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Exam 6: Process Costing

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Question 31

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Kelly, Inc. uses a weighted-average process costing system that calculates normal rework as 2% of the units passing inspection. The inspection point is at the 75% point and units failing inspection are returned to the 40% point. During the current period, 52,000 units were started; 62,000 units inspected; and 52,000 units completed. Direct material is added at the 50% point and conversion costs occur uniformly. Beginning work in process was 10,000 units, 55% complete and ending work in process was 8,000 units, 85% complete. Costs per equivalent unit for material were $1.00 and $3.00 for conversion costs. The loss from abnormal rework was:

A) $3,200
B) $2,470
C) $1,120
D) $4,018

E) B) and C)
F) C) and D)

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Question 32

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Hendrix, Inc. employs a process costing system. Direct materials are added at the beginning of the process. Here is information about July's activities: On July 1: Beginning inventories = 750 units, 60% complete Direct materials cost = $5,925 Conversion costs = $4,095 During July: 15,000 units started Direct materials added = $150,000 Conversion costs added = $83,520 On July 31: Ending inventories = 1,500 units, 40% complete Using the weighted average method, the number of equivalent units of material was:

A) 15,750
B) 14,250
C) 15,000
D) 13,500

E) B) and C)
F) All of the above

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Question 33

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Under mass production, at the end of the period:

The following method(s) best reflects current period costs: I. Weighted average method II. FIFO method III. Standard cost method

Miramar, Inc. uses a weighted-average process costing system which recognizes normal spoilage as 5% of good output. During the current period, 14,000 units were started and 10,000 units completed. Materials are added at the beginning of the process, conversion costs occur uniformly, and the inspection point is at the 70% point. Beginning work in process was 6,000 units, 40% complete, and ending work in process 9,000 units, 80% complete. The cost per equivalent unit for material was $1.00 and for conversion costs $3.00. The cost of goods completed was:

Miramar, Inc. uses a weighted-average process costing system which recognizes normal spoilage as 5% of good output. During the current period, 14,000 units were started and 10,000 units completed. Materials are added at the beginning of the process, conversion costs occur uniformly, and the inspection point is at the 70% point. Beginning work in process was 6,000 units, 40% complete, and ending work in process 9,000 units, 80% complete. The cost per equivalent unit for material was $1.00 and for conversion costs $3.00. The number of equivalent units of conversion costs was:

Macey Company uses a weighted-average process costing system. Beginning inventory consists of 6,000 units, 40% complete. Units started are 14,000, completed are 10,000, and ending inventories are 9,000 units, 70% complete. Normal spoilage is 5% of the units inspected. Direct material is added at the 75% point and spoilage inspection occurs at the 80% point. The cost per equivalent unit for materials was $1.00 and $3.00 for conversion costs. The loss from abnormal spoilage was:

Beginning WIP units were 8,000, and 40,000 units were transferred out this period. Ending WIP is 4,000 units. What is the number of units started and completed this period?

Assume there were 6,000 units in beginning work in process, 60% complete. 20,000 units were completed during the month. Ending work in process is 40% complete, which is equivalent to 3,200 units for conversion costs. Materials are added at the beginning of the process. The FIFO method is used. The number of equivalent units of conversion costs is:

Zuniga, Inc. uses a process costing system. During May, 1,200 units were transferred into Department 2 at a cost of $38,040. Direct materials are added at the beginning of the process. Additionally: On May 1: Beginning inventories = 250 units, 40% complete Direct materials costs = $1,250 Conversion costs = $1,356 Transferred-in costs = $2,560 During May: Direct materials costs incurred = $6,000 Conversion costs incurred = $17,013 On May 31: Ending Inventories = 350 units, 20% complete Using the FIFO method, the equivalent units of material were:

In the weighted average method, costs from beginning work in process are averaged with costs incurred during the current period and then allocated to units completed and ending work in process.

Process costing is simplified when a company uses just-in-time inventory methods.

Conversion costs must be incurred uniformly throughout the production process to calculate equivalent units.

Hendrix, Inc. employs a process costing system. Direct materials are added at the beginning of the process. Here is information about July's activities: On July 1: Beginning inventories = 750 units, 60% complete Direct materials cost = $5,925 Conversion costs = $4,095 During July: 15,000 units started Direct materials added = $150,000 Conversion costs added = $83,520 On July 31: Ending inventories = 1,500 units, 40% complete Using the FIFO method, the cost per equivalent unit for materials used during July was:

The accountant for Whirly Manufacturing Inc. gathered the following information for the month of November: $\begin{array} { l c } \text { Beginning WIP } & 16,000 \text { units } \\\text { Started production } & 100,000 \\\text { Completed production } & 92,000 \\\text { Ending WIP } & 24,000\end{array}$ The beginning inventory was 60% complete for materials and 20% complete for conversion costs. The ending inventory was 90% complete for materials and 40% complete for conversion costs. Costs pertaining to the month of November are as follows: Beginning inventory costs are: $\begin{array} { l r } \text { Materials } & \$ 54,560 \\\text { Direct labour } & 20,320 \\\text { Factory overhead } & 15,240 \\\text { Costs incurred during November include: } \\\text { Materials } & \$ 468,000 \\\text { Direct labour } & 182,880 \\\text { Factory overhead } & 391,160\end{array}$ Using the FIFO method, the total cost of units in the ending work in process inventory on November 30 is:

Conversion costs may be separated into direct labour and overhead when it is relatively easy to track direct labour, and the use of labour occurs in a different pattern than the use of overhead resources.

Zuniga, Inc. uses a process costing system. During May, 1,200 units were transferred into Department 2 at a cost of $38,040. Direct materials are added at the beginning of the process. Additionally: On May 1: Beginning inventories $=250$ units, $40 \%$ complete Direct materials costs $=\$ 1,250$ Conversion costs $=\$ 1,356$ Transferred-in costs $=\$ 2,560$ During May: Direct materials costs incurred $=\$ 6,000$ Conversion costs incurred $=\$ 17,013$ On May 31: Ending Inventories $=350$ units, $20 \%$ complete Using the weighted average method, the total transferred-in costs for the month were:

A costing system that determines an average cost for all units of product in a particular time period is:

Zuniga, Inc. uses a process costing system. During May, 1,200 units were transferred into Department 2 at a cost of $38,040. Direct materials are added at the beginning of the process. Additionally: On May 1: Beginning inventories = 250 units, 40% complete Direct materials costs = $1,250 Conversion costs = $1,356 Transferred-in costs = $2,560 During May: Direct materials costs incurred = $6,000 Conversion costs incurred = $17,013 On May 31: Ending Inventories = 350 units, 20% complete Using the weighted average method, the number of equivalent units for conversion costs was:

Which type of company would most likely use a process costing system?