Process Costing – Ch18 | Test Bank – 17th Edition

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Horngren's Cost Accounting: A Managerial Emphasis, 17e, Global Edition by Datar/Rajan

Chapter 18 Process Costing

Objective 18.1

1) Which of the following is the costing system used for mass produced like or similar units of products?

A) inventory-costing systems

B) job-costing systems

C) process-costing systems

D) weighted-average costing systems

Diff: 1

Objective: 1

AACSB: Analytical thinking

2) Which of the following companies is most likely to use process costing?

A) Crimpson Color, a company selling customized garments for niche customers

B) Effel & Associates, a consulting firm providing various audit and related services

C) Dental Bright Inc., a company manufacturing and selling toothpaste on a large scale

D) Grimpy Corp., a company manufacturing furniture for customers as per their requirements

Diff: 2

Objective: 1

AACSB: Analytical thinking

3) Process costing would most likely be used to assign costs to products produced by which of these companies?

A) Jones Flour Mill

B) Riley Automobile Dealer

C) Big Time Yacht Corporation

D) Sullivan and Murphy Law Firm LLC

Diff: 2

Objective: 1

AACSB: Analytical thinking

4) Which of the following statements is true?

A) In a job-costing system, average production cost is calculated for all units produced.

B) In a process-costing system, each unit uses approximately the same amount of resources.

C) In a job-costing system, overheads are allocated to all units equally.

D) In a process-costing system, individual jobs use different quantities of production resources.

Diff: 2

Objective: 1

AACSB: Analytical thinking

5) Which of the following most accurately describes the contrast between process and job costing?

A) in process costing, they include all the factors of production but job costing includes only materials and labor

B) job costing includes materials, labor and overhead while process costing only considers conversion costs

C) the main difference is the extent of averaging used to compute the unit costs

D) job costing measures the variable cost of identical jobs while process costing measures the cost of identical products using average units costs of materials and conversion costs, some of which are fixed costs

Diff: 3

Objective: 1

AACSB: Analytical thinking

6) Which if the following are not conversion costs?

A) the cost of direct laborers who assemble the parts of an automobile

B) the cost of tires on an automobile

C) the cost of depreciation on an automobile assembly plant

D) the cost of electricity to run the tools in the automobile assembly plant

Diff: 2

Objective: 1

AACSB: Analytical thinking

7) Which of the following statements best describes conversion costs?

A) Conversion costs are all manufacturing and nonmanufacturing costs.

B) Conversion costs are all manufacturing costs other than direct materials costs.

C) Conversion costs are all nonmanufacturing costs including marketing costs.

D) Conversion costs are all nonmanufacturing costs other than fixed selling and distribution costs.

Diff: 2

Objective: 1

AACSB: Analytical thinking

8) Process-costing systems separate costs into cost categories according to:

A) when costs are introduced into the process

B) cost behavior (fixed versus variable)

C) the specific job being worked on

D) customer being served

Diff: 2

Objective: 1

AACSB: Analytical thinking

9) Job-costing systems separate costs into cost categories according to when costs are introduced into the process of manufacture.

Diff: 2

Objective: 1

AACSB: Analytical thinking

10) The principal difference between process costing and job costing is that in job costing an averaging process is used to compute the unit costs of products or services.

Diff: 2

Objective: 1

AACSB: Analytical thinking

11) The main difference between process costing and job costing is the extent of averaging used to compute unit costs.

Diff: 2

Objective: 1

AACSB: Analytical thinking

12) In a process-costing system, each unit uses varying amounts of resources.

Diff: 1

Objective: 1

AACSB: Analytical thinking

13) If manufacturing labor costs are added to the process at a different time compared to other conversion costs, an additional cost category—direct manufacturing labor costs—would be needed to assign these costs to products.

Diff: 2

Objective: 1

AACSB: Analytical thinking

14) Estimating the degree of completion for the calculation of equivalent units is usually easier for conversion costs than it is for direct materials.

Diff: 2

Objective: 1

AACSB: Analytical thinking

15) If two different direct materials—such as the circuit board and microphone—are added to the process at different times, a company will need two different direct-materials categories to assign direct materials cost.

Diff: 2

Objective: 1

AACSB: Analytical thinking

16) Conversion costs include direct materials and direct labor but excludes all other manufacturing and non-manufacturing costs.

Diff: 2

Objective: 1

AACSB: Analytical thinking

17) Job-costing and process-costing are mutually exclusive, hence a hybrid costing system that combines elements of both job and process costing cannot be used.

Diff: 3

Objective: 1

AACSB: Analytical thinking

18) There are basically two distinct methods of calculating product costs.

Required:

Compare and contrast the two methods.

In process costing, the jobs or products are similar (or homogeneous). Each job usually requires the same inputs, and results in approximately the same costs per unit. The cost of a product or service is obtained by assigning total costs to many identical or similar units. We assume each unit receives the same amount of direct material costs, direct manufacturing labor costs, and indirect manufacturing costs. Unit costs are then computed by dividing total costs by the number of units.

The principal difference between process costing and job costing is the extent of averaging used to compute unit costs. As noted above in job costing, individual jobs use different quantities of production resources; whereas in process costing, we assume that each job uses approximately the same amount of resources.

Diff: 2

Objective: 1

AACSB: Analytical thinking

19) Why do we need to accumulate and calculate unit costs in process costing (and also job costing)?

1. Budget (planning)

2. Price

3. Account for the costs

1. Budgeting — To operate a successful business, we should prepare budgets, review the results, and make decisions as to how well our business is doing. Our business has formulated plans for the future. The resources we need for the future (materials, conversion costs, facilities, etc.) will depend on our estimate of the resources we need to accomplish these goals. An important part of these estimates is the unit costs of the products we plan to produce. These unit costs will tell us how many dollars we must acquire to accomplish our plans.

2. Price — In order to be a profitable business, we must sell our product at a price in excess of what it costs us to produce the product. Essential for the pricing decision is the cost per unit. We will also learn whether we can sell a product at a profit.

3. Accounting — During the course of the accounting period, we will be accumulating costs. At the end of the accounting period, we must allocate this pool of costs between the units that were transferred out and the goods in ending inventory. Unit costs are essential for this purpose.

Diff: 1

Objective: 1

AACSB: Analytical thinking

20) The president of the Gulf Coast Refining Corporation wants to know why his golfing partner, who is the chief financial officer of a large construction company, calculates his costs by the job, but his own corporation calculates costs by large units rather than by individual barrel of oil.

The construction company calculates costs by each job, since each job can require substantially different amounts of the various inputs. Thus, the cost of each job could be radically different from the other jobs.

Diff: 1

Objective: 1

AACSB: Analytical thinking

21) Describe the differences between process costing and job costing. Discuss some typical products which would be more likely to use process costing as compared to some which would be more likely to use job costing.

In a process-costing system, the units produced as output are very similar to one another. As a result, the means by which the raw material is converted to a finished product is common among all of the products. This allows the conversion costs to be summed up and divided by the total number of units for an accurate conversion cost on a unit by unit basis. Some typical types of products which are likely to use process costing are oil refineries, ice cream, various food preparation industries, etc. This is because the raw material is processed in a similar manner for all of the units produced.

Diff: 1

Objective: 1

AACSB: Analytical thinking

22) Briefly explain this statement: "Job costing and process costing are the ends of a continuum."

Diff: 1

Objective: 1

AACSB: Analytical thinking

Objective 18.2

1) In a process-costing system average unit costs are calculated:

A) by dividing total costs in a given accounting period by total units produced in that period

B) by multiplying total costs in a given accounting period by total units produced in that period

C) by dividing total costs in a given accounting period by units started in that period

D) by multiplying total costs in a given accounting period by units started in that period

Diff: 1

Objective: 2

AACSB: Analytical thinking

2) Vital Industries manufactured 2,600 units of its product Huge in the month of April. It incurred a total cost of $130,000 during the month. Out of this $130,000, $46,000 comprised of direct materials used in the product and the rest was incurred because of the conversion cost involved in the process. Ryan had no opening or closing inventory. What will be the total cost per unit of the product, assuming conversion costs contained $10,400 of indirect labor?

A) $50

B) $45

C) $35

D) $32

Diff: 3

Objective: 2

AACSB: Application of knowledge

3) Serile Pharma places 840 units in production during the month of January. All 840 units are completed during the month. It had no opening inventory. Direct material costs added during January was $106,000 and conversion costs added during January was $11,600. What is the total cost per unit of the product produced during January?

A) $140

B) $10

C) $80

D) $126

Diff: 3

Objective: 2

AACSB: Application of knowledge

4) When a company has no opening or ending inventory during the month, the cost per unit is calculated by dividing the total costs incurred in the period by the total units produced during the period.

Diff: 2

Objective: 2

AACSB: Analytical thinking

5) Often the need for separate equivalent unit calculations for materials and for conversion cost is due to the fact that material is typically added throughout the production process while conversion costs are added at the beginning of the process.

Diff: 2

Objective: 2

AACSB: Analytical thinking

Objective 18.3

1) The purpose of the equivalent-unit computation is to:

A) convert completed units into the amount of partially completed output units that could be made with that quantity of input

B) use a common metric to estimate the amount of work done on units in a period

C) predict the future production capabilities of the organization

D) satisfy the GAAP requirements which requires all partially completed goods to be reported as equivalent-units

Diff: 2

Objective: 3

AACSB: Analytical thinking

2) Which of the following is true regarding estimates of completion of units in a process costing system?

