Cost Accounting 15th edition solution manual (Horngren/Datar/Rajan), chapter - 17 - Process Costing. 1. Process Costing Cost Accounting A Managerial Emphasis 15th Edition Charles T. Horngren, Srikant M.
Datar, Madhav V. Rajan C h a p t e r - 1 7 Questions & Solutions. Questions 17-1 Give three examples of industries that use process-costing systems. 17-2 In process costing, why are costs often divided into two main classifications? 17-3 Explain equivalent units.
Instructor's Solutions Manual (Download only) for Cost Accounting, 15th Edition. Horngren, Stanford University. Datar, Harvard University.
Why are equivalent-unit calculations necessary in process costing? 17-4 What problems might arise in estimating the degree of completion of semiconductor chips in a semiconductor plant? 17-5 Name the five steps in process costing when equivalent units are computed. 17-6 Name the three inventory methods commonly associated with process costing. 17-7 Describe the distinctive characteristic of weighted-average computations in assigning costs to units completed and to units in ending work in process.
17-8 Describe the distinctive characteristic of FIFO computations in assigning costs to units completed and to units in ending work in process. 17-9 Why should the FIFO method be called a modified or department FIFO method? 17-10 Identify a major advantage of the FIFO method for purposes of planning and control. 17-11 Identify the main difference between journal entries in process costing and job costing. 17-12 “The standard-costing method is particularly applicable to process-costing situations.” Do you agree? 17-13 Why should the accountant distinguish between transferred-in costs and additional direct mate- rial costs for each subsequent department in a process-costing system? 17-14 “Transferred-in costs are those costs incurred in the preceding accounting period.” Do you agree?
17-15 “There’s no reason for me to get excited about the choice between the weighted-average and FIFO methods in my process-costing system. I have long-term contracts with my materials suppliers at fixed prices.” Do you agree with this statement made by a plant controller? Exercises 17-16 Equivalent units, zero beginning inventory. Candid, Inc., is a manufacturer of digital cameras. It has two departments: assembly and testing. In January 2014, the company incurred $800,000 on direct materials and $805,000 on conversion costs, for a total manufacturing cost of $1,605,000. Assume there was no beginning inventory of any kind on January 1, 2014.
During January, 5,000 cam- eras were placed into production and all 5,000 were fully completed at the end of the month. What is the unit cost of an assembled camera in January? Assume that during February 5,000 cameras are placed into production. Further assume the same total assembly costs for January are also incurred in February, but only 4,000 cameras are fully com- pleted at the end of the month. All direct materials have been added to the remaining 1,000 cameras. However, on average, these remaining 1,000 cameras are only 60% complete as to conversion costs.
(a) What are the equivalent units for direct materials and conversion costs and their respective costs per equivalent unit for February? (b) What is the unit cost of an assembled camera in February 2014? Explain the difference in your answers to requirements 1 and 2. 17-17 Journal entries (continuation of 17-16). Refer to requirement 2 of Exercise 17-16.
Prepare summary journal entries for the use of direct materials and incurrence of conversion costs. Also prepare a journal entry to transfer out the cost of goods completed. Show the postings to the Work in Process account. Required Required MyAccountingLab MyAccountingLab.
ASSIGNMENT MATERIAL 697 17-18 Zero beginning inventory, materials introduced in middle of process. Pilar Chemicals has a mixing department and a refining department. Its process-costing system in the mixing department has two direct materials cost categories (chemical P and chemical Q) and one conversion costs pool. The following data pertain to the mixing department for July 2014: Units Work in process, July 1 0 Units started 100,000 Completed and transferred to refining department 70,000 Costs Chemical P $600,000 Chemical Q 140,000 Conversion costs 360,000 Chemical P is introduced at the start of operations in the mixing department, and chemical Q is added when the product is three-fourths completed in the mixing department. Conversion costs are added evenly during the process. The ending work in process in the mixing department is two-thirds complete. Compute the equivalent units in the mixing department for July 2014 for each cost category.
