Deck 18: Process Costing

Question 1

United Construction Company,which manufactures residential buildings,would most likely use a process costing system.

Answer 1

False

Question 2

Job order costing involves averaging costs across products produced,and as such,the first step in job order costing is to clearly understand the physical flows.

Answer 2

False

Question 3

In most process costing systems,the number of units "in process" at any one time is usually significant relative to the total production output of the period.

Answer 3

False

Question 4

In a production cost report,the units in beginning Work-in-Process are always expressed as equivalent units.

Question 5

In a process costing system that uses equivalent units of production,the per-unit cost of direct materials equals the total cost of materials used in the current month divided by the number of units completed and transferred during the current month.

Question 6

Costs flow through a process costing system in the same sequence as actual products move through the assembly process.

Question 7

Completing 3,000 units,which were each 75% complete at the beginning of the period,represents 2,250 equivalent units of work during the current period.

Question 8

Equivalent units of production significantly differ from units completed and transferred during the period only when no significant differences exist between beginning and ending work in process.

Question 9

Conversion costs include direct labor and direct materials associated with converting units,so that they can be transferred out of Work in Process.

Question 10

A process costing system is highly desirable when a company mass produces identical goods.

Question 11

The number of equivalent units of production during a period may be greater than,equal to,or smaller than the actual number of units completed and transferred to the finished goods warehouse.

Question 12

Manufacturing overhead is not applied to products when a process costing system is used.

Question 13

Debiting Work-in-Process in Department Two and crediting Work-in-Process in Department One represents costs transferred from Department Two to Department One.

Question 14

A company may choose to use process costing or job order costing,but never both simultaneously.

Question 15

A process costing system is suitable for a company with a large volume of standard products produced on a relatively continuous basis,for example,golf balls or petroleum.

Question 16

Jiffy Company has 3,000 units that are 70% complete.Jiffy's "equivalent units" are 3,000 completed units.

Question 17

The production cost report is an estimate of the equivalent units completed during the period.

Question 18

As costs flow from one production department to the next in a process costing system,one Work-in-Process Inventory account shows all the changes to the units in production.

Question 19

An equivalent unit measures the percentage of a completed unit's cost that is present in a partially finished unit.

Question 20

The cost transferred to Cost of Goods Sold is equal to the total manufacturing costs incurred for the units sold.

Question 21

[The following information applies to the questions displayed below.]
Sue's Soup Products uses a process costing system with two processing departments: the Mixing and Cooking Department and the Canning Department.Work in process inventories are reduced to zero each month.In March,the Mixing and Cooking Department incurred manufacturing costs of $63,000 to mix 42,000 gallons of soup.The Canning Department incurred manufacturing costs of $9,000.A total of 170,000 cans of soup were transferred to the finished goods warehouse during the month.
The journal entry to record the transfer of soup out of the Mixing and Cooking Department during March would include:

A)A debit to Work in Process Inventory,Mixing and Cooking Department of $63,000.
B)A credit to Work in Process Inventory,Canning Department of $72,000.
C)A debit to Finished Goods Inventory of $72,000.
D)A credit to Work in Process Inventory,Mixing and Cooking Department of $63,000.

Question 22

[The following information applies to the questions displayed below.]
Evans Products uses a process costing system with two processing departments: the Mixing Department and the Finishing Department.In June,unit costs incurred by the Mixing Department amounted to $4.00 per unit.Unit costs transferred to the finished goods warehouse during the month amounted to $22.Work-in-process inventories are reduced to zero each month.
The transfer of 35,000 units to the Finishing Department in June required:

A)A debit to Finished Goods Inventory of $770,000.
B)A credit to Work-in-Process Inventory,Mixing Department of $770,000.
C)A credit to Work-in-Process Inventory,Finishing Department of $140,000.
D)A debit to Work-in-Process Inventory,Finishing Department of $140,000.

Question 23

Process costing does not:

A)Trace direct costs to a specific production process.
B)Provide information about cost of goods manufactured on a per-unit basis.
C)Average direct and indirect costs across mass-produced identical units.
D)Apply overhead using an activity base.