A) estimating the degree of completion with regards to conversion costs is more of a science than an art

B) estimating the degree of completion with regards to conversion costs is usually easier and more accurate than estimating the degree of completion with regards to direct materials

C) estimating the degree of completion with regards to direct materials is usually easier and more accurate than estimating the degree of completion with regards to conversion costs

D) when estimating degree of completion, the degree of completion with regards to conversion costs is usually a portion similar to the degree of completion with regards to direct materials

Diff: 2

Objective: 3

AACSB: Analytical thinking

3) When a Bakery transfers goods from the Mixing Department to the Baking Department, the accounting entry would be:

A) Debit: Work in Process — Mixing Department

Credit: Work in Process — Baking Department

B) Debit: Work in Process — Baking Department

Credit: Accounts Payable

C) Debt: Work in Process — Baking Department

Credit: Work in Process — Mixing Department

D) Debt: Work in Process — Mixing Department

Credit: Accounts Payable

Diff: 2

Objective: 3

AACSB: Analytical thinking

4) Charlie Chairs Inc., manufactures plastic moldings for car seats. Its costing system utilizes two cost categories, direct materials and conversion costs. Each product must pass through Department A and Department B. Direct materials are added at the beginning of production. Conversion costs are allocated evenly throughout production.

What is the unit cost per equivalent unit of beginning inventory in Department A? (Round the final answer to the nearest whole dollar.)

A) $500

B) $962

C) $2,200

D) $1,962

Diff: 2

Objective: 3

AACSB: Application of knowledge

5) Charlie Chairs Inc., manufactures plastic moldings for car seats. Its costing system utilizes two cost categories, direct materials and conversion costs. Each product must pass through Department A and Department B. Direct materials are added at the beginning of production. Conversion costs are allocated evenly throughout production.

How many units were completed and transferred out of Department A during February?

A) 440 units

B) 900 units

C) 1,100 units

D) 1,220 units

Diff: 2

Objective: 3

AACSB: Application of knowledge

6) Dessa Cabinetry, Inc., manufactures standard sized modular cabinet units for kitchens and other applications within the home. Its costing system utilizes two cost categories, direct materials and conversion costs. Each product must pass through the rough cut department and the finish department. Direct materials are added at the beginning of production. Conversion costs are allocated evenly throughout production.

What is the unit cost per equivalent unit of the beginning inventory in the Finishing Department? (Round the final answer to the nearest whole dollar.)

A) $225

B) $360

C) $773

D) $998

Diff: 2

Objective: 3

AACSB: Application of knowledge

7) Dessa Cabinetry, Inc., manufactures standard sized modular cabinet units for kitchens and other applications within the home. Its costing system utilizes two cost categories, direct materials and conversion costs. Each product must pass through the rough cut department and the finish department. Direct materials are added at the beginning of production. Conversion costs are allocated evenly throughout production.

How many units were completed and transferred out of the Finishing Department during March?

A) 1,020 units

B) 1,200 units

C) 1,620 units

D) 2,100 units

Diff: 2

Objective: 3

AACSB: Application of knowledge

8) Which of the following entries is used to record direct materials purchased and used in production during a month in the Assembly department, before transferring the goods to Testing department?

A) Debit: Work in Process—Assembly

Credit: Wages Payable Control

B) Debit: Accounts Payable Control

Credit: Work in Process—Assembly

C) Debit: Work in Process—Assembly

Credit: Accounts Payable Control

D) Debit: Accounts Payable Control

Credit: Cash

Diff: 2

Objective: 3

AACSB: Analytical thinking

9) Stefan Ceramics is in the business of selling ceramic vases. It has two departments – molding and finishing. Molding department purchases tungsten carbide and produces ceramic vases out of it. Ceramic Vases are then transferred to finishing department, which designs it as per the requirement of the customers.

During the month of July, molding department purchased 720 kgs of tungsten carbide at $280 per kg. It started manufacture of 4,200 vases and completed and transferred 3,200 vases during the month. It has 1,000 vases in the process at the end of the month. It incurred direct labor charges of $1,700 and other manufacturing costs of $1,200, which included electricity costs of $500. Stefan had no inventory of tungsten carbide at the end of the month. It also had no beginning inventory of vases. The ending inventory was 55% complete in respect of conversion costs.

Which of the following journal entry would record the tungsten carbide purchased and used in production during July?

A) Work in Process—Molding $2,200

Accounts Payable Control $2,200

B) Work in Process—Molding $201,600

Accounts Payable Control $201,600

C) Accounts Payable Control $2,200

Work in Process—Molding $2,200

D) Accounts Payable Control $201,600

Work in Process—Molding $201,600

Diff: 2

Objective: 3

AACSB: Application of knowledge

10) Stefan Ceramics is in the business of selling ceramic vases. It has two departments – molding and finishing. Molding department purchases tungsten carbide and produces ceramic vases out of it. Ceramic Vases are then transferred to finishing department, which designs it as per the requirement of the customers.

During the month of July, molding department purchased 650 kgs of tungsten carbide at $210 per kg. It started manufacture of 3,500 vases and completed and transferred 3,200 vases during the month. It has 300 vases in the process at the end of the month. It incurred direct labor charges of $1,000 and other manufacturing costs of $600, which included electricity costs of $900. Stefan had no inventory of tungsten carbide at the end of the month. It also had no beginning inventory of vases. The ending inventory was 55% complete in respect of conversion costs.

Which of the following journal entries would be correct to record direct labor for July?

A) Work in Process—Molding $136,500

Accounts Payable Control $136,500

B) Work in Process—Molding $1,000

Overhead Control $1,000

C) Work in Process—Molding $1,000

Wages Payable Control $1,000

D) Work in Process—Molding $1,000

Work in Process—Finishing $1,000

Diff: 2

Objective: 3

AACSB: Application of knowledge

11) Stefan Ceramics is in the business of selling ceramic vases. It has two departments – molding and finishing. Molding department purchases tungsten carbide and produces ceramic vases out of it. Ceramic Vases are then transferred to finishing department, which designs it as per the requirement of the customers.

During the month of July, molding department purchased 500 kgs of tungsten carbide at $60 per kg. It started manufacture of 4,000 vases and completed and transferred 3,600 vases during the month. It has 400 vases in the process at the end of the month. It incurred direct labor charges of $1,400 and other manufacturing costs of $900, which included electricity costs of $700. Stefan had no inventory of tungsten carbide at the end of the month. It also had no beginning inventory of vases. The ending inventory was 55% complete in respect of conversion costs. What is the total conversion costs for the month of July?

A) $3,000

B) $2,300

C) $1,600

D) $1,400

Diff: 2

Objective: 3

AACSB: Application of knowledge

12) Stefan Ceramics is in the business of selling ceramic vases. It has two departments – molding and finishing. Molding department purchases tungsten carbide and produces ceramic vases out of it. Ceramic Vases are then transferred to finishing department, which designs it as per the requirement of the customers.

During the month of July, molding department purchased 500 kgs of tungsten carbide at $60 per kg. It started manufacture of 4,000 vases and completed and transferred 3,700 vases during the month. It has 300 vases in the process at the end of the month. It incurred direct labor charges of $1,400 and other manufacturing costs of $800, which included electricity costs of $400. Stefan had no inventory of tungsten carbide at the end of the month. It also had no beginning inventory of vases. The ending inventory was 45% complete in respect of conversion costs. What is the cost of tungsten carbide that will be assigned to vases finished and transferred to the finishing department for the month of July?

A) $30,000

B) $30,350

C) $4,500

D) $27,750

Diff: 3

Objective: 3

AACSB: Application of knowledge

13) Which of the following statements is true of conversion costs?

A) Estimating the degree of completion is usually easier for direct material costs than for conversion costs.

B) The calculation of equivalent units is relatively easy for the textile industry.

C) The conversion cost needed for a completed unit and the conversion cost in a partially completed unit can be measured accurately.

D) If conversion costs are added evenly during the assembly we can conclude that there are more than one indirect-cost category.

Diff: 2

Objective: 3

AACSB: Analytical thinking

14) Underestimating the degree of completion of ending work in process leads to increase in operating income.

Diff: 2

Objective: 3

AACSB: Analytical thinking

15) The last step in a process-costing system is to compute cost per equivalent unit.

Diff: 2

Objective: 3

AACSB: Analytical thinking

16) Equivalent units is a derived measure of output calculated by converting the quantity of inputs into the amount of completed output that could be produced with that quantity of input.

Diff: 2

Objective: 3

AACSB: Analytical thinking

17) When there are beginning inventories, it is assumed that the percentage of completion of the unfinished units is 100%.

Diff: 2

Objective: 3

AACSB: Analytical thinking

18) The accuracy of the completion estimate of conversion costs depends on the care, skill, and experience of the estimator and also the nature of the conversion process.

Diff: 2

Objective: 3

AACSB: Analytical thinking

19) The accuracy of the percentage of completion estimate of conversion costs depends on formulas used by cost accountants.

Diff: 2

Objective: 3

AACSB: Analytical thinking

20) In a process-costing system, there is always a separate Work-in-Process account for each different process. or department in the process.

Diff: 2

Objective: 3

AACSB: Analytical thinking

21) A production cost worksheet is used to summarize total costs to account for, compute cost per equivalent unit, and assign total costs to units completed and to units in ending work-in-process.

