Chapter 3 Exercises

1. Weber Company purchases HK$500,000 of raw materials on account, and it incurs HK$600,000 of factory labor
costs. Journalize the two transactions on March 31 assuming the labor costs are not paid until April. Supporting
records show that (a) the Assembly Department used HK$240,000 of raw materials and HK$350,000 of the factory
labor, and (b) the Finishing Department used the remainder. Journalize the assignment of the costs to the
processing departments on March 31. Factory labor data for Weber Company. Manufacturing overhead is assigned
to departments on the basis of 160% of labor costs. Journalize the assignment of overhead to the Assembly and
Finishing Departments.

2. Goode Company has the following production data for selected months.
Ending
Work in Process
Beginning Units % Complete as to
Month Work in Process Transferred Out Units Conversion Cost
January –0– 35,000 10,000 40%
March –0– 40,000 8,000 75
July –0– 45,000 16,000 25
Compute equivalent units of production for materials and conversion costs, assuming materials are entered at the
beginning of the process.

3. The Smelting Department of Mathews Company has the following production and cost data for November.
Beginning work in process 2,000 units that are 100% complete as to materials and 20% complete as to conversion
costs; units transferred out 9,000 units; and ending work in process 7,000 units that are 100% complete as to
materials and 40% complete as to conversion costs.
Compute the equivalent units of production for (a) materials and (b) conversion costs for the month of November.

4. In Lopez Company, total material costs are $33,000, and total conversion costs are $54,000. Equivalent units of
production are materials 10,000 and conversion costs 12,000. Compute the unit costs for materials, conversion
costs, and total manufacturing costs.

5. Trek Company has the following production data for April: units transferred out 40,000, and ending work in
process 5,000 units that are 100% complete for materials and 40% complete for conversion costs. If unit materials
cost is $120 and unit conversion cost is $120, determine the costs to be assigned to the units transferred out and
the units in ending work in process.

6. Production costs chargeable to the Finishing Department in June in Cascio Company are materials $12,000, labor
$29,500, overhead $18,000. Equivalent units of production are materials 20,000 and conversion costs 19,000.
Compute the unit costs for materials and conversion costs.
Production records indicate that 18,000 units were transferred out, and 2,000 units in ending work in process were
50% complete as to conversion cost and 100% complete as to materials. Prepare a cost reconciliation schedule.

7. Sanderson Company has the following production data for March: no beginning work in process, units started
and completed 30,000, and ending work in process 5,000 units that are 100% complete for materials and 40%
complete for conversion costs. Sanderson uses the FIFO method to compute equivalent units. If unit materials cost
is $6 and unit conversion cost is $10, determine the costs to be assigned to the units transferred out and the units
in ending work in process. The total costs to be assigned are $530,000. Prepare the cost section of the production
cost report for Sanderson Company.

8. Production costs chargeable to the Finishing Department in May at Kim Company are materials $80,000, labor
$200,000, overhead $180,000, and transferred‐in costs $670,000. Equivalent units of production are materials
20,000 and conversion costs 19,000. Kim uses the FIFO method to compute equivalent units. Compute the unit
costs for materials and conversion costs. Transferred‐in costs are considered materials costs.

9. Robert Mallory has prepared the following list of statements about process cost accounting.
1. Process cost systems are used to apply costs to similar products that are mass‐produced in a continuous fashion.
2. A process cost system is used when each finished unit is indistinguishable from another.
3. Companies that produce soft drinks, motion pictures, and computer chips would all use process cost accounting.
4. In a process cost system, costs are tracked by individual jobs.
5. Job order costing and process costing track different manufacturing cost elements.
6. Both job order costing and process costing account for direct materials, direct labor, and manufacturing
overhead.
7. Costs flow through the accounts in the same basic way for both job order costing and process costing.
8. In a process cost system, only one work in process account is used.
9. In a process cost system, costs are summarized in a job cost sheet.
10. In a process cost system, the unit cost is total manufacturing costs for the period divided by the equivalent units
produced during the period.

10. Schrager Company has two production departments: Cutting and Assembly. July 1 inventories are Raw Materials
$4,200, Work in Process—Cutting $2,900, Work in Process—Assembly $10,600, and Finished Goods $31,000. During
July, the following transactions occurred.
1. Purchased $62,500 of raw materials on account.
2. Incurred $60,000 of factory labor. (Credit Wages Payable.)
3. Incurred $70,000 of manufacturing overhead; $40,000 was paid and the remainder is unpaid.
4. Requisitioned materials for Cutting $15,700 and Assembly $8,900.
5. Used factory labor for Cutting $33,000 and Assembly $27,000.
6. Applied overhead at the rate of $18 per machine hour. Machine hours were Cutting 1,680 and Assembly 1,720.
7. Transferred goods costing $67,600 from the Cutting Department to the Assembly Department.
8. Transferred goods costing $134,900 from Assembly to Finished Goods.
9. Sold goods costing $150,000 for $200,000 on account.
Instructions
Journalize the transactions. (Omit explanations.)

11. Overton Company has gathered the following information.

Units in beginning work in process 20,000
Units started into production 164,000
Units in ending work in process 24,000
Percent complete in ending work in process:
Conversion costs 60%
Materials 100%
Costs incurred:
Direct materials $101,200
Direct labor $164,800
Overhead $184,000
Instructions
(a) Compute equivalent units of production for materials and for conversion costs.
(b) Determine the unit costs of production.
(c) Show the assignment of costs to units transferred out and in process.

12. The Cutting Department of Keigi Company has the following production and cost data for August.
Production Costs
1. Started and completed 10,000 units. Beginning work in process $ –0–
2. Started 2,000 units that are 40% Materials 45,000
completed at August 31. Labor 13,600
Manufacturing overhead 16,100
Materials are entered at the beginning of the process. Conversion costs are incurred uniformly during the process.
Keigi Company uses the FIFO method to compute equivalent units.
Instructions
(a) Determine the equivalent units of production for (1) materials and (2) conversion costs.
(b) Compute unit costs and show the assignment of manufacturing costs to units transferred out and in work in
process.