 Total 96,000 84,800

Robotics and Automation

Robotics and Automation Many production processes are automated. This results in reduced direct labor costs. Machine learning can lead to process improvements that reduce costs and increase efficiency.

Hi-T Company uses the weighted average method of process costing. Information for the company's first production process follows. All direct materials are added at the beginning of this process, and conversion costs are added uniformly throughout the process.

STEP 1: Equivalent Units of Production (EUP) : Weighted Average Direct Materials Conversion Units % Complete EUP % Complete EUP Completed and transferred out 23,000 100% 23,000 100% 23,000 Ending work in process 7,000 100% 7,000 40% 2,800 Equivalent Units of Production 30,000 25,800 STEP 2: Cost per Equivalent Unit of Production Direct Materials Conversion Cost of Beginning WIP $45,000 $56,320 Cost Incurred/Added $375,000 $341,000 Total Costs $420,000 $397,320 /] Equivalent Units of Production 30,000 25,800 Cost Per Equivalent Unit $14.00 $15.40 STEP 3: Cost Assignment- Weighted Average Completed and transferred out EUP Cost per EUP Total Cost Direct Materials 23,000 $14.00 $322,000 Conversion 23,000 $15.40 $354,200 Total Costs Transferred out $676,200 Ending work in process EUP Cost per EUP Total Cost Direct Materials 7,000 $14.00 $98,000 Conversion 2,800 $15.40 $43,120 Total cost of Ending work in process $141,120 Total Costs Accouned for $817,320

Services

Service-based businesses are common. For standardized services like oil changes and simple tax returns, computing costs based on the process is simpler and more useful than a cost per individual job. More complex service companies use process departments to perform specific tasks for consumers. Hospitals, for example, have radiology and physical therapy facilities, each with special equipment and trained employees. When patients need services, they are processed through departments to receive prescribed care.

Equivalent units of production refers to the number of units that could have been:

Started and completed

The journal entry to record the purchase of materials on account in process cost accounting is:

The journal entry to record the purchase of materials on account in process cost accounting is:

The journal entry to record the transfer of partially completed work in process to the next process in process costing is a(n):

decrease in one asset and an increase in another asset

Department C had direct materials EUP cost of $4.00 and conversion EUP cost of $2.50. If the department had 38,000 units completed and transferred to the next department, their cost of units completed for direct materials is $

Their cost of units completed for direct materials is $152,000. Explanation: Cost of units completed for direct materials = Units completed and transferred *Direct material EUP cost = 38,000 *$4.00 = $1,52,000 Therefore, Their cost of units completed for direct materials is $152,000.

True or false: Using the weighted-average method, the computation of EUP separates units into direct materials and conversion.

True

True or false: A production department in a process operation has a manager that works for two departments. Since the manager is in a supervisory position, the labor is considered indirect labor and the cost is charged to Factory Overhead.

True The managerial role in a production department is often considered indirect labor, with the associated cost charged to Factory Overhead. This is because the work of the manager is not directly tied to the creation of specific products. Explanation: True: A production department in a process operation may often have a manager who oversees two or more departments. This managerial role is typically categorized as an indirect labor because their work is not directly connected to the manufacturing or creating of a specific product. Instead, they supervise and facilitate these processes. As a result, the costs associated with this labor are generally accounted for under Factory Overhead rather than being directly factored into the cost of manufacturing a specific product.

The journal entry to record the transfer of units to the next department in process accounting is a(n):

decrease in one asset and an increase in another asset Reason: It is a decrease in assets and an increase in another asset. Debit Work in Process Inventory - Dept. 1 and credit Work in Process Inventory - Dept. 2.

The journal entry to apply Factory Overhead includes:

a credit to Factory Overhead

When indirect materials are used in process costing, the effect on the Raw Materials Inventory account is:

a decrease

Process and job order operations are similar in that both: (Check all that apply.)

are used to determine the cost per units of product or service combine materials, labor, and overhead in producing products

A process cost report summarizes the following process costing steps: (Check all that apply).

costs per equivalent unit of production physical flow of units equivalent units of production

The journal entry to record the use of indirect labor in process costing is to:

debit Factory Overhead and credit Factory Wages Payable.

The journal entry to record the insurance on the factory equipment is to:

debit Factory Overhead and credit Prepaid Insurance

The journal entry to record the use of indirect materials in process costing is to:

debit Factory Overhead and credit Raw Materials Inventory.

The journal entry to record the accrual of factory utilities is to:

debit Factory Overhead and credit Utilities Payable

The journal entry to record the transfer of completed work in process to finished goods in process costing is to:

debit Finished Goods Inventory and credit Work in Process Inventory

The journal entry to record the transfer of units from one department to the next is to:

debit Work in Process Inventory - Dept. 2 and credit Work in Process Inventory - Dept. 1

The journal entry to record the use of direct labor in process costing is to:

debit Work in Process Inventory and credit Factory Wages Payable.

The journal entry to record the use of direct materials in process costing is to:

debit Work in Process Inventory and credit Raw Materials Inventory.

The journal entry to record the transfer of completed work in process to finished goods in process costing is a(n):

decrease in one asset and an increase in another asset

Department A had a beginning inventory balance of 25 units which were 40% complete. During the accounting period, the department started an additional 275 units and had an ending balance of 50 units which were 20% complete. Using FIFO, the equivalent units of production is

the equivalent units of production is 250 units Explanation: The computation of the equivalent units of production is units under FIFO method is shown below: = Opening inventory balance in units + additional units - ending inventory balance units = 25 units + 275 units - 50 units = 250 units hence, the equivalent units of production is 250 units We simply applied the above formula so that the correct value could come And, the same is to be considered

A company using the FIFO method had beginning work in process inventory of 10,000 units and completed 75,000 units. They also had 5,000 units in ending work in process inventory. The number of units started and completed equals

the number of units started and completed is 65,000 units Explanation: The computation of the number of units started and completed is given below: = Units completed - beginning work in process inventory units = 75,000 units - 10,000 units = 65,000 units Hence, the number of units started and completed is 65,000 units