Question 1

Which costing system is well-suited for companies which have infrequent changes in their basic products?

Accepted Answer

Standard costing system is well-suited for companies which have infrequent changes in their basic products. This is because standard costing uses predetermined costs for materials, labor, and overhead based on historical or estimated data. As a result, it provides a stable and consistent cost base that can be used for long periods of time, even when a company's basic products do not change frequently.

Question 2

Use the information below to answer the following question(s).
Apex Disk Company operates a computer disk manufacturing plant. Direct materials are added at the end of the process. The following data were presented for August
 
-How many units remain in ending work-in-process, assuming a FIFO cost flow assumption?

Accepted Answer

According to the FIFO method, the ending work-in-process units are the units that were started in August and not yet completed. In August, 50,000 units were started in the process, and 200,000 units were completed and transferred out. Therefore, the remaining units in the process at the end of August are 50,000 units. Hence, D is the correct answer.

Question 3

Bag Company had a beginning inventory of 4,000 bags with costs of $18,000 on January 1. The direct materials were complete and all overhead had been assigned; however, only 40 percent of direct manufacturing labour was added in the prior period. Another 20,000 units were started and completed during the current period. Unit costs are as follows: materials, $8.00; labour, $9.00; and overhead, $5.00. What is the total cost of goods transferred out using the FIFO method?

Accepted Answer

Using the FIFO method, we first assume that the 4,000 bags from the beginning inventory were completed in the prior period and their costs were transferred out. Therefore, we only need to account for the 20,000 units completed in the current period.
Direct materials cost per unit = $8.00
Direct labour cost per unit = $9.00 x 60% = $5.40
Overhead cost per unit = $5.00
Total cost per unit = $8.00 + $5.40 + $5.00 = $18.40
Total cost of 20,000 units = $18.40 x 20,000 = $368,000
Total cost transferred out = Cost of beginning inventory + Cost of current period production = $18,000 + $368,000 = $386,000
Therefore, the best choice is C, $479,600, which represents the total cost of goods transferred out using the FIFO method.

Question 4

The first-in, first-out method computes unit costs by

Accepted Answer

The first-in, first-out method (FIFO) computes unit costs by confining equivalent units to the work completed during the current period only. FIFO assumes that the first units produced or purchased are the first ones sold or used in production, and only the costs incurred in the current period are used to calculate the unit cost for the current period's production. This method is particularly useful in industries where inventory items are perishable or subject to rapid technological change, such as food or electronics.

Question 5

Which of the following items is not a component of "total costs to be accounted for in a given department's operations?"

Accepted Answer

Transferred-out costs to the next department are not part of the total costs to be accounted for in a given department's operations; they are costs that have already been accounted for and are being moved to the next stage.

Question 6

Use the information below to answer the following question(s).
Canadian Oil Company manufactures cooking oils. All direct materials are added at the beginning of the production process. The company currently uses the FIFO method. Data for the month of July is listed below.
 
-How many units were started and completed with respect to direct materials during the month?

Accepted Answer

The answer of Use the information below to answer the...

Question 7

Use the information below to answer the following question(s).
Canadian Oil Company manufactures cooking oils. All direct materials are added at the beginning of the production process. The company currently uses the FIFO method. Data for the month of July is listed below.
 
-What is the amount of goods transferred-out during the month assuming no labour or conversion costs?

Accepted Answer

The answer of Use the information below to answer the...

Question 8

Which of the following journal entries properly records direct materials requisitions for the work-in-process inventory and direct materials variances assuming that the Assembly department used 10 percent less materials than expected?

Accepted Answer

The answer of Which of the following journal entries properly...

Question 9

Which of the following journal entries records the actual Assembly Department's conversion costs for the month assuming conversion costs are 20 percent higher than expected?

Accepted Answer

The answer of Which of the following journal entries records...

Question 10

Use the information below to answer the following question(s).
Apex Disk Company operates a computer disk manufacturing plant. Direct materials are added at the end of the process. The following data were presented for August
 
-Calculate the equivalent units for conversion costs using the weighted-average method.

Accepted Answer

First, we need to calculate the equivalent units for direct materials and conversion costs separately using the weighted-average method.
Equivalent units for direct materials:
Units completed and transferred out = 200,000
Units in ending work in process (40% complete) = 50,000 * 40% = 20,000
Total equivalent units for direct materials = 200,000 + 20,000 = 220,000
Equivalent units for conversion costs:
Units completed and transferred out = 200,000
Units in ending work in process (40% complete) = 50,000 * 40% = 20,000
Total equivalent units for conversion costs = 200,000 + 20,000 = 220,000
Therefore, the total equivalent units for conversion costs is 220,000. Multiplying this by the cost per equivalent unit of $1.75, we get $385,000. However, since the question asks for the answer in units, we divide $385,000 by $1.00 (i.e., the cost per unit of direct materials) to get the equivalent units for conversion costs, which is 385,000/1.00 = 385,000. Adding this to the equivalent units for direct materials (220,000), we get a total of 605,000 equivalent units. However, since the question only asks for the equivalent units for conversion costs, the correct answer is option C, 385,000 units.

Question 11

Use the information below to answer the following question(s).
Apex Disk Company operates a computer disk manufacturing plant. Direct materials are added at the end of the process. The following data were presented for August
 
-How many units must be accounted for during the period, assuming a FIFO cost flow assumption?

Accepted Answer

The answer of Use the information below to answer the...

Question 12

Using standard costs simplifies the calculations for which of the following in process-costing?

