Financial and Managerial Accounting Ch 16 & 17 (week 2)

Equivalent Units of Conversion Costs The Rolling Department of Kraus Steel Company had 5,832 tons in beginning work in process inventory (80% complete) on October 1. During October, 48,600 tons were completed. The ending work in process inventory on October 31 was 2,916 tons (20% complete). What are the total equivalent units for conversion costs? Round to the nearest whole unit. _________units

44,518 units

Which of the following costs are not included in finished goods inventory? a. factory overhead b. direct materials c. chief financial officer's salary d. direct labor

c. chief financial officer's salary

In a process cost system, the cost of completed production in Department A is transferred to Department B by which of the following journal entries? a. debit Work in Process—Department B and credit Finished Goods—Department A b. debit Finished Goods—Department A and credit Work in Process—Department B c. debit Work in Process—Department B and credit Work in Process—Department A d. debit Work in Process—Department B and credit Cost of Goods Sold—Department A

c. debit Work in Process—Department B and credit Work in Process—Department A

The primary costs for a service business includes ________. a. materials b. supplies c. direct labor d. All of these choices are correct.

c. direct labor

The journal entry to recognize depreciation on machinery is ________. a. a debit to Factory Overhead and a credit to Accumulated Depreciation b. a debit to Accumulated Depreciation and a credit to Factory Overhead c. a debit to Factory Overhead and a credit to Depreciation Expense d. a debit to Depreciation Expense and a credit to Factory Overhead

a. a debit to Factory Overhead and a credit to Accumulated Depreciation

The journal entry to record the direct labor costs for the month is ________. a. a debit to Work in Process and a credit to Wages Payable b. a debit to Wages Expense and a credit to Work in Process c. a debit to Wages Payable and a credit to Work in Process d. a debit to Work in Process and a credit to Wages Expense

a. a debit to Work in Process and a credit to Wages Payable

Which of the following manufacturers is most likely to use a process cost system? a. Purse manufacturer b. Sports drink manufacturer c. Automobile manufacturer d. Guitar manufacturer

b. Sports drink manufacturer

The journal entry to record the direct materials used for the month is ________. a. a debit to Factory Overhead and a credit to Cost of Goods Sold b. a debit to Work in Process and a credit to Materials c. a debit to Cost of Goods Sold and a credit to Factory Overhead d. a debit to Work in Process and a credit to Cost of Goods Sold

b. a debit to Work in Process and a credit to Materials

The first step in preparing a cost of production report is to _____. a. compute equivalent units of production b. determine the units to be assigned costs c. determine the cost per equivalent unit d. allocate costs to units transferred out and partially completed units

b. determine the units to be assigned costs

The two categories of cost comprising conversion costs are a. factory overhead and direct materials b. direct labor and factory overhead c. direct labor and direct materials d. direct labor and indirect labor

b. direct labor and factory overhead

For which of the following businesses would the job order cost system be appropriate? a. canned soup processor b. hospital c. lumber mill d. oil refinery

b. hospital

Which of the following represents the factory overhead applied to a product? a. actual factory overhead rate times estimated activity base b. predetermined factory overhead rate times actual activity base c. predetermined factory overhead rate times estimated activity base d. actual factory overhead rate times actual activity base

b. predetermined factory overhead rate times actual activity base

A manufacturing company applies factory overhead based on direct labor hours. At the beginning of the year, it estimated that factory overhead costs would be $360,000 and direct labor hours would be 30,000. Actual manufacturing overhead costs incurred were $377,200, and actual direct labor hours were 36,000. What is the predetermined overhead rate per direct labor hour? a. $12.57 b. $10.00 c. $12.00 d. $10.48

c. $12.00 Predetermined Overhead Rate = Estimated Total Factory Overhead Costs ÷ Estimated Activity Base = $360,000 ÷ 30,000 direct labor hours = $12 per direct labor hour

Which of the following types of inventories does a manufacturing business report on the balance sheet? a. direct materials inventory, work in process inventory, and finished goods inventory b. direct materials inventory and work in process inventory only c. direct materials inventory and finished goods inventory only d. finished goods inventory and work in process inventory only

a. direct materials inventory, work in process inventory, and finished goods inventory

Cost per Equivalent Unit The cost of direct materials transferred into the Rolling Department of Kraus Company is $508,800. The conversion cost for the period in the Rolling Department is $300,800. The total equivalent units for direct materials and conversion are 2,400 tons and 4,700 tons, respectively. Determine the direct materials and conversion costs per equivalent unit. Direct materials cost per equivalent unit:$ ______per ton Conversion cost per equivalent unit:$ _____per ton

