True/False Questions s2

Chapter 4 Systems Design: Process Costing

True/False Questions

1. In a process costing system, the costs of one processing department become part of the costs of the next processing department.

Ans: True AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: 1 Level: Easy

2. The equivalent units of production will be the same under the weighted-average and the FIFO method if there is no beginning work in process inventory.

Ans: True AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting Appendix: 4A LO: 2,5 Level: Medium

3. Under the weighted-average method, the equivalent units used to compute the unit costs of ending inventories relate only to work done during the current period.

Ans: False AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 2 Level: Hard

4. In order to equitably allocate costs in a process costing system, dissimilar products are restated in terms of equivalent units by weighting the number of units produced by their market values.

Ans: False AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: 2 Level: Easy

5. In a process costing system, units transferred to the next processing department are presumed to be 100% complete with respect to the work performed by the transferring department.

6. Under a weighted-average process costing system when all materials are added at the beginning of the production process, the equivalent units for materials is equal to the units completed and transferred out.

Ans: False AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 2 Level: Hard

Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition 4-7 Chapter 4 Systems Design: Process Costing

7. In calculating cost per equivalent unit under the weighted-average method, prior period costs are combined with current period costs.

8. The equivalent units of production for a department using the FIFO process costing method is equal to the number of units completed plus the equivalent units in the ending inventory.

Ans: False AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting Appendix: 4A LO: 5 Level: Hard

9. The step-down method of cost allocation is more accurate than the direct method since the step-down method considers services that service departments provide to each other.

Ans: True AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting Appendix: 4B LO: 8,9 Level: Easy

10. The step-down method and the direct method of cost allocation will result in the same amount of service department cost being allocated to a given operating department, although the step-down method is easier to apply than the direct method.

Ans: False AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting Appendix: 4B LO: 8,9 Level: Medium

11. The order in which the costs of service departments are allocated will affect the amounts allocated to an operating department when the direct method is used.

Ans: False AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting Appendix: 4B LO: 8 Level: Medium

12. The units in beginning work in process inventory plus the units started into production must equal the units transferred out of the department plus the units in ending work in process inventory.

4-8 Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition Chapter 4 Systems Design: Process Costing

13. In a process costing system, direct labor cost combined with manufacturing overhead cost is known as conversion cost.

14. Process costing is employed in industries that produce basically homogeneous products such as bricks, flour, or cement but would not be appropriate for assembly- type operations such as those that manufacture computers.

Ans: False AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 10 Level: Medium

15. Process costing is used where many different products are produced each period to customer specifications.

Ans: False AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: 10 Level: Easy

Multiple Choice Questions

16. Which of the following statements related to job-order costing and process costing are true? A) Under both costing methods, manufacturing overhead costs are included in the computation of unit product costs. B) Under both costing methods, the journal entry to record the completion of production will involve crediting a work in process account. C) Under both costing methods, the journal entry to record the cost of goods sold will involve crediting the finished goods account. D) All of the above are true.

Ans: D AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 1 Level: Hard

17. The completion of goods is recorded as a decrease in the work in process inventory account when using:

Job-order costing Process costing A) Yes No B) Yes Yes C) No Yes D) No No

Ans: B AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: 1 Level: Easy Source: CPA, adapted

18. In process costing, a separate work in process account is kept for each: A) individual order. B) equivalent unit. C) processing department. D) cost category (i.e., materials, conversion cost).

Ans: C AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: 1 Level: Easy

19. The weighted-average method of process costing differs from the FIFO method of process costing in that the weighted-average method: A) does not consider the degree of completion of beginning work in process inventory when computing equivalent units of production. B) considers ending work in process inventory to be fully complete. C) will always yield a higher cost per equivalent unit. D) All of the above.

Ans: A AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting Appendix: 4A LO: 2,3,5,6 Level: Hard

20. Which of the following are needed to compute equivalent units for conversion costs under the weighted-average method of process costing?

Percentage completion of Percentage completion of beginning work in process ending work in process A) Yes Yes B) No Yes C) Yes No D) No No

Ans: B AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: 2 Level: Easy

21. Malcolm Company uses a weighted-average process costing system. All materials at Malcolm are added at the beginning of the production process. The equivalent units for materials at Malcolm would be the sum of: A) units in ending work in process and the units started. B) units in beginning work in process and the units started. C) units in ending work in process and the units started and completed. D) units in beginning work in process and the units started and completed.

Ans: B AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 2 Level: Hard

22. In the computation of costs per equivalent unit, the weighted-average method of process costing considers: A) costs incurred during the current period only. B) costs incurred during the current period plus cost of ending work in process inventory. C) costs incurred during the current period plus cost of beginning work in process inventory. D) costs incurred during the current period less cost of beginning work in process inventory.

Ans: C AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: 3 Level: Easy Source: CPA, adapted

23. Which of the following are needed to compute the cost per equivalent unit for materials under the weighted-average method of process costing?

Material cost assigned to beginning Material cost added to production work in process last period during the current period A) Yes Yes B) No Yes C) Yes No D) No No

Ans: A AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: 3 Level: Medium

24. Under which of the following conditions will the FIFO method of process costing result in the same amount of cost being transferred to the next department as the weighted-average method? A) When the beginning and ending inventories are each fifty percent complete. B) When there is no beginning inventory. C) When there is no ending inventory. D) When units in the beginning inventory are all completed and transferred at the same time.

Ans: B AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting Appendix: 4A LO: 4,7 Level: Hard Source: CMA, adapted

25. In order to compute equivalent units of production using the FIF0 method of process costing, work for the period must be broken down into parts: A) completed during the period and units in ending inventory. B) completed from beginning inventory, started and completed during the month, and units in ending inventory. C) started during the period and units transferred out during the period. D) processed during the period and units completed during the period.

Ans: B AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting Appendix: 4A LO: 5 Level: Medium Source: CPA, adapted

26. Which of the following methods of allocating service departments take into account all of the effects of interdepartmental services?

Direct Step-Down A) Yes Yes B) Yes No C) No Yes D) No No

Ans: D AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting Appendix: 4B LO: 8,9 Level: Medium

27. All of the following statements are correct when referring to process costing except: A) Process costing would be appropriate for a jeweler who makes custom jewelry to order. B) A process costing system has the same basic purposes as a job-order costing system. C) Units produced are indistinguishable from each other. D) Costs are accumulated by department.

Ans: A AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: 10 Level: Medium

28. For which of the following would it be best to use an operation costing system? A) home remodeling B) automobile production C) cement used for roadways D) trash bags used for yard waste

Ans: B AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 10 Level: Medium

29. Health Beverage Company uses a process costing system to collect costs related to the production of its celery flavored cola. The cola is first processed in a Mixing Department at Health and is then transferred out and finished up in the Bottling Department. The finished cases of cola are then transferred to Finished Goods Inventory. The following information relates to Health's two departments for the month of January:

Mixing Bottling Cases of cola in work in process, January 1...... 10,000 3,000 Cases of cola completed/transferred out during January. 77,000 ? Cases of cola in work in process, January 31...... 4,000 8,000

How many cases of cola were completed and transferred to Finished Goods Inventory during January? A) 66,000 B) 71,000 C) 72,000 D) 74,000

Ans: C AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 1 Level: Medium

Solution:

To solve for units transferred: + Work in process, beginning...... 3,000 + Units started into production during the month...... 77,000 − Work in process, ending...... 8,000 = Units completed and transferred out during the month...... 72,000

30. The Assembly Department started the month with 83,000 units in its beginning work in process inventory. An additional 334,000 units were transferred in from the prior department during the month to begin processing in the Assembly Department. There were 34,000 units in the ending work in process inventory of the Assembly Department. How many units were transferred to the next processing department during the month? A) 417,000 B) 285,000 C) 451,000 D) 383,000

Ans: D AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 1 Level: Easy

Solution:

To solve for units transferred: + Work in process, beginning...... 83,000 + Units started into production during the month...... 334,000 − Work in process, ending...... 34,000 =Units completed and transferred out during the month.... 383,000

31. Colby Company has a process costing system in which the weighted-average method is used. The company adds all materials at the beginning of the process in the Molding Department, which is the first of two stages of its production process. Information concerning the materials used in the Molding Department during March is as follows:

Materials Units Costs Work in process at March 1...... 22,000 $11,000 Units started during March...... 90,000 $46,120 Units completed and transferred to next department during March...... 97,000

What was the materials cost of the work in process inventory at March 31? A) $11,220 B) $7,500 C) $5,100 D) $7,650

Ans: D AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 2,3 Level: Medium Source: CPA, adapted

Solution:

To solve for ending work in process: + Work in process, beginning...... 22,000 + Units started into production during the month...... 90,000 − Units completed and transferred out during the month...... 97,000 = Work in process, ending...... 15,000

Equivalent units of production Materials Transferred to next department...... 97,000 Ending work in process (materials: 15,000 units × 100% complete)...... 15,000 Equivalent units of production...... 112,000

Cost per Equivalent Unit Materials Cost of beginning work in process...... $11,000 Cost added during the period...... 46,120 Total cost (a)...... $57,120

Equivalent units of production (b)...... 112,000 Cost per equivalent unit, (a) ÷ (b)...... $0.51

Materials Ending work in process inventory: Equivalent units of production (materials: 15,000 units × 100% complete; conversion: 15,000 units × % complete)...... 15,000 Cost per equivalent unit...... $0.51 Cost of ending work in process inventory...... $7,650

32. Barnett Company uses the weighted-average method in its process costing system. The company adds materials at the beginning of the process in Department M. Conversion costs were 75% complete with respect to the 4,000 units in work in process at May 1 and 50% complete with respect to the 6,000 units in work in process at May 31. During May, 12,000 units were completed and transferred to the next department. An analysis of the costs relating to work in process at May 1 and to production activity for May follows:

Materials Conversion Work in process 5/1...... $13,800 $3,740 Costs added during May...... $42,000 $26,260

The total cost per equivalent unit for May was: A) $5.02 B) $5.10 C) $5.12 D) $5.25

Ans: B AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 2,3 Level: Medium

Solution:

Equivalent units of production Materials Conversion Transferred to next department...... 12,000 12,000 Ending work in process (materials: 6,000 units × 100% complete; conversion: 6,000 units × 50% complete)...... 6,000 3,000 Equivalent units of production...... 18,000 15,000

Cost per Equivalent Unit Materials Conversion Total Cost of beginning work in process...... $13,800 $ 3,740 Cost added during the period...... 42,000 26,260 Total cost (a)...... $55,800 $30,000

Equivalent units of production (b)...... 18,000 15,000 Cost per equivalent unit, (a) ÷ (b)...... $3.10 $2.00 $5.10

33. Maurice Company uses the weighted-average method in its process costing system. The company adds materials at the beginning of the process in the Forming Department, which is the first of two stages of its production process. Information concerning the materials used in the Forming Department in April follows:

Materials Units Costs Work in process at April 1...... 12,000 $6,000 Units started during April...... 100,000 $51,120 Units completed and transferred to next department during April...... 88,000

What was the materials cost of the work in process at April 30? A) $6,120 B) $11,040 C) $12,000 D) $12,240

Ans: D AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 2,3 Level: Medium Source: CPA, adapted

Solution:

To solve for ending work in process: + Work in process, beginning...... 12,000 + Units started into production during the month...... 100,000 − Units completed and transferred out during the month... 88,000 = Work in process, ending...... 24,000

Equivalent units of production Materials Transferred to next department...... 88,000 Ending work in process (materials: 24,000 units × 100% complete)...... 24,000 Equivalent units of production...... 112,000

Cost per Equivalent Unit Materials Cost of beginning work in process...... $ 6,000 Cost added during the period...... 51,120 Total cost (a)...... $57,120

Materials Ending work in process inventory: Equivalent units of production (materials: 24,000 units × 100% complete)...... 24,000 Cost per equivalent unit...... $0.51 Cost of ending work in process inventory...... $12,240

34. Destry Company uses the weighted-average method in its process costing system. The first processing department, the Welding Department, started the month with 10,000 units in its beginning work in process inventory that were 30% complete with respect to conversion costs. The conversion cost in this beginning work in process inventory was $19,200. An additional 60,000 units were started into production during the month. There were 19,000 units in the ending work in process inventory of the Welding Department that were 70% complete with respect to conversion costs. A total of $380,060 in conversion costs were incurred in the department during the month.

What would be the cost per equivalent unit for conversion costs for the month? (Round off to three decimal places.) A) $6.400 B) $6.334 C) $6.209 D) $4.811

Ans: C AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 2,3 Level: Medium

Solution:

To solve for units transferred: + Work in process, beginning...... 10,000 + Units started into production during the month...... 60,000 − Work in process, ending...... 19,000 = Units completed and transferred out during the month...... 51,000

Equivalent units of production Conversion Transferred to next department...... 51,000 Ending work in process (conversion: 19,000 units × 70% complete)...... 13,300 Equivalent units of production...... 64,300

Cost per Equivalent Unit Conversion Cost of beginning work in process...... $ 19,200 Cost added during the period...... 380,060 Total cost (a)...... $399,260

35. Limber Company uses the weighted-average method in its process costing system. Operating data for the first processing department for the month of June appear below:

Percent Complete with Respect to Units Conversion Beginning work in process inventory...... 18,000 80% Started into production during June...... 81,000 Ending work in process inventory...... 17,000 80%

According to the company's records, the conversion cost in beginning work in process inventory was $15,264 at the beginning of June. Additional conversion costs of $68,208 were incurred in the department during the month. What was the cost per equivalent unit for conversion costs for the month? (Round off to three decimal places.) A) $0.873 B) $0.696 C) $0.842 D) $1.060

Ans: A AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 2,3 Level: Medium

Solution:

To solve for units transferred: + Work in process, beginning...... 18,000 + Units started into production during the month...... 81,000 − Work in process, ending...... 17,000 = Units completed and transferred out during the month... 82,000

Cost per Equivalent Unit Conversion Cost of beginning work in process...... $15,264 Cost added during the period...... 68,208 Total cost (a)...... $83,472

36. Roy Company manufactures a product in Departments A and B. Materials are added at the beginning of the process in Department B. Roy uses the weighted-average method in its process costing system. Conversion costs for Department B were 50% complete with respect to the 6,000 units in the beginning work in process and 75% complete with respect to the 8,000 units in the ending work in process. A total of 12,000 units were completed and transferred out of Department B during February. An analysis of the costs in Department B for February follows:

Transferred In Materials Conversion Work in process, February 1...... $12,000 $2,500 $1,000 Costs added during February...... $29,000 $5,500 $5,000

The total cost per equivalent unit during February was closest to: A) $2.75 B) $2.78 C) $2.82 D) $2.85

Ans: B AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 2,3 Level: Medium Source: CPA, adapted

Solution:

Materials Conversion Transferred to next department...... 12,000 12,000 Ending work in process: Materials: 8,000 units × 100% complete...... 8,000 Conversion: 8,000 units × 75% complete...... 6,000 Equivalent units of production...... 20,000 18,000

Transferred In Materials Conversion Total Work in process, beginning... $12,000 $2,500 $1,000 Cost added during the month 29,000 5,500 5,000 Total cost (a)...... $41,000 $8,000 $6,000 Equivalent units (above) (b).. 20,000 20,000 18,000 Cost per equivalent unit (a) ÷ (b)...... $2.05 $0.40 $0.33 $2.78

37. Hammoudi Company uses the weighted-average method in its process costing system. The first processing department, the Welding Department, started the month with 16,000 units in its beginning work in process inventory that were 90% complete with respect to conversion costs. The conversion cost in this beginning work in process inventory was $61,920. An additional 53,000 units were started into production during the month and 45,000 units were completed in the Welding Department and transferred to the next processing department. There were 24,000 units in the ending work in process inventory of the Welding Department that were 70% complete with respect to conversion costs. A total of $194,340 in conversion costs were incurred in the department during the month.

Solution:

38. Paquet Company uses the weighted-average method in its process costing system. The Molding Department is the second department in its production process. The data below summarize the department's operations in January.

Percent Complete with Respect to Units Conversion Beginning work in process inventory...... 7,700 40% Transferred in from the prior...... department during January...... 56,000 Completed and transferred to the next...... department during January...... 58,400 Ending work in process inventory...... 5,300 90%

The accounting records indicate that the conversion cost that had been assigned to beginning work in process inventory was $16,940 and a total of $347,320 in conversion costs were incurred in the department during January.

What was the cost per equivalent unit for conversion costs for January in the Molding Department? (Round off to three decimal places.) A) $5.500 B) $5.666 C) $5.766 D) $6.202

Solution: Units transferred out...... 58,400 Add: equivalent units in the ending inventory (5300 × 90% complete)...... 4,770 Equivalent units of production...... 63,170

Cost in the beginning inventory...... $ 16,940 Cost added during the month...... 347,320 Total cost...... $364,260 $364,260 ÷ 63,170 units = $5.766 per unit

39. Jimmy Company uses the weighted-average method in its process costing system. The ending work in process inventory consists of 9,000 units. The ending work in process inventory is 100% complete with respect to materials and 70% complete with respect to labor and overhead. If the cost per equivalent unit for the period is $3.75 for material and $1.25 for labor and overhead, what is the balance of the ending work in process inventory account? A) $41,625 B) $33,750 C) $45,000 D) $31,500

Solution:

Ending work in process: Materials: 9,000 units × 100% complete.... 9,000 Conversion: 9,000 units × 70% complete... 6,300

Ending work in process: Materials Conversion Total Equivalent units of production...... 9,000 6,300 Cost per equivalent unit...... $3.75 $1.25 Cost of ending work in process...... $33,750 $7,875 $41,625

40. Lawton Company produces canned tomato soup in a single processing department and has a process costing system in which it uses the weighted-average method. The company sold 250,000 units in the month of January. Data concerning inventories follow:

Units Inventory at January 1: Work in process...... None Finished goods...... 75,000 Inventory at January 31: Work in process (conversion 75% complete)...... 16,000 Finished goods...... 60,000

What were the equivalent units for conversion costs for January? A) 235,000 B) 247,000 C) 251,000 D) 253,000

Ans: B AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 2 Level: Medium Source: CPA, adapted

Solution:

To calculate units transferred out: Units sold 250,000 + Ending finished goods inventory...... 60,000 − Beginning finished goods inventory...... 75,000 = Units transferred out...... 235,000

Units transferred out...... 235,000 Ending work in process (16,000 units × 75% complete).. 12,000 Equivalent units of production...... 247,000

41. Jersey Company has a process costing system in which it uses the weighted-average method. The equivalent units for conversion costs for the month were 47,500 units. The beginning work in process inventory consisted of 15,000 units, 60% complete with respect to conversion costs. The ending work in process inventory consisted of 10,000 units, 75% complete with respect to conversion costs. The number of units started during the month was: A) 25,000 units B) 34,000 units C) 35,000 units D) 40,000 units

Ans: C AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 2 Level: Hard

Solution:

Units transferred out...... 40,000 * Ending work in process (10,000 units × 75% complete)..... 7,500 Equivalent units for conversion costs...... 47,500 * Solve backwards: 47,500 − 7,500 = 40,000

Units in beginning inventory...... 15,000 + Units started...... 35,000 * − Units in ending inventory...... 10,000 = Units transferred out...... 40,000 * Solve backwards: Units started = 40,000 −15,000 + 10,000 = 35,000

42. Boswal Company uses the weighted-average method in its process costing system. The Assembly Department started the month with 6,000 units in its beginning work in process inventory that were 80% complete with respect to conversion costs. An additional 52,000 units were transferred in from the prior department during the month to begin processing in the Assembly Department. There were 18,000 units in the ending work in process inventory of the Assembly Department that were 20% complete with respect to conversion costs. What were the equivalent units for conversion costs in the Assembly Department for the month? A) 43,600 B) 40,000 C) 38,800 D) 64,000

Ans: A AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 2 Level: Medium

Solution:

To solve for units transferred: Work in process, beginning...... 6,000 + Units started into production during the month...... 52,000 − Work in process, ending...... 18,000 = Units completed and transferred out during the month... 40,000

Conversion Transferred to next department...... 40,000 Ending work in process (18,000 units × 20% complete). 3,600 Equivalent units of production...... 43,600

43. Jolly Company uses the weighted-average method in its process costing system. Operating data for the Painting Department for the month of April appear below:

Percent Complete with Respect to Units Conversion Beginning work in process inventory...... 4,700 90% Transferred in from the prior department during April. . 59,700 Ending work in process inventory...... 7,300 80%

What were the equivalent units for conversion costs in the Painting Department for April? A) 62,940 B) 62,300 C) 65,540 D) 57,100

Solution:

Units in beginning inventory...... 4,700 + Units started into production...... 59,700 − Units in ending inventory...... 7,300 = Units transferred out...... 57,100

Equivalent units transferred out...... 57,100 Add: Equivalent units in the ending work in process inventory (7,300 units × 80% complete)...... 5,840 Equivalent units for conversion costs...... 62,940

44. Parks Company uses the weighted-average method in its process costing system. At the start of the year, the company had 5,000 units in process in Department A that were 60% complete with respect to conversion costs. At the end of the year, 6,500 units were in process, 40% complete with respect to conversion costs. During the year, 30,000 units were completed and transferred on to the next department. The equivalent units for conversion costs would be: A) 32,600 units B) 29,600 units C) 33,000 units D) 30,000 units

Ans: A AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 2 Level: Easy

Solution:

45. Bart Co. adds materials at the beginning of the process in Department M. The company uses the weighted-average method in its process costing system. The following information pertains to Department M's work in process during April:

Units Work in process, April 1 (conversion 60% complete).... 3,000 Started in April...... 25,000 Completed...... 20,000 Work in process, April 30 (conversion 75% complete). . 8,000

