Module 5 and Module 6 Process Costing Notes and Quiz Answers

Jaunty Coffee Company has 1,000 units in beginning work-in-process inventory that are 100% complete with respect to direct materials. A total of 5,000 units were started during the period. A total of 2,000 units were in the ending work-in-process inventory. What are the equivalent units for direct materials in the beginning work-in-process inventory for the current period?

0 If all the direct materials were added in the prior period (which they were for the beginning work-in-process inventory), there are no equivalent units for direct materials this period for the beginning work-in-process inventory.

Figurine Production

1. end of yesterday 1 unit 90%, today 10% 2. Today 3 units 100% 3. Today started 1 unit 30%, finish tomorrow 10% + 300% + 30% = 340% = 3.4

Beginning inventory (50% complete): 1,000 units Started and completed: 35,000 units Ending inventory (50% complete): 2,000 units Both material costs and conversion costs are added evenly throughout the production process. What is Plairtrack's total equivalent number of units for the month of March?

36,500 units Beginning inventory of 1,000 units × 50% completed during the period = 500 units + 35,000 units started and completed during the period × 100% = 35,000 + Ending inventory of 2,000 units × 50% = 1,000 for a total of 36,500 total equivalent units for the month of March for both material and conversion costs.

Beginning work-in-process: 3,000 cases at 100% complete for direct materials and 60% for conversion costs Started and completed: 46,000 cases Ending work-in-process: 2,000 cases at 100% complete for direct materials and 70% for conversion costs What is Orange Zest Café's direct materials equivalent units of production for December?

48,000 cases All the material for the beginning inventory was complete at the beginning of the period, and so none of it was done this period. The ending inventory was 100% completed this period, and so the equivalent number of units for direct materials is the 2,000 cases in ending inventory plus the 46,000 cases that were started and completed.

What is Orange Zest Café's conversion cost equivalent units of production for December?

48,600 cases Because the ginning inventory was 60% complete at the beginning of the period, 40% or 1,200 equivalent units of beginning inventory were produced. Because the 2,000 units of ending inventory were 70% completed this period, the equivalent units in ending inventory is 1,400. The correct answer is the 1200 units of beginning inventory, the 1,400 units of ending inventory, and the 46,000 cases started and completed for a total of 48,600 cases.

The beginning inventory for a company is 100 units at 30% complete. A total of 5,000 units were started and completed during the period. Ending inventory is 400 units at 60% complete. How much is the company's equivalent units for the period?

5,310 units

Assume there are 3,000 units in ending work-in-process inventory, the unit cost for direct materials is $2.00, and the unit cost for conversion costs is $3.00. If the ending inventory is 100% complete as to direct materials and 60% complete as to conversion costs, what is the cost of ending work-in-process inventor?

6,000 for direct materials and $5,400 for conversion costs for a total of $11,400 Because the work-in-process inventory is 100% complete as to direct materials, the cost for direct materials is $2 × 3,000 units or $6,000. Because the conversion costs are only 60% complete, the conversion costs for the period are $5,400 for a total of $11,400.

Which manufacturer should use process costing?

A concrete manufacturer would make batches of concrete where all units produced are the same and the processes for making the cement is the same.

Which of the following are transferred from work-in-process to finished goods inventory?

Actual inventory items and the costs of those inventory items Both the costs and the actual inventory items must be tracked through the process costing system. When the items are 100% complete, the inventory would be transferred to finished goods inventory at the costs that were expended to make the inventory.

What is the name of the cost associated with the completed units?

Cost of goods manufactured The definition of cost of goods manufactured is the costs of the completed units that are transferred to finished goods during the period.

The costs of ending work-in-process inventory is calculated by which of the following formulas?

Cost per unit of direct materials times equivalent units for materials plus conversion costs per unit times the number of equivalent units for conversion costs

Which costs would be introduced into a process costing activity center first?

Direct labor and manufacturing overhead costs cannot be incurred until there are direct materials to work on.

Which costs make up the work-in-process inventory costs in the processing centers?

Direct materials and coversion costs

What is another name for the "work done" or "work performed" during a period under process costing

Equivalent units of production Equivalent units of production is the measure of work done or performed during a period. It is needed to calculate the unit cost of direct materials and conversion costs.

When computing the costs transferred out of a department or processing center, which of the following is true?

It is always the direct materials and conversion costs to complete beginning work-in-process inventory that are added to the total costs of the started and completed units that are the total cost of units transferred out.

Equivalent units of Production

It is the amount of work ACTUALLy done during a period. -some work is started last period and finished this period -some are started this period and finished next period -some are started/finished this period regardless, its what is DONE this period that counts.

When determining the cost per unit of units produced in a processing center, which statement is true?

Separate unit costs are calculated for direct materials and conversion costs for both beginning work-in-process inventory and conversion costs.

Which statement determines the conversion costs in the ending work-in-process inventory at the end of a current period?

The conversion cost per equivalent unit during the current period multiplied by the conversion equivalent units in the ending work-in-process inventory The conversion costs in the ending work-in-process inventory at the end of the current period is calculated by taking the conversion cost per equivalent unit during the current period and multiplying it by the conversion equivalent units in the ending work-in-process inventory.

