Process Costing Testbank

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Chapter 6—Process Costing

MULTIPLE CHOICE

1. Which cost accumulation procedure is most applicable in continuous mass-production manufacturing environments?

a. standard b. actual c. process d. job order

ANS: C PTS: 1 DIF: Easy OBJ: 6-1

NAT: AACSB: Reflective Thinking

LOC: AICPA Functional Competencies: Measurement, Reporting 2. Process costing is used in companies that

a. engage in road and bridge construction.

b. produce sailboats made to customer specifications. c. produce bricks for sale to the public.

d. construct houses according to customer plans.

LOC: AICPA Functional Competencies: Measurement, Reporting 3. A producer of ____ would not use a process costing system.

a. gasoline b. potato chips c. blank videotapes d. stained glass windows

ANS: D PTS: 1 DIF: Easy OBJ: 6-1

(2)

4. A process costing system is used by a company that a. produces heterogeneous products.

b. produces items by special request of customers. c. produces homogeneous products.

d. accumulates costs by job.

LOC: AICPA Functional Competencies: Measurement, Reporting

5. Which is the best cost accumulation procedure to use for continuous mass production of like units? a. actual

b. standard c. job order d. process

LOC: AICPA Functional Competencies: Measurement, Reporting 6. Equivalent units of production are equal to the

a. units completed by a production department in the period.

b. number of units worked on during the period by a production department.

c. number of whole units that could have been completed if all work of the period had been used to produce whole units.

d. identifiable units existing at the end of the period in a production department. ANS: C PTS: 1 DIF: Moderate OBJ: 6-2 NAT: AACSB: Reflective Thinking

7. In a process costing system using the weighted average method, cost per equivalent unit for a given cost component is found by dividing which of the following by EUP?

a. only current period cost

b. current period cost plus the cost of beginning inventory c. current period cost less the cost of beginning inventory d. current period cost plus the cost of ending inventory

ANS: B PTS: 1 DIF: Easy OBJ: 6-2

8. The weighted average method is thought by some accountants to be inferior to the FIFO method because it

a. is more difficult to apply.

b. only considers the last units worked on. c. ignores work performed in subsequent periods. d. commingles costs of two periods.

ANS: D PTS: 1 DIF: Moderate OBJ: 6-3 NAT: AACSB: Reflective Thinking

(3)

9. The first step in determining the cost per EUP per cost component under the weighted average method is to

a. add the beginning Work in Process Inventory cost to the current period's production cost. b. divide the current period's production cost by the equivalent units.

c. subtract the beginning Work in Process Inventory cost from the current period's production cost.

d. divide the current period's production cost into the EUP.

ANS: A PTS: 1 DIF: Moderate OBJ: 6-3 NAT: AACSB: Reflective Thinking

10. The difference between EUP calculated using FIFO and EUP calculated using weighted average is the equivalent units

a. started and completed during the period.

b. residing in beginning Work in Process Inventory. c. residing in ending Work in Process Inventory. d. uncompleted in Work in Process Inventory.

ANS: B PTS: 1 DIF: Moderate OBJ: 6-3 NAT: AACSB: Reflective Thinking

LOC: AICPA Functional Competencies: Measurement, Reporting 11. EUP calculations for standard process costing are the same as

a. the EUP calculations for weighted average process costing. b. the EUP calculations for FIFO process costing.

c. LIFO inventory costing for merchandise. d. the EUP calculations for LIFO process costing.

12. In a FIFO process costing system, which of the following are assumed to be completed first in the current period?

a. units started this period b. units started last period c. units transferred out d. units still in process

13. To compute equivalent units of production using the FIFO method of process costing, work for the current period must be stated in units

a. completed during the period and units in ending inventory.

b. completed from beginning inventory, units started and completed during the period, and units partially completed in ending inventory.

c. started during the period and units transferred out during the period. d. processed during the period and units completed during the period. ANS: B PTS: 1 DIF: Moderate OBJ: 6-4 NAT: AACSB: Reflective Thinking

(4)

14. The FIFO method of process costing will produce the same cost of goods transferred out amount as the weighted average method when

a. the goods produced are homogeneous.

b. there is no beginning Work in Process Inventory. c. there is no ending Work in Process Inventory.

d. beginning and ending Work in Process Inventories are each 50 percent complete.

15. The primary difference between the FIFO and weighted average methods of process costing is a. in the treatment of beginning Work in Process Inventory.

b. in the treatment of current period production costs. c. in the treatment of spoiled units.

d. none of the above.

ANS: A PTS: 1 DIF: Easy OBJ: 6-4

16. Material is added at the beginning of a process in a process costing system. The beginning Work in Process Inventory for the process was 30 percent complete as to conversion costs. Using the FIFO method of costing, the number of equivalent units of material for the process during this period is equal to the

a. beginning inventory this period for the process. b. units started and completed this period in the process.

c. units started this period in the process plus the beginning Work in Process Inventory. d. units started and completed this period plus the units in ending Work in Process Inventory. ANS: D PTS: 1 DIF: Moderate OBJ: 6-4

17. In a cost of production report using process costing, transferred-in costs are similar to the a. cost of material added at the beginning of production.

b. conversion cost added during the period. c. cost transferred out to the next department. d. cost included in beginning inventory.

18. In a process costing system, the journal entry to record the transfer of goods from Department #2 to Finished Goods Inventory is a

a. debit Work in Process Inventory #2, credit Finished Goods Inventory. b. debit Finished Goods Inventory, credit Work in Process Inventory #1. c. debit Finished Goods Inventory, credit Work in Process Inventory #2. d. debit Cost of Goods Sold, credit Work in Process Inventory #2.

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19. Transferred-in cost represents the cost from a. the last department only.

b. the last production cycle. c. all prior departments. d. the current period only.

