accounting students perception of public (1)

(1)

(2)

Item DL LO Item DL LO Item DL LO

69. Med C1,A1 82. Med C3 95. Easy P1

70. Med C1 83. Med C3 96. Easy P1

71. Med C1 84. Med C3 97. Easy P1

72. Med C1 85. Med C3 98. Med P2

73. Easy C2 86. Hard C3 99. Med P2

74. Med C2 87. Med C4 100. Easy P3

75. Med C2 88. Med C5 101. Med P3

76. Med C3 89. Hard C5 102. Med P4

77. Hard C3,C5 90. Hard C5 103. Hard P5

78. Med C3 91. Easy A1 104. Med P6

79. Med C3 92. Med A1

80. Hard C3 93. Med A1

81. Med C3 94. Easy A2

Matching

105. Med C2,C4, A1,A2,

P1

Short Essay

106. Med C2 110. Med A1 113. Med P2

107. Med C3 111. Med A2 114. Med P3

108. Med C4 112. Med P1

(3)

115. Med C3 126. Med P2 136. Med P5

116. Med C3 127. Med P3 137. Med P5

117. Med C3 128. Med P5 138. Med P6

118. Hard C5 129. Med P5

119. Hard C5 130. Med P5

120. Hard C5 131. Med P5

121. Hard C5 132. Med P5

122. Hard C5 133. Med P5

123. Hard C3 134. Hard P5

124. Med C5 135. Med P5,P6

125. Med P1

Completion Problems

139. Easy C1 145. Med C3 150. Med P2

140. Med C2 146. Med A1 151. Med P3

141. Med C2 147. Easy A2 152. Easy P5

142. Med C3 148. Med P1 153. Hard P5

143. Med C3 149. Hard P1 154. Med P6

(4)

True / False Questions

1. The managers of process manufacturing systems focus on the series of processes needed to complete the production of products.

TRUE

AACSB: Analytic AICPA BB: Industry AICPA FN: Measurement Difficulty: Easy Learning Objective: C1

2. Process manufacturing usually reflects a manufacturer that produces large quantities of identical products.

TRUE

3. To determine unit cost under a process cost accounting system, equivalent units produced must be calculated if the company has goods in process inventories.

TRUE

(5)

4. Equivalent units of production refer to the number of units that would be completed if all effort during a period had been applied only to those units that were started and completed in a period.

5. In a process cost accounting system, a department's production should be measured in terms of equivalent units when its beginning or ending inventory includes goods in process.

TRUE

6. Equivalent units of production are always the same as the total number of physical units finished during the period.

FALSE

7. Equivalent units of production need to be determined only if a processing department adds materials and labor to its products at different rates.

(6)

8. "Equivalent units of production" is an engineering term used to describe the process by which one company attempts to manufacture units of a product that are equivalent to the product manufactured by a competitor.

FALSE

9. The last step in the four-step accounting procedure for process costing is the calculation of equivalent units of production.

FALSE

10. The process cost summary is an important managerial accounting report produced by a process cost accounting system.

TRUE

11. A process cost summary is an accounting report that describes the costs charged to a department, the equivalent units of production by the department, and how the costs were assigned to the output.

TRUE

(7)

12. A process cost summary includes the amounts of equivalent finished units of production for the period.

TRUE

13. A process cost summary shows the cost of a particular job manufactured in the reporting period.

14. The FIFO method separates work done on beginning inventory in the previous period from work done on it in the current period.

TRUE

15. If a department that applies process costing starts the reporting period with 100,000 physical units that were 20% complete with respect to direct labor, it must add 80% direct labor in the current period to complete the units.

(8)

16. The FIFO method does not use the costs of beginning inventory in computing cost per equivalent unit for the current period.

TRUE

17. Process and job order manufacturing operations both combine materials, labor, and overhead items in the process of producing products.

TRUE

18. Process cost accounting systems are commonly used by companies that produce a large volume of standardized units on a continuous basis.

TRUE

19. Accountants use the term "process cost accounting system" because these systems use a number of trained individuals and computers to process the collected cost information.

(9)

20. A production department is an organizational unit of a factory that has the responsibility for at least partially manufacturing or producing a product or service.

TRUE

21. In a process cost accounting system, the cost of the finished goods from one department are transferred to the next department.

TRUE

22. When defining direct costs and indirect costs in process costing, it is the process that is the cost object.

(10)

24. In process cost accounting, all labor that is applied exclusively in a single production department is considered to be direct labor.

