Chapter 16
PROCESS COSTING AND ANALYSIS
True / False Questions
1. The managers of process operations focus on the series of repetitive processes, or steps,
resulting in a noncustomized product or service.
2. Manufacturers that utilize process operations produce large quantities of identical products.
3. In a process costing system costs are measured upon completion of each job.
4. Equivalent units of production refer to the number of units that could have been started and
completed given the costs incurred during the period.
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5. In a process costing system, companies typically end each period with only Finished Goods
Inventory.
6. Equivalent units of production are always the same as the total number of physical units
finished during the period.
7. Equivalent units of production for direct materials and direct labor are usually the same.
8. Equivalent units of production is an engineering term used to describe the process by which
one company attempts to manufacture units of a product that are equivalent to the product
manufactured by a competitor.
9. Conversion cost per equivalent unit is the combined costs of direct materials and factory
overhead.
10. The process cost summary is an important managerial accounting report produced by a
process costing system.
11. A process cost summary is an accounting report that describes the costs charged to each
department, the equivalent units of production by each department, and determining the costs
assigned to each department’s output.
12. A process cost summary usually does not include the number of equivalent units of
production for the period.
13. A process cost summary shows the cost of a particular job manufactured in the reporting
period.
14. The FIFO method of computing equivalent units focuses on production activity in the
current period only.
15. If a department that uses process costing starts the reporting period with 100,000 physical
units that were 20% complete with respect to direct labor, the equivalent units of direct labor
in Work in Process are 20,000.
16. The FIFO method of computing equivalent units includes the beginning inventory costs in
computing the cost per equivalent unit for the current period.
17. Process and job order manufacturing operations both combine materials, labor, and
overhead items in the process of producing products.
18. Process costing systems are commonly used by companies that produce a large volume of
standardized units on a continuous basis.
19. The term “process costing system” is used in reference to the number of trained
individuals and computers required to process the collected cost information.
20. A production department is an organizational unit that has the responsibility for the
complete processing of one particular product.
21. In a process costing system, with the exception of the first department, each department
receives output from the prior department as a partially processed product.
22. In process costing, the cost object is the process and in job costing, the cost object is a
job.
23. Process costing is applied to operations with repetitive production and customized
products.
24. In a process operation, all labor that is used exclusively by a single production department
is considered to be direct labor.
25. Process costing systems consider overhead costs to include those costs that cannot be
traced to a specific process.
26. Companies that use a series of repetitive manufacturing processes to produce standardized
products should use a process costing system.
27. Process costing systems are used only by companies that manufacture physical products;
companies that provide services do not use process costing.
28. Process costing systems are commonly used by companies that manufacture standardized
products by passing them through a series of manufacturing steps.
29. The use of process costing is of little benefit to a service type of operation.
30. In process costing, the classification of materials as direct or indirect depends on whether
or not they are clearly linked with a specific process or department.
31. Conversion cost per equivalent unit is the combined cost of direct labor and factory
overhead per equivalent unit.
32. When direct labor and overhead enter the production process at different rates, it is
appropriate to use a conversion cost per equivalent unit.
33. In process costing, indirect materials are always classified as factory overhead, even if
they are linked with a specific production process or department.
34. Hybrid systems contain features of both process and job order operations.
35. Hybrid costing systems can only be applied to auto manufacturing.
36. In a process costing system, the purchase of raw materials is credited to the Raw Materials
Inventory.
37. In a process costing system, the purchase of raw materials is debited to the Raw Materials
Inventory.
38. In a process costing system, the entry to record cost of materials assigned to a production
department requires a debit to the Raw Materials Inventory account and a credit to the Work
in Process Inventory account for that department.
39. A materials consumption report is used instead of materials requisitions in companies
where materials move continuously through the manufacturing process.
40. If Department C uses $10,000 of direct materials and Department D uses $15,000 of direct
materials, the following journal entry would be recorded by the process costing system:
Work in Process Inventory, Department C…..……… 10,000
Work in Process Inventory, Department D………….. 15,000
Raw Materials Inventory…………………. 25,000
41. A unique feature of process costing systems is the use of a single Work in Process
Inventory account regardless of the number of production departments that exist.