Question 24

In either a job order or a process costing system,credits to the Materials Inventory account represent:

A)The cost of materials purchased during the period.
B)The cost of materials relating to finished goods.
C)The cost of unused materials returned to the inventory.
D)The cost of materials placed into production.

Question 25

Which of the following is not a characteristic of a process costing system?

A)The costs incurred in each process are accumulated in separate Work-in-Process Inventory accounts.
B)It is suitable for mass-produced operations.
C)Costs are accumulated separately for each unit of production as it moves through the factory.
D)The cost of a finished unit is the sum of the unit costs of performing each manufacturing process.

Question 26

[The following information applies to the questions displayed below.]
Sue's Soup Products uses a process costing system with two processing departments: the Mixing and Cooking Department and the Canning Department.Work in process inventories are reduced to zero each month.In March,the Mixing and Cooking Department incurred manufacturing costs of $63,000 to mix 42,000 gallons of soup.The Canning Department incurred manufacturing costs of $9,000.A total of 170,000 cans of soup were transferred to the finished goods warehouse during the month.
The unit cost per gallon of soup transferred to the Canning Department during March was:

A)$1.50.
B)$1.62.
C)$1.71.
D)$1.83.

Question 27

The best cost system to use for a company producing a continuous stream of similar items would be a:

A)Job order system.
B)Process costing system.
C)Production costing system.
D)No cost system is required when jobs are similar.

Question 28

[The following information applies to the questions displayed below.]
Evans Products uses a process costing system with two processing departments: the Mixing Department and the Finishing Department.In June,unit costs incurred by the Mixing Department amounted to $4.00 per unit.Unit costs transferred to the finished goods warehouse during the month amounted to $22.Work-in-process inventories are reduced to zero each month.
The entry to record the sale of 3,500 units in June would include:

A)A debit to Work-in-Process Inventory,of $77,000.
B)A debit to Finished Goods Inventory of $77,000.
C)A debit to Cost of Goods Sold of $77,000.
D)A credit to Cost of Goods Sold of $77,000.

Question 29

[The following information applies to the questions displayed below.]
Duffy Brothers manufactures a single product using a process involving (1)mixing ingredients and (2)a subsequent packaging operation.Duffy uses a process costing system to account for the flow of costs through its production process.
In the production process described,what is the Work in Process Inventory: Packaging Department debited for?

A)Costs transferred from the Work in Process Inventory: Mixing Department only.
B)The cost of materials,direct labor,and overhead applicable to the packaging operation only.
C)Costs transferred from the Work in Process Inventory: Mixing Department,as well as materials,direct labor,and overhead applicable to the packaging operation.
D)Costs transferred to the Finished Goods Inventory.

Question 30

[The following information applies to the questions displayed below.]
Sue's Soup Products uses a process costing system with two processing departments: the Mixing and Cooking Department and the Canning Department.Work in process inventories are reduced to zero each month.In March,the Mixing and Cooking Department incurred manufacturing costs of $63,000 to mix 42,000 gallons of soup.The Canning Department incurred manufacturing costs of $9,000.A total of 170,000 cans of soup were transferred to the finished goods warehouse during the month.
The unit cost per can of soup transferred to the finished goods warehouse during March was:

A)$0.05.
B)$0.42.
C)$0.37.
D)$1.71.

Question 31

Which company would most likely not use a process costing system?

A)Bic Pens
B)Pepsi Cola
C)Hershey Candy
D)Tiffany Jewelers

Question 32

Process costing systems:

A)Are used when companies produce homogeneous units.
B)Do not have work in process accounts for each department.
C)Do not use equivalent units of production.
D)Track costs to individual products.

Question 33

For which of the following categories is it not important to know the number of units?

A)The number of units completed during the period.
B)The number of units transferred to the next department during the period.
C)Beginning work in process.
D)The number of units started during the period.

Question 34

All of the following are characteristics of the products of process costing except:

A)High volume.
B)Different amounts of direct materials.
C)Identical amounts of direct labor.
D)Repetitive operations.