The conversion cost of ending work-in-process inventory is equal to which of the following?

The conversion cost per equivalent unit this period multiplied by the conversion cost number of equivalent units The conversion cost of ending work-in-process inventory is calculated by multiplying the conversion cost per equivalent unit this period and the conversion cost number of equivalent units.

The costs that are associated with units completed and transferred out this period are the sum of which components?

The cost of beginning work-in-process inventory, both materials and conversion costs; the cost per equivalent unit required to complete those units in beginning inventory; and the cost per equivalent unit of the items started and completed this period, both materials and conversion costs It is these three costs that make up the costs of the units transferred out to finished goods.

Which statement accurately describes the cost of goods transferred out?

The cost of goods transferred out to finished goods is the sum of the costs to make the finished goods in all processes, both in the current or prior period. The costs of all work performed on the finished goods, whether in the current or prior periods. From all processes are the costs that are transferred to finished goods inventory.

Here are a few very important conclusions to remember:

The costs and equivalent units of production (work done) are tracked separately for direct materials and for conversion costs. You are assuming FIFO, which means that all work on beginning inventory is completed and transferred out before any work is started during the current period. For beginning inventory that are a certain percent completed (whether direct materials or conversion costs), say 40 percent, the work performed during the current period is 100 percent minus the 40 percent, which is 60 percent. It is always the work performed during the current period that you are interested in. A unit cost is computed for both direct materials and conversion costs for beginning inventory and work started and completed during the period. Under FIFO, the total costs for direct materials for conversion costs for the current period (called "dollars in") are allocated between goods transferred out to the next department. Or they are allocated to finished goods and remaining in ending inventory based on the unit costs and the equivalent units of production for both. In Allied's example, $79,680 of the total "dollars in" of $81,840 were transferred out with the balance remaining in ending inventory.

Using the data for Jaunty Coffee Company, which statement is true regarding costs per unit and ending work-in-process inventory?

The costs per unit of both direct materials and conversion costs are different for the beginning work-in-process inventory and costs incurred during the current period. The calculations for both direct materials costs and conversion costs are made separately for beginning work-in-process inventory and the current period and are usually different from each other. In Jaunty Coffee Company's case, both beginning inventory and ending inventory are 100% complete, while conversion costs are 40% and 30% respectively.

What is the relationship between equivalent number of units for direct materials?

The equivalent number of units for direct materials is usually different from the equivalent number of units for conversion costs.

Which statement accurately describes the equivalent number of units?

The equivalent number of units is not the same as the number of physical units transferred to finished goods. The equivalent number of units is a measure of work done on units and almost always differs from the actual number of units. It is a number used to calculate the cost per unit and not the transfer of actual units.

What is the number of equivalent units for direct materials equal to?

The equivalent units for beginning work-in-process inventory plus the equivalent units for units started and completed plus the equivalent units for ending work-in-process inventory The equivalent units of production is equal to the equivalent units for beginning work-in-process inventory plus the equivalent units for units started and completed plus the equivalent units for ending work-in-process inventory.

Which of the following statements calculates the material's costs in the ending work-in-process inventory at the end of the current period?

The materials cost per equivalent unit during the current period multiplied by the material's equivalent units in the ending work-in-process inventory The material costs in the ending work-in-process inventory at the end of the current period is calculated by taking the materials cost per equivalent unit during the period and multiplying it by the materials equivalent units in the ending work-in-process inventory.

What are the total processing dollars spent during a period in a process center equal to?

The sum of the cost of goods transferred out and the cost of ending work-in-process inventory The total dollars in, or total processing dollars spent during a period, is equal to the cost of goods transferred out and the cost of ending work-in-process inventory. Goods worked on were either not finished and are in ending inventory, or they are finished and transferred out. The ending inventory of one period becomes the beginning inventory of the next period and cannot be double counted.

Which of the following statements summarizes how the cost of the ending work-in-process inventory should be calculated?

The sum of the material costs plus the conversion costs for the unfinished units The cost of the ending work-in-process inventory is calculated by adding the material costs to the conversion costs for the unfinished units.

What happens to the total production costs remaining in work-in-process inventory at the end of the period?

The total production costs remaining in work-in-process inventory at the end of the period are carried forward as beginning work-in-process inventory for the next period and are included in the production cost computations for that subsequent period.

In process costing, the units completed and the units remaining in ending work-in-process inventory at the end of the period come from which of the following?

The units in beginning inventory and the units started during the current period The units in beginning inventory and the units started make up all the units active during the current period. Those "in play" units will either be completed and transferred out or remain in ending work-in-process inventory.

Which of the following are always considered 100% complete when calculating equivalent units?

Units started and completed during the period. Units started and completed during the period are always considered 100% completed and are 100% completed all the time. You cannot call them completed units if they are not completed during the period.

Which term is used for direct materials and conversion costs associated with items started but not finished?

Work-in-process inventory Direct materials and conversion costs associated with items started but not finished make up the work-in-process inventory.

If beginning inventory is 100%

it equals zero