Deck 20: Process Costing

Question 1

A process costing system is most suitable for businesses that manufacture batches of unique products or provide specialized services.

Answer 1

False

Question 2

Under process costing,the costs incurred by each department are reported in ________.

A)a job cost sheet
B)the Finished Goods Inventory account
C)the Cost of Goods Sold account
D)a production cost report

Answer 2

D

Question 3

Companies that manufacture identical items through a series of uniform production steps use ________ to determine cost per unit sold.

A)a process costing system
B)a job order costing system
C)the weighted-average method
D)the first-in,first-out method

Answer 3

A

Question 4

Under a process costing system,product costs are accumulated with respect to jobs completed.

Question 5

For each of the following statements,indicate whether the statement applies to Job Order Costing Systems (JO)or Process Costing Systems (PC).

Question 6

Under process costing,direct materials and direct labor are assigned to Work-in-Process Inventory for each process that uses them.

Question 7

A textile manufacturing company is most likely to use job order costing to arrive at the cost per unit of textile manufactured and sold to customers.

Question 8

A process is one of a series of steps in manufacturing production,usually associated with making large quantities of similar items.

Question 9

Both job order costing and process costing ________.

A)maintain a single Work-in-Process Inventory account
B)treat all period costs as product costs
C)follow last-in,first-out method for inventory valuation
D)have the same type of product costs

Question 10

In a process costing system,each process or department has its own Work-in-Process Inventory account.

Question 11

Which of the following statements is true of process costing?

A)It uses one Work-in-Process Inventory account.
B)It tracks and assigns both period costs and product costs to units produced.
C)It accumulates product costs by production departments.
D)It assigns manufacturing overhead costs to products only in the last production process.

Question 12

Under process costing,a single Work-in-Process Inventory account is maintained for all processes,with a subsidiary ledger containing individual production cost reports for each process.

Question 13

The combined production costs from all departments for completed products are transferred to the Cost of Goods Sold account immediately after the completion of all production processes.

Question 14

Under process costing,the costs incurred by each department are reported in a separate production cost report for each department.

Question 15

Both job order costing and process costing track the product costs of direct materials,direct labor,and manufacturing overhead through three inventory accounts on the balance sheet.

Question 16

Under a process costing system,costs of completed products are transferred to the Finished Goods Inventory at the end of the accounting period.

Question 17

A process costing system is generally used by companies that produce homogeneous products.

Question 18

A cellular phone manufacturer is more likely to use a process costing system rather than job order costing.

Question 19

Process costing is the most appropriate costing method for a restaurant serving specialty cuisine.

Question 20

Which of the following businesses is most likely to use a process costing system?

A)an accounting firm
B)a law firm
C)a soda manufacturer
D)a construction company

Question 21

If 30,000 units are 60% complete with respect to direct materials,then the equivalent units of production for direct materials are ________.

A)30,000 units
B)18,000 units
C)12,000 units
D)42,000 units

Question 22

At the end of an accounting period,the costs assigned to a production department can be split into the cost of units fully completed and transferred out,and the cost of units partially completed and remaining in the Work-in-Process Inventory of that department.

Question 23

Anthony Products manufactures a line of desk chairs.Anthony's production operations are divided into two departments - Department 1 and Department 2.The company uses a process costing system.Anthony incurred the following costs during the year to produce 26,400 chairs:

If Anthony sells 23,100 chairs during the year,what will be the cost per chair produced? (Round your answer to two decimal places. )

A)$32.56
B)$37.21
C)$43.69
D)$49.94

Question 24

The equivalent units of production for direct materials and conversion costs must be the same.

Question 25

What does the concept of equivalent units of production allow businesses to measure?

Question 26

Which of the following statements correctly describes the term "conversion costs"?

