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Chapter 18: Q5RQ (page 1005)

Question: Describe the flow of costs through a process costing system.

Short Answer

Expert verified

Answer:

In process costing, the cost is arrived by first adding the direct material cost at the beginning of the process and all the other cost (whether direct labor or overhead) are gradually added over the course of the production process.

Step by step solution

01

  Step 1: Process costing system

Process costing system requires to compute the cost of production of the goods at every stage of process involved in production.

02

The flow of cost through a process costing system

Particulars

Amount ($)

Direct cost at process 1

XXX

Add: Indirect cost at process 1

XXX

Add: Direct cost at process 2

XXX

Add: indirect cost at process 2

XXX

Total cost

XXX

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Most popular questions from this chapter

Brian’s Frozen Pizzas uses FIFO process costing. Selected production and cost data follow for April 2018.

Prepping department

Units to account for:

Beginning work-in-process, March 31

20,000

Started in April

45,000

Total units to account for

65,000

Units accounted for:

Completed and transferred out during April:

From beginning work-in-process inventory

20,000

Started and completed during April

30,000

Ending work-in-process, April 30

15,000

Total units accounted for

65,000

Requirements

1. Calculate the following:

a. On March 31, the Prepping Department beginning Work-in-Process Inventory was 75% complete for materials and 55% complete for conversion costs. This means that for the beginning inventory % of the materials and % of the conversion costs were added during April.

b. On April 30, the Prepping Department ending Work-in-Process Inventory was 60% complete for materials and 85% complete for conversion costs. This means that for the ending inventory % of the materials and % of the conversion costs were added during April.

2. Use the information in the table and the information in Requirement 1 to compute the equivalent units of production for direct materials and conversion costs for the Prepping Department.

Refreshing Water Company produces premium bottled water. In the second department, the Bottling Department, conversion costs are incurred evenly throughout the bottling process, but packaging materials are not added until the end of the process. Costs in beginning Work-in-Process Inventory include transferred in costs of \(1,400, direct labor of \)700, and manufacturing overhead of \(330. March data for the Bottling Department follow:


REFRESHING WATER COMPANY

WORK-IN-PROCESS INVENTORY – BOTTLING

Month ended March 31,2018
Dollars

Units

Transferred in

Direct materials

Direct labor

Manufacturing overheads

Total costs

Beginning inventory, Mar. 1 (40% complete)

15,000

\)1,400

\(700

\)330

\(2,430

Production started

160,000

135,100

\)30,400

33,100

16,300

214,900

Transferred out

152,000

Ending inventory, Mar 31 (70% completed)

23,000

Requirements

1. Prepare a production cost report for the Bottling Department for the month of

March. The company uses the weighted-average method.

2. Prepare the journal entry to record the cost of units completed and transferred out.

3. Post all transactions to the Work-in-Process Inventory—Bottling T-account. What is the ending balance?

Question: Refer to the data in Short Exercise S18-8 and your results for equivalent units of production. The Mixing Department of Complete Foods has direct materials costs of \(46,500 and conversion costs of \)23,540 for October.

Compute the cost per equivalent unit of production for direct materials and for

conversion costs.

Question: The Finishing Department of Lee and Lewis, Inc., the last department in the manufacturing process, incurred production costs of \(220,000 during the month of June.If the June 1 balance in Work-in-Process Inventory—Finishing is \)0 and the June 30balance is $70,000, what amount was transferred to Finished Goods Inventory?

Question: The Mixing Department of Complete Foods had 62,000 units to account for in October. Of the 62,000 units, 38,000 units were completed and transferred to the next department, and 24,000 units were 20% complete. All of the materials are added at the beginning of the process. Conversion costs are added evenly throughout the mixing process and the company uses the weighted-average method.

Compute the total equivalent units of production for direct materials and

conversion costs for October.
See all solutions

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