Deck 6: Process Costing

Question 1

From the industries listed below, which one is most likely to use process costing in accounting for production costs?

A)Printing shop.
B)Accounting firm.
C)Electrical contractor.
D)Steel mill.
E)Automobile repair shop.

Answer 1

D

Question 2

In process costing, unit product cost is calculated by dividing process cost in each department by the equivalent units produced:

A)Less beginning inventory.
B)Plus beginning inventory.
C)In the prior period.
D)In the following period.
E)During the period.

Answer 2

E

Question 3

Which one of the following process costing methods combines both current and prior costs in determining cost per equivalent unit?

A)FIFO method.
B)LIFO method.
C)Specific unit method.
D)Weighted-average method.
E)Moving-average method.

Answer 3

D

Question 4

The weighted-average method of process costing makes no distinction between the cost incurred prior to the current period and the cost incurred in:

A)A future period.
B)The current period.
C)Either a future period or the current period.
D)Both a future period and the current period.
E)The operational process.

Question 5

In calculating unit cost in a process costing system, "conversion cost" is defined as the sum of:

A)Direct and indirect material costs.
B)Direct and indirect labor costs.
C)Direct labor and factory overhead costs.
D)Indirect labor and factory overhead costs.
E)Indirect material and factory overhead costs.

Question 6

Firms should use a process costing system when they produce products that:

A)Are semi-homogeneous.
B)Pass through a series of inspection points.
C)Pass through a series of manufacturing departments.
D)Have a small batch size.

Question 7

The journal entry to record the application of factory overhead to work in process would include a credit to:

A)Work-in-Process.
B)Cost of Goods Sold.
C)Factory Overhead.
D)Materials Inventory.
E)Finished Goods Inventory.

Question 8

Which one of the following process costing methods includes only current costs in the calculations of cost per equivalent unit?

A)FIFO method.
B)LIFO method.
C)Specific unit method.
D)Weighted-average method.
E)Moving-average method.

Question 9

When using the first-in, first-out method of process costing, equivalent units for work done during this period is equal to the number of units:

A)In work-in-process at the beginning of the period times the percent of work necessary to complete the items, plus the number of units started and completed during the period, plus the number of units remaining in work-in-process at the end of the period times the percent of work done during the period.
B)In work-in-process at the beginning of the period, plus the number of units started during the period, plus the number of units remaining in work-in-process at the end of the period times the percent of work necessary to complete the items.
C)Started into process during the period, plus the number of units in work-in-process at the beginning of the period.
D)Transferred out during the period, plus the number of units remaining in work-in-process at the end of the period times the percent of work necessary to complete the items.
E)None of the above.

Question 10

The fifth and final step in determining process costs is:

A)Analyzing physical flow of production units.
B)Calculating equivalent units of production.
C)Determining total cost for each manufacturing element.
D)Computing the cost per equivalent unit.
E)Assigning cost to completed and uncompleted production.

Question 11

In a given process costing system, the equivalent units are computed using the weighted-average method. With respect to conversion costs, the percentage of completion for the current period is necessary for the calculation of the:

A)Option A
B)Option B
C)Option C
D)Option D
E)None of the above.

Question 12

The percentage of completion of the beginning work-in-process inventory should be considered in the computation of the equivalent units for which of the following methods of process costing?

A)Option A
B)Option B
C)Option C
D)Option D
E)None of the above.

Question 13

The sum of the beginning inventory units and the number of units started during the period determines the:

A)Units completed during the period.
B)Units to account for.
C)Units transferred in during the period.
D)Units accounted for.
E)Units started during the period.

Question 14

Which of the statements below is not correct?

A)Normal spoilage is spoilage that occurs under efficient operating conditions.
B)Normal spoilage is controllable in the short term and not considered a part of product cost.
C)Abnormal spoilage is spoilage in excess of that expected under efficient operating conditions.
D)Abnormal spoilage is charged as a loss to operations in the period detected.

Question 15

The sum of units transferred out and ending inventory units, assuming no spoilage, determines the:

A)Units completed during the period.
B)Units spoiled.
C)Units transferred in during the period.
D)Units accounted for.
E)Units started during the period.

Question 16

The first step in determining process costs is:

A)Assigning cost to completed and uncompleted production.
B)Computing the cost per equivalent unit.
C)Calculating equivalent units of production.
D)Analyzing physical flow of production units.
E)Determining total cost for each manufacturing element.

Question 17

The advantage of the weighted-average method is its:

A)Complexity and comprehensiveness.
B)Ability to handle spoilage and waste.
C)Appropriateness regardless of inventory level changes.
D)Effectiveness in a cost leadership strategy.
E)Simplicity.

Question 18

Process cost systems are used in all of the following industries except:

A)Chemicals.
B)Ship building.
C)Oil refining.
D)Textiles.
E)Steel.