Question 35

A process costing system differs from a job order costing system in that:

A)There is no need for overhead application rates in process costing systems.
B)Process costing systems are used primarily in service industries,whereas job order costing systems are used in manufacturing operations.
C)Per-unit costs are not computed in process costing systems.
D)Process costing systems are used when production involves large volumes of standardized products,whereas job order costing systems are used when each job or batch of products is uniquely different.

Question 36

[The following information applies to the questions displayed below.]
Sue's Soup Products uses a process costing system with two processing departments: the Mixing and Cooking Department and the Canning Department.Work in process inventories are reduced to zero each month.In March,the Mixing and Cooking Department incurred manufacturing costs of $63,000 to mix 42,000 gallons of soup.The Canning Department incurred manufacturing costs of $9,000.A total of 170,000 cans of soup were transferred to the finished goods warehouse during the month.
The journal entry to record the transfer of soup out of the Canning Department during March would include:

A)A credit to Work in Process Inventory,Canning Department of $9,000.
B)A credit to Work in Process Inventory,Canning Department of $63,000.
C)A debit to Finished Goods Inventory of $72,000.
D)A credit to Finished Goods Inventory,Mixing and Cooking Department of $72,000.

Question 37

[The following information applies to the questions displayed below.]
Duffy Brothers manufactures a single product using a process involving (1)mixing ingredients and (2)a subsequent packaging operation.Duffy uses a process costing system to account for the flow of costs through its production process.
In Duffy's operation,the Finished Goods Inventory account is debited for:

A)The cost of units transferred directly from the Mixing Department.
B)The cost of units transferred directly from the Packaging Department.
C)The cost of units transferred directly from both the Mixing Department and the Packaging Department.
D)The cost of the units sold.

Question 38

In a production cost report,the units transferred out refer to the equivalent units completed during the period that have been moved to the next department or to Finished Goods Inventory.

Question 39

Process costing would be suitable for:

A)Automobile repair.
B)Production of television sets.
C)Boat building.
D)Kitchen remodeling.

Question 40

The Work in Process - Assembly account would be credited and the Work in Process - Packaging account would be debited when:

A)Goods are transferred from Assembly to Packaging.
B)Goods are transferred from Packaging to Assembly.
C)The units are complete and ready for sale.
D)The number of units started during the period is greater than the number of units in process at the end of the period.

Question 41

[The following information applies to the questions displayed below.]
Aves Treats,Inc.produces birdseeds.All direct materials used in the production process are added at the beginning of the manufacturing process.Labor and overhead are added evenly thereafter,as each unit is mixed and packaged.Aves Treats uses process costing and had the following unit production information available for the months of June and July:
The units remaining in work in process at the end of June were 30% complete.During the month of July,all of the beginning work in process units was completed and the units remaining in work in process at the end of the month were 60% complete.
For the month of July,the number of equivalent units of labor and overhead produced was:

A)830.
B)320.
C)955.
D)895.

Question 42

The Finishing Department of Berle Industries works on only one product,and all costs are incurred uniformly while these units remain in the department.On March 1,6,000 units were in process that were 45% completed.An additional 60,000 units were transferred into the Finishing Department during March.At March 31,there were 25,000 units in process that were 75% completed.Compute the equivalent units of production for the Finishing Department during March.

A)81,450 units
B)60,000 units
C)57,050 units
D)69,550 units

Question 43

The number of equivalent units of production:

A)Is equal to the number of units completed by a department.
B)May not be greater than the number of units completed by a department.
C)Is used to complete the overhead application rate.
D)May be less than,equal to,or greater than the number of physical units completed during the period.

Question 44

In a process costing system,the number of units started and completed for a period is equal to:

A)Units transferred out less units in beginning work in process.
B)Units transferred out less units in ending work in process.
C)Units transferred out plus units of beginning work in process.
D)Units transferred out plus units in ending work in process.

Question 45

[The following information applies to the questions displayed below.]
Aves Treats,Inc.produces birdseeds.All direct materials used in the production process are added at the beginning of the manufacturing process.Labor and overhead are added evenly thereafter,as each unit is mixed and packaged.Aves Treats uses process costing and had the following unit production information available for the months of June and July:
The units remaining in work in process at the end of June were 30% complete.During the month of July,all of the beginning work in process units was completed and the units remaining in work in process at the end of the month were 60% complete.
For the month of June,the number of equivalent units of direct materials produced was:

A)750.
B)600.
C)150.
D)950.