Direct materials cost per equivalent unit:$212 per ton Conversion cost per equivalent unit:$64 per ton

Once equivalent units are computed for materials, this number will also be used for direct labor and factory overhead. True or False

False

When the goods are sold, their costs are transferred from Work in Process to Finished Goods. True or False

False

In the manufacture of 8,000 units of a product, direct materials cost incurred was $154,600, direct labor cost incurred was $84,000, and applied factory overhead was $45,500. The total conversion cost is a. $129,500 b. $238,600 c. $284,100 d. $154,600

a. $129,500 Total Conversion Cost = $84,000 + $45,500 = $129,500

The portion of whole units that were completed with respect to either materials or conversion costs within a given accounting period is the definition of a. ending work in process b. conversion costs c. equivalent units d. units started and completed

c. equivalent units

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

c. to project production

In the manufacture of 10,000 units of a product, direct materials cost incurred was $165,000, direct labor cost incurred was $105,000, and applied factory overhead was $53,000. The total conversion cost is a. $218,000 b. $53,000 c. $323,000 d. $158,000

d. $158,000 Total Conversion Cost = Direct Labor + Factory Overhead = $105,000 + $53,000 = $158,000

Process and job order cost systems are similar in that both systems _______. a. record and summarize product costs b. classify product costs as direct materials, direct labor, and factory overhead c. allocate factory overhead costs to products d. All of these choices are correct.

d. All of these choices are correct.

At the end of the fiscal year, the balance in Factory Overhead is small. The balance will be a. transferred to Work in Process b. transferred to Finished Goods c. allocated between Work in Process and Finished Goods d. transferred to Cost of Goods Sold

d. transferred to Cost of Goods Sold

activity base

(? aka allocation base, or activity driver?)

The Rolling Department of Kraus Steel Company had 3,200 tons in beginning work in process inventory (60% complete) on October 1. During October, 54,000 tons were completed. The ending work in process inventory on October 31 was 2,700 tons (50% complete). What are the total equivalent units for direct materials for October if materials are added at the beginning of the process? __________ units

53,500 units

Kraus Steel Company has two departments, Casting and Rolling. In the Rolling Department, ingots from the Casting Department are rolled into steel sheet. The Rolling Department received 62,900 tons from the Casting Department in October. During October, the Rolling Department completed 68,300 tons, including 7,900 tons of work in process on October 1. The ending work in process inventory on October 31 was 2,500 tons. How many tons were started and completed during October? ________tons

60,400 tons

direct materials cost per equivalent unit

= total direct materials cost for the period total equivalent units of direct materials

activity-based costing (ABC method)

A cost allocation method that identifies activities causing the incurrence of costs and allocates these costs to products (or other cost objects), based on activity drivers (bases).

process manufacturer

A manufacturer that produces products that are indistinguishable from each other using a continuous prodcuction process.

weighted average inventory cost flow method

A method of inventory costing in which the cost of the units sold and in ending inventory is a weighted average of the purchase costs.

cost of production report

A report prepared periodically by a processing department, summarizing (1) the units for which the department is accountable and the disposition of those units and (2) the costs incurred by the department and the allocation of those costs between completed and incomplete production.

Cost accounting systems

A system that measures, records, and reports product costs.

Job order cost system

A type of cost accounting system that provides for a separate record of the cost of each particular quantity of product (job) that is manufactured.

process cost system

A type of cost accounting system that provides product costs for each manufacturing department or process; a true type of cost system that records product costs for each manufacturing department or process within a manufacturing facility.

job cost sheets

An account in the work in process subsidiary ledger in which the costs charged to a particular job order are recorded.

indirect labor

Any labor needed to make a product that is not directly traced to the product.

indirect materials

Any materials needed to make a product that are not directly traced to the product.