Compute (a) the cost of goods completed and transferred to the refining department during July and (b) the cost of work in process as of July 31, 2014. 17-19 Weighted-average method, equivalent units. The assembly division of Fenton Watches, Inc., uses the weighted-average method of process costing. Consider the following data for the month of May 2014: Physical Units (Watches) Direct Materials Conversion Costs Beginning work in process (May 1)a 80 $ 493,360 $ 91,040 Started in May 2014 500 Completed during May 2014 460 Ending work in process (May 31)b 120 Total costs added during May 2014 $3,220,000 $1,392,000 a Degree of completion: direct materials, 90%; conversion costs, 40%. B Degree of completion: direct materials, 60%; conversion costs, 30%.
Compute equivalent units for direct materials and conversion costs. Show physical units in the first column of your schedule. 17-20 Weighted-average method, assigning costs (continuation of 17-19). For the data in Exercise 17-19, summarize the total costs to account for, calculate the cost per equivalent unit for direct materials and conversion costs, and assign costs to the units completed (and transferred out) and units in ending work in process. 17-21 FIFO method, equivalent units. Refer to the information in Exercise 17-19.
Suppose the assembly division at Fenton Watches, Inc., uses the FIFO method of process costing instead of the weighted-average method. Compute equivalent units for direct materials and conversion costs. Show physical units in the first column of your schedule. 17-22 FIFO method, assigning costs (continuation of 17-21).
For the data in Exercise 17-19, use the FIFO method to summarize the total costs to account for, calculate the cost per equivalent unit for direct materials and conversion costs, and assign costs to units completed (and transferred out) and to units in ending work in process. 17-23 Operation costing. Whole Goodness Bakery needs to determine the cost of two work orders for the month of June. Work order 215 is for 2,400 packages of dinner rolls, and work order 216 is for 2,800 loaves of multigrain bread. Dinner rolls are mixed and cut into individual rolls before being baked and then Required Required Required Required Required. 698 CHAPTER 17 PROCESS COSTING packaged.
Multigrain loaves are mixed and shaped before being baked, sliced, and packaged. The following information applies to work order 215 and work order 216: Work Order 215 Work Order 216 Quantity (packages) 2,400 2,800 Operations 1. Mix Use Use 2.
Shape loaves Do not use Use 3. Cut rolls Use Do not use 4. Bake Use Use 5. Slice loaves Do not use Use 6. Package Use Use Selected budget information for June follows: Dinner Rolls Multigrain Loaves Total Packages 9,600 13,000 22,600 Direct material costs $5,280 $11,700 $ 16,980 Budgeted conversion costs for each operation for June follow: Mixing $18,080 Shaping 3,250 Cutting 1,440 Baking 14,690 Slicing 1,300 Packaging 16,950 1. Using budgeted number of packages as the denominator, calculate the budgeted conversion-cost rates for each operation. Using the information in requirement 1, calculate the budgeted cost of goods manufactured for the two June work orders.
Calculate the cost per package of dinner rolls and multigrain loaves for work order 215 and 216. 17-24 Weighted-average method, assigning costs. Tomlinson Corporation is a biotech company based in Milpitas. It makes a cancer-treatment drug in a single processing department. Direct materials are added at the start of the process. Conversion costs are added evenly during the process.
Tomlinson uses the weighted-average method of process costing. The following information for July 2014 is available.
Equivalent Units Physical Units Direct Materials Conversion Costs Work in process, July 1 8,700a 8,700 2,175 Started during July 34,500 Completed and transferred out during July 32,000 32,000 32,000 Work in process, July 31 11,200b 11,200 7,840 a Degree of completion: direct materials, 100%; conversion costs, 25%. B Degree of completion: direct materials, 100%; conversion costs, 70%. Total Costs for July 2014 Work in process, beginning Direct materials $61,500 Conversion costs 43,200 $104,700 Direct materials added during July 301,380 Conversion costs added during July 498,624 Total costs to account for $904,704 Required. ASSIGNMENT MATERIAL 699 1. Calculate the cost per equivalent unit for direct materials and conversion costs.
Summarize the total costs to account for, and assign them to units completed (and transferred out) and to units in ending work in process. 17-25 FIFO method, assigning costs. Do Exercise 17-24 using the FIFO method. Tomlinson’s management seeks to have a more consistent cost per equivalent unit.
Which method of process costing should the company choose and why? 17-26 Transferred-in costs, weighted-average method. Trendy Clothing, Inc., is a manufacturer of winter clothes. It has a knitting department and a finishing department.
