Chapter Seventeen (ACG2071)

Which of the following is not a use of the cost of production report? a.To help managers isolate problems b.To help managers control operations c.To project production d.To help managers to improve operations

c. To project production Explanation: The cost of production report is often used by managers for decisions involving the control and improvement of operations. Projecting production is a budget process.

During the current month, Grey Company sold 60,000 units for $10 each. Each unit had an equivalent cost of $6 each. The journal entry to record the sale would include which of the following? a. Cost of Goods Sold...... 360,000 Finished Goods................................. 360,000 b. Finished Goods...... 360,000 Cost of Goods Sold........................ 360,000 c. Cost of Goods Sold...... 600,000 Finished Goods................................. 600,000 d. Finished Goods...... 600,000 Cost of Goods Sold........................ 600,000

a. Cost of Goods Sold...... 360,000 Finished Goods................................. 360,000 Explanation: Cost of Goods Sold is increased for the cost of the goods; Finished Goods is decreased. The cost of the goods is 60,000 units × $6 each = $360,000.

Which of the following products would use a process cost system? a.Gasoline b.Ocean liners c.Movie production d.Custom homes

a. Gasoline Explanation: A process cost system produces products that are indistinguishable from one another.

Which of the following measures would not help managers to control and improve operations? a.Marketing plan b.Units produced per time period c.Yield trends d.Cost trends of a product

a. Marketing plan Explanation: The marketing plan would not help managers control manufacturing costs.

Guardino Company manufactures a single product by a continuous process, involving three production departments. The records indicate that direct materials, direct labor, and applied factory overhead for Department 1 were $100,000, $125,000, and $150,000 respectively. The records further indicate that direct materials, direct labor, and applied factory overhead for Department 2 were $50,000, $60,000, and $70,000 respectively. In addition, work in process at the beginning of the period for Department 1 totaled $75,000 and work in process at the end of the period totaled $60,000. The journal entry to record the flow of costs into Department 2 during the period for direct labor is a. Work in Process—Department 2... $60,000 Wages Payable... $60,000 b. Wages Payable... $60,000 Work in Process—Department 2... $60,000 c. Work in Process—Department 2... $125,000 Wages Payable... $125,000 d. Wages Payable... $185,000 Work in Process—Department 2... $185,000

a. Work in Process—Department 2... $60,000 Wages Payable... $60,000 Explanation: Work in process is debited for direct labor costs incurred to increase the account, and wages payable is credited to increase the account.

For which of the following businesses would a process cost system be appropriate? a.beverage producer b.auto repair service c.specialty printer d.custom furniture manufacturer

a. beverage producer Explanation: Beverages are mass produced and thus would use a process cost system.

In the manufacture of 10,000 units of a product, direct materials cost incurred was $135,700, direct labor cost incurred was $82,000, and applied factory overhead was $37,500. What is the total conversion cost? a.$119,500 b.$135,700 c.$255,200 d.$82,000

a.$119,500 Explanation: Conversion cost is direct labor plus applied factory overhead: $82,000 + $37,500 = $119,500.

Conversion costs are comprised of a.direct labor and factory overhead. b.direct labor and selling expenses. c.factory overhead and direct materials. d.direct labor and direct materials.

a.direct labor and factory overhead. Explanation: Selling expenses are period costs, not product costs.

Conversion cost per equivalent unit is a.total conversion costs for the period divided by total equivalent units of conversion costs for the period. b.total equivalent units of conversion costs for the period divided by total conversion costs for the period. c.total direct materials cost for the period divided by total equivalent units of conversion costs for the period. d.total conversion costs for the period divided by total equivalent units of direct materials cost for the period.

a.total conversion costs for the period divided by total equivalent units of conversion costs for the period. Explanation: The cost of production report includes total conversion costs for the period divided by total equivalent units of conversion costs for the period.