20. Which of the following is(are) the same between the weighted average and FIFO methods of calculating EUPs?

Units to EUP Total cost to account for calculations account for a. no yes no b. yes yes yes c. yes no no d. yes no yes

LOC: AICPA Functional Competencies: Measurement, Reporting 21. Process costing techniques should be used in assigning costs to products

a. if a product is manufactured on the basis of each order received.

b. when production is only partially completed during the accounting period. c. if a product is composed of mass-produced homogeneous units.

d. whenever standard-costing techniques should not be used.

22. Averaging the total cost of completed beginning work-in-process inventory and units started and completed over all units transferred out is known as

a. strict FIFO. b. modified FIFO.

c. weighted average costing. d. normal costing.

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23. A process costing system a. cannot use standard costs.

b. restates Work in Process Inventory in terms of completed units. c. accumulates costs by job rather than by department.

d. assigns direct labor and manufacturing overhead costs separately to units of production.

LOC: AICPA Functional Competencies: Measurement, Reporting 24. A process costing system does which of the following?

Calculates EUPs Assigns costs to inventories a. no no

b. no yes c. yes yes d. yes no

LOC: AICPA Functional Competencies: Measurement, Reporting 25. A process costing system

Calculates average cost Determines total units to per whole unit account for a. yes yes b. no no c. yes no d. no yes

LOC: AICPA Functional Competencies: Measurement, Reporting 26. A hybrid costing system combines characteristics of

a. job order and standard costing systems. b. job order and process costing systems. c. process and standard costing systems. d. job order and normal costing systems.

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27. When standard costs are used in process costing,

a. variances can be measured during the production period.

b. total costs rather than current production and current costs are used. c. process costing calculations are made simpler.

d. the weighted average method of calculating EUPs makes computing transferred-out costs easier.

28. Which of the following is subtracted from weighted average EUP to derive FIFO EUP? a. beginning WIP EUP completed in current period

b. beginning WIP EUP produced in prior period c. ending WIP EUP not completed

d. ending WIP EUP completed

LOC: AICPA Functional Competencies: Measurement, Reporting 29. The cost of abnormal continuous losses is

a. considered a product cost.

b. absorbed by all units in ending inventory and transferred out on an equivalent unit basis. c. written off as a loss on an equivalent unit basis.

d. absorbed by all units past the inspection point.

LOC: AICPA Functional Competencies: Measurement, Reporting 30. Abnormal spoilage can be

continuous discrete a. yes no b. no no c. yes yes d. no yes

31. When the cost of lost units must be assigned, and those same units must be included in an equivalent unit schedule, these units are considered

a. normal and discrete. b. normal and continuous. c. abnormal and discrete. d. abnormal and continuous.

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32. A continuous loss

a. occurs unevenly throughout a process. b. never occurs during the production process.

c. always occurs at the same place in a production process. d. occurs evenly throughout the production process.

33. Which of the following would be considered a discrete loss in a production process? a. adding the correct ingredients to make a bottle of ketchup

b. putting the appropriate components together for a stereo c. adding the wrong components when assembling a stereo d. putting the appropriate pieces for a bike in the box

LOC: AICPA Functional Competencies: Measurement, Reporting 34. The method of neglect handles spoilage that is

a. discrete and abnormal. b. discrete and normal. c. continuous and abnormal. d. continuous and normal.

LOC: AICPA Functional Competencies: Measurement, Reporting 35. The cost of normal discrete losses is

a. absorbed by all units past the inspection point on an equivalent unit basis. b. absorbed by all units in ending inventory.

c. considered a period cost.

d. written off as a loss on an equivalent unit basis.

LOC: AICPA Functional Competencies: Measurement, Reporting 36. The cost of abnormal continuous losses is

a. considered a product cost.

b. absorbed by all units in ending inventory and transferred out on an equivalent unit basis. c. written off as a loss on an equivalent unit basis.

d. absorbed by all units past the inspection point.

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37. Normal spoilage units resulting from a continuous process a. are extended to the EUP schedule.

b. result in a higher unit cost for the good units produced. c. result in a loss being incurred.

d. cause estimated overhead to increase.

38. When the cost of lost units must be assigned, and those same units must be included in an equivalent unit schedule, these units are considered

a. normal and discrete. b. normal and continuous. c. abnormal and discrete. d. abnormal and continuous.

39. Which of the following accounts is credited when abnormal spoilage is written off in an actual cost system?

a. Miscellaneous Revenue b. Loss from Spoilage c. Finished Goods d. Work in Process

LOC: AICPA Functional Competencies: Measurement, Reporting 40. The cost of abnormal discrete units must be assigned to

good units lost units a. yes yes b. no no c. yes no d. no yes

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41. Which of the following statements is false? The cost of rework on defective units, if a. abnormal, should be assigned to a loss account.

b. normal and if actual costs are used, should be assigned to material, labor and overhead costs of the good production.

c. normal and if standard costs are used, should be considered when developing the overhead application rate.

d. abnormal, should be prorated among Work In Process, Finished Goods, and Cost of Goods Sold.

42. If normal spoilage is detected at an inspection point within the process (rather than at the end), the cost of that spoilage should be

a. included with the cost of the units sold during the period.

b. included with the cost of the units completed in that department during the period. c. allocated to ending work in process units and units transferred out based on their relative

values.

d. allocated to the good units that have passed the inspection point.

43. Dallas Co. has a production process in which the inspection point is at 65 percent of conversion. The beginning inventory for July was 35 percent complete and ending inventory was 80 percent complete. Normal spoilage costs would be assigned to which of the following groups of units, using FIFO costing?

Beginning Ending Units Started Inventory Inventory & Completed a. no yes yes b. yes yes yes c. no no yes d. yes no no

44. Which of the following is not a question that needs to be answered with regard to quality control? a. What happens to the spoiled units?

b. What is the actual cost of spoilage? c. How can spoilage be controlled? d. Why does spoilage happen?