A)the cost to convert finished goods to sales to customers
B)the cost incurred for direct and indirect materials during production
C)the cost of direct materials,direct labor,and manufacturing overhead costs incurred during production
D)the cost of direct labor combined with manufacturing overhead

Question 27

Peterson Enterprises manufactures picture frames.Its production operations are divided into two departments - Assembly and Finishing.The company uses a process costing system.Peterson incurred the following costs during the year to produce 5,600 picture frames:

If Peterson can only sell 5,800 picture frames during the year,what will be the cost per unit of the picture frames produced? (Round your answer to the nearest cent. )

A)$1.97
B)$2.04
C)$1.75
D)$1.69

Question 28

The Refining Department of Sweet Sugar,Inc.had 80,000 tons of sugar to account for in July.Of the 80,000 tons,49,000 tons were completed and transferred to the Boiling Department,and the remaining 31,000 tons were 75% complete.The materials required for production are added at the beginning of the process.Conversion costs are added equally throughout the refining process.Calculate the total equivalent units of production for direct materials.

A)72,250 units
B)49,000 units
C)23,250 units
D)80,000 units

Question 29

Conversion costs include the costs of purchasing and converting raw materials into finished products.

Question 30

Which of the following best describes the term equivalent units?

A)partially completed units expressed in terms of fully completed units
B)partially completed units of output that will be sold as is
C)substitute of units that are partially completed
D)different types of units that have same selling price

Question 31

Under process costing,the unit cost of the completed units is less than the unit cost of the incomplete units.

Question 32

Under process costing,the total production costs incurred in each process must be split between the units that have been completed in that process and transferred to the next process and the ________.

A)Finished Goods Inventory if it is the first process
B)units not completed and remaining in Work-in-Process Inventory for that department
C)Cost of Goods Sold when the units are sold
D)Work-in-Process Inventory of the previous department when there are no sales

Question 33

Young Manufacturing uses a process costing system and manufactures its product in three departments.Which of the following is not a way in which Young can use the cost per unit of each process?

A)Young can look for ways to cut the costs when actual process costs are more than planned process costs.
B)Young needs to set the selling price to cover the costs of making the product and provide a profit.
C)Young can only use the cost per unit of each process if all units are fully completed at the end of the accounting period.
D)Young needs to know the ending balances in the following accounts: Work-In-Process Inventory,Finished Goods Inventory,and Cost of Goods Sold.

Question 34

Muses Manufacturing produces plastic toys and uses process costing.There are three processing departments-Assembling,Finishing,and Packaging.On January 1,the Finishing Department had 2,000 units of partially processed product in production.During January,31,000 units were transferred in from the Assembling Department and 30,000 units were completed and transferred out.At the end of the month,3,000 units of partially processed products remained in the Finishing Department.See additional details below.
Finishing Department,ending balance at January 31

What was the number of equivalent units for the month of January,with respect to direct materials,for the Finishing Department?

A)32,820 units
B)33,000 units
C)30,000 units
D)2,820 units

Question 35

In a process costing system,a department's total production costs incurred in a particular period must equal the total costs transferred out of the department.

Question 36

Gizmo Manufacturer,a widgets manufacturing company,divides its production operations into three processes-Department 1,Department 2,and Department 3.The company uses a process costing system.Gizmo incurred the following costs during the year to produce 4,600 units:

If Gizmo could sell only 3,600 units in during the year,what will be the cost per unit of widget produced? (Round your answer to the nearest cent. )

A)$5.11
B)$3.80
C)$9.31
D)$7.28

Question 37

What are conversion costs? In determining equivalent units of production,why are conversion costs calculated separately from direct materials?

Question 38

In process costing,production costs are accumulated by process.At the end of the period,the total production costs incurred must be split into two components.What are these two components?

Question 39

In a process costing system,production costs are ________.

A)adjusted and allocated by jobs
B)not inventoried
C)directly shown on the income statement
D)accumulated by process

Question 40

In a process costing system,equivalent units must be calculated separately for materials and conversion costs.

Question 41

The task of summarizing the flow of physical units is one of the four steps involved in the preparation of the production cost report.

