56
13) Lexington Company produces baseball bats and cricket paddles. It has two departments that process
all products. During July, the beginning work in process in the cutting department was half completed as
to conversion, and complete as to direct materials. The beginning inventory included $40,000 for
materials and $60,000 for conversion costs. Ending work-in-process inventory in the cutting department
was 40% complete. Direct materials are added at the beginning of the process.
Beginning work in process in the finishing department was 80% complete as to conversion. Direct
materials for finishing the units are added near the end of the process. Beginning inventories included
$24,000 for transferred-in costs and $28,000 for conversion costs. Ending inventory was 30% complete.
Additional information about the two departments follows:
Cutting
Finishing
Beginning work-in-process units
20,000
24,000
Units started this period
60,000
Units transferred this period
64,000
68,000
Ending work-in-process units
20,000
Material costs added
$48,000
$34,000
Conversion costs
28,000
68,500
Transferred-out cost
128,000
Required:
Prepare a production cost worksheet, using FIFO for the finishing department.
14) When there are multiple support departments within an organization, it is common to use journal
entries to transfer-in costs from one department to another. What are some of the points to remember
about these costs?
1) Which of the following companies is most likely to use an operation-costing system?
A) a company involved in manufacture of ball bearing on a large scale
B) a company that has been awarded a contract to construct a bridge for the government
C) a company that makes suits for which the basic design is same, but depending on specifications, each
batch of suits varies somewhat from other batches
D) a furniture making company which makes furnitures as per the specifications of the customers
2) Which of the following companies is likely to use a hybrid-costing system?
A) Best Fit Corp., which manufactures pharmaceuticals
B) Rida Corp., which processes and sells, after import, a single variant of Turkish marble to real estate
companies
C) Fast run, which sells a limited range of televisions, which go through similar manufacturing process
D) Karoline Corp., which manufactures and sells a single model of cap
3) Managers find operation costing useful in cost management because it ________.
A) often results in profit maximization
B) results in cost minimization
C) focuses on control of physical processes of a given production system
D) uses job costing to account for the conversion costs and process costing for the material and
customizable components
4) An operation is a standardized method or technique performed repetitively, often on different
materials, resulting in different finished goods.
5) In hybrid-costing systems, managers use process costing to account for the conversion costs and job
costing for the material and customizable components.
6) A hybrid-costing system is a variant of process-costing that allows it to incorporate benefits of standard
costing and activity-based costing.
7) An operation-costing system is a hybrid-costing system applied to batches of similar, but NOT
identical, products.
8) Ford Motor Company is said to use a hybrid costing system. What is a hybrid costing system, and
what would be the advantage to Ford of such a system?
Objective 17.A
1) Emerging Dock Company manufactures boat docks on an assembly line. Its standard costing system
uses two cost categories, direct materials and conversion costs. Each product must pass through the
Assembly Department and the Finishing Department. Direct materials are added at the beginning of the
production process. Conversion costs are allocated evenly throughout production.
Data for the Assembly Department for May 20X5 are:
Work in process, beginning inventory: 70 units
Direct materials (100% complete)
Conversion costs (25% complete)
Units started during May 40 units
Work in process, ending inventory: 10 units
Direct materials (100% complete)
Conversion costs (50% complete)
Costs for May:
Standard costs for Assembly:
Direct materials $8,000 per unit
Conversion costs $32,000 per unit
Work in process, beginning inventory:
Direct materials $280,000
Conversion costs $520,000
What is the balance in ending work–in-process inventory?
A) $164,000
B) $240,000
C) $310,000
D) $340,000
2) Which of the following entries is used to record the standard costs of direct materials assigned to units
worked on and total direct materials variances?
A) Work in Process (at standard costs)
Direct Materials Variances
Direct Materials Control
B) Work in Process (at actual costs)
Direct Materials Variances
Direct Materials Control
C) Direct Materials Variances
Direct Materials Control
Work in Process (at standard costs)
D) Direct Materials Variances
Direct Materials Control
Work in Process (at actual costs)
Answer the following questions using the information below:
Emerging Dock Company manufactures boat docks on an assembly line. Its standard costing system uses
two cost categories, direct materials and conversion costs. Each product must pass through the Assembly
Department and the Finishing Department. Direct materials are added at the beginning of the production
process. Conversion costs are allocated evenly throughout production.