The equivalent units for conversion cost are: A) 26,000 B) 25,000 C) 24,200 D) 21,800

Ans: A AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 2 Level: Medium Source: CPA, adapted

Solution:

46. Fatas Corporation uses the weighted-average method in its process costing system. The Assembly Department started the month with 8,000 units in its beginning work in process inventory that were 20% complete with respect to conversion costs. An additional 95,000 units were transferred in from the prior department during the month to begin processing in the Assembly Department. During the month 102,000 units were completed in the Assembly Department and transferred to the next processing department. There were 1,000 units in the ending work in process inventory of the Assembly Department that were 20% complete with respect to conversion costs. What were the equivalent units for conversion costs in the Assembly Department for the month? A) 102,200 B) 100,600 C) 102,000 D) 88,000

Solution:

Equivalent units transferred out...... 102,000 Add: Equivalent units in the ending work in process inventory (1,000 units × 20% complete)...... 200 Equivalent units for conversion costs...... 102,200

47. Natiello Corporation uses the weighted-average method in its process costing system. Operating data for the Lubricating Department for the month of October appear below:

Percent Complete with Respect Units to Conversion Beginning work in process inventory...... 9,100 20% Transferred in from the prior department during October...... 38,500 Completed and transferred to the next department during October...... 41,000 Ending work in process inventory...... 6,600 70%

What were the equivalent units for conversion costs in the Lubricating Department for October? A) 41,000 B) 43,120 C) 36,000 D) 45,620

Solution:

Units in beginning inventory...... 9,100 + Units started into production...... 38,500 − Units in ending inventory...... 6,600 = Units transferred out...... 41,000

48. Kew Company uses the weighted-average method in its process costing system. The company had 3,000 units in work in process at April 1 that were 60% complete with respect to conversion cost. During April, 10,000 units were completed. At April 30, 4,000 units remained in work in process and they were 40% complete with respect to conversion cost. Direct materials are added at the beginning of the process. How many units were started during April? A) 9,000 B) 9,800 C) 10,000 D) 11,000

Ans: D AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 2 Level: Medium Source: CPA, adapted

Solution:

To solve for units started into production: + Work in process, ending...... 4,000 + Units completed and transferred out during the month...... 10,000 − Work in process, beginning...... 3,000 = Units started into production during the month...... 11,000

49. Pelican Corporation uses a weighted-average process costing system to collect costs related to production. The following selected information relates to production for March:

Units completed and transferred out...... 5,000 Units in work in process, March 31...... 800 Equivalent units, materials...... 5,800 Equivalent units, conversion costs...... 5,200

Materials Conversion Costs in work in process on March 1...... $ 2,900 $ 4,680 Costs added to production during March...... 71,050 131,040 Total cost...... $73,950 $135,720

All materials at Pelican are added at the beginning of the production process. Conversion costs are incurred uniformly over the production process. What total amount of cost should be assigned to the units in work in process at the end of March? A) $14,840 B) $15,420 C) $24,920 D) $25,860

Ans: B AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 3,4 Level: Hard

Solution:

Materials Conversion Total Total cost...... $73,950 $135,720 ÷ Equivalent units...... 5,800 5,200 = Cost per equivalent unit...... $12.75 $26.10 × Ending inventory Materials: 800 units × $12.75...... $10,200 Conversion costs: *200 units × $26.10.. $5,220 $15,420

Units in work in process, March 31...... 800 Less: Uncompleted as to conversion (5,800 total − 5,200 equivalent units). 600 Equivalent units in ending work in process: conversion...... 200

50. Kwan Manufacturing Company uses a process costing system. All materials at Kwan are added at the beginning of the production process. For the month of October, equivalent units for materials were 40,000 under the weighted-average method and 36,000 under the FIFO method. Kwan's costs for October were as follows:

Cost in beginning work in process (October 1)...... $ 25,200 Cost added to production during October...... 262,800 Total cost...... $288,000

What are Kwan’s equivalent costs per equivalent unit for October for materials under both process costing methods?

Weighted-Average FIFO A) $6.57 $8.00 B) $6.57 $7.30 C) $7.20 $8.00 D) $7.20 $7.30

Ans: D AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting Appendix: 4A LO: 3,6 Level: Medium

Solution:

Weighted-Average FIFO Total cost...... $288,000 $262,800 ÷ Equivalent units...... 40,000 36,000 Cost per equivalent unit.... $7.20 $7.30

51. Safia Corporation uses the weighted-average method in its process costing system. The Fitting Department is the second department in its production process. The data below summarize the department's operations in March.

Percent Complete with Respect to Units Conversion Beginning work in process inventory...... 3,300 40% Transferred in from the prior department during March...... 67,000 Ending work in process inventory...... 5,600 30%

The Fitting Department's cost per equivalent unit for conversion cost for March was $4.70. How much conversion cost was assigned to the units transferred out of the Fitting Department during March? A) $330,410.00 B) $314,900.00 C) $304,090.00 D) $297,886.00

Solution:

Units in beginning inventory...... 3,300 + Units transferred in...... 67,000 − Units in ending inventory...... 5,600 = Units transferred out...... 64,700 × Cost per equivalent unit...... $4.70 $304,090

52. The following data were taken from the accounting records of the Mixing Department of Kappa Company which uses the weighted-average method in its process costing system:

Beginning work in process inventory: Cost...... $19,000 Units...... 30,000 units Percentage completion with respect to materials...... 100% Percentage completion with respect to conversion...... 60% Units completed and transferred out...... 82,000 units Cost per equivalent unit: Material...... $1.50 Conversion...... $0.75

The cost of units transferred out was: A) $184,500 B) $149,500 C) $167,500 D) $145,000

Solution:

Cost computation for units transferred out: 82,000 units × ($1.50 + $0.75) = $184,500

53. Wit Company uses the weighted-average method in its process costing system. Information for the month of May concerning Department A, the first stage of the company's production process follows:

Materials Conversion Work in process, beginning...... $ 4,000 $ 3,000 Current costs added...... 20,000 16,000 Total costs...... $24,000 $19,000 Equivalent units...... 100,000 95,000 Costs per equivalent unit...... $0.24 $0.20 Goods completed...... 90,000 units Work in process, ending...... 10,000 units

Material costs are added at the beginning of the process. The ending work in process is 50% complete with respect to conversion costs. How would the costs be distributed?

Goods completed and transferred out Ending work in process A) $39,600 $3,400 B) $39,600 $4,400 C) $43,000 $0 D) $44,000 $3,400

Ans: A AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 4 Level: Medium Source: CPA, adapted

Solution:

Materials Conversion Transferred to next department...... 90,000 90,000 Ending work in process: Materials: 10,000 units × 100% complete...... 10,000 Conversion: 10,000 units × 50% complete...... 5,000 Equivalent units of production...... 100,000 95,000

Materials Conversion Work in process, beginning...... $ 4,000 $ 3,000 Cost added during the month...... 20,000 16,000 Total cost (a)...... $24,000 $19,000 Equivalent units (above) (b)...... 100,000 95,000 Cost per equivalent unit (a) ÷ (b)...... $0.24 $0.20

Materials Conversion Total Units transferred out...... 90,000 90,000 Cost per equivalent unit...... $0.24 $0.20 Cost transferred out...... $21,600 $18,000 $39,600

Materials Conversion Total Equivalent units of production: ending work in process...... 10,000 5,000 Cost per equivalent unit...... $0.24 $0.20 Cost of ending work in process...... $2,400 $1,000 $3,400

54. Lap Company uses the weighted-average method in its process costing system. The beginning work in process inventory in a particular department consisted of 80,000 units, 100% complete with respect to materials and 25% complete with respect to conversion costs. The total dollar value of this inventory was $226,000. During the month, 150,000 units were transferred out of the department. The costs per equivalent unit for the month were $2.00 for materials and $3.50 for conversion costs. The value of the units completed and transferred out of the department was: A) $681,000 B) $765,000 C) $821,000 D) $825,000

Ans: D AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 4 Level: Medium

Solution:

150,000 units × ($2.00 + $3.50) = $825,000

55. Bly Company uses the weighted-average method in its process costing system. During March, Bly Company's Department Y costs per equivalent unit were as follows:

Materials...... $1 Conversion...... $3 Transferred-in...... $5

There were 4,000 units (40% complete with respect to conversion cost and 0% complete with respect to materials cost) in Work in Process at March 31. The total costs assigned to the March 31, Work in Process inventory should be: A) $36,000 B) $28,800 C) $27,200 D) $24,800

Ans: D AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 4 Level: Hard Source: CPA, adapted

Solution:

Ending work in process: Conversion costs (4,000 × 40%) × $3.... $ 4,800 Transferred in costs (4,000 × $5)...... 20,000 Total cost: Work in process, March 31...... $24,800

56. The following information was provided by Fystro Corporation for the month of March. Fystro uses the weighted-average method in its process costing system.

Total cost transferred out during March...... $74,000 Cost in Work in Process, March 1...... $12,000 Cost in Work in Process, March 31...... $5,000

How much cost did Fystro add to production during March? A) $57,000 B) $62,000 C) $67,000 D) $81,000

Solution:

Work in process, ending...... $ 5,000 + Cost transferred out during the month...... 74,000 − Work in process, beginning...... 12,000 = Cost added to production during the month...... $67,000

57. Rangan Corporation uses the weighted-average method in its process costing system. The Molding Department is the second department in its production process. The data below summarize the department's operations in January.

Percent Complete with Respect to Units Conversion Beginning work in process inventory...... 2,100 50% Transferred in from the prior department during January...... 76,000 Completed and transferred to the next department during January...... 74,200 Ending work in process inventory...... 3,900 70%

The Molding Department's cost per equivalent unit for conversion cost for January was $3.91.

How much conversion cost was assigned to the ending work in process inventory in the Molding Department for January? A) $10,674.30 B) $15,249.00 C) $4,574.70 D) $4,105.50

Solution:

Equivalent units in ending inventory: 3,900 units × 70% 2,730 complete...... × $3.91 Conversion costs in ending work in process inventory...... $10,674.30

58. Merckley Company has a process costing system and uses the FIFO method. For May, the company's beginning work in process inventory was 80% complete with respect to conversion, and the ending work in process inventory was 50% complete with respect to conversion. Information on units processed and conversion costs incurred during May follow:

Conversion Units Cost Work in process inventory on May 1...... 25,000 $22,000 Units started into production, and costs incurred during the month...... 135,000 $143,000 Units completed and transferred to finished goods during the month...... 100,000 Work in process inventory on May 31...... 60,000

The amount of conversion cost in the ending work in process inventory was: A) $33,000 B) $38,100 C) $39,000 D) $45,000

Ans: C AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting Appendix: 4A LO: 5,6,7 Level: Medium Source: CMA, adapted

Solution:

Equivalent Units of Production Conversion To complete beginning work in process (conversion: 25,000 units × 20% complete)...... 5,000 Units started and completed during the period (135,000 units started − 60,000 units in ending inventory)...... 75,000

Ending work in process (60,000 units × 50% complete). . 30,000 Equivalent units of production...... 110,000

Cost per Equivalent Unit Conversion Cost added during the period (a)...... $143,000 Equivalent units of production (b)...... 110,000 Cost per equivalent unit (a) ÷ (b)...... $1.30

Costs of Ending Work in Process Inventory and Units Transferred Out Conversion Ending work in process inventory: Equivalent units of production...... 30,000 Cost per equivalent unit...... $1.30 Cost of ending work in process inventory...... $39,000

59. Doofus Music Company manufactures air guitars and uses a FIFO process costing system to collect costs related to its production. Doofus only accounts for conversion costs because the only direct material, air, has no cost. The following information relates to September production:

Percent complete Number with respect to of units conversion costs Work in process, September 1...... 20,000 20% Units started into production...... 90,000 Work in process, September 30..... 8,000 75%

Conversion cost in work in process on September 1...... $ 263,120 Conversion cost added to production during September.... 5,262,400 Total cost...... $5,525,520

What amount of cost should Doofus assign to the units (guitars) in work in process on September 30? A) $125,580 B) $303,600 C) $318,780 D) $343,200

Ans: B AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting Appendix: 4A LO: 5,6,7 Level: Hard

Solution:

Equivalent Units of Production Materials Conversion To complete beginning work in process (materials: 20,000 units × 100% complete; conversion: 20,000 units × 80% complete)...... 20,000 16,000 Units started and completed during the period (90,000 units started − 8,000 units in ending inventory)...... 82,000 82,000 Ending work in process (materials: 8,000 units × 0% complete; conversion: 8,000 units × 75% complete)...... 0 6,000 Equivalent units of production...... 102,000 104,000

Cost per Equivalent Unit Materials Conversion Cost added during the period (a)...... $0 $5,262,400 Equivalent units of production (b)...... 102,000 104,000 Cost per equivalent unit (a) ÷ (b)...... $0.00 $50.60

Costs of Ending Work in Process Inventory and Units Transferred Out Materials Conversion Total Ending work in process inventory: Equivalent units of production...... 0 6,000 Cost per equivalent unit...... $0.00 $50.60 $303,60 Cost of ending work in process inventory.... $0 $303,600 0

60. Edwin Company uses the FIFO method in its process costing system. The first processing department, the Welding Department, started the month with 22,000 units in its beginning work in process inventory that were 20% complete with respect to conversion costs. The conversion cost in this beginning work in process inventory was $24,200. An additional 96,000 units were started into production during the month. There were 20,000 units in the ending work in process inventory of the Welding Department that were 90% complete with respect to conversion costs. A total of $585,900 in conversion costs were incurred in the department during the month. What would be the cost per equivalent unit for conversion costs? (Round off to three decimal places.) A) $6.103 B) $5.170 C) $5.500 D) $5.250

Solution:

Equivalent Units of Production Conversion To complete beginning work in process (22,000 units × 80% complete)...... 17,600 Units started and completed during the period (96,000 units started − 20,000 units in ending inventory)...... 76,000 Ending work in process (20,000 units × 90% complete)...... 18,000 Equivalent units of production...... 111,600

61. Makridakis Corporation uses the FIFO method in its process costing system. Operating data for the Casting Department for the month of September appear below:

Percent Complete with Respect Units to Conversion Beginning work in process inventory...... 17,000 10% Transferred in from the prior department during September...... 50,000 Ending work in process inventory...... 17,000 40%

According to the company's records, the conversion cost in beginning work in process inventory was $3,434 at the beginning of September. Additional conversion costs of $117,914 were incurred in the department during the month. What would be the cost per equivalent unit for conversion costs for September? (Round off to three decimal places.) A) $2.020 B) $1.811 C) $2.140 D) $2.358

Ans: C AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting Appendix: 4A LO: 5,6 Level: Medium

Solution:

Equivalent Units of Production Conversion To complete beginning work in process (17,000 units × 90% complete)...... 15,300 Units started and completed during the period (50,000 units started − 17,000 units in ending inventory)...... 33,000 Ending work in process (17,000 units × 40% complete) 6,800 Equivalent units of production...... 55,100

62. Krumbly Company uses the FIFO method in its process costing system. At the beginning of the month, Department D's work in process inventory contained 2,000 units. These units were fully complete with respect to materials and 40% complete with respect to conversion costs, with a total cost at that point of $3,600. During the month, conversion costs amounted to $8 per equivalent unit. If all 2,000 units are fully complete by the end of the month, their total cost by that time will be: A) $19,600 B) $10,000 C) $13,200 D) $9,000

Ans: C AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting Appendix: 4A LO: 5,6 Level: Medium

Solution:

Cost from beginning inventory...... $ 3,600 Cost to finish beginning inventory: (1 − 40%) = 60% × 2,000 = 1,200 EU × $8 cost per EU...... 9,600 Total cost of units from beginning inventory...... $13,200

63. Inka Corporation uses the FIFO method in its process costing system. The first processing department, the Forming Department, started the month with 13,000 units in its beginning work in process inventory that were 20% complete with respect to conversion costs. The conversion cost in this beginning work in process inventory was $4,160. An additional 97,000 units were started into production during the month and 97,000 units were completed and transferred to the next processing department. There were 13,000 units in the ending work in process inventory of the Forming Department that were 30% complete with respect to conversion costs. A total of $136,637 in conversion costs were incurred in the department during the month.

Ans: A AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting Appendix: 4A LO: 5,6 Level: Medium Solution:

Equivalent Units of Production Conversion To complete beginning work in process (13,000 units × 80% complete). 10,400 Units started and completed during the period (97,000 units started − 13,000 units in ending inventory)...... 84,000 Ending work in process (13,000 units × 30% complete)...... 3,900 Equivalent units of production...... 98,300

64. Qvr Corporation uses the FIFO method in its process costing system. Operating data for the Cutting Department for the month of March appear below:

Percent Complete with Respect to Units Conversion Beginning work in process inventory...... 2,500 60% Transferred in from the prior department during March. 45,000 Completed and transferred to the next department during March...... 40,500 Ending work in process inventory...... 7,000 70%

According to the company's records, the conversion cost in beginning work in process inventory was $3,600 at the beginning of March. Additional conversion costs of $99,477 were incurred in the department during the month. What would be the cost per equivalent unit for conversion costs for March? (Round off to three decimal places.) A) $2.211 B) $2.400 C) $2.170 D) $2.266

Solution:

65. Marston Company uses the FIFO method in its process costing system. The equivalent units for March for conversion costs totaled 37,500 units. The beginning work in process inventory in March consisted of 15,000 units, 60% complete with respect to conversion costs. The ending work in process inventory in March consisted of 10,000 units, 75% complete with respect to conversion costs. The number of units started during the month was: A) 41,500 units B) 34,000 units C) 25,000 units D) 72,500 units

Ans: B AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting Appendix: 4A LO: 5 Level: Hard

Solution:

Equivalent Units of Production Calculation: To complete beginning work in process (15,000 units × 40% complete)...... 6,000 Units started and completed during the period (? units started − 10,000 units in ending inventory)...... ? Ending work in process (10,000 units × 75% complete)...... 7,500 Equivalent units of production...... 37,500 To solve for Units started and completed during the period, solve algebraically: 6,000 + ? + 7,500 = 37,500 ? = 24,000 Next: Units started and completed = units started – 10,000 units from ending inventory 24,000 = units started – 10,000 = 34,000

66. Catin Company uses the FIFO method in its process costing system. The Assembly Department started the month with 7,000 units in its beginning work in process inventory that were 40% complete with respect to conversion costs. An additional 60,000 units were transferred in from the prior department during the month to begin processing in the Assembly Department. There were 19,000 units in the ending work in process inventory of the Assembly Department that were 90% complete with respect to conversion costs.

