Chapter 16

Which of the following products is least likely to be produced in a process operations system? Compact disks Slacks for casual wear Baseball hats Calculators Custom cabinets

Custom Cabinets

Equivalent units of production refer to the number of units that could have been started and completed given the costs incurred during the period. True False

True

A production department's output for the most recent month consisted of 8,000 units completed and transferred to the next stage of production and 5,000 units in ending Work in Process inventory. The units in ending Work in Process inventory were 50% complete with respect to both direct materials and conversion costs. Calculate the equivalent units of production for the month, assuming the company uses the weighted average method. 6,500 units. 9,000 units. 13,000 units. 5,500 units. 10,500 units.

10,500 units.

The combined costs of direct labor and factory overhead per equivalent unit used by many businesses with process operations is called: Physical cost per equivalent unit Overhead cost per equivalent unit Combined cost per equivalent unit Conversion cost per equivalent unit Finished cost per equivalent unit

Conversion cost per equivalent unit

Equivalent units of production is an engineering term used to describe the process by which one company attempts to manufacture units of a product that are equivalent to the product manufactured by a competitor. True False

False

In a process costing system costs are measured upon completion of each job. True False

False

A process cost summary is a managerial accounting report that describes all but which of the following: The gross profit earned on the sale of products. The equivalent units of production by the department. How the costs were assigned to the output. Physical transfers for a department. The costs charged to a department.

The gross profit earned on the sale of products.

Metaline Corp. uses the weighted average method for inventory costs and had the following information available for the year. The number of units transferred to finished goods during the year is: Beginning Work in Process (40% complete, $1,100) 200 units Ending inventory of Work in Process (80% complete) 400 units Total units started during the year 3,200 units 3,200 units. 3,000 units. 3,400 units. 3,160 units. 3,500 units.

3,000 units.

The following refers to units processed by a breakfast cereal maker in August. Compute the total equivalent units of production with respect to conversion for July using the weighted-average inventory method. Tons of Product Percent of Conversion Added Beginning Work in Process 230,000 60% Goods started 570,000 100% Goods completed 620,000 100% Ending Work in Process 180,000 70% 758,000 800,000 620,000 746,000 884,000

746,000

When raw materials are purchased on account for use in a process costing system, the corresponding journal entry that should be recorded will include: A debit to Work in Process Inventory. A debit to Accounts Payable. A credit to Cash. A debit to Raw Materials Inventory. A credit to Raw Materials Inventory.

A debit to Raw Materials Inventory.

Yamada Company applies factory overhead to its production departments on the basis of 90% of direct labor costs. In the Assembly Department, Yamada had $125,000 of direct labor cost, and in the Finishing Department, Yamada had $35,000 of direct labor cost. The entry to apply overhead to these production departments is: Debit Factory Overhead—Assembly $112,500; debit Factory Overhead—Finishing $31,500; credit Work in Process Inventory $144,000. Debit Factory Overhead $144,000; credit Work in Process Inventory—Assembly $112,500; credit Work in Process—Finishing $31,500. Debit Factory Overhead $144,000; credit Factory Payroll $144,000. Debit Work in Process Inventory—Assembly $112,500; debit Work in Process Inventory—Finishing $31,500; credit Factory Overhead $144,000. Debit Factory Payroll $144,000; credit Cash $144,000.

Debit Work in Process Inventory—Assembly $112,500; debit Work in Process Inventory—Finishing $31,500; credit Factory Overhead $144,000.

Which of the following characteristics does not usually apply to process operations systems? Each unit of product is separately identifiable. Partially completed products are transferred between processes. Different managers are responsible for different processes. The output of all processes except the final process is an input to the next process. Costs are computed using equivalent units.

Each unit of product is separately identifiable.

In a process costing system, companies typically end each period with only Finished Goods Inventory. True False

False

Equivalent units of production are equal to: The number of units that could have been started and completed given the costs incurred during the period. The number of finished units actually produced during a period. The number of units started into the process during a period. The number of units still in process at the end of a period. Physical units that were started and completed during a period.

The number of units that could have been started and completed given the costs incurred during the period.

If Department C uses $10,000 of direct materials and Department D uses $15,000 of direct materials, the following journal entry would be recorded by the process costing system: Work in Process Inventory, Department C 10,000 Work in Process Inventory, Department D 15,000 Raw Materials Inventory 25,000 True False

True

If a department that uses process costing starts the reporting period with 100,000 physical units that were 20% complete with respect to direct labor, the equivalent units of direct labor in Work in Process are 20,000. True False

True

In process costing, the cost object is the process and in job costing, the cost object is a job. True False

True

In the same time period, it is possible that a production department can produce 1,000 equivalent finished units with respect to direct materials and 1,200 equivalent finished units with respect to direct labor. True False

True

Process and job order manufacturing operations both combine materials, labor, and overhead items in the process of producing products. True False

True

Process costing systems are commonly used by companies that manufacture standardized products by passing them through a series of manufacturing steps. True False

True