TRUE

25. Process cost accounting systems consider overhead costs to include those costs that cannot be readily identified with any specific process.

TRUE

26. Companies that use a series of repetitive manufacturing processes to produce standardized products should use a process cost accounting system.

TRUE

27. Process cost accounting systems are used only by companies that manufacture physical products; meaning that companies and other organizations that provide services to their customers do not use process cost accounting.

FALSE

(11)

28. Process cost accounting systems are commonly used by companies that manufacture standardized products by passing them through a series of manufacturing steps.

TRUE

29. The use of process costing is of little benefit to a service type of operation.

FALSE

30. In process cost accounting, the classification of materials as direct or indirect depends on whether they are clearly linked with a specific process.

TRUE

31. Direct costs in process cost accounting include only those costs that can be readily identified with particular product units.

(12)

32. Process cost accounting systems consider direct costs to include those costs that can be readily identified with a particular process.

TRUE

33. In process cost accounting, materials are always classified as indirect if they are not physically incorporated into the final product.

FALSE

34. Hybrid systems contain aspects of both process and job order operations.

TRUE

35. Hybrid costing systems can only be applied to auto manufacturing.

(13)

36. When a process cost accounting system records the purchase of raw materials, the Raw Materials Inventory account is credited.

FALSE

37. When a process cost accounting system records the purchase of raw materials, the Raw Materials Inventory account is debited.

TRUE

38. When a process cost accounting system assigns the cost of materials to a production department, the journal entry debits the Raw Materials Inventory account and credits the Goods in Process Inventory account for that department.

FALSE

39. A materials consumption report is a source document that summarizes the materials used during a reporting period.

(14)

40. If Department A uses $10,000 of direct materials and Department B uses $15,000 of direct materials, the following journal entry would be recorded by the process cost accounting system:

41. A unique feature of process costing systems is the use of a single Goods in Process Inventory control account.

FALSE

(15)

43. After all process cost accounting journal entries are recorded and posted for a reporting period, the Factory Payroll account should have a zero balance.

TRUE

AACSB: Analytic AICPA BB: Industry AICPA FN: Measurement Difficulty: Medium Learning Objective: P2

44. If the factory labor cost for a month was $123,000 (paid in cash), the following journal entry would be recorded by the process cost accounting system:

TRUE

45. In process cost accounting, direct labor includes only the labor that is applied directly to the products.

FALSE

(16)

46. In some circumstances, a process cost accounting system can classify wages paid to maintenance workers as direct labor costs instead of factory overhead.

TRUE

47. In a process costing system, factory labor costs incurred in a reporting period are presented on the income statement as Factory Labor Expense.

FALSE

48. The following journal entry would be made to record the use of direct labor in the reporting period covered by the information:

FALSE

(17)

49. If Department G uses $53,000 of direct labor and Department H uses $21,000 of direct labor, the following journal entry would be recorded by the process cost accounting system:

50. Factory overhead costs can be allocated by a process cost accounting system to the output of production departments by using a predetermined overhead allocation rate.

TRUE

51. If the indirect materials cost for a reporting period was $37,500, the following journal entry would be recorded by the process cost accounting system:

(18)

52. In process costing there is never a balance remaining in Factory Overhead that needs to be closed at period end.

FALSE

AACSB: Analytic AICPA BB: Industry AICPA FN: Measurement Difficulty: Easy Learning Objective: P3

53. In process costing, indirect materials are charged directly to Goods in Process Inventory.

FALSE

54. A process cost accounting system records all factory overhead costs directly in the Goods in Process Inventory accounts.

FALSE

(19)

55. If the predetermined overhead allocation rate is 350% of direct labor cost and the Painting Department's direct labor cost for the reporting period is $20,000, the following entry would record the allocation of overhead to the products processed in this department:

56. If the predetermined overhead allocation rate is 85% of direct labor cost, and the Polishing Department's direct labor cost for the reporting period is $20,000, the following entry would be made to record the allocation of overhead to the products processed in this department:

57. If the predetermined overhead allocation rate is 225% of direct labor cost, and the Mixing Department's direct labor cost for the reporting period is $10,000, the following entry would be made to record the allocation of overhead to the products processed in this department:

(20)

58. The number of equivalent units of production assigned to ending goods in process

inventory should usually be equal to or less than the number of physical units in ending goods in process inventory.