ANS: A PTS: 1 DIF: Moderate OBJ: 6-8 NAT: AACSB: Reflective Thinking

(11)

45. Normal spoilage units resulting from a continuous process a. are extended to the EUP schedule.

b. result in a higher unit cost for the good units produced. c. result in a loss being incurred.

d. cause estimated overhead to increase.

46. The addition of material in a successor department that causes an increase in volume is called a. accretion.

b. reworked units. c. complex procedure. d. undetected spoilage.

47. Wood Company transferred 5,500 units to Finished Goods Inventory during October. On October 1, the company had 300 units on hand (40 percent complete as to both material and conversion costs). On October 31, the company had 800 units (10 percent complete as to material and 20 percent complete as to conversion costs). The number of units started and completed during October was:

a. 5,200. b. 5,380. c. 5,500. d. 6,300. ANS: A

Units Transferred Out 5,500

Less: Units in Beginning Inventory (300)

Units Started and Completed 5,200

PTS: 1 DIF: Easy OBJ: 6-2 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting

48. Cole Company transferred 6,000 units to Finished Goods Inventory during August. On August 1, the company had 400 units on hand (35 percent complete as to both material and conversion costs). On August 31, the company had 750 units (20 percent complete as to material and 30 percent complete as to conversion costs). The number of units started and completed during August was:

a. 5,600 b. 5,860 c. 6,000 d. 6,750 ANS: A

Units Transferred Out 6,000

Less: Units in Beginning Inventory (400)

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49. Boggs Company started 9,000 units in March. The company transferred out 7,000 finished units and ended the period with 3,500 units that were 40 percent complete as to both material and conversion costs. Beginning Work in Process Inventory units were

a. 500. b. 600. c. 1,500. d. 2,000. ANS: C

Beginning Work in Process 1,500

Add: Units Started 9,000

Deduct: Units Transferred Out (7,000)

Ending Work in Process 3,500

50. Williams Company started 8,600 units in April. The company transferred out 6,400 finished units and ended the period with 3,200 units that were 40 percent complete as to both material and conversion costs. Beginning Work in Process Inventory units were

a. 400. b. 1,000. c. 1,280. d. 2,200. ANS: B

Beginning Work in Process 1,000

Deduct: Units Transferred Out (6,400)

51. Lincoln Company had beginning Work in Process Inventory of 5,000 units that were 40 percent complete as to conversion costs. Lincoln Company started and completed 42,000 units this period and had ending Work in Process Inventory of 12,000 units. How many units were started this period? a. 42,000

b. 47,000 c. 54,000 d. 59,000 ANS: C

Beginning Work in Process 5,000

Add: Units Started 54,000

Deduct: Units Transferred Out ( 47,000)

PTS: 1 DIF: Moderate OBJ: 6-2 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting

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52. Douglas Company had beginning Work in Process Inventory of 6,000 units that were 45 percent complete as to conversion costs. Douglas Company started and completed 46,000 units this period and had ending Work in Process Inventory of 11,000 units. How many units were started this period? a. 46,000

b. 52,000 c. 57,000 d. 63,000 ANS: C

Add: Units Started 57,000

53. Streete Company uses a weighted average process costing system. Material is added at the start of production. Streete Company started 13,000 units into production and had 4,500 units in process at the start of the period that were 60 percent complete as to conversion costs. If Streete Company transferred out 11,750 units, how many units were in ending Work in Process Inventory?

a. 1,250 b. 3,000 c. 3,500 d. 5,750 ANS: D

Ending Work in Process 5,750

54. Roache Company uses a weighted average process costing system. Material is added at the start of production. Roache Company started 14,000 units into production and had 5,000 units in process at the start of the period that were 75 percent complete as to conversion costs. If Roache Company

transferred out 12,250 units, how many units were in ending Work in Process Inventory? a. 1,750

b. 3,000 c. 5,500 d. 6,750 ANS: D

Ending Work in Process 6,750

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55. Jones Company uses a weighted average process costing system and started 30,000 units this month. Jones had 12,000 units that were 20 percent complete as to conversion costs in beginning Work in Process Inventory and 3,000 units that were 40 percent complete as to conversion costs in ending Work in Process Inventory. What are equivalent units for conversion costs?

a. 37,800 b. 40,200 c. 40,800 d. 42,000 ANS: B

Beginning Work in Process 12,000 20% 2,400

+ Completion of Units in Process 12,000 80% 9,600 + Units Started and Completed 27,000 100% 27,000

+ Ending Work in Process 3,000 40% 1,200

Equivalent Units of Production 40,200

56. Summers Company uses a weighted average process costing system and started 36,000 units this month. Jones had 15,000 units that were 25 percent complete as to conversion costs in beginning Work in Process Inventory and 6,000 units that were 35 percent complete as to conversion costs in ending Work in Process Inventory. What are equivalent units for conversion costs?

a. 43,350 b. 47,100 c. 48,900 d. 51,000 ANS: B

Beginning Work in Process 15,000 25% 3,750 + Completion of Units in Process 15,000 75% 11,250 + Units Started and Completed 30,000 100% 30,000

57. Weston Company makes small metal containers. The company began April with 250 containers in process that were 30 percent complete as to material and 40 percent complete as to conversion costs. During the month, 5,000 containers were started. At month end, 1,700 containers were still in process (45 percent complete as to material and 80 percent complete as to conversion costs). Using the weighted average method, what are the equivalent units for conversion costs?

a. 3,450 b. 4,560 c. 4,610 d. 4,910

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ANS: D

Beginning Work in Process 250 40% 100

+ Completion of Units in Process 250 60% 150 + Units Started and Completed 3,300 100% 3,300 + Ending Work in Process 1,700 80% 1,360