Question 42

The Assembly Department of Smart,Inc. ,a manufacturer of computers,had a beginning inventory of 5,000 units.During November,it assembled 4,000 units and transferred them to the Packaging Department.It incurred $250,000 in direct materials and $75,000 in conversion costs.The ending inventory in November was 3,000 units,which were 100% and 50% complete with respect to materials and conversion costs,respectively.Calculate the total equivalent units of production for conversion costs for November.

A)4,000 units
B)7,000 units
C)5,500 units
D)1,500 units

Question 43

Effects Manufacturing produces a pesticide chemical and uses process costing.There are three processing departments-Mixing,Refining,and Packaging.On January 1,the Refining Department had 4,000 gallons of partially processed product in production.During January,30,000 gallons were transferred in from the Mixing Department,and 30,000 gallons were completed and transferred out.At the end of the month,4,000 gallons of partially processed product remained in the Refining Department.See additional details below.
Refining Department,ending balance at January 31

What was the total number of equivalent units of production for conversion costs for the month of January for the Refining Department?

A)3,000 units
B)33,000 units
C)30,000 units
D)3,760 units

Question 44

A production cost report shows only the calculations for the physical flow of products.

Question 45

Under process costing,the number of units to account for must always be ________ the number of units accounted for.

A)greater than
B)lesser than
C)equal to
D)twice

Question 46

The number of equivalent units for direct materials and conversion costs must always be equal.

Question 47

The Refining Department of Ingber Sugar,Inc.had 55,000 tons of sugar to account for in December.Of the 55,000 tons,45,000 tons were completed and transferred to the Boiling Department,and the remaining 10,000 tons were 60% complete.The materials required for production are added at the beginning of the process.Conversion costs are added equally throughout the refining process.Calculate the total equivalent units of production for conversion costs.

A)6,000 units
B)45,000 units
C)51,000 units
D)55,000 units

Question 48

The weighted-average method determines the cost of equivalent units of production by accounting for beginning inventory costs separately from current period costs.

Question 49

LDR Manufacturing produces a pesticide chemical and uses process costing.There are three processing departments-Mixing,Refining,and Packaging.On January 1,the first department-Mixing-had no beginning inventory.During January,42,000 fl.oz.of chemicals were started in production.Of these,32,000 fl.oz.were completed and 10,000 fl.oz.remained in process.In the Mixing Department,all direct materials are added at the beginning of the production process,and conversion costs are applied evenly through the process.
At the end of the month,LDR calculated equivalent units.The ending inventory in the Mixing Department was 65% complete with respect to conversion costs.With respect to direct materials,what is the number of equivalent units in the ending inventory?

A)6,500 equivalent units
B)32,000 equivalent units
C)42,000 equivalent units
D)10,000 equivalent units

Question 50

Organic Sugar,Inc.in Ohio has six processing departments for refining sugar-Affination,Carbonatation,Decolorization,Boiling,Recovery,and Packaging.Conversion costs are added evenly throughout each process.Data from the month of August for the Decolorization Department are as follows:


The ending Work-in-Process Inventory is 100% and 70% complete with respect to direct materials and conversion costs,respectively.Compute the equivalent units of production (EUP)for direct materials and for conversion costs for the month of August.

A)11,500 EUP for direct materials and 3,500 EUP for conversion costs
B)13,000 EUP for direct materials and 11,500 EUP for conversion costs
C)3,500 EUP for direct materials and 11,500 EUP for conversion costs
D)13,000 EUP for direct materials and 3,500 EUP for conversion costs

Question 51

Conversion costs include ________.

A)direct labor and manufacturing overhead costs
B)direct material and direct labor costs
C)product and period costs
D)direct material,direct labor,and manufacturing overhead costs

Question 52

In a production cost report,the number of units to account for must always be greater than the number of units accounted for.

Question 53

A report prepared by a processing department for equivalent units of production,production costs,and the assignment of those costs to the completed and in-process units is called a(n)________.

A)organizational report
B)equivalent units report
C)job costing report
D)production cost report

Question 54

List the four steps,in the order of occurrence,that are used in preparing a production cost report.