Diff: 2

Objective: 3

AACSB: Analytical thinking

22) When calculating the equivalent units, we should only focus on dollar amounts of inventory.

Diff: 2

Objective: 3

AACSB: Analytical thinking

23) The accounting entry to record the conversion cost of the Assembly Department is:

Work in Process-Assembly Department

Accounts Payable Control

Diff: 2

Objective: 3

AACSB: Analytical thinking

24) Big Bernard Corporation was recently formed to produce a semiconductor chip that forms an essential part of the personal computer manufactured by a major corporation. The direct materials are added at the start of the production process while conversion costs are added uniformly throughout the production process. June is Big Bernard's first month of operations, and therefore, there was no beginning inventory. Direct materials cost for the month totaled $950,000, while conversion costs equaled $4,625,000. Accounting records indicate that 475,000 chips were started in June and 425,000 chips were completed.

Ending inventory was 50% complete as to conversion costs.

Required:

a. What is the total manufacturing cost per chip for June?

b. Allocate the total costs between the completed chips and the chips in ending inventory.

a.

Equivalent unit for conversion costs =

425,000 completed + (50,000 × 0.5 completed) =

425,000 + 25,000 = 450,000

b. Completed units = $12.28 × 425,000 = $5,219,000

Ending work in process = Direct materials = 50,000 × $2.00 = $ 100,000

Conversion costs = 25,000 × $10.28 = 257,000

Total ending work in process $357,000

Diff: 2

Objective: 3

AACSB: Application of knowledge

25) The Esther Valve Corporation was recently formed to produce a brass valve that forms an essential part of a compressor manufactured by a major corporation. The direct materials are added at the start of the production process while conversion costs are added uniformly throughout the production process. September is Parson's first month of operations, and therefore, there was no beginning inventory. Direct materials cost for the month totaled $2,800,000, while conversion costs equaled $3,600,000. Accounting records indicate that 1,600,000 valves were started in September and 1,400,000 valves were completed.

Ending inventory was 20% complete as to conversion costs.

Required:

a. What is the total manufacturing cost per valve for September?

b. Allocate the total costs between the completed valves and the valves in ending inventory.

a.

Equivalent unit for conversion costs =

1,400,000 completed + (200,000 × 0.2 completed) =

1,400,000 + 40,000 = 1,440,000

b. Completed units = $4.25 × 1,400,000 = $5,950,000

Ending work in process = Direct materials = 200,000 × $1.75 = $ 350,000

Conversion costs =40,000 × $2.50 = 100,000

Total ending work in process $450,000

Diff: 2

Objective: 3

AACSB: Application of knowledge

26) Sodius Chemical Inc. placed 220,000 liters of direct materials into the mixing process. At the end of the month, 5,000 liters were still in process, 30% converted as to labor and factory overhead. All direct materials are placed in mixing at the beginning of the process and conversion costs occur evenly during the process. Sodius uses weighted-average costing.

Required:

a. Determine the equivalent units in process for direct materials and conversion costs, assuming there was no beginning inventory.

b. Determine the equivalent units in process for direct materials and conversion costs, assuming that 12,000 liters of chemicals were 40% complete prior to the addition of the 220,000 liters.

a. Direct materials:

Beginning inventory 0 liters

Units started 220,000 liters

Equivalent units 220,000 liters

Conversion costs:

Beginning inventory 0 liters

Units started 220,000 liters

To account for 220,000 liters

Units transferred out 215,000 liters

Ending inventory 5,000 liters

Units transferred out 215,000 liters

Ending inventory, 30% complete 1,500 liters

Equivalent units 216,500 liters

b. Direct materials:

Completed and transferred out (215,000 + 12,000) 227,000 liters

Ending inventory, 100% complete 5,000 liters

Equivalent units 232,000 liters

Conversion costs:

Completed and transferred out 227,000 liters

Ending inventory, 30% complete 1,500 liters

Equivalent units 228,500 liters

Diff: 2

Objective: 3

AACSB: Application of knowledge

27) Bright Colors Company placed 315,000 gallons of direct materials into the mixing process. All direct materials are placed in mixing at the beginning of the process and conversion costs occur evenly during the process. Bright Colors uses weighted-average costing. The initial forecast for the end of the month was to have 75,000 gallons still in process, 15% converted as to labor and factory overhead.

Required:

a. Determine the total equivalent units (in process and transferred out) for direct materials and for conversion costs, assuming there was no beginning inventory.

b. With the installation of a new paint processing filtration device, the forecast for the end of the month was to have 50,000 gallons still in process, 70% converted as to labor and factory overhead. In this event, determine the equivalent units (in process and transferred out) for direct materials and for conversion costs, assuming there was no beginning inventory.

a. Direct materials:

Beginning inventory 0 gallons

Units started 315,000 gallons

Equivalent units 315,000 gallons

Conversion costs:

Beginning inventory 0 gallons

Units started 315,000 gallons

To account for 315,000 gallons

Units transferred out 240,000 gallons

Ending inventory 75,000 gallons

Units transferred out 240,000 gallons

Ending inventory, 15% complete 11,250 gallons

Equivalent units 251,250 gallons

b. Direct materials:

Beginning inventory 0 gallons

Units started 315,000 gallons

Equivalent units 315,000 gallons

Conversion costs:

Beginning inventory 0 gallons

Units started 315,000 gallons

To account for 315,000 gallons

Units transferred out 265,000 gallons

Ending inventory 50,000 gallons

Units transferred out 265,000 gallons

Ending inventory, 70% complete 35,000 gallons

Equivalent units 300,000 gallons

Diff: 2

Objective: 3

AACSB: Analytical thinking

28) Jordana Woolens is a manufacturer of wool cloth. The information for March is as follows:

Beginning work in process was half converted as to labor and overhead. Direct materials are added at the beginning of the process. All conversion costs are incurred evenly throughout the process. Ending work in process was 60% complete.

Required:

Prepare a production cost worksheet using the weighted-average method. Include any necessary supporting schedules.

Diff: 3

Objective: 3

AACSB: Analytical thinking

29) List and describe the five steps in process costing.

Diff: 2

Objective: 3

AACSB: Analytical thinking

30) Marv and Vicki own and operate a vegetable canning plant. In recent years, their business has grown tremendously and, at any point in time, they may have 30 to 35 different vegetables being processed. Also, during the peak summer months there are several thousand bushels of vegetables in some stage of processing at any one time. With the company's growth during the past few years, the owners decided to employ an accountant to provide cost estimations on each vegetable category and prepare monthly financial statements. Although the accountant is doing exactly as instructed, Marv and Vicki are confused about the monthly operating costs. Although they process an average of 50,000 canned units a month, the monthly production report fluctuates wildly.

Required:

Explain how the production report can fluctuate wildly if they process a constant amount of vegetables each month.

Diff: 2

Objective: 3

AACSB: Analytical thinking

Objective 18.4

1) The weighted-average process-costing method calculates the equivalent units by:

A) considering only the work done during the current period

B) the units started during the current period minus the units in ending inventory

C) the units started during the current period plus the units in ending inventory

D) the equivalent units completed during the current period plus the equivalent units in ending inventory

Diff: 2

Objective: 4

AACSB: Analytical thinking

2) Assembly department of Zahra Technologies had 200 units as work in process at the beginning of the month. These units were 50% complete. It has 300 units which are 30% complete at the end of the month. During the month, it completed and transferred 600 units. Direct materials are added at the beginning of production. Conversion costs are allocated evenly throughout production. Zahra uses weighted-average process-costing method. What is the number of equivalent units of work done during the month with regards to direct materials?

A) 700 units

B) 1,100 units

C) 900 units

D) 600 units

Diff: 2

Objective: 4

AACSB: Application of knowledge

3) Assembly department of Zahra Technologies had 100 units as work in process at the beginning of the month. These units were 60% complete. It has 300 units which are 35% complete at the end of the month. During the month, it completed and transferred 500 units. Direct materials are added at the beginning of production. Conversion costs are allocated evenly throughout production. Zahra uses weighted-average process-costing method. Calculate the total equivalent units in ending inventory for assignment of conversion costs?

A) 100 units

B) 105 units

C) 195 units

D) 300 units

Diff: 2

Objective: 4

AACSB: Application of knowledge

4) Assembly department of Zahra Technologies had 100 units as work in process at the beginning of the month. These units were 60% complete. It has 300 units which are 25% complete at the end of the month. During the month, it completed and transferred 600 units. Direct materials are added at the beginning of production. Conversion costs are allocated evenly throughout production. Zahra uses weighted-average process-costing method. What is the total equivalent units in ending inventory for assignment of direct materials cost?

A) 100 units

B) 75 units

C) 225 units

D) 300 units

Diff: 2

Objective: 4

AACSB: Application of knowledge

5) In the computation of the cost per equivalent unit, the weighted-average method of process costing considers all the costs:

A) entering work in process from the units in beginning inventory plus the costs for the work completed during the current accounting period

B) that have entered work in process from the units started or transferred in during the current accounting period

C) that have entered work in process during the current accounting period from the units started or transferred in minus the costs associated with ending inventory

D) that have entered work in process during the current accounting period from the units started or transferred in plus the costs associated with ending inventory

Diff: 3

Objective: 4

AACSB: Analytical thinking

6) Which of the following is NOT true of the weighted-average process-costing method?