Which of the following industries would typically use job order costing, and which would typically use process costing? Steel manufacturing - Business consulting - Web designer - Computer chip manufacturing - Candy making - Designer clothes manufacturing -

Steel manufacturing - Process costing Business consulting - Job order costing Web designer - Job order costing Computer chip manufacturing - Process costing Candy making - Process costing Designer clothes manufacturing - Job order costing

underapplied factory overhead

The amount of actual factory overhead in excess of the factory overhead applied to production during a period.

overapplied factory overhead

The amount of factory overhead applied in excess of the actual factory overhead costs incurred for production during a period.

time tickets

The form on which the amount of time spent by each employee and the labor cost incurred for each individual job, or for factory overhead, are recorded.

materials requisition

The form or electronic transmission used by a manufacturing department to authorize materials issuances from the storeroom.

receiving report

The form or electronic transmission used by the receiving personnel to indicate that materials have been received and inspected.

first-in, first-out (FIFO) inventory cost flow method

The method of inventory costing based on the assumption that the costs of merchandise sold should be charged against revenue in the order in which costs were incurred.

equivalent units of production

The number of production units that could have been completed within a given accounting period, given the resources consumed.

whole units

The number of units in production during a period, whether completed or not.

cost allocation

The process by which factory overhead or other costs are assigned to a cost object, such as a job.

cost per equivalent unit

The rate used to allocate costs between completed and partially completed production. = total conversion costs or the period total equivalent units of conversion costs

predetermined factory overhead rate

The rate used to apply factory overhead costs to the goods manufactured. The rate is determined by dividing the estimated total factory overhead costs by the estimated activity base at the beginning of the fiscal period. = Estimated Total Factory Overhead Costs Estimated Activity Base

materials ledger

The subsidiary ledger containing the individual accounts for each type of material.

stock ledger

The subsidiary ledger that contains the individual accounts for each kind of commodity or product produced, containing cost data for the units manufactured, units sold, and units on hand. (aka finished goods ledger)

finished goods ledger

The subsidiary ledger that contains the individual accounts for each kind of commodity or product produced, containing cost data for the units manufactured, units sold, and units on hand. (aka stock ledger)

If the principal products of a manufacturing process are identical, a process cost system is more appropriate than a job order cost system. True or False

True

Rambo-Conduit Corporation manufactures plastic conduit that is used in the cable industry. A conduit is a tube that encircles and protects the underground cable. In the process of making the plastic conduit, called extrusion, the melted plastic (resin) is pressed through a die to form a tube. Scrap is produced in this process. Information from the cost of production reports for three months is as follows, assuming that inventory remains constant: May Resin pounds input into the process - 470,000 Price per pound - x$1.50 Plastic material costs - $493,000 Conversion costs - $80,000 Conduit output from the process (feet) - 800,000 June Resin pounds input into the process - 700,000 Price per pound - x$1.50 Plastic material costs - $640,000 Conversion costs - $120,000 Conduit output from the process (feet) - 1,200,000 July Resin pounds input into the process - 650,000 Price per pound - x$1.50 Plastic material costs - $677,000 Conversion costs - $115,000 Conduit output from the process (feet) - 1,130,000 Assuming that there is one-half pound of resin per foot of the finished product, determine the resin materials cost per foot of finished product for June. a. $0.53 b. $0.60 c. $0.54 d. None of these choices are correct.

a. $0.53

Which of the following accounts are NOT likely appear in a job order cost system of a service business? a. Finished Goods b. Work in Process c. Factory Overhead d. None of these choices are correct.

a. Finished Goods

Which of the following represents the computation of direct materials cost per equivalent unit? a. Total direct cost for the period divided by total equivalent units of direct materials. b. Total equivalent units of direct materials divided by total direct cost for the period. c. Total direct cost for the period divided by total units of direct materials. d. Total units of direct materials divided by total direct cost for the period.

a. Total direct cost for the period divided by total equivalent units of direct materials.

Rambo-Conduit Corporation manufactures plastic conduit that is used in the cable industry. A conduit is a tube that encircles and protects the underground cable. In the process of making the plastic conduit, called extrusion, the melted plastic (resin) is pressed through a die to form a tube. Scrap is produced in this process. Information from the cost of production reports for three months is as follows, assuming that inventory remains constant: May Resin pounds input into the process - 470,000 Price per pound - x$1.50 Plastic material costs - $493,000 Conversion costs - $80,000 Conduit output from the process (feet) - 800,000 June Resin pounds input into the process - 700,000 Price per pound - x$1.50 Plastic material costs - $640,000 Conversion costs - $120,000 Conduit output from the process (feet) - 1,200,000 July Resin pounds input into the process - 650,000 Price per pound - x$1.50 Plastic material costs - $677,000 Conversion costs - $115,000 Conduit output from the process (feet) - 1,130,000 Assuming that there is one-half pound of resin per foot of the finished product, determine the conversion cost per foot of finished product for May. a. $0.50 b. $0.10 c. $0.30 d. None of these choices are correct.

