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The production department in a process manufacturing system completed 78,000 units of product and transferred them to finished goods during a recent period. Of these units, 31,200 were in process at the beginning of the period. The other 46,800 units were started
and completed during the period. At period-end, 17,400 units were in process.
Prepare the department’s equivalent units of production with respect to direct materials under each of three separate assumptions
using the weighted-average method for process costing.
 

   
During April, the production department of a process manufacturing system completed a number of units of a product and
transferred them to finished goods. Of these transferred units, 64,000 were in process in the production department at the
beginning of April and 256,000 were started and completed in April. April’s beginning inventory units were 80% complete
with respect to materials and 20% complete with respect to conversion. At the end of April, 86,000 additional units were in
process in the production department and were 85% complete with respect to materials and 35% complete with respect to conversion.
 
1. Compute the number of units transferred to finished goods.
2. Compute the number of equivalent units with respect to both materials used and conversion used in the production
     department for April using the weighted-average method.
 
1. Compute the number of units transferred to finished goods.
 

 
2. Compute the number of equivalent units with respect to both materials used and conversion used in the production
department for April using the weighted-average method.
 

   
During April, the production department of a process manufacturing system completed a number of units of a product and transferred
them to finished goods. Of these transferred units, 68,000 were in process in the production department at the beginning of April and
272,000 were started and completed in April. April’s beginning inventory units were 75% complete with respect to materials and 25%
complete with respect to conversion. At the end of April, 90,000 additional units were in process in the production department and were
90% complete with respect to materials and 40% complete with respect to conversion.
The production department had $1,006,400 of direct materials and $728,770 of conversion costs charged to it during April. Also,
its beginning inventory of $174,580 consists of $151,350 of direct materials cost and $23,230 of conversion costs.
 
1 & 2. Using the weighted-average method, compute the direct materials cost and the conversion cost per equivalent unit and assign April’s
costs to the department’s output.
(Round “Cost per EUP” to 2 decimal places.)
 

   
The following partially completed process cost summary describes the July production activities of Ashad Company.
Its production output is sent to its warehouse for shipping. All direct materials are added to products when processing begins.
Beginning work in process inventory is 20% complete with respect to conversion.
 

Equivalent Units of Production	Direct Materials	Conversion
Units transferred out	36,500 EUP	36,500 EUP
Units of ending work in process	4,000 EUP	2,400 EUP
Equivalent units of production	40,500 EUP	38,900 EUP

 

Costs per EUP	Direct Materials	Conversion
Costs of beginning work in process	$35,850	$4,200
Costs incurred this period	421,800	229,200
Total costs	$457,650	$233,400

 

Units in beginning work in process (all completed during July)	3,500
Units started this period	37,000
Units completed and transferred out	36,500
Units in ending work in process	4,000

 
Prepare its process cost summary using the weighted-average method.
(Round “Cost per EUP” to 2 decimal places.)
 
 
Laffer Lumber produces bagged bark for use in landscaping. Production involves packaging bark chips in plastic bags in a bagging department.
The following information describes production operations for October.
 

	Bagging Department
Direct materials used	$238,000
Direct labor used	$39,000
Predetermined overhead rate (based on direct labor)	130%
Goods transferred from bagging to finished goods	$(208,000)

 
The company’s revenue for the month totaled $470,000 from credit sales, and its cost of goods sold for the month is $258,000.
Prepare summary journal entries dated October 31 to record its October production activities for
 
(1) direct materials usage,
(2) direct labor incurred
(3) overhead allocation,
(4) goods transfer from production to finished goods
(5) credit sales.
 

   
Connect Managerial Accounting Chapter 3 Quiz
 
A company uses the weighted-average method for inventory costing. At the end of the period, 22,000 units were in the ending
Work in Process inventory and are 100% complete for materials and 75% complete for conversion.
The equivalent costs per unit are materials, $2.65 and conversion $5.35.
Compute the cost that would be assigned to the ending Work in Process inventory for the period.

• $146,575
• $176,000
• $87,725
• $93,775
• $132,000

Which of the following is not one of the four steps in accounting for production activity and assigning costs during a period under a process cost system?

• Determine over or underapplied overhead.
• Determine the physical flow of units.
• Compute the equivalent units of production.
• Compute the cost per equivalent unit of production.
• Assign and reconcile costs.

 
Wilturner Company incurs $74,000 of labor related directly to the product in the Assembly Department, $23,000 of labor not directly related to the product
but related to the Assembly Department as a whole, and $10,000 of labor for services that help production in both the Assembly and Finishing departments.
The journal entries to record the labor would include:

• Debit Work in Process Inventory $74,000; debit Factory Overhead $33,000.
• Debit Work in Process Inventory $74,000; debit Wages Expense $33,000.
• Debit Work in Process Inventory $97,000; debit Wages Expense $10,000.
• Debit Work in Process Inventory $107,000.
• Debit Work in Process Inventory $97,000; debit Factory Overhead $10,000.