A) the method calculates the cost per equivalent unit of all work done to date regardless of the accounting period in which the work was done

B) the costs in work in process (beginning work in process) when the period starts are not considered when calculating the weighted-average cost per equivalent unit

C) the weighted-average cost is the total of all costs entering the Work in Process account divided by the total equivalent units in ending work-in-process inventory

D) the costs to account for are equal to the beginning work in process plus the costs added to work in process during the same period

Diff: 3

Objective: 4

AACSB: Analytical thinking

7) Under the weighted-average method, how would you calculate the cost per equivalent units with regards to conversion costs?

A) conversion costs for work done in the current period/units completed and transferred out in the current period

B) (total conversion costs in beginning work in process)/(units completed and transferred out during the period + equivalent units in ending inventory)

C) (total conversion costs in beginning work in process + conversion cost for work done in the current period)/(units completed and transferred out during the period + equivalent units in ending inventory)

D) (total direct labor costs in beginning work in process + conversion cost for work done in the current period)/(units completed and transferred out during the period + equivalent units in ending inventory)

Diff: 2

Objective: 4

AACSB: Analytical thinking

8) Timekeeper Inc. manufactures clocks on a highly automated assembly line. Its costing system uses two cost categories, direct materials and conversion costs. Each product must pass through the Assembly Department and the Testing Department. Direct materials are added at the beginning of the production process. Conversion costs are allocated evenly throughout production. Timekeeper Inc. uses weighted-average costing.

What are the equivalent units for direct materials and conversion costs, respectively, for June? (Round final answers to the nearest unit.)

A) 1,250 units; 953 units

B) 1,250 units; 1,195 units

C) 1,170 units; 1,170 units

D) 1,098 units; 979 units

Diff: 2

Objective: 4

AACSB: Application of knowledge

9) Timekeeper Inc. manufactures clocks on a highly automated assembly line. Its costing system uses two cost categories, direct materials and conversion costs. Each product must pass through the Assembly Department and the Testing Department. Direct materials are added at the beginning of the production process. Conversion costs are allocated evenly throughout production. Timekeeper Inc. uses weighted-average costing.

What is the total amount debited to the Work-in-Process account during the month of June?

A) $233,500

B) $1,002,500

C) $1,142,500

D) $1,236,000

Diff: 1

Objective: 4

AACSB: Application of knowledge

10) Timekeeper Inc. manufactures clocks on a highly automated assembly line. Its costing system uses two cost categories, direct materials and conversion costs. Each product must pass through the Assembly Department and the Testing Department. Direct materials are added at the beginning of the production process. Conversion costs are allocated evenly throughout production. Timekeeper Inc. uses weighted-average costing.

What is the direct materials cost per equivalent unit during June?

A) $776.54

B) $523.04

C) $534.62

D) $462.69

Diff: 3

Objective: 4

AACSB: Application of knowledge

11) Timekeeper Inc. manufactures clocks on a highly automated assembly line. Its costing system uses two cost categories, direct materials and conversion costs. Each product must pass through the Assembly Department and the Testing Department. Direct materials are added at the beginning of the production process. Conversion costs are allocated evenly throughout production. Timekeeper Inc. uses weighted-average costing.

What is the conversion cost per equivalent unit in June?

A) $521.80

B) $920.94

C) $405.63

D) $382.71

Diff: 3

Objective: 4

AACSB: Application of knowledge

12) Timekeeper Inc. manufactures clocks on a highly automated assembly line. Its costing system uses two cost categories, direct materials and conversion costs. Each product must pass through the Assembly Department and the Testing Department. Direct materials are added at the beginning of the production process. Conversion costs are allocated evenly throughout production. Timekeeper Inc. uses weighted-average costing.

What amount of direct materials costs is assigned to the ending Work-in-Process account for June?

(Round intermediary calculations to the nearest whole dollar.)

A) $109,200

B) $79,492

C) $116,115

D) $64,957

Diff: 3

Objective: 4

AACSB: Application of knowledge

13) Timekeeper Inc. manufactures clocks on a highly automated assembly line. Its costing system uses two cost categories, direct materials and conversion costs. Each product must pass through the Assembly Department and the Testing Department. Direct materials are added at the beginning of the production process. Conversion costs are allocated evenly throughout production. Timekeeper Inc. uses weighted-average costing.

What amount of conversion costs is assigned to the ending Work-in-Process account for June? (Round any intermediary calculations to the nearest cent.)

A) $103,013.51

B) $74,068.83

C) $315.74

D) $400,500.00

Diff: 3

Objective: 4

AACSB: Application of knowledge

14) Shiffon Electronics manufactures music players. Its costing system uses two cost categories, direct materials and conversion costs. Each product must pass through the Assembly Department, the Programming department, and the Testing Department. Direct materials are added at the beginning of the production process. Conversion costs are allocated evenly throughout production. Shiffon Electronics uses weighted-average costing.

The following information is available for the month of March 2020 for the Assembly department.

The cost details for the month of March are as follows:

What are the equivalent units for direct materials and conversion costs, respectively, for March?

A) 1,190 units; 1,190 units

B) 1,110 units; 1,190 units

C) 1,190 units; 1,110 units

D) 990 units; 1,110 units

Diff: 2

Objective: 4

AACSB: Application of knowledge

15) Shiffon Electronics manufactures music players. Its costing system uses two cost categories, direct materials and conversion costs. Each product must pass through the Assembly Department, the Programming department, and the Testing Department. Direct materials are added at the beginning of the production process. Conversion costs are allocated evenly throughout production. Shiffon Electronics uses weighted-average costing.

The following information is available for the month of March 2020 for the Assembly department.

The cost details for the month of March are as follows:

What is the total amount debited to the Work-in-Process account during the month of March?

A) $2,538,500

B) $2,191,500

C) $1,830,500

D) $703,500

Diff: 1

Objective: 4

AACSB: Application of knowledge

16) Shiffon Electronics manufactures music players. Its costing system uses two cost categories, direct materials and conversion costs. Each product must pass through the Assembly Department, the Programming department, and the Testing Department. Direct materials are added at the beginning of the production process. Conversion costs are allocated evenly throughout production. Shiffon Electronics uses weighted-average costing.

The following information is available for the month of March 2020 for the Assembly department.

The cost details for the month of March are as follows:

What is the direct materials cost per equivalent unit during March? (round to the nearest dollar)

A) $898

B) $853

C) $572

D) $281

Diff: 3

Objective: 4

AACSB: Application of knowledge

17) Shiffon Electronics manufactures music players. Its costing system uses two cost categories, direct materials and conversion costs. Each product must pass through the Assembly Department, the Programming department, and the Testing Department. Direct materials are added at the beginning of the production process. Conversion costs are allocated evenly throughout production. Shiffon Electronics uses weighted-average costing.

The following information is available for the month of March 2020 for the Assembly department.

The cost details for the month of March are as follows:

What is the conversion cost per equivalent unit in March? (Round to the nearest cent)

A) $911.29

B) $1,261.84

C) $1,249.15

D) $956.01

Diff: 3

Objective: 4

AACSB: Application of knowledge

18) Shiffon Electronics manufactures music players. Its costing system uses two cost categories, direct materials and conversion costs. Each product must pass through the Assembly Department, the Programming department, and the Testing Department. Direct materials are added at the beginning of the production process. Conversion costs are allocated evenly throughout production. Shiffon Electronics uses weighted-average costing.

The following information is available for the month of March 2020 for the Assembly department.

The cost details for the month of March are as follows:

What amount of direct materials costs is assigned to the ending Work-in-Process account for March?

(Round intermediary calculations to the nearest whole dollar.)

A) $45,508

B) $92,721

C) $98,201

D) $138,240

Diff: 3

Objective: 4

AACSB: Application of knowledge

19) Shiffon Electronics manufactures music players. Its costing system uses two cost categories, direct materials and conversion costs. Each product must pass through the Assembly Department, the Programming department, and the Testing Department. Direct materials are added at the beginning of the production process. Conversion costs are allocated evenly throughout production. Shiffon Electronics uses weighted-average costing.

The following information is available for the month of March 2020 for the Assembly department.

The cost details for the month of March are as follows:

What amount of conversion costs is assigned to the ending Work-in-Process account for March?

(Round intermediary dollar amounts to the nearest cent and unit amounts to the nearest whole unit.)

A) $175,875

B) $118,401

C) $105,525

D) $266,787

Diff: 3

Objective: 4

AACSB: Application of knowledge

20) The Swivel Chair Company manufacturers a standard recliner. During February, the firm's Assembly Department started production of 155,000 chairs. During the month, the firm completed 183,000 chairs and transferred them to the Finishing Department. The firm ended the month with 23,000 chairs in ending inventory. All direct materials costs are added at the beginning of the production cycle. Weighted-average costing is used by Swivel. How many chairs were in inventory at the beginning of the month? Conversion costs are incurred uniformly over the production cycle.

A) 46,000 chairs

B) 23,000 chairs

C) 42,500 chairs

D) 51,000 chairs

Diff: 2

Objective: 4

AACSB: Application of knowledge

21) The Swivel Chair Company manufacturers a standard recliner. During February, the firm's Assembly Department started production of 147,000 chairs. During the month, the firm completed 184,000 chairs and transferred them to the Finishing Department. The firm ended the month with 26,000 chairs in ending inventory. All direct materials costs are added at the beginning of the production cycle. Weighted-average costing is used by Swivel. What were the equivalent units for materials for February?