What were the equivalent units for conversion costs in the Assembly Department for the month? A) 48,000 B) 72,000 C) 62,300 D) 65,100

Ans: C AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting Appendix: 4A LO: 5 Level: Medium

Solution:

To solve for units transferred: + Work in process, beginning...... 7,000 + Units started into production during the month...... 60,000 − Work in process, ending...... 19,000 = Units completed and transferred out during the month..... 48,000

67. Kavadias Corporation uses the FIFO method in its process costing system. Operating data for the Enameling Department for the month of May appear below:

Percent Complete with Respect to Units Conversion Beginning work in process inventory...... 7,400 80% Transferred in from the prior...... department during May...... 75,200 Ending work in process inventory...... 3,000 90%

What were the equivalent units for conversion costs in the Enameling Department for May? A) 79,600 B) 82,300 C) 76,380 D) 70,800

Ans: C AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting Appendix: 4A LO: 5 Level: Medium

Solution:

68. Kale Company uses the FIFO method in its process costing system. At the beginning of March, the inventory in the Blending Processing Center consisted of 3,000 units, 90% complete with respect to conversion costs. At the end of the month, the inventory consisted of 2,000 units that were 60% complete with respect to conversion costs. If 10,000 units were transferred to the next processing center during the period, the equivalent units for conversion costs would be: A) 8,500 units B) 11,500 units C) 10,500 units D) 9,500 units

Ans: A AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting Appendix: 4A LO: 5 Level: Medium

Solution:

To solve for units started into production: + Work in process, ending...... 2,000 + Units completed and transferred out during the month..... 10,000 − Work in process, beginning...... 3,000 = Units started into production during the month...... 9,000

Equivalent Units of Production Conversion To complete beginning work in process (3,000 units × 10% complete)...... 300 Units started and completed during the period (9,000 units started − 2,000 units in ending inventory)...... 7,000 Ending work in process (2,000 units × 60% complete)...... 1,200 Equivalent units of production...... 8,500

69. Billings Company uses the FIFO method in its process costing system. On July 1, Department A had 10,000 units in process that were 80% complete with respect to conversion. On July 31 the department had 8,000 units in process that were 60% complete with respect to conversion. The department transferred 40,000 units out during the month, of which 10,000 units came from the beginning work in process inventory, and 30,000 units were started and completed during the month. All materials are added at the beginning of the process in Department A. What are the equivalent units for the month for materials and conversion, respectively? A) 38,000 units, and 36,800 units B) 38,000 units, and 38,000 units C) 48,000 units, and 44,800 units D) 48,000 units, and 48,000 units

Ans: A AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting Appendix: 4A LO: 5 Level: Medium Source: CMA, adapted

Solution:

To solve for units started into production: + Work in process, ending...... 8,000 + Units completed and transferred out during the month...... 40,000 − Work in process, beginning...... 10,000 = Units started into production during the month...... 38,000

Equivalent Units of Production Materials Conversion To complete beginning work in process (materials: 10,000 units × 0% complete; conversion: 10,000 units × 20% complete)...... 0 2,000 Units started and completed during the period (38,000 units started − 8,000 units in ending inventory)...... 30,000 30,000 Ending work in process (materials: 8,000 units × 100% complete; conversion: 8,000 units × 60% complete). . 8,000 4,800 Equivalent units of production...... 38,000 36,800

70. Gadroy Corporation uses the FIFO method in its process costing system. The Grinding Department started the month with 13,000 units in its beginning work in process inventory that were 80% complete with respect to conversion costs. An additional 52,000 units were transferred in from the prior department during the month to begin processing in the Grinding Department. During the month 55,000 units were completed in the Grinding Department and transferred to the next processing department. There were 10,000 units in the ending work in process inventory of the Grinding Department that were 70% complete with respect to conversion costs. What were the equivalent units for conversion costs in the Grinding Department for the month? A) 62,000 B) 49,000 C) 55,000 D) 51,600

Ans: D AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting Appendix: 4A LO: 5 Level: Medium

Solution:

71. Outiniki Company uses the FIFO method in its process costing system. Operating data for the Brazing Department for the month of November appear below:

Percent Complete with Respect to Units Conversion Beginning work in process inventory...... 3,400 30% Transferred in from the prior department during November...... 54,100 Completed and transferred to the next department during November...... 52,600 Ending work in process inventory...... 4,900 70%

What were the equivalent units for conversion costs in the Brazing Department for November? A) 55,010 B) 55,600 C) 56,030 D) 52,600

Solution:

72. Steven Company uses the FIFO method in its process costing system. The following data were taken from the accounting records of a particular department for last month:

Beginning work in process inventory: (10,000 units; materials 100% complete, conversion 60% complete)...... $17,500 Units completed and transferred out during the month...... 60,000 units Cost per equivalent unit: Material...... $2.50 Conversion...... $2.00

The cost of units transferred out of the department during the month is: A) $270,000 B) $242,500 C) $254,500 D) $250,500

Solution: EU Total Total Materials Conversion Cost Transferred to the next department: From beginning work in process*. . 10,000 0 4,000 From started and completed during month...... 50,000 50,000 50,000 Total EU this period...... 60,000 50,000 54,000 Cost per EU...... $2.50 $2.00 Cost from current period (EU × Cost per EU)...... $125,000 $108,000 $233,000 Cost from beginning work in process...... 17,500 Total cost of units transferred out of the department during current month...... $250,500 *(Materials=100% complete; 0% needed to complete with respect to materials; Conversion=60% complete; (1 − 0.6) = 40% × 10,000 units to complete units with respect to conversion)

73. Teboul Corporation uses the FIFO method in its process costing system. Operating data for the Curing Department for the month of March appear below:

Percent Complete with Respect to Units Conversion Beginning work in process inventory...... 7,900 20% Transferred in from the prior department during March...... 40,000 Completed and transferred to the next department during March...... 43,900 Ending work in process inventory...... 4,000 60%

According to the company's records, the conversion cost in beginning work in process inventory was $11,850 at the beginning of March. The cost per equivalent unit for conversion costs for March was $7.40. How much conversion cost would be assigned to the units completed and transferred out of the department during March? A) $325,018 B) $313,168 C) $296,000 D) $324,860

Solution:

Equivalent Units of Production Materials Conversion To complete beginning work in process (materials: 7,900 units × 100% complete; conversion: 7,900 units × 80% complete)...... 7,900 6,320 Units started and completed during the period (40,000 units started − 4,000 units in ending inventory)...... 36,000 36,000 Ending work in process (materials: 4,000 units × % complete; conversion: 4,000 units × 60% complete)...... 0 2,400 Equivalent units of production...... 43,900 44,720

Cost per Equivalent Unit Materials Conversion Cost added during the period (a)...... $0 $330,928 $330,928 Equivalent units of production (b)...... 43,900 44,720 Cost per equivalent unit (a) ÷ (b)...... $0.00 $7.40

Costs of Ending Work in Process Inventory and Units Transferred Out Materials Conversion Total Ending work in process inventory: Equivalent units of production...... 0 2,400 Cost per equivalent unit...... $0.00 $7.40 Cost of ending work in process inventory...... $0 $17,760 $17,760

Units transferred out: Cost in beginning inventory...... $0 $11,850 $ 11,850 Cost to complete the units in beginning inventory: Equivalent units of production required to complete the beginning inventory...... 7,900 6,320 Cost per equivalent unit...... $0.00 $7.40 Cost to complete the units in beginning inventory...... $0 $46,768 46,768 Cost of units started and completed this period: Units started and completed this period...... 36,000 36,000 Cost per equivalent unit...... $0.00 $7.40 Cost of units started and completed this period... $0 $266,400 266,400 Cost of units transferred out...... $325,018

74. Koehl Corporation uses the direct method to allocate service department costs to operating departments. The company has two service departments, Administrative and Facilities, and two operating departments, Assembly and Wholesaling.

Service Department Operating Department Assembl Administrative Facilities y Wholesaling Departmental costs.... $19,440 $71,340 $185,580 $392,950 Employee hours...... 4,000 2,000 22,000 14,000 Space occupied...... 3,000 1,000 39,000 2,000

Administrative costs are allocated on the basis of employee hours and Facilities costs are allocated on the basis of space occupied. The total Wholesaling Department cost after the allocations of service department costs is closest to: A) $403,990 B) $396,430 C) $403,642 D) $402,601

Ans: A AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting Appendix: 4B LO: 8 Level: Easy

Solution: Operating Service Department Department Admin- Facil- Assem- Whole- istrative ities bly saling Total Departmental costs before allocation..... $19,440 $71,340 $185,580 $392,950 $669,310 Allocation: Administrative costs (22/36, 14/36) *...... (19,440) 11,880 7,560 Facilities costs (39/41, 2/41)**...... (71,340) 67,860 3,480 Total cost after allocation...... $ 0 $ 0 $265,320 $403,990 $669,310

* Based on the employee hours in the two operating departments, which are 22,000 hours + 14,000 hours = 36,000 hours **Based on the space occupied by the two operating departments, which is 39,000 + 2,000 = 41,000.

75. Behrend Clinic uses the direct method to allocate service department costs to operating departments. The clinic has two service departments, Personnel and Support, and two operating departments, Prenatal and Pediatrics.

Service Department Operating Department Personnel Support Prenatal Pediatrics Departmental costs.... $29,200 $55,040 $242,050 $423,200 Employee hours...... 5,000 1,000 26,000 14,000 Space occupied...... 3,000 2,000 35,000 8,000

Personnel Department costs are allocated on the basis of employee hours and Support Department costs are allocated on the basis of space occupied in square feet. The total Pediatrics Department cost after the allocations of service department costs is closest to: A) $441,260 B) $443,660 C) $433,440 D) $444,471

Ans: B AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting Appendix: 4B LO: 8 Level: Easy

Solution: Service Department Operating Department Personnel Support Prenatal Pediatrics Total Departmental costs before allocation...... $29,200 $55,040 $242,050 $423,200 $749,490 Allocation: Personnel costs (26/40, 14/40)* (29,200) 18,980 10,220 Support costs (35/43, 8/43)** (55,040) 44,800 10,240 Total cost after allocation...... $ 0 $ 0 $305,830 $443,660 $749,490

* Based on the employee hours in the two operating departments, which are 26,000 hours + 14,000 hours = 40,000 hours **Based on the space occupied by the two operating departments, which is 35,000 + 8,000 = 43,000.

76. Stoltz Corporation uses the direct method to allocate service department costs to operating departments. The company has two service departments, Data Processing and Personnel, and two operating departments, Assembly and Finishing.

Operating Service Department Department Data Processing Personnel Assembly Finishing Departmental costs...... $26,488 $18,630 $188,980 $506,980 Computer workstations... 37 12 45 41 Employees...... 35 11 46 35

Data Processing Department costs are allocated on the basis of computer workstations and Personnel Department costs are allocated on the basis of employees. The total amount of Data Processing Department cost allocated to the two operating departments is closest to: A) $23,245 B) $26,488 C) $61,567 D) $16,874

Solution: Operating Service Department Department Data Processing Personnel Assembly Finishing Total Departmental costs before allocation...... $26,488 $18,630 $188,980 $506,960 $741,078 Allocation: Data processing costs (45/86, 41/86)*...... (26,488) 13,860 12,628 Personnel costs (46/81, 35/81)**...... (18,630) 10,580 8,050 Total cost after allocation $ 0 $ 0 $213,420 $527,638 $741,078

* Based on the number of computer workstations in the two operating departments, which are 45 + 41 = 86 **Based on the number of employees in the two operating departments, which is 46 + 35 = 81

77. The direct method is used by Marrero Publishing, Inc., to allocate service department costs to operating departments. The company has two service departments, Information Technology and Personnel, and two operating departments, Prepress and Printing.

Operating Service Department Department Information Technology Personnel Prepress Printing Departmental costs...... $27,412 $27,008 $376,940 $530,110 Computer workstations. 28 19 51 38 Employees...... 27 14 98 30

Information Technology Department costs are allocated on the basis of computer workstations and Personnel Department costs are allocated on the basis of employees. The total Prepress Department cost after service department allocations is closest to: A) $406,961 B) $413,326 C) $402,881 D) $410,563

Solution: Operating Service Department Department Information Technology Personnel Prepress Printing Total Departmental costs before allocation...... $27,412 $27,008 $376,940 $530,110 $961,470 Allocation: Information technology costs (51/89, 38/89)* (27,412) 15,708 11,704 Personnel costs (98/128, 30/128)**...... (27,008) 20,678 6,330 Total cost after allocation $ 0 $ 0 $413,326 $548,144 $961,470

* Based on the number of computer workstations in the two operating departments, which are 51 + 38 = 89 **Based on the number of employees in the two operating departments, which is 98 + 30 = 128

78. Kolinski Surgical Hospital uses the direct method to allocate service department costs to operating departments. The hospital has two service departments, Telecommunications and Administration, and two operating departments, Surgery and Recovery. Operating Service Department Department Telecomm- Adminis- unications tration Surgery Recovery Departmental costs...... $26,344 $27,472 $282,750 $599,690 Telecommunications ports...... 31 14 40 34 Employees...... 30 11 74 27

Telecommunications Department costs are allocated on the basis of the number of telecommunications ports in departments and Administration Department costs are allocated on the basis of employees. The total Surgery Department cost after service department allocations is closest to: A) $317,118 B) $314,853 C) $310,244 D) $305,921

Solution: Operating Service Department Department Telecom- Adminis- munications tration Surgery Recovery Total Departmental costs before allocation.. $26,344 $27,472 $282,750 $599,690 $936,256 Allocation: Telecommunication costs (40/74, 34/74) *...... (26,344) 14,240 12,104 Administration costs (74/101, 27/101)**...... (27,472) 20,128 7,344 Total cost after allocation...... $ 0 $ 0 $317,118 $619,138 $936,256

* Based on the number of telecommunication ports in the two operating departments, which are 40 + 34 = 74 **Based on the number of employees in the two operating departments, which is 74 + 27 = 101

79. Dainels Corporation uses the step-down method to allocate service department costs to operating departments. The company has two service departments, General Management and Physical Plant, and two operating departments, Sales and After- Sales. Data concerning those departments follow: Operating Service Department Department General Physical After- Management Plant Sales Sales Departmental costs...... $36,550 $70,300 $412,500 $492,780 Employee time...... 5,000 2,000 27,000 14,000 Space occupied...... 1,000 1,000 38,000 7,000

General Management Department costs are allocated first on the basis of employee time and Physical Plant Department costs are allocated second on the basis of space occupied. The total After-Sales Department cost after allocations is closest to: A) $516,196 B) $515,880 C) $503,980 D) $513,911

Solution: Operating Service Department Department General Physical After- Mgmt Plant Sales Sales Total Departmental costs $1,012,13 before allocation...... $36,550 $70,300 $412,500 $492,780 0 Allocation: General costs (2/43, 27/43, 14/43)*...... (36,550) 1,700 22,950 11,900 0 Physical plant costs (38/45, 7/45)**...... (72,000) 60,800 11,200 0 Total costs after $1,012,13 allocation...... $ 0 $ 0 $496,250 $515,880 0 *Based on the employee time in Physical Plant and the two operating departments, which are 2,000 + 27,000 + 14,000 = 43,000. **Based on the space occupied by the two operating departments, 38,000 + 7,000 = 45,000.

80. Cervetti, Inc., allocates service department costs to operating departments using the step-down method. The company has two service departments, Administration and Physical Plant, and two operating departments, Assembly and Testing. Data concerning those departments follow: Operating Service Department Department Physical Administration Plant Assembly Testing Departmental costs.. $26,220 $78,860 $127,160 $737,860 Employee time...... 4,000 1,000 25,000 12,000 Space occupied...... 9,000 1,000 37,000 6,000

Administration Department costs are allocated first on the basis of employee time and Physical Plant Department costs are allocated second on the basis of space occupied. The total Testing Department cost after allocations is closest to: A) $754,279 B) $757,240 C) $748,960 D) $757,368

Solution: Operating Service Department Department Admini- Physical stration Plant Assembly Testing Total Departmental costs $970,10 before allocation...... $26,220 $78,860 $127,160 $737,860 0 Allocation: Administration costs (1/38, 25/38, 12/38)*. (26,220) 690 17,250 8,280 0 Physical plant costs (37/43, 6/43)**...... (79,550) 68,450 11,100 0 Total costs after $970,10 allocation...... $ 0 $ 0 $212,860 $757,240 0 *Based on the employee time in Physical Plant and the two operating departments, which are 1,000 + 25,000 + 12,000 = 38,000. **Based on the space occupied by the two operating departments, 37,000 + 6,000 = 43,000.

81. Reddicks Clinic uses the step-down method to allocate service department costs to operating departments. The clinic has two service departments, Personnel and Information Technology (IT), and two operating departments, Family Medicine and Pediatric. Data concerning those departments follow: Operating Service Department Department Family Personnel IT Medicine Pediatric Departmental costs.. $86,184 $45,995 $608,130 $316,290 Employees...... 18 26 128 188 PCs...... 19 26 125 156

Personnel costs are allocated first on the basis of employees and IT costs are allocated second on the basis of PCs. The total Pediatric Department cost after allocations is closest to: A) $345,462 B) $393,099 C) $392,838 D) $383,307

Ans: C AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting Appendix: 4B LO: 9 Level: Easy

Solution: Operating Service Department Department Family Personnel IT Medicine Pediatric Total Departmental costs $1,056,59 before allocation...... $86,184 $45,995 $608,130 $316,290 9 Allocation: Personnel costs (26/342, 128/342, 188/342)*..... (86,184) 6,552 32,256 47,376 0 IT costs (125/281, 156/281)**...... (52,547) 23,375 29,172 0 Total costs after $392,83 $1,056,59 allocation...... $ 0 $ 0 $663,761 8 9 *Based on the employees in IT and the two operating departments, which are 26 + 128 + 188 = 342. **Based on PCs of the two operating departments, 125 + 156 = 281.

82. Rondo Children's Clinic allocates service department costs to operating departments using the step-down method. The clinic has two service departments, Administration and Information Technology (IT), and two operating departments, Prenatal and Pediatric. Data concerning those departments follow: Operating Service Department Department Administration IT Prenatal Pediatric Departmental costs.. $54,736 $37,449 $383,270 $259,590 Employees...... 15 21 118 172 PCs...... 15 21 102 109

Administration costs are allocated first on the basis of employees and IT costs are allocated second on the basis of PCs. The total Pediatric Department cost after allocations is closest to: A) $311,117 B) $280,845 C) $304,995 D) $311,400

Solution: Operating Service Department Department Admini- stration IT Prenatal Pediatric Total Departmental costs $735,04 before allocation...... $54,736 $37,449 $383,270 $259,590 5 Allocation: Administration costs (21/311, 118/311, 172/311)*...... (54,736) 3,696 20,768 30,272 0 IT costs (102/211, 109/211)**...... (41,145) 19,890 21,255 0 Total costs after $735,04 allocation...... $ 0 $ 0 $423,928 $311,117 5 *Based on the employee time in IT and the two operating departments, which are 21 + 118 + 172 = 311. **Based on the number of PCs of the two operating departments, 102 + 109 = 211.

Use the following to answer questions 83-86:

Kota Toy Company manufactures lizard dolls in two departments, Molding and Hairification. In the Molding Department, plastic is injected into a lizard-shaped mold. The dolls that come out of the molds are then transferred to the Hairification Department where hair is applied. Kota uses a weighted-average process cost system to collect costs in both departments. On January 1, the Molding Department had 4,000 dolls in process. These dolls were 100% complete with respect to direct materials and 70% complete with respect to conversion cost. During January, Molding completed 79,000 dolls. On January 31, Molding had 7,000 dolls in work in process. These dolls were 100% complete with respect to direct materials and 25% complete with respect to conversion cost.

83. How many dolls were started in the Molding Department during January? A) 75,000 B) 76,000 C) 82,000 D) 86,000

Solution:

Beginning work in process inventory... 4,000 + Units started into production...... 82,000 * − Units completed and transferred...... 79,000 = Ending work in process inventory..... 7,000

* 4000 + Units started into production − 79,000 = 7,000 Units started into production = 82,000

84. What account would Kota debit to record the transfer of dolls out of the Molding Department? A) Work in Process–Hairification B) Finished Goods C) Manufacturing Overhead D) Work in Process–Molding

85. What are the Molding Department's equivalent units related to materials for January? A) 79,000 B) 86,000 C) 89,000 D) 93,000

Solution:

Materials Transferred to next department...... 79,000 Ending work in process: Materials: 7,000 dolls × 100%...... 7,000 Equivalent units of production...... 86,000

86. What are the Molding Department's equivalent units related to conversion costs for January? A) 77,950 B) 80,750 C) 83,750 D) 84,250

Solution:

Conversion Transferred to next department...... 79,000 Ending work in process: Conversion: 7,000 dolls × 25%...... 1,750 Equivalent units of production...... 80,750

Yoder Company uses the weighted-average method in its process costing system. The following data pertain to operations in the first processing department for a recent month:

Work in process, beginning: Units in process...... 40,000 Percent complete with respect to materials...... 70% Percent complete with respect to conversion...... 60% Costs in the beginning inventory: Materials cost...... $8,600 Conversion cost...... $4,800 Units started into production during the month...... 750,000 Units completed and transferred out during the month... ? Costs added to production during the month: Materials cost...... $223,000 Conversion cost...... $149,000 Work in process, ending: Units in process...... 30,000 Percent complete with respect to materials...... 40% Percent complete with respect to conversion...... 30%

87. How many units were completed and transferred to the next department during the month? A) 750,000 units B) 790,000 units C) 760,000 units D) 740,000 units

Solution:

88. What was the cost per equivalent unit for materials during the month? A) $0.30 B) $0.25 C) $0.20 D) $0.15

Solution:

Equivalent units of production Materials Transferred to next department...... 760,000 Ending work in process (30,000 units × 40% complete)...... 12,000 Equivalent units of production...... 772,000

89. How much cost, in total, was assigned to the ending work in process inventory? A) $2,600 B) $4,300 C) $15,000 D) $5,400

Solution:

Equivalent units of production Materials Conversion Transferred to next department...... 760,000 760,000 Ending work in process (materials: 30,000 units × 40% complete; conversion: 30,000 units × 30% complete) 12,000 9,000 Equivalent units of production...... 772,000 769,000

Cost per Equivalent Unit Materials Conversion Cost of beginning work in process...... $ 8,600 $ 4,800 Cost added during the period...... 223,000 149,000 Total cost (a)...... $231,600 $153,800

Equivalent units of production (b)...... 772,000 769,000 Cost per equivalent unit, (a) ÷ (b)...... $0.30 $0.20

Materials Conversion Total Ending work in process inventory: Equivalent units of production (materials: 30,000 units × 40% complete; conversion: 30,000 units × 30% complete) 12,000 9,000 Cost per equivalent unit...... $0.30 $0.20 $5,40 Cost of ending work in process inventory...... $3,600 $1,800 0

Onitsha Corporation uses a weighted-average process costing system to collect costs related to production. The following selected information relates to production for June:

Units started into production...... 25,000 Units completed and transferred out...... 20,000 Equivalent units, materials...... 28,000 Equivalent units, conversion costs...... 26,000

Materials Conversion Costs in work in process on June 1...... $ 6,720 $ 9,100 Costs added to production during June...... 57,120 88,400 Total cost...... $63,840 $97,500

All materials at Onitsha are added at the beginning of the production process. Conversion costs are incurred uniformly over the production process.

90. How many partially completed units were in work in process inventory at the beginning of June? A) 3,000 B) 5,000 C) 7,000 D) 8,000

Ans: A AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 2 Level: Hard

Solution:

Since all materials are added at the beginning of the production process, the “equivalent units, materials” of 28,000 units represents the number of units that were in ending work in process inventory plus the units completed transferred out.

Thus: Beginning work in process inventory...... 3,000 * + Units started into production...... 25,000 = Equivalent units...... 28,000

* Beginning work in process inventory + 25,000 = 28,000 Beginning work in process inventory = 3,000

91. What total amount of cost should be assigned to the units completed and transferred out during June? A) $102,510 B) $108,800 C) $120,600 D) $136,000

Ans: C AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 3,4 Level: Hard

Solution:

Materials Conversion Work in process, beginning...... $ 6,720 $ 9,100 Cost added during the month...... 57,120 88,400 Total cost (a)...... $63,840 $97,500 Equivalent units (above) (b)...... 28,000 26,000 Cost per equivalent unit (a) ÷ (b)...... $2.28 $3.75

Materials Conversion Total Units transferred out...... 20,000 20,000 Cost per equivalent unit...... $2.28 $3.75 Cost transferred out...... $45,600 $75,000 $120,600

Aple Corporation uses the weighted-average method in its process costing system. This month, the beginning inventory in the first processing department consisted of 300 units. The costs and percentage completion of these units in beginning inventory were:

Cost Percent Complete Materials costs...... $3,100 70% Conversion costs...... $2,900 50%

A total of 8,500 units were started and 8,100 units were transferred to the second processing department during the month. The following costs were incurred in the first processing department during the month:

Materials costs...... $110,500 Conversion costs...... $153,900

The ending inventory was 90% complete with respect to materials and 55% complete with respect to conversion costs. Note: Your answers may differ from those offered below due to rounding error. In all cases, select the answer that is the closest to the answer you computed. To reduce rounding error, carry out all computations to at least three decimal places.