Question 46

[The following information applies to the questions displayed below.]
Aves Treats,Inc.produces birdseeds.All direct materials used in the production process are added at the beginning of the manufacturing process.Labor and overhead are added evenly thereafter,as each unit is mixed and packaged.Aves Treats uses process costing and had the following unit production information available for the months of June and July:
The units remaining in work in process at the end of June were 30% complete.During the month of July,all of the beginning work in process units was completed and the units remaining in work in process at the end of the month were 60% complete.
For the month of June,the number of equivalent units of labor and overhead produced was:

A)750.
B)600.
C)645.
D)595.

Question 47

In most process costing systems,per-unit costs are determined by:

A)Dividing the number of units completed during the period by the total manufacturing costs incurred during the period.
B)Dividing the total manufacturing costs incurred during the period by the number of units worked on during the period.
C)Dividing the total manufacturing costs incurred during the period by the equivalent number of units completed during the period.
D)Unit costs cannot be determined in a process costing system.

Question 48

Equivalent units of production represent units of:

A)Finished goods inventory.
B)Units of work-in-process inventory.
C)Work performed during the period.
D)Sales generated during the period.

Question 49

Department X of a manufacturing company works on only one product,and all costs are incurred uniformly as the product goes along the assembly line.The 8,000 units in process on December 1 were 60% completed.An additional 40,000 units were placed in production during December.At December 31,the 10,000 units in process were 60% completed.The equivalent units of production during December amounted to:

A)49,200.
B)60,800.
C)57,200.
D)58,800.

Question 50

In a process costing system,costs flow from one Work in Process Inventory account to the next in the same sequence as:

A)Units flow through production.
B)In a LIFO periodic inventory system.
C)Shipped to customers.
D)In a job order cost system.

Question 51

The computation of equivalent units is generally not necessary when:

A)Beginning work-in-process inventories are significantly larger than ending work-in-process inventories.
B)Beginning and ending work in process inventories differ only slightly.
C)The number of units in ending work-in-process exceeds the number of units completed and transferred to finished goods during the period.
D)Per-unit costs become distorted as a result of not computing equivalent units of production.

Question 52

Companies that compute equivalent units of production do so to:

A)Comply with income tax regulations.
B)Compute total manufacturing costs for the period.
C)Determine a manufacturing overhead application rate.
D)Determine departmental per-unit costs.

Question 53

[The following information applies to the questions displayed below.]
Aves Treats,Inc.produces birdseeds.All direct materials used in the production process are added at the beginning of the manufacturing process.Labor and overhead are added evenly thereafter,as each unit is mixed and packaged.Aves Treats uses process costing and had the following unit production information available for the months of June and July:
The units remaining in work in process at the end of June were 30% complete.During the month of July,all of the beginning work in process units was completed and the units remaining in work in process at the end of the month were 60% complete.
For the month of July,the number of equivalent units of direct materials produced was:

A)700.
B)800.
C)900.
D)950.

Question 54

Equivalent units are usually computed for:

A)Only direct materials.
B)Only direct labor.
C)Only factory overhead.
D)Direct materials,direct labor,and factory overhead costs.

Question 55

During August,Department Z started and completed 90,000 units and also finished 18,000 units that were 75% completed on July 31.On August 31,Department Z's ending inventory consisted of 26,000 units that were 45% completed.All manufacturing costs are incurred at a uniform rate throughout Department Z's production process.The number of equivalent units of production for Department Z during August is:

A)106,200.
B)90,000.
C)94,500.
D)117,800.

Question 56

If beginning inventory in Work in Process is zero,2,000 units are started during the period,and 300 units remain in ending inventory,how many equivalent units were completed and transferred out?

A)2,000 units
B)285 units
C)300 units
D)1,700 units

Question 57

If 80% of all inventory was sold at $32 per unit and 3,500 units were sold,what is the cost of the finished goods inventory at year-end?

