MGMT 312 - Module 2 Review Questions

Module 2 Review Questions

I. Terminology in process cost accounting Match each of the following items A through G with the best numbered description of its purpose.

A. Process cost summary B. Equivalent units of production C. Goods in Process Inventory account D. Raw Materials Inventory account E. Materials requisition F. Finished Goods Inventory account G. Factory Overhead Account

________ 1. Holds costs of materials until they are used in production or as factory overhead. ________ 2. Holds costs of indirect materials, indirect labor, and similar costs until assigned to

production. ________ 3. Holds cost of direct materials, direct labor, and applied overhead until products

are transferred from production to finished goods (or another department). ________ 4. Standardizes partially completed units into equivalent completed units. ________ 5. Holds costs of finished products until sold to customers. ________ 6. Describes the activity and output of production department for a period. ________ 7. Notifies the materials manager to send materials to a production department.

II. Equivalent units computed – weighted average The production department in a process manufacturing system completed 191,500 units of product and transferred them to finished goods during a recent period. Of these units, 31,500 were in process at the beginning of the period. The other 160,000 units were started and completed during the period. At period-end, 29,500 units were in process. Compute the department’s equivalent units of production with respect to direct materials under each of three separate assumptions:

1. All direct materials are added to products when processing beings. 2. Direct materials are added to products evenly throughout the process. Beginning goods

in process inventory was 40% complete and ending goods in process inventory was 75% complete.

3. One-half of direct materials is added to products when the process begins and the other half is added when the process is 75% complete as to direct labor. Beginning goods in process inventory is 40% complete as to direct labor, and ending goods in process inventory is 60% complete as to direct labor.

III. Interpretation of journal entries in process cost accounting The following journal entries are recorded in Kiera Co.’s process cost accounting system. Kiera produces handbags and scarves. Overhead is applied to production based on direct labor cost for the period. Prepare a brief explanation (including any overhead rates applied) for each journal entry (a) through (j).

IV. Completing a process cost summary The following partially completed process cost summary describes the May production activities of Raman Company. Its production output is sent to its warehouse for shipping. Prepare its process cost summary using the weighted-average method.

V. Process costing – weighted average Ebony Company uses the weighted-average method of process costing to assign production costs to the products. Information for April follows. Assume that all materials are added at the beginning of the production process, and that direct labor and factory overhead are added uniformly throughout the process.

Using the format illustrated on the next page, complete a process cost summary using the following sections:

1. Costs charged to production 2. Unit cost information 3. Equivalent units of production 4. Cost per Equivalent unit of production 5. Cost assignment and reconciliation