Question 19

The key difference between weighted-average and FIFO process costing methods is the handling of the partially completed:

A)Beginning direct materials inventory.
B)Ending direct materials inventory.
C)Beginning work-in-process inventory.
D)Ending work-in-process inventory.
E)Beginning finished goods inventory.

Question 20

Which one of the following is one of the key steps in determining process costs?

A)Assigning the total manufacturing costs to the units completed and transferred out and the units of work in process at the end of the period.
B)Analyzing the physical flow of production units.
C)Computing the cost per equivalent unit for each manufacturing cost element.
D)Calculating equivalent units of production for all manufacturing cost elements.
E)All of the above are correct.

Question 21

Cost per equivalent unit for conversion under the FIFO method is calculated to be (rounded):

A)$112.103.
B)$49.242.
C)$109.496.
D)$82.757.
E)$60.185.

Question 22

Cost per equivalent unit for materials under the FIFO method is calculated to be (rounded):

A)$112.103.
B)$49.242.
C)$109.496.
D)$82.757.
E)$60.185.

Question 23

In a production cost report using process costing, transferred-in costs are similar to:

A)Materials costs added at the end of the process.
B)Materials costs added at the beginning of the process.
C)Conversion costs added during the process.
D)Conversion costs transferred to the next process.
E)Conversion costs included in beginning inventory.

Question 24

Cost per equivalent unit for conversion under the FIFO method is calculated to be:

A)$2.00.
B)$2.40.
C)$3.00.
D)$3.10.
E)$3.20.

Question 25

Normal spoilage and abnormal spoilage should be classified as:

A)Option A
B)Option B
C)Option C
D)Option D
E)None of the above.

Question 26

Total equivalent units for materials under the FIFO method are calculated to be:

A)1,110 equivalent units.
B)1,080 equivalent units.
C)1,032 equivalent units.
D)1,008 equivalent units.
E)1,320 equivalent units.

Question 27

The cost of goods completed and transferred out under the weighted-average method is calculated to be:

A)$96,000.
B)$476,400.
C)$571,200.
D)$484,000.
E)$468,200.

Question 28

Cost per equivalent unit for materials under the weighted-average method is calculated to be:

A)$2.00.
B)$2.40.
C)$3.00.
D)$3.10.
E)$3.20.

Question 29

Which of the following characteristics applies to process costing but not to job costing?

A)Identifiable batches of production.
B)Average costs.
C)Equivalent units.
D)Application of overhead.
E)Use of standard costs.

Question 30

Total equivalent units for conversion under the FIFO method are calculated to be:

A)1,110 equivalent units.
B)1,080 equivalent units.
C)1,032 equivalent units.
D)1,008 equivalent units.
E)1,320 equivalent units.

Question 31

Total equivalent units for materials under the weighted-average method are calculated to be:

A)6,830 equivalent units.
B)8,180 equivalent units.
C)6,980 equivalent units.
D)7,140 equivalent units.
E)7,620 equivalent units.

Question 32

In a process costing system, the cost of abnormal spoilage should be:

A)Prorated between units transferred out and ending inventory.
B)Included in the cost of units transferred out.
C)Treated as a loss in the period incurred.
D)Added to overhead.

Question 33

In a process costing system, which assumes that normal spoilage occurs at the end of a process, the cost attributable to normal spoilage should be assigned to:

A)Beginning work-in-process inventory.
B)Ending work-in-process inventory.
C)Cost of goods manufactured and ending work-in-process inventory in the ratio of units worked on during the period to units remaining in work-in-process inventory.
D)Cost of goods manufactured (transferred out).
E)A separate loss account in order to highlight production inefficiencies.

Question 34

In the computation of manufacturing cost per equivalent unit, the weighted-average method of process costing considers:

A)Current costs only.
B)Current costs less cost of ending work-in-process inventory.
C)Current costs plus cost of beginning work-in-process inventory.
D)Current costs plus cost of ending work-in-process inventory.
E)Current costs less cost of beginning work-in-process inventory.

Question 35

Total equivalent units for conversion under the FIFO method are calculated to be:

A)126,000 equivalent units.
B)114,000 equivalent units.
C)90,000 equivalent units.
D)102,000 equivalent units.
E)96,000 equivalent units.

Question 36

The journal entry to record requisitioned and usage of direct materials would include a credit to:

A)Work-in-Process Inventory.
B)Accrued Payroll.
C)Factory Overhead.
D)Materials Inventory.
E)Finished Goods Inventory.

Question 37

Total equivalent units for materials under the FIFO method are calculated to be:

A)6,830 equivalent units.
B)8,180 equivalent units.
C)6,980 equivalent units.
D)7,140 equivalent units.
E)7,620 equivalent units.