TRUE

AACSB: Analytic

AICPA BB: Critical Thinking AICPA FN: Measurement Difficulty: Medium Learning Objective: P4

59. In the same time period, it is possible that a production department can produce 1,000 equivalent finished units with respect to direct materials and 1,200 equivalent finished units with respect to direct labor.

TRUE

60. If a production department has 100 equivalent units of production with respect to direct materials in a given reporting period, the equivalent units of production with respect to direct labor also must be 100.

(21)

61. Once equivalent units are calculated for materials, this number will also used for direct labor and factory overhead.

FALSE

62. If a department that applies process costing starts the reporting period with 50,000

physical units that were 25% complete with respect to direct materials and 40% complete with respect to direct labor, it must add 12,500 equivalent units of direct materials and 20,000 equivalent units of direct labor to complete them.

FALSE

(22)

64. A process cost summary for a production department accounts for all costs assigned to that department during the period plus costs that were in the department's Goods in Process Inventory account at the beginning of the period.

TRUE

65. The process cost summary presents calculations of the cost of units completed during the reporting period, but does not present any information about the ending goods in process inventory.

(23)

67. All costs of the processes in a process costing system ultimately pass through the Cost of Goods Sold account.

TRUE

68. The Packing Department transferred out completed units with a cost of $74,000. This transfer should be recorded with the following entry:

69. Which of the following five types of products is least likely to be produced in a process manufacturing system?

A. Compact disks.

B. Slacks for casual wear. C. Baseball hats.

D. Calculators.

E. Oil paintings.

(24)

70. Which of the following characteristics does not usually apply to process manufacturing systems?

A. Each unit of product is separately identifiable.

B. Partially completed products are transferred between processes. C. Different managers are responsible for different processes.

D. The output of all processes except the final process is an input to the next process. E. All of these are characteristics of process manufacturing systems.

AACSB: Analytic AICPA BB: Industry AICPA FN: Measurement Difficulty: Medium Learning Objective: C1

71. Hou Company applies factory overhead to its production departments on the basis of 90% of direct labor costs. In the Assembly Department, Hou had $125,000 of direct labor cost, and in the Finishing Department, Hou had $35,000 of direct labor cost. The entry to apply

overhead to these production departments is:

(25)

72. Which of the following characteristics applies to process cost accounting but not to job order cost accounting?

A. Use of a predetermined overhead rate. B. Identifiable lots of production.

C. Equivalent units of production. D. Labor time ticket for each employee. E. Use of a single Goods in Process account.

73. A measure of the productivity of a process with respect to its use of direct materials, direct labor, or overhead, and an expression of the activity of a process as the number of units that would have been processed during a period if all effort had been applied to units that were started and finished during the period, is called:

A. Manufacturing overhead. B. Units in process.

C. A job cost sheet.

D. Equivalent units of production. E. Process cost summary.

(26)

74. Equivalent units of production are equal to:

A. The number of units that could have been completed if all effort had been applied to units that were started and completed that period.

B. The number of finished units actually produced that period. C. The number of units introduced into the process that period. D. The number of units still in process that period.

E. Physical units that were completed this period from all effort being applied to them.

75. Which of the following is the best explanation for why it is necessary to calculate equivalent units of production in a process costing environment?

A. In most manufacturing environments, it is not possible to conduct a physical count of units. B. Companies often use a combination of a process costing and job order costing systems. C. In most process costing systems, direct materials are added at the beginning of the process while conversion costs are added evenly throughout the manufacturing process.

D. All of the work to make a unit 100% complete and ready to move to the next stage of production or to finished goods inventory may not have been completed in a single time period.

(27)

76. Which of the following is not one of the four steps in accounting for production activity in a period?

A. Determine over or underapplied overhead. B. Analyze the physical flow of units.

C. Analyze equivalent units.

D. Determine cost per equivalent unit. E. Prepare a cost reconciliation.

77. Which of the following statements is most accurate?

A. In process costing, estimating the degree of completion of units is usually more accurate for conversion costs than for direct materials.

B. The weighted average method uses the stage of completion of the current period's beginning goods in process inventory account in calculating equivalent units.

C. The weighted average method focuses on the total costs and total equivalent units

completed to date; this is the major difference between the weighted average method and the FIFO method of calculating equivalent units of production.

D. The FIFO method of calculating equivalent units of production merges the work and the costs of the beginning inventory with the work and the costs done during the current period. E. It is not possible for there to be a significant difference between the cost of completed units between the weighted average and the FIFO methods.

