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Chapter 18: Q18E (page 1010)

Match the following terms to their definitions.

1. Direct labor plus manufacturing

Overhead

a. Expresses partially completed units in terms of fully completed units

2. Prepared by department for EUP, production costs, and assignment of costs

b. Used by companies that manufacture

homogenous products

3. Equivalent units of production

c. Previous costs brought into later

process

4. Process costing system

d. Conversion costs

5. Transferred in costs

e. Combines prior period costs with current period costs

6. Weighted-average method

f. Production cost report

Short Answer

Expert verified

S.No.

Particulars

S.no

Particulars

1.

Direct labor plus manufacturing

Overhead

D

Conversion costs

2.

Prepared by department for EUP, production costs, and assignment of costs

F

Production cost report

3.

Equivalent units of production

A

Expresses partially completed units in terms of fully completed units

4.

Process costing system

B

Used by companies that manufacture homogenous products

5

Transferred in costs

C

Previous cost brought into later process

6.

Weighted-average method

E

Combines prior period costs with current period costs

Step by step solution

01

Step-by-Step Solution:Step 1: Costing System

The companies use costing system to arrive at the total cost incurred by the company while manufacturing the products. The costing of products is done either by the process or job order costing system.

02

Conversion cost

Conversion cost is an aggregate of direct labor cost and the works or manufacturing overhead. It is the cost of converting the raw material into final products.

03

Production cost report

Production cost report is prepared by the companies using the process costing system. The department prepares it for EUP, manufacturing costs, and the assignment of costs.

04

Equivalent unit of production

The equivalent unit of production shows the amount of work done by the manufacturing process. It depicts the partially completed units as the fully completed units.

05

Process costing system

The process costing system is used by the companies that manufacture similar kinds of products in large quantities to determine the total cost of production.

06

Transferred in cost

Transferred in cost means the total cost transferred from one department to another. It is the total cost incurred in the previous department.

07

Weighted average method

The weighted average method is the method for calculating the cost in which the cost of the prior period or process is added to the cost of the current period or process to compute the cost per unit.

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Most popular questions from this chapter

Salish Craft Beers provides the following information for the Malting Department for the month of August 2018:


UNITS
COSTS

Beginning Work-in-Process Inventory

0

\(0

Started in Production in August

26,000

54,000*

Total to Account For

26,000

\)54,000

Completed and Transferred to Packaging Department during August

21,000

?

Ending Work-in-Process Inventory (30% complete for direct materials and 60% complete for conversion work)

5,000

?

Total Accounted For

26,000

\(54,000

* Includes \)18,000 direct materials and $36,000 conversion costs

Requirements

Complete a production cost report for the Malting Department for the month of August 2018 to determine the cost of the units completed and transferred out, and the cost of the ending Work-in-Process Inventory. Assume Salish Craft Beers uses the weighted average method.

Cheerful Colors manufactures crayons in a three-step process: mixing, molding, and packaging. The Mixing Department combines the direct materials of paraffin wax and pigments. The heated mixture is pumped to the Molding Department, where it is poured into molds. After the molds cool, the crayons are removed from the molds and are transferred to the Packaging Department, where paper wrappers are added and the crayons are boxed.

In the Mixing Department, the direct materials are added at the beginning of the

process and the conversion costs are incurred evenly throughout the process. Work in process of the Mixing Department on March 1, 2018, consisted of 800 batches of crayons that were 10% of the way through the production process. The beginning balance in Work-in-Process Inventory鈥擬ixing was \(32,800, which consisted of \)14,000 in direct materials costs and $18,800 in conversion costs. During March, 5,200 batches were started in production. The Mixing Department transferred 3,000 batches to the Molding Department in March, and 3,000 were still in process on March 31. This ending inventory was 80% of the way through the mixing process. Cheerful Colors uses FIFO process costing.

At March 31, before recording the transfer of costs from the Mixing Department

to the Molding Department, the Cheerful Colors general ledger included the following account:

Work-in-process inventory 鈥� Mixing

Balance, March 1

32,800

Direct materials

42,000

Direct labor

24,610

Manufacturing overhead

65,830

Requirements

1. Prepare a production cost report for the Mixing Department for March. Round

equivalent unit of production costs to four decimal places. Round all other costs to the nearest whole dollar.

2. Journalize all transactions affecting the Mixing Department during March, including the entries that have already been posted. Assume labor costs are accrued and not yet paid.

Sea Worthy uses three processes to manufacture lifts for personal watercrafts: forming a lift鈥檚 parts from galvanized steel, assembling the lift, and testing the completed lift. The lifts are transferred to finished goods before shipment to marinas across the country. Sea Worthy鈥檚 Testing Department requires no direct materials. Conversion costs are incurred evenly throughout the testing process. Other information follows for October 2018:

UNITS

Beginning work-in-process inventory

2,300 units

Transferred in from assembling department during the period

6,800 units

Completed during the period

4,100 units

Ending work in process inventory (40% complete for conversion work)

5,000 units

COSTS

Beginning work in process inventory (transferred in costs, \(93,400, conversion costs, \)18,100)

$111,500

Transferred in from the assembly department during the period

671,000

Conversion cost added during the period

49,000

The cost transferred into Finished Goods Inventory is the cost of the lifts transferred out of the Testing Department. Sea Worthy uses weighted-average process costing.

Requirements

1. Prepare a production cost report for the Testing Department.

2. What is the cost per unit for lifts completed and transferred out to Finished Goods Inventory? Why would management be interested in this cost?

Complete the missing amounts and labels in the T-accounts.

Work-in-process inventory 鈥� Cutting

Balance, May 1

0

Transferred out to

(A)

Direct materials

57,000

Direct labor

5,000

Manufacturing overhead

39,000

Balance, May 31

16,000

Work-in-process inventory 鈥� Finishing

Balance, May 1

11,000

Transferred out to

80,000

Transferred in from

(B)

Direct materials

21,000

Direct labor

(C )

Manufacturing overhead

18,000

Balance, May 31

68,000

Work-in-process inventory 鈥� Packaging

Balance, May 1

4,000

Transferred out to

(D)

Transferred in from

(E )

Direct material

1,000

Direct labor

9,000

Manufacturing overhead

14,000

Balance, May 31

8,000

Finished goods inventory

Balance, May 1

0

Transferred out to

(F)

Transferred in from

(G)

Balance, May 31

2,000

Cost of goods sold

Balance, May 1

0

Transferred in from

(H)

Balance, May 31

(I)

Refer to your answers from Exercise E18-21.

Requirements

1. Prepare the journal entries to record the assignment of direct materials and direct labor and the allocation of manufacturing overhead to the Blending Department. Also, prepare the journal entry to record the costs of the gallons completed and transferred out to the Packaging Department. Assume labor costs are accrued and not yet paid.

2. Post the journal entries to the Work-in-Process Inventory鈥擝lending T-account.

What is the ending balance?

3. What is the average cost per gallon transferred out of the Blending Department

into the Packaging Department? Why would the company managers want to

know this cost?
See all solutions

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