42. If Department R uses $60,000 of direct materials and Department S uses $15,000 of direct
materials, the following journal entry would be recorded by the process costing system:
Work in Process Inventory, Department R…..……… 60,000
Work in Process Inventory, Department S…........... 15,000
Raw Materials Inventory…………………………………………………. 75,000
43. If Grayson Manufacturing incurred $17,400 for direct labor in the assembly department
and $10,300 for direct labor in the painting department, the journal entry to record the labor
used is:
Work in Process—Assembly ……………………..$17,400
Work in Process—Painting……………………….$10,300
Raw Materials Inventory………………………………….$27,700
44. If the indirect labor cost in August for clerical and maintenance that help production in all
departments was $123,000, the following journal entry would be recorded in a process costing
system:
Factory Overhead…………………………………………… 123,000
Factory Payroll Payable…………………………………….. 123,000
45. In process costing, direct labor includes only the labor that is applied directly to individual
units of product.
46. In some circumstances, a process costing system can classify wages paid to maintenance
workers as direct labor costs instead of factory overhead.
47. In a process costing system, factory labor costs incurred in a reporting period are
presented on the income statement as Factory Labor Expense.
48. The following journal entry would be made to record the use of $6,100 of direct labor in a
production department during the reporting period:
Factory Overhead………………………………………………….. 6,100
Work in Process Inventory…………………………. 6,100
49. If Department L uses $53,000 of direct labor and Department M uses $21,000 of direct
labor, the following journal entry would be recorded using a process costing system:
Work in Process Inventory, Department L….…….... 53,000
Work in Process Inventory, Department M……….... 21,000
Factory Payroll Payable…………………………… 74,000
50. In a process costing system, factory overhead costs can be allocated to production
departments by using a predetermined overhead allocation rate.
51. If indirect materials costing $37,500 that were not clearly linked with any specific
production process or department were used during a reporting period, the following journal
entry would be recorded in the process costing system:
Factory Overhead……………………………………….…… 37,500
Raw Materials Inventory………………… 37,500
52. In process costing there is never a balance remaining in Factory Overhead that needs to be
closed at period end.
53. In process costing, all indirect materials are charged directly to Work in Process
Inventory.
54. A process costing system records all factory overhead costs directly in the Work in
Process Inventory accounts.
55. If the predetermined overhead allocation rate is 250% of direct labor cost and the
Finishing Department’s direct labor cost for the reporting period is $20,000, the following
entry would record the allocation of overhead to the products processed in this department:
Work in Process Inventory, Finishing Dept............ 50,000
Factory Overhead. ………………………. 50,000
56. If the predetermined overhead allocation rate is 75% of direct labor cost, and the
Assembly Department’s direct labor cost for the reporting period is $20,000, the following
entry would be made to record the allocation of overhead to the products processed in this
department:
Factory Overhead 15,000
Work in Process Inventory, Assembly Dept 15,000
57. If the predetermined overhead allocation rate is 245% of direct labor cost, and the Baking
Department’s direct labor cost for the reporting period is $10,000, the following entry would
be made to record the allocation of overhead to the products processed in this department:
Work in Process Inventory, Baking Dept………….... 24,500
Factory Overhead……………………….. 24,500
58. The number of equivalent units of production assigned to ending Work in Process
inventory should be equal to or less than the number of physical units in ending Work in
Process inventory.
59. In the same time period, it is possible that a production department can produce 1,000
equivalent finished units with respect to direct materials and 1,200 equivalent finished units
with respect to direct labor.
60. If a production department has 100 equivalent units of production with respect to direct
materials in a given reporting period, the equivalent units of production with respect to direct
labor also must be 100.
61. Once equivalent units are calculated for materials, this number will also be used for direct
labor and factory overhead.
62. If a department that applies process costing starts the reporting period with 50,000
physical units that were 25% complete with respect to direct materials and 40% complete with
respect to direct labor, it must add 12,500 equivalent units of direct materials and 20,000
equivalent units of direct labor to complete them.
