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Test Bank for Accounting, Tools for Business Decision Making Fifth Edition
16 - 56
Solution 176 (Cont.)
Ex. 177
The Polishing Department of Estaban Company has the following production and manufacturing
cost data for September. Materials are entered at the beginning of the process.
Production: Beginning inventory 2,000 units that are 100% complete as to materials and 30%
complete as to conversion costs; units started during the period are 38,000, ending inventory of
6,000 units 10% complete as to conversion costs.
Manufacturing costs: Beginning inventory costs, comprised of $18,000 of materials and
$13,000 of conversion costs; materials costs added in Polishing during the month, $202,000
labor and overhead applied in Polishing during the month $176,200 and $312,500 respectively.
Instructions
(a) Compute the equivalent units of productions for materials and conversion costs for the
month of September.
(b) Compute the unit costs for materials and conversion costs for the month.
(c) Determine the costs to be assigned to the units transferred out and in process.
Process Costing
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Solution 177 (Cont.)
Ex. 178
Grey Building Supplies' total materials costs are $40,000 and total conversion costs are $33,000.
Equivalent units of production for materials are 10,000, and 6,000 for conversion costs.
Instructions
Compute the unit costs for materials, conversion costs, and total manufacturing costs for the
month.
Test Bank for Accounting, Tools for Business Decision Making Fifth Edition
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Ex. 179
Glazer, Inc. has the following production data for June:
Transferred out 50,000 units
Ending work in process 5,000 units
The units in work in process are 100% complete for materials and 60% complete for conversion
costs. Materials costs are $4 per unit and conversion costs are $9 per unit.
Instructions
Determine the costs to be assigned to the units transferred out and the units in ending work in
process.
Ex. 180
Production costs chargeable to the Sanding Department in July in Magnum Company are
$30,000 for materials, $17,000 for labor, and $13,000 for manufacturing overhead. Equivalent
units of production are 25,000 for materials and 15,000 for conversion costs.
Instructions
Compute the unit costs for materials and conversion costs.
Ex. 181
Mayer Company uses a process cost system. The Molding Department adds materials at the
beginning of the process and conversion costs are incurred uniformly throughout the process.
Work in process on May 1 was 75% complete and work in process on May 31 was 40%
complete.
Instructions
Complete the Production Cost Report for the Molding Department for the month of May using the
above information and the information below.
Process Costing
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Ex. 181 (cont.)
MAYER COMPANY
Molding Department
Production Cost Report
For the Month Ended May 31, 2013
Equivalent Units
QUANTITIES Physical Units Materials Conversion Costs
Units to be accounted for
Work in process, May 1 8,000
Started into production 27,000
Total units 35,000
Units accounted for
Transferred out 30,000
Work in process, May 31 5,000
Total units 35,000
COSTS
Unit costs Materials Conversion Costs Total
Costs in May $140,000 $160,000 $300,000
Equivalent units
Unit costs $ $ $
Costs to be accounted for
Work in process, May 1 $ 60,000
Started into production 240,000
Total costs $300,000
Cost Reconciliation Schedule
Costs accounted for
Transferred out $
Work in process, May 31
Materials $
Conversion costs
Total costs $300,000
Test Bank for Accounting, Tools for Business Decision Making Fifth Edition
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Solution 181 (12–16 min.)
Ex. 182
Baker Winery manufactures a fine wine in two departments, Fermenting and Bottling. In the
Fermenting Department, grapes are aged in casks for a period of 30 days. In the Bottling
Department, the wine is bottled and then sent to the finished goods warehouse. Labor and
overhead are incurred uniformly through both processes. Materials are entered at the beginning
of both processes. Cost and production data for the Fermenting Department for December 2013
are presented below:
Cost data
Beginning work in process inventory $ 37,000 ($30,000 of materials cost)
Materials 390,000
Conversion costs 121,000
Total costs $548,000
Process Costing
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Ex. 182 (cont.)
Production data
Beginning work in process (gallons) 5,000 (40%)
Gallons started into production 65,000
Ending work in process (gallons) 8,000 (25%)
Instructions
(a) Compute the equivalent units of production.
(b) Determine the unit production costs.
(c) Determine the costs to be assigned to units transferred out and ending work in process.
Ex. 183
The Assembly Department of Nitz Company has the following production and cost data at the end
of May, 2013.
Production: 25,000 units started into production; 20,000 units transferred out and 5,000 units
100% completed as to materials and 40% completed as to conversion costs.
Manufacturing Costs: Materials added at beginning of process, $90,000; labor, $72,000;
overhead $60,000.
Instructions
Prepare a production cost report for the month of May.
Test Bank for Accounting, Tools for Business Decision Making Fifth Edition
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Solution 183 (22–30 min.)
Ex. 184
Romero Company—Perth Division is a new state of the art production facility that manufactures
landing gears for airplanes. The September 30th ending work in process is comprised of labor
and overhead and is approximately 60% complete. All materials are assumed to be 100%
complete. Total materials costs during the period totaled $840,000.
Instructions
As the new plant accountant, you are asked to complete the production cost report which appears
as follows:
Process Costing
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Ex. 184 (cont.)
