Chapter 16: Q16QS (page 746)
Question: Refer to the information in QS 16-10. Assign costs to the assembly department’s output—specifically, the units transferred out to the painting department and the units that remain in process in the assembly department at month-end. Use the FIFO method.
Total cost accounted for $24,270.
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Question: Label each statement below as either true (T) or false (F).
1. The cost per equivalent unit is computed as the total costs of a process divided by the number of equivalent units passing through that process.
2. Service companies are not able to use process costing.
3. Costs per job are computed in both job order and process costing systems.
4. Job order and process operations both combine materials, labor, and overhead in producing products or services.
Laffer Lumber produces bagged bark for use in landscaping. Production involves packaging bark chips in plastic bags in a bagging department. The following information describes production operations for October.
Bagging department | |
Direct material used | \(522,000 |
Direct labor used | \)130,000 |
Pre-determined overhead rate (based on direct labor) | 175% |
Goods transferred from bagging to finished goods | (\(595,000) |
The company’s revenue for the month totaled \)950,000 from credit sales, and its cost of goods sold for the month is $540,000. Prepare summary journal entries dated October 31 to record its October production activities for
(1) direct materials usage,
(2) direct labor incurred
(3) overhead allocation,
(4) goods transfer from production to finished goods, and
(5) credit sales.
Refer to information in QS 16-18. Using the weighted-average method, assign direct materials costs to the molding department’s output—specifically, the units transferred out to the packaging department and the units that remain in process in the molding department at month-end.
Prepare journal entries to record the following production activities for Hotwax.
Tamar Co. manufactures a single product in one department. All direct materials are added at the beginning of the manufacturing process. Conversion costs are added evenly throughout the process. During May, the company completed and transferred 22,200 units of product to finished goods inventory. Its 3,000 units of beginning work in process consisted of \(19,800 of direct materials and \)221,940 of conversion costs. It has 2,400 units (100% complete with respect to direct materials and 80% complete with respect to conversion) in process at month-end. During the month, \(496,800 of direct material costs and \)2,165,940 of conversion costs were charged to production.
Required
1. Prepare the company’s process cost summary for May using the weighted-average method.
2. Prepare the journal entry dated May 31 to transfer the cost of completed units to finished goods inventory
Analysis Component
3. The costing process depends on numerous estimates.
a. Identify two major estimates that determine the cost per equivalent unit.
b. In what direction might you anticipate a bias from management for each estimate in part 3a (assume that management compensation is based on maintaining low inventory amounts)? Explain your answer.
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