92. What are the equivalent units for conversion costs for the month in the first processing department? A) 385 B) 8,800 C) 8,100 D) 8,485

Solution:

To solve for ending work in process: + Work in process, beginning...... 300 + Units started into production during the month...... 8,500 − Units completed and transferred out during the month..... 8,100 = Work in process, ending...... 700

Equivalent units of production Conversion Transferred to next department...... 8,100 Ending work in process (materials: 700 units × 90% complete; conversion: 700 units × 55% complete)...... 385 Equivalent units of production...... 8,485

93. The cost per equivalent unit for materials for the month in the first processing department is closest to: A) $12.91 B) $12.66 C) $12.56 D) $13.01

Solution:

Equivalent units of production Materials Transferred to next department...... 8,100 Ending work in process (materials: 700 units × 90% complete; conversion: 700 units × 55% complete)...... 630 Equivalent units of production...... 8,730

94. The cost per equivalent unit for conversion costs for the first department for the month is closest to: A) $17.82 B) $19.40 C) $18.14 D) $18.48

Solution:

To solve for ending work in process: + Work in process, beginning...... 300 + Units started into production during the month...... 8,500 − Units completed and transferred out during the month.... 8,100 = Work in process, ending...... 700

Equivalent units of production Conversion Transferred to next department...... 8,100 Ending work in process (700 units × 55% complete).... 385 Equivalent units of production...... 8,485

95. The total cost transferred from the first processing department to the next processing department during the month is closest to: A) $264,400 B) $277,138 C) $270,400 D) $255,093

Solution:

Equivalent units of production Materials Conversion Transferred to next department...... 8,100 8,100 Ending work in process (materials: 700 units × 90% complete; conversion: 700 units × 55% complete) 630 385 Equivalent units of production...... 8,730 8,485

Materials Conversion Total Units transferred out: Units transferred to the next department...... 8,100 8,100 Cost per equivalent unit...... $13.01 $18.48 $255,08 Cost of units transferred out...... $105,402 $149,685 7

96. The cost of ending work in process inventory in the first processing department according to the company's cost system is closest to: A) $19,841 B) $15,313 C) $22,045 D) $12,125

Solution:

Equivalent units of production Materials Conversion Transferred to next department...... 8,100 8,100 Ending work in process (materials: 700 units × 90% complete; conversion: 700 units × 55% complete)...... 630 385 Equivalent units of production...... 8,730 8,485

Cost per Equivalent Unit Materials Conversion Cost of beginning work in process...... $3,100 $2,900 Cost added during the period...... 110,500 153,900 Total cost (a)...... $113,600 $156,800

Materials Conversion Total Ending work in process inventory: Equivalent units of production (materials: 700 units × 90% complete; conversion: 700 units × 55% complete) 630 385 Cost per equivalent unit...... $13.01 $18.48 $15,31 Cost of ending work in process inventory...... $8,198 $7,115 3

Buklin Corporation uses the weighted-average method in its process costing system. This month, the beginning inventory in the first processing department consisted of 700 units. The costs and percentage completion of these units in beginning inventory were:

The ending inventory was 75% complete with respect to materials and 15% complete with respect to conversion costs. Note: Your answers may differ from those offered below due to rounding error. In all cases, select the answer that is the closest to the answer you computed. To reduce rounding error, carry out all computations to at least three decimal places.

97. How many units are in ending work in process inventory in the first processing department at the end of the month? A) 1,600 B) 700 C) 7,300 D) 900

Solution:

To solve for ending work in process: + Work in process, beginning...... 700 + Units started into production during the month...... 8,000 − Units completed and transferred out during the month.... 7,100 = Work in process, ending...... 1,600

98. What are the equivalent units for conversion costs for the month in the first processing department? A) 7,340 B) 8,700 C) 7,100 D) 240

Solution:

Equivalent units of production Conversion Transferred to next department...... 7,100 Ending work in process (1,600 units × 15% complete)...... 240 Equivalent units of production...... 7,340

Solution:

Equivalent units of production Materials Conversion Transferred to next department...... 7,100 7,100 Ending work in process (materials: 1,600 units × 75% complete; conversion: 1,600 units × 15% complete) 1,200 240 Equivalent units of production...... 8,300 7,340

Solution:

Equivalent units of production Materials Conversion Transferred to next department...... 7,100 7,100 Ending work in process (materials: 1,600 units × 75% complete; conversion: 1,600 units × 15% complete) 1,200 240 Equivalent units of production...... 8,300 7,340

Materials Conversion Total Ending work in process inventory: Equivalent units of production (materials: 1,600 units × 75% complete; conversion: 1,600 units × 15% complete) 1,200 240 Cost per equivalent unit...... $21.95 $13.77 $29,64 Cost of ending work in process inventory...... $26,342 $3,306 8

Cavalerio Corporation uses the weighted-average method in its process costing system. This month, the beginning inventory in the first processing department consisted of 700 units. The costs and percentage completion of these units in beginning inventory were:

The ending inventory was 80% complete with respect to materials and 70% complete with respect to conversion costs.

Note: Your answers may differ from those offered below due to rounding error. In all cases, select the answer that is the closest to the answer you computed. To reduce rounding error, carry out all computations to at least three decimal places.

103. How many units are in ending work in process inventory in the first processing department at the end of the month? A) 800 B) 1,500 C) 900 D) 6,500

Ans: B AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 2 Level: Easy

Solution:

To solve for ending work in process: + Work in process, beginning...... 700 + Units started into production during the month...... 7,200 − Units completed and transferred out during the month..... 6,400 = Work in process, ending...... 1,500

104. What are the equivalent units for conversion costs for the month in the first processing department? A) 7,900 B) 7,450 C) 6,400 D) 1,050

Solution:

Equivalent units of production Conversion Transferred to next department...... 6,400 Ending work in process (1,500 units × 70% complete)...... 1,050 Equivalent units of production...... 7,450

Solution:

Equivalent units of production Materials Conversion Transferred to next department...... 6,400 6,400 Ending work in process (materials: 1,500 units × 80% complete; conversion: 1,500 units × 70% complete) 1,200 1,050 Equivalent units of production...... 7,600 7,450

Escoffier Corporation uses the weighted-average method in its process costing system. This month, the beginning inventory in the first processing department consisted of 500 units. The costs and percentage completion of these units in beginning inventory were:

Solution:

Equivalent units of production Materials Transferred to next department...... 4,400 Ending work in process (1,100 units × 85% complete).... 935 Equivalent units of production...... 5,335

Solution:

Equivalent units of production Materials Conversion Transferred to next department...... 4,400 4,400 Ending work in process (materials: 1,100 units × 85% complete; conversion: 1,100 units × 25% complete) 935 275 Equivalent units of production...... 5,335 4,675

Equivalent units of production (b)...... 5,335 4,675 Cost per equivalent unit, (a) ÷ (b)...... $23.17 $38.63 Materials Conversion Total Units transferred out: Units transferred to the next department...... 4,400 4,400 Cost per equivalent unit...... $23.17 $38.63 $271,91 Cost of units transferred out...... $101,938 $169,976 5

Fuchs Corporation uses the weighted-average method in its process costing system. This month, the beginning inventory in the first processing department consisted of 300 units. The costs and percentage completion of these units in beginning inventory were:

Ans: A AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 2,3,4 Level: Medium

Solution:

Equivalent units of production Materials Conversion Transferred to next department...... 8,500 8,500 Ending work in process (materials: 900 units × 85% complete; conversion: 900 units × 15% complete) 765 135 Equivalent units of production...... 9,265 8,635

Cost of Ending Work in Process Inventory and Units Transferred Out Materials Conversion Total Units transferred out: Units transferred to the next department...... 8,500 8,500 Cost per equivalent unit...... $22.97 $33.18 $477,25 Cost of units transferred out...... $195,229 $282,021 0

Ans: C AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 2,3,4 Level: Medium

Solution:

Cost of Ending Work in Process Inventory and Units Transferred Out Materials Conversion Total Ending work in process inventory: Equivalent units of production (materials: 900 units × 85% complete; conversion: 900 units × 15% complete) 765 135 Cost per equivalent unit...... $22.97 $33.18 $22,05 Cost of ending work in process inventory...... $17,571 $4,479 0

Guerin Corporation uses the weighted-average method in its process costing system. This month, the beginning inventory in the first processing department consisted of 300 units. The costs and percentage completion of these units in beginning inventory were:

112. How many units are in ending work in process inventory in the first processing department at the end of the month? A) 5,100 B) 300 C) 900 D) 600

Ans: C AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 2 Level: Easy

Solution:

113. What are the equivalent units for materials for the month in the first processing department? A) 4,800 B) 5,700 C) 720 D) 5,520

Solution:

Equivalent units of production Materials Transferred to next department...... 4,800 Ending work in process (900 units × 80% complete)...... 720 Equivalent units of production...... 5,520

114. What are the equivalent units for conversion costs for the month in the first processing department? A) 4,800 B) 5,295 C) 495 D) 5,700

Solution:

Equivalent units of production Conversion Transferred to next department...... 4,800 Ending work in process (900 units × 55% complete).... 495 Equivalent units of production...... 5,295

Solution:

Equivalent units of production Materials Transferred to next department...... 4,800 Ending work in process (900 units × 80% complete)...... 720 Equivalent units of production...... 5,520

Solution:

Equivalent units of production Conversion Transferred to next department...... 4,800 Ending work in process (materials: 900 units × 80% complete; conversion: 900 units × 55% complete).... 495 Equivalent units of production...... 5,295

Solution:

Equivalent units of production Material Conversio s n Transferred to next department...... 4,800 4,800 Ending work in process (materials: 900 units × 80% complete; conversion: 900 units × 55% complete) 720 495 Equivalent units of production...... 5,520 5,295

Cost per Equivalent Unit Material Conversio s n Cost of beginning work in process...... $ 4,400 $ 2,200 Cost added during the period...... 120,000 92,500 Total cost (a)...... $124,400 $94,700

Material Conversio s n Total Units transferred out: Units transferred to the next department...... 4,800 4,800 Cost per equivalent unit...... $22.54 $17.88

$194,02 Cost of units transferred out...... $108,174 $85,847 1

118. The cost of ending work in process inventory in the first processing department according to the company’s cost system is closest to: A) $25,079 B) $36,379 C) $20,008 D) $29,103

Solution:

To solve for ending work in process: + Work in process, beginning...... 300 + Units started into production during the month...... 5,400 − Units completed and transferred out during the month..... 4,800 = Work in process, ending...... 900 Equivalent units of production Material s Conversion Transferred to next department...... 4,800 4,800 Ending work in process (materials: 900 units × 80% complete; conversion: 900 units × 55% complete)...... 720 495 Equivalent units of production...... 5,520 5,295

Cost per Equivalent Unit Material s Conversion Cost of beginning work in process...... $ 4,400 $ 2,200 Cost added during the period...... 120,000 92,500 Total cost (a)...... $124,400 $94,700

Cost of Ending Work in Process Inventory and Units Transferred Out Material Conversio s n Total Ending work in process inventory: Equivalent units of production (materials: 900 units × 80% complete; conversion: 900 units × 55% complete) 720 495

Cost per equivalent unit...... $22.54 $17.88 $25,07 Cost of ending work in process inventory...... $16,226 $8,853 9

Hall Corporation uses the weighted-average method in its process costing system. Data concerning the first processing department for the most recent month are listed below:

Beginning work in process inventory: Units in beginning work in process inventory...... 500 Materials costs...... $7,700 Conversion costs...... $2,900 Percent complete with respect to materials...... 75% Percent complete with respect to conversion...... 25% Units started into production during the month...... 6,700 Units transferred to the next department during the month..... 5,900 Materials costs added during the month...... $108,600 Conversion costs added during the month...... $121,000 Ending work in process inventory: Units in ending work in process inventory...... 1,300 Percent complete with respect to materials...... 65% Percent complete with respect to conversion...... 40%

119. What are the equivalent units for materials for the month in the first processing department? A) 845 B) 6,745 C) 7,200 D) 5,900

Solution:

Equivalent units of production Materials Transferred to next department...... 5,900 Ending work in process (1,300 units × 65% complete)...... 845 Equivalent units of production...... 6,745

Solution: Equivalent units of production Conversion Transferred to next department...... 5,900 Ending work in process (1,300 units × 40% complete)...... 520 Equivalent units of production...... 6,420

Solution:

Equivalent units of production Materials Transferred to next department...... 5,900 Ending work in process (1,300 units × 65% complete)...... 845 Equivalent units of production...... 6,745

Solution:

Equivalent units of production Materials Conversion Transferred to next department...... 5,900 5,900 Ending work in process (materials: 1,300 units × 65% complete; conversion: 1,300 units × 40% complete) 845 520 Equivalent units of production...... 6,745 6,420

Solution:

Equivalent units of production Materials Conversion Transferred to next department...... 5,900 5,900 Ending work in process (materials: 1,300 units × 65% complete; conversion: 1,300 units × 40% complete)...... 845 520 Equivalent units of production...... 6,745 6,420

Materials Conversion Total Ending work in process inventory: Equivalent units of production (materials: 1,300 units × 65% complete; conversion: 1,300 units × 40% complete) 845 520

Kumari Corporation uses the weighted-average method in its process costing system. Data concerning the first processing department for the most recent month are listed below:

Beginning work in process inventory: Units in beginning work in process inventory...... 200 Materials costs...... $2,900 Conversion costs...... $6,400 Percent complete with respect to materials...... 85% Percent complete with respect to conversion...... 70% Units started into production during the month...... 7,800 Units transferred to the next department during the month..... 7,400 Materials costs added during the month...... $128,000 Conversion costs added during the month...... $332,600 Ending work in process inventory: Units in ending work in process inventory...... 600 Percent complete with respect to materials...... 60% Percent complete with respect to conversion...... 35%

Ans: D AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 2,3,4 Level: Medium

Solution:

Ans: A AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 2,3,4 Level: Medium

Solution:

Materials Conversion Total Ending work in process inventory:...... Equivalent units of production (materials: 600 units × 60% complete; conversion: 600 units × 35% complete)...... 360 210 Cost per equivalent unit...... $16.87 $44.55 $15,42 Cost of ending work in process inventory...... $6,073 $9,355 8

Loxham Corporation uses the weighted-average method in its process costing system. Data concerning the first processing department for the most recent month are listed below:

Beginning work in process inventory: Units in beginning work in process inventory...... 400 Materials costs...... $6,900 Conversion costs...... $2,500 Percent complete with respect to materials...... 80% Percent complete with respect to conversion...... 15% Units started into production during the month...... 6,000 Units transferred to the next department during the month... 5,400 Materials costs added during the month...... $112,500 Conversion costs added during the month...... $210,300 Ending work in process inventory: Units in ending work in process inventory...... 1,000 Percent complete with respect to materials...... 80% Percent complete with respect to conversion...... 30%

Solution:

Equivalent units of production Materials Transferred to next department...... 5,400 Ending work in process (materials: 1,000 units × 80% complete; conversion: 1,000 units × 30% complete)..... 800 Equivalent units of production...... 6,200

Solution:

Equivalent units of production Conversion Transferred to next department...... 5,400 Ending work in process (1,000 units × 30% complete).... 300 Equivalent units of production...... 5,700

Solution:

Equivalent units of production Materials Conversion Transferred to next department...... 5,400 5,400 Ending work in process (materials: 1,000 units × 80% complete; conversion: 1,000 units × 30% complete)...... 800 300 Equivalent units of production...... 6,200 5,700

Materials Conversion Total Ending work in process inventory: Equivalent units of production (materials: 1,000 units × 80% complete; conversion: 1,000 units × 30% complete)...... 800 300 Cost per equivalent unit...... $19.26 $37.33 $26,60 Cost of ending work in process inventory...... $15,406 $11,200 6

Doz Corporation uses the weighted-average method in its process costing system. This month, the beginning inventory in the first processing department consisted of 600 units. The costs and percentage completion of these units in beginning inventory were:

130. How many units are in ending work in process inventory in the first processing department at the end of the month? A) 900 B) 800 C) 1,400 D) 4,400

Solution:

Equivalent units of production Conversio n Transferred to next department...... 4,200 Ending work in process (1,400 units × 35% complete)...... 490 Equivalent units of production...... 4,690

Solution:

Equivalent units of production Materials Transferred to next department...... 4,200 Ending work in process (1,400 units × 75% complete).... 1,050 Equivalent units of production...... 5,250

L.A. Company uses the weighted-average method in its process costing system. The following information for the assembly department was obtained from the accounting records for September (all materials are added at the beginning of the process):

Labor and Number Overhead Percent of Units Complete Work in process inventory, Sept. 1...... 40,000 25% Transferred in during the month...... 100,000 Work in process inventory, Sept. 30.... 20,000 50%

Transferred Labor and In Materials Overhead Beginning work in process inventory.. $80,000 $37,600 $5,000 Cost added during the month...... $251,000 $122,400 $66,500

133. The equivalent units for material for the month are: A) 100,000 units B) 120,000 units C) 140,000 units D) 160,000 units

Solution:

To solve for units transferred: + Work in process, beginning...... 40,000 + Units started into production during the month...... 100,000 − Work in process, ending...... 20,000 = Units completed and transferred out during the month.... 120,000

Equivalent units of production Materials Transferred to next department...... 120,000 Ending work in process (20,000 units × 100% complete)... 20,000 Equivalent units of production...... 140,000

134. The cost per equivalent unit for labor and overhead for the month is: A) $0.50 B) $0.125 C) $0.52 D) $0.55

Solution:

To solve for units transferred: + Work in process, beginning...... 40,000 + Units started into production during the month...... 100,000 − Work in process, ending...... 20,000 = Units completed and transferred out during the month.... 120,000

Equivalent units of production Labor and Overhead Transferred to next department...... 120,000 Ending work in process (20,000 units × 50% complete)...... 10,000 Equivalent units of production...... 130,000

Cost per Equivalent Unit Labor and Overhead Cost of beginning work in process...... $ 5,000 Cost added during the period...... 66,500 Total cost (a)...... $71,500

Iyer Corporation uses the weighted-average method in its process costing system. Data concerning the first processing department for the most recent month are listed below:

Beginning work in process inventory: Units in beginning work in process inventory...... 800 Materials costs...... $13,900 Conversion costs...... $7,200 Percent complete with respect to materials...... 85% Percent complete with respect to conversion...... 20% Units started into production during the month...... 7,200 Units transferred to the next department during the month...... 6,100 Materials costs added during the month...... $115,700 Conversion costs added during the month...... $240,600 Ending work in process inventory: Units in ending work in process inventory...... 1,900 Percent complete with respect to materials...... 75% Percent complete with respect to conversion...... 10%

Solution:

Jones Corporation uses the weighted-average method in its process costing system. Data concerning the first processing department for the most recent month are listed below:

Ans: D AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 2,3 Level: Medium

Solution: Equivalent units of production Materials Transferred to next department...... 4,400 Ending work in process (1,400 units × 50% complete).... 700 Equivalent units of production...... 5,100

Solution:

Equivalent units of production Conversion Transferred to next department...... 4,400 Ending work in process (1,400 units × 30% complete).... 420 Equivalent units of production...... 4,820

(Appendix 4A) The following data relate to the Mixing Department of Dillard Company for a recent month:

Percent Complete with Respect to Units Processing Beginning work in process inventory..... 10,000 65% Units started into production...... 50,000 Units completed and transferred out...... 51,000 Ending work in process inventory...... 9,000 30%

All materials are added at the beginning of the mixing process.