(28)

78. A production department's output for the most recent month consisted of 10,000 units completed and transferred to the next stage of production and 10,000 units in ending goods in process inventory. The units in ending goods in process inventory were 50% complete with respect to both direct materials and conversion costs. There were 1,000 units in beginning goods in process inventory, and they were 70% complete with respect to both direct materials and conversion costs. Calculate the equivalent units of production for the month, assuming the company uses the weighted average method.

A. 10,000 units.

79. The Machining Department started the current month with a beginning goods in process inventory of $10,000. During the month, it was assigned the following costs: direct materials, $76,000; direct labor, $24,000; and factory overhead, 50% of direct labor cost. Also,

(29)

80. A company uses a process cost accounting system. Its Assembly Department's beginning inventory consisted of 50,000 units, 3/4 complete with respect to direct labor and overhead. The department started and finished 127,500 units this period. The ending inventory consists of 40,000 units that are 1/4 complete with respect to direct labor and overhead. All direct materials are added at the beginning of the process. The department incurred direct labor costs of $24,000 and overhead costs of $32,000 for the period. Assuming the weighted average method, the direct labor cost per equivalent unit (rounded to the nearest cent) is:

A. $0.14. B. $0.16.

C. $0.17. D. $0.30. E. $0.37.

(30)

81. A company's beginning work in process inventory consisted of 20,000 units that were 1/5 complete with respect to direct labor. These beginning units were completed and another 90,000 units were started during the current period. Of those started, 60,000 were finished and the remaining 30,000 were 1/3 complete at the end of the period. Using the weighted-average method, the equivalent units of production with regard to direct labor were:

A. 60,000.

(31)

83. A company uses the weighted average method for inventory costing. During a period, Department A finished and transferred 50,000 units to Department B. Also, during the period, 10,000 units were started but brought only to a stage of being 3/5 completed. The number of equivalent units produced by Department A during the period was:

A. 44,000 units. B. 50,000 units. C. 54,000 units.

D. 56,000 units. E. 60,000 units.

(32)

Medina Corp. uses the weighted average method for inventory costs and had the following information available for the year:

84. The number of units transferred to finished goods during the year is: A. 3,200 units.

B. 3,000 units. C. 3,400 units. D. 3,160 units. E. 3,500 units.

(33)

85. Equivalent units of production for the year are: A. 3,200 units.

B. 3,320 units. C. 3,240 units. D. 3,520 units. E. 3,800 units.

(34)

86. A company uses a process cost accounting system. Its Sewing Department completed and transferred out 120,000 units during the current period. The ending inventory in the Sewing Department consists of 40,000 units (20% complete with respect to direct materials and 60% complete with respect to direct labor). Overhead is applied on the basis of direct labor.

Determine the equivalent units of production for the Sewing Department for direct materials, direct labor and overhead assuming the weighted average method.

A. 120,000; 120,000; 120,000 B. 120,000; 160,000; 120,000 C. 128,000; 120,000; 120,000

D. 128000; 144,000; 144,000 E. 128,000; 184,000; 160,000

AACSB: Analytic AICPA BB: Industry AICPA FN: Measurement Difficulty: Hard Learning Objective: C3

87. A process cost summary is a managerial accounting report that describes: A. The costs charged to a department.

B. The equivalent units of production by the department. C. How the costs were assigned to the output.

D. Physical transfers for a department.

(35)

Aniston Enterprises manufactures stylish hats for sophisticated women. All materials are introduced at the beginning of the manufacturing process in the Cutting Department.

(36)

unit for May 2010 were:

A. Choice A B. Choice B C. Choice C D. Choice D E. Choice E

(37)

89. If Aniston Enterprises uses the FIFO method of process costing, the equivalent units of work completed in May 2010 were:

All 50,000 units in beginning Goods in Process were already 100% complete with respect to direct materials. The information indicates 225,000 units were begun during May. Since direct materials are added at the beginning of the process, those units were 100% complete with respect to direct materials by the end of May. Therefore, the equivalent units of production for direct materials for May was 225,000.

