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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

Question: The Cutting Department has 6,500 units in process at the end of September that are 100% complete for direct materials and 85% complete for conversion costs. Calculate the equivalent units of production for direct materials and conversion costs.

Question: What is a production cost report?

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.

When might it be beneficial for a company to use the FIFO method? When is the weighted-average method more practical?

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

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