In the manufacture of 10,000 units of a product, direct materials cost incurred was $145,700, direct labor cost incurred was $85,000, and applied factory overhead was $47,500. What is the total conversion cost? a.$193,200 b.$132,500 c.$278,200 d.$85,000

b. $132,000 Explanation: Conversion costs are direct labor plus applied factory overhead; thus, it equals $85,000 + $47,500 = $132,500.

What is the journal entry for the application of Factory Overhead to Work in Process if the driver is imprints, the rate is $1. 80 per imprint, and the imprint meter reads 1,780 at the start of the day and 2,890 at the end of the day? a. Work in Process... 1,998 Depreciation Expense... 1,998 b. Work in Process... 1,998 Factory Overhead... 1,998 c. Work in Process... 1,998 Cash... 1,998 d. Work in Process... 1.80 Factory Overhead... 1.80

b. Work in Process... 1,998 Factory Overhead... 1,998 Explanation: $1.80 represents the rate per imprint.

Carmel Company manufactures a single product by a continuous process, involving the production departments. The records indicate that direct materials, direct labor, and applied factory overhead for Department 1 were $160,000, $125,000, and $150,000, respectively. The records further indicate that direct materials, direct labor, and applied factory overhead for Department 2 were $40,000, $60,000, and $70,000, respectively. In addition, work in process at the beginning of the period for Department 1 totaled $75,000, and work in process at the end of the period totaled $60,000. The journal entry to record the flow of costs into Department 2 during the period for direct materials is a. Work in Process—Department... $170,000 Materials... $170,000 b. Work in Process—Department... $40,000 Materials... $40,000 c. Materials... $160,000 Work in Process—Department... $160,000 d. Materials... $40,000 Work in Process—Department... $40,000

b. Work in Process—Department... $40,000 Materials... $40,000 Explanation: Work in Process is debited for materials coming in to increase the account, and Materials is credited to decrease the account.

Carmel Company manufactures a single product by a continuous process, involving the production departments. The records indicate that direct materials, direct labor, and applied factory overhead for Department 1 were $160,000, $125,000, and $150,000, respectively. The records further indicate that direct materials, direct labor, and applied factory overhead for Department 2 were $40,000, $60,000, and $70,000, respectively. In addition, work in process at the beginning of the period for Department 1 totaled $75,000, and work in process at the end of the period totaled $60,000. The journal entry to record the flow of costs into Department 2 during the period for direct materials is a.Work in Process—Department.... $1170,000 Materials.................................................................. $170,000 b.Work in Process—Department.... $240,000 Materials.................................................................. $40,000 c.Materials................................................ $160,000 Work in Process—Department...................... $1160,000 d.Materials................................................ $40,000 Work in Process—Department...................... $240,000

b. Work in Process—Department.... $240,000 Materials.................................................................. $40,000 Explanation: Work in Process is increased and Materials is decreased when recording direct materials costs. $160,000 represents the direct materials costs for Department 1.

The journal entry to record applied factory overhead includes a. an increase to Wages Payable. b. a decrease to Factory Overhead. c. a decrease to Work in Process. d. an increase to Factory Overhead.

b. a decrease to Factory Overhead. Explanation: The journal entry to record applied factory overhead includes a decrease to Factory Overhead.

The yield is the ratio of a.the quantity of materials input to the quantity of materials output. b.the quantity of materials output to the quantity of materials input. c.materials costs to equivalent units. d.materials costs to conversion costs.

b. the quantity of materials output to the quantity of materials input. Explanation: The ratio of the quantity of materials output compared to the quantity of materials input is the definition of yield.

Assume 5,000 pounds of direct materials entered the packaging department and 4,750 pounds were packaged. Determine the yield. a.105% b.95% c.100% d.5%

b.95% Explanation: Yield is computed as quantity of material output divided by quantity of material input. 4,750/5,000 = 95%.

The cost of production report may include all of the following except a.direct labor. b.advertising costs. c.direct materials. d.cost per unit.

b.advertising costs Explanation: Advertising costs are selling expenses and these are not included on the cost of production report.