The 50,000 units in beginning Goods in Process were only 40% complete with respect to conversion costs. Therefore, the remaining 60% or 30,000 units were completed in May as far as conversion costs are concerned. The information also indicates that 200,000 units were completed during May. That means that another 150,000 units were started and completed during May and were 100% complete with respect to conversion costs (200,000 - 50,000). Finally, there were 75,000 units in ending Goods in Process inventory and those units were 20% complete with respect to conversion costs. 75,000 units x 20% = 15,000 units Therefore, the total equivalent units of production for conversion costs during May were 30,000 + 150,000 + 15,000 = 195,000.

(38)

90. The following data are available for a company's manufacturing activities:

If materials are added when the production process begins and direct labor is applied uniformly throughout the process, what are the equivalent units for direct materials and for direct labor, respectively using the FIFO method of process costing?

A. 16,250; 19,250. B. 16,250; 21,750.

C. 21,000; 19,250. D. 19,250; 18,750. E. 21,000; 22,250.

AACSB: Analytic AICPA BB: Industry AICPA FN: Measurement Difficulty: Hard Learning Objective: C5

91. A system of accounting in which the costs of each process are accumulated separately and then assigned to the units of product that passed through the process is a:

A. General cost accounting system.

B. Process cost accounting system. C. Job order cost accounting system. D. Manufacturing cost accounting system. E. Goods in process accounting system.

(39)

92. A company that applies process costing is most frequently characterized by: A. Low standardization and high production volume.

B. Custom orders and homogeneous products.

C. Repetitive production and heterogeneous products. D. Repetitive production and low production volume.

E. Homogeneous product and high production volume.

AACSB: Analytic AICPA BB: Industry AICPA FN: Measurement Difficulty: Medium Learning Objective: A1

93. An organizational unit of a factory that has the responsibility for partially manufacturing or producing a product is called a:

A. Production department. B. Service department.

94. A hybrid costing system would be most appropriate when:

A. A manufacturer is able to standardize processes while at the same time attempting to cater to individual customer needs.

B. Large quantities of identical products are being produced. C. The volume of production is low and costs are high. D. There is no standardization of units of production. E. All of these would necessitate a hybrid costing system.

(40)

95. Direct material costs are recorded: A. Indirectly to Goods in Process account. B. Indirectly to a Finished Goods account.

C. Directly to a Goods in Process account. D. Directly to a Finished Goods account. E. Directly to a Cost of Goods Sold account.

96. The purchase of raw materials on account in a process costing system is recorded with a: A. Debit to Purchases and credit to Cash.

B. Debit to Purchases and a credit to Accounts Payable.

C. Debit to Raw Materials Inventory and a credit to Accounts Payable. D. Debit to Accounts Payable and a credit to Raw Materials Inventory. E. Debit to Goods in Process Inventory and a credit to Accounts Payable

97. When raw materials are purchased on account for use in a process costing system, the corresponding journal entry that should be recorded will include:

A. A debit to Goods in Process Inventory. B. A debit to Accounts Payable.

C. A credit to Cash.

D. A debit to Raw Materials Inventory. E. A credit to Raw Materials Inventory.

(41)

98. Direct labor and indirect labor are recorded, respectively, to: A. Factory Overhead and Goods in Process.

B. Goods in Process and Finished Goods. C. Finished Goods and Goods in Process.

D. Goods in Process and Factory Overhead. E. Cost of Goods Sold and Finished Goods.

99. In a process operation, the direct labor of a production department includes:

A. All labor used exclusively by that department, even if the labor is not applied to the product itself.

B. All labor used exclusively by that department, but only if the labor is applied to the product itself.

C. All labor for that department, including labor for services that help more than one production department, such as clerical, repair, and computer technicians.

D. Only labor that helps more than one production department, such as clerical, repair, and computer technicians.

E. Only that labor that is recorded in the Factory Payroll account.

(42)

100. After posting all actual factory overhead and applying factory overhead to production departments in a process costing system,

A. There will never be underapplied overhead. B. There will never be overapplied overhead. C. There will always be underapplied overhead. D. There will always be overapplied overhead.

E. There may be over or underapplied overhead.

101. In a process costing system, when manufacturing overhead costs are applied to the cost of production, they are debited to:

A. the Finished Goods Inventory account. B. the Cost of Goods Sold account.

C. the Goods in Process Inventory account. D. the Manufacturing Overhead account. E. the Raw Materials Inventory account.