139. Assuming that Dillard Company uses the FIFO method, the equivalent units for materials would be: A) 47,200 B) 50,000 C) 51,000 D) 59,000

Ans: B AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting Appendix: 4A LO: 5 Level: Medium

Solution:

Equivalent Units of Production Materials To complete beginning work in process (10,000 units × 0%).... 0 Units started and completed during the period (50,000 units started − 9,000 units in ending inventory)...... 41,000 Ending work in process (9,000 units × 100% complete)...... 9,000 Equivalent units of production...... 50,000

140. Assuming that Dillard Company uses the FIFO method, the equivalent units for processing would be: A) 47,200 B) 50,200 C) 51,000 D) 60,000

Solution:

Equivalent Units of Production Conversion To complete beginning work in process (10,000 units × 35%).. 3,500 Units started and completed during the period (50,000 units started − 9,000 units in ending inventory)...... 41,000 Ending work in process (9,000 units × 30% complete)...... 2,700 Equivalent units of production...... 47,200

141. Assuming that Dillard Company uses the weighted-average method, the equivalent units for materials would be: A) 50,000 B) 51,000 C) 53,700 D) 60,000

Solution:

142. Assuming that Dillard Company uses the weighted-average method, the equivalent units for processing would be: A) 53,700 B) 51,000 C) 50,200 D) 47,200

Solution:

Equivalent units of production Conversion Transferred to next department...... 51,000 Ending work in process (9,000 units × 30% complete).... 2,700 Equivalent units of production...... 53,700

(Appendix 4A) Activities in the Sargent Company's Assembly Department for the month of March follow:

Percent Complete with Respect to Labor & Units Materials Overhead Work-in-process inventory, March 1...... 7,000 70% 35% Started into production during March.... 66,000 Work-in-process inventory, March 31.... 5,000 45% 30%

143. The equivalent units for materials for March, using the weighted-average method, would be: A) 66,000 B) 68,000 C) 70,250 D) 71,000

Solution:

144. The equivalent units for labor and overhead for March, using the weighted-average method, would be: A) 69,500 B) 68,000 C) 67,500 D) 71,000

Solution:

Equivalent units of production Labor and Overhead Transferred to next department...... 68,000 Ending work in process (5,000 units × 30% complete).... 1,500 Equivalent units of production...... 69,500

145. The equivalent units for materials for March using the FIFO method, would be: A) 68,000 B) 65,350 C) 71,000 D) 67,000

Ans: B AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting Appendix: 4A LO: 5 Level: Medium

Solution:

Equivalent Units of Production

Materials To complete beginning work in process (7,000 units × 30%)...... 2,100 Units started and completed during the period (66,000 units started − 5,000 units in ending inventory)...... 61,000 Ending work in process (5,000 units × 45% complete)...... 2,250 Equivalent units of production...... 65,350

146. The equivalent units for labor and overhead for March using the FIFO method, would be: A) 62,950 B) 65,050 C) 66,000 D) 67,050

Solution:

Equivalent Units of Production Labor and Overhead To complete beginning work in process (7,000 units × 65%)...... 4,550 Units started and completed during the period (66,000 units started − 5,000 units in ending inventory)...... 61,000 Ending work in process (5,000 units × 30% complete)...... 1,500 Equivalent units of production...... 67,050

Bronson Company has a process costing system and uses the weighted-average method. The company had 6,000 units in work in process on January 1 that were 60% complete with respect to conversion costs. During January 20,000 units were completed. On January 31, 8,000 units remained in work in process that were 40% complete with respect to conversion costs. Materials are added at the beginning of the process.

147. The equivalent units for January for conversion costs were: A) 19,600 B) 22,400 C) 23,200 D) 25,600

Ans: C AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 2 Level: Medium Source: CPA, adapted

Solution:

Equivalent units of production Conversion Transferred to next department...... 20,000 Ending work in process (8,000 units × 40% complete).... 3,200 Equivalent units of production...... 23,200

148. How many units were started into production during January? A) 18,000 B) 19,600 C) 20,000 D) 22,000

Ans: D AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 2 Level: Medium Source: CPA, adapted

Solution:

To solve for units started into production: + Work in process, ending...... 8,000 + Units completed and transferred out during the month.... 20,000 − Work in process, beginning...... 6,000 = Units started into production during the month...... 22,000

The following information relates to the Blending Department of Kedakai Products Company for the month of May. Kedakai uses a weighted-average process costing system.

Work in process, beginning (May 1): Units in process...... 30,000 Percent complete with respect to materials...... 100% Percent complete with respect to conversion...... 10% Units completed and transferred out during May...... 290,000 Work in process, ending (May 31): Units in process...... 17,000 Percent complete with respect to materials...... 100% Percent complete with respect to conversion...... 80%

149. What are the Blending Department's equivalent units related to materials for May? A) 260,000 B) 277,000 C) 290,000 D) 307,000

Solution:

Equivalent units of production Materials Transferred to next department...... 290,000 Ending work in process (17,000 units × 100% complete) 17,000 Equivalent units of production...... 307,000

150. What are the Blending Department's equivalent units related to conversion costs for May? A) 266,400 B) 290,400 C) 293,400 D) 303,600

Solution:

Equivalent units of production Conversion Transferred to next department...... 290,000 Ending work in process (17,000 units × 80% complete). . 13,600 Equivalent units of production...... 303,600

Bettie Corporation uses a weighted-average process costing system to collect costs related to production. The following selected information relates to production for October:

Materials Conversion Units completed and transferred out...... 50,000 50,000 Equivalent units: work in process, October 31...... 10,000 4,000 Total equivalent units...... 60,000 54,000

Materials Conversion Costs in work in process on October 1...... $ 9,000 $ 5,400 Costs added to production during October...... 243,000 513,000 Total cost...... $252,000 $518,400

All materials at Bettie are added at the beginning of the production process.

151. What total amount of cost should be assigned to the units completed and transferred out during October? A) $642,000 B) $677,500 C) $690,000 D) $691,900

Solution:

Materials Conversion Total Total cost...... $252,000 $518,400 Equivalent units...... ÷ 60,000 ÷ 54,000 Cost per equivalent unit...... $4.20 $9.60 × # of units completed and transferred out 50,000 50,000 Total cost of units completed and transferred out...... $210,000 $480,000 $690,000

152. What total amount of cost should be assigned to the units in work in process on October 31? A) $78,500 B) $80,400 C) $135,500 D) $138,000

Solution:

Materials Conversion Total Total cost...... $252,000 $518,400 Equivalent units...... ÷ 60,000 ÷ 54,000 Cost per equivalent unit...... $4.20 $9.60 × # of equivalent units in ending work in process...... 10,000 4,000 Total cost of ending work in process...... $42,000 $38,400 $80,400

(Appendix 4A) Owens Company uses a process costing system. For March, the beginning work in process inventory consisted of 60,000 units that were 60% complete with respect to processing. The ending work in process inventory for the month consisted of units that were 20% complete with respect to processing. A summary of unit and cost data for the month follows:

Units Processing Cost Work in process inventory on March 1..... 60,000 $35,000 Units started into production and costs incurred during the month...... 190,000 $700,000 Units completed and transferred out...... 200,000

153. Assuming that Owens Company uses the weighted-average method, which of the following is closest to the cost per equivalent unit for processing cost for March? A) $4.08 B) $3.87 C) $3.68 D) $3.50

Solution:

To solve for ending work in process: + Work in process, beginning...... 60,000 + Units started into production during the month...... 190,000 − Units completed and transferred out during the month..... 200,000 = Work in process, ending...... 50,000

Equivalent units of production Processing Cost Transferred to next department...... 200,000

Ending work in process (50,000 units × 20% complete)...... 10,000 Equivalent units of production...... 210,000

154. Assuming that Owens Company uses the FIFO method, which of the following is closest to the cost per equivalent unit for processing cost for March? A) $3.23 B) $3.98 C) $4.02 D) $4.22

Ans: C AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting Appendix: 4A LO: 6 Level: Hard

Solution:

To solve for ending work in process: + Work in process, beginning...... 60,000 + Units started into production during the month...... 190,000 − Units completed and transferred out during the month..... 200,000 = Work in process, ending...... 50,000

Equivalent Units of Production Processing Cost To complete beginning work in process (60,000 units × 40%)...... 24,000 Units started and completed during the period (190,000 units started − 50,000 units in ending inventory)...... 140,000

Ending work in process (50,000 units × 20% complete)...... 10,000 Equivalent units of production...... 174,000

The following information relates to the Assembly Department of Jataca Corporation for the month of November. Jataca uses a weighted-average process costing system. All materials at Jataca are added at the beginning of the production process.

Percent Complete Number of with Respect to Units Conversion Work in process, November 1...... 4,000 40% Units started into production...... 317,000 Work in process, November 30..... 10,000 90%

On November 1, the work in process inventory account contained $6,400 of material cost and $4,400 of conversion cost. Cost per equivalent unit for November was $1.50 for materials and $2.80 for conversion costs.

155. What total amount of cost should be assigned to the units transferred out during November? A) $1,337,300 B) $1,348,100 C) $1,369,500 D) $1,380,300

Solution:

Cost per equivalent unit (given)...... $1.50 $2.80

Materials Conversion

Units transferred out: Units transferred to the next department...... 311,000 311,000 Cost per equivalent unit...... $1.50 $2.80 $1,337,30 Cost of units transferred out...... $466,500 $870,800 0

156. What total amount of cost should be assigned to the units in work in process on November 30? A) $17,800 B) $38,700 C) $40,200 D) $43,000

Solution:

Cost per equivalent unit (given)...... $1.50 $2.80

Cost of Ending Work in Process Inventory and Units Transferred Out Materials Conversion Ending work in process inventory: Equivalent units of production (materials: 10,000 units × 100% complete; conversion: 10,000 units × 90% complete)...... 10,000 9,000 Cost per equivalent unit...... $1.50 $2.80 $40,20 Cost of ending work in process inventory...... $15,000 $25,200 0

(Appendix 4A) Moureaux Corporation uses the FIFO method in its process costing system. Data concerning the first processing department for the most recent month are listed below:

Solution:

Equivalent Units of Production Materials To complete beginning work in process (600 units × 35%)...... 210 Units started and completed during the period (5,700 units started − 1,300 units in ending inventory)...... 4,400 Ending work in process (1,300 units × 70% complete)...... 910 Equivalent units of production...... 5,520

158. What are the equivalent units for conversion costs for the month in the first processing department? A) 520 B) 6,300 C) 4,400 D) 5,220

Solution:

Equivalent Units of Production Conversion To complete beginning work in process (600 units × 50%)...... 300 Units started and completed during the period (5,700 units started − 1,300 units in ending inventory)...... 4,400 Ending work in process (1,300 units × 40% complete)...... 520 Equivalent units of production...... 5,220

Solution:

Equivalent Units of Production Materials To complete beginning work in process (600 units × 35%)...... 210 Units started and completed during the period (5,700 units started − 1,300 units in ending inventory)...... 4,400 Ending work in process (1,300 units × 70% complete)...... 910 Equivalent units of production...... 5,520

Cost per Equivalent Unit Materials Cost added during the period (a)...... $92,400 Equivalent units of production (b)...... 5,520 Cost per equivalent unit (a) ÷ (b)...... $16.74

Solution:

Equivalent Units of Production Conversion To complete beginning work in process (600 units × 50%)...... 300 Units started and completed during the period (5,700 units started − 1,300 units in ending inventory)...... 4,400 Ending work in process (1,300 units × 40% complete)...... 520 Equivalent units of production...... 5,220

Solution:

Equivalent Units of Production Materials Conversion To complete beginning work in process (materials: 600 units × 35% complete; conversion: 600 units × 50% complete)...... 210 300 Units started and completed during the period (5,700 units started − 1,300 units in ending inventory)...... 4,400 4,400 Ending work in process (materials: 1,300 units × 70% complete; conversion: 1,300 units × 40% complete)...... 910 520 Equivalent units of production...... 5,520 5,220

Cost per Equivalent Unit Materials Conversion Total Cost added during the period (a)...... $92,400 $160,000 Equivalent units of production (b)...... 5,520 5,220 Cost per equivalent unit (a) ÷ (b)...... $16.74 $30.65 $47.39

Units transferred out: Cost in beginning inventory...... $7,800 $10,700 $ 18,500 Cost to complete the units in beginning inventory: Equivalent units of production required to complete the beginning inventory...... 210 300 Cost per equivalent unit...... $16.74 $30.65 Cost to complete the units in beginning inventory...... $3,515 $9,195 12,710 Cost of units started and completed this period: Units started and completed this period...... 4,400 4,400 Cost per equivalent unit...... $16.74 $30.65 Cost of units started and completed this period. $73,652 $134,866 208,518 Cost of units transferred out...... $239,728

Solution:

Equivalent Units of Production Materials Conversion To complete beginning work in process (materials: 600 units × 35%; conversion: 600 units × 50%). 210 300 Units started and completed during the period (5,700 units started − 1,300 units in ending inventory)...... 4,400 4,400 Ending work in process (materials: 1,300 units × 70% complete; conversion: 1,300 units × 40% complete)...... 910 520 Equivalent units of production...... 5,520 5,220

Cost per Equivalent Unit Materials Conversion Cost added during the period (a)...... $92,400 $160,000 Equivalent units of production (b)...... 5,520 5,220 Cost per equivalent unit (a) ÷ (b)...... $16.74 $30.65

Costs of Ending Work in Process Inventory and Units Transferred Out Materials Conversion Ending work in process inventory: Equivalent units of production...... 910 520 Cost per equivalent unit...... $16.74 $30.65 $31,17 Cost of ending work in process inventory...... $15,233 $15,939 1

(Appendix 4A) Prochino Corporation uses the FIFO method in its process costing system. Data concerning the first processing department for the most recent month are listed below:

163. What are the equivalent units for materials for the month in the first processing department? A) 1,680 B) 9,605 C) 10,700 D) 7,700

Solution:

Equivalent Units of Production Materials To complete beginning work in process (900 units × 25% complete)...... 225 Units started and completed during the period (9,800 units started − 2,100 units in ending inventory)...... 7,700 Ending work in process (2,100 units × 80% complete)...... 1,680 Equivalent units of production...... 9,605

Solution:

Equivalent Units of Production Conversion To complete beginning work in process (900 units × 75% complete)...... 675 Units started and completed during the period (9,800 units started − 2,100 units in ending inventory)...... 7,700 Ending work in process (2,100 units × 45% complete)...... 945 Equivalent units of production...... 9,320

Solution: Equivalent Units of Production Materials Conversion To complete beginning work in process (materials: 900 units × 25% complete; conversion: 900 units × 75% complete)...... 225 675 Units started and completed during the period (9,800 units started − 2,100 units in ending inventory)...... 7,700 7,700 Ending work in process (materials: 2,100 units × 80% complete; conversion: 2,100 units × 45% complete)...... 1,680 945 Equivalent units of production...... 9,605 9,320

Cost per Equivalent Unit Materials Conversion Total Cost added during the period (a)...... $112,900 $143,000 Equivalent units of production (b)...... 9,605 9,320 Cost per equivalent unit (a) ÷ (b)...... $11.75 $15.34 $27.10

Units transferred out: Cost in beginning inventory...... $9,500 $4,100 $ 13,600 Cost to complete the units in beginning inventory: Equivalent units of production required to complete the beginning inventory...... 225 675 Cost per equivalent unit...... $11.75 $15.34 Cost to complete the units in beginning inventory...... $2,645 $10,357 13,001

Cost of units started and completed this period: Units started and completed this period...... 7,700 7,700 Cost per equivalent unit...... $11.75 $15.34 Cost of units started and completed this period $90,508 $118,144 208,652 Cost of units transferred out...... $235,253

(Appendix 4A) Malmedy Company uses the FIFO method in its process costing system. The following data pertain to operations in the first processing department for a recent month:

Work in process, beginning: Units in process...... ? Percent complete with respect to materials...... 75% Percent complete with respect to conversion...... 50% Costs in the beginning inventory: Materials cost...... $2,300 Conversion cost...... $3,600 Units started into production during the month...... 25,200 Units completed and transferred out during the month...... 24,000 Costs added to production during the month: Materials cost...... $98,750 Conversion cost...... $220,500 Work in process, ending: Units in process...... 2,000 Percent complete with respect to materials...... 80% Percent complete with respect to conversion...... 45%

166. How many units were in the beginning work in process inventory? A) 600 units B) 1,000 units C) 800 units D) 1,400 units

Solution: + Work in process, ending...... 2,000 + Units completed and transferred out during the month..... 24,000 − Units started into production during the month...... 25,200 = Work in process, beginning...... 800

167. What was the cost per equivalent unit for materials during the month? A) $3.95 B) $4.50 C) $2.00 D) $5.00

Solution:

To complete beginning work in process (800 units × 25%)...... 200 Units started and completed during the period (25,200 units started − 2,000 units in ending inventory)...... 23,200 Ending work in process (2,000 units × 80% complete)...... 1,600 Equivalent units of production...... 25,000

Cost per Equivalent Unit Cost added during the period (a)...... $98,750 Equivalent units of production (b)...... 25,000 Cost per equivalent unit (a) ÷ (b)...... $3.95

(Appendix 4A) Quochang Corporation uses the FIFO method in its process costing system. Data concerning the first processing department for the most recent month are listed below:

Beginning work in process inventory: Units in beginning work in process inventory...... 400 Materials costs...... $6,900 Conversion costs...... $6,900 Percent complete with respect to materials...... 60% Percent complete with respect to conversion...... 35% Units started into production during the month...... 5,700 Materials costs added during the month...... $142,800 Conversion costs added during the month...... $242,800 Ending work in process inventory: Units in ending work in process inventory...... 900 Percent complete with respect to materials...... 70% Percent complete with respect to conversion...... 45%

168. How many units were started AND completed during the month in the first processing department? A) 5,200 B) 4,800 C) 6,100 D) 5,700

Solution:

To solve for units transferred: + Work in process, beginning...... 400 + Units started into production during the month...... 5,700 − Work in process, ending...... 900 = Units completed and transferred out during the month..... 5,200

Since there were 400 units in beginning work in process, these were not started AND completed, so the 400 should be subtracted from the total units completed and transferred out during the month (5,200 – 400 = 4,800) to arrive at the total units which were both started and completed during the month.

Solution:

Conversion To complete beginning work in process (400 units × 65% complete)...... 260 Units started and completed during the period (5,700 units started − 900 units in ending inventory)...... 4,800 Ending work in process (900 units × 45% complete)...... 405 Equivalent units of production...... 5,465

(Appendix 4A) Noguti Corporation uses the FIFO method in its process costing system. Data concerning the first processing department for the most recent month are listed below:

Beginning work in process inventory: Units in beginning work in process inventory...... 200 Materials costs...... $1,800 Conversion costs...... $2,100 Percent complete with respect to materials...... 70% Percent complete with respect to conversion...... 40% Units started into production during the month...... 7,300 Units transferred to the next department during the month...... 7,000 Materials costs added during the month...... $82,700 Conversion costs added during the month $174,600 Ending work in process inventory:...... Units in ending work in process inventory...... 500 Percent complete with respect to materials...... 50% Percent complete with respect to conversion...... 45%

Solution:

Equivalent Units of Production Materials To complete beginning work in process (200 units × 30% complete) 60 Units started and completed during the period (7,300 units started − 500 units in ending inventory)...... 6,800 Ending work in process (500 units × 50% complete)...... 250 Equivalent units of production...... 7,110

Solution:

Equivalent Units of Production Conversion To complete beginning work in process (200 units × 60% complete)...... 120 Units started and completed during the period (7,300 units started − 500 units in ending inventory)...... 6,800 Ending work in process (500 units × 45% complete)...... 225 Equivalent units of production...... 7,145

(Appendix 4A) Outinki Corporation uses the FIFO method in its process costing system. Data concerning the first processing department for the most recent month are listed below:

172. What are the equivalent units for conversion costs for the month in the first processing department? A) 6,910 B) 425 C) 8,500 D) 6,100

Solution:

Equivalent Units of Production Conversion To complete beginning work in process (700 units × 55% complete)...... 385 Units started and completed during the period (7,800 units started − 1,700 units in ending inventory)...... 6,100 Ending work in process (1,700 units × 25% complete)...... 425 Equivalent units of production...... 6,910

Solution:

Equivalent Units of Production Materials To complete beginning work in process (700 units × 25% complete)...... 175 Units started and completed during the period (7,800 units started − 1,700 units in ending inventory)...... 6,100 Ending work in process (1,700 units × 90% complete)...... 1,530 Equivalent units of production...... 7,805

Cost per Equivalent Unit Materials Cost added during the period (a)...... $97,600 Equivalent units of production (b)...... 7,805 Cost per equivalent unit (a) ÷ (b)...... $12.50

(Appendix 4A) Sumptuous Beer Company manufactures beer in two departments, Fermenting and Bottling. In the Fermenting Department, ingredients are placed in a large vat and fermented for three days. The beer is then transferred over to Bottling where it is further purified and bottled. Sumptuous uses a FIFO process cost system to collect costs in both departments.

On May 1, the Fermenting Department had 32,000 gallons (units) in process. These gallons were 100% complete with respect to materials (ingredients) and 80% complete with respect to conversion cost. During May, Fermenting started an additional 460,000 gallons into production. On May 31, Fermenting had 18,000 gallons in work in process. These gallons were 100% complete with respect to materials and 60% complete with respect to conversion cost.

174. What are the Fermenting Department's equivalent units (gallons) of production related to materials for May? A) 442,000 B) 460,000 C) 474,000 D) 492,000

Solution:

Equivalent Units of Production Materials To complete beginning work in process (32,000 units × 0% complete)...... 0 Units started and completed during the period (460,000 units started − 18,000 units in ending inventory)...... 442,000 Ending work in process (18,000 units × 100% complete)...... 18,000 Equivalent units of production...... 460,000

175. What are the Fermenting Department's equivalent units (gallons) of production related to conversion costs for May? A) 459,200 B) 474,800 C) 477,200 D) 478,400

Solution:

(Appendix 4A) Lahania Corporation uses a FIFO process costing system to collect costs related to production. The following selected information relates to production for April:

Equivalent units: Materials Conversion Units in process, April 1...... 0 2,500 Units started and completed during April...... 32,000 32,000 Units in process, April 31...... 8,000 1,500 Total equivalent units...... 40,000 36,000

Materials Conversion Costs in work in process on April 1...... $ 50,400 $126,000 Costs added to production during April...... 169,600 529,200 Total cost...... $220,000 $655,200

All materials at Lahania are added at the beginning of the production process. Conversion costs are incurred uniformly over the production process. During April, Lahania completed 44,000 units.

176. What total amount of cost should be assigned to the units completed and transferred out during April? A) $642,830 B) $819,230 C) $833,360 D) $1,009,760

Ans: B AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 6,7 Level: Hard

Solution:

Equivalent Units of Production MaterialsConversion To complete beginning work in process...... 0 2,500 Units started and completed during the period...... 32,000 32,000 Ending work in process...... 8,000 1,500 Equivalent units of production...... 40,000 36,000

Cost per Equivalent Unit MaterialsConversion Cost added during the period (a)...... $169,600 $529,200 Equivalent units of production (b)...... 40,000 36,000 Cost per equivalent unit (a) ÷ (b)...... $4.24 $14.70

Units transferred out: Cost in beginning inventory...... $50,400 $126,000 Cost to complete the units in beginning inventory: Equivalent units of production required to complete the beginning inventory...... 0 2,500 Cost per equivalent unit...... $4.24 $14.70 Cost to complete the units in beginning inventory...... $0 $36,750 Cost of units started and completed this period: Units started and completed this period...... 32,000 32,000 Cost per equivalent unit...... $4.24 $14.70 Cost of units started and completed this period...... $135,680 $470,400 Cost of units transferred out...... $186,080 $633,150

Total cost of units transferred out = $186,080 + $633,150 =$819,230.