Data for the Assembly Department for May 20X5 are:
Work in process, beginning inventory: 70 units
Direct materials (100% complete)
Conversion costs (25% complete)
Units started during May 40 units
Work in process, ending inventory: 10 units
Direct materials (100% complete)
Conversion costs (50% complete)
Costs for May:
Standard costs for Assembly:
Direct materials $8,000 per unit
Conversion costs $32,000 per unit
Work in process, beginning inventory:
Direct materials $280,000
Conversion costs $520,000
3) Which of the following journal entries records the Assembly Department’s conversion costs at actual
costs for the month, assuming conversion costs are 20% higher than expected?
A) Assembly Department Conversion Cost Control 3,360,000
Various accounts 3,360,000
B) Materials Inventory 3,360,000
Assembly Department Conversion Cost Control 3,360,000
C) Assembly Department Conversion Cost Control 2,800,000
Materials Inventory 2,800,000
D) Materials Inventory 3,360,000
Work in Process — Assembly 3,360,000
4) Which of the following journal entries records the total conversion costs variances of the Assembly
Department, assuming that conversion costs are 20% higher than expected?
A) Work in Process — Assembly 3,360,000
Conversion-Cost Variances 560,000
Assembly Department Conversion Cost Control 2,800,000
B) Assembly Department Conversion Costs Allocated 3,360,000
Direct Materials Variances 560,000
Finishing Department Conversion Cost Control 2,800,000
C) Assembly Department Conversion Costs Allocated 2,800,000
Conversion-Cost Variances 560,000
Assembly Department Conversion Cost Control 3,360,000
D) Work in Process — Assembly 560,000
Assembly Department Conversion Cost Control 560,000
5) Which of the following journal entries records the standard costs of direct materials assigned to units
worked on and total direct materials variances assuming that the Assembly Department used 10% less
materials than expected?
A) Work in Process — Assembly 320,000
Assembly Department Materials Cost Control 320,000
B) Work in Process — Assembly 320,000
Direct Materials Variance 32,000
Assembly Department Materials Cost Control 288,000
C) Work in Process — Assembly 32,000
Assembly Department Materials Cost Control 32,000
D) Work in Process — Assembly 288,000
Direct Materials Variances 32,000
Assembly Department Materials Cost Control 320,000
Answer the following questions using the information below:
Morgan Clay Products manufactures clay molded pottery on an assembly line. Its standard costing
system uses two cost categories, direct materials and conversion costs. Each product must pass through
the Molding Department and the Finishing Department. Direct materials are added at the beginning of
the production process. Conversion costs are allocated evenly throughout production.
Data for the Assembly Department for August 2015 are:
Work in process, beginning inventory: 1,200 units
Direct materials (100% complete)
Conversion costs (40% complete)
Units started during August 675 units
Work in process, ending inventory: 450 units
Direct materials (100% complete)
Conversion costs (60% complete)
Costs for August:
Standard costs for Assembly:
Direct materials $15 per unit
Conversion costs $27.50 per unit
Work in process, beginning inventory:
Direct materials $11,000
Conversion costs $8,250
6) What is the balance in ending work-in-process inventory?
A) $25,500
B) $19,250
C) $15,600
D) $14,175
7) Which of the following journal entries records the Molding Department’s conversion costs for the
month, assuming conversion costs are 10% higher than expected?
A) Molding Department Conversion Cost Control 3,341.25
Various accounts 3,341.25
B) Materials Inventory 33,412.50
Molding Department Conversion Cost Control 33,412.50
C) Molding Department Conversion Cost Control 36,753.75
Various accounts 36,753.75
D) Materials Inventory 36,753.75
Work in Process — Molding 36,753.75
8) From an accounting standpoint, favorable cost variances are debit entries, while unfavorable ones are
credits.
9) Under standard costing the cost per equivalent-unit calculation is more difficult than in either
weighted average or FIFO.
10) Both, the standard-costing method and FIFO, assumes that the earliest equivalent units in beginning
work in process are completed first.
11) Standard costing is NOT possible in a firm that uses process costing.
12) Process-costing systems using standard costs record standard direct material costs in Direct Materials
Control and standard conversion costs in Conversion Costs Control.
13) In companies that produce masses of identical or similar units of output and consequently use
process-costing systems, it is relatively easy to set standards and use a standard cost as the cost per
equivalent unit.
14) BIG Manufacturing Products has been using FIFO process costing for tracking the costs of its
manufacturing activities. However, in recent months, the system has become somewhat bogged down
with details. It seems that, when the company purchased Brown Electronics last year, its product lines
increased six-fold. This has caused both the accountants and the suppliers of the information, the line
managers, great difficulty in keeping the costs of each product line separate. Likewise, the estimation of
the completion of ending work-in-process inventories and the associated costs has become very
cumbersome. The chief financial officer of the company is looking for ways to improve the reporting
system of product costs.
Required:
What can you recommend to improve the situation?