Chapter 18: Q2RQ (page 1005)
Question: What types of companies use process costing systems?
Answer:
The companies that produce the goods in large quantity or are engaged in producing similar products, use the process costing system.
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For each of the following products or services, indicate if the cost would most likely be determined using a job order costing system or a process costing system.
a. Soft drinks
b. Automobile repairs
c. Customized furniture
d. Aluminum foil
e. Lawn chairs
f. Chocolate candy bars
g. Hospital surgery
h. Pencils
The Blending Department for CenTex Paints started October with 1,000 gallons in process and started in production 9,500gallons. During the month, 7,000 gallons were completed and transferred to the next department. Ending work-in-process was3,500 gallons (100% complete with respect to direct materials and 30% complete for conversion costs). The department uses the
weighted-average method. The Blending Department incurred the following costs:
Beginning WIP-Direct materials cost | \(500 |
Beginning WIP-Conversion cost | 1,210 |
Direct material added during the month | 5,800 |
Conversion cost added during the month | 5,230 |
Total | \)12,740 |
7. Prepare a production cost report for the Blending Department for the month of October.
Mayhem Electronics makes game consoles in three processes: assembly, programming, and packaging. Direct materials are added at the beginning of the assembly process. Conversion costs are incurred evenly throughout the process. The Assembly Department had no Work-in-Process Inventory on March 31. In mid-April, Mayhem Electronics started production on 99,000 game consoles. Of this number, 95,000 game consoles were assembled during April and transferred out to the Programming Department. The April 30 Work-in-Process Inventory in the Assembly Department was 45% of the way through the assembly process. Direct materials costing \(301,950 were placed in production in Assembly during April, direct labor of \)100,960 was assigned, and manufacturing overhead of $136,200 was allocated to that department.
Requirements
1. Prepare a production cost report for the Assembly Department for April. The
company uses the weighted-average method.
2. Prepare a T-account for Work-in-Process Inventory—Assembly to show its activity during April, including the April 30 balance.
Refer to Short Exercise S18A-15. At Spring Fresh, water is added at the beginning of the filtration process. Conversion costs are added evenly throughout the process. Now assume that in February, 130,000 liters were completed and transferred out of the Filtration Department into the Bottling Department. The 70,000 liters remaining in Filtration’s ending Work-in-Process Inventory were 80% of the way through the filtration process. Recall that Spring Fresh has no beginning inventories.
Compute the equivalent units of production for direct materials and conversion
costs for the Filtration Department using the FIFO method.
Shea Winery in Pleasant Valley, New York, has two departments: Fermenting and Packaging. Direct materials are added at the beginning of the fermenting process (grapes) and at the end of the packaging process (bottles). Conversion costs are added evenly throughout each process. The company uses the weighted-average method. Data from the month of March for the Fermenting Department are as follows:
Gallons | |
Beginning work-in-process inventory | 500 gallons |
Started in production | 8,600 gallon |
Completed and transferred out to packaging in march | 7,900 gallon |
Ending work-in-process inventory (80% of the way through the blending process) | 1,200 gallon |
Costs | |
Beginning work-in-process inventory | |
| \(540 |
| 195 |
| 210 |
Cost added during march | |
| 9,288 |
| 3,305 |
| 3,378 |
Total cost added during march | \)15,971 |
Requirements
1. Compute the Fermenting Department’s equivalent units of production for direct
materials and for conversion costs.
2. Compute the total costs of the units (gallons)
a. completed and transferred out to the Packaging Department.
b. in the Fermenting Department ending Work-in-Process Inventory.
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