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Exam 8: Process Costing

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Question 51

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Mobility,Inc.uses the FIFO method in its process costing system.The following data concern the operations of the company's first processing department - Shaping - for a recent month. $\begin{array}{l}\begin{array} { | l | r | } \hline \text { Work-ir-process, beginning: }\\\text { Units in process } & 500 \\\hline \text { Percent complete with respect to materials } & 70 \% \\\hline \text { Percent complete with respect to conversion } & 40 \% \\\hline \text { Units started into production during the month } & 28,000 \\\hline \text { Work-in-process, ending: } & 100 \\\hline \text { Units in process } \\\text { Percent complete with respect to materials } & 50 \% \\\hline \text { Percent complete with respect to comversion } & 30 \% \\\hline\end{array}\end{array}$ Required: Using the FIFO method,determine the equivalent units of production for materials and conversion costs.

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FIFO method:
\[\begin{array} { | l | r ...

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Question 52

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The debits to Work-in-Process for Department #2 for the month of April of the current year,together with information concerning production,are presented below. $\begin{array}{l}\text { WOFKHNPPROCESS - DEPARTMENT \#2 }\\\begin{array} { | l | r | l | l | } \hline \begin{array} { l } 1,200 \text { units, } 1 / 4 \\\text { completed }\end{array} & \$ 1,200 & \begin{array} { l } \text { Product } X , 6,200 \\\text { units }\end{array} & ? ? ? ? \\\hline \begin{array} { l } \text { From Dept. 1, 6,000 } \\\text { units }\end{array} & 3,600 & & \\\hline \text { Direct Labor } & 8,000 & & \\\hline \text { Factory } \mathrm { OH } & 4,800 & & \\\hline \begin{array} { l } 1,000 \text { units, } 1 / 2 \\\text { complete }\end{array} & ? ? ? ? & & \\\hline\end{array}\end{array}$ All direct materials come from Department #1.The units completed include the 1,200 in process at the beginning of the period.Department #2 uses FIFO costing.The conversion costs per equivalent unit is:

A) $1.00.
B) $1.50.
C) $2.00.
D) $2.55.

E) B) and C)
F) None of the above

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Question 53

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In general,weighted-average costing is simpler to use while first-in,first-out (FIFO)costing provides greater decision-making benefits to managers.

The following data pertain to the Grinding Department of Dancer Corporation for July.The company uses the FIFO method in its process costing. Required: Compute the equivalent units of production for both materials and conversion costs for the Grinding Department for July using the FIFO method.

Explain the major differences between weighted-average costing and FIFO costing.

Toxo Chemicals produces a solvent in its Glendale plant.Three chemicals are combined at the start of the process and blended under pressure for a period of time.At the 75% point of completion,an additional chemical is added.The following information has been gathered: $\begin{array} { | l | r | r | r | r | } \hline & \begin{array} { r } \text { Chemical } \\\text { Mix }\end{array} & \begin{array} { r } \text { Additional } \\\text { Chemical }\end{array} & \begin{array} { r } \text { Comersion } \\\text { Cost }\end{array} & \text { Gallons } \\\hline \text { BWIP } & \$ 5,000 & - 0 - & \$ 3,000 & 10,000 \\\hline \text { Added } & 65,000 & 15,000 & 35,000 & 100,000 \\\hline\end{array}$ Toxo completed 98,000 gallons during the month.The process engineer informs you that the beginning WIP was at the 40% completion point,the ending WIP is at 70%.Toxo uses first-in,first out (FIFO)costing.Required: (HINT: use 4 decimal places in your calculations) a.Compute the equivalent units of production for each input.b.Compute the cost per unit.c.Compute the cost transferred out to finished goods.d.Compute the ending work-in-process inventory balance.

The number of units in the beginning Work-in-Process Inventory plus the units transferred out during the period equals the number of units started during the period plus the number of units in the ending Work-in-Process Inventory.

In May,one of the processing departments at Patton Corporation had beginning work-in-process inventory of $31,000.During the month,$369,000 of costs were added to production and the cost of units transferred out from the department was $368,000.Required: Construct a cost reconciliation report for the department for the month of March.