b. $0.10

What is the conversion cost per equivalent unit, when the total conversion cost for the period is $1,225 and the total units of packaged drinking water produced during the same period is 5,000 gallons (70 percent complete). a. $0.17 per gallon b. $0.35 per gallon c. $2.86 per gallon d. None of these choices are correct.

b. $0.35 per gallon

Reynolds Manufacturers Inc. has estimated total factory overhead costs of $95,000 and expected direct labor hours of 9,500 for the current fiscal year. If Job 117 incurs 2,300 direct labor hours, Work in Process will be debited and Factory Overhead will be credited for a. $21,850 b. $23,000 c. $95,000 d. $2,300

b. $23,000 Predetermined Factory Overhead Rate = Estimated Total Factory Overhead Costs ÷ Estimated Activity Base = $95,000 ÷ 9,500 labor hours = $10 per labor hour Amount Credited to Factory Overhead = Predetermined Factory Overhead Rate × Direct Labor Hours = $10 × 2,300 labor hours = $23,000

Starfish Enterprises produces men's sports coats that are sold by popular department stores. Each retail order is treated as a job that accumulates materials, labor, and overhead costs for a batch of sports coats. Management has obtained data on the labor costs for four selected jobs over a six-month period. Each selected job represents a similar style and size of sports coat. The data are as follows: Job 107 Count- 10 Direct Labor Hour - 4.50 Direct Labor Rate per Hour - 14.00 Total Direct Labor Cost - 63.00 Job 125 Count- 14 Direct Labor Hour - 7.00 Direct Labor Rate per Hour - 14.00 Total Direct Labor Cost - 98.00 Job 160 Count- 16 Direct Labor Hour - 8.80 Direct Labor Rate per Hour - 14.00 Total Direct Labor Cost - 123.20 Job 190 Count- 8 Direct Labor Hour - 3.20 Direct Labor Rate per Hour - 14.00 Total Direct Labor Cost - 51.20 The direct labor cost per unit for Job 125 is ________. a. $6.30 b. $7.00 c. $7.70 d. $6.40

b. $7.00

Department A had 5,000 units in work in process that were 60% completed as to labor and overhead at the beginning of the period, 34,000 units of direct materials were added during the period, 31,000 units were completed during the period, and 2,000 units were 80% completed as to labor and overhead at the end of the period. All materials are added at the beginning of the process. The first-in, first-out method is used to cost inventories. ​ The number of equivalent units of production for material costs for the period was a. 29,800 b. 32,000 c. 34,000 d. 29,000

c. 34,000 Equivalent Units = Number of Units of Direct Materials Added during the Period = 34,000 units

If a company uses a process costing system to account for the costs in its five production departments, how many work in process accounts will it use? a. 4 b. 6 c. 5 d. 2

c. 5

The controlling account for the job cost sheets is a. Materials b. Cost of Goods Sold c. Work in Process d. Finished Goods

c. Work in Process

Starfish Enterprises produces men's sports coats that are sold by popular department stores. Each retail order is treated as a job that accumulates materials, labor, and overhead costs for a batch of sports coats. Management has obtained data on the labor costs for four selected jobs over a six-month period. Each selected job represents a similar style and size of sports coat. The data are as follows: Job 107 Count- 10 Direct Labor Hour - 4.50 Direct Labor Rate per Hour - 14.00 Total Direct Labor Cost - 63.00 Job 125 Count- 14 Direct Labor Hour - 7.00 Direct Labor Rate per Hour - 14.00 Total Direct Labor Cost - 98.00 Job 160 Count- 16 Direct Labor Hour - 8.80 Direct Labor Rate per Hour - 14.00 Total Direct Labor Cost - 123.20 Job 190 Count- 8 Direct Labor Hour - 3.20 Direct Labor Rate per Hour - 14.00 Total Direct Labor Cost - 51.20 The direct labor hour per unit for Job 190 is ________ hours. a. 0.45 b. 0.50 c. 0.55 d. 0.40

d. 0.40

The last step in preparing a cost of production report is to _____. a. compute equivalent units of production b. determine the units to be assigned costs c. determine the cost per equivalent unit d. allocate costs to units transferred out and partially completed units

d. allocate costs to units transferred out and partially completed units

Which of the following is not included in conversion costs? a. direct labor b. indirect labor c. factory overhead d. direct materials

d. direct materials

The two main types of cost accounting systems for manufacturing businesses are the __________ cost system and the __________ cost system. a. perpetual; process b. periodic; perpetual c. perpetual; job order d. process; job order

d. process; job order