A)$16,800
B)$77,000
C)$19,250
D)$96,250

Question 58

If beginning inventory in Work in Process is zero,2,000 units are started during the period,and 1,700 units were completed and transferred out,how many units remain in ending inventory?

A)2,000 units
B)285 units
C)300 units
D)1,700 units

Question 59

Equivalent units of production are:

A)A measure representing the percentage of a unit's cost that has been completed.
B)Not computed separately for each input added during production.
C)Not assigned to beginning work-in-process or ending work-in-process.
D)The total units completed during the period.

Question 60

If 8,000 units were in beginning inventory,26,000 units were started,and 6,000 units were in the ending inventory,how many units were transferred out?

A)40,000 units
B)26,000 units
C)28,000 units
D)24,000 units

Question 61

Job order and process costing systems
There are two distinct types of cost accounting systems: job order costing systems and process costing systems.How does management decide whether to use a job order costing system or a process costing system in any given manufacturing situation? Explain briefly.

Question 62

[The following information applies to the questions displayed below.]
During May,the number of equivalent units of materials applied to units produced by Department Q totaled 48,000,computed as follows: beginning inventory,5,000 equivalent units;units started and completed in May,37,000 equivalent units;and ending inventory,6,000 equivalent units.
Assuming that the cost of direct materials used by Department Q in May was $440,000,the materials cost assigned to unfinished units at May 31 would be: (Do not round intermediate calculations. )

A)$55,000.
B)$26,400.
C)$70,400.
D)Impossible to determine unless we know the percentage of completion for ending inventory units.

Question 63

Process costing system-journal entries
Joyce Industries uses a process costing system.All of the company's manufacturing activities take place in a single processing department.There was no beginning inventory in May.During the month,$60,000 of materials were added and $40,000 of labor and $75,000 of overhead costs were charged to work in process.The entire work in process inventory of 20,000 units was completed and transferred to finished goods.Of these 20,000 units,15,000 were sold on account at $14 per unit.
In the space provided,prepare a general journal entry to summarize each of the following categories of transactions for the month of May.(You may omit explanations. )
(a. )The recording of manufacturing costs applied to production (use a single journal entry).
(b. )The transfer of completed units from work in process to the finished goods warehouse.
(c. )The sale of 15,000 units manufactured during the month and the related cost of goods sold.

Question 64

A typical production cost report will contain all of the following except:

A)The number of equivalent units.
B)The total cost of production.
C)The costs per equivalent units.
D)The costs assigned to each job.

Question 65

Equivalent units
In the first month of operations,the manufacturing costs for Blue Sun Company were as follows:
During the month 10,000 units were completed,and 5,000 units were in process at the end of the month.The 5,000 units in process were 100% completed as to materials and 80% completed as to direct labor and overhead.Compute the following:
(a)Direct materials cost per equivalent unit: $________
(b)Equivalent units of production for direct labor and manufacturing overhead: ________
(c)Direct labor cost per equivalent unit: $________
(d)Manufacturing overhead cost per equivalent unit: $________
(e)Total cost of 10,000 units completed: $________
(f)Total cost of 5,000 units in process at the end of the month: $________

Question 66

[The following information applies to the questions displayed below.]
Note: Materials are all added in the beginning
What are the equivalent units for direct labor and overhead?

A)140,000 units
B)80,000 units
C)160,000 units
D)130,000 units

Question 67

Selecting an appropriate cost accounting system
Listed below are seven businesses.In the spaces provided,identify whether a job order costing system or a process costing system would most likely be appropriate.
(a)________ Nancy's Paper Plate Company
(b)________ Two Leg Pants Manufacturers,Inc.
(c)________ Solid Residential Contractors
(d)________ Float's Boats
(e)________ Big Heart Hospital
(f)________ Fizz Soda,Inc.
(g)________ Sugarmore Candies,Inc.

Question 68

[The following information applies to the questions displayed below.]
Note: Materials are all added in the beginning
What are the equivalent units for materials?

A)92,000 units
B)60,000 units
C)160,000 units
D)110,000 units

Question 69

[The following information applies to the questions displayed below.]
Note: Materials are all added in the beginning
How many units were started in June?