58. Meade Company makes small metal containers. The company began October with 300 containers in process that were 35 percent complete as to material and 45 percent complete as to conversion costs. During the month, 6,000 containers were started. At month end, 1,900 containers were still in process (40 percent complete as to material and 75 percent complete as to conversion costs). Using the weighted average method, what are the equivalent units for conversion costs?

a. 4,265 b. 5,590 c. 5,825 d. 6,300 ANS: C

+ Completion of Units in Process 300 55% 165 + Units Started and Completed 4,100 100% 4,100

59. Ormandy Company uses a FIFO process costing system. The company had 5,000 units that were 60 percent complete as to conversion costs at the beginning of the month. The company started 22,000 units this period and had 7,000 units in ending Work in Process Inventory that were 35 percent complete as to conversion costs. What are equivalent units for material, if material is added at the beginning of the process?

a. 18,000 b. 22,000 c. 25,000 d. 27,000 ANS: B

The material is added at the beginning of the process; therefore there are 22,000 equivalent units of material.

60. Bernstein Company uses a FIFO process costing system. The company had 6,000 units that were 75 percent complete as to conversion costs at the beginning of the month. The company started 25,000 units this period and had 8,000 units in ending Work in Process Inventory that were 40 percent complete as to conversion costs. What are equivalent units for material, if material is added at the beginning of the process?

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a. 18,500 b. 25,000 c. 26,500 d. 31,000 ANS: B

The material is added at the beginning of the process; therefore there are 25,000 equivalent units of material.

61. Montgomery Company makes fabric-covered hatboxes. The company began July with 500 boxes in process that were 100 percent complete as to cardboard, 80 percent complete as to cloth, and 60 percent complete as to conversion costs. During the month, 3,300 boxes were started. On April 30, 350 boxes were in process (100 percent complete as to cardboard, 70 percent complete as to cloth, and 55 percent complete as to conversion costs). Using the FIFO method, what are equivalent units for cloth? a. 3,295

b. 3,395 c. 3,450 d. 3,595 ANS: A

Beginning Work in Process (Ignored for FIFO) 500 0% -

+ Completion of Units in Process 500 20% 100

+ Units Started and Completed 2,950 100% 2,950

+ Ending Work in Process 350 70% 245

62. Hahn Company makes fabric-covered storage totes. The company began July with 600 totes in process that were 100 percent complete as to cardboard, 75 percent complete as to cloth, and 65 percent complete as to conversion costs. During the month, 3,600 totes were started. On April 30, 450 totes were in process (100 percent complete as to cardboard, 60 percent complete as to cloth, and 50 percent complete as to conversion costs). Using the FIFO method, what are equivalent units for cloth?

a. 3,570 b. 3,750 c. 3,870 d. 4,020 ANS: A

Beginning Work in Process (Ignored for FIFO) 600 0% -

+ Completion of Units in Process 600 25% 150

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Brewer Corporation

Brewer Corporation. has the following information for August: Beginning Work in Process Inventory

(70% complete as to conversion) 6,000 units

Started 24,000 units

Ending Work in Process Inventory

Beginning WIP Inventory Costs:

Material $23,400

Conversion 50,607

Current Period Costs:

Material $31,500

Conversion 76,956

All material is added at the start of the process and all finished products are transferred out. 63. Refer to Brewer Corporation. How many units were transferred out in August?

a. 15,500 b. 18,000 c. 21,500 d. 24,000 ANS: C

Deduct: Units Transferred Out (21,500)

64. Refer to Brewer Corporation. Assume that weighted average process costing is used. What is the cost per equivalent unit for material?

a. $0.55 b. $1.05 c. $1.31 d. $1.83 ANS: D Material Costs:

Beginning $23,400

Current Period 31,500

54,900 ÷ 30,000 units = $ 1.83

(18)

65. Refer to Brewer Corporation. Assume that FIFO process costing is used. What is the cost per equivalent unit for conversion?

a. $3.44 b. $4.24 c. $5.71 d. $7.03 ANS: B Conversion Costs:

Beginning (Ignored for FIFO) $ -

$ 76,956

Equivalent Units

Beginning Inventory (6,000 * 30%) 1,800

Started and Completed (15,500) 15,500 Ending Inventory (8,500 * 10%) 850

18,150 eq units

Cost per equivalent unit $ 4.24

Collins Corporation

Collins Corporation. has the following information for May: Beginning Work in Process Inventory

Started 27,000 units

Beginning WIP Inventory Costs:

Material $25,500

Conversion 52,725

Material $34,300

Conversion 80,845

All material is added at the start of the process and all finished products are transferred out. 66. Refer to Collins Corporation. How many units were transferred out in May?

a. 17,600 b. 19,500 c. 25,100 d. 27,000

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ANS: C

Deduct: Units Transferred Out (25,100)

67. Refer to Collins Corporation. Assume that weighted average process costing is used. What is the cost per equivalent unit for material?

a. $0.99 b. $1.18 c. $1.64 d. $1.73 ANS: D Material Costs:

Beginning $25,500

Current Period _34,300

$59,800 ÷ 34,500 units = $ 1.73

68. Refer to Collins Corporation. Assume that FIFO process costing is used. What is the cost per equivalent unit for conversion?

a. $3.05 b. $3.87 c. $4.25 d. $6.40 ANS: B Conversion Costs:

Beginning (Ignored for FIFO) $ -

$ 80,845

Equivalent Units

Beginning Inventory (7,500 * 25%) 1,875

Started and Completed (17,600) 17,600 Ending Inventory (9,400 * 15%) 1,410

20,885 equivalent units

Cost per equivalent unit ($80,845/20885) $ 3.87

(20)