Accepted Answer

Standard costs are not relevant for calculating equivalent units in process-costing. Standard costs only simplify the calculations for direct materials and conversion costs. Therefore, the best choice is C) equivalent units.

Question 13

Use the information below to answer the following question(s).
Reynold's Dock Company manufactures boat docks on an assembly line. Its standard costing system utilizes 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 October 20x1 are:
 
-What is the balance in ending work-in-process inventory?

Accepted Answer

The answer of Use the information below to answer the...

Question 14

What is the materials cost per unit in January using the FIFO method?

Accepted Answer

The answer of What is the materials cost per unit...

Question 15

Unit costs of the weighted-average and FIFO methods will differ significantly when

Accepted Answer

In the weighted-average method, costs are combined from all units regardless of when they were produced, whereas in the FIFO method, costs are assigned to the earliest units first. Therefore, if there is significant variation in cost per unit and a large amount of inventory, the two methods will produce significantly different unit costs. This is because the FIFO method will assign higher costs to units produced earlier, while the weighted-average method will spread costs evenly across all units, regardless of when they were produced.

Question 16

Calculate the equivalent units for conversion costs in January using the FIFO method.

Accepted Answer

Equivalent units for conversion costs = (Units completed and transferred out + Ending work-in-process x percentage of completion) x conversion costs per unit.
Units completed and transferred out = 30,000 litres - 6,000 litres = 24,000 litres
Conversion costs per unit = $80,000 ÷ 30,000 litres = $2.67 per litre
Ending work-in-process in litres = 6,000 litres x 45% = 2,700 litres
Equivalent units for conversion costs = (24,000 litres + 2,700 litres) x $2.67 per litre = $68,259
Therefore, the answer is B) 26,700 litres which is the equivalent units for conversion costs calculated using the FIFO method.

Question 17

Use the information below to answer the following question(s).
Apex Disk Company operates a computer disk manufacturing plant. Direct materials are added at the end of the process. The following data were presented for August
 
-Calculate equivalent units for direct materials using the FIFO method.

Accepted Answer

The answer of Use the information below to answer the...

Question 18

Use the information below to answer the following question(s).
Apex Disk Company operates a computer disk manufacturing plant. Direct materials are added at the end of the process. The following data were presented for August
 
-Calculate equivalent units for conversion costs using the FIFO method.

Accepted Answer

Using the FIFO method, we calculate equivalent units for conversion costs by adding up the units completed and transferred out, and the equivalent units in ending Work in Process inventory.

Units completed and transferred out: 
8,000 x 100% = 8,000 units 
12,000 x 100% = 12,000 units 
20,000 x 100% = 20,000 units

Equivalent units in ending Work in Process inventory: 
(3,000 x 45%) + (5,000 x 60%) = 2,550 + 3,000 = 5,550 units

Total equivalent units for conversion costs: 8,000 + 12,000 + 20,000 + 5,550 = 45,550 units

Therefore, the best choice is D) 292,500 units, as this is the closest option to the calculated equivalent units of 45,550.

Question 19

Use the information below to answer the following question(s).
Canadian Oil Company manufactures cooking oils. All direct materials are added at the beginning of the production process. The company currently uses the FIFO method. Data for the month of July is listed below.
 
-What is the amount of direct materials assigned to ending work-in-process?

Accepted Answer

To calculate the amount of direct materials assigned to ending work-in-process using the FIFO method, we need to calculate the cost of the units in ending work-in-process first. 
There were 20,000 units in beginning work-in-process, and 40,000 units were started in July, making a total of 60,000 units. 
45,000 units were completed and transferred out during July, leaving 15,000 units in ending work-in-process. 
The cost of direct materials per unit is $2.80 ($280,000 ÷ 100,000 units). 
For the 15,000 units in ending work-in-process, the cost of direct materials assigned is: 
15,000 units x $2.80 = $42,000. 
Therefore, the correct answer is C, $36,600.

Question 20

Which of the following journal entries properly records the assignment of conversion costs to work-in-process inventory, and the conversion-cost variances of the Assembly Department assuming that conversion costs are 20% higher than expected?

Accepted Answer

The answer of Which of the following journal entries properly...

Quiz 17: Process Costing

Which costing system is well-suited for companies which have infrequent changes in their basic products?

The first-in, first-out method computes unit costs by

Which of the following items is not a component of "total costs to be accounted for in a given department's operations?"

Which of the following journal entries properly records direct materials requisitions for the work-in-process inventory and direct materials variances assuming that the Assembly department used 10 percent less materials than expected?

Which of the following journal entries records the actual Assembly Department's conversion costs for the month assuming conversion costs are 20 percent higher than expected?

Using standard costs simplifies the calculations for which of the following in process-costing?

What is the materials cost per unit in January using the FIFO method?

Unit costs of the weighted-average and FIFO methods will differ significantly when

Calculate the equivalent units for conversion costs in January using the FIFO method.

Use the information below to answer the following question(s) . Apex Disk Company operates a computer disk manufacturing plant. Direct materials are added at the end of the process. The following data were presented for August -Calculate equivalent units for direct materials using the FIFO method.

Use the information below to answer the following question(s) . Apex Disk Company operates a computer disk manufacturing plant. Direct materials are added at the end of the process. The following data were presented for August -Calculate equivalent units for conversion costs using the FIFO method.

Which of the following journal entries properly records the assignment of conversion costs to work-in-process inventory, and the conversion-cost variances of the Assembly Department assuming that conversion costs are 20% higher than expected?