63. If a department that applies process costing starts the reporting period with 40,000
physical units that were 80% complete with respect to direct materials and 50% complete with
respect to direct labor, it must add 8,000 equivalent units of direct materials and 20,000
equivalent units of direct labor to complete them.
64. One section of the process cost summary describes the equivalent units of production for
the department during the reporting period and presents the calculations of the direct materials
and conversion costs per equivalent unit.
65. A process cost summary for a production department accounts for all costs assigned to
that department during the period plus costs that were in the department’s Work in Process
Inventory account at the beginning of the period.
66. The process cost summary presents calculations of the cost of units completed during the
reporting period, but does not present any information about the ending Work in Process
inventory.
67. Since the process cost summary describes the activities of a production department for a
specified reporting period, it does not present information about any costs incurred in prior
periods.
68. The cost of units transferred from Work in Process Inventory to Finished Goods Inventory
is called the cost of goods manufactured.
69. The Finishing Department transferred out completed units with a cost of $74,000. This
transfer should be recorded with the following entry:
Finished Goods Inventory……………………. 74,000
Work in Process Inventory, Finishing Dept. 74,000
70. Which of the following products is least likely to be produced in a process operations
system?
A. Compact disks
B. Slacks for casual wear
C. Baseball hats
D. Calculators
E. Custom cabinets
71. Which of the following products is most likely to be produced in a process operations
system?
A. Airplanes
B. Cereal
C. Bridges
D. Designer bridal gowns
E. Custom cabinets
72. Which of the following characteristics does not usually apply to process operations
systems?
A. Each unit of product is separately identifiable.
B. Partially completed products are transferred between processes.
C. Different managers are responsible for different processes.
D. The output of all processes except the final process is an input to the next process.
E. Costs are computed using equivalent units .
73. Yamada Company applies factory overhead to its production departments on the basis of
90% of direct labor costs. In the Assembly Department, Yamada had $125,000 of direct labor
cost, and in the Finishing Department, Yamada had $35,000 of direct labor cost. The entry to
apply overhead to these production departments is:
A. Debit Factory Overhead—Assembly $112,500; debit Factory Overhead—Finishing
$31,500; credit Work in Process Inventory $144,000.
B. Debit Factory Overhead $144,000; credit Work in Process Inventory—Assembly $112,500;
credit Work in Process—Finishing $31,500.
C. Debit Factory Overhead $144,000; credit Factory Payroll $144,000.
D. Debit Work in Process Inventory—Assembly $112,500; debit Work in Process Inventory—
Finishing $31,500; credit Factory Overhead $144,000.
E. Debit Factory Payroll $144,000; credit Cash $144,000.
74. Clarksen Company uses a process costing system. The company requisitioned $93,000 of
materials for Department A and $67,000 of materials for Department D. The entry to record
the use of the direct materials by these two departments is:
A. Debit Raw Materials Inventory $160,000; credit Accounts Payable $160,000.
B. Debit Work in Process Inventory—Dept A $93,000; debit Work in Process Inventory—
Dept D $67,000; credit Raw Materials Inventory $160,000.
C. Debit Factory overhead $160,000; credit Raw Materials Inventory $160,000.
D. Debit Raw Materials Inventory—Dept A $93,000; debit Raw Materials Inventory—Dept D
$67,000; credit Work in Process Inventory $160,000.
E. Debit Work in Process Inventory—Dept A $93,000; debit Work in Process Inventory—
Dept D $67,000; credit Accounts Payable $160,000.
75. Which of the following characteristics applies to process costing but not to job order cost
accounting?
A. Use of a predetermined overhead rate.
B. Identifiable units of production.
C. Equivalent units of production.
D. Determining cost of goods manufactured.
E. Use of a single Work in Process Inventory account.
76. A key idea in process costing that refers to the number of units that could have been
started and completed given the costs incurred during the period is known as:
A. Manufacturing overhead.
B. Units in process.
C. A job cost sheet.
D. Equivalent units of production.
E. Process cost summary.
77. Equivalent units of production are equal to:
A. The number of units that could have been started and completed given the costs incurred
during the period.
