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Exam 3: Process Costing

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Question 1

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Nettle Co.uses process costing to account for the production of rubber balls.Direct materials are added at the beginning of the process and conversion costs are incurred uniformly throughout the process.Equivalent units have been calculated to be 12,000 units for materials and 10,000 units for conversion costs.Beginning inventory consisted of $14,000 in materials and $8,000 in conversion costs.April costs were $72,000 for materials and $80,000 for conversion costs.Ending inventory still in process was 4,000 units (100% complete for materials,50% for conversion) .The cost per unit for conversion costs using the FIFO method would be

A) $8.00
B) $8.80
C) $2.20
D) $17.40

E) B) and C)
F) B) and D)

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Question 2

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Computing equivalent units is particularly important for products that take a long time to manufacture,such as airplanes.Computing equivalent units is particularly important for products that take a long time to manufacture,such as wine that must be aged or airplanes.

A) True
B) False

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Question 3

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Cost per equivalent unit is kept separate for direct materials and conversion costs because

The journal entry to record the purchase of direct materials for cash includes

Stangol Co.uses process costing to account for the production of highlighter pens.Direct materials are added at the beginning of the process and conversion costs are incurred uniformly throughout the process.Cost per equivalent unit has been calculated to be $8.80 for conversion costs and $7.1667 for materials.12,000 units were worked on during the period.Ending inventory still in process was 4,000 units (100% complete for materials,50% for conversion) .The value of ending inventory using the weighted average method would be closest to:

Brody Corp uses a process costing system in which direct materials are added at the beginning of the process and conversion costs are incurred uniformly throughout the process.Beginning inventory for January consisted of 1,300 units that were 40% completed.13,000 units were started into the process during January.On January 31,the inventory consisted of 650 units that were 70% completed.What would be the equivalent units for conversion cost using the weighted average method?

A process costing production report prepared using the weighted-average method is acceptable for external reporting purposes whereas a process costing production report prepared using the FIFO method is not acceptable for external reporting purposes.Either method of preparing a process costing production report is acceptable for external reporting (GAAP).

Middle Co.uses process costing to account for the production of chocolate candy bars.Direct materials are added at the beginning of the process and conversion costs are incurred uniformly throughout the process.Cost per equivalent unit has been calculated to be $4.00 for conversion costs and $3.00 for materials.3,000 units were in beginning inventory (100% complete for materials,80% for conversion) .12,000 units were started and completed during the period.Ending inventory still in process was 6,000 units (100% complete for materials,40% for conversion) .The value of ending inventory using the FIFO method would be

The journal entry to record the purchase of direct materials includes

Cost per equivalent unit is calculated separately for direct materials and for conversion costs.Because equivalent units are different for direct materials and conversion costs,we must make a separate calculation for each category.

Equivalent units are calculated by multiplying the number of physical units by their percentage of completion.This is how equivalent units are calculated.

Heathcoat Co.uses process costing to account for the production of canned vegetables.Direct materials are added at the beginning of the process and conversion costs are incurred uniformly throughout the process.Beginning inventory consisted of $7,000 in materials and $4,000 in conversion costs.April costs were $36,000 for materials and $40,000 for conversion costs.On April 1,there were 2,000 units in beginning inventory (80% complete) .During April 10,000 units were completed.Ending in process inventory was 4,000 units (100% complete for materials,40% for conversion) .The total cost per unit using the FIFO method would be

(Beginning inventory + Current costs)/Equivalent units is the formula to calculate the cost per equivalent unit using the weighted-average method.This is the correct formula for calculating cost per equivalent unit.

The number of beginning units in process plus the number of ending units in process should equal the number of units started plus the number of units completed.The number of beginning units in process plus the number of units started should equal the number of units completed plus the number of ending units in process.

South Corp uses a FIFO process costing system in which direct materials are added at the beginning of the process and conversion costs are incurred uniformly throughout the process.Beginning inventory for January consisted of 1,000 units that were 40% completed.10,000 units were started into the process during January.On January 31,the inventory consisted of 500 units that were 70% completed.How many units were started and completed during the period?

Sanger Corp uses a process costing system in which direct materials are added at the beginning of the process and conversion costs are incurred uniformly throughout the process.Beginning inventory for January consisted of 1,000 units that were 40% completed.10,000 units were started into the process during January.On January 31,the inventory consisted of 500 units that were 70% completed.What would be the equivalent units for conversion cost using the FIFO method?

Rathburn,Inc.is a service firm that uses process costing.The firm worked on a total of 1,000 cases this month,800 of which were completed during the period.The remaining cases were 40% complete.The firm incurred $180,000 in direct labor and manufacturing overhead costs during the period,and had $4,800 in direct labor and manufacturing costs in beginning inventory.Using the weighted average method,what was the total cost of cases still in process at the end of the period?

Livingston Co.uses process costing to account for the production of elastic bands.Direct materials are added at the beginning of the process and conversion costs are incurred uniformly throughout the process.Beginning inventory consisted of $14,000 in materials and $8,000 in conversion costs.April costs were $72,000 for materials and $80,000 for conversion costs.During April 8,000 units were completed.Ending in process inventory was 4,000 units (100% complete for materials,50% for conversion) .The total cost per unit using the weighted average method would be

Which of the following statements is true?

Macadam Corp.uses the weighted average method of process costing.Its cost per equivalent unit for direct materials was $5.00 this period,and it had 25,000 equivalent units for direct materials.Beginning inventory costs were 25% of current costs.How much were current costs?