This exercise focuses on the finishing department. Direct materials are added at the end of the process.
Conversion costs are added evenly during the process. Trendy uses the weighted-average method of process costing. The following information for June 2014 is available.
Calculate equivalent units of transferred-in costs, direct materials, and conversion costs. Summarize the total costs to account for, and calculate the cost per equivalent unit for transferred-in costs, direct materials, and conversion costs.
Cost Accounting Horngren 15th Edition
Assign costs to units completed (and transferred out) and to units in ending work in process. 17-27 Transferred-in costs, FIFO method. Refer to the information in Exercise 17-26. Suppose that Trendy uses the FIFO method instead of the weighted-average method in all of its departments. The only changes to Exercise 17-26 under the FIFO method are that total transferred-in costs of beginning work in process on June 1 are $45,000 (instead of $60,000) and total transferred-in costs added during June are $114,000 (instead of $117,000).
Do Exercise 17-26 using the FIFO method. Note that you first need to calculate equivalent units of work done in the current period (for transferred-in costs, direct materials, and conversion costs) to complete begin- ning work in process, to start and complete new units, and to produce ending work in process. 17-28 Operation costing. Purex produces three different types of detergents: Breeze, Fresh, and Joy. The company uses four operations to manufacture the detergents: spray drying, mixing, blending, and packaging. Breeze and Fresh are produced in powder form in the mixing department, while Joy is produced in liquid form in the blending department.
The powder detergents are packed in 50-ounce paperboard cartons, and the liquid detergent is packed in 50-ounce bottles made of recycled plastic. Purex applies conversion costs based on labor-hours in the spray drying department. It takes 1½ min- utes to mix the ingredients for a 50-ounce container for each product. Conversion costs are applied based on the number of containers in the mixing and blending departments and on the basis of machine-hours in the packaging department. It takes 0.3 minutes of machine time to fill a 50-ounce container, regardless of the product. The budgeted number of containers and expected direct materials cost for each type of detergent are as follows: Breeze Fresh Joy Number of 50-ounce containers 11,000 8,000 21,000 Direct materials cost $21,450 $20,000 $52,500 Required Required Required Required.
700 CHAPTER 17 PROCESS COSTING The budgeted conversion costs for each department for July are as follows: Department Budgeted Conversion Cost Spray Drying $ 8,000 Mixing 22,800 Blending 30,450 Packaging 1,000 1. Calculate the conversion cost rates for each department. Calculate the budgeted cost of goods manufactured for Breeze, Fresh, and Joy for the month of July. Calculate the cost per 50-ounce container for each type of detergent for the month of July. 17-29 Standard-costing with beginning and ending work in process. Priscilla’s Pearls Company (PPC) is a manufacturer of knock-off jewelry. Priscilla attends Fashion Week in New York City every September and February to gauge the latest fashion trends in jewelry.
She then makes jewelry at a fraction of the cost of those designers who participate in Fashion Week. This fall’s biggest item is triple-stranded pearl necklaces. Because of her large volume, Priscilla uses process costing to account for her production. In October, she had started some of the triple strands.
She continued to work on those in November. Costs and output figures are as follows: Priscilla’s Pearls Company Process Costing For the Month Ended November 30, 2014 Units Direct Materials Conversion Costs Standard cost per unit $ 2.40 $ 9.00 Work in process, beginning inventory (Nov. 1) 29,000 $ 69,600 $ 156,600 Degree of completion of beginning work in process 100% 60% Started during November 124,200 Completed and transferred out 127,000 Work in process, ending inventory (Nov.
30) 26,200 Degree of completion of ending work in process 100% 40% Total costs added during November $327,500 $1,222,000 1. Compute equivalent units for direct materials and conversion costs. Show physical units in the first column of your schedule. Compute the total standard costs of pearls transferred out in November and the total standard costs of the November 30 inventory of work in process. Compute the total November variances for direct materials and conversion costs.
Problems 17-30 Equivalent units, comprehensive. Louisville Sports manufactures baseball bats for use by players in the major leagues.