B. The number of finished units actually produced during a period.
C. The number of units started into the process during a period.
D. The number of units still in process at the end of a period.
E. Physical units that were started and completed during a period.
78. Which of the following is the best explanation for why it is necessary to calculate
equivalent units of production in a process costing environment?
A. In most manufacturing environments, it is not possible to conduct a physical count of units.
B. Companies often use a combination of a process costing and job order costing systems.
C. In most process costing systems, direct materials are added at the beginning of the process
while conversion costs are added evenly throughout the manufacturing process.
D. All of the work to make a unit 100% complete and ready to move to the next stage of
production or to finished goods inventory may not have been completed in a single time
period.
E. In most cases, there is no difference between physical units and equivalent units of
production.
79. The combined costs of direct labor and factory overhead per equivalent unit used by many
businesses with process operations is called:
A. Physical cost per equivalent unit
B. Overhead cost per equivalent unit
C. Combined cost per equivalent unit
D. Conversion cost per equivalent unit
E. Finished cost per equivalent unit
80. Using conversion cost per equivalent unit is appropriate for many business that use
process costing because:
A. Direct materials and direct labor are usually entered into the production process at the
same rate.
B. All manufacturing costs are entered into the production process in the same period.
C. Equivalent cost per unit is not sufficient measurement of production activity.
D. The weighted average method of calculating equivalent units requires it.
E. Direct labor and factory overhead enter the production process at the same rate.
81. Which of the following is not one of the four steps in accounting for production activity
and assigning costs during a period under a process cost system?
A. Determine over or underapplied overhead.
B. Determine the physical flow of units.
C. Compute the equivalent units of production.
D. Compute the cost per equivalent unit of production.
E. Assign and reconcile costs.
82. Which of the following statements is most accurate?
A. In process costing, estimating the degree of completion of units is usually more accurate
for conversion costs than for direct materials.
B. The FIFO method includes the cost of the beginning Work in Process inventory account in
calculating cost per equivalent units.
C. The FIFO method computes equivalent units based only on production activity in the
current period, ignoring the percentage of completion in beginning Work in Process inventory.
D. The FIFO method of calculating equivalent units of production merges the work and the
costs of the beginning inventory with the work and the costs done during the current period.
E. It is not possible for there to be a significant difference between the cost of completed units
between the weighted average and the FIFO methods.
83. A production department’s output for the most recent month consisted of 10,000 units
completed and transferred to the next stage of production and 10,000 units in ending Work in
Process inventory. The units in ending Work in Process inventory were 50% complete with
respect to both direct materials and conversion costs. There were 1,000 units in beginning
Work in Process inventory, and they were 70% complete with respect to both direct materials
and conversion costs. Calculate the equivalent units of production for the month, assuming the
company uses the weighted average method.
A. 10,000 units.
B. 10,300 units.
C. 15,000 units.
D. 15,300 units.
E. 10,700 units.
84. A production department’s output for the most recent month consisted of 8,000 units
completed and transferred to the next stage of production and 5,000 units in ending Work in
Process inventory. The units in ending Work in Process inventory were 50% complete with
respect to both direct materials and conversion costs. Calculate the equivalent units of
production for the month, assuming the company uses the weighted average method.
A. 6,500 units.
B. 9,000 units.
C. 13,000 units.
D. 5,500 units.
E. 10,500 units.
85. The Fabricating Department started the current month with a beginning Work in Process
inventory of $10,000. During the month, it was assigned the following costs: direct materials,
$76,000; direct labor, $24,000; and factory overhead, 50% of direct labor cost. Also,
inventory with a cost of $109,000 was transferred out of the department to the next phase in
the process. The ending balance of the Work in Process Inventory account for the Fabricating
Department is:
A. $ 13,000.
B. $ 56,000.
C. $ 59,000.
D. $110,000.
E. $165,000.
86. A company uses a process costing system. Its Assembly Department’s beginning inventory
consisted of 30,000 units, 75% complete with respect to direct labor and overhead. The
department completed and transferred out 127,500 units this period. The ending inventory
consists of 20,000 units that are 25% complete with respect to direct labor and overhead. All
direct materials are added at the beginning of the process. The department incurred direct
labor costs of $24,000 and overhead costs of $32,000 for the period. Assuming the weighted
average method, the direct labor cost per equivalent unit (rounded to the nearest cent) is:
A. $0.14.
B. $0.16.
C. $0.18.
D. $0.30.
E. $0.37.
87. A company’s beginning Work in Process inventory consisted of 20,000 units that were
20% complete with respect to direct labor. These beginning units were completed and another
90,000 units were started during the current period. Of those started, 60,000 were finished and
the remaining 30,000 were 40% complete at the end of the period. Using the weighted-
average method, the equivalent units of production with regard to direct labor were:
A. 60,000.
B. 74,000.
C. 76,000.
D. 92,000.
E. 96,000.
88. A company’s beginning Work in Process inventory consisted of 20,000 units that were
80% complete with respect to direct labor. A total of 90,000 were finished during the period
and 25,000 remaining in Work in Process inventory were 40% complete with respect to direct
labor at the end of the period. Using the weighted-average method, the equivalent units of
production with regard to direct labor were:
A. 46,000.
B. 100,000.
C. 76,000.
D. 90,000.
E. 116,000.
89. The following refers to units processed by a breakfast cereal maker in August. Compute
the total equivalent units of production with respect to conversion for July using the weighted-
average inventory method.
Tons of
Product
Percent of
Conversion
Added
Beginning Work in Process 230,000 60%
Goods started 570,000 100%
Goods completed 620,000 100%
Ending Work in Process 180,000 70%
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A. 758,000
B. 800,000
C. 620,000
D. 746,000
E. 884,000
90. At the beginning of the recent period, there were 900 units of product in a department,
35% completed. These units were finished and an additional 5,000 units were started and
completed during the period. 800 units were still in process at the end of the period, 25%
completed. Using the weighted average method, the equivalent units produced by the
department were:
A. 5,000 units.
B. 5,900 units.
C. 6,100 units.
D. 5,500 units.
E. 6,700 units.
91. A company uses the weighted average method for inventory costing. During a period,
Department B finished and transferred 50,000 units to Department C. Also in Department B
during the period, 10,000 units were started but brought only to a stage of being 60%
completed. The number of equivalent units produced by Department B during the period was:
A. 44,000 units.
B. 50,000 units.
C. 54,000 units.
D. 56,000 units.
E. 60,000 units.
92. Metaline Corp. uses the weighted average method for inventory costs and had the
following information available for the year. The number of units transferred to finished
goods during the year is:
Beginning Work in Process (40% complete, $1,100) 200 units
Ending inventory of Work in Process (80% complete)………….....400 units
Total units started during the year………………………………………….. 3,200 units
A. 3,200 units.
B. 3,000 units.
C. 3,400 units.
D. 3,160 units.
E. 3,500 units.
93. Metaline Corp. uses the weighted average method for inventory costs and had the
following information available for the year. Equivalent units of production for the year are:
Beginning inventory of Work in Process (40% complete, $1,100) 200 units
Ending inventory of Work in Process (80% complete)……….. 400 units
Total units started during the year…………………………….. 3,200 units
A. 3,200 units.
B. 3,320 units.
C. 3,240 units.
D. 3,520 units.
E. 3,800 units.
94. A company uses a process costing system. Its Weaving Department completed and
transferred out 120,000 units during the current period. The ending inventory in the Weaving
Department consists of 40,000 units (20% complete with respect to direct materials and 60%
complete with respect to conversion costs).
Determine the equivalent units of production for the Weaving Department for direct materials
and conversion costs assuming the weighted average method.
A. 120,000; 120,000
B. 120,000; 160,000
C. 128,000; 120,000
D. 128,000; 144,000
E. 128,000; 184,000
95. A company uses a process costing system. Its Welding Department completed and
transferred out 100,000 units during the current period. The ending inventory in the Welding
Department consists of 30,000 units (75% complete with respect to direct materials and 40%
complete with respect to conversion costs).