Question 55

Which of the following is a step in the preparation of a production cost report?

A)assignment of costs to units completed and units in process
B)summarization of the flow of physical units to the suppliers
C)computation of expected units of production
D)computation of amount of materials required for production

Question 56

In a production cost report,________ includes the number of units completed and transferred out of a process and the number of units remaining in ending WIP.The weighted-average method is used.

A)total units estimated for
B)total units budgeted for
C)total units accounted for
D)total units to account for

Question 57

The cost per equivalent unit for transferred in units is calculated by dividing total transferred in costs by the equivalent units of production for transferred in units.

Question 58

The direct labor costs and manufacturing overhead costs required to produce finished goods from raw materials are called ________.

A)transferred in costs
B)cost of sales
C)finished goods costs
D)conversion costs

Question 59

WSP Manufacturing produces a pesticide chemical and uses process costing.There are three processing departments-Mixing,Refining,and Packaging.On January 1,the first department-Mixing-had no beginning inventory.During January,40,000 fl.oz.of chemicals were started in production.Of these,32,000 fl.oz.were completed and 8,000 fl.oz.remained in process.In the Mixing Department,all direct materials are added at the beginning of the production process,and conversion costs are applied evenly through the process.
At the end of the month,WSP calculated equivalent units.The ending inventory in the Mixing Department was 60% complete with respect to conversion costs.With respect to conversion costs,how many equivalent units were calculated for the product that was completed and for ending inventory?

A)Product completed: 32,000 equivalent units;Products in ending inventory: 4,800 equivalent units
B)Product completed: 32,000 equivalent units;Products in ending inventory: 8,000 equivalent units
C)Product completed: 40,000 equivalent units;Products in ending inventory: 4,800 equivalent units
D)Product completed: 40,000 equivalent units;Products in ending inventory: 8,000 equivalent units

Question 60

The production cost reports show the calculations for the physical flows and the ________ flows of the products.

A)cash
B)price
C)cost
D)supply

Question 61

PM Manufacturing produces a chemical pesticide and uses process costing.There are three processing departments-Mixing,Refining,and Packaging.On January 1,the first department-Mixing-had no beginning inventory.During January,37,000 fl.oz.of chemicals were started in production.Of these,30,000 fl.oz.were completed,and 7,000 fl.oz.remained in process.In the Mixing Department,all direct materials are added at the beginning of the production process,and conversion costs are applied evenly through the process.The weighted-average method is used.
At the end of the month,PM calculated equivalent units in the Mixing Department as shown below:

* Percent complete for direct materials costs: 100%
Percent complete of completion for conversion costs: 60%
During January,the Mixing Department incurred $50,000 in direct materials costs and $213,400 in conversion costs.How much was the cost per equivalent unit for materials and for conversion costs?
(Use the weighted average method and round your answer to the nearest cent. )

A)$7.14 per EP for direct materials and $5.77 per EUP for conversion costs
B)$1.35 for materials and $7.11 for conversion
C)$1.67 for materials and $7.11 for conversion
D)$1.35 for materials and $6.24 for conversion

Question 62

Which of the following formulas is used to calculate the cost per equivalent unit of production (EUP)for direct materials? The weighted-average method is used.

A)Cost per EUP for direct materials = Total conversion costs / Equivalent units of production for direct materials
B)Cost per EUP for direct materials = Total direct materials costs / Equivalent units of production for direct materials
C)Cost per EUP for direct materials = Total transferred in costs / Equivalent units for transferred in
D)Cost per EUP for direct materials = Total direct materials costs / Equivalent units of production for conversion costs

Question 63

Southwest Sugar,Inc.has six processing departments for refining sugar-Affination,Carbonation,Decolorization,Boiling,Recovery,and Packaging.Conversion costs are added evenly throughout each process.Data from the month of August for the Recovery Department are as follows:


The ending Work-in-Process Inventory is 100% and 85% complete with respect to direct materials and conversion costs,respectively.The weighted-average method is used.How many metric tons of sugar were refined and transferred to the Packaging Department in August?

