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Exam 3: Process Costing

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Question 21

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Under process costing, the total production costs incurred must be split between the units that have been completed in that process and transferred to the next process and the:

A) Finished Goods Inventory if it is the first process.
B) units not completed and remaining in Work-in-Process Inventory for that department.
C) Cost of Goods Sold when the units are sold.
D) Work-in-Process Inventory of the previous department when there are no sales.

E) B) and C)
F) A) and C)

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Question 22

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A process costing system is most suitable for businesses that manufacture batches of unique products or provide specialized services.

A) True
B) False

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Question 23

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The cost amounts that are transferred out from one process to another process become transferred in costs for the receiving process.

Under process costing, the costs incurred by each department are recorded in a separate production cost report for each department.

Muses Manufacturing produces plastic toys and uses process costing. There are three processing departments-Assembling, Finishing, and Packaging. On January 1, 2012, the Finishing Department had 2,000 units of partially processed product in production. During January, 32,000 units were transferred in from the Assembling Department and 29,000 units were completed and transferred out. At the end of the month, there were 5,000 units of partially processed products remaining in the Finishing Department. See additional details below. $\begin{array}{l}\text { Finishing Department, ending balance at January 31, } 2012\\\begin{array} { | l | r | } \hline \text { Percentage completion for materials cost: } & 90 \% \\\hline \text { Percentage completion for conversion cost: } & 75 \% \\\hline\end{array}\end{array}$ For the Finishing Department, what was the number of equivalent units for the month of January, with respect to direct materials?

In a process costing system, equivalent units must be calculated separately for materials and conversion costs.

Production cost reports prepared using first-in, first-out (FIFO) method determines the average cost of equivalent units of production by combining beginning inventory costs with current period costs.

If 20,000 units are 60% complete with respect to direct materials, then the equivalent units of production for direct materials are:

A production cost report shows only the calculations for the physical flow of products.

The Assembling Department of Mat Liners had 10,000 units in process on December 1 and received 30,000 units from the Sewing Department. During the month, it completed 20,000 units and transferred them to the Packaging Department. Calculate the number of units accounted for by the Assembling Department for December. Prepare the production cost report for the Assembling Department for the whole units for the month of December. Use the FIFO method.

The first-in, first-out (FIFO) method creates better month-to-month cost comparisons than the weighted-average method:

Which of the following statements correctly describes the term conversion costs?

A predetermined overhead allocation rate is used to allocate direct materials cost to various processes or departments.

Under process costing, a single Work-in-Process Inventory account is maintained for all processes, with a subsidiary ledger containing individual production cost reports for each process.

Which of the following is a step in the preparation of a production cost report?

At the start of June, the Polishing Department of Wood Shiners had 15,000 units in beginning inventory which were 100% complete with respect to direct materials and conversion costs. During the month, it received 25,000 units from the Machining Department. It started and completed 17,000 units and transferred 32,000 units to the Packaging Department. It had 8,000 units in ending Work-in-Process Inventory. Direct materials are added at the beginning of the process. Units in ending Work-in-Process Inventory were 40% complete with respect to conversion costs. Prepare the production cost report for the Polishing Department for the equivalent units of production for the month of June. Use the FIFO method.

Under a process costing system, direct labor costs are assigned to the Work-in-Process account of the department for which they are incurred.

LDR Manufacturing produces a pesticide chemical and uses process costing. There are three processing departments-Mixing, Refining, and Packaging. On January 1, 2012, the first department, Mixing, had a zero beginning balance. During January, 40,000 gallons of chemicals were started into production. During the month, 32,000 gallons were completed, and 8,000 remained in process, partially completed. In the Mixing Department, all direct materials are added at the beginning of the production process, and conversion costs are applied evenly through the process. During January, the Mixing Department incurred $48,000 in direct materials costs and $211,600 in conversion costs. At the end of the month, the ending inventory in the Mixing Department was 60% complete with respect to conversion costs. The total cost of product in ending inventory was:

Both job order costing and process costing track the product costs of direct materials, direct labor, and manufacturing overhead through three inventory accounts on the balance sheet.

Travel Trails manufactures railway coaches and uses the FIFO method of process costing to record costs. The Work-in-Process Inventory of the Heating Department on October 1 was 70% complete for materials and 20% complete for conversion costs. On October 31, its ending Work-in-Process Inventory was 80% complete for materials and 40% complete for conversion costs. This means that for the ending inventory ________ % of the materials and ________ % of the conversion costs were added during October.