Deck 5: Process Costing

Question 1

The following information is provided: Units
Work in progress, June 1 (20% complete)
4,000
Started in June
32,000
Work 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 1

D

Question 2

The Packing Department receives goods produced in previous departments. The costs transferred into the Packing Department are treated as

A) conversion cost incurred uniformly throughout the process.
B) materials cost added at the end of the process.
C) materials cost added at the beginning of the process.
D) either materials cost or conversion cost, depending on whether the firm uses FIFO or weighted average.

Answer 2

C

Question 3

Beginning inventory for the month contained 2,000 units that were 70 per cent complete with respect to materials. During the month, 60,000 units were completed and transferred out. Ending inventory contained 3,000 units, 20 per cent complete with 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 3

C

Question 4

Process costing is complicated by

A) the presence of significant beginning and ending inventories.
B) the treatment of beginning inventory cost.
C) nonuniform application of manufacturing costs.
D) all of the above.

Question 5

Equivalent units of production are

A) complete units that could have been produced given the total amount of manufacturing effort expended for the period under consideration.
B) the average number of units produced in a given period.
C) continuously measured in a total quality environment.
D) computed in both job-order and process cost systems.

Question 6

When computing equivalent units of production, the method that combines partially completed units in beginning inventory with current period production is the

A) FIFO method.
B) LIFO method.
C) weighted average method.
D) specific identification method.

Question 7

Equivalent production expresses all activity of the period in terms of

A) direct labour hours.
B) partially completed units.
C) fully completed units.
D) units of input.

Question 8

The two methods used to determine equivalent units of production are

A) weighted average and FIFO.
B) weighted average and LIFO.
C) FIFO and LIFO.
D) FIFO and specific identification.

Question 9

If costs of manufacturing inputs fluctuate from period to period, which of the following methods is more useful for cost control?

A) FIFO
B) LIFO
C) weighted average
D) equivalent units

Question 10

In a process used by Kane Company, conversion cost is incurred uniformly throughout the process. Material is added at the end of the process. Which of the following statements is true?

A) Kane Company cannot use process costing and must use job-order costing.
B) Kane Company must calculate the unit cost of materials and the unit conversion cost separately.
C) Kane Company will report the cost of materials with the cost of the ending inventory.
D) Kane Company uses parallel processing.

Question 11

If the cost of materials increased from January to February and there is beginning inventory for each month, which of the following statements would be true? (Assume all other factors are held constant.)

A) Only the weighted average method would result in an increase in the unit cost for February.
B) Only the FIFO method would result in an increase in the unit cost for February.
C) Both the weighted average method and the FIFO method would result in an increase in the unit cost for February; however, the weighted average method would result in a greater unit cost for units in February than the FIFO method.
D) Both the weighted average method and the FIFO method would result in an increase in the unit cost for February; however, the FIFO method would result in a greater unit cost for units in February than the weighted average method.

Question 12

The sum of direct labour and factory overhead is referred to as

A) period costs.
B) conversion costs.
C) prime costs.
D) direct product costs.

Question 13

Conversion costs consist of

A) direct materials and direct labour.
B) direct materials and manufacturing overhead.
C) direct labour and manufacturing overhead.
D) direct labour and transferred-in costs.

Question 14

Nortfont Industries had 25,000 units in production during the period just ended. Equivalent units of production were calculated at 24,000; 22,000 units were completed and transferred to finished goods. Cost associated with the beginning inventory was £125,000. Manufacturing costs totaling £850,000 were added during the period. Nortfont uses the weighted average cost method. Nortfont's cost per unit was

A) £34.00.
B) £39.00.
C) £40.63.
D) £38.64.

Question 15

Dedo Company purchased £4,000 of raw materials and used £3,750. The entry to record the requisition of direct materials for the Mixing Department would be

A) Raw Materials 3,750
Work in Progress--Mixing Department 3,750
B) Materials Expense 4,000
Raw Materials 4,000
C) Work in Progress--Mixing Department 3,750
Raw Materials 3,750
D) Work in Progress--Mixing Department 4,000
Raw Materials 4,000

Question 16

The cost per equivalent unit using the weighted average method is calculated as

A) Total costs to account for/Equivalent units.
B) Costs added during the period/Equivalent units.
C) Total costs to account for/Number of partially completed units.
D) Costs added during the period/Number of partially completed units.

Question 17

If the cost of materials decreased from June to July, which of the following statements would be true? (Assume all other factors are held constant.)

