chapter 6 - process costing 6e tb06.pdf · 1. process costing accumulates costs by individual jobs....
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1. Process costing accumulates costs by individual jobs.
a. True
b. False
ANSWER: False
RATIONALE: Process costing accumulates costs by processing departments rather than by individual jobs.
2. Process costing is most appropriate for manufacturers of homogeneous products.
a. True
b. False
ANSWER: True
3. Process costing is appropriate for companies providing services.
a. True
b. False
ANSWER: True
4. Process costing is most useful in situations when relatively homogeneous products are produced.
a. True
b. False
ANSWER: True
5. Large manufacturing plants, such as chemical, food, and tire manufacturers, use process costing.
a. True
b. False
ANSWER: True
6. Parallel processing requires that units pass through one process before they can be worked on in the next process.
a. True
b. False
ANSWER: False
RATIONALE: In parallel processing, two subcomponents can be worked on simultaneously in different processes andthen brought together in a final process for completion.
7. In process costing, each producing department has its own work-in-process account.
a. True
b. False
ANSWER: True
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Chapter 6 - Process Costing
8. A production report contains information on costs transferred in from prior departments as well as costs added inthe department such as direct materials, direct labor, and overhead.
a. True
b. False
ANSWER: True
9. Any product or service that is basically homogeneous and repetitively produced can take advantage of a process-costing approach.
a. True
b. False
ANSWER: True
10. Firms that offer services cannot have work-in-process inventories.
a. True
b. False
ANSWER: False
11. Manufacturing firms may operate without significant work-in-process inventories.
a. True
b. False
ANSWER: True
12. Process-costing systems are specifically designed to support costing of mass-produced homogeneous products.
a. True
b. False
ANSWER: True
13. The presence of beginning and ending work-in-process inventories leads to much of the complication surroundingprocess costing.
a. True
b. False
ANSWER: True
14. The production report is the document that summarizes the manufacturing activity that takes place in a processdepartment for a given period of time.
a. True
b. False
ANSWER: True
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Chapter 6 - Process Costing
15. The costs transferred from a prior process to a subsequent process are referred to as transferred-in costs.
a. True
b. False
ANSWER: True
16. Transferred-in costs are a type of raw material cost.
a. True
b. False
ANSWER: True
17. The FIFO costing method separates work and costs of the equivalent units in beginning inventory from work andcosts of the equivalent units produced during the current period. Only current work and costs are used to calculatethis period's unit cost.
a. True
b. False
ANSWER: True
18. The FIFO method is the only method used to calculate equivalent units in process costing.
a. True
b. False
ANSWER: False
RATIONALE: The FIFO method is one of the methods used to calculate equivalent units in process costing.
19. To calculate the equivalent units of production, the number of physical units is multiplied by the percentage ofcompletion.
a. True
b. False
ANSWER: True
20. Equivalent units of output are the complete units that could have been produced given the total amount ofmanufacturing effort expended during the period.
a. True
b. False
ANSWER: True
21. There are two approaches for dealing with the prior-period output and prior-period costs found in beginning work inprocess: the weighted average method and the FIFO method.
a. True
b. False
ANSWER: True
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Chapter 6 - Process Costing
22. The major benefit of the FIFO method is simplicity.
a. True
b. False
ANSWER: False
RATIONALE: The major benefit of the weighted average method is simplicity.
23. A production report provides information about the physical units processed in a department and also about themanufacturing costs associated with them.
a. True
b. False
ANSWER: True
24. The unit information section of the production report has two major subdivisions: (1) units to account for and (2)units accounted for.
a. True
b. False
ANSWER: True
25. The cost information section of the production report has two major subdivisions: (1) costs to account for and (2)costs accounted for.
a. True
b. False
ANSWER: True
26. The weighted average costing method combines beginning inventory costs and work done with current period costsand work to calculate this period's unit cost.
a. True
b. False
ANSWER: True
27. In process costing, it is unreasonable to assume uniform application of material costs.
a. True
b. False
ANSWER: True
28. Different percentage completion figures for manufacturing inputs pose a problem for the calculation of equivalentunits, unit cost, and valuation of ending work in process.
a. True
b. False
ANSWER: True
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Chapter 6 - Process Costing
29. The solution for different percentage completion figures for manufacturing inputs is to calculate equivalent units asif there were uniform manufacturing inputs.
a. True
b. False
ANSWER: False
30. The usual approach is to treat transferred-in goods as a separate conversion category when calculating equivalentunits.
a. True
b. False
ANSWER: False
31. If changes occur in the prices of the manufacturing inputs from one period to the next, then the weighted averagemethod produces a more accurate unit cost than does the FIFO method.
a. True
b. False
ANSWER: False
RATIONALE: If changes occur in the prices of the manufacturing inputs from one period to the next, then FIFO produces amore accurate unit cost than does the weighted average method.
32. Since FIFO excludes prior-period work and costs, it is necessary to create three categories of completed units.
a. True
b. False
ANSWER: False
33. FIFO assumes that units in beginning work in process are completed last.
a. True
b. False
ANSWER: False
RATIONALE: FIFO assumes that units in beginning work in process are completed first, before any new units are started.
34. Under the FIFO method, for the beginning work-in-process units, the total associated manufacturing costs are thesum of the prior-period costs plus the costs incurred in the current period to finish the units.
a. True
b. False
ANSWER: True
35. ___________________ requires that units pass through one process before they can be worked on in the nextprocess.
ANSWER: Sequential processing
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Chapter 6 - Process Costing
36. _________________ works well whenever relatively homogeneous products pass through a series of processesand receive similar amounts of manufacturing costs.
ANSWER: Process costing
37. Firms that have adopted a __________ approach try to reduce WIP inventories to very low levels.
ANSWER: just-in-time(JIT)JIT
38. The processing pattern in which partially completed units can be worked on simultaneously in different processesand then brought together in a final process for completion is known as ____________________.
ANSWER: parallel processing
39. In process costing, each producing department has its own ________________ account.
ANSWER: work-in-process(WIP)WIP
40. Direct materials used in production, direct labor, and applied overhead are charged to the _______________account.
ANSWER: work-in-process
41. _________________________ are costs transferred from a prior process to a subsequent process.
ANSWER: Transferred-in costs
42. The _______________________ is the document that summarizes the manufacturing activity that takes place ina process department for a given period of time.
ANSWER: production report
43. ___________ costs are a type of raw material cost.
ANSWER: Transferred-in
44. __________________________ are the complete units that could have been produced given the total amount ofmanufacturing effort expended for the period under consideration.
ANSWER: Equivalent units of output
45. The _________________________ combines beginning inventory costs and work done with current-periodcosts and work done to calculate this period’s unit cost.
ANSWER: weighted average costing method
46. The number of physical units is multiplied by the _____________________ to calculate equivalent units.
ANSWER: percentage of completion
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Chapter 6 - Process Costing
47. The _______________________ separates work and costs of the equivalent units in beginning inventory fromwork and costs of the equivalent units produced during the current period.
ANSWER: FIFO costing method
48. The _____________________ provides an analysis of the physical flow of units.
ANSWER: physical flow schedule
49. If great accuracy in computing unit costs is desired, a company should use the _________ method to determineunit cost.
ANSWER: FIFO
50. _____________________ checks to see if the costs to account for are exactly assigned to inventories.
ANSWER: Cost reconciliation
51. Under the _______________ method equivalent units of output are computed by adding units completed toequivalent units in ending working-in-process.
ANSWER: weighted average
52. When inputs are added _______________, equivalent units and unit cost are calculated for each separate inputcategory.
ANSWER: nonuniformly
53. If changes occur in the ________ of the manufacturing inputs from one period to the next, then FIFO produces amore accurate unit cost than does the weighted average method.
ANSWER: prices
54. Under the _________________ method there are two categories of completed units; units started and completedduring the period and units from beginning inventory.