Fantastic Decorations Corporation

The Fantastic Decorations Corporation makes wreaths in two departments: Forming and Decorating. Forming began the month with 500 wreaths in process that were 100 percent complete as to material and 40 percent complete as to conversion. During the month, 6,500 wreaths were started. At month end, Forming had 2,100 wreaths that were still in process that were 100 percent complete as to material and 50 percent complete as to conversion. Assume Forming uses the weighted average method of process costing. Costs in the Forming Department are as follows:

Beginning Work in Process Costs:

Material $1,000

Conversion 1,500

Current Costs:

Material $3,200

Conversion 5,045

The Decorating Department had 600 wreaths in process at the beginning of the month that were 80 percent complete as to material and 90 percent complete as to conversion. The department had 300 units in ending Work in Process that were 50 percent complete as to material and 75 percent complete as to conversion. Decorating uses the FIFO method of process costing, and costs associated with Decorating are:

Beginning WIP Inventory:

Transferred In $1,170 Material 4,320 Conversion 6,210 Current Period: Transferred In ? Material $67,745 Conversion 95,820

69. Refer to Fantastic Decorations Corporation. How many units were transferred to Decorating during the month? a. 600 b. 4,900 c. 5,950 d. 7,000 ANS: B

Wreaths completed from BWIP 500

Wreaths started and completed 4,400

4,900

70. Refer to Fantastic Decorations Corporation. What was the cost transferred out of Forming during the month?

a. $5,341 b. $6,419 c. $8,245 d. $8,330

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ANS: D

Units Transferred Out Cost per Eq. Unit Total

4,900 1.70 $8,330

71. Refer to Fantastic Decorations Corporation. Assume 8,000 units were transferred to Decorating. Compute the number of equivalent units as to costs in Decorating for the transferred-in cost component. a. 7,400 b. 7,700 c. 8,000 d. 8,600 ANS: C

The transferred-in cost component is the 8,000 units that were transferred in.

72. Refer to Fantastic Decorations Corporation. Assume 8,000 units were transferred to Decorating. Compute the number of equivalent units in Decorating for material.

a. 7,970 b. 8,000 c. 8,330 d. 8,450 ANS: A

Materials: Decorating: FIFO Units % Complete Eqiv. Units

73. Refer to Fantastic Decorations Corporation. Assume 8,000 units were transferred to Decorating. Compute the number of equivalent units in Decorating for conversion.

a. 7,925 b. 7,985 c. 8,360 d. 8,465

(22)

ANS: B

Conversion: Decorating: FIFO Units % Complete Equiv. Units

74. Refer to Fantastic Decorations Corporation. Assume that 8,000 units were transferred to Decorating at a total cost of $16,000. What is the material cost per equivalent unit in Decorating?

a. $8.50 b. $8.65 c. $8.80 d. $9.04 ANS: A

When FIFO is used, consider only current costs.

Current Costs Equiv Units

Cost/ Equiv Unit

$67,745 7,970 $8.50

75. Refer to Fantastic Decorations Corporation. Assume that 8,000 units were transferred to Decorating at a total cost of $16,000. What is the conversion cost per equivalent unit in Decorating?

a. $11.32 b. $11.46 c. $12.00 d. $12.78 ANS: C

When FIFO is used, consider only current costs.

Current Costs Equiv Units

Cost/ Equiv Unit

$95,820 7,985 $12.00

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76. Refer to Fantastic Decorations Corporation. Assume the material cost per EUP is $8.00 and the conversion cost per EUP is $15 in Decorating. What is the cost of completing the units in beginning inventory? a. $ 960 b. $ 1,380 c. $ 1,860 d. $11,940 ANS: C Costs to

Complete Beg Inv Units

Percent to Complete Cost per Unit Total Materials 600 20% $8 $960 Conversion 600 10% $15 $900

Total Costs to Complete $1,860

Four Seasons Company

Four Seasons Company adds material at the start to its production process and has the following information available for August:

Beginning Work in Process Inventory

Started this period 32,000 units

Transferred out ?

77. Refer to Four Seasons Company. Compute the number of units started and completed in August. a. 29,500

b. 34,500 c. 36,500 d. 39,000 ANS: A

Units started this period 32,000

Less: Ending Work in Process 2,500

Units started and completed this period 29,500

78. Refer to Four Seasons Company. Calculate equivalent units of production for material using FIFO. a. 32,000

b. 36,800 c. 37,125 d. 39,000

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ANS: A

Materials are added at the beginning of the process. 32,000 units were started in the current period; therefore there are 32,000 equivalent units for materials.

79. Refer to Four Seasons Company. Calculate equivalent units of production for conversion using FIFO. a. 30,125

b. 34,325 c. 37,125 d. 39,000 ANS: B

Equivalent Units for Conversion

Beginning Inventory (7,000 * 60%) 4,200 Started and Completed (29,500) 29,500 Ending Inventory (2,500 * 25%) 625

34,325 eq. units

80. Refer to Four Seasons Company. Calculate equivalent units of production for material using weighted average. a. 32,000 b. 34,325 c. 37,125 d. 39,000 ANS: D Equivalent Units--Materials

Beginning Inventory (7,000 units) 7,000 Started this Period (32,000) 32,000

39,000 eq. units

81. Refer to Four Seasons Company. Calculate equivalent units of production for conversion using weighted average. a. 34,325 b. 37,125 c. 38,375 d. 39,925 ANS: B Equivalent Units--Conversion Beginning Inventory (7,000 * 100%) 7,000 Started and Completed (29,500) 29,500 Ending Inventory (2,500 * 25%) 625

(25)

Simpson Company

Simpson Company adds material at the start of production. The following production information is available for September:

Beginning Work in Process Inventory

Started this period 120,000 units

(80% complete as to conversion) 8,200 units Beginning Work in Process Inventory Costs:

Material $24,500

Conversion 68,905

Material $ 75,600

Conversion 130,053

82. Refer to Simpson Company. How many units must be accounted for? a. 118,200

b. 128,200 c. 130,000 d. 138,200 ANS: C

Units Started 120,000

Total Units 130,000

83. Refer to Simpson Company. What is the total cost to account for? a. $ 93,405 b. $205,653 c. $274,558 d. $299,058 ANS: D BWIP: Materials $ 24,500 BWIP: Conversion 68,905

Current Period: Materials 75,600 Current Period: Conversion 130,053

Total Costs $299,058

(26)

84. Refer to Simpson Company. How many units were started and completed in the period? a. 111,800 b. 120,000 c. 121,800 d. 130,000 ANS: A

Units started this period 120,000 Less: Ending Work in Process 8,200

Units started and completed this period 111,800

85. Refer to Simpson Company. What are the equivalent units for material using the weighted average method? a. 120,000 b. 123,860 c. 128,360 d. 130,000 ANS: D Equivalent Units Beginning Inventory (10,000 * 100%) 10,000 Started and Completed (111,800) 111,800 Ending Inventory (8,200 * 25%) 8,200

130,000 eq. units

86. Refer to Simpson Company. What are the equivalent units for material using the FIFO method? a. 111,800 b. 120,000 c. 125,500 d. 130,000 ANS: B Equivalent Units

Beginning Inventory (Ignored for FIFO) 0 Started and Completed (111,800) 111,800 Ending Inventory (8,200 * 25%) 8,200

120,000 eq. units

87. Refer to Simpson Company. What are the equivalent units for conversion using the weighted average method?

a. 120,000 b. 123,440 c. 128,360 d. 130,000

(27)

ANS: C

Beginning Work in Process 10,000 45% 4,500 + Completion of Units in Process 10,000 55% 5,500 + Units Started and Completed 111,800 100% 111,800 + Ending Work in Process 8,200 80% 6,560

88. Refer to Simpson Company. What are the equivalent units for conversion using the FIFO method? a. 118,360

b. 122,860 c. 123,860 d. 128,360 ANS: C

Beginning Work in Process (ignored) 10,000 0% - + Completion of Units in Process 10,000 55% 5,500 + Units Started and Completed 111,800 100% 111,800 + Ending Work in Process 8,200 80% 6,560

89. Refer to Simpson Company. What is the material cost per equivalent unit using the weighted average method? a. $.58 b. $.62 c. $.77 d. $.82 ANS: C Material Costs: Beginning $ 24,500 Current Period 75,600

100,100 ÷ 130,000 units= $ 0.77 per unit

90. Refer to Simpson Company. What is the conversion cost per equivalent unit using the weighted average method?

a. $1.01 b. $1.05 c. $1.55 d. $1.61

(28)

ANS: C

Conversion Costs:

Beginning $ 68,905 Current Period 130,053

198,958 ÷ 128,360 units= $ 1.55 per unit

91. Refer to Simpson Company. What is the cost of units completed using the weighted average method? a. $237,510

b. $266,742 c. $278,400 d. $282,576 ANS: D

Units Completed Costs per Equivalent Unit Total

121,800 (1.55 + .77) = $2.32 $282,576

PTS: 1 DIF: Difficult OBJ: 6-3 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting

92. Refer to Simpson Company. What is the conversion cost per equivalent unit using the FIFO method? a. $1.05 b. $.95 c. $1.61 d. $1.55 ANS: A Conversion Costs:

Beginning (Ignored)

Current Period $130,053

$130,053 ÷ 123,860 units= $1.05 per unit

93. Refer to Simpson Company. What is the cost of all units transferred out using the FIFO method? a. $204,624 b. $191,289 c. $287,004 d. $298,029 ANS: C Beginning Inventory 10,000 units:

Raw Materials (prior period) $24,500 Direct Labor (prior period 68,905 FOH (10,000 * .55 * $1.05) 5,775 $99,180 Units Started and Completed

111,800 units * $ (.63+1.05): $187,824

(29)

Mercury Corporation

Beginning inventory (30% complete as to Material B and 60% complete for conversion)

700 _units

Started this cycle 2,000 units

Ending inventory (50% complete as to Material B and 80% complete for conversion)

500 _units

Beginning inventory costs:

Material A $14,270

Material B 5,950

Conversion 5,640

Current Period costs:

Material A $40,000

Material B 70,000

Conversion 98,100

Material A is added at the start of production, while Material B is added uniformly throughout the process.

94. Refer to Mercury Corporation. Assuming a weighted average method of process costing, compute EUP units for Materials A and B.

a. 2,700 and 2,280, respectively b. 2,700 and 2,450, respectively c. 2,000 and 2,240, respectively d. 2,240 and 2,700, respectively ANS: B

Weighted Average Material A Material B

Beginning Work in Process 700 700

Units Started and Completed 1,500 1,500

Ending Work in Process 500 250

EUP Materials 2,700 2,450

95. Refer to Mercury Corporation Assuming a FIFO method of process costing, compute EUP units for Materials A and B. a. 2,700 and 2,280, respectively b. 2,700 and 2,450, respectively c. 2,000 and 2,240, respectively d. 2,450 and 2,880, respectively ANS: C

FIFO Material A Material B

Beginning Work in Process 0 490

Units Started and Completed 1,500 1,500

(30)

EUP Materials 2,000 2,240

96. Refer to Mercury Corporation Assuming a weighted average method of process costing, compute EUP for conversion. a. 2,600 b. 2,180 c. 2,000 d. 2,700 ANS: A Weighted Average

Beginning Work in Process 700

Ending Work in Process 400

2,600

97. Refer to Mercury Corporation Assuming a FIFO method of process costing, compute EUP for conversion. a. 2,240 b. 2,180 c. 2,280 d. 2,700 ANS: B FIFO