102. To compute an equivalent unit of production, one must be able to reasonably estimate:

A. The percentage of completion. B. Units completed.

C. Units started and completed. D. Direct labor cost.

E. Materials cost.

(43)

103. The following is an account for a production department, showing its costs for one month:

Assume that materials are added at the beginning of the production process and that direct labor and overhead are applied uniformly. If the units in ending goods in process inventory cost $4,590, and the started and completed units cost $41,850, what was the cost of

completing the units in the beginning goods in process inventory? A. $12,150.

B. $ 2,160. C. $ 7,560. D. $54,000. E. $37,260.

Total costs = $5,400 + $21,600 + 16,200 + $10,800 = $54,000 Total transferred out = $54,000 - $4,590 = $49,410

BGIP transferred out = $49,410 - $41,850 = $7,560 Cost to complete BGIP = $7,560 - $5,400 = $2,160

AACSB: Analytic

(44)

104. Que Corporation uses a process cost accounting system. The company manufactured certain goods at a cost of $800 and sold them on credit to Are Corporation for $1,075. The complete journal entry to be made by Que at the time of this sale is:

A.

B.

C.

D.

E.

(45)

Matching Questions

105. Match the following terms with the definitions.

1. Materials consumption report

Number of units that would be completed if all effort during a period had been applied to units that were started

and finished. 7

2. Hybrid manufacturing system

Costing system to determine the cost of producing each job or job lot. 4

3. Process manufacturing

system A manufacturing system that contains features of bothprocess and job order systems. 2

4. Job order cost

accounting system Process of products in a continuous flow of steps. 3

5. Process cost summary

System of assigning direct materials, direct labor, and overhead to specific processes; total costs associated with each process are then divided by the number of units. passing through that process to determine cost per

equivalent unit. 6

6. Process cost accounting system

Document that summarizes the materials a department uses during a reporting period; replaces materials

requisition. 1

7. Equivalent units of production.

Report of costs charged to a department, its equivalent units of production achieved, even the costs assigned to its

(46)

Short Answer Questions

106. What is meant by equivalent units of production, and why are they important when a process cost accounting system is used?

Equivalent units of production measure production with respect to direct materials, direct labor and overhead, expressed as the number of units that could have been manufactured during a period if all effort during a period had been applied only to those units started and completed during the period. Determining equivalent units of production is important for the calculation of the cost per unit and, thus, for calculating the costs of inventories and the cost of goods sold.

107. What are the four steps in accounting for production activity in a period?

Accounting for a department's activity for a period includes the four steps of analyzing (1) physical flow, (2) equivalent units, (3) cost per equivalent unit, (4)cost reconciliation.

(47)

108. (a) Why is the Process Cost Summary important to Management? (b) How does the Process Cost Summary accomplish its purposes?

(a) The Process Cost Summary depicts a four-step process detailing physical flows and cost flows. It allows management to verify inputs and outputs as part of a cost control and monitoring system. It also lets management logically perform unit costing—a necessary activity to allow for appropriate product pricing.

(b) By detailing physical flow, a process cost summary measures accountability and responsibility. By detailing cost flow, it allows management to determine and derive appropriate cost allocations in a logical format.

109. Briefly explain the conditions under which job order cost accounting systems and process cost accounting systems are commonly applied.

Job order cost accounting systems are commonly used when each product or job has a unique design so that the manufacturing process focuses on the production of that specific job.

(48)

110. Job order manufacturing and process manufacturing are two major costing systems used in manufacturing. Briefly contrast the characteristics of these two systems.

111. What is a hybrid costing system? When is a hybrid costing system appropriate for a manufacturer?

A hybrid manufacturing system contains the features of both process and job order operations. In a hybrid costing system, some parts of the manufacturing process are accounted for using a process costing system, and other parts are accounted for using a job order costing system. Hybrid costing systems are appropriate when a manufacturer can standardize processes and yet cater to individual customer needs.

(49)

112. Describe the flow of materials in a process cost accounting system, including accounts used.

When raw materials are purchased they are debited to a Raw Materials Inventory account. When direct materials are needed in a production department, a materials requisition or materials consumption report is used to move the materials from the storeroom to the production department. Direct materials used are recorded with a debit to the Goods in Process Inventory for that department and a credit to Raw Materials Inventory. Indirect materials used in a department are recorded with a debit to Factory Overhead and a credit to Raw Materials Inventory. The Factory Overhead is subsequently allocated to the Goods in Process account for each production department.