ANSWER: FIFO
55. Which type of costing system works best with a large number of homogeneous products?
a. job-order costing
b. process costing
c. sequential costing
d. parallel costing
ANSWER: b
56. Which of the following businesses is most likely to use process costing?
a. chemical plant
b. architectural firm
c. dentist's office
d. manufacturer of fine furniture
ANSWER: a
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Chapter 6 - Process Costing
57. Which of the following businesses is most likely to use process costing?
a. custom home builder
b. CPA firm
c. chemical manufacturer
d. custom machine tools manufacturer
ANSWER: c
58. Manufacturers that produce a large number of homogeneous products are most likely to use which of thefollowing?
a. job-order costing
b. process costing
c. sequential costing
d. parallel costing
ANSWER: b
59. Which of the following companies would be least likely to use a process costing system?
a. an oil refinery
b. a home-builder
c. a fertilizer company
d. a chemical company
ANSWER: b
60. What types of costs are normally found in a process accounting system?
a. materials, labor and overhead
b. materials and labor
c. labor and overhead
d. overhead, selling and administrative
ANSWER: a
61. The cost of units finished at the last (final) department will flow from work in process to:
a. raw materials
b. finished goods
c. cost of goods sold
d. accounts receivable
ANSWER: b
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Chapter 6 - Process Costing
62. Which of the following best describes sequential processing?
a. Units must pass through one process before they can be worked on in the next processes.
b. Several sequences of production are applied to a product in the department.
c. Only one process can be applied to a product in each department.
d. Subcomponents can be worked on simultaneously in different processes and then brought together in a finalprocess for completion.
ANSWER: a
63. Which of the following best describes parallel processing?
a. A large number of similar products pass through an identical set of processes.
b. Units typically pass through a series of manufacturing or producing departments.
c. Partially completed units can be worked on simultaneously in different processes and then brought togetherin a final process for completion.
d. Units must pass through one process before they can be worked on in the next processes.
ANSWER: c
64. Which is the best description of the production report?
a. The production report provides information about the manufacturing costs incurred by the department.
b. The report provides information about the physical units processed by the department.
c. The production report is the document that summarizes the manufacturing activity that takes place in aprocess department for a given period of time.
d. None of these.
ANSWER: c
65. Process accounting can be appropriate for
a. service firms.
b. manufacturing firms with JIT orientation.
c. traditional manufacturing firms.
d. All of these.
ANSWER: d
66. Process costing would be most appropriate for which of the following?
a. soft drink bottler
b. custom home builder
c. caterer
d. photocopy shop
ANSWER: a
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Chapter 6 - Process Costing
67. In process costing, the cost of units finished in the last department will be transferred from work in process to
a. cost of goods sold.
b. completed processes.
c. finished goods.
d. sales.
ANSWER: c
68. Process accounting is most probably used by a(n)
a. paint manufacturer
b. cement manufacturer
c. oil change and lube shop
d. All of these.
ANSWER: d
69. When should process costing techniques be used in assigning costs to products?
a. Any time production is only partially completed during the accounting period.
b. If the product is composed of mass-produced homogeneous products.
c. If the product is manufactured according to customer specifications.
d. All of these.
ANSWER: b
70. At the time they are used, raw materials, direct labor, and applied overhead costs are recorded in
a. raw materials inventory
b. finished goods
c. work in process
d. cost of goods sold
ANSWER: c
71. What does the accountant need to know to calculate unit cost?
a. materials cost plus overhead
b. the output for a period and the manufacturing costs for the department for that period
c. prime costs
d. total units produced by all departments
ANSWER: b
72. How is unit cost calculated?
a. total units divided by total costs
b. sum of all cost drivers
c. total cost divided by equivalent units produced
d. total of all costs incurred
ANSWER: c
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Chapter 6 - Process Costing
73. A cost transferred from a prior process to a subsequent process is referred to as
a. work in process transfer
b. beginning work in process
c. transferred in cost
d. costs added in
ANSWER: c
74. Units transferred from a prior process to a subsequent process are referred to as
a. transferred in units
b. finished goods
c. cost of goods sold
d. beginning goods
ANSWER: a
75. Equivalent production expresses all activity of the period in terms of
a. work in process
b. materials, labor and overhead
c. fully completed units
d. partially completed units
ANSWER: c
76. Two methods used to determine equivalent units of production in process costing are
a. weighted average and FIFO
b. FIFO and LIFO
c. weighted average and LIFO
d. weighted average and exact costing
ANSWER: a
77. Which of the following methods uses costs and work of beginning work in process?
a. weighted average method
b. FIFO method
c. sequential processing method
d. both the weighted average and FIFO methods
ANSWER: d
78. Which statement best describes the concept of equivalent units of production?
a. Equivalent units are a measure of a period's output.
b. Equivalent units are the units completed in a department.
c. Equivalent units are the total of the units produced by all departments.
d. Equivalent units are the number of units completed at the end of the last process.
ANSWER: a
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Chapter 6 - Process Costing
79. When computing equivalent units of production, the method that combines partially completed units in beginninginventory with current period production is the
a. FIFO method
b. LIFO method
c. weighted average method
d. actual cost method
ANSWER: c
80. The Fox Company uses the weighted average method. The beginning work in process consists of 20,000 units(100% completed as to materials and 50% complete as to conversion costs). The number of units completed was80,000. The ending work in process consists of 10,000 units (100% complete as to materials and 20% complete asto conversion costs). Calculate the equivalent units of production for conversion costs.
a. 110,000
b. 82,000
c. 80,000
d. 90,000
ANSWER: b
RATIONALE: Units completed 80,000Ending work in process (10,000 × 20%) 2,000 82,000
81. Beginning inventory for the month contained 2,000 units that were 70% complete with respect to materials. Duringthe month, 60,000 units were completed and transferred out. Ending inventory contained 3,000 units, 20% completewith respect to materials. The weighted average equivalent units of production for materials for the month would be
a. 62,400
b. 63,000
c. 60,600
d. 60,000
ANSWER: c
RATIONALE: Units completed 60,000Ending work in process (3,000 × 20%) 600Total equivalent units 60,600
82. Estimating the degree of completion of ending work in process requires:
a. judgement and ethical behavior
b. The degree of completion of beginning work in process
c. adjusting the degree of completion of completed units
d. use of the weighted average method
ANSWER: a
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Chapter 6 - Process Costing
83. Beginning inventory for the month contained 3,000 units that were 60% complete with respect to materials. Duringthe month, 50,000 units were completed and transferred out. Ending inventory contained 5,000 units, 30% completewith respect to materials. The weighted average equivalent units of production for materials for the month would be
a. 50,000
b. 51,500
c. 50,300
d. 49,500
ANSWER: b
RATIONALE: Units completed 50,000Units in ending work in process (5,000 × 30%) 1,500Total equivalent units 51,500
84. The following information is provided:
UnitsWork in process, June 1 (20% complete) 4,000Started in June 32,000Work in process, June 30 (30% complete) 12,000
Materials are added at the beginning of the process.
Equivalent units of production for conversion costs using the weighted average method would be
a. 35,600
b. 34,800
c. 36,000
d. 27,600
ANSWER: d
RATIONALE: Units completed (4,000 + 32,000 − 12,000) 24,000Units in ending work in process (12,000 × 30%) 3,600Total equivalent units--conversion 27,600
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Chapter 6 - Process Costing
85. The following information concerns Schroeder's equivalent units in May:
UnitsBeginning work-in-process (50% complete) 2,000Units started during May 8,000Units completed and transferred 7,500Ending work-in-process (80% complete) 2,500
Using the weighted average method, what are Schroeder's equivalent units for May?
a. 7,000
b. 9,500
c. 10,000
d. 19,500
ANSWER: b
RATIONALE: Units completed 7,500Ending WIP (2,500 × 80%) 2,000Equivalent units 9,500
Figure 6-5.For the current period, Haley Co. started 20,000 units and completed 8,000 units, leaving 12,000 units in process40% complete.
86. Refer to Figure 6-5. How many equivalent units of production did Haley Co. have for the period?
a. 13,500
b. 12,000
c. 12,800
d. 8,000
ANSWER: c
RATIONALE: 8,000 units + (12,000 units × 40%) = 12,800 equivalent units
87. Refer to Figure 6-5. If Haley Co. incurred $31,800 in production costs what was Haley's cost per equivalent unitfor the period?
a. $2.48
b. $3.00
c. $2.75
d. $3.25
ANSWER: a
RATIONALE: $31,800 / 12,800 equivalent units = $2.48 per equivalent unit
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Chapter 6 - Process Costing
88. The following information is provided:
UnitsWork in process, May 1 (10% complete) 4,000Started in May 17,000Work in process, May 31 (20% complete) 3,000Materials and conversion are incurred uniformly throughout the process.