A)21,500 metric tons
B)5,000 metric tons
C)16,500 metric tons
D)26,500 metric tons

Question 64

Story Manufacturing produces a chemical pesticide and uses process costing.There are three processing departments-Mixing,Refining,and Packaging.On January 1,the first department-Mixing-had a zero beginning balance.During January,42,000 gallons of chemicals were started into production.During the month,33,000 gallons were completed,and 9,000 remained in process,partially completed.In the Mixing Department,all direct materials are added at the beginning of the production process,and conversion costs are applied evenly through the process.
During January,the Mixing Department incurred $60,000 in direct materials costs and $250,000 in conversion costs.At the end of the month,the ending inventory in the Mixing Department was 60% complete with respect to conversion costs.First,calculate the equivalent units,then calculate the cost per equivalent unit,and then calculate the total cost of the product that was completed and transferred out during January.The weighted-average method is used.
The total cost of product transferred out was ________.(Round any intermediate calculations two decimal places,and your final answer to the nearest dollar. )

A)$47,143
B)$250,000
C)$310,000
D)$262,020

Question 65

The Assembly Department of One Roof,Inc. ,manufacturer of computers,incurred $280,000 in direct material costs and $80,000 in conversion costs.The equivalent units of production for direct materials and conversion costs are 1,500 and 800,respectively.The cost per equivalent unit of production (EUP)for conversion costs is ________.(Round your answer to the nearest cent. )

A)$100.00 per EUP
B)$53.33 per EUP
C)$350.00 per EUP
D)$186.67 per EUP

Question 66

Babson Sugar,Inc.has six processing departments for refining sugar-Affination,Carbonation,Decolorization,Boiling,Recovery,and Packaging.Conversion costs are added evenly throughout each process.Data from August for the Decolorization Department are as follows:


The ending Work-in-Process Inventory is 100% and 65% complete with respect to direct materials and conversion costs,respectively.The weighted-average method is used.Compute the cost per equivalent unit for the units transferred to the Boiling process.(Round any intermediate calculations and your final answer to two decimal places. )

A)$192.31 per metric ton
B)$88.46 per metric ton
C)$143.75 per metric ton
D)$352.31 per metric ton

Question 67

Provide the formula for (1)To account for and (2)Accounted for.

Question 68

Pattern Manufacturing produces a chemical pesticide and uses process costing.There are three processing departments-Mixing,Refining,and Packaging.On January 1,the first department-Mixing-had no beginning inventory.During January,48,000 fl.oz.of chemicals were started in production.Of these,38,000 fl.oz.were completed,and 10,000 fl.oz.remained in process.In the Mixing Department,all direct materials are added at the beginning of the production process,and conversion costs are applied evenly through the process.
At the end of January,the equivalent unit data for the Mixing Department were as follows:

* Percent complete for conversion costs: 44%
In addition to the above,the costs per equivalent unit were $1.35 for direct materials and $5.20 for conversion costs.Using this data,calculate the full cost of the ending WIP balance in the Mixing Department.The weighted-average method is used.

A)$42,400
B)$13,500
C)$36,380
D)$64,800

Question 69

The costs that were incurred in a previous process and brought into a later process as part of the product's cost are called ________ costs.

A)transferred in
B)transferred out
C)accounted for
D)to account for

Question 70

The Assembly Department of Fallon,Inc. ,manufacturer of computers,had 2,000 units of beginning inventory in September,and 3,000 units were transferred to it from the Production Department.The Assembly Department completed 1,500 units during the month and transferred them to the Packaging Department.Calculate the total number of units to account for by the Assembly Department.

