92. Amos and Son Manufacturing Company of Asheville, Tennessee, produces about 1,000
units of hand-crafted wooden chairs per month. Their chairs are known for quality and durability.
Most of the chairs are marketed through two furniture outlets with over 200 stores in the
southwestern United States. You have been hired as a cost consultant to recommend
improvements in Amos and Son’s process cost system, a system installed some fifty years ago.
Since then, the number of product lines has increased tenfold, and the units sold each year have
increased from 3,000 to 12,000. You discover a process cost system driven by volume only, with a
single rate for factory overhead based on units produced.
Required:
Given these limited facts, explain what impact changing to an activity-based process
costing/management system (ABC/ABM) would have on Amos and Son’s costing and pricing
activities.
93. Bob and Nancy Barnett have recently expanded their television-based educational film
business by shooting 30-second television ads for a regional television market in southern
Colorado. They began business about 15 years ago with a contract to film training videos for the
U.S. Army, and that business continues to provide a steady revenue base, currently about 40
percent of total revenue. Nancy Barnett is the firm’s accountant, and in a visit to your accounting
class last week, made a presentation detailing her firm’s costing activities. Your instructor has
asked you to respond to one particular statement that Nancy Barnett made: “Since our contract
for military training films requires us to detail all costs, we use the process cost method that
gives the maximum amount of fixed overhead cost. This almost covers all of our overhead, giving
us an edge in competitively pricing our 30-second TV ads, and explains why we have grown so
much in this sector of our business.”
Required:
Is there an ethical problem with this approach? Does it represent acceptable accounting
procedure?
94. Many industries, for example mining and other extractive industries, use process costing
to provide information regarding sustainability.
Required:
Provide an example of how a company could use process costing to assist in making decisions
regarding sustainability.
95. Pierce Co. manufactures a single product that goes through two processes — mixing and
cooking. The following data pertains to the Mixing Department for September.
Work-in-process inventory, September 1 38,000 units
Conversion— 60% completed
Work-in-process inventory, September 30 24,000 units
Conversion — 40% completed
Units started into production 86,000 units
Units completed and transferred out ? units
Costs:
Work-in-process inventory, September 1
Material R $122,300
Material S 143,780
Conversion 194,550
Costs added during September:
Material R 409,660
Material S 246,820
Conversion 526,618
Material R is added at the beginning of work in the Mixing Department. Material S is also added
in the Mixing Department, but not until units of product are thirty percent completed with regard
to conversion. Conversion costs are incurred uniformly during the process.
Required:
(1) Calculate the equivalent units for Material R using the weighted-average method.
(2) Calculate the equivalent units for Material S using the weighted-average method.
(3) Calculate the equivalent units for conversion using the weighted-average method.
(4) Calculate the unit costs using the weighted-average method.
(5) Calculate the cost of units completed and transferred out using the weighted–average
method.
(6) Calculate the cost of ending work in process using the weighted-average method.
96. Assad Company uses the process costing method with the following data for the month
of July.
Work-in-process, July 1, 30,000 units:
Direct material: 100% completed $65,500
Conversion: 30% completed 51,910
Balance in work in process, July 1 $117,410
Units started during July 40,000
Units finished 50,000
Work in process, July 31, 20,000 units:
Direct material: 100% completed
Conversion: 60% completed
Cost incurred during July:
Direct materials $120,000
Conversion costs 199,810
Total $319,810
Required:
(1) Compute cost per equivalent unit under the weighted-average method.
(2) Compute cost per equivalent unit under FIFO method.
97. Each of the following cases is independent. Use the FIFO method.
Beginning
Inventory Current
Cost Transferred
Out Cost Ending
Inventory Equivalent
Units Unit
Cost
A $5,000 $44,000 $6,000 $6
B $30,000 35,000 28,000 10,000
C 18,000 45,000 11,000 15
D 20,000 30,000 10,000 5
E 30,000 25,000 10,000 7
F 40,000 60,000 80,000 20,000
Required:
Fill in the blanks.
98. Irvine Company uses process costing. The following data are available for the month of
June.
(a) Materials purchased, $800,000.
(b) Materials used: Direct materials: Department A $250,000, Department B $230,000. Indirect
materials: $20,000.
(c) Factory payroll incurred, $600,000: Direct labor: Department A $300,000, Department B
$200,000. Indirect labor: $100,000.
(d) Other factory overhead incurred, $30,000: Power and light $2,000, Depreciation $20,000,
Property tax $5,000, Insurance $3,000.
(e) Factory overhead cost was allocated equally to Department A and Department B.
(f) Department A completed and transferred to department B $600,000.
(g) Department B completed and transferred to Finished Goods Inventory account $1,000,000.
Required:
(1) Prepare journal entries for June activities in Irvine Company.
(2) Compute ending working-in-process inventories in Department A and Department B.
99. Edenton Boat Company manufactures small pleasure boats on an assembly-line basis.
The units are started in the Department A. On July 1 of this year, the Work–in-Process inventory
of the department A consisted of 200 units 100% complete as to materials and 40% complete as
to conversion. During the month, 400 units were started and 500 units were completed and
transferred out. The Work-in-Process on July 31 was 100% complete as to materials and 30%
complete as to conversion.
Costs in process at the beginning of the period amounted to $600,000 for materials and $160,000
for conversion. Costs added during the period were materials costs of $1,802,700 and conversion
costs of $905,512.
Required:
Prepare a production cost report using the weighted-average method.