177. What total amount of cost should be assigned to the units in work in process on April 30? A) $55,970 B) $71,300 C) $151,520 D) $179,930

Solution:

Equivalent Units of Production: MaterialsConversion To complete beginning work in process...... 0 2,500 Units started and completed during the period...... 32,000 32,000 Ending work in process...... 8,000 1,500 Equivalent units of production...... 40,000 36,000

Cost per Equivalent Unit: MaterialsConversion Total Cost added during the period (a)...... $169,600 $529,200 Equivalent units of production (b)...... 40,000 36,000 Cost per equivalent unit (a) ÷ (b)...... $4.24 $14.70 $18.94

Costs of Ending Work in Process Inventory and Units Transferred Out: MaterialsConversion Ending work in process inventory: Equivalent units of production...... 8,000 1,500 Cost per equivalent unit...... $4.24 $14.70 Cost of ending work in process inventory...... $33,920 $22,050 $55,970

(Appendix 4A) The following information relates to the Cutting Department of Kittina Corporation for the month of February. Kittina uses a FIFO process costing system. All materials at Kittina are added at the beginning of the production process.

Percentage complete Number of with respect to units conversion Work in process, February 1...... 18,000 10% Units started into production...... 160,000 Work in process, February 28...... 7,000 40%

On February 1, the work in process inventory account contained $55,620 of material cost and $123,120 of conversion cost. Cost per equivalent unit for February was $3.10 for materials and $7.50 for conversion costs.

178. What total amount of cost should be assigned to the units completed and transferred out during February? A) $1,743,300 B) $1,812,600 C) $1,814,040 D) $1,922,040

Ans: D AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 7 Level: Hard

Solution:

Equivalent Units of Production Materials Conversion To complete beginning work in process (materials: 18,000 units × 0% complete; conversion: 18,000 units × 90% complete)...... 0 16,200 Units started and completed during the period (160,000 units started − 7,000 units in ending inventory)...... 153,000 153,000 Ending work in process (materials: 7,000 units × 100% complete; conversion: 7,000 units × 40% complete)...... 7,000 2,800 Equivalent units of production...... 160,000 172,000

Cost per Equivalent Unit Materials Conversion Cost added during the period (a)...... $496,000 $1,290,000 Equivalent units of production (b)...... 160,000 172,000 Cost per equivalent unit (a) ÷ (b)...... $3.10 $7.50 $10.60

Units transferred out: Cost in beginning inventory...... $55,620 $123,120 $ 178,740 Cost to complete the units in beginning inventory: Equivalent units of production required to complete the beginning inventory...... 0 16,200 Cost per equivalent unit...... $3.10 $7.50 Cost to complete the units in beginning inventory...... $0 $121,500 121,500

Cost of units started and completed this period: Units started and completed this period...... 153,000 153,000 Cost per equivalent unit...... $3.10 $7.50 Cost of units started and completed this period... $474,300 $1,147,500 1,621,800 $1,922,04 Cost of units transferred out...... 0

179. What total amount of cost should be assigned to the units in work in process on February 28? A) $29,680 B) $42,700 C) $44,520 D) $53,200

Solution:

Equivalent Units of Production Materials Conversion To complete beginning work in process (materials: 18,000 units × 0% complete; conversion: 18,000 units × 90% complete)...... 0 16,200 Units started and completed during the period (160,000 units started − 7,000 units in ending inventory)...... 153,000 153,000 Ending work in process (materials: 7,000 units × 100% complete; conversion: 7,000 units × 40% complete)..... 7,000 2,800 Equivalent units of production...... 160,000 172,000

Cost per Equivalent Unit Materials Conversion Cost added during the period (a)...... $496,000 $1,290,000 Equivalent units of production (b)...... 160,000 172,000 Cost per equivalent unit (a) ÷ (b)...... $3.10 $7.50

Materials Conversion Total Ending work in process inventory: Equivalent units of production...... 7,000 2,800 Cost per equivalent unit...... $3.10 $7.50 Cost of ending work in process inventory...... $21,700 $21,000 $42,70

(Appendix 4B) Zorn Company has a Custodial Services department which services the company's Maintenance department and its two operating departments. Costs of the Custodial Services department are allocated to other departments on the basis of square feet of space occupied. The amount of space occupied by each department is given below:

Custodial Services...... 500 square feet Maintenance...... 2,000 square feet Operating Department 1.... 10,000 square feet Operating Department 2.... 8,000 square feet

Budgeted costs in the Custodial Services department total $36,000.

180. If Zorn Company uses the step-down method and allocates the Custodial Services costs first, the amount of this cost allocated to the Maintenance department would be closest to: A) $3,512 B) $3,600 C) $9,000 D) $0

Solution:

Department: Square Feet Percent Maintenance...... 2,000 10% Operating Department 1...... 10,000 50% Operating Department 2...... 8,000 40% Total square feet...... 20,000 100%

Total Custodial Services costs...... $36,000 × % to Maintenance...... 10% Custodial Services costs allocated to Maintenance...... $3,600

181. The amount of Custodial Services department cost allocated to Operating Department 2 under the direct method would be closest to: A) $14,400 B) $14,049 C) $16,000 D) $9,000

Solution:

Department: Square Feet Percent Operating Department 1...... 10,000 56% Operating Department 2...... 8,000 44% Total square feet...... 18,000 100%

Total Custodial Services costs...... $36,000 × % to Operating Department 2...... 44% Custodial Services costs allocated to Operating Department 2...... $16,000

(Appendix 4B) Kahuna Financial Services Corporation has two service departments and two operating departments. Selected information on the four departments for last year are as follows:

Number of CPU Hours Employees Service departments: Data Processing...... – 15 Cafeteria...... 1,000 – Operating departments: Investments...... 15,000 114 Loans...... 9,000 171

Kahuna allocates Data Processing cost first on the basis of CPU hours. Kahuna then allocates Cafeteria cost on the basis of the number of employees. Operating costs in Data Processing for last year were $870,000. Operating costs in Cafeteria for last year were $200,000. No distinction is made between variable and fixed costs.

182. If service department costs are allocated using the direct method, how much service cost will be allocated from Data Processing to Investments? A) $435,000 B) $522,000 C) $528,000 D) $543,750

Solution: Operating Service Department Department Data Invest- Processing Cafeteria ments Loans Total Departmental costs $1,070,00 before allocation..... $870,000 $200,000 0 Allocation: Data processing costs (15/24, 9/24)*...... (870,000) $543,750 $326,250 0 Cafeteria costs (114/285, 171/285)**...... (200,000) 80,000 120,000 0 Total costs after $1,070,00 allocation...... $ 0 $ 0 $623,750 $446,250 0

*Data processing costs are allocated on the basis of CPU hours: 15 + 9 = 24. **Cafeteria costs are allocated on the basis of the number of employees: 114 + 171 = 285.

183. If service department costs are allocated using the step-down method, how much service cost will be allocated from Data Processing to Loans? A) $313,200 B) $316,800 C) $326,250 D) $330,000

Solution: Operating Service Department Department Data Invest- Processing Cafeteria ments Loans Total Departmental costs $1,070,00 before allocation...... $870,000 $200,000 0 Allocation: Data processing costs $313,20 (1/25, 15/25, 9/25)*...... (870,000) 34,800 $522,000 0 0 Cafeteria costs (114/285, 171/285)**...... (234,800) 93,920 140,880 0 Total costs after $454,08 $1,070,00 allocation...... $ 0 $ 0 $615,920 0 0

*Data processing costs are allocated on the basis of CPU hours: 15 + 9 + 1 = 25. **Cafeteria costs are allocated on the basis of the number of employees: 114 + 171 = 285.

(Appendix 4B) Greek Corporation has two service departments (Sigma and Delta) that provide service to each other and to two operating departments (Chi and Omega). Sigma provides 25% of its service to Delta, 15% of its service to Chi, and 60% of its service to Omega. Delta provides 8% of its service to Sigma, 69% of its service to Chi, and 23% of its service to Omega. Operating costs in Sigma are $90,000. Operating costs in Delta are $50,000. Cost allocations are made starting with Sigma. No distinction is made between variable and fixed costs.

184. If service department costs are allocated using the direct method, what is the total amount of service cost that will be allocated to Omega? A) $84,500 B) $70,675 C) $72,125 D) $73,075

Solution: Service Operating Department Department Sigma Delta Chi Omega Total Departmental costs before $140,00 allocation $90,000 $50,000 0 Allocation: Sigma costs (15/75, 60/75)* (90,000) $18,000 $72,000 0 Delta costs (69/92, 23/92)** (50,000) 37,500 12,500 0 $140,00 Total costs after allocation $ 0 $ 0 $55,500 $84,500 0

*Sigma department costs allocation: 15% + 60% = 75%. **Delta department costs allocation: 69% + 23% = 92%.

185. If service department costs are allocated using the step-down method, what is the total amount of service cost that will be allocated to Chi? A) $48,000 B) $67,875 C) $63,525 D) $64,125

Solution: Service Operating Department Department Sigma Delta Chi Omega Total Departmental costs before $140,00 allocation...... $90,000 $50,000 0 Allocation: Sigma costs (25%, 15%, 60%)*...... (90,000) 22,500 $13,500 $54,000 0 Delta costs (69/92, 23/92)**... (72,500) 54,375 18,125 0 $140,00 Total costs after allocation...... $ 0 $ 0 $67,875 $72,125 0

*Sigma department costs allocation: 15% + 60% + 25% = 100%. **Delta department costs allocation: 69% + 23% = 92%.

(Appendix 4B) Seidell Corporation has two service departments, Administrative and Facilities, and two operating departments, Assembly and Customer Solutions.

Service Department Operating Department Adminis- Customer trative Facilities Assembly Solutions Departmental costs... $43,560 $54,720 $561,960 $253,030 Employee hours...... 4,000 2,000 27,000 17,000 Space occupied...... 1,000 2,000 37,000 1,000

The company uses the direct method to allocate service department costs to operating departments. Administrative costs are allocated on the basis of employee hours and Facilities costs are allocated on the basis of space occupied.

186. The total amount of Administrative Department cost allocated to the Assembly Department is closest to: A) $26,730 B) $25,568 C) $42,414 D) $23,522

Solution: Service Operating Department Department Customer Admin. Facilities Assembly Solutions Total Departmental costs before $913,27 allocation...... $43,560 $54,720 $561,960 $253,030 0 Allocation: Admin. costs (27/44, 17/44)*...... (43,560) 26,730 16,830 0 Facilities costs (37/38, 1/38)**...... (54,720) 53,280 1,440 0 $913,27 Total costs after allocation $ 0 $ 0 $641,970 $271,300 0

*Administration costs are allocated on the basis of employee hours: 27 + 17 = 44. **Facilities costs are allocated on the basis of space occupied: 37 + 1 = 38.

187. The total Customer Solutions Department cost after the allocations of service department costs is closest to: A) $269,175 B) $254,470 C) $270,593 D) $271,300

Solution: Service Department Operating Department Customer Admin. Facilities Assembly Solutions Total Departmental costs before $913,27 allocation...... $43,560 $54,720 $561,960 $253,030 0 Allocation: Admin. costs (27/44, 17/44)*...... (43,560) 26,730 16,830 0 Facilities costs (37/38, 1/38)**...... (54,720) 53,280 1,440 0 $913,27 Total costs after allocation. $ 0 $ 0 $641,970 $271,300 0

*Administrative costs are allocated on the basis of employee hours: 27 + 17 = 44. **Facilities costs are allocated on the basis of space occupied: 37 + 1 = 38.

(Appendix 4B) Maute Clinic has two service departments, Administrative and Support, and two operating departments, Adult Medicine and Pediatrics.

Service Department Operating Department Adminis- Adult trative Support Medicine Pediatrics Departmental costs... $23,600 $51,480 $259,690 $288,790 Employee hours...... 3,000 2,000 26,000 14,000 Space occupied...... 3,000 2,000 38,000 6,000

The clinic uses the direct method to allocate service department costs to operating departments. Administrative Department costs are allocated on the basis of employee hours and Support Department costs are allocated on the basis of space occupied in square feet.

188. The total amount of Administrative Department cost allocated to the Adult Medicine Department is closest to: A) $13,636 B) $14,610 C) $20,382 D) $15,340

Solution: Service Operating Department Department Adult Admin. Support Medicine Pediatrics Total Departmental costs before $623,56 allocation...... $23,600 $51,480 $259,690 $288,790 0 Allocation: Admin. costs (26/40, 14/40)*...... (23,600) 15,340 8,260 0 Support costs (38/44, 6/44)**...... (51,480) 44,460 7,020 0 $623,56 Total costs after allocation.. $ 0 $ 0 $319,490 $304,070 0

*Administration costs are allocated on the basis of employee hours: 26 + 14 = 40. **Support costs are allocated on the basis of space occupied: 38 + 6 = 44.

189. The total Pediatrics Department cost after the allocations of service department costs is closest to: A) $302,436 B) $304,070 C) $304,136 D) $295,810

Solution: Service Operating Department Department Adult Admin. Support Medicine Pediatrics Total Departmental costs before $623,56 allocation...... $23,600 $51,480 $259,690 $288,790 0 Allocation: Admin. costs (26/40, 14/40)*...... (23,600) 15,340 8,260 0 Support costs (38/44, 6/44)**...... (51,480) 44,460 7,020 0 $623,56 Total costs after allocation.. $ 0 $ 0 $319,490 $304,070 0

*Administration costs are allocated on the basis of employee hours: 26 + 14 = 40. **Support costs are allocated on the basis of space occupied: 38 + 6 = 44.

(Appendix 4B) Ockey Corporation uses the direct method to allocate service department costs to operating departments. The company has two service departments, Information Technology and Personnel, and two operating departments, Fabrication and Customization.

Service Department Operating Department Information Fabri- Customi- Technology Personnel cation zation Departmental costs... $26,880 $21,525 $251,210 $447,000 Computer workstations...... 37 18 43 37 Employees...... 34 13 73 32

Information Technology Department costs are allocated on the basis of computer workstations and Personnel Department costs are allocated on the basis of employees.

190. The total amount of Information Technology Department cost allocated to the two operating departments is closest to: A) $26,880 B) $15,929 C) $58,119 D) $21,943

Solution:

All of the Information Technology Department cost will be allocated to the two operating departments.

191. The total Fabrication Department cost after service department allocations is closest to: A) $270,110 B) $277,969 C) $280,623 D) $274,308

Solution: Service Operating Department Department Info. Tech. Personnel Fabrication Custom. Total Departmental costs before $746,61 allocation...... $26,880 $21,525 $251,210 $447,000 5 Allocation: Info. Tech. costs (43/80, 37/80)*...... (26,880) 14,448 12,432 0 Personnel costs (73/105, 32/105)**...... (21,525) 14,965 6,560 0 $746,61 Total costs after allocation $ 0 $ 0 $280,623 $465,992 5

*Information technology costs are allocated on the basis of number of computer workstations: 26 + 14 = 40. **Personnel costs are allocated on the basis of employees: 38 + 6 = 44.

(Appendix 4B) Romain Surgical Hospital uses the direct method to allocate service department costs to operating departments. The hospital has two service departments, Information Technology and Administration, and two operating departments, Surgery and Recovery.

Service Department Operating Department Information Admini- Technology stration Surgery Recovery Departmental costs... $25,956 $36,356 $563,640 $588,200 Computer workstations...... 20 17 54 30 Employees...... 15 13 95 27

Information Technology Department costs are allocated on the basis of computer workstations and Administration Department costs are allocated on the basis of employees.

192. The total amount of Information Technology Department cost allocated to the two operating departments is closest to: A) $18,019 B) $109,015 C) $21,587 D) $25,956

Solution:

All of the Information Technology Department cost will be allocated to the two operating departments.

193. The total Surgery Department cost after service department allocations is closest to: A) $598,249 B) $608,636 C) $602,727 D) $605,827

Solution: Service Operating Department Department Info. Tech. Admin. Surgery Recovery Total Departmental costs before $1,214,15 allocation...... $25,956 $36,356 $563,640 $588,200 2 Allocation: Info. Tech. costs (54/84, 30/84)*...... (25,956) 16,686 9,270 0 Administration costs (95/122, 27/122)**...... (36,356) 28,310 8,046 0 $1,214,15 Total costs after allocation $ 0 $ 0 $608,636 $605,516 2

*Administration costs are allocated on the basis of computer workstations: 54 + 30 = 84. **Support costs are allocated on the basis of employees: 95 + 27 = 122.

(Appendix 4B) Strzelecki Corporation uses the step-down method to allocate service department costs to operating departments. The company has two service departments, Service Department A and Service Department B, and two operating departments, Operating Department X and Operating Department Y. Data concerning those departments follow:

Service Department Operating Department Service Service Operating Operating Department Department Department Department A B X Y Departmental costs $37,800 $45,780 $247,360 $304,330 Allocation base A. . 5,000 1,000 29,000 15,000 Allocation base B... 5,000 2,000 39,000 3,000

Service Department A costs are allocated first on the basis of allocation base A and Service Department B costs are allocated second on the basis of allocation base B.

194. In the first step of the allocation, the amount of Service Department A cost allocated to the Operating Department X is closest to: A) $24,360 B) $21,924 C) $16,948 D) $24,914

Solution: Operating Service Department Department Service Service Oper. Oper. Dept. A Dept. B Dept. X Dept.Y Total Departmental costs $635,27 before allocation...... $37,800 $45,780 $247,360 $304,330 0 Allocation: Serv. Dept. A costs (1/45, 29/45, 15/45)*...... (37,800) 840 24,360 12,600 0 Serv. Dept. B costs (39/42, 3/42)**...... (46,620) 43,290 3,330 0 Total costs after $635,27 allocation...... $ 0 $ 0 $315,010 $320,260 0

*Service Department A costs are allocated on the basis of allocation base A: 1 + 29 + 15 = 45. **Service Department B costs are allocated on the basis of allocation base B: 39 + 3 = 42.

195. The total Operating Department Y cost after allocations is closest to: A) $320,486 B) $318,473 C) $320,260 D) $307,660

Solution: Service Operating Department Department Service Service Oper. Oper. Dept. A Dept. B Dept. X Dept.Y Total Departmental costs before $635,27 allocation...... $37,800 $45,780 $247,360 $304,330 0 Allocation: Serv. Dept. A costs (1/45, 29/45, 15/45)*...... (37,800) 840 24,360 12,600 0 Serv. Dept. B costs (39/42, 3/42)**...... (46,620) 43,290 3,330 0 $635,27 Total costs after allocation... $ 0 $ 0 $315,010 $320,260 0

*Service Department A costs are allocated on the basis of allocation base A: 1 + 29 + 15 = 45. **Service Department B costs are allocated on the basis of allocation base B: 39 + 3 = 42.

(Appendix 4B) Yamane Corporation, a manufacturer, uses the step-down method to allocate service department costs to operating departments. The company has two service departments, Administration and Facilities, and two operating departments, Assembly and Finishing. Data concerning those departments follow:

Service Department Operating Department Adminis- trative Facilities Assembly Finishing Departmental costs... $22,620 $67,440 $105,520 $427,780 Labor hours...... 3,000 2,000 21,000 16,000 Space occupied...... 7,000 1,000 32,000 3,000

Administration Department costs are allocated first on the basis of labor hours and Facilities Department costs are allocated second on the basis of space occupied.

196. In the first step of the allocation, the amount of Administration Department cost allocated to the Assembly Department is closest to: A) $4,476 B) $12,838 C) $11,310 D) $12,180

Solution: Service Operating Department Department Admin. Facilities Assembly Finishing Total Departmental costs before $623,36 allocation...... $22,620 $67,440 $105,520 $427,780 0 Allocation: Admin. costs (2/39, 21/39, 16/39)*...... (22,620) 1,160 12,180 9,280 0 Facilities costs (32/35, 3/35)**...... (68,600) 62,720 5,880 0 $623,36 Total costs after allocation.. $ 0 $ 0 $180,420 $442,940 0

*Administration costs are allocated on the basis of labor hours: 2 + 21 + 16 = 39. **Facilities costs are allocated on the basis of space occupied: 32 + 3 = 35.

197. The total Finishing Department cost after allocations is closest to: A) $443,342 B) $433,660 C) $441,102 D) $442,940

Solution: Service Operating Department Department Admin. Facilities Assembly Finishing Total Departmental costs before $623,36 allocation...... $22,620 $67,440 $105,520 $427,780 0 Allocation: Admin. costs (2/39, 21/39, 16/39)*...... (22,620) 1,160 12,180 9,280 0 Facilities costs (32/35, 3/35)**...... (68,600) 62,720 5,880 0 $623,36 Total costs after allocation..... $ 0 $ 0 $180,420 $442,940 0

*Administration costs are allocated on the basis of labor hours: 2 + 21 + 16 = 39. **Facilities costs are allocated on the basis of space occupied: 32 + 3 = 35.

