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Exam 5: Process Costing and Cost Allocation

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Question 31

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Managerial accountants realize that a distinct feature of the first-in,first-out (FIFO) process-costing method is that:

A) it keeps work done on beginning inventory blended with work done during the current period in the calculation of equivalent units.
B) it keeps separate work completed on beginning inventory before the current period from work completed in the current period.
C) work done on ending inventory is kept separate from the work during the calculation of equivalent units and is usually not included in the calculation.
D) managerial accountants fail to assign the costs of the previous accounting period's equivalent units in beginning work-in-process inventory.
E) it is really the same as the weighted-average process-costing method.

F) C) and E)
G) All of the above

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Question 32

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The basic point in operation costing is that managers assume operation unit costs are the same regardless of the work order,but direct material costs:

A) are never relevant in the operation unit costs.
B) vary across orders when the materials used for each work order vary.
C) never vary across orders when the materials used for each work order vary.
D) can vary across orders but not when the materials used for each work order vary.
E) never vary across orders but only when the materials used for each work order vary.

F) A) and B)
G) A) and C)

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Question 33

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In process costing with no beginning or ending work-in-process inventory,physical units,whether complete or incomplete,refer to the number of:

Overestimating the degree of completion increases the costs assigned to goods transferred out and eventually to cost of goods sold,and it increases operating income.

In a manufacturing process-costing setting,each unit receives the same or similar amounts of direct material costs,direct manufacturing labor costs,and indirect manufacturing costs.

The common metric that managerial accountants use to compare work completed in each category and to obtain the measure of work completed is:

The Flannigan Factory was recently formed to product a specialized part that forms and essential part to go on a refrigerator.The direct materials are added at the start of the production process while conversion costs are added uniformly throughout the production process.December is Flannigan's first month of operations;and,therefore,there was no beginning inventory.Direct materials cost for the month totaled $1,200,000,while conversion costs equaled $1,600,000.The accounting records indicate that 500,000 parts were started in December and 400,000 parts were completed. Ending inventory was 30% complete as to conversion costs. Required: a.What is the total manufacturing cost per part for December? b.Allocate the total costs between the completed parts and the parts in ending inventory.

A ________ cost is a cost of operating a facility,department,activity,or similar cost object that two or more users share.

Costs are averaged in service organizations that implement process-costing system with no beginning or ending work-in-process inventory.

Karen is a managerial accountant at a manufacturing company.She uses manufacturing process costing to assign costs to products and services.Write a short summary and explain how the manufacturing process is different compared to a job-costing system.

Costs added evenly during production are:

The Studio Furniture Company manufactures leather recliners.In February,the firm's Assembly Division started production of 50,000 leather recliners.During the month,the firm completed 55,000 chairs,and transferred them to the Finishing Department.The firm ended the month with 10,000 chairs in ending inventory.There were 15,000 chairs in beginning inventory.All direct materials costs are added at the beginning of the production cycle and conversion costs are added uniformly throughout the production process.The FIFO method of process costing is used by the accounting manager.The Operations Manager reported that the beginning work in process was 30% complete as to conversion costs,while ending work-in process was 80% completed as to conversion costs. Required: Using the FIFO method,determine how many units that were started in February were completed during February?

The accountant at John's Cycle Manufacturing Company uses the weighted-average costing method.The accountant reported that there were 400 equivalent units of work completed to date,and reported the following cost: Summary of Total Costs Required: Compute the conversion cost-per-unit using the weighted-average costing method.

Service-sector organizations typically have homogeneous product or service.

It is easier for managerial accountants to estimate the degree of completion for direct-material costs than for conversion costs because quantities of direct materials in completed and partially-completed units are more accurately measured.

The manager at Puppet and Doll Factory reported 50,000 units of direct materials in the processing division.All direct materials are placed in the processing at the beginning of the process and conversion costs occur evenly during the process.The managerial accountant uses the weighted-average costing method and their first goal was to have 10,000 left in processing and 20% converted to factory and labor overhead. Required a.Determine the total equivalent units in process and transferred out for direct materials and conversion costs,assuming there is no beginning inventory. b.With the installation of a new sewing machine,the forecast for the end of the month was to have 2,000 left in process and 80 % converted as to labor and factory overhead.Compute the equivalent units in process and transferred out for direct materials and conversion costs,assuming there was no beginning inventory.

The system that blends characteristics from both job-costing and process-costing systems is a:

The accounting manager at Sarah's Pet Toy Manufacturing uses the weighted-average method costing system.The accountant reported 85,000 units in beginning work in process and 32,000 equivalent units of work done in the current period.Compute the equivalent units completed and transferred out in the current period.

Operation-costing systems use work orders that specify the amount of direct materials needed and step-by-step operations.

John's Assembly Service provided the following data for the assembly department for January 2013: Required: Compute the direct material cost per unit;the conversion cost per unit;and,the total department cost per unit.