Equivalent units of production for conversion using the weighted average method would be
a. 17,400
b. 18,600
c. 21,000
d. 22,000
ANSWER: b
RATIONALE: Units completed (4,000 + 17,000 − 3,000) 18,000Units in ending work in process (3,000 × 20%) 600Total equivalent units--conversion 18,600
Figure 6-6.The Martin Company uses the weighted average method. The beginning work in process consists of 6,000 units(100% completed as to materials and 50% complete as to conversion costs). The number of units completed was120,000. The ending work in process consists of 10,000 units (100% complete as to materials and 20% complete asto conversion costs).
89. Refer to Figure 6-6. What are the equivalent units of production for conversion costs?
a. 120,000
b. 132,000
c. 122,000
d. 135,000
ANSWER: c
RATIONALE: SUPPORTING CALCULATIONSEquivalent units = 120,000 + (10,000 × 0.20) = 122,000
90. Refer to Figure 6-6. Calculate the number of units started during the period.
a. 124,000
b. 100,000
c. 120,000
d. 130,000
ANSWER: a
RATIONALE: Units started during the period = 120,000 + 10,000 – 6,000 = 124,000
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Chapter 6 - Process Costing
91. Simplicity is the main advantage of which of the following process costing methods?
a. LIFO
b. FIFO
c. weighted average
d. exact cost method
ANSWER: c
92. Which of the following does not appear in the production report?
a. costs transferred from prior departments
b. costs added in the department
c. physical units passing through the department
d. retail value of the units produced
ANSWER: d
93. A production report is divided into two sections:
a. work in process and completed goods.
b. a unit information section and a cost information section.
c. finished goods and cost of goods sold.
d. goods produced and goods in process.
ANSWER: b
94. The production report
a. is a subsidiary to the work in process account.
b. provides information about the manufacturing costs incurred by the department.
c. provides information about the physical units processed by the department.
d. All of these.
ANSWER: d
95. What is the major advantage of the weighted average cost method?
a. simplicity
b. accuracy
c. it is the required method
d. it is the preferred method
ANSWER: a
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Chapter 6 - Process Costing
96. Burgundy Manufacturing uses a process cost system and computes cost using the weighted average method.During the current period, the beginning work-in-process inventory cost was $13,525. Manufacturing cost addedwas $57,000. If Burgundy's ending work-in-process inventory was valued at $15,100, then cost of goods transferredmust have been
a. $70,525
b. $55,425
c. $84,625
d. $58,575
ANSWER: b
RATIONALE: Cost to be accounted for = $13,525 + $57,000 = $70,525
Cost to be accounted for − Ending inventory = Cost transferred$70,525 − $15,100 = $55,425
97. Which step is cost reconciliation in the general pattern of a process-costing production report?
a. as part of the physical flow analysis
b. before calculation of equivalent units
c. before the computation of unit cost
d. the last step
ANSWER: d
RATIONALE: The following five steps describe the general pattern of a process-costing production report:1. physical flow analysis2. calculation of equivalent units3. computation of unit cost4. valuation of inventories (goods transferred out and ending work in process)5. cost reconciliation
98. Which step is physical flow analysis in the general pattern of a process-costing production report?
a. the first step
b. after calculation of equivalent units
c. after the computation of unit cost
d. the last step
ANSWER: a
RATIONALE: The following five steps describe the general pattern of a process-costing production report:1. physical flow analysis2. calculation of equivalent units3. computation of unit cost4. valuation of inventories (goods transferred out and ending work in process)5. cost reconciliation
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Chapter 6 - Process Costing
99. The following amounts were selected from the production report of Chandon Corporation:
Actual units in production 42,000Equivalent units (materials) 42,000Equivalent units (conversion) 39,000Cost per equivalent unit (materials) $1.10Cost per equivalent unit (conversion) $0.90Chandon uses the weighted average method in preparing its production reports. Chandon's total production cost tobe accounted for must have been
a. $89,100.
b. $84,000.
c. $81,300.
d. $72,900.
ANSWER: c
RATIONALE: (42,000 × $1.10) + (39,000 × $0.90) = $81,300
100. Garcia Company uses the weighted average method in its costing system. For the month of May in the AssemblyDepartment, the equivalent units for conversion costs amounted to 35,000. There were 5,000 units in beginningwork-in-process that were 50% complete. During the month, 33,000 units were started and 31,400 were completedand transferred. The ending work in process consists of
a. 5,000 units.
b. 7,000 units.
c. 3,600 units.
d. 6,600 units.
ANSWER: d
RATIONALE: Ending inventory = (5,000 + 33,000) − 31,400 = 6,600 units
101. Beginning inventory for the month contained 3,000 units that were 60% complete with respect to materials. Duringthe month, 50,000 units were completed and transferred out. Ending inventory contained 5,000 units, 30% completewith respect to materials. The weighted average equivalent units of production for materials for the month would be
a. 50,000.
b. 51,500.
c. 50,300.
d. 49,500.
ANSWER: b
RATIONALE: Units completed 50,000Units in ending work in process (5,000 × 30%) 1,500Total equivalent units 51,500
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Chapter 6 - Process Costing
Figure 6-3.Kelley Inc., manufactures a product that passes through two processes: mixing and molding. All manufacturingcosts are added uniformly in the mixing department.
Information for the mixing department for October follows:
Work in process, October 1:
Units (55% complete) 6,000
Direct materials $35,000
Direct labor $42,000
Overhead $12,000
During October, 32,000 units were completed and transferred to the molding department. The following costs wereincurred by the mixing department during October:
Direct materials $120,000
Direct labor $160,000
Overhead $50,000
By October 31, 3,000 units that were 75% complete remained in Mixing. Kelley uses the weighted average method.102. Refer to Figure 6-3. Kelley's equivalent units of production using the weighted average method would be
a. 34,250.
b. 32,000.
c. 35,000.
d. 24,740.
ANSWER: a
RATIONALE: Units completed 32,000Units in ending work in process (3,000 × 75%) 2,250Total equivalent units 34,250
103. Refer to Figure 6-3. Kelley's total costs to account for would be
a. $304,000.
b. $264,000.
c. $419,000.
d. $155,000.
ANSWER: c
RATIONALE: Costs to account for: Conversion Materials Cost TotalBeginning work in process $35,000 $54,000 $89,000Incurred during the period $120,000 $210,000 $330,000Total costs to account for $155,000 $264,000 $419,000
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Chapter 6 - Process Costing
104. Refer to Figure 6-3. Kelley's total cost per equivalent unit of production would be
a. $12.23.
b. $10.76.
c. $11.26.
d. $8.52.
ANSWER: a
RATIONALE: Units completed 32,000 Units in ending work in process (3,000 × 75%) 2,250 Total equivalent units 34,250 Cost to account for: Conversion Materials Cost TotalBeginning work in process $35,000 $54,000 $89,000Incurred during the period $120,000 $210,000 $330,000Total costs to account for $155,000 $264,000 $419,000 Cost per equivalent unit ($419,000 / 34,250) = $12.23
105. Refer to Figure 6-3. Kelley's cost of goods transferred to the molding department during October would be
a. $310,000.
b. $261,050.
c. $391,360.
d. $294,000.
ANSWER: c
RATIONALE: Units completed 32,000 Units in ending work in process (3,000 × 75%) 2,250 Total equivalent units 34,250 Cost to account for: Conversion Materials Cost TotalBeginning work in process $35,000 $54,000 $89,000Incurred during the period $120,000 $210,000 $330,000Total costs to account for $155,000 $264,000 $419,000 Cost per equivalent unit ($419,000 / 34,250) = $12.23 32,000 × $12.23 = $391,360
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Chapter 6 - Process Costing
106. Refer to Figure 6-3. Kelley's cost of October's ending work in process for the mixing department would be
a. $27,500.
b. $29,200.
c. $22,520.
d. $27,518.
ANSWER: d
RATIONALE: Units completed 32,000 Units in ending work in process (3,000 × 75%) 2,250 Total equivalent units 34,250 Cost to account for: Conversion Materials Cost TotalBeginning work in process $35,000 $54,000 $89,000Incurred during the period $120,000 $210,000 $330,000Total costs to account for $155,000 $264,000 $419,000 Cost per equivalent unit ($419,000 / 34,250) = $12.23 2,250 EWIP × $12.23 = $27,517.50
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Chapter 6 - Process Costing
Figure 6-4.The following information is available for Department X for August:
Work in process, August 1: Materials $ 8,000 Conversion costs $15,000 Costs added during August: Materials $28,000 Conversion costs $25,000 Equivalent units of production (weighted average): Materials 4,000 Conversion 5,000
107. Refer to Figure 6-4. Department X's cost per equivalent unit for materials using the weighted average methodwould be
a. $2.00.
b. $7.00.
c. $8.00.
d. $9.00.