ROMERO COMPANY—Perth Division
Assimilation Department
Production Cost Report
For the Month Ended September 30, 2013
Equivalent Units
QUANTITIES Physical Units Materials Conversion Costs
Units to be accounted for
Work in process, September 1 300
Started into production 900
Total units 1,200
Units accounted for
Transferred out 700 700 700
Work in process, September 30 500 500
Total units 1,200 1,200
COSTS
Unit Costs Materials Conversion Costs Total
Costs in September $840,000 $ $1,100,000
Equivalent units
Unit costs $ $ 260 $
Costs to be accounted for
Work in process, Sept. 1 $ 243,400
Started into production
Total costs $
Cost Reconciliation Schedule
Costs accounted for
Transferred out $
Work in process, September
Materials $
Conversion costs 78,000
Total costs $1,100,000
Test Bank for Accounting, Tools for Business Decision Making Fifth Edition
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Solution 184 (Cont.)
aEx. 185
At Oxley Company, materials are entered at the beginning of each process. The company uses
the FIFO method for process costing. Work in process inventories, with the percentage of work
done on conversion, and production data for its Finishing Department for March are as follows:
Beginning Work in Process Ending Work in Process
Percentage Units Completed Percentage
Month Units Completed and Transferred Out Units Completed
March 2,100 60% 18,500 750 90%
Instructions
(a) Compute the physical units for March.
(b) Compute the equivalent units of production for materials and conversion costs for March.
Process Costing
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aSolution 185 (Cont.)
aEx. 186
Taco Ranch uses a process cost system and the FIFO cost flow assumption. Production begins
in the Crafting Department where materials are added at the beginning of the process and
conversion costs are incurred uniformly throughout the process. On November 1, the beginning
work in process inventory consisted of 10,000 units, which were 60% complete and had a cost of
$266,000, $140,000 of which were materials costs. During November, the following occurred:
Materials added $315,000
Conversion costs incurred $66,000
Units completed and transferred out in November 45,000
Units in ending work in process November 30 (20% complete) 25,000
Instructions
Answer the following questions and show the computations that support your answers:
(a) What are the equivalent units of production for materials and conversion costs in the Crafting
Department for the month of November?
(b) What are the costs assigned to the ending work in process inventory on November 30?
(c) What are the costs assigned to units completed and transferred out during November?
Test Bank for Accounting, Tools for Business Decision Making Fifth Edition
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aSolution 186 (cont.)
COMPLETION STATEMENTS
187. Process cost systems are used to apply costs to similar products that are ____________
in a ____________ fashion.
188. Separate _________________ accounts are maintained for each production department
or manufacturing process in a process cost system.
189. In a process cost system, manufacturing costs are summarized in a ________________
report for each department.
190. A primary driver of overhead costs in continuous manufacturing operations is
_______________.
191. Equivalent units of production measure the work done during the period, expressed in fully
________________ units.
192. Unit production costs are expressed in terms of _____________ units of production.
193. If a processing department has 27,000 units in process at the beginning of the period,
completes and transfers out 90,000 and has 18,000 units in process at the end of the
period, then the number of units started into production during the period was
______________ units.
194. A cost reconciliation schedule is prepared to assign total costs to units ______________,
and to the units in the _________________ work in process.
195. The production cost report is an internal document that shows production quantity and
______________ for a production department.
Answers to Completion Statements
MATCHING
196. Match the items in the two columns below by entering the appropriate code letter in the
space provided.
A. Total manufacturing cost per unit E. Cost reconciliation schedule
B. Equivalent units of production F. Units transferred out
C. Total units accounted for G. Unit production costs
D. Production cost report H. Physical units
____ 1. A summary of both production quantity and cost data for a production department.
____ 2. Shows that the total costs accounted for equal the total costs to be accounted for.
____ 3. Work done during a period expressed in fully completed units.
____ 4. Costs expressed in terms of equivalent units of production.
____ 5. Actual units to be accounted for during a period, irrespective of any work performed.
____ 6. Units transferred out during the period plus units in ending work in process.
____ 7. Unit materials costs plus unit conversion costs.
____ 8. Total units accounted for minus units in ending work in process.
Test Bank for Accounting, Tools for Business Decision Making Fifth Edition
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SHORT-ANSWER ESSAY QUESTIONS
S-A E 197
Why do some companies need a cost accounting system while others do not? What are the
determining characteristics or factors that influence the type of cost accounting system that is
appropriate for a company?
S-A E 198
The production cost report summarizes the activities that have taken place in a department or
process over a period of time. Identify the major types of information found on a production cost
report, and indicate who in the business organization uses this type of information and for what
purpose the information is used.
S-A E 199
Your roommate is curious about the features of process cost accounting. Identify and explain the
distinctive features for your roommate.
Process Costing
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S-A E 200
What purposes are served by a production cost report?
S-A E 201 (Ethics)
Dolly's Dream Homes, Inc. manufactures doll houses in a continuous process. Various
customizing features and furnishings are added at the end of the process to create the various
models that are sold. The basic design and floor plans of all the houses are identical, however.
During the most recent month, the lumber used in trimming the houses was inadvertently
recorded as direct materials. At month end, when the error was discovered, Susie Rief, the
accountant, was told by the accounting manager, Karen Tate, not to bother with correcting the
error, because the dollar amount of the error was not "worth it." Susie believes that the dollar
amount is not as important as the quality of the reports. She wonders whether she would be
committing an unethical act if she were to make the changes anyway, despite her superior's
telling her not to.
Required:
1. Who are the stakeholders in this situation?
2. Was it unethical for the company to ask that the error not be corrected? Explain briefly.
3. Would it be unethical for Susie to correct the error? Explain briefly.