A)1,000 units
B)3,000 units
C)2,000 units
D)5,000 units

Question 71

Thomas Manufacturing produces a chemical pesticide and uses process costing.There are three processing departments-Mixing,Refining,and Packaging.On January 1,the Refining Department had 4,000 gallons of partially processed product in production.During January,34,000 gallons were transferred in from the Mixing Department,and 32,000 gallons were completed and transferred out.At the end of the month,there were 6,000 gallons of partially processed product remaining in the Refining Department.See additional details below.
Refining Department,beginning balance at January 1

Costs added during January

Refining Department,ending balance at January 31

What was the cost per equivalent unit with respect to direct materials costs for the Refining Department in the month of January? Use the weighted-average method.(Round your calculations to the nearest cent. )

A)$1.29
B)$2.71
C)$1.26
D)$8.00

Question 72

Waterfall Manufacturing produces a chemical pesticide and uses process costing.There are three processing departments-Mixing,Refining,and Packaging.On January 1,the first department-Mixing-had a zero beginning balance.During January,43,000 gallons of chemicals were started into production.During the month,34,000 gallons were completed,and 9,000 remained in process,partially completed.In the Mixing Department,all direct materials are added at the beginning of the production process,and conversion costs are applied evenly through the process.
During January,the Mixing Department incurred $50,000 in direct materials costs and $211,200 in conversion costs.At the end of the month,the ending inventory in the Mixing Department was 60% complete with respect to conversion costs.The weighted-average method is used.
The total cost of product in ending inventory was ________.(Round any intermediate calculations two decimal places,and your final answer to the nearest dollar. )

A)$211,200
B)$50,000
C)$39,384
D)$261,200

Question 73

The costs that are transferred out from one process to another process become transferred in costs for the receiving process.

Question 74

Gravity Manufacturing produces a chemical pesticide and uses process costing.There are three processing departments-Mixing,Refining,and Packaging.On January 1,the first department-Mixing-had no beginning inventory.During January,47,000 fl.oz.of chemicals were started in production.Of these,38,000 fl.oz.were completed,and 9,000 fl.oz.remained in process.In the Mixing Department,all direct materials are added at the beginning of the production process,and conversion costs are applied evenly through the process.The weighted-average method is used.
At the end of January,the equivalent unit data for the Mixing Department were as follows:

* Percent complete for conversion costs: 40%
In addition to the above,the costs per equivalent unit were $1.51 for direct materials and $5.00 for conversion costs.Using this data,calculate the cost of the units that were transferred out of the Mixing Department and into the Refining Department.

A)$190,000
B)$132,620
C)$247,380
D)$57,380

Question 75

In a production cost report,the number of total units to account for consists of ________.The weighted-average method is used.

A)units in process at the beginning of the period and units started or added during the period
B)units in process at the end of the period and units started or added during the period
C)units in process at the beginning of the period and units remaining at the end of the period
D)units of completed and transferred out products and total units produced

Question 76

The equivalent units of production for transferred in units are always 100% because ________.

A)they are the finished goods purchased and transferred to the next department
B)they are considered 100% complete with respect to the entire production process
C)they were 100% complete with respect to the previous department
D)they are not utilized for production in the subsequent department

Question 77

Cost amounts that are transferred out of one department become the transferred in cost for the next department.

Question 78

The beginning inventory costs and the product costs of the current period are combined to determine the average cost of equivalent units of production under the ________.

A)equivalent units method
B)conversion costs method
C)first-in,first-out method
D)weighted-average method

Question 79

The Assembly Department of Intuitive,Inc. ,manufacturer of computers,had 2,000 units of beginning inventory in September,and 8,000 units were transferred to it by the Production Department.The Assembly Department completed 4,000 units during the month and transferred them to the Packaging Department.Calculate the total number of units accounted for by the Assembly Department if it had 6,000 units in ending inventory.The weighted-average method is used.

A)6,000 units
B)8,000 units
C)2,000 units
D)10,000 units

Question 80

The Assembly Department of ZigZag,Inc. ,manufacturer of computers,incurred $280,000 in direct material costs and $70,000 in conversion costs.The equivalent units of production for direct materials and conversion costs are 1,000 and 800,respectively.The cost per equivalent unit of production for direct materials is ________.(Round your answer to the nearest cent. )

A)$87.50
B)$70.00
C)$350.00
D)$280.00