ANSWER: d
RATIONALE: Beginning work in process, materials $ 8,000Material costs incurred during period 28,000Total costs to account for $36,000 Cost per equivalent unit for materials ($36,000 / 4,000) $9.00
108. Refer to Figure 6-4. Department X's cost per equivalent unit for conversion using the weighted average methodwould be
a. $8.00.
b. $5.00.
c. $3.00.
d. $9.00.
ANSWER: a
RATIONALE: Beginning work in process, conversion $15,000Conversion costs incurred during period 25,000 Total costs to account for $40,000 Cost per equivalent unit for conversion ($40,000 / 5,000) $8.00
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Figure 6-7.Geller Manufacturing uses a process cost system to manufacture sensors for the security industry. The followinginformation pertains to operations for the month of March.
Units
Beginning work-in-process inventory, March 1 12,000
Started in production during March 110,000
Completed production during March 88,000
Ending work-in-process inventory, March 31 34,000
The beginning inventory was 70% complete for materials and 30% complete for conversion costs. The endinginventory was 90% complete for materials and 50% complete for conversion costs.
Costs pertaining to the month of March are as follows:
Beginning inventory costs are: materials, $44,400; conversion cost $30,500.
Costs incurred during March are: materials used, $588,000; conversion cost $624,000.109. Refer to Figure 6-7. Using the weighted average method, the unit cost of materials, rounded to 2 decimal places, for
March is
a. $4.50.
b. $5.33.
c. $5.00.
d. $5.46.
ANSWER: b
RATIONALE: Direct Conversion Materials CostCompleted 88,000 88,000Ending WIP 30,600 17,000Equivalent units of Production 118,600 105,000 Unit direct materials cost = ($44,400 + $588,000) / 118,600 = $5.33
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110. Refer to Figure 6-7. Using the weighted average method, the equivalent unit conversion cost, rounded to 2 decimalplaces, for March is
a. $5.95.
b. $6.00.
c. $5.13.
d. $6.23.
ANSWER: d
RATIONALE: Direct Conversion Materials CostCompleted 88,000 88,000Ending WIP 30,600 17,000Equivalent units of Production 118,600 105,000 Unit conversion cost = ($30,500 + $624,000) / 105,000 = $6.23
111. Refer to Figure 6-7. Using the weighted average method the total equivalent units of production for direct materialsis
a. 120,000.
b. 118,600.
c. 116,000.
d. 105,000.
ANSWER: b
RATIONALE: Direct Conversion Materials CostCompleted 88,000 88,000Ending WIP 30,600 17,000Equivalent units of Production 118,600 105,000
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112. Refer to Figure 6-7. Using the weighted average method, the total cost of the units in the ending work-in-processinventory at March 31 is
a. $253,960.
b. $269,008.
c. $250,000.
d. $256,960.
ANSWER: b
RATIONALE: Direct Conversion Materials CostCompleted 88,000 88,000Ending WIP 30,600 17,000Equivalent units of Production 118,600 105,000 Unit direct materials cost = ($44,400 +$588,000) / 118,600 = $5.33Unit conversion cost = ($30,500 + $624,000) / 105,000 = $6.23 EWIP = ($5.33 × 30,600) + ($6.23 × 17,000) = $269,008
113. Assuming conversion costs represent a single category, how many input categories would a department receivingtransferred-in goods normally have?
a. 4
b. 5
c. 3
d. 2
ANSWER: c
114. Conversion costs include:
a. direct labor and overhead.
b. direct materials, direct labor and overhead.
c. direct materials and overhead.
d. selling and administrative.
ANSWER: a
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Figure 6-2.The Bing Corporation produces a product that passes through two processes. During June, the first departmenttransferred 60,000 units to the second department. The cost of the units transferred was $90,000. Materials areadded uniformly in the second process. The following information was provided about the second department'soperations during June:
Units, beginning work in process 5,000
Units, ending work in process 13,000
115. Refer to Figure 6-2. Units started in the second department during June for Bing Corporation would be
a. 60,000.
b. 55,000.
c. 73,000.
d. 48,000.
ANSWER: a
RATIONALE: Units started = Number of units transferred in = 60,000
116. Refer to Figure 6-2. Units completed in the second department during June for Bing Corporation would be
a. 48,000.
b. 52,000.
c. 49,000.
d. 55,000.
ANSWER: b
RATIONALE: Beginning work in process 5,000Transferred in 60,000 65,000Less: Ending work in process 13,000Units completed 52,000
117. Refer to Figure 6-2. Units started and completed in Bing Corporation's second department during June would be
a. 48,000.
b. 37,000.
c. 47,000.
d. 55,000.
ANSWER: c
RATIONALE: Units completed (5,000 + 60,000 – 13,000) 52,000Less: Units in beginning work in process 5,000Units started and completed 47,000
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118. In process manufacturing, the manufacturing input categories include
a. only work in process.
b. only cost of goods sold.
c. only raw materials.
d. transferred-in materials, materials added, and conversion costs.
ANSWER: d
119. The cost of a department's transferred-in goods is the cost of
a. its materials, labor, and overhead.
b. the goods transferred out as computed in the prior department.
c. its materials and conversion costs.
d. None of these.
ANSWER: b
120. Assuming that there is a one-to-one relationship between the output measures, the units started in a subsequentdepartment are
a. equal to the equivalent units plus the materials added.
b. equal to the equivalent units of that department.
c. equal to the materials added plus conversion costs.
d. equal to the units transferred out from the prior department.
ANSWER: d
121. Nonuniform manufacturing inputs affect
a. the calculation of equivalent units, unit cost, and valuation of ending work in process.
b. only the calculation of equivalent units, and valuation of ending work in process.
c. only the valuation of ending work in process.
d. only the manufacturing outputs.
ANSWER: a
122. Process accounting's solution for nonuniform manufacturing inputs is
a. calculate equivalent units for each category of manufacturing input.
b. calculate total unit cost as if there were uniform manufacturing inputs.
c. to use the weighted average method.
d. to use FIFO method or the weighted average method.
ANSWER: a
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Figure 6-1.The following information is available for Department Z for the month of July:
Units CostWork in process, July 1 (70% complete) 2,000 Direct materials $ 6,000 Direct labor 3,000 Manufacturing overhead 4,000 Total work in process, July 1 $13,000 Started in production during July 20,000 Costs added: Direct materials $18,000 Direct labor 8,000 Manufacturing overhead 10,000 Total costs added during July $36,000 Work in process, July 31, (80% complete) 2,000 Materials are added at the beginning of the process. (Round unit costs to two decimal places.)
123. Refer to Figure 6-1. Department Z's cost per equivalent unit of production for materials using the FIFO methodwould be
a. $1.20.
b. $1.04.
c. $0.96.
d. $0.90.
ANSWER: d
RATIONALE: MaterialsUnits started and completed (20,000 − 2,000) 18,000Units completed from beginning work in process -0-Units in ending work in process (2,000 × 100%) 2,000Total equivalent units 20,000 Cost per equivalent unit ($18,000 / 20,000) $0.90
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124. Refer to Figure 6-1. Department Z's cost per equivalent unit of production for conversion costs using the FIFOmethod would be
a. $1.18.
b. $1.02.
c. $0.85.
d. $0.73.
ANSWER: c
RATIONALE: Conversion CostUnits started and completed (20,000 − 2,000) 18,000Units completed from beginning work in process (5,000 × 30%) 1,500Units in ending work in process (2,000 × 80%) 1,600 Total equivalent units 21,100 Cost per equivalent unit ($18,000 / 21,100)Cost = Direct Labor ($8,000) + MOH ($10,000)
$0.85
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125. Refer to Figure 6-1. Department Z's cost of goods transferred out using the FIFO method would be
a. $40,250.
b. $45,540.
c. $44,500.
d. $45,775.