Question 38

Total equivalent units for conversion under the FIFO method are calculated to be:

A)6,560 equivalent units.
B)8,180 equivalent units.
C)6,420 equivalent units.
D)7,140 equivalent units.
E)7,320 equivalent units.

Question 39

Total equivalent units for materials under the weighted-average method are calculated to be:

A)126,000 equivalent units.
B)114,000 equivalent units.
C)90,000 equivalent units.
D)102,000 equivalent units.
E)96,000 equivalent units.

Question 40

Total equivalent units for conversion under the weighted-average method are calculated to be:

A)6,830 equivalent units.
B)8,180 equivalent units.
C)6,980 equivalent units.
D)7,140 equivalent units.
E)7,620 equivalent units.

Question 41

The journal entry to record incurred direct labor would include a credit to:

A)Work-in-Process Inventory.
B)Accrued Payroll.
C)Factory Overhead.
D)Materials Inventory.
E)Finished Goods Inventory.

Question 42

Total equivalent units for conversion under the weighted-average method are calculated to be:

A)104,000 equivalent units.
B)71,600 equivalent units.
C)85,400 equivalent units.
D)72,000 equivalent units.
E)94,000 equivalent units.

Question 43

How many units were completed in June?

A)12,000.
B)10,000.
C)14,000.
D)16,000.
E)18,000.

Question 44

Which of the following companies (industries) would not use a process cost system?

A)Georgia-Pacific Corporation (Lumber & Paper).
B)Durham Integrative Medical Care (Medical practice).
C)Bayer Pharmaceuticals (Drugs).
D)Reichhold Chemical Co. (Chemicals).
E)Accenture (Consulting).

Question 45

Cost per equivalent unit for Material P under the weighted-average method is calculated to be:

A)$5.10.
B)$2.60.
C)$2.50.
D)$2.30.
E)$5.40.

Question 46

Cost per equivalent unit for conversion under the weighted-average method is calculated to be:

A)$5.10.
B)$2.60.
C)$2.50.
D)$2.30.
E)$5.40.

Question 47

Conversion costs in a process cost system include:

A)Direct materials and direct labor.
B)Direct labor and manufacturing overhead.
C)Direct materials and manufacturing overhead.
D)Manufacturing overhead and selling, general & administrative expenses.

Question 48

The cost of goods completed and transferred out under the weighted-average method is calculated to be:

A)$885,000.
B)$882,000.
C)$888,000.
D)$891,000.
E)$887,000.

Question 49

The equivalent units for conversion under the weighted average method are calculated to be:

A)12,000.
B)10,000.
C)14,000.
D)16,000.
E)18,000.

Question 50

Total equivalent units for Material P under the weighted-average method are calculated to be:

A)104,000 equivalent units.
B)71,600 equivalent units.
C)85,400 equivalent units.
D)72,000 equivalent units.
E)94,000 equivalent units.

Question 51

What are the equivalent units for the month of July if the company uses the FIFO method?

A)Option A
B)Option B
C)Option C
D)Option D
E)Option E

Question 52

Larsen Company adds materials at the beginning of the process in Department 2. Data concerning the materials used in May production are as follows: Using the weighted-average method, the equivalent units for materials are:

A)44,000.
B)41,000.
C)36,000.
D)33,000.
E)32,000.

Question 53

How many units were started and completed in June?

A)12,000.
B)10,000.
C)14,000.
D)16,000.
E)18,000.

Question 54

Total equivalent units for Material Q under the weighted-average method are calculated to be:

A)104,000 equivalent units.
B)71,600 equivalent units.
C)85,400 equivalent units.
D)72,000 equivalent units.
E)94,000 equivalent units.

Question 55

What are the equivalent units for the month of July if the company uses the weighted-average method?

A)Option A
B)Option B
C)Option C
D)Option D
E)Option E

Question 56

The equivalent units for transferred-in costs under the FIFO method are calculated to be:

A)12,000.
B)10,000.
C)14,000.
D)16,000.
E)18,000.

Question 57

The equivalent units for materials under the weighted-average method are calculated to be:

A)12,000.
B)10,000.
C)14,000.
D)16,000.
E)18,000.

Question 58

Cost per equivalent unit for Material Q under the weighted-average method is calculated to be:

A)$5.10.
B)$2.60.
C)$2.50.
D)$2.30.
E)$5.40.

Question 59

On March 1, Portland Company had 20,000 units of work in process in Department A, which were 100% complete as to material costs and 40% complete as to conversion costs. During March, 150,000 units were started in Department A and 160,000 units were completed and transferred to Department B. Work in process on March 31 was 100% complete as to material costs and 50% complete as to conversion costs. By what amount would the equivalent units for conversion costs for the month of March differ if the FIFO method were used instead of the weighted-average method?

A) 10,000 decrease.
B) 8,000 decrease.
C) 6,000 decrease.
D) 5,000 decrease.
E) 4,000 decrease.