 
During December, the production department of a process operations system completed and transferred to finished goods a total of 65,000 units of product.
At the end of March, 15,000 additional units were in process in the production department and were 80% complete with respect to materials.
The beginning inventory included materials cost of $57,500 and the production department incurred direct materials cost of $183,000 during December.
Compute the direct materials cost per equivalent unit for the department using the weighted-average method.

• $3.70
• $2.38
• $2.82
• $3.12
• $4.79

 
Dazzle, Inc. produces beads for jewelry making use. The following information summarizes production operations for June.
The journal entry to record June production activities for direct labor usage is:

• Debit Factory Payroll Payable $160,000; credit Cash $160,000.
• Debit Work in Process Inventory $160,000; credit Factory Payroll Payable $160,000.
• Debit Cost of Goods Sold $160,000; credit Factory Payroll Payable $160,000.
• Debit Work in Process Inventory $160,000; credit Raw Materials Inventory $160,000.
• Debit Work in Process Inventory $160,000; credit Cash $160,000.

 
When raw materials are purchased on account for use in a process costing system, the corresponding journal entry that should be recorded will include:

• A debit to Work in Process Inventory.
• A debit to Accounts Payable.
• A credit to Cash.
• A debit to Raw Materials Inventory.
• A credit to Raw Materials Inventory.

 
Which of the following is the best explanation for why it is necessary to calculate equivalent units of production in a process costing environment?
 
·         In most manufacturing environments, it is not possible to conduct a physical count of units.
·         Companies often use a combination of a process costing and job order costing systems.
·         In most process costing systems, direct materials are added at the beginning of the process while conversion costs are added evenly throughout the manufacturing process.
·         All of the work to make a unit 100% complete and ready to move to the next stage of production or to finished goods
inventory may not have been completed in a single time period.
·         In most cases, there is no difference between physical units and equivalent units of production.
   
A company uses a process costing system. Its Welding Department completed and transferred out 100,000 units during the current period.
The ending inventory in the Welding Department consists of 30,000 units (75% complete with respect to direct materials and 40% complete with respect to conversion costs).
Determine the equivalent units of production for the Welding Department for direct materials and conversion costs assuming the weighted average method.

• 130,000 materials; 130,000 conversion.
• 130,000 materials; 112,000 conversion.
• 107,500 materials; 118,000 conversion.
• 122,500 materials; 112,000 conversion.
• 112,500 materials; 130,000 conversion.

 
Andrews Corporation uses the weighted-average method of process costing.
The following information is available for February in its Polishing Department:

• $9.26
• $4.21
• $5.85
• $5.05
• $4.97

Cost of beginning WIP $36,000 + costs incurred in February $520,000 = $556,000
Total cost $556,000/Equivalent units of production 95,000 = $5.85 cost per equivalent unit of production.
   
Which of the following products is most likely to be produced in a process operations system?

• Airplanes
• Cereal
• Bridges
• Designer bridal gowns
• Custom cabinets

 
Cameroon Corp. manufactures and sells electric staplers for $15.40 each.
If 10,000 units were sold in December, and management forecasts 3% growth in sales each month,
the dollar amount of electric stapler sales budgeted for February should be:
 
$163,379
 
December sales $15.40 · 10,000 = $154,000
January sales = $1`54,000 · 1.03 = $158,620
February sales = $158,620 · 1.03 = $163,379
   
Bengal Co. provides the following sales forecast for the next three months:
 
July                        August                 September
Sales units           5,300                    6,000                   5,860 
 
The company wants to end each month with ending finished goods inventory equal to 25% of the next month's sales.
Finished goods inventory on June 30 is 1,325 units. The budgeted production units for July are:
 
5,475 units
 
July units + 25% of August units - June ending inventory = July production
5,300 units + (6,000 units · 0.25) - 1,325 units = 5,475 units
   
3. Bengal Co. provides the following sales forecast for the next three months:
 
July                        August                  September
Sales units           6,000                     6,700                   6,450 
 
The company wants to end each month with ending finished goods inventory equal to 30% of the next month's sales.
Finished goods inventory on June 30 is 1,800 units.
The budgeted production units for August are:
 
6,625 units.
 
August units + 30% of September units - July ending inventory = August production
6,700 units + (6,450 units · 0.30) - (6,700 · 0.30) = 6,625 units
6,700 + 1,935 - 2,010 = 6,625 units
   
4. Flack Corporation, a merchandiser, provides the following information for its December budgeting process:
 
The November 30 inventory was                1,880 units.
Budgeted sales for December are              4,700 units.
Desired December 31 inventory is             3,290 units.
 
Budgeted purchases are:
 
6,110 units.
 