ANSWER: d
RATIONALE: Materials: Units started and completed (20,000 − 2,000) 18,000Units completed from beginning work in process -0-Units in ending work in process (2,000 × 100%) 2,000 Total equivalent units 20,000 Cost per equivalent unit ($18,000 / 20,000) $0.90 Conversion: Units started and completed (20,000 − 2,000) 18,000Units completed from beginning work in process (5,000 × 30%) 1,500Units in ending work in process (2,000 × 80%) 1,600 Total equivalent units 21,100 Cost per equivalent unit ($18,000 / 21,100) $0.85 Cost of units transferred out: Beginning work in process: From prior period ($6,000 + $3,000 + $4,000) $13,000 Current period--conversion (1,500 × $0.85) 1,275Cost of units started and completed (18,000 × $1.75) 31,500 $45,775
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126. Refer to Figure 6-1. Department Z's cost of ending work in process using the FIFO method would be
a. $3,960.
b. $3,552.
c. $3,500.
d. $3,160.
ANSWER: d
RATIONALE: Materials: Units started and completed (20,000 − 2,000) 18,000Units completed from beginning work in process -0-Units in ending work in process (2,000 × 100%) 2,000 Total equivalent units 20,000 Cost per equivalent unit ($18,000 / 20,000) $0.90 Conversion: Units started and completed (20,000 − 2,000) 18,000Units completed from beginning work in process (5,000 × 30%) 1,500Units in ending work in process (2,000 × 80%) 1,600 Total equivalent units 21,100 Cost per equivalent unit ($18,000 / 21,100) $0.85 Ending work in process: Materials (2,000 × $0.90) $1,800 Conversion (1,600 × $0.85) 1,360Cost of ending work in process $3,160
127. Under the FIFO production costing method, the two categories of completed units used to compute the totalcost of units completed during a period are:a. beginning work-in-process units and units started.
b. units started and completed and ending work-in-process units.
c. beginning work-in-process units and units started and completed during the current period.
d. other categories.
ANSWER: c
128. The total associated manufacturing costs for beginning work in process units under the FIFO method are:a. the sum of the prior-period costs plus the costs incurred in the current period to finish the units in beginning
work in process
b. the cost of ending work-in-process units.
c. the cost of units started and completed.
d. conversion costs.
ANSWER: a
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129. Information concerning Department A of Ali Company for the month of June is as follows:
Materials Units CostsWork in process, beginning of month 20,000 $14,250Started in June 85,000 $66,600Units completed 90,000 Work in process, end of month 15,000 All materials are added at the beginning of the process. Using the first-in, first-out method, the equivalent units formaterials would be
a. 105,000.
b. 85,000.
c. 90,000.
d. 110,000.
ANSWER: b
RATIONALE: To complete beginning units in process (all had 100% of materials) 0Units started and completed during the month (85,000 started − 15,000 in ending WIP) 70,000Units in process, June 30 with all materials 15,000Equivalent production for materials in period 85,000
130. Information concerning Department A of Ali Company for the month of June is as follows:
Materials Units CostsWork in process, beginning of month 20,000 $14,250Started in June 85,000 $66,600Units completed 90,000 Work in process, end of month 15,000 All materials are added at the beginning of the process. Using the first-in, first-out method, the cost (rounded to twoplaces) per equivalent unit for materials is:
a. $0.74.
b. $0.90.
c. $0.77.
d. $0.78.
ANSWER: d
RATIONALE: Materials cost: Added during June $66,600 Total materials cost for period $66,600$66,600 / 85,000 (equivalent units) = cost per equivalent unit $ .78
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131. Which of the following methods considers the percentage of completion of beginning work-in-process?
a. FIFO
b. weighted average
c. both weighted average and FIFO
d. neither FIFO nor weighted average
ANSWER: a
132. Montgomery Corporation produces boxes of cookies that go through three departments: Mixing, Cooking andPackaging. During April, Montgomery produced 250,000 boxes of cookies with the following costs:
Mixing department Cooking department
Packaging
department
Direct materials $325,000 $110,000 $90,000
Direct labor 65,000 35,000 80,000
Applied Overhead 85,000 30,000 95,000
Required:A. Calculate the costs transferred out of each department.B. Prepare journal entries that reflect these cost transfers.
ANSWER: A.
Mixing department Cooking department Packaging department
Direct materials $325,000 $110,000 $90,000
Direct labor 65,000 35,000 80,000
Applied Overhead 85,000 30,000 95,000
Transferred-in cost 0 $475,000 $650,000
Total cost $475,000 $650,000 $915,000
B.
Work in Process-Cooking $475,000 Work in Process-Mixing $475,000 Work in Process-Packaging $650,000 Work in Process-Cooking $650,000 Finished Goods $915,000 Work in Process-Packaging $915,000
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133. The bottling department had the following data for the month of January:
Units in BWIP -Units completed 7,500Units in EWIP (35% complete) 1,200Total manufacturing costs 13,464
Required:A. What is the output in equivalent units for January?B. What is the unit manufacturing cost for January?C. Calculate the cost of goods transferred out for January.D. Calculate the value of January's EWIP
ANSWER: A.
Units completed 7,5001,200 units × 35% complete 420January output 7,920
B.Unit cost = $13,464 / 7,920 = $1.70
C.Cost transferred out = $1.70 × 7,500 = $12,750
D.EWIP = $1.70 × 420 = $714
134. Scott Inc., manufactures a product that passes through two processes: mixing and molding. All manufacturing costsare added uniformly in the mixing department.
Information for the mixing department for May follows:
Work in process, May 1:
Units (45% complete) 10,000
Direct materials $23,000
Direct labor $37,000
Overhead $15,000
During May, 65,000 units were completed and transferred to the molding department. The following costs wereincurred by the mixing department during May:
Direct materials $115,000
Direct labor $140,000
Overhead $55,000
By May 31, 4,000 units that were 80% complete remained in Mixing. Scott uses the weighted average method.
Required:A. Calculate the equivalent units of production using the weighted average method.B. Calculate the total costs to account for.C. Calculate total cost per equivalent unit of production rounded to 2 decimal places.
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D. Calculate the cost of goods transferred to the molding department during May.E. Calculate the cost of May's ending work-in-process for the mixing department.
ANSWER: A.Units completed 65,000Units in ending work in process (7,000 × 80%) 3,200 Total equivalent units 68,200
B.
Costs to account for: Conversion Materials Cost TotalBeginning work in process $23,000 $52,000 $75,000Incurred during the period $115,000 $195,000 $310,000 Total costs to account for $138,000 $247,000 $385,000
C.
Units completed 65,000 Units in ending work in process (7,000 × 80%) 3,200 Total equivalent units 68,200 Costs to account for: Conversion Materials Cost TotalBeginning work in process $23,000 $52,000 $75,000Incurred during the period $115,000 $195,000 $310,000 Total costs to account for $138,000 $247,000 $385,000 Cost per equivalent unit ($385,000 / 68,200) = $5.65
D.
Cost per equivalent unit ($385,000 / 68,200) = $5.65 65,000 × 5.65 = $367,250
E.
Units completed 65,000 Units in ending work in process (7,000 × 80%) 3,200 Total equivalent units 68,200 Costs to account for: Conversion Materials Cost TotalBeginning work in process $23,000 $52,000 $75,000Incurred during the period $115,000 $195,000 $310,000 Total costs to account for $138,000 $247,000 $385,000
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Cost per equivalent unit ($385,000 / 68,200) = $5.65 3,200 EWIP × $5.65 = $18,080
135. Barr Inc., manufactures a product that passes through two processes: mixing and packaging. All manufacturingcosts are added uniformly in the mixing department.
Information for the mixing department for June follows:
Work in process, June 1 Units (60% complete) 5,000 Direct materials $20,000 Direct labor $24,000 Overhead $ 4,000During June, 80,000 units were completed and transferred to packaging.
The following costs were incurred by the mixing department during June:
Direct materials $180,000Direct labor 200,000Overhead 59,200At June 30, 12,000 units that were 10% complete remained in the mixing department.
Use the weighted average method and round unit costs to two decimal places.
Required:A. Determine equivalent units of production for June.B. Determine June's total costs to account for.C. Determine total cost per equivalent unit of production.D. Determine the cost of goods transferred to the packaging department.E. Determine the cost of June's ending work in process for the mixing department.
ANSWER:
A. 81,200 Units accounted for: Physical Equivalent Flow Units Units completed 80,000 80,000 Units in EWIP (10% complete) 12,000 1,200 Total units accounted for 92,000 81,200 B. $487,200 Costs to account for: Manufacturing Costs Beginning work in process ($20,000 + $24,000 + $4,000) $ 48,000 Incurred during the period
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($180,000 + $200,000 + $59,200) 439,200 Total costs to account for $487,200 C. $6.00 ($487,200 / 81,200) D. $480,000 (80,000 × $6.00) E. $7,200 (1,200 × $6.00)
136. Star Inc., manufactures a product that passes through two processes: mixing and packaging. All manufacturingcosts are added uniformly in the mixing department.