Determine the equivalent units of production for the Welding Department for direct materials
and conversion costs assuming the weighted average method.
A. 130,000; 130,000
B. 130,000; 112,000
C. 107,500; 118,000
D. 122,500; 112,000
E. 112,500; 130,000
96. A process cost summary is a managerial accounting report that describes all but which of
the following:
A. The gross profit earned on the sale of products
B. The equivalent units of production by the department.
C. How the costs were assigned to the output.
D. Physical transfers for a department.
E. The costs charged to a department.
97. Pitt Enterprises manufactures jeans. All materials are introduced at the beginning of the
manufacturing process in the Cutting Department. Conversion costs are incurred uniformly
throughout the manufacturing process. As the cutting of material is completed, the pieces are
immediately transferred to the Sewing Department. Information for the Cutting Department
for the month of May follows.
Work in Process, May 1 (50,000 units, 100% complete for direct materials, 40% complete
with respect to conversion costs; includes $70,500 of direct material cost; $34,050 of
conversion costs).
Units started in May 225,000
Units completed in May 200,000
Work in Process, May 31 (75,000 units, 100% complete for direct materials; 20% complete
for conversion costs).
Costs incurred in May
Direct materials $342,000
Conversion costs $352,950
If Pitt Enterprises uses the FIFO method of process costing, compute the cost per equivalent
unit for direct materials and conversion costs respectively for May.
A. $1.52; $1.81.
B. $1.50; $1.76.
C. $1.83; $1.72.
D. $1.71; $1.81.
E. $3.30; $3.30.
98. Pitt Enterprises manufactures jeans. All materials are introduced at the beginning of the
manufacturing process in the Cutting Department. Conversion costs are incurred uniformly
throughout the manufacturing process. As the cutting of material is completed, the pieces are
immediately transferred to the Sewing Department. Information for the Cutting Department
for the month of May follows.
Work in Process, May 1 (50,000 units, 100% complete for direct materials, 40% complete
with respect to direct labor and overhead; includes $70,500 of direct material cost; $34,050 of
conversion costs).
Units started in May 225,000
Units completed in May 200,000
Work in Process, May 31 (75,000 units, 100% complete for direct materials; 20% complete
for conversion costs).
Costs incurred in May
Direct materials $342,000
Conversion costs $352,950
If Pitt Enterprises uses the FIFO method of process costing, compute the equivalent units for
materials and conversion costs respectively for May.
A. 225,000; 225,000.
B. 200,000; 195,000
C. 275,000; 200,000
D. 225,000; 195,000
E. 200,000; 200,000
99. The following data are available for a company’s manufacturing activities:
Beginning Work in Process inventory….…….. 5,000 units, 75% completed as to direct labor
Units started and completed ………………….... 15,000
Ending Work in Process inventory ……........ 6,000 units, 50% completed as to labor
If materials are added when the production process begins and direct labor is applied
uniformly throughout the process, what are the equivalent units for direct materials and for
direct labor, respectively using the FIFO method of process costing?
A. 16,250; 19,250.
B. 16,250; 21,750.
C. 21,000; 19,250.
D. 19,250; 18,750.
E. 21,000; 22,250.
100. A system of accounting in which costs are accumulated and then measured per unit at the
end of a period by combining costs per equivalent unit from various departments is a:
A. General cost accounting system.
B. Process costing system.
C. Job order cost accounting system.
D. Manufacturing cost accounting system.
E. Work in Process accounting system.
101. A company that applies process costing is most frequently characterized by:
A. Low standardization and high production volume.
B. Custom orders and mass production.
C. Repetitive production and unique products.
D. Repetitive production and low production volume.
E. Similar products and high production volume.
102. An organizational unit of a factory that has the responsibility for partially manufacturing
or producing a product is called a:
A. Production department.
B. Service department.
C. Primary department.
D. Responsibility department.
E. Control department.
103. A hybrid costing system would be most appropriate when:
A. A manufacturer is able to standardize processes while at the same time attempting to meet
individual customer needs.