A) 210,000 chairs

B) 184,000 chairs

C) 173,000 chairs

D) 194,500 chairs

Diff: 3

Objective: 4

AACSB: Application of knowledge

22) The Swivel Chair Company manufacturers a standard recliner. During February, the firm's Assembly Department started production of 145,000 chairs. During the month, the firm completed 178,000 chairs and transferred them to the Finishing Department. The firm ended the month with 18,000 chairs in ending inventory. All direct materials costs are added at the beginning of the production cycle. Weighted-average costing is used by Swivel. What were the equivalent units for conversion costs for February if the beginning inventory was 65% complete as to conversion costs and the ending inventory was 50% complete as to conversion costs?

A) 187,000

B) 154,000

C) 178,000

D) 161,200

Diff: 3

Objective: 4

AACSB: Application of knowledge

23) The Swivel Chair Company manufacturers a standard recliner. During February, the firm's Assembly Department started production of 154,000 chairs. During the month, the firm completed 178,000 chairs and transferred them to the Finishing Department. The firm ended the month with 24,000 chairs in ending inventory. All direct materials costs are added at the beginning of the production cycle. Weighted-average costing is used by Swivel. Of the 154,000 units Swivel started during February, how many were finished during the month?

A) 193,400

B) 216,300

C) 130,000

D) 207,900

Diff: 3

Objective: 4

AACSB: Application of knowledge

24) Weighty Steel processes a single type of steel. For the current period the following information is given:

All materials are added at the beginning of the production process. The beginning inventory was 40% complete as to conversion, while the ending inventory was 30% completed for conversion purposes.

Weighty uses the weighted-average costing method.

What is the total cost assigned to the units completed and transferred this period? (Round intermediary dollar amounts to the nearest cent and total costs to the nearest whole dollar.)

A) $109,350

B) $105,440

C) $114,660

D) $121,500

Diff: 3

Objective: 4

AACSB: Application of knowledge

25) A distinct feature of the FIFO process-costing method is that the:

A) work done on beginning inventory before the current period is blended with the work done during the current period in the calculation of equivalent units

B) work done on beginning inventory before the current period is kept separate from the work done during the current period in the calculation of equivalent units

C) work done on ending inventory is kept separate from the work done during the current period in the calculation of equivalent units and is usually not included in the calculation

D) FIFO process-costing method is only minimally different from the weighted-average process-costing method

Diff: 2

Objective: 4

AACSB: Analytical thinking

26) Which of the following steps are part of the first-in, first-out (FIFO) process-costing method?

A) assignment of costs of the current period's equivalent units to the first units completed and transferred out of the process

B) assumes as part of its first step that the most recently worked on units are completed and transferred out first

C) assumes as part of its first step that there is no beginning work-in-process

D) assignment of costs of the previous period's equivalent units in beginning work-in-process inventory to the first units completed and transferred out of the process

Diff: 2

Objective: 4

AACSB: Analytical thinking

27) An assumption of the FIFO process-costing method is that:

A) the units in beginning inventory are not necessarily assumed to be completed by the end of the period

B) the units in beginning inventory are assumed to be completed first

C) ending inventory will always be completed in the next accounting period

D) no calculation of conversion costs is possible

Diff: 2

Objective: 4

AACSB: Analytical thinking

28) Comfort chair company manufacturers a standard recliner. During February, the firm's Assembly Department started production of 73,200 chairs. During the month, the firm completed 78,600 chairs, and transferred them to the Finishing Department. The firm ended the month with 10,600 chairs in ending inventory. There were 16,000 chairs in beginning inventory. All direct materials costs are added at the beginning of the production cycle and conversion costs are added uniformly throughout the production process. The FIFO method of process costing is used by Comfort. Beginning work in process was 20% complete as to conversion costs, while ending work in process was 80% complete as to conversion costs.

Beginning inventory:

Manufacturing costs added during the accounting period:

How many of the units that were started and completed during February?

A) 83,800

B) 78,600

C) 73,200

D) 62,600

Diff: 2

Objective: 4

AACSB: Application of knowledge

29) Comfort chair company manufacturers a standard recliner. During February, the firm's Assembly Department started production of 73,400 chairs. During the month, the firm completed 78,100 chairs, and transferred them to the Finishing Department. The firm ended the month with 10,500 chairs in ending inventory. There were 15,200 chairs in beginning inventory. All direct materials costs are added at the beginning of the production cycle and conversion costs are added uniformly throughout the production process. The FIFO method of process costing is used by Comfort. Beginning work in process was 35% complete as to conversion costs, while ending work in process was 70% complete as to conversion costs.

Beginning inventory:

Manufacturing costs added during the accounting period:

What were the equivalent units for conversion costs during February?

A) 80,130

B) 83,900

C) 73,400

D) 78,720

Diff: 2

Objective: 4

AACSB: Application of knowledge

30) Comfort chair company manufacturers a standard recliner. During February, the firm's Assembly Department started production of 73,400 chairs. During the month, the firm completed 78,700 chairs, and transferred them to the Finishing Department. The firm ended the month with 10,300 chairs in ending inventory. There were 15,600 chairs in beginning inventory. All direct materials costs are added at the beginning of the production cycle and conversion costs are added uniformly throughout the production process. The FIFO method of process costing is used by Comfort. Beginning work in process was 35% complete as to conversion costs, while ending work in process was 70% complete as to conversion costs.

Beginning inventory:

Manufacturing costs added during the accounting period:

What is the amount of direct materials cost assigned to ending work-in-process inventory at the end of February?

(Round intermediary calculations to the nearest cent.)

A) $17,615

B) $23,587

C) $25,900

D) $26,520

Diff: 3

Objective: 4

AACSB: Application of knowledge

31) Comfort chair company manufacturers a standard recliner. During February, the firm's Assembly Department started production of 74,000 chairs. During the month, the firm completed 78,300 chairs, and transferred them to the Finishing Department. The firm ended the month with 11,600 chairs in ending inventory. There were 15,900 chairs in beginning inventory. All direct materials costs are added at the beginning of the production cycle and conversion costs are added uniformly throughout the production process. The FIFO method of process costing is used by Comfort. Beginning work in process was 35% complete as to conversion costs, while ending work in process was 75% complete as to conversion costs.

Beginning inventory:

Manufacturing costs added during the accounting period:

What is the cost of the goods transferred out during February?

(Round intermediary calculations to the nearest cent.)

A) $421,886.72

B) $449,774.35

C) $476,380.24

D) $506,100.00

Diff: 3

Objective: 4

AACSB: Application of knowledge

32) Jane Industries manufactures plastic toys. During October, Jane's Fabrication Department started work on 10,300 models. During the month, the company completed 11,100 models, and transferred them to the Distribution Department. The company ended the month with 2,000 models in ending inventory. There were 2,800 models in beginning inventory. All direct materials costs are added at the beginning of the production cycle and conversion costs are added uniformly throughout the production process. The FIFO method of process costing is being followed. Beginning work in process was 30% complete as to conversion costs, while ending work in process was 50% complete as to conversion costs.

Beginning inventory:

Manufacturing costs added during the accounting period:

How many of the units that were started and completed during October?

A) 13,900

B) 8,300

C) 9,210

D) 10,300

Diff: 2

Objective: 4

AACSB: Application of knowledge

33) Jane Industries manufactures plastic toys. During October, Jane's Fabrication Department started work on 10,000 models. During the month, the company completed 11,500 models, and transferred them to the Distribution Department. The company ended the month with 1,000 models in ending inventory. There were 2,500 models in beginning inventory. All direct materials costs are added at the beginning of the production cycle and conversion costs are added uniformly throughout the production process. The FIFO method of process costing is being followed. Beginning work in process was 25% complete as to conversion costs, while ending work in process was 50% complete as to conversion costs.

Beginning inventory:

Manufacturing costs added during the accounting period:

What were the equivalent units for conversion costs during October?

A) 9,250

B) 11,750

C) 11,375

D) 8,500

Diff: 2

Objective: 4

AACSB: Application of knowledge

34) Jane Industries manufactures plastic toys. During October, Jane's Fabrication Department started work on 10,500 models. During the month, the company completed 11,500 models, and transferred them to the Distribution Department. The company ended the month with 2,500 models in ending inventory. There were 3,500 models in beginning inventory. All direct materials costs are added at the beginning of the production cycle and conversion costs are added uniformly throughout the production process. The FIFO method of process costing is being followed. Beginning work in process was 25% complete as to conversion costs, while ending work in process was 55% complete as to conversion costs.

Beginning inventory:

Manufacturing costs added during the accounting period:

What is the amount of direct materials cost assigned to ending work-in-process inventory at the end of October?

(Round intermediary calculations to the nearest cent.)

A) $20,551

B) $23,633

C) $11,817

D) $16,875

Diff: 3

Objective: 4

AACSB: Application of knowledge

35) Jane Industries manufactures plastic toys. During October, Jane's Fabrication Department started work on 10,800 models. During the month, the company completed 11,700 models, and transferred them to the Distribution Department. The company ended the month with 2,600 models in ending inventory. There were 3,500 models in beginning inventory. All direct materials costs are added at the beginning of the production cycle and conversion costs are added uniformly throughout the production process. The FIFO method of process costing is being followed. Beginning work in process was 25% complete as to conversion costs, while ending work in process was 55% complete as to conversion costs.