Information for the mixing department for June follows:
Work in process, June 1: Units (30% complete) 15,000 Direct materials $ 4,000 Direct labor $ 3,000 Overhead $ 2,376During June, 100,000 units were completed and transferred to packaging.
The following costs were incurred by the mixing department during June:
Direct materials $50,000 Direct labor 30,000 Overhead 12,000At June 30, 8,000 units that were 70% complete remained in the mixing department.
Use the weighted average method, and round unit costs to two decimal places.
Required:A. Determine equivalent units of production for June.B. Determine June's total costs to account for.C. Determine total cost per equivalent unit of production.D. Determine the cost of goods transferred to the packaging department.E. Determine the cost of June's ending work in process for the mixing department.
F.Determine the equivalent units of production for June if ending inventory had been 80%complete.
ANSWER:
A. 105,600 Units accounted for: Physical Equivalent Flow Units Units completed 100,000 100,000 Units in EWIP (70% complete) 8,000 5,600 Total units accounted for 108,000 105,600
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B. $101,376 Costs to account for: Manufacturing Costs Beginning work in process ($4,000 + $3,000 + $2,376) $ 9,376 Costs added ($50,000 + $30,000 + $12,000) 92,000 Total costs to account for $101,376
C.Cost of direct materials per unit = $54,000 / 105,600 = $0.51Cost of direct labor and factory overhead = $47,376 / 105,600 = $0.45 Total cost per equivalent unit = $0.51 + $0.45 = $0.96
D. $96,000 = (100,000 × $0.96) E. $5,376 = 5,600 × $0.96 F. 100,000 + (8,000 × 80%) = 106,400
Figure 6-8.Department A had the following data for October:
Units in beginning work in process 0Units Completed 2,000Units in ending work in process (30% complete) 1,200Total manufacturing cost $6,608
137. Refer to Figure 6-8.
A. Calculate the equivalent units of production in ending work-in-process inventory.B. Calculate total equivalent units of production for Department A for October.
ANSWER:
A. Ending work-in-process 1,200 × 0.30 360B. Total equivalent units 360 + 2,000 2,360
138. Refer to Figure 6-8. What is the unit manufacturing cost for Department A for October?
ANSWER: Unit cost = $6,608 / 2,360 = $2.80
139. Refer to Figure 6-8.
A. What is the cost of goods transferred out?B. What is the cost of ending work-in-process inventory?
ANSWER: A. Cost of goods transferred out $2.80 × 2,000 $5,600
B. Cost of ending work-in-process inventory $2.80 × 360 $1,008
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140. Harley Company manufactures a product that passes through two processes. The following information is availablefor the first department for October.
All materials are added at the beginning of the process.
Beginning work in process consisted of 25,000 units that were 80% complete with respect to conversion.
Ending work in process consisted of 15,000 units that were 40% complete with respect to conversion.
During the month, 90,000 units were started in process.
Required:A. Prepare a physical flow schedule.B. Compute equivalent units using the weighted average method.
ANSWER:
A. Physical flow schedule: Units to account for: Units in beginning work in process 25,000 Units started 90,000 Total units to account for 115,000 Units accounted for: Units completed and transferred out: Started and completed 75,000 From beginning work in process 25,000 100,000 Units in ending work in process 15,000 Total units accounted for 115,000 B. Equivalent units: Conversion Materials Cost Units completed 100,000 100,000 Units in EWIP × Fraction complete: Materials (15,000 × 100%) 15,000 Conversion (15,000 × 40%) 6,000 Equivalent units of output 115,000 106,000
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141. King Corporation produces a product that passes through two departments. For December, the following equivalentunit schedule was prepared for the first department:
Materials Conversion CostUnits completed 10,000 10,000Units in EWIP × Fraction complete: Materials (2,000 × 100%) 2,000 Conversion (2,000 × 25%) 500 Equivalent units of output 12,000 10,500Costs assigned to beginning work in process: Materials: $14,000 Conversion: $20,000Manufacturing costs incurred during the month: Materials: $34,000 Conversion: $43,000
Required:A. Compute the unit cost for December using the weighted average method.B. Determine the cost of goods transferred out.C. Determine the cost of ending work in process.
ANSWER:
A. Cost per equivalent unit: Materials = ($14,000 + $34,000) / 12,000 = $4.00 Conversion = ($20,000 + $43,000) / 10,500 = $6.00 Total unit cost = $10.00 per equivalent unit ($4.00 + $6.00) B. Cost of goods transferred out = $10 × 10,000 = $100,000 C. Cost of ending work in process = (2,000 × $4) + (500 × $6) = $8,000 + $3,000 = $11,000
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142. Royal, Inc., manufactures products that pass through two or more processes. The company uses the weightedaverage method to compute unit costs. During April, equivalent units were computed as follows:
Materials Conversion CostUnits completed 90,000 90,000Units in EWIP × Fraction complete: Materials (4,000 × 100%) 4,000 Conversion (4,000 × 30%) 1,200 Equivalent units of output 94,000 91,200
The unit cost per equivalent unit was computed as follows:
Materials $5.00Conversion cost 3.00 Total cost per unit $8.00
Required:A. Determine the cost of the goods transferred out.B. Determine the cost of ending work in process.
ANSWER:
A. Cost of goods transferred out = $8.00 × 90,000 = $720,000 B. Cost of ending work in process: Materials (4,000 × $5.00) $20,000 Conversion (1,200 × $3.00) 3,600 Total cost $23,600
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143. Indigo Inc., manufactures a product that passes through two processes. The following information is available forthe first department for September.
All materials are added at the beginning of the process.
Beginning work in process consisted of 200 units that were 60% complete with respect to conversion.
Ending work in process consisted of 500 units that were 10% complete with respect to conversion.
During the month, 3,000 units were started in process.
Required:A. Prepare a physical flow schedule.B. Compute equivalent units using the weighted average method.
C.How would your answer change in part B if the beginning work in process consisted of200 units that were 80% complete with respect to conversion?
ANSWER:
A. Physical flow schedule: Units to account for: Units in beginning work in process 200 Units started 3,000 Total units to account for 3,200 Units accounted for: Units completed and transferred out: Started and completed 2,500 From beginning work in process 200 2,700 Units in ending work in process 500 Total units accounted for 3,200 B. Equivalent units: Conversion Materials Cost Units completed 2,700 2,700 Units in EWIP × Fraction complete: Materials (500 × 100%) 500 Conversion (500 × 10%) 50 Equivalent units of output 3,200 2,750
C.The equivalent units calculated under the weighted average method is unaffected by the degreeof completion of beginning inventory.
144. Delilah, Incorporated, manufactures quality hair care products. The ingredients are combined in the mixingdepartment and put in 16-ounce containers in the packaging department.
The following information pertains to the mixing department for the month of May:
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Units (Gallons)Work in process, May 1 (100% complete materials, 75% labor and overhead) 10,000 Started during May 50,000 Work in process, May 31 (100% complete materials, 50% labor and overhead) 8,000The costs in work in process at May 1 in the mixing department were as follows:
Mixing DepartmentWork in process, May 1: Materials $15,000 Direct labor 20,000 Manufacturing overhead 17,600 Total costs $52,600The costs added by the mixing department during the month of May were as follows:
Mixing DepartmentMaterials $ 90,000Direct labor 120,000Manufacturing overhead 100,000 Total costs added $310,000Round unit costs to two decimal places.
Required:A. Prepare a physical flow schedule for the mixing department for May.
B.Using the weighted average method, determine the equivalent units of production formaterials and conversion for the mixing department for May.
C.Using the weighted average method, determine the cost per equivalent unit of productionfor materials and conversion for the mixing department for May.
D.Using the weighted average method, determine the cost of goods transferred out and thecost of ending work in process for the mixing department.