Budgeted sales units + desired ending inventory - beginning inventory = purchases
4,700 units + 3,290 units − 1,880 units = 6,110 units
   
A sporting equipment store expects to purchase $7,400 of ski boots in October.
The store had $3,400 of ski boots in merchandise inventory at the beginning of October and expects to have $2,400
of ski boots in merchandise inventory at the end of October to cover part of anticipated November sales.
What is the budgeted cost of goods sold for October?
 
$8,400.
 
Cost of Goods Sold = Beginning inventory + purchases - ending inventory
$3,400 + $7,400 - $2,400 = $8,400
   
Alliance Company’s budgets production of 24,000 units in January and 28,000 units in the February.
Each finished unit requires 3 pounds of raw material K that costs $3.00 per pound.
Each month’s ending raw materials inventory should equal 35% of the following month’s budgeted materials.
The January 1 inventory for this material is 25,200 pounds. What is the budgeted materials cost for January?
 
$228,600.
 
Budgeted production units * materials requirement per unit = materials needed
Materials needed + ending inventory requirements - beginning inventory available = materials to be purchased
24,000 · 3 lbs. =
72,000 lbs.
72,000 lbs. + (28,000 · 3 lbs. · 35%) - 25,200 lbs. =
76,200 lbs · $3.00 per lb. =
$228,600.
   
Boulware Company’s budgeted production calls for 6,000 units in October and 9,000 units in November.
Each unit requires 7 pounds (lbs.) of raw material
 
Each month’s ending inventory of raw materials should equal 25% of the following month’s budgeted materials requirements.
The October 1 inventory for this material is 10,500 pounds.
What is the budgeted materials purchases for this key material in pounds for October?
 
47,250 lbs.
 
Materials needed + ending inventory requirements - beginning inventory available = materials to be purchased
 
(6,000 units · 7 lbs. ÷ unit) + (9,000 units · 7 lbs. ÷ unit * 25%) –
10,500 lbs. =
47,250 lbs
   
Southland Company is preparing a cash budget for August.
The company has $16,400 cash at the beginning of August and anticipates $124,000 in cash receipts and $133,900 in cash disbursements during August.
Southland Company wants to maintain a minimum cash balance of $10,000. The preliminary cash balance at the end of August before any loan activity is:
 
$6,500.
 
Beginning cash balance $ 16,400   
Add cash receipts   124,000   
Less cash disbursements · 133,900 
Cash balance before financing $ 6,500   
   
9. Frankie's Chocolate Co. reports the following information from its sales budget:
        
Expected Sales:                 July        $            84,000 
August                  104,000 
                                                September          114,000 
 
Cash sales are normally 30% of total sales and all credit sales are expected to be collected in the month following the date of sale.
 
The total amount of cash expected to be received from customers in September is:
 
$107,000.
      
September cash sales (30% · $114,000) $ 34,200 
August credit sales (70% · $104,000) 72,800 
Cash collected in September $ 107,000 
________________________________________
 
10. Justin Company's budget includes the following credit sales for the current year:
 
September          $30,000
October                $41,000
November           $35,000
December            $37,000
 
Experience has shown that payment for the credit sales is received as follows:
10% in the month of sale, 65% in the first month after sale, 23% in the second month after sale, and 2% is uncollectible.
 
How much cash can Justin Company expect to collect in November as a result of current and past credit sales?
 
$37,050.
    
10% of November sales (10% · $35,000) $ 3,500 
65% of October sales (65% · $41,000)   26,650 
23% of September sales (23% · $30,000)   6,900 
Total cash receipts $ 37,050 
   
A company's history indicates that 30% of its sales are for cash and the rest are on credit.
Collections on credit sales are 20% in the month of the sale, 50% in the next month, 25% the following month, and 5% is uncollectible.
Projected sales for December, January, and February are $65,000, $90,000 and $100,000, respectively.
The February expected cash receipts from all current and prior credit sales is:
 
$56,875
Amount collected in February:
          
20% of February credit sales   20% · (70% * $100,000) = $ 14,000 
50% of January credit sales   50% · (70% * $90,000) =   31,500 
25% of December credit sales   25% · (70% · $65,000) =   11,375 
Total collected in February     $ 56,875 
   
Memphis Company anticipates total sales for April, May, and June of $820,000, $920,000, and $970,000 respectively.
Cash sales are normally 25% of total sales. Of the credit sales, 40% are collected in the same month as the sale,
55% are collected during the first month after the sale, and the remaining 5% are not collected.
Compute the amount of cash received from total sales during the month of June.
 
$913,000.
    
June cash sales (25% · $970,000) $ 242,500 
40% of June credit sales (40% * 75% · $970,000) 291,000 
55% of May credit sales (55% · 75% * $920,000) 379,500 
Total cash receipts $ 913,000