(Appendix 4B) Muckenfuss Clinic uses the step-down method to allocate service department costs to operating departments. The clinic has two service departments, Personnel and Information Technology (IT), and two operating departments, Family Medicine and Geriatric Medicine. Data concerning those departments follow:

Service Department Operating Department Family Geriatric Personnel IT Medicine Medicine Departmental costs... $66,930 $11,678 $563,940 $82,310 Employees...... 11 27 104 160 PCs...... 11 27 85 87

Personnel costs are allocated first on the basis of employees and IT costs are allocated second on the basis of PCs.

198. In the first step of the allocation, the amount of Personnel Department cost allocated to the Family Medicine Department is closest to: A) $23,920 B) $58,405 C) $23,049 D) $26,366

Solution: Service Operating Department Department Family Geriatric Personnel IT Medicine Medicine Total Departmental costs before $724,85 allocation...... $66,930 $11,678 $563,940 $82,310 8 Allocation: Personnel costs (27/291, 104/291, 160/291)*...... (66,930) 6,210 23,920 36,800 0 IT costs (85/172, 87/172)** (17,888) 8,840 9,048 0 $724,85 Total costs after allocation.. $ 0 $ 0 $596,700 $128,158 8

*Personnel costs are allocated on the basis of employees: 27 + 104 + 160 = 291. **IT costs are allocated on the basis of number of PCs: 85 + 87 = 172.

199. The total Geriatric Medicine Department cost after allocations is closest to: A) $122,608 B) $128,781 C) $128,158 D) $91,358

Solution: Service Operating Department Department Family Geriatric Personnel IT Medicine Medicine Total Departmental costs before $724,85 allocation...... $66,930 $11,678 $563,940 $82,310 8 Allocation: Personnel costs (27/291, 104/291, 160/291)*...... (66,930) 6,210 23,920 36,800 0 IT costs (85/172, 87/172)** ...... (17,888) 8,840 9,048 0 $724,85 Total costs after allocation $ 0 $ 0 $596,700 $128,158 8

(Appendix 4B) Blondell Legal Services, LLC, uses the step-down method to allocate service department costs to operating departments. The firm has two service departments, Personnel and Information Technology (IT), and two operating departments, Family Law and Corporate Law. Data concerning those departments follow:

Service Department Operating Department Family Corporate Personnel IT Law Law Departmental costs... $85,284 $29,703 $883,360 $189,010 Employees...... 11 25 121 163 PCs...... 12 26 112 137

Personnel costs are allocated first on the basis of employees and IT costs are allocated second on the basis of PCs.

200. In the first step of the allocation, the amount of Personnel Department cost allocated to the Family Law Department is closest to: A) $32,248 B) $70,252 C) $36,336 D) $33,396

Solution: Service Operating Department Department Family Corporate Personnel IT Law Law Total Departmental costs before $1,187,35 allocation...... $85,284 $29,703 $883,360 $189,010 7 Allocation: Personnel costs (25/309, 121/309, 163/309)*...... (85,284) 6,900 33,396 44,988 0 IT costs (112/249, 137/249)**...... (36,603) 16,464 20,139 0 $1,187,35 Total costs after allocation $ 0 $ 0 $933,220 $254,137 7

201. The total Corporate Law Department cost after allocations is closest to: A) $254,137 B) $246,630 C) $254,301 D) $209,149

Solution: Service Operating Department Department Family Corporate Personnel IT Law Law Total Departmental costs before $1,187,35 allocation...... $85,284 $29,703 $883,360 $189,010 7 Allocation: Personnel costs (25/309, 121/309, 163/309)*...... (85,284) 6,900 33,396 44,988 0 IT costs (112/249, 137/249)**...... (36,603) 16,464 20,139 0 $1,187,35 Total costs after allocation $ 0 $ 0 $933,220 $254,137 7

Essay Questions

202. Bayas Corporation uses processing costing. A number of transactions that occurred in November are listed below.

(1) Raw materials that cost $39,800 are withdrawn from the storeroom for use in the Mixing Department. All of these raw materials are classified as direct labor. (2) Direct labor costs of $16,100 are incurred, but not yet paid, in the Mixing Department. (3) Manufacturing overhead of $45,700 is applied in the Mixing Department using the department's predetermined overhead rate. (4) Units with a carrying cost of $87,600 finish processing in the Mixing Department and are transferred to the Drying Department for further processing. (5) Units with a carrying cost of $111,300 finish processing in the Drying Department, the final step in the production process, and are transferred to the finished goods warehouse. (6) Finished goods with a carrying cost of $98,200 are sold.

Required:

Prepare journal entries for each of the transactions listed above.

(1) Work in Process-Mixing Department $39,800 Raw Materials $39,800 (2) Work in Process-Mixing Department $16,100 Salaries and Wages Payable $16,100 (3) Work in Process-Mixing Department $45,700 Manufacturing Overhead $45,700 (4) Work in Process-Drying Department $87,600 Work in Process-Mixing Department $87,600 (5) Finished Goods $111,300 Work in Process-Drying Department $111,300 (6) Cost of Goods Sold $98,200 Finished Goods $98,200

AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 1 Level: Easy

203. During August, the following transactions were recorded at Goyer Corporation. The company uses processing costing.

(1) Raw materials that cost $24,500 are withdrawn from the storeroom for use in the Assembly Department. All of these raw materials are classified as direct labor. (2) Direct labor costs of $29,000 are incurred, but not yet paid, in the Assembly Department. (3) Manufacturing overhead of $58,900 is applied in the Assembly Department using the department's predetermined overhead rate. (4) Units with a carrying cost of $101,200 finish processing in the Assembly Department and are transferred to the Painting Department for further processing. (5) Units with a carrying cost of $106,100 finish processing in the Painting Department, the final step in the production process, and are transferred to the finished goods warehouse. (6) Finished goods with a carrying cost of $95,100 are sold.

Required:

Prepare journal entries for each of the transactions listed above.

(1) Work in Process-Assembly Department $24,500 Raw Materials $24,500 (2) Work in Process-Assembly Department $29,000 Salaries and Wages Payable $29,000 (3) Work in Process-Assembly Department $58,900 Manufacturing Overhead $58,900 (4) Work in Process-Painting Department $101,200 Work in Process-Assembly Department $101,200 (5) Finished Goods $106,100 Work in Process-Painting Department $106,100 (6) Cost of Goods Sold $95,100 Finished Goods $95,100

204. Kamp Company uses the weighted-average method in its process costing. Information about units processed during a recent month in the Curing Department follow:

Conversion Percent Units Completion Beginning work in process inventory...... 10,000 30% Units started into production...... 150,000 Units completed and transferred out...... 140,000 Ending work in process inventory...... 20,000 40%

The beginning work in process inventory had $4,600 in conversion cost. During the month, the Department incurred an additional $210,000 in conversion cost.

Required:

a. Determine the equivalent units of production for conversion for the month. b. Determine the cost per equivalent unit of production for conversion for the month. c. Determine the total conversion cost transferred out during the month. d. Determine the conversion cost assigned to the ending work in process inventory.

a. Units transferred out...... 140,000 Add: equivalent units in the ending inventory...... 8,000 Equivalent units of production...... 148,000

b. Cost in the beginning inventory...... $ 4,600 Cost added during the month...... 210,000 Total cost...... $214,600 $214,600 ÷ 148,000 units = $1.45 per unit

c. 140,000 units × $1.45 per unit = $203,000

d. 20,000 units × 40% × $1.45 per unit = $11,600

AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 2,3,4 Level: Medium

205. Timberline Associates uses the weighted-average method in its process costing system. The following data are for the first processing department for a recent month:

Work in process, beginning: Units in process...... 2,400 Percent complete with respect to materials...... 75% Percent complete with respect to conversion...... 50% Costs in the beginning inventory: Materials cost...... $8,400 Conversion cost...... $7,200 Units started into production during the month...... 20,800 Units completed and transferred out...... 22,200 Costs added to production during the month: Materials cost...... $97,400 Conversion cost...... $129,600 Work in process, ending: Units in process...... 1,000 Percent complete with respect to materials...... 80% Percent complete with respect to conversion...... 60%

Required:

a. Determine the equivalent units of production. b. Determine the costs per equivalent unit. c. Determine the cost of ending work in process inventory. d. Determine the cost of the units transferred to the next department.

a. Materials Conversion Transferred to next department...... 22,200 22,200 Ending work in process: Materials: 1,000 units × 80%...... 800 Conversion: 1,000 units × 60%...... 600 Equivalent units of production...... 23,000 22,800

b. Materials Conversion Work in process, beginning...... $ 8,400 $ 7,200 Cost added during the month...... 97,400 129,600 Total cost (a)...... $105,800 $136,800 Equivalent units (above) (b)...... 23,000 22,800 Cost per equivalent unit (a) ÷ (b)...... $4.60 $6.00

c. Materials Conversion Total Units transferred out...... 22,200 22,200 Cost per equivalent unit...... $4.60 $6.00 Cost transferred out...... $102,120 $133,200 $235,320

d. Materials Conversion Total Equivalent units of production: ending work in process...... 800 600 Cost per equivalent unit...... $4.60 $6.00 Cost of ending work in process...... $3,680 $3,600 $7,280

AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 2,3,4 Level: Hard

206. Avignon Inc. uses the weighted-average method in its process costing system. The following data concern the operations of the company's first processing department for a recent month.

Work in process, beginning: Units in process...... 900 Percent complete with respect to materials...... 80% Percent complete with respect to conversion..... 10% Costs in the beginning inventory: Materials cost...... $6,768 Conversion cost...... $3,186 Units started into production during the month..... 10,000 Units completed and transferred out...... 10,100 Costs added to production during the month: Materials cost...... $97,104 Conversion cost...... $356,940 Work in process, ending: Units in process...... 800 Percent complete with respect to materials...... 90% Percent complete with respect to conversion..... 20%

Required:

a. Determine the equivalent units of production. b. Determine the costs per equivalent unit. c. Determine the cost of ending work in process inventory. d. Determine the cost of the units transferred to the next department.

a. Materials Conversion Units transferred to next department...... 10,100 10,100 Ending work in process: Materials: 800 units × 90%...... 720 Conversion: 800 units × 20%...... 160 Equivalent units of production...... 10,820 10,260

b. Materials Conversion Cost of beginning work in process...... $ 6,768 $ 3,186 Cost added during the month...... 97,104 356,940 Total cost...... $103,872 $360,126 Equivalent units...... 10,820 10,260 Cost per equivalent unit...... $9.60 $35.10

c. Ending work in process: Materials Conversion Total Equivalent units of production...... 720 160 Cost per equivalent unit...... $9.60 $35.10 Cost of ending work in process inventory...... $6,912 $5,616 $12,528

d. Materials Conversion Total Units completed and transferred out...... 10,100 10,100 Cost per equivalent unit...... $9.60 $35.10 Cost of units transferred out...... $96,960 $354,510 $451,470

207. Bansal Inc. uses the weighted-average method in its process costing system. The following data concern the operations of the company's first processing department for a recent month.

Work in process, beginning: Units in process...... 300 Percent complete with respect to materials...... 60% Percent complete with respect to conversion..... 60% Costs in the beginning inventory: Materials cost...... $342 Conversion cost...... $4,518 Units started into production during the month..... 22,000 Units completed and transferred out...... 21,800 Costs added to production during the month: Materials cost...... $45,963 Conversion cost...... $538,602 Work in process, ending: Units in process...... 500 Percent complete with respect to materials...... 50% Percent complete with respect to conversion..... 20%

Required:

Using the weighted-average method: a. Determine the equivalent units of production for materials and conversion costs. b. Determine the cost per equivalent unit for materials and conversion costs. c. Determine the cost of units transferred out of the department during the month. d. Determine the cost of ending work in process inventory in the department.

Weighted-average method: a. Materials Conversion Units transferred to next department...... 21,800 21,800 Ending work in process: Materials: 500 units × 50%...... 250 Conversion: 500 units × 20%...... 100 Equivalent units of production...... 22,050 21,900

b. Materials Conversion Cost of beginning work in process...... $ 342 $ 4,518 Cost added during the month...... 45,963 538,602 Total cost...... $46,305 $543,120 Equivalent units...... 22,050 21,900 Cost per equivalent unit...... $2.10 $24.80

c. Ending work in process: Materials Conversion Total Equivalent units of production...... 250 100 Cost per equivalent unit...... $2.10 $24.80 Cost of ending work in process...... $525 $2,480 $3,005

d. Materials Conversion Total Units completed and transferred out...... 21,800 21,800 Cost per equivalent unit...... $2.10 $24.80 Cost of units transferred out...... $45,780 $540,640 $586,420

208. Whitney Company uses the weighted-average method in its process costing system. The following data were taken from the records of the first processing department for a recent month.

Work in process, beginning: Units in process...... 10 Percent complete with respect to materials...... 60% Percent complete with respect to conversion..... 30% Costs in the beginning inventory: Materials cost...... $1,200 Conversion cost...... $3,000 Units started into production during the month..... 150 Costs added to production during the month: Materials cost...... $42,460 Conversion cost...... $137,400 Work in process, ending: Units in process...... 20 Percent complete with respect to materials...... 40% Percent complete with respect to conversion..... 20%

Required:

a. How many units were transferred to the next department during the month? b. What were the equivalent units of production for materials and for conversion costs for the month? c. What were the costs per equivalent unit of production for materials and for conversion costs for the month? d. What was the cost of the ending work in process inventory in the department at the end of the month?

Weighted-average method: a. Units in beginning inventory...... 10 + Units started into production...... 150 − Units in ending inventory...... 20 = Units transferred out...... 140

b. Materials Conversion Transferred to next department...... 140 140 Work in process, ending...... 8 4 Equivalent units of production...... 148 144

c. Materials Conversion Work in process, beginning...... $ 1,200 $ 3,000 Cost added during the month...... 42,460 137,400 Total cost (a)...... $43,660 $140,400 Equivalent units (above) (b)...... 148 144 Cost per equivalent unit (a) ÷ (b)...... $295 $975

d. Materials Conversion Total Ending work in process equivalent units... 8 4 Cost per equivalent unit...... $295 $975 Cost of ending work in process...... $2,360 $3,900 $6,260

209. Mccabe Corporation uses the weighted-average method in its process costing. The following data pertain to its Assembly Department for November.

Percent Complete Units Materials Conversion Work in process, November 1...... 800 55% 10% Units started into production during November...... 8,200 Units completed during November and transferred to the next department...... 7,300 Work in process, November 30...... 1,700 75% 25%

Required:

Compute the equivalents units of production for both materials and conversion costs for the Assembly Department for November using the weighted-average method.

Weighted-average method: Materials Conversion Units transferred to the next department...... 7,300 7,300 Work in process, November 30: 1,700 units × 75%...... 1,275 1,700 units × 25%...... 425 Equivalent units of production...... 8,575 7,725

210. The following data have been provided by Cutts Corporation, which uses the weighted-average method in its process costing. The data are for the company's Shaping Department for February.

Percent Complete Units Materials Conversion Work in process, February 1...... 300 50% 10% Units started into production during February...... 5,200 Units completed during February and transferred to the next department...... 4,800 Work in process, February 28...... 700 50% 40%

Required:

Compute the equivalents units of production for both materials and conversion costs for the Shaping Department for February using the weighted-average method.

Weighted-average method: Materials Conversion Units transferred to the next department...... 4,800 4,800 Work in process, February 28: 700 units × 50%...... 350 700 units × 40%...... 280 Equivalent units of production...... 5,150 5,080

211. Camelin Inc. uses the weighted-average method in its process costing system. The following data concern the operations of the company's first processing department for a recent month.

Work in process, beginning: Units in process...... 600 Percent complete with respect to materials...... 60% Percent complete with respect to conversion...... 70% Units started into production during the month...... 20,000 Work in process, ending: Units in process...... 800 Percent complete with respect to materials...... 80% Percent complete with respect to conversion...... 50%

Required:

Using the weighted-average method, determine the equivalent units of production for materials and conversion costs.

Weighted-average method: Materials Conversion Transferred to next department...... 19,800 19,800 Work in process, ending: Materials: 800 units × 80%...... 640 Conversion: 800 units × 50%...... 400 Equivalent units of production...... 20,440 20,200

212. Poirrier Corporation uses process costing. The following data pertain to its Assembly Department for May.

Units in process, May 1: materials 75% complete, conversion 30% complete...... 700 Units started into production during May...... 5,500 Units completed and transferred to the next department.... 4,600 Units in process, May 31: materials 85% complete, conversion 65% complete...... 1,600

Required:

Determine the equivalent units of production for the Assembly Department for May using the weighted-average method.

Weighted-average method: Materials Conversion Transferred to next department...... 4,600 4,600 Work in process, ending: Materials: 1,600 units × 85%...... 1,360 Conversion: 1,600 units × 65%...... 1,040 Equivalent units of production...... 5,960 5,640

213. Greenham Corporation uses the weighted-average method in its process costing. The following data pertain to its Materials Preparation Department for March.

Units in process, March 1: materials 75% complete, conversion 60% complete...... 400 Units started into production during March...... 6,800 Units completed and transferred to the next department...... 6,300 Units in process, March 31: materials 55% complete, conversion 10% complete...... 900

Required:

Determine the equivalent units of production for the Materials Preparation Department for March using the weighted-average method.

Weighted-average method: Materials Conversion Transferred to next department...... 6,300 6,300 Work in process, ending: Materials: 900 units × 55%...... 495 Conversion: 900 units × 10%...... 90 Equivalent units of production...... 6,795 6,390

214. Jahncke Inc. uses the weighted-average method in its processing costing. The following data concern the company's Assembly Department for the month of April.

Materials Conversion Work in process, April 1...... $3,600 $1,902 Cost added to production in the Assembly Department during April...... $103,882 $278,010 Equivalent units of production for April...... 8,810 8,720

Required:

Compute the costs per equivalent unit for the Assembly Department for April.

Weighted-average method: Materials Conversion Work in process, April 1...... $ 3,600 $ 1,902 Cost added during the month in the Assembly Department...... 103,882 278,010 Total cost...... $107,482 $279,912 Equivalent units of production...... 8,810 8,720 Cost per equivalent unit...... $12.20 $32.10

215. Holling Inc. uses the weighted-average method in its processing costing. The following data concern the company's Mixing Department for the month of December.

Materials Conversion Work in process, December 1...... $7,530 $8,528 Cost added to production in the Mixing Department during December...... $225,900 $283,632 Equivalent units of production for December...... 9,300 8,800

Required:

Compute the cost per equivalent unit for materials and conversion for the Mixing Department in December.

Weighted-average method: Materials Conversion Work in process, December 1...... $ 7,530 $ 8,528 Cost added during the month in the Mixing Department 225,900 283,632 Total cost...... $233,430 $292,160 Equivalent units of production...... 9,300 8,800 Cost per equivalent unit...... $25.10 $33.20

216. Hutchcroft Corporation uses the weighted-average method in its processing costing. The following data concern the company's Assembly Department for the month of December.

Materials Conversion Cost per equivalent unit...... $24.30 $27.10 Equivalent units in ending work in process...... 630 225

During the month, 6,200 units were completed and transferred from the Assembly Department to the next department.

Required:

Determine the cost of ending work in process inventory and the cost of units transferred out of the department during December using the weighted-average method.

Weighted-average method: Transferred to the next department: 6,200 units at $51.40 per unit...... $318,680 Work in process, December 31: Materials, 630 EUs at $24.30 per EU...... $15,309 Conversion, 225 EUs at $27.10 per EU...... 6,098 Total work in process, December 31...... $21,407

AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 4 Level: Medium

217. Lorona Inc. has provided the following data concerning the Assembly Department for the month of June. The company uses the weighted-average method in its processing costing.

Materials Conversion Cost per equivalent unit...... $8.10 $28.50 Equivalent units in ending work in process...... 1,330 1,235

During the month, 7,400 units were completed and transferred from the Assembly Department to the next department.

Required:

Determine the cost of ending work in process inventory and the cost of units transferred out of the department during June using the weighted-average method.

Weighted-average method: Transferred to the next department: 7,400 units × $36.60 per unit...... $270,840 Work in process, June 30: Materials, 1,330 EUs at $8.10 per EU...... $10,773 Conversion, 1,235 EUs at $28.50 per EU...... 35,198 Total work in process, June 30...... $45,971

AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 4 Level: Medium

218. Dalsace Inc. uses the FIFO method in its process costing system. The following data concern the operations of the company's first processing department for a recent month.

Work in process, beginning: Units in process...... 400 Percent complete with respect to materials...... 60% Percent complete with respect to conversion...... 40% Costs in the beginning inventory: Materials cost...... $1,944 Conversion cost...... $4,512 Units started into production during the month...... 15,000 Units completed and transferred out...... 14,500 Costs added to production during the month: Materials cost...... $119,053 Conversion cost...... $418,950 Work in process, ending: Units in process...... 900 Percent complete with respect to materials...... 90% Percent complete with respect to conversion...... 40%

Required:

Using the FIFO method: a. Determine the equivalent units of production for materials and conversion costs. b. Determine the cost per equivalent unit for materials and conversion costs. c. Determine the cost of ending work in process inventory. d. Determine the cost of units transferred out of the department during the month.

FIFO method: a. Materials Conversion To complete the beginning work in process: Materials: 400 units × (100% − 60%)...... 160 Conversion: 400 units × (100% − 40%)...... 240 Units started and completed (14,500 − 400)...... 14,100 14,100 Ending work in process: Materials: 900 units × 90%...... 810 Conversion: 900 units × 40%...... 360 Equivalent units of production...... 15,070 14,700

b. Materials Conversion Cost added during the month...... $119,053 $418,950 Equivalent units of production...... 15,070 14,700 Cost per equivalent unit...... $7.90 $28.50

c. Materials Conversion Total Ending work in process: Equivalent units of production...... 810 360 Cost per equivalent unit...... $7.90 $28.50 Cost of ending work in process...... $6,399 $10,260 $16,659

d. Materials Conversion Total Cost from the beginning inventory...... $1,944 $4,512 $6,456 Cost to complete the units in beginning inventory: Equivalent units to complete...... 160 240 Cost per equivalent unit...... $7.90 $28.50 Cost to complete...... $1,264 $6,840 $8,104 Cost of units started and completed: Units started and completed...... 14,100 14,100 Cost per equivalent unit...... $7.90 $28.50 Cost of units started and completed...... $111,390 $401,850 $513,240 Total cost of units transferred out...... $527,800

AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting Appendix: 4A LO: 5,6,7 Level: Hard

219. Engsbye Inc. uses the FIFO method in its process costing system. The following data concern the operations of the company's first processing department for a recent month.