Beginning Work in Process (700 * 40%) 280

Ending Work in Process (500 * 80%) 400

2,180

98. Refer to Mercury Corporation Assuming a weighted average method of process costing, compute the average cost per unit for Material A.

a. $20.10 b. $20.00 c. $31.25 d. $31.00 ANS: A

Weighted Average: Material A

54,270 ÷ 2,700 units= $ 20.10 per unit

(31)

99. Refer to Mercury Corporation Assuming a FIFO method of process costing, compute the average cost per EUP for Material A.

a. $31.25 b. $20.10 c. $20.00 d. $31.00 ANS: C Material A Costs (Current Period)

Equivalent Units Average Cost per EUP

$40,000 2,000 $20.00

100. Refer to Mercury Corporation Assuming a FIFO method of process costing, compute the average cost per EUP for Material B.

a. $20.10 b. $31.25 c. $20.00 d. $31.00 ANS: B Material B Costs

(Current Period) Equivalent Units Average Cost per EUP

$70,000 2,240 $31.25

101. Refer to Mercury Corporation Assuming a weighted average method of process costing, compute the average cost per EUP for Material B.

a. $20.00 b. $31.25 c. $20.10 d. $31.00 ANS: D Material B Costs

(Beginning Inventory and Current Period) Equivalent Units Average Cost per EUP

$75,950 2,450 $31.00

102. Refer to Mercury Corporation Assuming a FIFO method of process costing, compute the average cost per EUP for conversion.

a. $45.50 b. $45.00 c. $43.03 d. $47.59

(32)

ANS: B

Conversion Costs (Current Period)

Equivalent Units Average Cost per EUP

$98,100 2,180 $45.00

103. Refer to Mercury Corporation Assuming a weighted average method of process costing, compute the average cost per EUP for conversion.

a. $39.90 b. $45.00 c. $43.03 d. $47.59 ANS: A Conversion Costs

(Beginning WIP and Current Period) Equivalent Units Average Cost per EUP

$(98,100 + $5,640)=$103,640 2,600 $39.90

Guthrie Corporation

The following information is available for Guthrie Corporation for the current year: Beginning Work in Process Costs of Beginning Work in Process:

(75% complete) 14,500 units Material $25,100

Started 75,000 units Conversion 50,000

Ending Work in Process Current Costs:

(60% complete) 16,000 units Material $120,000 Abnormal spoilage 2,500 units Conversion 300,000 Normal spoilage

(continuous)

5,000 units

Transferred out 66,000 units All materials are added at the start of production.

104. Refer to Guthrie Corporation. Using weighted average, what are equivalent units for material? a. 82,000

b. 89,500 c. 84,500 d. 70,000 ANS: C

Materials: Weighted Average Units % Complete Eq. Units

+ Abnormal Spoilage 2,500 100% 2,500

(33)

105. Refer to Guthrie Corporation. Using weighted average, what are equivalent units for conversion costs? a. 80,600

b. 78,100 c. 83,100 d. 75,600 ANS: B

Conversion: Weighted Average Units % Complete Eq Units

106. Refer to Guthrie Corporation. What is the cost per equivalent unit for material using weighted average? a. $1.72 b. $1.62 c. $1.77 d. $2.07 ANS: A

Weighted Average: Materials

145,100 ÷ 84,500 units= $1.72 per unit

107. Refer to Guthrie Corporation. What is the cost per equivalent unit for conversion costs using weighted average? a. $4.62 b. $4.21 c. $4.48 d. $4.34 ANS: C

Weighted Average: Conversion

$ 350,000 ÷ 78,100 units = $ 4.48 per unit

(34)

108. Refer to Guthrie Corporation. What is the cost assigned to normal spoilage using weighted average? a. $31,000

b. $15,500 c. $30,850

d. None of the responses are correct ANS: D

No costs are assigned to normal, continuous spoilage. Higher costs are assigned to good units produced.

109. Refer to Guthrie Corporation. Assume that the cost per EUP for material and conversion are $1.75 and $4.55, respectively. What is the cost assigned to ending Work in Process?

a. $100,800 b. $87,430 c. $103,180 d. $71,680 ANS: D Equivalent Units Cost per

Equivalent Unit Total

16,000 $1.75 $28,000

9,600 $4.55 $43,680

$71,680

110. Refer to Guthrie Corporation. Using FIFO, what are equivalent units for material? a. 75,000 b. 72,500 c. 84,500 d. 70,000 ANS: D Materials: FIFO

Beginning Work in Process - 0% - + Units Started and Completed 51,500 100% 51,500 + Ending Work in Process 16,000 100% 16,000 + Abnormal Spoilage 2,500 100% 2,500

111. Refer to Guthrie Corporation. Using FIFO, what are equivalent units for conversion costs? a. 72,225

b. 67,225 c. 69,725 d. 78,100

(35)

ANS: B

Conversion: FIFO

112. Refer to Guthrie Corporation. Using FIFO, what is the cost per equivalent unit for material? a. $1.42 b. $1.66 c. $1.71 d. $1.60 ANS: C FIFO: Materials Current Period $ 120,000

120,000 ÷ 70,000 units = $1.71 per unit

113. Refer to Guthrie Corporation. Using FIFO, what is the cost per equivalent unit for conversion costs? a. $4.46 b. $4.15 c. $4.30 d. $3.84 ANS: A FIFO: Conversion Current Period $ 300,000

300,000 ÷ 67,225 units = $ 4.46 per unit

114. Refer to Guthrie Corporation. Assume that the FIFO EUP cost for material and conversion are $1.50 and $4.75, respectively. Using FIFO what is the total cost assigned to the units transferred out? a. $414,194

b. $339,094 c. $445,444 d. $396,975 ANS: A

Transferred Out Units: FIFO Equiv Units

Cost per Equiv Unit

Total

+ Completion of Beginning Inventory (14,500 * 25%) 3,625 4.75 17,219

+Units Started and Completed 51,500 6.25 321,875

(36)

Crafton Corporation

Crafton Corporation has the following information for the current month:

Units started 100,000 units

Beginning Work in Process: (35% complete) 20,000 units

Normal spoilage (discrete) 3,500 units

Abnormal spoilage 5,000 units

Ending Work in Process: (70% complete) 14,500 units

Transferred out 97,000 units

Beginning Work in Process Costs:

Material $15,000

Conversion 10,000

All materials are added at the start of the production process. Crafton Corporation inspects goods at 75 percent completion as to conversion.