113. Describe the flow of labor in a process cost accounting system, including accounts used.

Each pay period, as workers earn their wages, Factory Payroll is debited and Cash is credited to record the amount paid to workers. As direct labor is used in each production department, Goods in Process of that department are debited and Factory Payroll is credited to assign the labor to the department. Indirect labor is recorded to the factory overhead with a debit to Factory Overhead and a credit to Factory Payroll. The Factory Overhead is subsequently allocated to the Goods in Process account for each production department.

(50)

114. Describe the flow of overhead costs in a process cost accounting system, including accounts used.

As actual overhead costs are incurred for indirect labor, indirect materials, insurance, utilities, and so on, the Factory Overhead account is debited, and the appropriate accounts are credited (for instance, Factory Payroll, Raw Materials Inventory, various payables, and cash). When overhead is applied to production based on the overhead allocation rate, Goods in Process is debited and Factory Overhead is credited. Any under or overapplied overhead is closed to either the Cost of Goods Sold account, or allocated among the Cost of Goods Sold, Goods in Process Inventory, and Finished Goods.

(51)

Problems

115. A company's January 1 goods in process inventory contained 30,000 units that were 1/4 complete with respect to direct labor. The beginning inventory was completed this year and another 120,000 units were started. Of those started, 80,000 were finished and the remaining 40,000 were left 1/5 complete. Calculate the equivalent units of production for the year using the weighted average method.

116. The following data is available for Osman Corp. for the current year:

Calculate the equivalent units of production for the year using the weighted average method.

(52)

117. A company uses a process cost accounting system and the weighted average method for inventory costs. The following information is available regarding direct labor for the current year:

(a) Calculate the equivalent units of production for direct labor for the year.

(b) Calculate the average cost per equivalent unit for direct labor (round to the nearest cent).

(53)

Refer to the following information about the Painting Department in the Richardson Factory for the month of June. Richardson Factory uses the FIFO method of inventory costing.

118. How many equivalent units of materials were added to the beginning inventory to finish those units during June? How many equivalent units of labor and overhead were added to the beginning inventory to finish those units during June?

(54)

119. How many equivalent units of materials were added to the ending inventory to get those units to their state of partial completion? How many equivalent units of labor and overhead were added to the ending inventory to get those units to their state of partial completion?

(55)

120. How many equivalent units of materials were added to all units processed during June? How many equivalent units of labor and overhead were added to all units processed during June?

(56)

121. What was the materials cost per equivalent unit produced during June? What was the labor and overhead cost per equivalent unit produced during June?

(57)

(58)

(59)

(60)

(61)

(62)

AICPA BB: Industry AICPA FN: Measurement Difficulty: Hard Learning Objective: C3

124. A company's January 1 goods in process inventory contained 30,000 units that were 1/4 complete with respect to direct labor. The beginning inventory was completed this year and another 120,000 units were started. Of those started, 80,000 were finished and the remaining 40,000 were left 1/5 complete. Calculate the equivalent units of production for the year using the FIFO method.

(63)

125. Prepare the required general journal entries to record the following transactions for the Bell Company.

a. Purchased $40,000 of raw materials on account.

b. Used $12,000 of direct materials in the production department c. Used $5,000 of indirect materials.

126. Prepare the required general journal entry to record the following transactions for the Flaherty Company.

a. Incurred $95,000 of factory labor cost which is paid in cash. b. Used $78,000 of direct labor in the production department. c. Used $17,000 of indirect labor.

(64)

127. Iolaus Company provides the following data for the current year:

Required:

a. Calculate the predetermined overhead allocation rate based on direct labor. b. Determine the amount of overhead applied to production.

c. Prepare the journal entry to apply factory overhead to goods in process.

(65)

Refer to the following information about the Dipping Department of the Indiana Factory for the month of August. Indiana Factory uses the FIFO method of inventory costing.

The cost per equivalent unit of materials is $10.00, and the cost per equivalent unit of labor and overhead is $22.00.

128. What total cost should be assigned to the units that were in the beginning goods in process inventory and completed during August?

(66)

129. What total cost should be assigned to the units that were started and completed during August?

130. What total cost should be assigned to all units that were completed during August?

(67)

131. What total cost should be assigned to the units that were in process at the end of August?

(68)

132. Prepare a cost reconciliation for the month of August.

(69)

133. Nano Company uses a weighted average process cost system. The department started and finished 149,000 units during the current period. The ending inventory consists of 60,000 units that are 3/4 complete with respect to direct labor and overhead. All direct materials are added at the beginning of the process. The department incurred direct labor costs of $262,500 and overhead costs of $126,000.