Question 60

The journal entry to record finished product units would include a debit to:

A)Work-in-Process Inventory.
B)Accrued Payroll.
C)Factory Overhead.
D)Materials Inventory.
E)Finished Goods Inventory.

Question 61

What are the unit conversion costs?

A)$534.54.
B)$583.14.
C)$605.81.
D)$649.08.

Question 62

What are the equivalent units for conversion costs?

A)4,200 units.
B)4,800 units.
C)4,000 units.
D)4,400 units.

Question 63

O'Leary Company manufactures Product Z in a two-stage production cycle in Departments A and B. Materials are added at the beginning of the process in Department B. O'Leary uses the weighted-average method. Conversion costs for Department B were 40% complete as to the 5,000 units in the beginning work-in-process (WIP) inventory and 50% complete as to the 7,000 units in the ending work-in-process inventory. 10,000 units were completed and transferred out of Department B during October. An analysis of the costs relating to work-in-process inventories and production activity in Department B for October follows:
The total cost per equivalent unit transferred-out for October of Product Z, rounded to the nearest penny, was:

A) $2.75.
B) $2.80.
C) $2.85.
D) $2.90.
E) $2.95.

Question 64

Process costing can be found in which of the following companies (industries)?

A)Coca-Cola.
B)Royal Dutch Shell Group.
C)Kimberly-Clark (paper products).
D)Reichhold Chemical (chemicals).
E)All of the above.

Question 65

Conversion costs are the sum of direct labor and:

A)Unit costs.
B)Factory overhead costs.
C)Process costs.
D)Labor costs.

Question 66

What are the total conversion costs in ending inventory?

A)$430.
B)$500.
C)$850.
D)$1,150.

Question 67

What are the total conversion costs transferred to finished goods?

A)$6,750.
B)$7,740.
C)$8,600.
D)$9,460.

Question 68

What are the total conversion costs of abnormal spoilage?

A)$375.
B)$430.
C)$625.
D)$860.

Question 69

Abnormal spoilage is considered what kind of cost?

A)Period cost.
B)Product cost.
C)Opportunity cost.
D)Sunk cost.

Question 70

What are the total conversion costs transferred to finished goods?

A)$801,810.
B)$855,720.
C)$921,340.
D)$910,000.

Question 71

What are the equivalent units for conversion costs?

A)1,700 units.
B)1,800 units.
C)1,900 units.
D)2,000 units.

Question 72

Which equation correctly calculates the total weighted average equivalent units of production?

A)Completed and transferred out units + Beginning work-in-process equivalent units.
B)Ending work-in-process equivalent units - Completed and transferred out units.
C)Beginning work-in-process equivalent units - Completed and transferred out units.
D)Completed and transferred out units + Ending work-in-process equivalent units.
E)Ending work-in-process equivalent units + Beginning work-in-process equivalent units.

Question 73

What are the unit conversion costs?

A)$2.15.
B)$2.36.
C)$2.50.
D)$2.75.

Question 74

What are the total conversion costs of abnormal spoilage?

A)$60,518.
B)$53,454.
C)$64,908.
D)$58,314.

Question 75

Place the following Process costing steps in the correct order: 1 - Calculate equivalent units
2 - Determine the total costs to account for
3 - Analyze flow of physical units
4 - Assign total manufacturing costs
5 - Compute unit costs

A)3, 5, 2, 1, 4.
B)2, 1, 5, 4, 3.
C)2, 3, 5, 4, 1.
D)3, 1, 2, 5, 4.
E)None of the above.

Question 76

A Production Cost Report summarizes all except:

A)The physical units of a department.
B)The equivalent units of a department.
C)The costs incurred during the period.
D)The costs assigned to both units completed and ending work-in-process inventories.
E)All of the above are correct.

Question 77

Which of the following is not a step in the preparation of a production cost report?

A)Analyze the physical flow of production units.
B)Determine total costs for each manufacturing cost element.
C)Compute cost per equivalent unit for each manufacturing cost element.
D)Calculate incomplete units for each manufacturing cost element.

Question 78

Backflush costing:

A)Is a simplified approach to determining product cost that is used when there is little or no work-in-process inventory.
B)Involves the use of standard costing.
C)Allows product costs to be quickly and conveniently calculated
D)Is an approach to determining product cost that is used when JIT is used.
E)ALL of the above.

Question 79

The number of the same or similar units that could have been produced given the amount of work actually performed on both complete and partially complete units is referred to as:

A)Physical units.
B)Completed units.
C)Equivalent units.
D)Produced units.
E)Units to account for.

Question 80

Which method is (are) used to prepare the departmental production cost report when using a process cost system?

A)LIFO method.
B)FIFO method.
C)Weighted average method.
D)Both A & B are correct.
E)Both B & C are correct.