Beginning inventory:

Manufacturing costs added during the accounting period:

What is the cost assigned to ending inventory during October? (Round intermediary calculations to the nearest cent.)

A) $45,061

B) $53,444

C) $57,898

D) $41,138

Diff: 3

Objective: 4

AACSB: Application of knowledge

36) Which of the following is true of weighted-average process-costing?

A) It does not represent the average cost of units when inputs prices fluctuates markedly from month to month.

B) It facilitates period-to-period comparisons and hence is very useful in analyzing the performances of managers for different periods.

C) It arrives at the same unit costs as arrived under FIFO method, but the computations are easier under weighted-average process-costing.

D) It calculates the cost per equivalent unit of all work done to date, regardless of the accounting period in which it was done.

Diff: 3

Objective: 4

AACSB: Analytical thinking

37) Which of the following is an assumption under FIFO process-costing method?

A) It assumes some of the higher-cost units are placed in ending work in process.

B) It assumes that all the lower-cost units from the previous period in beginning work in process are the first to be completed and transferred out of the process.

C) It assumes that unit inputs costs are constant and do not fluctuate in the short run.

D) It assumes that the ending work in process consists of only the lower-cost current-period units.

Diff: 3

Objective: 4

AACSB: Analytical thinking

38) A major advantage of using the FIFO process-costing method is that:

A) FIFO makes the unit cost calculations simpler

B) in contrast with the weighted-average method, FIFO is considered GAAP

C) FIFO provides managers with information about changes in the costs per unit from one period to the next

D) in the period of rising prices, it leads to lower operating income and lower tax payments, saving the company cash and increasing the company's value

Diff: 2

Objective: 4

AACSB: Analytical thinking

39) Which of the following is a disadvantage of the weighted-average method compared to the FIFO process-costing method?

A) FIFO is computationally simpler

B) FIFO provides better management information for planning and control purposes

C) when unit cost per input prices fluctuate markedly from month to month, its per unit cost is less representative than FIFO

D) the information it provides about changes in unit prices from one period to the next is less useful than the information provided by FIFO

Diff: 2

Objective: 4

AACSB: Analytical thinking

40) Which of the following statements is true of process costing?

A) In the period of rising prices, weighted-average process-costing method will result in higher operating income as compared to FIFO process-costing method.

B) The operating income and the income tax liability of a company are not affected by the method of process-costing being followed by the company.

C) In the period of rising prices, weighted-average process-costing method will result in lower cost of goods sold as compared to FIFO process-costing method.

D) In a period of falling prices, weighted-average process-costing method will result in a higher income tax liability as compared to FIFO process-costing method.

Diff: 2

Objective: 4

AACSB: Analytical thinking

41) FIFO Aluminum processes a single type of aluminum. During the current period the following information was given:

All materials are added at the beginning of the production process. The beginning inventory was 25% complete as to conversion, while the ending inventory was 40% completed for conversion purposes.

FIFO Aluminum uses the first-in, first-out system of process costing.

What were the costs assigned to the units transferred out this period (Round intermediary calculations to the nearest cent)?

A) $110,658

B) $111,322

C) $254,416

D) $165,143

Diff: 3

Objective: 4

AACSB: Analytical thinking

42) Which of the following entries is correct to record depreciation expense of Assembly Department?

A) Debit: Work in Process—Assembly

Credit: Finished Goods

B) Debit: Work in Process—Assembly

Credit: Accumulated Depreciation

C) Debit: Finished Goods

Credit: Work in Process—Assembly

D) Debit: Accumulated Depreciation

Credit: Work in Process—Assembly

Diff: 2

Objective: 4

AACSB: Analytical thinking

43) Audrey Auto Accessories manufactures plastic moldings for car seats. Its costing system uses two cost categories, direct materials and conversion costs. Each product must pass through Department A and Department B. Direct materials are added at the beginning of production. Conversion costs are allocated evenly throughout production.

What were the equivalent units of direct materials and conversion costs, respectively, at the end of February? Assume Audrey uses the weighted-average process costing method.

A) 1,260; 1,050

B) 1,260; 1,260

C) 1,260; 960

D) 900; 600

Diff: 2

Objective: 4

AACSB: Application of knowledge

44) The weighted-average process costing method does not distinguish between units started in the previous period but completed during the current period and units started and completed during the current period.

Diff: 2

Objective: 4

AACSB: Analytical thinking

45) Activity -based costing plays a more significant role in job costing as compared to process costing as companies using process costing have homogeneous products.

Diff: 2

Objective: 4

AACSB: Analytical thinking

46) In the weighted-average costing method, the costs of direct materials in beginning inventory are NOT included in the cost per unit calculation since direct materials are almost always added at the start of the production process.

Diff: 2

Objective: 4

AACSB: Analytical thinking

47) Partially completed units in ending work in process are 100 percent complete with regard to their direct materials costs if the direct materials are introduced at the beginning of the process.

Diff: 2

Objective: 4

AACSB: Analytical thinking

48) The weighted-average cost is the total of all costs entering the Work-in-Process account (whether they are from beginning work-in-process or from work started during the current period) divided by total equivalent units of work done to date.

Diff: 2

Objective: 4

AACSB: Analytical thinking

49) Weighted-average cost per equivalent unit is obtained by dividing the sum of costs for beginning work in process plus costs for work done in the current period by total equivalent units of work done to date.

Diff: 2

Objective: 4

AACSB: Analytical thinking

50) The cost of units completed can differ materially between the weighted average and the FIFO methods of process costing.

Diff: 2

Objective: 4

AACSB: Analytical thinking

51) Under the FIFO method of process-costing, costs incurred and units produced in the current period are used to calculate the cost per equivalent unit of work in the current period in contrast the weighted-average method which merges the units and costs of the previous period with that of the current period.

Diff: 2

Objective: 4

AACSB: Analytical thinking

52) A distinctive feature of the FIFO process costing method is that the work done on beginning inventory before the current period is kept separate from work done in the current period.

Diff: 2

Objective: 4

AACSB: Analytical thinking

53) In a period of rising prices, the weighted-average method will result in higher tax payments.

Diff: 2

Objective: 4

AACSB: Analytical thinking

54) In calculating cost per equivalent unit, the FIFO method of process costing merges the work and the costs of the beginning inventory with the work and the costs done during the current period.

Diff: 2

Objective: 4

AACSB: Analytical thinking

55) The first-in, first-out process-costing method assumes that the earliest equivalent units in work in process are completed first.

Diff: 2

Objective: 4

AACSB: Analytical thinking

56) In a period of falling prices, the lower cost of goods sold under the FIFO method leads to higher operating income and higher tax payments.

Diff: 3

Objective: 4

AACSB: Analytical thinking

57) The weighted average method of process costing assigns the cost of equivalent units worked on during the current period first to complete beginning inventory, next to start and complete new units, and finally to units in ending work-in-process inventory.

Diff: 2

Objective: 4

AACSB: Analytical thinking

58) The weighted-average method merges unit costs from different accounting periods, obscuring period-to-period comparisons.

Diff: 2

Objective: 4

AACSB: Analytical thinking

59) With the weighted-average method, the costs in work in process (beginning work in process) when the period starts are not considered when calculating the weighted-average cost per equivalent unit.

Diff: 2

Objective: 4

AACSB: Analytical thinking

60) Pet Products Company uses an automated process to manufacture its pet replica products. For June, the company had the following activities:

Direct materials are placed into production at the beginning of the process and conversion costs are incurred evenly throughout the process.

Required:

Prepare a production cost worksheet using the FIFO method.

Diff: 3

Objective: 4

AACSB: Analytical thinking

61) Four Seasons Company makes snow blowers. Materials are added at the beginning of the process and conversion costs are uniformly incurred. At the beginning of September, work in process is 40% complete and at the end of the month it is 60% complete. Other data for the month include:

Required:

a. Prepare a production cost worksheet with supporting schedules using the weighted-average method of process costing.

b. Prepare journal entries to record transferring of materials to processing and from processing to finished goods.

a. PRODUCTION COST WORKSHEET

b.

Diff: 3

Objective: 4

AACSB: Analytical thinking

62) Shining Star Company uses an automated process to clean and polish its souvenir items. For March, the company had the following activities:

Direct materials are placed into production at the beginning of the process and conversion costs are incurred evenly throughout the process.

Required:

Prepare a production cost worksheet using the FIFO method.

Diff: 3

Objective: 4

AACSB: Analytical thinking

63) What is the difference between a weighted-average method of process costing and a first-in, first-out method of process costing?

The first-in, first-out (FIFO) method computes unit costs based on costs incurred during the current period and equivalent units of work done in the current period. It assigns the costs of beginning work-in-process inventory to the first units completed, and it assigns costs of the equivalent units worked on during the current period first to complete beginning inventory, next to start and complete new units, and finally to units in ending work-in-process inventory.

Diff: 3

Objective: 4

AACSB: Analytical thinking

64) High Universal Industries operates a division in Brazil, a country with very high inflation rates. Traditionally, the company has used the same costing techniques in all countries to facilitate reporting to corporate headquarters. However, the financial accounting reports from Brazil never seem to match the actual unit results of the division. Management has studied the problem and it appears that beginning inventories may be the cause of the unmatched information. The reason for this is that the inventories have a different financial base because of the severe inflation.

Required:

How can process costing assist in addressing the problem facing Universal Industries?

