## Weighted-average method of process costing

During July, the production department of a process operations system completed and transferred to finished goods 39,000 units that were in process at the beginning of July and 65,000 that were started and completed in July. July’s beginning inventory units were 100% complete with respect to materials and 45% complete with respect to labor. At the end of July, 26,000 additional units were in process in the production department and were 100% complete with respect to materials and 60% complete with respect to labor. The beginning inventory included labor cost of \$53,100 and the production department incurred direct labor cost of \$451,950 during July. Compute the direct labor cost per equivalent unit for the department using the weighted-average method.

Multiple Choice

\$.82.

\$4.86.

\$3.78.

\$4.22.

\$2.04.

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

Units:
Beginning Inventory: 29,000 units, 100% complete as to materials and 60% complete as to conversion.
Units started and completed: 118,000.
Units completed and transferred out: 147,000.
Ending Inventory: 32,000 units, 100% complete as to materials and 25% complete as to conversion.

Costs:
Costs in beginning Work in Process – Direct Materials: \$47,000.
Costs in beginning Work in Process – Conversion: \$52,850.
Costs incurred in February – Direct Materials: \$320,650.
Costs incurred in February – Conversion: \$603,150.

Calculate the cost per equivalent unit of conversion.

Multiple Choice

\$3.77

\$4.56

\$4.23

\$5.53

\$5.21

11.

Kent Manufacturing produces a product that sells for \$59.00. Fixed costs are \$276,000 and variable costs are \$36.00 per unit. Kent can buy a new production machine that will increase fixed costs by \$20,400 per year, but will decrease variable costs by \$3.00 per unit. What effect would the purchase of the new machine have on Kent’s break-even point in units?

Multiple Choice

7,698 unit decrease.

600 unit decrease.

600 unit increase.

3,059 unit increase.

No effect on the break-even point in units.

12.

During March, the production department of a process operations system completed and transferred to finished goods 27,000 units that were in process at the beginning of March and 190,000 units that were started and completed in March. March’s beginning inventory units were 100% complete with respect to materials and 60% complete with respect to labor. At the end of March, 27,000 additional units were in process in the production department and were 100% complete with respect to materials and 45% complete with respect to labor. The production department incurred direct materials cost of \$253,700 and its beginning inventory included materials cost of \$93,800. Compute the direct materials cost per equivalent unit for the department using the weighted-average method.

Multiple Choice

\$1.37.

\$1.42.

\$1.83.

\$1.60.

\$1.34.

13.

Kent Manufacturing produces a product that sells for \$64.00 and has variable costs of \$35.00 per unit. Fixed costs are \$348,000. Kent can buy a new production machine that will increase fixed costs by \$20,500 per year, but will decrease variable costs by \$4.50 per unit. Compute the contribution margin per unit if the machine is purchased.

Multiple Choice

\$24.50.

\$29.00.

\$39.50.

\$33.50.

\$36.50.

14

At the beginning of the month, the Forming Department of Martin Manufacturing had 15,000 units in inventory, 30% complete as to materials, and 10% complete as to conversion. During the month the department started 70,000 units and transferred 72,000 units to the next manufacturing department. At the end of the month, the department had 13,000 units in inventory, 80% complete as to materials and 60% complete as to conversion. If Martin Manufacturing uses the FIFO method of process costing, compute the equivalent units for materials and conversion respectively for the Forming Department.

Multiple Choice

77,900 materials; 78,300 conversion.

68,500 materials; 71,500 conversion.

67,400 materials; 64,800 conversion.

77,900 materials; 79,800 conversion.

82,400 materials; 79,800 conversion.

15

A company’s product sells at \$12.06 per unit and has a \$5.09 per unit variable cost. The company’s total fixed costs are \$97,700. The break-even point in units is:

Multiple Choice

5,547.

8,101.

14,017.

19,194.

7,009.

16

Forrester Company is considering buying new equipment that would increase monthly fixed costs from \$123,000 to \$187,000 and would decrease the current variable costs of \$80 by \$25 per unit. The selling price of \$110 is not expected to change. Forrester’s current break-even sales are \$451,000 and current break-even units are 4,100. If Forrester purchases this new equipment, the revised break-even point in units would:

Multiple Choice

Increase by 4,920.

Decrease by 700.

Increase by 700.

Increase by 820.

Decrease by 820.

17

Mott Company’s sales mix is 3 units of A, 2 units of B, and 1 unit of C. Selling prices for each product are \$23, \$33, and \$43, respectively. Variable costs per unit are \$18, \$19, and \$26, respectively. Fixed costs are \$318,000. What is the break-even point in composite units?

