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Exam 4: Process Costing and Hybrid Product-Costing Systems

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Question 41

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Kentucky Corporation uses a process-cost accounting system. The company adds direct materials at the start of its production process; conversion cost, on the other hand, is incurred evenly throughout manufacturing. The firm has no beginning work-in-process inventory; its ending work in process is 40% complete. Which of the following sets of percentages would be used to calculate the correct number of equivalent units in the ending work-in-process inventory?

A) Materials, 40%; conversion cost, 40%.
B) Materials, 40%; conversion cost, 100%.
C) Materials, 100%; conversion cost, 40%.
D) Materials, 100%; conversion cost, 60%.
E) Materials, 100%; conversion cost, 100%.

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Question 42

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Hamilton, which uses a process-costing system, had a balance in its Work-in-Process account of $68,000 on January 1. The account was charged with direct materials, direct labor, and manufacturing overhead of $450,000 throughout the year. If a review of the accounting records determined that $86,000 of goods were still in production at year-end, Hamilton should make a journal entry on December 31 that includes:

A) a debit to Cost of Goods Sold for $432,000.
B) a credit to Finished-Goods Inventory for $432,000.
C) a credit to Work-in-Process Inventory for $432,000.
D) a debit to Finished-Goods Inventory for $86,000.
E) a credit to Work-in-Process Inventory for $86,000.

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Question 43

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Which of the following data are needed to calculate total equivalent units under the weighted-average method?

Aglow Company uses a process-cost system for its single product. Material A is added at the beginning of the process; in contrast, material B is added when the units are 50% complete. The firm's ending work-in-process inventory consists of 4,000 units that are 75% complete. Which of the following correctly expresses the equivalent units of production with respect to materials A and B in the ending work-in-process inventory?

Griswold, Inc., which uses a process-costing system, transfers completed production from Department no. 1 to Department no. 2 for further work. Which of the following best describes the account that would be debited to record this transfer?

Barnett, Inc., which uses a process-costing system, transfers completed production from Department no. 1 to Department no. 2 for further work. Which of the following best describes the account that would be credited to record this transfer?

Which of the following best describes the procedures used in operation costing to assign direct-material and conversion costs to production?

Baxley Products manufactures office furniture by using an assembly-line process. All direct materials are introduced at the start of the process, and conversion cost is incurred evenly throughout manufacturing. An examination of the company's Work-in-Process account for August revealed the following selected information: Debit side- August 1 balance: 600 units, 40% complete; cost, $44,600* Production started: 1,800 units Direct materials used during August: $90,000 August conversion cost: $51,400 Credit side- Production completed: 1,400 units *Supplementary records disclosed direct material cost of $30,000 and conversion cost of $14,600. Conversations with manufacturing personnel revealed that the ending work in process was 80% complete. Required: A. Determine the number of units in the August 31 work-in-process inventory. B. Calculate the cost of goods completed during August, and prepare the appropriate journal entry to record completed production. C. Determine the cost of the August 31 work-in-process inventory.

When determining the cost of a manufactured good under an operation-costing system, a company would:

Operation costing is a hybrid type of accounting system that combines features of job-order and process-cost accounting. Required: A. Briefly discuss the similarities and differences of an operation-costing system and a job-order cost system. B. Briefly discuss the similarities and differences of an operation-costing system and a process-cost system.

Gilberto adds materials at the beginning of production and incurs conversion cost uniformly throughout manufacturing. Consider the data that follow. $\begin{array}{ll}&\text { Units }\\\text { Beginning work in process } & 20,000 \\\text { Started in August } & 60,000 \\\text { Production completed } & 55,000 \\\text { Ending work in process, } 40 \% \text { complete } & 25,000\end{array}$ Conversion cost in the beginning work-in-process inventory totaled $120,000, and August conversion cost totaled $270,000. Assuming use of the weighted-average method, which of the following choices correctly depicts the number of equivalent units for materials and the conversion cost per equivalent unit?

Ohio, Inc., which uses a process-cost accounting system, began operations on January 1 of the current year. The company incurs conversion cost evenly throughout manufacturing. If Ohio started work on 3,000 units during the period and these units were 70% of the way through manufacturing, it would be correct to say that the company has:

Gajewski began operations on January 1 of the current year. The company uses a process-costing system, and conversion cost is incurred evenly throughout manufacturing. By January 31, the firm had completed 56,000 units. Which of the following statements is true about the ending work-in-process inventory if equivalent units for conversion cost totaled 59,000 units?

Portofina Manufacturing uses a weighted-average process-costing system. The following figures pertain to July: All materials are introduced at the start of the process, and conversion cost is incurred evenly throughout production. The company used direct materials that cost $640,000; conversion amounted to $8 per equivalent unit. Required: A. Calculate the direct materials cost per equivalent unit. B. Calculate the cost of units completed and transferred. C. What percentage of conversion work will be performed on the 40,000-unit ending work-in-process inventory during August? D. In all likelihood, were all of the 120,000 completed units begun in July? Explain.

Operation costing is a popular type of accounting system, one that combines selected features of job-order and process-cost accounting. Required: A. Briefly discuss the basic features that are associated with an operation-costing system. B. Explain why a sweater manufacturer may have a need for an operation-costing system.

Which of the following companies would likely use a process-costing system?

Corruption, Inc. overstated the percentage of work completed with respect to conversion cost on the ending work-in-process inventory. What is the effect of this overstatement on conversion-cost equivalent units and physical units manufactured, respectively?

Cosby uses a weighted-average process-costing system. All materials are added at the beginning of the process; conversion costs are incurred evenly throughout production. The company finished 40,000 units during the period and had 15,000 units in progress at year-end, the latter at the 40% stage of completion. Total material costs amounted to $220,000; conversion costs were $414,000. The cost of goods completed is:

Levitt Corporation, which uses an operation-costing system, has three processing departments. All units pass through Department no. 1; upon completion, 70% of the goods are sent to Department no. 2 and 30% are sent to Department no. 3. Additional data follow. • Forty thousand units were manufactured during the year. • Conversion cost in each department was: No. 1, $380,000; no. 2, $196,000; and no. 3, $150,000. • Batch no. 67, which consisted of 500 units, was sent to Department no. 3 for its additional processing. Direct materials of $23,500 and $11,900 were introduced to this batch in Department nos. 1 and 3, respectively. Levitt assigns conversion cost to goods manufactured on the basis of units produced. Required: A. Determine the conversion cost per unit in Department no. 1, Department no. 2, and Department no. 3. B. Compute the total cost of batch no. 67. C. Operation costing is sometimes referred to as a hybrid costing system. Briefly explain.

Starling Chemical uses a weighted-average process-costing system. The following data relate to May: Required: A. Calculate the number of pounds completed during May. B. Calculate equivalent units of materials and conversion for May. C. Does Starling introduce all of its direct materials at the very beginning of production? Explain your answer.