ExErcisEs: sEt B - Cengage sEt B Process Costing ... Total Cost Unit Cost Department A: Direct materials $10,000 $1.00 ... data that follow pertain to the company’s production of

ExErcisEs: sEt BProcess Costing Versus Job Order CostingE1B. Indicate whether the manufacturer of each of the following products should use a job order costing system or a process costing system to accumulate product costs: 1. paint 5. coffee cups printed with your school insignia 2. fruit juices 6. paper 3. tailor-made suits 7. roller coaster for a theme park 4. milk 8. posters for a fund-raising event

Use of Process Costing InformationE2B. Accounting connEction ▶ Tom’s Bakery makes a variety of cakes, cookies, and pies for distribution to five major chains of grocery stores in the area. The company uses a standard manufacturing process for all items except special-order cakes. It currently uses a process costing system. Tom, the owner, has the following questions: 1. How much does it cost to make one chocolate cheesecake? 2. Did the cost of making special-order cakes exceed the cost budgeted for this month? 3. What is the value of the pie inventory at the end of June? 4. What were the costs of the cookies sold during June? 5. At what price should Tom’s Bakery sell its famous brownies to the grocery store

chains? 6. Were the planned production costs of $3,000 for making pies in June exceeded?

Which of these questions can be answered using information from a process costing system? Which can be best answered using information from a job order costing system? Explain your answers.

Work in Process Inventory Accounts in Process Costing SystemsE3B. Gilbert, Inc., which uses a process costing system, makes a chemical used as a food preservative. The manufacturing process involves Departments A and B. The company had the following total costs and unit costs for completed production last month, when it manufactured 10,000 pounds of the chemical. Neither Department A nor Depart-ment B had any beginning or ending work in process inventories:

Total Cost Unit CostDepartment A:

Direct materials $10,000 $1.00

Direct labor 2,600 0.26

Overhead 1.300 0.13

Total costs $13,900 $1.39

Department B:

Direct materials $ 3,000 $0.30

Direct labor 700 0.07

Overhead 1,000 0.10

Total costs $ 4,700 $0.47

Totals $18,600 $1.86

1. How many Work in Process Inventory accounts would Gilbert use? 2. What dollar amount of the chemical’s production cost was transferred from Depart-

ment A to Department B last month? 3. What dollar amount was transferred from Department B to the Finished Goods

Inventory account? 4. What dollar amount is useful in determining a selling price for 1 pound of the

chemical?

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Chapter Assignments 1

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2 Chapter 19: Costing Systems: Process Costing

Equivalent Production: FIFO Costing MethodE4B. McQuary Stone Company produces bricks. Although the company has been in operation for only 12 months, it already enjoys a good reputation. During its first 12 months, it put 600,000 bricks into production and completed and transferred 586,000 bricks to finished goods inventory. The remaining bricks were still in process at the end of the year and were 60 percent complete.

The company’s process costing system adds all direct materials costs at the begin-ning of the production process; conversion costs are incurred uniformly throughout the process. Using the FIFO costing method, compute the equivalent units of produc-tion for direct materials and conversion costs for the company’s first year, which ended December 31.

Equivalent Production: FIFO Costing MethodE5B. O’Leon Enterprises makes Perfect Shampoo for professional hair stylists. On July 31, it had 5,200 liters of shampoo in process that were 80 percent complete in regard to conversion costs and 100 percent complete in regard to direct materials costs. During August, it put 212,500 liters of direct materials into production. Data for Work in Pro-cess Inventory on August 31 were as follows: shampoo, 4,500 liters; stage of comple-tion, 60 percent for conversion costs and 100 percent for direct materials. Using the FIFO costing method, compute the equivalent units of production for direct materials and conversion costs for the month.

Equivalent Production: FIFO Costing MethodE6B. Paper Savers Corporation produces wood pulp that is used in making paper. The data that follow pertain to the company’s production of pulp during September.

Percentage Complete

TonsDirect

MaterialsConversion

CostsWork in process, Aug. 31 40,000 100% 60%

Placed into production 250,000 — —

Work in process, Sept. 30 80,000 100% 40%

Compute the equivalent units of production for direct materials and conversion costs for September using the FIFO costing method.