Work in process, beginning: Units in process...... 200 Percent complete with respect to materials...... 80% Percent complete with respect to conversion...... 10% Costs in the beginning inventory: Materials cost...... $800 Conversion cost...... $406 Units started into production during the month...... 20,000 Units completed and transferred out...... 20,000 Costs added to production during the month: Materials cost...... $96,000 Conversion cost...... $413,648 Work in process, ending: Units in process...... 200 Percent complete with respect to materials...... 80% Percent complete with respect to conversion...... 50%

Required:

Using the FIFO method: a. Determine the equivalent units of production for materials and conversion costs. b. Determine the cost per equivalent unit for materials and conversion costs. c. Determine the cost of ending work in process inventory. d. Determine the cost of units transferred out of the department during the month.

FIFO method: a. Materials Conversion To complete the beginning work in process: Materials: 200 units × (100% − 80%)...... 40 Conversion: 200 units × (100% − 10%)...... 180 Units started and completed (20,000 − 200). . 19,800 19,800 Ending work in process: Materials: 200 units × 80%...... 160 Conversion: 200 units × 50%...... 100 Equivalent units of production...... 20,000 20,080

b. Materials Conversion Cost added during the month...... $96,000 $413,648 Equivalent units of production...... 20,000 20,080 Cost per equivalent unit...... $4.80 $20.60

c. Ending work in process: Materials Conversion Total Equivalent units of production...... 160 100 Cost per equivalent unit...... $4.80 $20.60 Cost of ending work in process...... $768 $2,060 $2,828

d. Materials Conversion Total Cost from the beginning inventory...... $800 $406 $1,206 Cost to complete the units in beginning inventory: Equivalent units to complete...... 40 180 Cost per equivalent unit...... $4.80 $20.60 Cost to complete...... $192 $3,708 $3,900 Cost of units started and completed: Units started and completed...... 19,800 19,800 Cost per equivalent unit...... $4.80 $20.60 Cost of units started and completed..... $95,040 $407,880 $502,920 Total cost of units transferred out...... $508,026

AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting Appendix: 4A LO: 5,6,7 Level: Hard

220. Lenning Corporation uses the FIFO method in its process costing. The following data pertain to its Assembly Department for July.

Percent Complete Units Materials Conversion Work in process, July 1...... 300 75% 10% Units started into production during July. . 6,100 Units completed during July and transferred to the next department...... 5,600 Work in process, July 31...... 800 90% 85%

Required:

Compute the equivalent units of production for both materials and conversion costs for the Assembly Department for July using the FIFO method.

FIFO method: Materials Conversion Work in process, July 1: 300 units × (100% − 75%)...... 75 300 units × (100% − 10%)...... 270 Units started and completed in July...... 5,300 5,300 Work in process, July 31: 800 units × 90%...... 720 800 units × 85%...... 680 Equivalent units of production...... 6,095 6,250

AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting Appendix: 4A LO: 5 Level: Medium

221. The following data pertain to the Milling Department of Malmberg Corporation for June. The company uses the FIFO method in its process costing.

Percent Complete Units Materials Conversion Work in process, June 1...... 800 80% 35% Units started into production during June.. 9,400 Units completed during June and transferred to the next department...... 8,300 Work in process, June 30...... 1,900 75% 40%

Required:

Compute the equivalents units of production for both materials and conversion costs for the Milling Department for June using the FIFO method.

FIFO method: Materials Conversion Work in process, June 1: 800 units × (100% − 80%)...... 160 800 units × (100% − 35%)...... 520 Units started and completed in June...... 7,500 7,500 Work in process, June 30: 1,900 units × 75%...... 1,425 1,900 units × 40%...... 760 Equivalent units of production...... 9,085 8,780

222. Fuchs Inc. uses the FIFO method in its process costing system. The following data concern the operations of the company's first processing department for a recent month.

Work in process, beginning: Units in process...... 800 Percent complete with respect to materials...... 70% Percent complete with respect to conversion...... 10% Units started into production during the month...... 14,000 Work in process, ending: Units in process...... 800 Percent complete with respect to materials...... 60% Percent complete with respect to conversion...... 40%

Required:

Using the FIFO method, determine the equivalent units of production for materials and conversion costs.

FIFO method: Materials Conversion To complete the beginning work in process: Materials: 800 units × (100% − 70%)...... 240 Conversion: 800 units × (100% − 10%)...... 720 Units started and completed (14,000 − 800)...... 13,200 13,200 Ending work in process: Materials: 800 units × 60%...... 480 Conversion: 800 units × 40%...... 320 Equivalent units of production...... 13,920 14,240

223. Clarks Corporation uses the FIFO method in its process costing. The following data pertain to its Assembly Department for August.

Units in process, August 1: materials 85% complete, conversion 20% complete...... 700 Units started into production during August...... 9,400 Units completed and transferred to the next department. 8,300 Units in process, August 31: materials 90% complete, conversion 60% complete...... 1,800

Required:

Determine the equivalent units of production for the Assembly Department for August using the FIFO method.

FIFO method: Materials Conversion To complete the beginning work in process: Materials: 700 units × (100% − 85%)...... 105 Conversion: 700 units × (100% − 20%)...... 560 Units started and completed (8,300 – 700)...... 7,600 7,600 Ending work in process: Materials: 1,800 units × 90%...... 1,620 Conversion: 1,800 units × 60%...... 1,080 Equivalent units of production...... 9,325 9,240

224. The following data have been provided by Corby Corporation for the Circuit Prep Department. The company uses the FIFO method in its process costing.

Units in process, May 1: materials 60% complete, conversion 45% complete...... 500 Units started into production during May...... 8,900 Units started and completed during May...... 7,800 Units completed and transferred to the next department during May...... 8,300 Units in process, May 31: materials 80% complete, conversion 40% complete...... 1,100

Required:

Determine the equivalent units of production for the Circuit Prep Department for May using the FIFO method.

FIFO method: Materials Conversion To complete the beginning work in process: Materials: 500 units × (100% − 60%)...... 200 Conversion: 500 units × (100% − 45%)...... 275 Units started and completed...... 7,800 7,800 Ending work in process: Materials: 1,100 units × 80%...... 880 Conversion: 1,100 units × 40%...... 440 Equivalent units of production...... 8,880 8,515

225. Zubris Corporation uses the FIFO method in its processing costing. The following data concern the company's Assembly Department for the month of July.

Materials Conversion Work in process, July 1...... $4,761 $5,365 Cost added to production in the Assembly Department during July...... $26,496 $34,040 Equivalent units of production for July..... 2,070 1,850

Required:

Compute the costs per equivalent unit for the Assembly Department for July using the FIFO method.

FIFO method: Materials Conversion Cost added during July...... $26,496 $34,040 Equivalent units of production...... 2,070 1,850 Cost per equivalent unit...... $12.80 $18.40

AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting Appendix: 4A LO: 6 Level: Easy

226. Rauzman Corporation uses the FIFO method in its processing costing. The following data concern the company's Mixing Department for the month of August.

Materials Conversion Work in process, August 1...... $25,641 $15,300 Cost added to production in the Mixing Department during August...... $170,940 $179,775 Equivalent units of production for August...... 7,770 7,650

Required:

Compute the cost per equivalent unit for materials and conversion for the Mixing Department for August using the FIFO method.

FIFO method: Materials Conversion Cost added during the month...... $170,940 $179,775 Equivalent units...... 7,770 7,650 Cost per equivalent unit...... $22.00 $23.50

AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting Appendix: 4A LO: 6 Level: Easy

227. Crone Corporation uses the FIFO method in its processing costing system. The following data concern the company's Assembly Department for the month of October.

Cost in beginning work in process inventory...... $1,920 Units started and completed this month...... 3,130

Materials Conversion Cost per equivalent unit...... $9.50 $20.40 Equivalent units required to complete the units in beginning work in process inventory...... 360 140 Equivalent units in ending work in process inventory...... 330 264

Required:

Determine the cost of ending work in process inventory and the cost of units transferred out of the department during October using the FIFO method.

FIFO method: Transferred to the next department: From the beginning work in process inventory: Cost in beginning work in process inventory...... $ 1,920 Cost to complete these units: Materials, 360 EUs at $9.50 per EU...... 3,420 Conversion, 140EUs at $20.40 per EU...... 2,856 Total cost from beginning inventory...... 8,196 Units started and completed this month, 3,130 units at $29.90 per unit...... 93,587 Total cost transferred to the next department...... $101,783

Work in process, October 31: Materials, 330 EUs at $9.50 per EU...... $3,135 Conversion, 264 EUs at $20.40 per EU...... 5,386 Total work in process, October 31...... $8,521

228. The following data has been provided by Glasco Inc., a company that uses the FIFO method in its processing costing system. The data concern the company's Shaping Department for the month of June.

Cost in beginning work in process inventory...... $1,690 Units started and completed this month...... 4,110

Materials Conversion Cost per equivalent unit...... $12.50 $45.70 Equivalent units required to complete the units in beginning work in process inventory...... 460 260 Equivalent units in ending work in process inventory...... 220 176

Required:

Determine the cost of ending work in process inventory and the cost of the units transferred out of the department during June using the FIFO method.

FIFO method: Transferred to the next department: From the beginning work in process inventory: Cost in beginning work in process inventory. . $ 1,690 Cost to complete these units: Materials, at 460 EUs $12.50 per EU...... 5,750 Conversion, at 260 EUs $45.70 per EU...... 11,882 Total cost from beginning inventory...... 19,322 Units started and completed this month, 4,110 units at $58.20 per unit...... 239,202 Total cost transferred to the next department..... $258,524

Work in process, June 30: Materials, 220 EUs at $12.50 per EU...... $ 2,750 Conversion, 176 EUs at $45.70 per EU...... 8,043 Total work in process, June 30...... $10,793

229. Central Medical Clinic has two service departments, Building Services and Energy, and three operating departments, Pediatrics, Geriatrics, and Surgery. Central allocates the cost of Building Services on the basis of square feet and Energy on the basis of patient days. No distinction is made between variable and fixed costs. Budgeted operating data for the year just completed follow:

Service Departments Operating Departments Building Services Energy Pediatrics Geriatrics Surgery Budgeted costs before allocation. $20,000 $10,000 $90,000 $60,000 $100,000 Square feet...... 1,000 4,000 6,000 18,000 12,000 Patient days...... 0 0 5,500 7,700 8,800

Required:

a. Prepare a schedule to allocate service department costs to operating departments by the direct method (round all dollar amounts to the nearest whole dollar). b. Prepare a schedule to allocate service department costs to operating departments by the step-down method, allocating Building Services first (round all amounts to the nearest whole dollar).

a. Direct Method:

Building Services Energy Pediatrics Geriatrics Surgery Budgeted costs before allocation $20,000 $10,000 $90,000 $60,000 $100,000 Allocation of Building Services: (20,000) Pediatrics: 6,000/36,000 × $20,000...... 3,333 Geriatrics:18,000 /36,000 × $20,000...... 10,000 Surgery: 12,000/36,000 × $20,000...... 6,667 Allocation of Energy: (10,000) Pediatrics: 5,500/22,000 × $10,000...... 2,500 Geriatrics: 7,700/22,000 × $10,000...... 3,500 Surgery: 8,800/22,000 × $10,000...... 4,000 Costs after allocation...... $0 $0 $95,833 $73,500 $110,667

b. Step Method

Building Services Energy Pediatrics Geriatrics Surgery Budgeted costs before allocation. $20,000 $10,000 $90,000 $60,000 $100,000 Allocation of Building Services: (20,000) Energy: 4,000/40,000 × $20,000...... 2,000 Pediatrics: 6,000/40,000 × $20,000...... 3,000 Geriatrics: 18,000/40,000 × $20,000...... 9,000 Surgery: 12,000/40,000 × $20,000...... 6,000 Allocation of Energy: (12,000) Pediatrics: 5,500/22,000 × $12,000...... 3,000 Geriatrics: 7,700/22,000 × $12,000...... 4,200 Surgery: 8,800/22,000 × $12,000...... 4,800 Costs after allocation...... $0 $0 $96,000 $73,200 $110,800

AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting Appendix: 4B LO: 8,9 Level: Medium

230. Cerce Corporation uses the direct method to allocate service department costs to operating departments. The company has two service departments, Administrative and Facilities, and two operating departments, Assembly and Finishing.

Service Department Operating Department Administrative Facilities Assembly Finishing Departmental costs.... $29,440 $46,740 $258,880 $320,280 Employee hours...... 5,000 2,000 29,000 17,000 Space occupied– square feet...... 2,000 2,000 30,000 8,000

Administrative Department costs are allocated on the basis of employee hours and Facilities Department costs are allocated on the basis of space occupied.

Required:

Allocate the service department costs to the operating departments using the direct method.

Allocation rate for administrative costs = Cost to be allocated ÷ Allocation base = $29,440 ÷ (29,000 + 17,000) = $0.64 Allocation rate for facilities costs = Cost to be allocated ÷ Allocation base = $46,740 ÷ (30,000 + 8,000) = $1.23

Administrative Facilities Assembly Finishing Departmental costs...... $29,440 $46,740 $258,880 $320,280 Allocation: Administrative costs...... (29,440) 18,560 10,880 Facilities costs...... (46,740) 36,900 9,840 Total costs after allocation. $ 0 $ 0 $314,340 $341,000

AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting Appendix: 4B LO: 8 Level: Easy

231. Sandven Corporation uses the direct method to allocate its two service department costs to its two operating departments. Data concerning those departments follow:

Service Service Operating Operating Department Department Department Department A B X Y Departmental costs... $34,300 $66,230 $161,710 $503,220 Allocation base A..... 5,000 1,000 32,000 17,000 Allocation base B...... 8,000 2,000 32,000 5,000

Service Department A costs are allocated on the basis of allocation base A and Service Department B costs are allocated on the basis of allocation base B.

Required:

Allocate the service department costs to the operating departments using the direct method. Ans:

Allocation rate for Service Department A costs = Cost to be allocated ÷ Allocation base = $34,300 ÷ (32,000 + 17,000) = $0.70 Allocation rate for Service Department B costs = Cost to be allocated ÷ Allocation base = $66,230 ÷ (32,000 + 5,000) = $1.79

Service Service Operating Operating Department Department Department Department A B X Y Departmental costs...... $34,300 $66,230 $161,710 $503,220 Service Department A. (34,300) 22,400 11,900 Service Department B.. (66,230) 57,280 8,950 Total costs after allocation...... $ 0 $ 0 $241,390 $524,070

232. The direct method is used by Kurpinski Clinic to allocate its service department costs to its operating departments. Data concerning those departments follow:

Operating Service Departments Departments Information Technology Personnel Pediatrics Prenatal Departmental costs $34,650 $31,356 $566,960 $688,220 Computers...... 22 17 44 46 Employees...... 15 15 75 42

Information Technology costs are allocated on the basis of computers and Personnel costs are allocated on the basis of employees.

Required:

Allocation rate for Information Technology costs = Cost to be allocated ÷ Allocation base = $34,650 / (44 + 46) = $385.00 Allocation rate for Personnel costs = Cost to be allocated ÷ Allocation base = $31,356 / (75 + 42) = $268.00

Service Departments Operating Departments Information Technology Personnel Pediatrics Prenatal Departmental costs.. $34,650 $31,356 $566,960 $688,220 Information Technology...... (34,650) 16,940 17,710 Personnel...... (31,356) 20,100 11,256 Total costs after allocation...... $ 0 $ 0 $604,000 $717,186

233. Mercik Consultancy uses the direct method to allocate its service department costs to its operating departments. The company has two service departments, Information Technology and Administration, and two operating departments, Corporate Practice and Government Practice. Data concerning those departments follow:

Service Departments Operating Departments Information Admini- Corporate Government Technology stration Practice Practice Departmental costs $26,244 $21,696 $226,170 $477,980 Computers...... 39 14 51 30 Employees...... 32 10 70 26

Information Technology Department costs are allocated on the basis of computers and Administration Department costs are allocated on the basis of employees.

Required:

Allocation rate for Information Technology costs = Cost to be allocated ÷ Allocation base = $26,244 / (51 + 30) = $324.00 Allocation rate for Administration costs = Cost to be allocated ÷ Allocation base = $21,696 / (70 + 26) = $226.00

Information Corporate Government Technology Administration Practice Practice Departmental costs $26,244 $21,696 $226,170 $477,980 Information Technology...... (26,244) 16,524 9,720 Administration...... (21,696) 15,820 5,876 Total costs after allocation...... $ 0 $ 0 $258,514 $493,576

234. Bazin Corporation has two service departments, Service Department A and Service Department B, and two operating departments, Operating Department X and Operating Department Y.

Service Service Operating Operating Department Department Department Department A B X Y Departmental costs $31,280 $55,640 $161,490 $399,350 Allocation base A. . 4,000 1,000 26,000 19,000 Allocation base B... 6,000 2,000 30,000 2,000

The company uses the step-down method to allocate service department costs to operating departments. Service Department A costs are allocated first on the basis of allocation base A and Service Department B costs are allocated second on the basis of allocation base B.

Required:

Allocate the service department costs to the operating departments using the step- down method.

Service Service Operating Operating Department Department Department Department A B X Y Departmental costs...... $31,280 $55,640 $161,490 $399,350 Service Department A costs. (31,280) 680 17,680 12,920 Service Department B costs.. (56,320) 52,800 3,520 Total costs after allocation.... $ 0 $ 0 $231,970 $415,790

Allocation rate for Service Department A costs = Cost to be allocated / Allocation base = $31,280 / (1,000 + 26,000 + 19,000) = $0.68 Allocation rate for Service Department B costs = Cost to be allocated / Allocation base = ($55,640 + $680) / (30,000 + 2,000) = $1.76

235. Coakley Corporation uses the step-down method to allocate service department costs to operating departments. The company has two service departments, Administration and Facilities, and two operating departments, Assembly and Finishing.

Operating Service Department Department Administration Facilities Assembly Finishing Departmental costs. $22,260 $69,130 $137,520 $900,750 Employee time...... 4,000 1,000 25,000 16,000 Space occupied...... 6,000 1,000 34,000 9,000

Administration Department costs are allocated first on the basis of employee time and Facilities Department costs are allocated second on the basis of space occupied.

Required:

Ans: Admini- stration Facilities Assembly Finishing Departmental costs...... $22,260 $69,130 $137,520 $900,750 Administration costs...... (22,260) 530 13,250 8,480 Facilities costs...... (69,660) 55,080 14,580 Total costs after allocation.... $ 0 $ 0 $205,850 $923,810

Allocation rate for Administration Department costs = Cost to be allocated ÷ Allocation base = $22,260 ÷ (1,000 + 25,000 + 16,000) = $0.53 Allocation rate for Facilities Department costs = Cost to be allocated ÷ Allocation base = ($69,130 + $530) ÷ (34,000 + 9,000) = $1.62

236. Georgeson Emergency Care Hospital uses the step-down method to allocate service department costs to operating departments. The hospital has two service departments, Administration and Information Technology (IT), and two operating departments, Emergency Room and Intensive Care.

Service Department Operating Department Admini- Emergency Intensive stration IT Room Care Departmental costs $13,340 $15,805 $597,700 $396,240 Employees...... 4 5 142 83 Computers...... 4 4 65 46

Administration Department costs are allocated first on the basis of employees and IT Department costs are allocated second on the basis of computers.

Required:

Ans: Admini- Emergency Intensive stration IT Room Care Departmental costs...... $13,340 $15,805 $597,700 $396,240 Administration costs...... (13,340) 290 8,236 4,814 IT costs...... (16,095) 9,425 6,670 Total costs after allocation...... $ 0 $ 0 $615,361 $407,724

Allocation rate for Administration Department costs = Cost to be allocated ÷ Allocation base = $13,340 ÷ (5 + 142 + 83) = $58 Allocation rate for IT Department costs = Cost to be allocated ÷ Allocation base = ($15,805 + $290) ÷ (65 + 46) = $145

237. Lester Natal Clinic uses the step-down method to allocate service department costs to operating departments. The clinic has two service departments, Administration and Information Technology (IT), and two operating departments, Prenatal Care and Postnatal Care.

Service Department Operating Department Admini- Prenatal Postnatal stration IT Care Care Departmental costs $20,448 $22,506 $570,720 $369,880 Employees...... 2 3 131 79 Computers...... 2 2 45 42

Administration Department costs are allocated first on the basis of employees and IT Department costs are allocated second on the basis of computers.

Required:

Ans: Admini- Prenatal Postnatal stration IT Care Care Departmental costs...... $20,448 $22,506 $570,720 $369,880 Administration costs...... (20,448) 288 12,576 7,584 IT costs...... (22,794) 11,790 11,004 Total costs after allocation. $0 $0 $595,086 $388,468

Allocation rate for Administration Department costs = Cost to be allocated ÷ Allocation base = $20,448 ÷ (3 + 131 + 79) = $96 Allocation rate for IT Department costs = Cost to be allocated ÷ Allocation base = ($22,506 + $288) ÷ (45 + 42) = $262

Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition 4-257