The following production data were taken from the records of the Finishing Department for July: Inventory in process, July 1, 40% completed.................... 4,000 units Transferred to finished goods during July......................... 37,500 units Ending work in process during July, 20% completed... 3,500 units Determine the total equivalent units for direct materials, assuming that the first-in, first-out method is used to cost inventories. Assume that all direct materials are placed in the process at the beginning of production. a. 41,000 units b. 39,400 units c. 37,000 units d. 36,600 units

c. 37,000 units Explanation: Started and completed are completed units minus beginning = 37,500 - 4,000 = 33,500 4,000 × (1. 00 - . 40) = 2,400 3,500 × . 20 = 700

When materials are requisitioned and transferred in, all of the following accounts may be included on the journal entry except a.Work in Process. b.Factory Overhead. c.Finished Goods. d.Materials.

c. Finished Goods. Explanation: Indirect materials are requisitioned and the costs are transferred into Factory Overhead.

According to the just-in-time philosophy a.employees should be expert at one function rather than be cross-trained for multiple functions. b.finished goods should always be available in case a customer wants something. c.employees should be cross-trained for multiple functions. d.the product is "pushed through" the system in order to increase inventory.

c. employees should be cross-trained for multiple functions. Explanation: In JIT systems, the product is "pulled through" the system just in time to satisfy the demand or need of the next work center.

In a process cost system, the amount of work in process inventory at the end of a period is valued by a.summing estimated costs budgeted for the inventory during the period. b.summing all actual costs that flowed through the department from the beginning to the end of the period. c.summing the costs remaining in each department account at the end of the period. d.All of these choices are correct.

c. summing the costs remaining in each department account at the end of the period. Explanation: In a process cost system, the work in process at the end of the period is the sum of the costs remaining in each department account at the end of the period.

In a just-in-time system a.a worker is viewed as an expert in one function only. b.a worker typically performs only one function. c.workers typically identify better with the end product because of performing several functions. d.workers typically identify better with the end product because of performing a single function.

c. workers typically identify better with the end product because of performing several functions. Explanation: In traditional manufacturing, a worker typically performs only one function.

Department Z had no work in process at the beginning of the period, 18,000 units were started during the period, 2,000 units were 30% completed at the end of the period, and the following manufacturing costs were debited to the departmental work in process account during the period (assuming the company uses FIFO): Direct materials........ $80,100 Direct labor................ $102,300 Factory overhead.... $37,140 Assuming that all direct materials are placed in process at the beginning of production, what is the total cost of the units completed during the period? a.$213,310 b.$134,400 c.$80,100 d.$205,600

d. $205,000 Explanation: Total units started minus ending inventory = 18,000 - 2,000 = 16,000 ***NOTE: 2,000 units × .30 = 600 for conversion costs Direct Materials Costs per Equivalent Unit = $80,100/18,000 = $4.45 Conversion Cost per Equivalent Unit = ($102,300 + $37,140)/16,600 = $8.40 Total cost per unit = ($4.45 + $8.40) × 16,000 = $205,600

Department A had no work in process at the beginning of the period, 16,000 units were started during the period, 2,000 units were 40% completed at the end of the period, and the following manufacturing costs were debited to the departmental work in process account during the period (assuming the company uses FIFO): Direct materials........ $100,000 Direct labor................ $122,300 Factory overhead.... $45,200 Assuming that all direct materials are placed in process at the beginning of production, what are the total equivalent units for conversion costs? a. 18,000 units b. 16,000 units c. 15,200 units d. 14,800 units

d. 14,800 units Explanation: Total units started minus ending inventory = 16,000 - 2,000 = 14,000 2,000 units × .40 = 800 for conversion costs

The following production data were taken from the records of the Finishing Department for July: Inventory in process, June 1, 30% completed..................... 5,000 units Transferred to finished goods during June.......................... 39,500 units Ending work in process during June 25%, completed... 4,500 units Determine the total equivalent units for conversion costs, assuming that the first-in, first-out method is used to cost inventories. Assume that all direct materials are placed in process at the beginning of production. a.44,000 units b.39,500 units c.39,000 units d.39,125 units

d. 39,125 units Explanation: Started and completed are completed units minus beginning = 39,500 - 5,000 = 34,500 5,000 × (1. 00 - .30) = 3,500 4,500 × .25 = 1,125