Work in Process Inventory Accounts: Total Unit CostE7B. Scientists at Anschultz Laboratories, Inc., have just perfected Dentalite, a liquid substance that dissolves tooth decay. The substance, which is generated by a complex process involving five departments, is very expensive. Cost and equivalent unit data for the latest week follow (units are in ounces).

Direct Materials Conversion Costs

Dept. CostEquivalent

Units CostEquivalent

UnitsA $12,000 1,000 $33,825 2,050

B 21,835 1,985 13,065 1,005

C 23,896 1,030 20,972 2,140

D — — 22,086 2,045

E — — 15,171 1,945

Compute the unit cost for each department and the total unit cost of producing 1 ounce of Dentalite.

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Chapter Assignments 3

Determining Unit Cost: FIFO Costing MethodE8B. Reuse Cookware, Inc., manufactures sets of heavy-duty pots. It has just completed production for August. At the beginning of August, its Work in Process Inventory account showed direct materials costs of $31,700 and conversion costs of $29,400. The cost of direct materials used in August was $275,373; conversion costs were $175,068. During the month, the company started and completed 15,190 sets. For August, a total of 16,450 equivalent sets for direct materials and 16,210 equivalent sets for conversion costs have been computed. Using the FIFO costing method, determine the cost per equivalent set for August.

Assigning Costs: FIFO Costing MethodE9B. The Bakery produces tea cakes. It uses a process costing system. In March, its beginning inventory was 450 units, which were 100 percent complete for direct materi-als costs and 10 percent complete for conversion costs. The cost of beginning inven-tory was $655. Units started and completed during the month totaled 14,200. Ending inventory was 410 units, which were 100 percent complete for direct materials costs and 70 percent complete for conversion costs. Costs per equivalent unit for March were $1.40 for direct materials costs and $0.80 for conversion costs. Using the FIFO cost-ing method, compute the cost of goods transferred to the Finished Goods Inventory account, the cost remaining in the Work in Process Inventory account, and the total costs to be accounted for. (Round ending inventory to the nearest whole dollar.)

Process Cost Report: FIFO Costing MethodE10B. Toy Country Corporation produces children’s toys using a liquid plastic formula and a continuous production process. In the company’s toy truck work cell, the plastic is heated and fed into a molding machine. The molded toys are then cooled and trimmed and sent to the packaging work cell. All direct materials are added at the beginning of the process. In November, the beginning work in process inventory was 420 units, which were 40 percent complete; the ending balance was 400 units, which were 70 per-cent complete.

During November, 15,000 units were started into production. The Work in Process Inventory account had a beginning balance of $937 for direct materials costs and $370 for conversion costs. In the course of the month, $35,300 of direct materials were added to the process, and $31,760 of conversion costs were assigned to the work cell. Using the FIFO costing method, prepare a process cost report that computes the equivalent units for November, the product unit cost for the toys, and the ending balance in the Work in Process Inventory account. (Round cost per equivalent unit to the nearest cent. Round units started and completed this period to the nearest whole dollar.)

Equivalent Production: Average Costing MethodE11B. Using the data given for McQuary Stone Company in E4B and assuming that the company uses the average costing method, compute the equivalent units of production for direct materials and conversion costs for the company’s first year ended December 31.

Equivalent Production: Average Costing MethodE12B. Using the data given for O’Leon Enterprises in E5B and assuming that the com-pany uses the average costing method, compute the equivalent units of production for direct materials and conversion costs for August.

Equivalent Production: Average Costing MethodE13B. Using the data given for Paper Savers Corporation in E6B and assuming that the company uses the average costing method, compute the equivalent units of production for direct materials and conversion costs for September.

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4 Chapter 19: Costing Systems: Process Costing

Determining Unit Cost: Average Costing MethodE14B. Using the data given for Reuse Cookware, Inc., in E8B and assuming that the company uses the average costing method, determine the cost per equivalent set for August. Assume equivalent sets are 16,900 for direct materials costs and 17,039 for conversion costs.

Process Cost Report: Average Costing MethodE15B. Using the data given for Toy Country Corporation in E10B and assuming that the company uses the average costing method, prepare a process cost report that com-putes the equivalent units for November, the product unit cost for the toys, and the ending balance in the Work in Process Inventory account.

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ExErcisEs: sEt B - Cengage sEt B Process Costing ... Total Cost Unit Cost Department A: Direct materials $10,000 $1.00 ... data that follow pertain to the company’s production of