A) Only the FIFO method would result in a decrease in the unit cost for July.
B) Only the weighted average method would result in a decrease in the unit cost for July.
C) Both the weighted average method and the FIFO method would result in a decrease in the unit cost for July; however, the FIFO method would result in a lower unit cost for units in July than the weighted average method.
D) Both the weighted average method and the FIFO method would result in a decrease in the unit cost for July; however, the weighted average method would result in a lower unit cost for units in July than the FIFO method.

Question 18

Simplicity is the main advantage of which of the following process costing methods?

A) weighted average
B) LIFO
C) FIFO
D) specific identification

Question 19

Beginning inventory for the month contained 2,000 units that were 45 per cent complete with respect to materials. During the month, 18,000 units were completed and transferred out. Ending inventory contained 2,500 units, 20 per cent complete with respect to materials. The weighted average equivalent units of production for materials for the month would be

A) 18,000.
B) 19,600.
C) 19,400.
D) 18,500.

Question 20

Conversion costs do NOT include

A) direct materials.
B) direct labour.
C) factory overhead.
D) all of these costs

Question 21

Burgundy Manufacturing uses a process cost system and computes cost using the weighted average method. During the current period, the beginning work-in-progress inventory cost was £13,525. Manufacturing cost added was £57,000. If Burgundy's ending work-in-progress inventory was valued at £15,100, then cost of goods transferred must have been

A) £70,525.
B) £55,425.
C) £84,625.
D) £58,575.

Question 22

Lee Company began making lipstick in October 2011 using a single-step process. Lee incurred £42,000 for materials and £48,640 for conversion during the month. There were 21,000 cases of lipstick started in October and 3,000 cases unfinished (40 per cent complete) at the end of the period. All materials were added at the beginning of the production process. What is the unit cost for materials for Lee using the FIFO method?

A) £4.53
B) £2.00
C) £2.03
D) none of these

Question 23

Unit cost of materials for a department using the FIFO method of process costing is found by taking the total cost of materials issued to the department during the year divided by

A) units in process.
B) units started and completed.
C) total units manufactured.
D) equivalent units manufactured.

Question 24

What system would a manufacturer of unique special orders or batch processes most likely use to accumulate costs?

A) process costing
B) contract costing
C) variable costing
D) job-order costing

Question 25

If beginning inventory contained 2,000 units of product that were judged to be 40 per cent complete as to labour, the equivalent units of production for labour during the current period under the FIFO method for these 2,000 units are

A) 2,000 units.
B) 800 units.
C) 1,200 units.
D) 400 units.

Question 26

The following amounts were selected from the production report of Chandon Corporation: Actual units in production
42,000
Equivalent units (materials)
42,000
Equivalent units (conversion)
39,000
Cost per equivalent unit (materials)
£1)10
Cost per equivalent unit (conversion)
£0)90
Chandon uses the weighted average method in preparing its production reports. Chandon's total production cost to be accounted for must have been

A) £81,300.
B) £84,000.
C) £89,100.
D) £72,900.

Question 27

Beginning inventory consisted of 1,000 units with costs of £21,000. All materials and 60 per cent of labour and overhead were added in the prior period. In addition, another 8,000 units were started and completed. Unit costs are materials, £6.00; labour, £15.00; overhead, £9.00. What is the total cost of goods transferred out using FIFO?

A) £240,000
B) £270,000
C) £262,200
D) £270,600

Question 28

Urban Company manufactures a product through a continuous single-step process. All materials are added at the beginning of processing. Production and cost data for the company for February 2011 are as follows:
Production data:
In process, beginning of month (20% converted)
1,000 units
Started during February
5,000 units
Completed and transferred to finished goods
4,500 units
In process, end of month (60% converted)
1,500 units
Manufacturing costs:
Work in progress, beginning
£14,730
Materials
£45,000
Direct labour cost
£102,960
Factory overhead cost
£51,480
Required:
Prepare a cost of production report for February 2011. Use FIFO process costing.

Question 29

The following information pertains to Jones Company: Units
Work-in-progress inventory, March 1 (30% complete)
20,000
Units transferred in
50,000
Work-in-progress inventory, March 31 (60% complete)
16,000
Materials are added at the start of the progress.
How many equivalent units for conversion costs would there be using the FIFO method?

A) 49,600 units
B) 70,000 units
C) 50,000 units
D) 57,600 units