ANSWER:
A. Physical flow schedule: Units to account for: Units in beginning work in process 10,000 Units started during May 50,000 Total units to account for 60,000 Units accounted for: Units completed and transferred out:
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Started and completed 42,000 From beginning work in process 10,000 52,000 Units in ending work in process 8,000 Total units accounted for 60,000 B. Equivalent units of production--materials: 60,000 Equivalent units of production--conversion: 56,000 Materials Conversion Cost Units completed 52,000 52,000 Units in EWIP × Fraction complete: Materials (8,000 × 100%) 8,000 Conversion (8,000 × 50%) 4,000 Total equivalent units 60,000 56,000 C. Unit cost for materials: $1.75 Unit cost for conversion: $4.60 Costs to account for: Conversion Materials Cost Total Beginning work in process $ 15,000 $ 37,600 $ 52,600 Costs added 90,000 220,000 310,000 Total costs to account for $105,000 $257,600 $362,600 Divided by equivalent units 60,000 56,000 Cost per equivalent unit $1.75 $4.60 $6.35 D. Costs of goods transferred out: $330,200 Cost of ending work in process: $ 32,400 Costs accounted for: Transferred Ending Work Out in Process Total Units transferred out (52,000 × $6.35) $330,200 − $330,200 Ending work in process: Materials (8,000 × $1.75) − $ 14,000 14,000 Conversion (4,000 × $4.60) − 18,400 18,400 Total costs accounted for $330,200 $ 32,400 $362,600
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Chapter 6 - Process Costing
145. AL Corporation produces a product that passes through two departments. For January, the following equivalent unitschedule was prepared for the first department:
Materials Conversion CostUnits completed 120,000 120,000Units in EWIP × Fraction complete: Materials (10,000 × 100%) 10,000 Conversion (10,000 × 40%) 4,000 Equivalent units of output 130,000 124,000Costs assigned to beginning work in process: Materials: $68,000 Conversion: $33,000Manufacturing costs incurred during the month: Materials: $75,000 Conversion: $60,000
Required:A. Compute the unit cost for January using the weighted average method.B. Determine the cost of goods transferred out.C. Determine the cost of ending work in process.
ANSWER:
A. Cost per equivalent unit: Materials = ($68,000 + $75,000) / 130,000 = $1.10 Conversion = ($33,000 + $60,000) / 124,000 = $0.75 Total unit cost = $1.85 per equivalent unit B. Cost of goods transferred out = $1.85 × 120,000 = $222,000 C. Cost of ending work in process = (10,000 × $1.10) + (4,000 × $0.75) = $11,000 + $3,000 = $14,000
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Chapter 6 - Process Costing
146. Mermain Inc., manufactures products that pass through two processes. The company uses the weighted averagemethod to compute unit costs. During March, equivalent units were computed as follows:
Materials Conversion CostUnits completed 50,000 50,000Units in EWIP × Fraction complete: Materials (9,000 × 100%) 9,000 Conversion (9,000 × 80%) 7,200 Equivalent units of output 59,000 57,200Cost was added as follows:
Materials $ 73,750Conversion cost 57,200 Total cost $130,950
Required:A. Determine the cost of the goods transferred out.B. Determine the cost of ending work in process.
C.Determine the cost of the goods transferred out if materials in ending work in process hadbeen 90% complete and conversion in ending work in process had been 70% complete.Round costs per unit to 2 decimals if necessary.
ANSWER: Unit cost computation:Materials = $73,750 / 59,000 units = $1.25Conversion = $57,200 / 57,200 units = $1.00
A. Cost of goods transferred out = ($1.25 + $1.00) × 50,000 = $112,500 B. Cost of ending work in process: Materials (9,000 × $1.25) $11,250 Conversion (7,200 × $1.00) 7,200 Total cost $18,450 C. Materials equivalent units = 50,000 + (9,000 × .9) = 58,100 Conversion equivalent units = 50,000 + (9,000 × .7) = 56,300 Materials cost per unit = $73,750 / 58,100 = $1.27 Conversion cost per unit = $57,200 / 56,300 = $1.02 Cost of units transferred out = 50,000 × ($1.27 + $1.02) = $114,500
147. Davidson Company manufactures a product that passes through two processes. The following information isavailable for the first department for October.
All materials are added at the beginning of the process.
Beginning work in process consisted of 20,000 units that were 80% complete with respect to conversion.
Ending work in process consisted of 15,000 units that were 40% complete with respect to conversion.
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Chapter 6 - Process Costing
During the month, 90,000 units were started in process.
Required:A. Prepare a physical flow schedule.B. Compute equivalent units using the FIFO method.
ANSWER:
A. Physical flow schedule: Units to account for:
Units in beginning workin process
20,000
Units started 90,000
Total units to accountfor
110,000
Units accounted for:
Units completed andtransferred out:
Started andcompleted 75,000
From beginning workin process 20,000 95,000
Units in ending work inprocess
15,000
Total units accountedfor
110,000
B. Equivalent units: Conversion Materials Cost Units started and completed 75,000 75,000
Units in BWIP × Fractioncomplete:
Conversion (20,000 ×20%)
4,000
Units in EWIP × Fractioncomplete:
Materials (15,000 ×100%) 15,000
Conversion (15,000 ×40%) 6,000
Equivalent units ofoutput 90,000 85,000
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Chapter 6 - Process Costing
148. List the five steps in preparing a production report.
ANSWER: 1. physical unit flow analysis2. calculation of equivalent units3. computation of unit cost4. valuation of inventories (goods transferred out and ending work in process)5. cost reconciliation
149. Titan Manufacturing uses a process cost system. The following information pertains to operations for the month ofDecember.
Units
Beginning work-in-process inventory, December 1 7,000
Started in production during December 185,000
Completed production during December 93,500
Ending work-in-process inventory, December 31 98,500
The beginning inventory was 80% complete for materials and 40% complete for conversion costs. The endinginventory was 85% complete for materials and 30% complete for conversion costs.
Costs pertaining to the month of December are as follows:Beginning inventory costs are: materials, $38,200; conversion cost $41,400.Costs incurred during December are: materials used, $462,300; conversion cost $602,700.
Required:A. Using the weighted average method calculate the total equivalent units of production for direct materials andconversion cost.
B. Using the weighted average method, calculate the unit cost of materials and conversion for December.
C. Using the weighted average method, calculate the total cost of the units in the ending work-in-process inventoryat December 31.
ANSWER: A.
Direct Conversion Materials CostCompleted 93,500 93,500Ending WIP (98,500 × 85%; 98,500 × 30%) 83,725 29,550Equivalent units of Production 177,225 123,050
B.
Direct Conversion Materials CostCompleted 93,500 93,500Ending WIP 83,725 29,550Equivalent units of Production 177,225 123,050 Unit direct materials cost = ($38,200 +$462,300) / 177,225 = $2.82Unit conversion cost = ($41,400 + $602,700) / 123,050 = $5.23
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Chapter 6 - Process Costing
C.UNITS Direct Conversion Materials CostCompleted 93,500 93,500Ending WIP 83,725 29,550Equivalent units of Production 177,225 123,050
COSTS
Unit direct materials cost = ($38,200 +$462,300) / 177,225 = $2.82Unit conversion cost = ($41,400 + $602,700) / 123,050 = $5.23 EWIP = ($2.82 × 83,725) + ($5.23 × 29,550) = $390,651 $236,104.50 + $154,546.50 = $390,651.00
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Chapter 6 - Process Costing
150. Plemmon Company adds materials at the beginning of the process in the forming department, which is the first oftwo stages of its production cycle. Information concerning the materials used in the forming department in Aprilfollows:
Materials Units CostsWork in process at April 1 15,000 $ 8,000Units started during April 60,000 $38,500Units completed and transferred to next department during April 65,000 Using the FIFO method, what is the cost of materials in work in process at April 30 (round unit calculations to thenearest cent)?
ANSWER:
UnitsBeginning work in process 15,000Started 60,000Total 75,000 Less completed 65,000Ending work in process (complete as to material) 10,000Unit cost (See calculation below) $ 0.64Materials cost in ending work in process $6,400 To complete beginning in process units (materials all 100%) 0Units started and finished during month (60,000 started − 10,000 in ending WIP) 50,000Units in process, April 30 (Complete as to materials) 10,000Equivalent production for materials 60,000Materials cost: Costs added during June $38,500 Total materials cost for period $38,500$38,500 / 60,000 units = cost per equivalent unit $ 0.64
151. The Roberto Company had computed the flow of units for Department A for the month of May as follows:
Work in process, May 1: 10,000 Started into production during May 39,000 Units to be accounted for 49,000
Beginning Added during the work in process current monthMaterials $20,800 $ 97,500Labor 5,200 34,920Factory overhead 4,800 32,980 Total $30,800 $165,400Materials are added at the beginning of the process. There were 8,000 units of work in process atMay 31. The work in process at May 1 was 70% complete as to direct labor and factory overhead costs and thework in process at May 31 was 60% complete as to direct labor and factory overhead costs. What was the cost of
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Chapter 6 - Process Costing
the goods transferred out and in ending work in process using the FIFO method?