Diff: 2

Objective: 4

AACSB: Analytical thinking

Objective 18.5

1) Which of the following best describes transferred-in costs?

A) they are the cost of transferring products from a vendor

B) they are value-added costs that are only considered in the first-in, first out process costing system

C) costs incurred in a previous department or process that are carried forward as the product's cost as that product moves to another department or process in the production cycle

D) they are the shipping costs related to finished goods that are transported to a customer's location

Diff: 1

Objective: 5

AACSB: Analytical thinking

2) Which of the following best describes transferred-in costs in process costing?

A) These costs are incurred in previous departments that are carried forward to subsequent departments.

B) These costs are transferred in to the company by an external vendor.

C) These costs are incurred in transferring raw materials and labor from the place of availability to the factory.

D) These costs cannot be controlled by an organization as they are transferred to the organization from the market participants.

Diff: 2

Objective: 5

AACSB: Analytical thinking

3) Transferred-in costs are treated as if they are:

A) conversion costs added at the beginning of the process

B) costs of beginning inventory added at the beginning of the process

C) direct labor costs added at the beginning of the process

D) a separate direct material added at the beginning of the process

Diff: 2

Objective: 5

AACSB: Analytical thinking

4) Direct Disk Drive Company operates a computer disk manufacturing plant. Direct materials are added at the end of the process. The following data were for June 2020:

How many units must be accounted for during the period?

A) 216,500 units

B) 191,100 units

C) 171,100 units

D) 140,300 units

Diff: 1

Objective: 5

AACSB: Analytical thinking

5) Direct Disk Drive Company operates a computer disk manufacturing plant. Direct materials are added at the end of the process. The following data were for August 2020:

Calculate equivalent units for conversion costs using the FIFO method.

A) 30,160 units

B) 352,800 units

C) 299,400 units

D) 399,560 units

Diff: 2

Objective: 5

AACSB: Analytical thinking

6) The journal entry for transfer from Department B to finished goods is:

Debit: Work in Process—Department B

Credit: Finished Goods Control

Diff: 3

Objective: 5

AACSB: Analytical thinking

7) In a series of interdepartmental transfers, each department is regarded as separate and distinct for accounting purposes.

Diff: 2

Objective: 5

AACSB: Analytical thinking

8) When calculating the costs to be transferred using the FIFO method, we should not include costs assigned in the previous period to units that were in process at the beginning of the current period but are now included in the units transferred.

Diff: 2

Objective: 5

AACSB: Analytical thinking

9) Transferred-in costs are treated as if they are 100 percent complete at the beginning of the process in the new department.

Diff: 2

Objective: 5

AACSB: Analytical thinking

10) Transferred-in costs are costs incurred in previous departments that are carried forward as the product's cost when it moves to a subsequent process in the production cycle.

Diff: 2

Objective: 5

AACSB: Analytical thinking

11) Transferred-in costs are treated as direct materials in which all the materials are added at the beginning of the process for that department.

Diff: 2

Objective: 5

AACSB: Analytical thinking

12) Otylia Manufacturing Company assembles its product in several departments. It has two departments that process all units. During February, the beginning work in process in the cutting department was half completed as to conversion, and complete as to direct materials. The beginning inventory included $12,000 for materials and $3,000 for conversion costs. Ending work-in-process inventory in the cutting department was 40% complete. Direct materials are added at the beginning of the process.

Beginning work in process in the finishing department was 75% complete as to conversion. Beginning inventories included $16,000 for transferred-in costs and $20,000 for conversion costs. Ending inventory was 25% complete. Additional information about the two departments follows:

Required:

Prepare a production cost worksheet using weighted-average for the cutting department.

Cutting Department

Weighted-Average Method

Diff: 3

Objective: 5

AACSB: Application of knowledge

13) The Laramie Factory produces expensive boots. It has two departments that process all the items. During January, the beginning work in process in the tanning department was 40% complete as to conversion and 100% complete as to direct materials. The beginning inventory included $6,000 for materials and $18,000 for conversion costs. Ending work-in-process inventory in the tanning department was 40% complete. Direct materials are added at the beginning of the process.

Beginning work in process in the finishing department was 60% complete as to conversion. Beginning inventories included $7,000 for transferred-in costs and $10,000 for conversion costs. Ending inventory was 30% complete.

Additional information about the two departments follows:

Tanning Finishing

Beginning work-in-process units 5,000 4,000

Units started this period 14,000 ?

Units transferred this period 16,000 18,000

Ending work-in-process units ? 2,000

Material costs added $18,000 ?

Conversion costs 32,000 $19,000

Transferred-out cost 50,000 ?

Required:

Prepare a production cost worksheet using weighted-average costing for the finishing department.

Finishing Department

Weighted-Average Method

Diff: 3

Objective: 5

AACSB: Application of knowledge

14) Lexington Company produces baseball bats and cricket paddles. It has two departments that process all products. During July, the beginning work in process in the cutting department was half completed as to conversion, and complete as to direct materials. The beginning inventory included $40,000 for materials and $60,000 for conversion costs. Ending work-in-process inventory in the cutting department was 40% complete. Direct materials are added at the beginning of the process.

Beginning work in process in the finishing department was 80% complete as to conversion. Direct materials for finishing the units are added near the end of the process. Beginning inventories included $24,000 for transferred-in costs and $28,000 for conversion costs. Ending inventory was 30% complete. Additional information about the two departments follows:

Required:

Prepare a production cost worksheet, using FIFO for the finishing department.

Finishing Department

FIFO Method

Diff: 3

Objective: 5

AACSB: Analytical thinking

15) When there are multiple support departments within an organization, it is common to use journal entries to transfer-in costs from one department to another. What are some of the points to remember about these costs?

1. Be sure to include transferred-in costs from previous departments in your calculations.

2. If you are using a FIFO basis, do not overlook costs assigned in the previous period to units that were in process at the beginning of the current period but are now included in the units transferred.

3. Unit costs may fluctuate between periods, consequently, transferred units may contain batches accumulated at different unit costs.

4. Different departments may have different measurement denominations. If this is the case, as units are received in one department coming from another department, their measurements must be converted to the denomination of the receiving department.

Diff: 2

Objective: 5

AACSB: Analytical thinking

Objective 18.6

1) Which of the following companies is most likely to use an operation-costing system?

A) a company involved in manufacture of ball bearing on a large scale

B) a company that has been awarded a contract to construct a bridge for the government

C) a company that makes suits for which the basic design is same, but depending on specifications, each batch of suits varies somewhat from other batches

D) a furniture making company which makes furniture pieces as per the specifications of the customers

Diff: 3

Objective: 6

AACSB: Application of knowledge

2) A golf shoe manufacturer makes and sells thousands of golf shoes each year through two channels: wholesale to sporting good stores and direct to consumers through it's custom portal. Customers can specify modifications to 6 basic golf shoe models including spiked or spikeless, traditional or casual, even laced or other closures. From there, customers can specify many details to their preferred model such as size and width (different for each foot), favorite colors for the base, saddle, accents and laces. A customer can choose to embroidered a name or initials or include the logo of their favorite MLB, NFL, NHL or NCAA team. Which of the following costing systems would make the most sense for the custom golf shoe operation and the main product operation (not customized/wholesale)?

A) operation-costing and job costing

B) job costing for both operations

C) operation-costing and process costing

D) process costing for both operations

Diff: 3

Objective: 6

AACSB: Analytical thinking

3) Managers find operation costing useful in cost management because it:

A) often results in profit maximization

B) results in cost minimization

C) focuses on control of physical processes of a given production system

D) uses job costing to account for the conversion costs and process costing for the material and customizable components

Diff: 2

Objective: 6

AACSB: Analytical thinking

4) Silver Bowls for You Inc. utilizes operation costing as it produces large batches of very similar products but offers customer customization for some of its offerings. Below is summary cost data for the month of June:

Conversion cost data follows for the 51,000 units produced. Please note that the custom design costs are only attributed to Product A.

What is the cost per unit for product A and B respectively if operation costing is used? (Round any intermediary calculations to the nearest cent. Round final answer to the nearest dollar.)

A) $52, $227

B) $51, $227

C) $51, $231

D) $48, $227

Diff: 2

Objective: 6

AACSB: Analytical thinking

5) An operation is a standardized method or technique performed repetitively, often on different materials, resulting in different finished goods.

Diff: 2

Objective: 6

AACSB: Analytical thinking

6) In hybrid-costing systems, managers use process costing to account for the conversion costs and job costing for the material and customizable components.

Diff: 2

Objective: 6

AACSB: Analytical thinking

7) A hybrid-costing system is a variant of process-costing that allows it to incorporate benefits of standard costing and activity-based costing.

Diff: 2

Objective: 6

AACSB: Analytical thinking

8) An operation-costing system is a hybrid-costing system applied to batches of similar, but NOT identical, products.

Diff: 2

Objective: 6

AACSB: Analytical thinking

9) Ford Motor Company is said to use a hybrid costing system. What is a hybrid costing system, and what would be the advantage to Ford of such a system?

Another important part of profitability is making a product different than other vehicles so buyers will be attracted to purchase the vehicle. Vehicles that are different can command a higher price and increase profitability. Costs are accumulated using process costing up to the point where the product is differentiated. Job costing is used from that point forward.

Diff: 2

Objective: 6

AACSB: Analytical thinking

10) Compare and contrast process costing with operation costing.