A)92,000 units
B)60,000 units
C)160,000 units
D)110,000 units

Question 70

[The following information applies to the questions displayed below.]
Note: Materials are all added in the beginning
If direct labor and overhead costs totaled $172,000,what would be the unit cost?

A)$1.23 per unit
B)$1.08 per unit
C)$1.56 per unit
D)$3.44 per unit

Question 71

Process costing system-journal entries
Milton Manufacturing uses a process costing system.Products are processed successively by Department × and Department Y and are then transferred to the finished goods warehouse.Shown below is cost information for Department Y during the month of May: The cost of work in process in Department Y at May 31 has been determined to be $113,500.
In the space provided,prepare a general journal entry to summarize for the month of May each of the following categories of transactions (you may omit explanations):
(a. )The transfer of production from Department × to Department Y.
(b. )The recording of manufacturing costs incurred in Department Y during May.(Use a single journal entry. )
(c. )The transfer of completed units from Department Y to the finished goods warehouse.

Question 72

For the month of December,its first month of operations,the Radcliffe Corporation completed and transferred 800 units of product costing $80,000 to produce to Finished Goods Inventory.If Radcliffe sold 650 units during the same month,how much was cost of goods sold for the same period?

A)$80,000
B)$8,000
C)$6,500
D)$65,000

Question 73

To identify the cause of a change in a product total unit cost,management may:

A)Compute per unit product cost in total.
B)Compute per unit total cost.
C)Compute per unit product cost for each individual production department.
D)Compare prior period to current period per unit product cost in total.

Question 74

During the month of August,$582,000 of costs were transferred from the Mixing Department to the Baking Department.The journal entry to summarize the transfer of these costs includes:

A)A debit to the Mixing department for $582,000.
B)A debit to the Baking department for $582,000.
C)A credit to the Baking department for $582,000.
D)A debit to Finished Goods Inventory.

Question 75

Process costing with equivalent units and beginning inventory
The records of Westminster Manufacturing Company for the month of May show the following costs in Department A: The beginning inventory for May consisted of 10,000 units that were 80% complete as to direct materials and 60% complete as to labor and overhead.A total of 100,000 units were completed and transferred out during May,and 20,000 units remained in the work in process inventory.The ending inventory was 80% complete as to direct materials and 40% complete as to labor and overhead.Compute the following:
(a)Direct materials cost per equivalent unit: $________
(b)Equivalent units of production for direct labor and overhead: ________
(c)Total cost of 100,000 units completed: $________
(d)Total cost of 20,000 units in process at the end of the month: $________

Question 76

A summary of work completed with related unit and total costs in a process costing system is called a(n):

A)Equivalent units production form.
B)Cost requisition form.
C)Summary of conversion costs.
D)Production cost report.

Question 77

During July,the equivalent units of direct materials added to the product worked on by Department A amounted to a total of 90,000 applied as follows: beginning inventory,20,000 units;units started and completed in July,60,000 units;and ending inventory,10,000 units.Assuming that the cost of direct materials requisitioned by the department in July was $135,000;the amount of the materials cost to be assigned to the ending inventory would be: (Do not round intermediate calculations. )

A)$16,875.
B)$54,000.
C)$15,000.
D)$18,000.

Question 78

During the month of June,$352,150 of costs were transferred from Department A to Department B.The journal entry to summarize the transfer of these costs includes:

A)A debit to department A for $352,150.
B)A credit to department B for $352,150.
C)A credit to department A for $352,150.
D)No entry is required when costs are transferred between departments.

Question 79

In evaluating the efficiency of a production department,management should:

A)Consider all costs of production across departments.
B)Consider that department activities only.
C)Consider all corporate-wide period costs.
D)Compare the costs of production across departments.

Question 80

On the basis of this information,which of the following statements is true?

A)The number of units transferred in May from Department Q to the next process or department was 37,000.
B)There were more units in Department Q's ending inventory than in Department Q's beginning inventory for May.
C)Department Q completed 48,000 units of product during May.
D)Department Q used enough materials during May to produce 48,000 equivalent units.