ANSWER: Unit output for the month:
Conversion Materials CostsTo complete beginning work inprocess:
Materials needed -0- 30% × 10,000 units 3,000Started and finished during month: All costs added 31,000 31,000Ending work in process: All materials added 8,000 60% × 8,000 4,800Total 39,000 38,800
Unit costs for month:
Materials $97,500 / 39,000 $2.50Labor $34,920 / 38,800 0.90Factory overhead $32,980 / 38,800 0.85 Total $4.25
Inventory Costs:Cost of goods finished and transferred out during month: Beginning units in process: Prior month's cost $30,800 Current cost to complete:
Materials (alreadycomplete) 0
Labor (10,000 × 30%× $.90) 2,700
Factory overhead(10,000 × 30% × $.85) 2,550 $ 36,050
Units started and completed during month (31,000 × $4.25) 131,750 Total cost transferred $167,800
Cost of work in process, endof month:
Materials (8,000 × $2.50) $20,000
Labor (8,000 × 60% ×$.90) 4,320
Factory overhead (8,000× 60% × $.85) 4,080 28,400
Total production costsaccounted for
$196,200
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Chapter 6 - Process Costing
152. Garrison Inc. manufactures product where all manufacturing inputs are applied uniformly. The company producedthe following physical flow schedule for July:
Units to account for:
Units in BWIP (60% complete) 17,000
Units started 46,000
Total units to account for 63,000
Units accounted for:
Units completed:
From BWIP 17,000
Started and completed 38,000
55,000
Units, EWIP (65% completed) 8,000
Total units accounted for 63,000
Required: Prepare a schedule of equivalent units using the FIFO method.
ANSWER: Units started and completed 38,000Units in BWIP × Fraction to be completed: 17,000 × 40% 6,800Units in EWIP × Fraction complete: 8,000 × 65% 5,200Equivalent units of output 50,000
153. Describe the differences between process costing and job-order costing.
ANSWER: Process costing collects costs by process (department) for a given period of time. Unit costs arecomputed by dividing these costs by the department's output measured for the same period of time.Process costing is typically used for industries where units are homogenous and mass produced.Job-order costing collects costs by job. Unit costs are computed by dividing the job's costs by the unitsproduced by the job. Job-order costing is used for industries that produce heterogeneous products.
154. Describe how process costing for services differs from process costing for manufactured goods.
ANSWER: Service firms generally do not have work-in-process inventories, and so equivalent units of productionare not needed.
155. Explain the role of the departmental production report in process costing and name the five steps for completing thedepartmental production report.
ANSWER: The production report summarizes cost and manufacturing activity for a producing department for agiven period of time. The production report is subsidiary to the work-in-process account for adepartment. The following five steps describe the general pattern of a process-costing productionreport:Step 1. Physical flow analysisStep 2. Calculation of equivalent unitsStep 3. Computation of unit costStep 4. Valuation of inventoriesStep 5. Cost reconciliation
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Chapter 6 - Process Costing
156. Explain how nonuniform inputs and multiple departments affect process costing.
ANSWER: Accounting for production under process costing is complicated by nonuniform application ofmanufacturing inputs and the presence of multiple processing departments. Assuming uniformapplication of conversion costs (direct labor and overhead) is not unreasonable. Direct labor input isusually needed throughout the process, and overhead is often assigned on the basis of direct laborhours. Direct materials, on the other hand, are not as likely to be applied uniformly. In many instances,materials are added at either the beginning or the end of the process.
Different percentage completion figures for manufacturing inputs pose a problem for the calculation ofequivalent units, unit cost, and valuation of ending work in process. Equivalent unit calculations are donefor each category of manufacturing input with nonuniform application of inputs. Thus, equivalent unitsare calculated for each category of materials and for conversion cost.
Next, a unit cost for each input category is computed. The individual category costs are then used tocost out ending work in process. The total unit cost is used to calculate the cost of goods transferredout in the same way as when there was only one input category.
157. Describe the differences in the ways that prior-period costs and output are treated under the weighted averagemethod and the FIFO method?
ANSWER: The weighted average method uses the same unit cost for all goods transferred out. The FIFO methoddivides goods transferred out into two categories: units started and completed during the period andunits from beginning work in process. Only current work and costs are used to calculate this period’sunit cost. It is assumed that units from beginning inventory are completed first and transferred out. Thecost of these units include the cost of the work done in the prior period as well as the current-periodcosts necessary to complete the units.
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Chapter 6 - Process Costing
You Decide158. The controller has asked you do determine what method you think would be the best approach to dealing with
beginning work-in-process; weighted average costing method or FIFO costing method. Explain the differencesbetween the two methods. Which method would you recommend?
ANSWER: The weighted average combines beginning inventory costs and work done with current-period costs andwork to calculate this period’s unit cost. Beginning inventory work and costs are pooled with currentwork and costs, and an average unit cost is computed and applied to both units transferred out and unitsremaining in ending inventory. A major benefit of this method is simplicity. However the maindisadvantage of using this method is the reduced accuracy in computing unit costs for current periodoutput and for units in beginning work-in-process. The FIFO method separates work and costs of the equivalent units in beginning inventory from workand costs of the equivalent units produced in the current period. Only current work and costs are used
to calculate this period’s unit cost. It is assumed that units from beginning inventory are completed firstand transferred out. If changes occur in the prices of the manufacturing inputs from one period to the next then FIFOproduces a more accurate unit cost than does the weighted average method. A more accurate unit costmeans better cost control, better pricing decisions. If the period is as short as a week or month the unit costs calculated under the two methods are notlikely to differ much, FIFO has little if anything to offer over the weighted average method.
I would recommend adopting the FIFO method, since our costs do change between periods and theprocess relationship is relatively long. This will result in a more accurate cost for our company.
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Chapter 6 - Process Costing
Choose the most likely used costing system for the industries listed below.
a. Process Costing
b. Job Order Costing
159. Costing system used by a chemical manufacturer.
ANSWER: a
160. Costing system used by an architectural firm.
ANSWER: b
161. Costing system used by a home builder.
ANSWER: b
162. Costing system used by a manufacturer of custom furniture.
ANSWER: b
163. Costing system used by a tire manufacturer.
ANSWER: a
164. Costing system used by a food manufacturer.
ANSWER: a
Select the appropriate definition for each of the items listed below
a. parallel processing
b. sequential processing
c. process costing
d. weighted-average costing method
165. partially completed units can be worked on simultaneously in different processes then brought together in a finalprocess for completion
ANSWER: a
166. units pass through one process before they can be worked on in the next processes
ANSWER: b
167. works well whenever relatively homogeneous products pass through a series of processes and receive similaramounts of manufacturing costs
ANSWER: c
168. combines beginning inventory costs and work done with current-period costs and work to calculate this period's unitcost
ANSWER: d
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Chapter 6 - Process Costing
Match the five steps involved in creating the department production report with the steps below in theproper order.
a. step 1 in preparing a Production Report
b. step 2 in preparing a Production Report
c. step 3 in preparing a Production Report
d. step 4 in preparing a Production Report
e. step 5 in preparing a Production Report
169. calculation of equivalent units
ANSWER: b
170. cost reconciliation
ANSWER: e
171. physical flow analysis
ANSWER: a
172. computation of unit cost
ANSWER: c
173. valuation of inventories
ANSWER: d
Select the appropriate definition for each of the items listed below
a. equivalent units of production
b. transferred-in costs
c. FIFO costing methods
d. Production report
174. Complete units that could have been produced given the total amount of manufacturing effort expended for theperiod under consideration.
ANSWER: a
175. The costs transferred from a prior process to a subsequent process.
ANSWER: b
176. Separates work and costs of the equivalent units in beginning inventory from work and costs of the equivalent unitsproduced during the current period.
ANSWER: c
177. The document that summarizes the manufacturing activity that takes place in a process department for a givenperiod of time.
ANSWER: d
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Chapter 6 - Process Costing