A critical requirement for elite players is that each bat they use have an identical look and feel. As a result, Louisville uses a dedicated process to produce bats to each player’s specifications. One of Louisville’s key clients is Ryan Brown of the Green Bay Brewers. Producing his bat involves the use of three materials—ash, cork, and ink—and a sequence of 20 standardized steps. Materials are added as follows: Ash: This is the basic wood used in bats.
Eighty percent of the ash content is added at the start of the process; the rest is added at the start of the 16th step of the process. Cork: This is inserted into the bat in order to increase Ryan’s bat speed.
Half of the cork is introduced at the beginning of the seventh step of the process; the rest is added at the beginning of the 14th step. Ink: This is used to stamp Ryan’s name on the finished bat and is added at the end of the process. Of the total conversion costs, 6% are added during each of the first 10 steps of the process, and 4% are added at each of the remaining 10 steps. On May 1, 2014, Louisville had 100 bats in inventory. These bats had completed the ninth step of the process as of April 30, 2014.
During May, Louisville put another 60 bats into production. At the end of May, Louisville was left with 40 bats that had completed the 12th step of the production process. Required Required MyAccountingLab. ASSIGNMENT MATERIAL 701 1.
Under the weighted-average method of process costing, compute equivalent units of work done for each relevant input for the month of May. Under the FIFO method of process costing, compute equivalent units of work done for each relevant input for the month of May. 17-31 Weighted-average method. Larsen Company manufactures car seats in its San Antonio plant. Each car seat passes through the assembly department and the testing department.
This problem focuses on the assembly department. The process-costing system at Larsen Company has a single direct-cost category (direct materials) and a single indirect-cost category (conversion costs).
Direct materials are added at the beginning of the process. Conversion costs are added evenly during the process. When the assembly department finishes work on each car seat, it is immediately transferred to testing. Larsen Company uses the weighted-average method of process costing. Data for the assembly depart- ment for October 2014 are as follows: Physical Units (Car Seats) Direct Materials Conversion Costs Work in process, October 1a 5,000 $1,250,000 $ 402,750 Started during October 2014 20,000 Completed during October 2014 22,500 Work in process, October 31b 2,500 Total costs added during October 2014 $4,500,000 $2,337,500 a Degree of completion: direct materials,?%; conversion costs, 60%. B Degree of completion: direct materials,?%; conversion costs, 70%. For each cost category, compute equivalent units in the assembly department.
Show physical units in the first column of your schedule. What issues should the manager focus on when reviewing the equivalent units calculation? For each cost category, summarize total assembly department costs for October 2014 and calculate the cost per equivalent unit. Assign costs to units completed and transferred out and to units in ending work in process. 17-32 Journal entries (continuation of 17-31). Prepare a set of summarized journal entries for all October 2014 transactions affecting Work in Process— Assembly.
Set up a T-account for Work in Process—Assembly and post your entries to it. 17-33 FIFO method (continuation of 17-31). Do Problem 17-31 using the FIFO method of process costing. Explain any difference between the cost per equivalent unit in the assembly department under the weighted-average method and the FIFO method. Should Larsen’s managers choose the weighted-average method or the FIFO method?
Explain briefly. 17-34 Transferred-in costs, weighted-average method (related to 17-31 to 17-33). Larsen Company, as you know, is a manufacturer of car seats.
Each car seat passes through the assembly department and testing department. This problem focuses on the testing department. Direct materials are added when the testing department process is 90% complete. Conversion costs are added evenly during the testing department’s process.
As work in assembly is completed, each unit is immediately transferred to testing. As each unit is completed in testing, it is immediately transferred to Finished Goods. Larsen Company uses the weighted-average method of process costing. Data for the testing depart- ment for October 2014 are as follows: Physical Units (Car Seats) Transferred- In Costs Direct Materials Conversion Costs Work in process, October 1a 7,500 $2,932,500 $ 0 $ 835,460 Transferred in during October 2014? Completed during October 2014 26,300 Work in process, October 31b 3,700 Total costs added during October 2014 $7,717,500 $9,704,700 $3,955,900 a Degree of completion: transferred-in costs,?%; direct materials,?%; conversion costs, 70%. B Degree of completion: transferred-in costs,?%; direct materials,?%; conversion costs, 60%.