Diff: 2

Objective: 6

AACSB: Analytical thinking

Objective 18.A

1) Emerging Dock Company manufactures boat docks on an assembly line. Its standard costing system uses two cost categories, direct materials and conversion costs. Each product must pass through the Assembly Department and the Finishing Department. Direct materials are added at the beginning of the production process. Conversion costs are allocated evenly throughout production.

What is the balance in ending work-in-process inventory?

A) $217,861

B) $349,800

C) $470,445

D) $177,055

Diff: 3

Objective: A

AACSB: Application of knowledge

2) Which of the following entries is used to record the standard costs of direct materials assigned to units worked on and total direct materials variances?

A) Work in Process (at standard costs)

Direct Materials Variances

Direct Materials Control

B) Work in Process (at actual costs)

Direct Materials Variances

Direct Materials Control

C) Direct Materials Variances

Direct Materials Control

Work in Process (at standard costs)

D) Direct Materials Variances

Direct Materials Control

Work in Process (at actual costs)

Diff: 3

Objective: A

AACSB: Analytical thinking

3) Cook's Fancy Products uses a standard costing system and account for variances in the general ledger. Consider the following information for the month of June:

Which of the following entries would be made regarding the actual cost of direct materials?

A) Debit $24,000 Direct material control

B) Credit $24,000 Work-in-Process

C) Debit $24,000 Work-in-Process

D) Credit $24,000 Direct Material Control

Diff: 2

Objective: A

AACSB: Application of knowledge

4) Cook's Fancy Products uses a standard costing system and account for variances in the general ledger. Consider the following information for the month of June:

Which of the following entries would be made regarding the standard costs for Direct Materials?

A) Debit $20,000 Work-in-Process, Credit $700 Direct Material Variances, Credit $19,300 Direct Materials Control

B) Debit $19,300 Work-in-Process, Credit $700 Direct Material Variances, Credit $20,000 Direct Materials Control

C) Debit $19,300 Work-in-Process, Debit $700 Direct Material Variances, Credit $20,000 Direct Materials Control

D) Debit $20,000 Work-in-Process, Debit $8900 Direct Material Variances, Credit $28,900 Direct Materials Control

Diff: 2

Objective: A

AACSB: Application of knowledge

5) Cook's Fancy Products uses a standard costing system and account for variances in the general ledger. Consider the following information for the month of June:

Which of the following entries would be made regarding the actual conversion costs?

A) Debit $18,000 Conversion costs control

B) Credit $18,000 Work-in-Process

C) Debit $18,000 Work-in-Process

D) Credit $18,000 Direct Material Control

Diff: 2

Objective: A

AACSB: Application of knowledge

6) Cook's Fancy Products uses a standard costing system and account for variances in the general ledger. Consider the following information for the month of June:

Which of the following entries would be made regarding the standard costs for Conversion Costs?

A) Debit $19,000 Work-in-Process, Debit $400 Conversion Costs Variances, Credit $19,400 Direct Materials Control

B) Debit $28,100 Work-in-Process, Debit $900 Direct Material Variances, Credit $29,000 Direct Materials Control

C) Debit $19,400 Work-in-Process, Credit $400 Conversion Costs Variances, Credit $19,000 Conversion Cost Control

D) Debit $19,400 Work-in-Process, Debit $9,600 Direct Material Variances, Credit $29,000 Direct Materials Control

Diff: 2

Objective: A

AACSB: Application of knowledge

7) Emerging Dock Company manufactures boat docks on an assembly line. Its standard costing system uses two cost categories, direct materials and conversion costs. Each product must pass through the Assembly Department and the Finishing Department. Direct materials are added at the beginning of the production process. Conversion costs are allocated evenly throughout production.

Which of the following journal entries records the Assembly Department's conversion costs at actual costs for the month, assuming conversion costs are 20% higher than expected?

A) Assembly Department Conversion Cost Control 4,464,480

Various accounts 4,464,480

B) Materials Inventory 4,464,480

Assembly Department Conversion Cost Control 4,464,480

C) Assembly Department Conversion Cost Control 3,720,400

Materials Inventory 3,720,400

D) Materials Inventory 4,464,480

Work in Process — Assembly 4,464,480

Diff: 3

Objective: A

AACSB: Application of knowledge

8) Emerging Dock Company manufactures boat docks on an assembly line. Its standard costing system uses two cost categories, direct materials and conversion costs. Each product must pass through the Assembly Department and the Finishing Department. Direct materials are added at the beginning of the production process. Conversion costs are allocated evenly throughout production.

Which of the following journal entries records the total conversion costs variances of the Assembly Department, assuming that conversion costs are 10% higher than expected?

A)

Work in Process — Assembly 3,464,835

Conversion-Cost Variances 314,985

Assembly Department Conversion Cost Control 3,149,850

B)

Assembly Department Conversion Costs Allocated 3,464,835

Direct Materials Variances 314,985

Finishing Department Conversion Cost Control 3,149,850

C)

Assembly Department Conversion Costs Allocated 3,149,850

Conversion-Cost Variances 314,985

Assembly Department Conversion Cost Control 3,464,835

D)

Work in Process — Assembly 314,985

Assembly Department Conversion Cost Control 314,985

Diff: 3

Objective: A

AACSB: Application of knowledge

9) Emerging Dock Company manufactures boat docks on an assembly line. Its standard costing system uses two cost categories, direct materials and conversion costs. Each product must pass through the Assembly Department and the Finishing Department. Direct materials are added at the beginning of the production process. Conversion costs are allocated evenly throughout production.

Which of the following journal entries records the standard costs of direct materials assigned to units worked on and total direct materials variances assuming that the Assembly Department used 15% less materials than expected?

A)

Work in Process — Assembly 459,000

Assembly Department Materials Cost Control 459,000

B)

Work in Process — Assembly 459,000

Direct Materials Variance 68,850

Assembly Department Materials Cost Control 390,150

C)

Work in Process — Assembly 68,850

Assembly Department Materials Cost Control 68,850

D)

Work in Process — Assembly 390,150

Direct Materials Variances 68,850

Assembly Department Materials Cost Control 459,000

Diff: 2

Objective: A

AACSB: Application of knowledge

10) Morgan Clay Products manufactures clay molded pottery on an assembly line. Its standard costing system uses two cost categories, direct materials and conversion costs. Each product must pass through the Molding Department and the Finishing Department. Direct materials are added at the beginning of the production process. Conversion costs are allocated evenly throughout production.

What is the balance in ending work-in-process inventory?

A) $35,100

B) $22,250

C) $19,199

D) $20,834

Diff: 3

Objective: A

AACSB: Application of knowledge

11) Morgan Clay Products manufactures clay molded pottery on an assembly line. Its standard costing system uses two cost categories, direct materials and conversion costs. Each product must pass through the Molding Department and the Finishing Department. Direct materials are added at the beginning of the production process. Conversion costs are allocated evenly throughout production.

Which of the following journal entries records the Molding Department's conversion costs for the month, assuming conversion costs are 15% higher than expected?

A) Molding Department Conversion Cost Control 6,591.83

Various accounts 6,591.83

B) Materials Inventory 43,945.50

Molding Department Conversion Cost Control 43,945.50

C) Molding Department Conversion Cost Control 50,537.33

Various accounts 50,537.33

D) Materials Inventory 50,537.33

Work in Process — Molding 50,537.33

Diff: 3

Objective: A

AACSB: Application of knowledge

12) A company that uses standard costing does so for budgeting purposes but cannot utilize standard costs in the general ledger.

Diff: 2

Objective: A

AACSB: Application of knowledge

13) Process-costing systems using standard costs record actual direct materials costs in Direct Materials Control and actual conversion costs in Conversion Costs Control with standard costs recorded in Work-in-Process.

Diff: 2

Objective: A

AACSB: Application of knowledge

14) From an accounting standpoint, favorable cost variances are debit entries, while unfavorable ones are credits.

Diff: 2

Objective: A

AACSB: Analytical thinking

15) Under standard costing the cost per equivalent-unit calculation is more difficult than in either weighted average or FIFO.

Diff: 2

Objective: A

AACSB: Analytical thinking

16) Both, the standard-costing method and FIFO, assumes that the earliest equivalent units in beginning work in process are completed first.

Diff: 2

Objective: A

AACSB: Analytical thinking

17) Standard costing is NOT possible in a firm that uses process costing.

Diff: 2

Objective: A

AACSB: Analytical thinking

18) Process-costing systems using standard costs record standard direct material costs in Direct Materials Control and standard conversion costs in Conversion Costs Control.

Diff: 2

Objective: A

AACSB: Application of knowledge

19) In companies that produce masses of identical or similar units of output and consequently use process-costing systems, it is relatively easy to set standards and use a standard cost as the cost per equivalent unit.

Diff: 2

Objective: A

AACSB: Analytical thinking

20) BIG Manufacturing Products has been using FIFO process costing for tracking the costs of its manufacturing activities. However, in recent months, the system has become somewhat bogged down with details. It seems that, when the company purchased Brown Electronics last year, its product lines increased six-fold. This has caused both the accountants and the suppliers of the information, the line managers, great difficulty in keeping the costs of each product line separate. Likewise, the estimation of the completion of ending work-in-process inventories and the associated costs has become very cumbersome. The chief financial officer of the company is looking for ways to improve the reporting system of product costs.

Required:

What can you recommend to improve the situation?

Diff: 3

Objective: A

AACSB: Analytical thinking