Multiple Choice

1,420 composite units.

1,104 composite units.

4,130 composite units.

5,300 composite units.

2,355 composite units.

18

A company uses the FIFO method for inventory costing. At the beginning of a period, the production department had 50,000 units in beginning Work in Process inventory which were 35% complete; the department completed and transferred 170,000 units. At the end of the period, 17,000 units were in the ending Work in Process inventory and are 70% complete. Compute the number of equivalent units produced by the department.

Multiple Choice

120,000.

170,000.

181,900.

164,400.

187,000.

19

During March, the production department of a process operations system completed and transferred to finished goods 29,000 units that were in process at the beginning of March and 190,000 units that were started and completed in March. March’s beginning inventory units were 100% complete with respect to materials and 63% complete with respect to conversion. At the end of March, 38,000 additional units were in process in the production department and were 100% complete with respect to materials and 38% complete with respect to conversion. Compute the number of physical units transferred to finished goods.

Multiple Choice

232,000.

185,000.

257,000.

190,000.

219,000.

20

A company’s product sells at \$12.14 per unit and has a \$5.21 per unit variable cost. The company’s total fixed costs are \$97,300.The contribution margin per unit is:

Multiple Choice

\$5.21.

\$17.35.

\$12.14.

\$6.93.

\$8.10.

21

Major League Bat Company manufactures baseball bats. In addition to its work in process inventories, the company maintains inventories of raw materials and finished goods. It uses raw materials as direct materials in production and as indirect materials. Its factory payroll costs include direct labor for production and indirect labor. All materials are added at the beginning of the process, and conversion costs are applied uniformly throughout the production process.
Required:

You are to maintain records and produce measures of inventories to reflect the July events of this company. The June 30 balances: Raw Materials Inventory, \$35,000; Work in Process Inventory, \$10,065 (\$3,460 of direct materials and \$6,605 of conversion); Finished Goods Inventory, \$160,000; Sales, \$0; Cost of Goods Sold, \$0; Factory Payroll Payable, \$0; and Factory Overhead, \$0.

1.
Prepare journal entries to record the following July transactions and events.

1. Purchased raw materials for \$195,000 cash (the company uses a perpetual inventory system).
2. Used raw materials as follows: direct materials, \$61,340; and indirect materials, \$18,000.
3. Recorded factory payroll payable costs as follows: direct labor, \$222,250; and indirect labor, \$33,000.
4. Paid factory payroll cost of \$255,250 with cash (ignore taxes).
6. Allocated factory overhead to production at 50% of direct labor costs.

1. Information about the July inventories follows. Use this information with that from part 1 to prepare a process cost summary, assuming the weighted-average method is used. (Round “Cost per EUP” to 2 decimal places.)

 Units Beginning inventory 11,000 units Started 13,000 units Ending inventory 7,000 units Beginning inventory Materials—Percent complete 100 % Conversion—Percent complete 70 % Ending inventory Materials—Percent complete 100 % Conversion—Percent complete 30 %

1. Using the results from part 2 and the available information, make computations and prepare journal entries to record the following:
2. Total costs transferred to finished goods for July.
3. Sale of finished goods costing \$305,700 for \$705,000 in cash.

4. Post entries from parts 1 and 3 to the following general ledger accounts.

5. Compute the amount of gross profit from the sales in July. (Add any underapplied overhead to, or deduct any overapplied overhead from, the cost of goods sold.)

22.

 Activity Cost Driver Setting up machinfes \$ 20,800 26 batches Inspecting components \$ 4,500 4,500 parts Providing utilities \$ 9,000 4,500 machine hours

Overhead has been applied to output at a rate of 60% of direct labor costs. The following data pertain to Job 615.

 Direct materials \$ 2,000 Direct labor \$ 3,100 Batches 6 batches Number of parts 400 parts Machine hours 530 machine hours

Required:
1. Classify each of its three overhead activities as unit level, batch level, product level, or facility level.

1. What is the total cost of Job 615 if Business Solutions applies overhead at 60% of direct labor cost?

2. What is the total cost of Job 615 if Business Solutions uses activity-based costing?

23

Business Solutions sells upscale modular desk units and office chairs in the ratio of 2:1 (desk unit:chair). The selling prices are \$1,240 per desk unit and \$490 per chair. The variable costs are \$740 per desk unit and \$240 per chair. Fixed costs are \$143,750.

Required:

1. Compute the selling price per composite unit.
2.Compute the variable costs per composite unit.
3. Compute the break-even point in composite units.
4. Compute the number of units of each product that would be sold at the break-even point.