In a production cost report using process costing,transferred-in costs are most similar to:

If materials are only added at the beginning of the production process,then the degree of completion for materials in the ending Work-in-Process Inventory is always 100%.

In a weighted-average process costing system,the costs in the beginning Work-in-Process Inventory are not used to compute the costs transferred-out.

Dickerson Company uses a process costing system.The following information relates to one month's activity in the company's Mixing Department. The conversion cost of the beginning inventory was $6,500.During the month,$112,000 in additional conversion cost was incurred. Required: a.Assume that the company uses the FIFO method.Compute: 1.The equivalent units of production for conversion for the month. 2.The cost per equivalent unit for conversion for the month. 3.The total cost transferred out during the month. 4.The cost assigned to the ending work-in-process inventory. b.Assume that the company uses the weighted-average cost method.Compute: 1.The equivalent units of production for conversion for the month. 2.The cost per equivalent unit for conversion for the month. 3.The total cost transferred out during the month. 4.The cost assigned to the ending work-in-process inventory.

The following data have been provided by Brice Corporation for the 3-D Printing Department.The company uses the FIFO method in its process costing. $\begin{array} { | l | c | } \hline \text { Units in process, August 1: materials } 60 \% & 900 \\\text { complete, conversion } 30 \% \text { complete } & \\\hline \text { Units started into production during August } & 8,400 \\\hline \text { Units started and completed during August } & 6,500 \\\hline \begin{array} { l } \text { Units completed and transferred to the next } \\\text { department during August }\end{array} & 7,400 \\\hline \begin{array} { l } \text { Units in process, August } 31 \text { : materials } 65 \% \\\text { complete, conversion } 25 \% \text { complete }\end{array} & 1,900 \\\hline\end{array}$ Required: Determine the equivalent units of production for the 3-D Printing Department for August using the FIFO method.

The following examples briefly describe the manufacture of two different products.Which costing method (job-order or process) would be the best method to use for each project? I.Steven Lawless manufactures Lawless Fine Wine Coolers.Steven once made the statement,"People can have any flavor of Lawless Fine Wine Coolers they want as long it's strawberry." II) Northridge Spacetronics is manufacturing three space shuttles for the country of Xanadu.Each shuttle is slightly different and production will last approximately two years. $\begin{array} { | c | c | c | } \hline & \text { I } & \text { II } \\\hline \text { A. } & \text { Process } & \text { Process } \\\hline \text { B. } & \text { Job-Order } & \text { Job-Order } \\\hline \text { C. } & \text { Process } & \text { Job-Order } \\\hline \text { D. } & \text { Job-Order } & \text { Process } \\\hline\end{array}$

The Lakeside Company uses a weighted-average process costing system.The following data are available: $\begin{array} { | l | r | } \hline \text { Beginning inventory } & - 0 \\\hline \text { Units started in production } & 20,000 \\\hline \text { Units finished during the period } & 16,000 \\\hline \begin{array} { l } \text { Units in process at the end of the period } \\\text { (complete as to materials, } 1 / 4 \text { complete as to } \\\text { labor and overhead) }\end{array} & 4,000 \\\hline \text { Cost of materials used } & \$ 35,200 \\\hline \text { Labor and overhead costs } & \$ 37,400 \\\hline\end{array}$ Total cost of the 16,000 units finished is:

Phantom Company has beginning and ending Work-in-Process Inventories that are 45% and 10% complete,respectively.Materials are added at the beginning of the process.If first-in,first-out (FIFO) process costing is used,the total equivalent units for materials will equal the number of units:

Job costing requires more detailed recordkeeping than process costing.

Predetermined manufacturing overhead rates can be used in all of the following costing systems except:

Cranford Company completed and transferred out 2,300 units in May 2016.There were 200 units in the Work-in-Process Inventory on May 31,2016,30% complete as to conversion costs and 100% complete as to materials.The month's charges for conversion costs and material costs were $9,440 and $6,250,respectively.There was no beginning inventory on May 1,2016.What is the cost of the work transferred-out during May?

In general,the ending Work-in-Process Inventory value computed using first-in,first-out (FIFO)will be the same as the ending value computed using weighted-average process costing.