Cost Accumulation Systems Paper 2


Colt Company uses a first-in, first-out (FIFO) process cost system to account for the cost of producing a chemical compound. As part of production, Material B is added when the goods are 80% complete. Beginning work-in-process inventory for the current month was 20,000 units, 90% complete. During the month, 70,000 units were started in process, and 65,000 of these units were completed. There were no lost or spoiled units. If the ending inventory was 60% complete, the total equivalent units for Material B for the month was


San Jose, Inc., uses a weighted-average process costing system. All materials are introduced at the start of manufacturing, and conversion cost is incurred evenly throughout production. The company started 70,000 units during May and had the following work-in-process inventories at the beginning and end of the month:
May 1 30,000 units, 40% complete
May 31 24,000 units, 25% complete
Assuming no spoilage or defective units, the total equivalent units used to assign costs for May are
Materials.... Conversion Cost


Waller Co. uses a weighted-average process-costing system. Material B is added at two different points in the production of shirms, 40% is added when the units are 20% completed, and the remaining 60% of Material B is added when the units are 80% completed. At the end of the quarter, there are 22,000 shirms in process, all of which are 50% completed. With respect to Material B, the ending shirms in process represent how many equivalent units?


A company uses a process cost system in accounting for its single product. The cost of units failing final inspection, termed normal spoilage, is added to the inventory cost of the good units produced. Units spoiled during production are termed abnormal spoilage, and their cost is immediately written off to cost of goods sold. During the previous month, the entire inventory of spoiled units (both normal and abnormal spoilage) was sold at a price lower than it had cost to produce them. How would this sale affect the reported net income of the company?


Fact Pattern:
Morris Metal Fabricators specializes in the production of metal antennae. The fabrication process includes three steps: cutting, bending, and assembly. Cutting and bending processes are completed together, and then units are sent to the assembly department for completion. Direct materials and conversion costs are added proportionately throughout the process. Units are 50% complete for both direct materials and conversion costs when the units are transferred from the cutting and bending process to assembly. Morris uses the FIFO (first in, first out) inventory method. The activity report for the assembly department for the current month is shown below.
Beginning inventory (60% complete) 240 units
Transferred in from cutting-bending department 680 units
Units completed and transferred out 800 units
Ending inventory (75% complete) -
What is the assembly department’s equivalent units produced for the current month?


A profitable company with five departments uses plantwide overhead rates for its highly diversified operation. The firm is studying a change to either allocating overhead by using departmental rates or using activity-based costing (ABC). Which one of these two methods will likely result in the use of a greater number of cost allocation bases and more accurate costing results?
Greater Number of More Accurate
Allocation Bases... Costing Results


Young Company is beginning operations and is considering three alternative ways in which to allocate manufacturing overhead to individual units produced. Young can use a plantwide rate, departmental rates, or activity-based costing. Young will produce many types of products in its single plant, and not all products will be processed through all departments. In which one of the following independent situations would reported net income for the first year be the same regardless of which overhead allocation method had been selected?


Cost allocation is the process of assigning indirect costs to a cost object. The indirect costs are grouped in cost pools and then allocated by a common allocation base to the cost object. The base that is employed to allocate a homogeneous cost pool should


A company with three products classifies its costs as belonging to five functions: design, production, marketing, distribution, and customer services. For pricing purposes, all company costs are assigned to the three products. The direct costs of each of the five functions are traced directly to the three products. The indirect costs of each of the five business functions are collected into five separate cost pools and then assigned to the three products using appropriate allocation bases. The allocation base that will most likely be the best for allocating the indirect costs of the distribution function is


Activities, their drivers, and their costs may be classified as unit-level, batch-level, product-level, and facility-level. If activity-based costing (ABC) information is prepared for internal purposes, which costs are most likely to be treated as period costs?


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