(a) What is the direct labor cost per equivalent unit? (b) What is the overhead cost per equivalent unit?

AACSB: Analytic

(70)

data occurred during October:

(71)

(72)

AACSB: Analytic

AICPA BB: Resource Management AICPA FN: Measurement Difficulty: Hard Learning Objective: P5

135. Lipinski Company completed and transferred 90,000 units during the current period. Based on the following information, determine the cost of the goods completed during the current reporting period and journalize the transfer.

AACSB: Analytic

(73)

136. Browning Company had 8,700 units in beginning inventory with accumulated costs for direct materials of $17,900, $16,500 direct labor, and $13,200 of overhead. During July, the company completed and transferred 50,000 units to finished goods. Costs incurred in the current period included $45,000 of direct materials, $58,500 of direct labor, and $46,800 of factory overhead. Ending inventory consisted of 12,000 units which were 80% complete with respect to materials and 50% complete with respect to labor and overhead. Determine the value assigned to ending inventory based on the weighted average method of inventory costing.

AACSB: Analytic

(74)

137. During the year, RB Corp. introduced 132,000 units into production and 144,000 units were completed and transferred to finished goods. At the end of the year, the company had 13,600 units in process that were 80% complete. Determine how many units the company had in goods in process at the beginning of the year.

AACSB: Analytic

AICPA BB: Resource Management AICPA FN: Measurement Difficulty: Medium Learning Objective: P5

(75)

to record the:

a. Transfer of goods from the molding department to the finished goods inventory. b. Cost of goods sold for November.

Fill in the Blank Questions

139. Process manufacturing, also called process operations or process production, is the ___________ production of products in a _____________________ flow of steps.

Mass; continuous

140. An equivalent unit of production is an estimate of efforts that is used to calculate the ______________ of each production component.

Unit Cost.

(76)

141. If a process has _______________ or _______________ inventory of partially

completed production, equivalent units must be calculated so that total costs incurred during the period are assigned to all units worked on.

Beginning or ending

142. The first step in accounting for production activity in a period, ________________, is a reconciliation of the physical units started in a period with the physical units completed in that period.

143. The second step in accounting for production activity in a period is to compute ______________________.

144. The third step in accounting for production activity in a period is to compute the ______________________.

Cost per equivalent unit

(77)

145. The fourth step in accounting for production activity in a period is to prepare a cost reconciliation, which reconciles _____________________ with the

_____________________.

Costs to account for; costs accounted for

146. Materials and labor costs that are clearly associated with a specific process are known as ___________________. Those costs that are not clearly associated with a specific process are called ________________.

Direct costs, Indirect costs.

147. A ____________________ contains features of both process and job order operations.

Hybrid system

148. In a process costing accounting system, direct materials used are debited to the ______________________ account, and indirect materials used are debited to the ______________________ account.

Goods in process; factory overhead

(78)

149. In a manufacturing operation with two process departments (1 and 2), the flow of costs would proceed from Goods in Process, Dept #1 to ________________.

Goods in Process, Dept#2

AACSB: Analytic AICPA BB: Industry AICPA FN: Measurement Difficulty: Hard Learning Objective: P1

150. In a process costing accounting system, factory wages are debited to _______________, and when direct labor is used, that account is credited and ____________________ is debited. When indirect labor is used, the ________________________ account is debited and

______________________ is credited.

Factory payroll; Goods in process; Factory overhead; Factory payroll

151. In process costing, factory overhead incurred does not usually equal that applied, which yields either ____________________ or ___________________ overhead.

(79)

152. A process cost summary involves computations and analysis at four sequential steps. These are (1) _________ (2) _____________, (3) _______________, and (4)

______________.

(1) Physical Flow, (2) Equivalent Units, (3) Cost per equivalent unit of production, (4) Cost Reconciliation

153. On a process cost summary, the total costs to account for (the processing costs for the period plus the goods in process at the end of the period) should equal ___________________ (____________________ plus _____________________).

Total costs accounted for; total costs transferred; ending goods in process

AACSB: Analytic AICPA BB: Industry AICPA FN: Measurement Difficulty: Hard Learning Objective: P5

154. When the final production department completes goods, the cost of the completed goods are transferred to ____________________ .

(80)

155. When the completed goods are sold, the cost of the completed goods are transferred to ____________________ .

Cost of Goods Sold