115. Refer to Crafton Corporation. What are equivalent units of production for material, assuming FIFO? a. 100,000 b. 96,500 c. 95,000 d. 120,000 ANS: A Materials: FIFO

Beginning Work in Process - 0% - + Units Started and Completed 77,000 100% 77,000 + Normal Spoilage--Discrete 3,500 100% 3,500 + Abnormal Spoilage 5,000 100% 5,000 + Ending Work in Process 14,500 100% 14,500

116. Refer to Crafton Corporation. What are equivalent units of production for conversion costs, assuming FIFO? a. 108,900 b. 103,900 c. 108,650 d. 106,525 ANS: D Conversion: FIFO

Beginning Work in Process 20,000 65% 13,000 + Units Started and Completed 77,000 100% 77,000 +Normal Spoilage--Discrete 3,500 75% 2,625 + Abnormal Spoilage 5,000 75% 3,750 + Ending Work in Process 14,500 70% 10,150

(37)

117. Refer to Crafton Corporation. Assume that the costs per EUP for material and conversion are $1.00 and $1.50, respectively. What is the amount of the period cost for July using FIFO?

a. $0 b. $9,375 c. $10,625 d. $12,500 ANS: C

Abnormal spoilage is a period cost.

Materials 5,000 * $1.00/unit $5,000

Conversion Costs 3,750 * $1.50/unit 5,625

Total Abnormal Spoilage $10,625

118. Refer to Crafton Corporation. Assume that the costs per EUP for material and conversion are $1.00 and $1.50, respectively. Using FIFO, what is the total cost assigned to the transferred-out units (rounded to the nearest dollar)?

a. $245,750 b. $244,438 c. $237,000 d. $224,938 ANS: B

Transferred Out Units: FIFO

Beginning Work in Process $ 25,000

+ Completion of Beginning Inventory (20,000 * 65%) 13,000 1.50 19,500

+ Units Started and Completed 77,000 2.50 192,500

+Normal Spoilage--Discrete-Materials 3,500 1.00 3,500

+Normal Spoilage--Discrete-Conversion 2,625 1.50 3,938

Equivalent Units of Production $244,438

119. Refer to Crafton Corporation. What are equivalent units of production for material assuming weighted average is used?

a. 107,000 b. 116,500 c. 120,000 d. 115,000

(38)

ANS: C

Materials: Weighted Average

Beginning Work in Process 20,000 100% 20,000 + Units Started and Completed 77,000 100% 77,000 + Normal Spoilage--Discrete 3,500 100% 3,500 + Abnormal Spoilage 5,000 100% 5,000 + Ending Work in Process 14,500 100% 14,500

120. Refer to Crafton Corporation. What are equivalent units of production for conversion costs assuming weighted average is used?

a. 113,525 b. 114,400 c. 114,775 d. 115,650 ANS: A

Conversion: Weighted Average

Beginning Work in Process 20,000 100% 20,000 + Units Started and Completed 77,000 100% 77,000 +Normal Spoilage--Discrete 3,500 75% 2,625 + Abnormal Spoilage 5,000 75% 3,750 + Ending Work in Process 14,500 70% 10,150

121. Refer to Crafton Corporation. Assume that the costs per EUP for material and conversion are $1.00 and $1.50, respectively. What is the cost assigned to normal spoilage, using weighted average, and where is it assigned?

Value Assigned To

a. $7,438 Units transferred out and Ending Inventory b. $7,438 Units transferred out

c. $8,750 Units transferred out and Ending Inventory d. $8,750 Units transferred out

ANS: B

Equivalent Units

Cost per

Equivalent Unit Total

3,500 $1.00 $3,500

2,625 $1.50 3,938

$7,438 This amount is transferred out.

(39)

122. Refer to Crafton Corporation. Assume that the costs per EUP for material and conversion are $1.00 and $1.50, respectively. Assuming that weighted average is used, what is the cost assigned to ending inventory? a. $29,725.00 b. $37,162.50 c. $38,475.00 d. $36,250.00 ANS: A

Ending Inventory: Weighted Average

Materials 14,500 $1.00 $ 14,500.00 Conversion (14,500 * 70%) 10,150 1.50 15,225.00

Total $ 29,725.00

Knight Corporation

Knight Corporation has the following information for the current month:

Units started 95,000 units

Beginning Work in Process: (30% complete) 15,000 units

Normal spoilage (discrete) 3,000 units

Abnormal spoilage 4,000 units

Ending Work in Process: (75% complete) 15,000 units

Transferred out 88,000 units

Beginning Work in Process Costs:

Material $18,000

Conversion 14,000

All materials are added at the start of the production process. Knight Corporation inspects goods at 75 percent completion as to conversion.

123. Refer to Knight Corporation. What are equivalent units of production for material, assuming FIFO? a. 91,000 b. 92,000 c. 95,000 d. 110,000 ANS: C Materials: FIFO

Beginning Work in Process - 0% - + Units Started and Completed 73,000 100% 73,000 + Normal Spoilage--Discrete 3,000 100% 3,000 + Abnormal Spoilage 4,000 100% 4,000 + Ending Work in Process 15,000 100% 15,000