Required Required Required Required. 702 CHAPTER 17 PROCESS COSTING 1. What is the percentage of completion for (a) transferred-in costs and direct materials in beginning work-in-process inventory and (b) transferred-in costs and direct materials in ending work-in-process inventory? For each cost category, compute equivalent units in the testing department. Show physical units in the first column of your schedule. For each cost category, summarize total testing department costs for October 2014, calculate the cost per equivalent unit, and assign costs to units completed (and transferred out) and to units in ending work in process. Prepare journal entries for October transfers from the assembly department to the testing department and from the testing department to Finished Goods.
17-35 Transferred-in costs, FIFO method (continuation of 17-34). Refer to the information in Problem 17-34. Suppose that Larsen Company uses the FIFO method instead of the weighted-average method in all of its departments.
The only changes to Problem 17-34 under the FIFO method are that total transferred-in costs of beginning work in process on October 1 are $2,800,000 (instead of $2,932,500) and that total transferred-in costs added during October are $7,735,250 (instead of $7,717,500). Using the FIFO process-costing method, complete Problem 17-34. 17-36 Weighted-average method. McKnight Handcraft is a manufacturer of picture frames for large retailers. Every picture frame passes through two departments: the assembly department and the finishing department.
This problem focuses on the assembly department. The process-costing system at McKnight has a single direct-cost category (direct materials) and a single indirect-cost category (conversion costs). Direct materials are added when the assembly department process is 10% complete. Conversion costs are added evenly during the assembly department’s process. McKnight uses the weighted-average method of process costing.
Thermomix manual. Consider the following data for the assembly department in April 2014: Physical Unit (Frames) Direct Materials Conversion Costs Work in process, April 1a 60 $ 1,530 $ 156 Started during April 2014 510 Completed during April 2014 450 Work in process, April 30b 120 Total costs added during April 2014 $17,850 $11,544 a Degree of completion: direct materials, 100%; conversion costs, 40%. B Degree of completion: direct materials, 100%; conversion costs, 15%. Summarize the total assembly department costs for April 2014, and assign them to units completed (and transferred out) and to units in ending work in process.
What issues should a manager focus on when reviewing the equivalent units calculation? 17-37 FIFO method (continuation of 17-36). Complete Problem 17-36 using the FIFO method of process costing. If you did Problem 17-36, explain any difference between the cost of work completed and transferred out and the cost of ending work in process in the assembly department under the weighted-average method and the FIFO method. Should McKnight’s managers choose the weighted-average method or the FIFO method? Explain briefly.
17-38 Transferred-in costs, weighted-average method. Publishers, Inc., has two departments: printing and binding. Each department has one direct-cost category (direct materials) and one indirect-cost category (conversion costs).
This problem focuses on the binding department. Books that have undergone the printing process are immediately transferred to the binding department. Direct material is added when the binding process is 70% complete. Conversion costs are added evenly during binding operations. When those operations are done, the books are immediately transferred to Finished Goods. Publishers, Inc., uses the weighted-average method of process costing.
The following is a summary of the April 2014 operations of the binding department. Required Required Required Required. ASSIGNMENT MATERIAL 703 1. Summarize total binding department costs for April 2014, and assign these costs to units completed (and transferred out) and to units in ending work in process. Prepare journal entries for April transfers from the printing department to the binding department and from the binding department to Finished Goods. 17-39 Transferred-in costs, FIFO method. Refer to the information in Problem 17-38.
Suppose that Publishers, Inc., uses the FIFO method instead of the weighted-average method in all of its departments. The only changes to Problem 17-38 under the FIFO method are that total transferred-in costs of beginning work in process on April 1 are $44,100 (instead of $39,060) and that total transferred-in costs added during April are $149,760 (instead of $155,520). Using the FIFO process-costing method, complete Problem 17-38. If you did Problem 17-38, explain any difference between the cost of work completed and transferred out and the cost of ending work in process in the binding department under the weighted-average method and the FIFO method. 17-40 Transferred-in costs, weighted-average and FIFO methods. Portland Pale Ale, Inc., makes a variety of specialty beers at its main brewery in Oregon. Production of beer occurs in three main stages: mashing, boiling, and fermenting.
Consider the fermenting department, where direct materials (bottles and other packaging) are added at the end of the process. Conversion costs are added evenly during the process.