What is the journal entry for the application of Factory Overhead to Work in Process if the driver is imprints, the rate is $1. 80 per imprint, and the imprint meter reads 1,780 at the start of the day and 2,890 at the end of the day? a. Work in Process............... 1.80 Factory Overhead..................... 1.80 b. Work in Process.............. 1,998 Depreciation Expense............. 1,998 c. Work in Process............... 1,998 Cash................................................. 1,998 d. Work in Process............... 1,998 Factory Overhead..................... 1,998

d. Work in Process............... 1,998 Factory Overhead..................... 1,998 Explanation: Cash is not affected when applying factory overhead.

Guardino Company manufactures a single product by a continuous process, involving three production departments. The records indicate that direct materials, direct labor, and applied factory overhead for Department 1 were $100,000, $125,000, and $150,000 respectively. The records further indicate that direct materials, direct labor, and applied factory overhead for Department 2 were $50,000, $60,000, and $70,000 respectively. In addition, work in process at the beginning of the period for Department 1 totaled $75,000 and work in process at the end of the period totaled $60,000. The journal entry to record the flow of costs into Department 1 during the period for factory overhead is a. Factory Overhead—Department... $150,000 Work in Process—Department... $150,000 b. Work in Process—Department... $125,000 Factory Overhead—Department... $125,000 c. Work in Process—Department $70,000 Factory Overhead—Department $70,000 d. Work in Process—Department... $150,000 Factory Overhead—Department... $150,000

d. Work in Process—Department 1... $150,000 Factory Overhead—Department 1... $150,000 Explanation: Work in Process is debited for factory overhead applied to increase the account, and Factory Overhead is credited to decrease the account.

The cost of energy consumed in producing good units in the Steaming Department of Apple Processing Company was $8,600 and $8,820 for June and July, respectively. The number of equivalent units produced in June and July was 65,000 and 72,000 liters respectively. What is the cost of energy for the two months (rounded to the nearest cent)? a.$0.12 and $0.13 for June and July respectively b.$0.12 and $0.14 for June and July respectively c.$0.14 and $0.12 for June and July respectively d.$0.13 and $0.12 for June and July respectively

d.$0.13 and $0.12 for June and July respectively Explanation: Energy costs per liter for June = $8,600 /65,000 liters = $0.13. Energy costs per liter for July = $8,820 / 72,000 liters = $0.12.

The following production data were taken from the records of the Finishing Department for July: Inventory in process, July 1, 30% completed....................... 5,000 units Transferred to finished goods during July............................ 40,500 units Ending work in process during July, 40% completed..... 4,000 units Determine the total equivalent units for conversion costs, assuming that the first-in, first-out method is used to cost inventories. Assume that all direct materials are placed in the process at the beginning of production. a.44,500 units b.40,500 units c.39,500 units d.40,600 units

d.40,600 units Explanation: Started and completed are completed units minus beginning = 40,500 - 5,000 = 35,500 5,000 × (1. 00 - . 30) = 3,500 4,000 × . 40 = 1,600

Which of the following is not a way in which process and job order cost systems are similar? a.Both categorize manufacturing costs into direct materials, direct labor, and factory overhead. b.Both allocate factory overhead costs to products. c.Both maintain perpetual inventories. d.Both must calculate equivalent units to calculate per unit costs.

d.Both must calculate equivalent units to calculate per unit costs. Explanation: Process and job order cost systems maintain perpetual inventories.

The journal entry to record direct labor for Department A and Department B would include a.a decrease to Work in Process for both departments summed together. b.a decrease to Wages Payable. c.a decrease to Work in Process for each department individually. d.None of these choices are correct.

d.None of these choices are correct. Explanation: The journal entry to record direct labor for Department A and Department B would include a debit to Work in Process for each department and a credit to Wages Payable.