B. Large quantities of identical products are being produced.
C. The volume of production is low and costs are high.
D. There is no standardization of units of production.
E. All the products produced are unique.
104. In a process costing system, direct material costs incurred are recorded:
A. Indirectly to a Work in Process Inventory account from Factory Overhead.
B. Indirectly to a Finished Goods Inventory account from Factory Overhead.
C. Directly to a Work in Process Inventory account.
D. Directly to a Finished Goods Inventory account.
E. Directly to a Cost of Goods Sold account.
105. The purchase of raw materials on account in a process costing system is recorded with a:
A. Debit to Purchases and credit to Cash.
B. Debit to Purchases and a credit to Accounts Payable.
C. Debit to Raw Materials Inventory and a credit to Accounts Payable.
D. Debit to Accounts Payable and a credit to Raw Materials Inventory.
E. Debit to Work in Process Inventory and a credit to Accounts Payable.
106. When raw materials are purchased on account for use in a process costing system, the
corresponding journal entry that should be recorded will include:
A. A debit to Work in Process Inventory.
B. A debit to Accounts Payable.
C. A credit to Cash.
D. A debit to Raw Materials Inventory.
E. A credit to Raw Materials Inventory.
107. Direct labor and indirect labor are recorded, respectively, to:
A. Factory Overhead and Work in Process Inventory.
B. Work in Process Inventory and Finished Goods Inventory.
C. Finished Goods Inventory and Work in Process Inventory.
D. Work in Process Inventory and Factory Overhead.
E. Cost of Goods Sold and Finished Goods Inventory.
108. Wilturner Company incurs $74,000 of labor related directly to the product in the
Assembly Department, $23,000 of labor not directly related to the product but related to the
Assembly Department as a whole, and $10,000 of labor for services that help production in
both the Assembly and Finishing departments. The amount of direct labor and factory
overhead respectively are:
A. $74,000 and $33,000.
B. $97,000 and $10,000
C. $84,000 and $23,000.
D. $107,000 and $0.
E. $74,000 and $10,000.
109. Wilturner Company incurs $74,000 of labor related directly to the product in the
Assembly Department, $23,000 of labor not directly related to the product but related to the
Assembly Department as a whole, and $10,000 of labor for services that help production in
both the Assembly and Finishing departments. The journal entries to record the labor would
include:
A. Debit Work in Process Inventory $74,000; debit Factory Overhead $33,000.
B. Debit Work in Process Inventory $74,000; debit Wages Expense $33,000
C. Debit Work in Process Inventory $97,000; debit Wages Expense $10,000.
D. Debit Work in Process Inventory $107,000.
E. Debit Work in Process Inventory $97,000; debit Factory Overhead $10,000.
110. In a process operation, the direct labor of a production department includes:
A. All labor used exclusively by that department, even if the labor is not applied to the
product itself.
B. All labor used exclusively by that department, but only if the labor is applied to the product
itself.
C. All labor for that department, including labor for services that help more than one
production department, such as clerical, repair, and computer technicians.
D. Only labor that helps more than one production department, such as clerical, repair, and
computer technicians.
E. Only labor that relates to goods finished during the period.
111. After posting all actual factory overhead and applying factory overhead to production
departments in a process costing system,
A. There will never be underapplied overhead.
B. There will never be overapplied overhead.
C. There will always be underapplied overhead.
D. There will always be overapplied overhead.
E. There may be over or underapplied overhead.
112. In a process costing system, when manufacturing overhead costs are applied to the cost
of production, they are debited to:
A. the Finished Goods Inventory account.
B. the Cost of Goods Sold account.
C. the Work in Process Inventory account.
D. the Manufacturing Overhead account.
E. the Raw Materials Inventory account.
113. To compute equivalent units of production, one must be able to reasonably estimate:
A. The percentage of completion.
B. Units completed.
C. Units started and completed.
D. Direct labor cost.
E. Materials cost.
114. The following is an account for a production department, showing its costs for one
month:
Work in Process Inventory
Beginning Balance 5,400 Completed and transferred out 49,410
Direct materials 21,600
Direct labor 16,200
Overhead 10,800
Ending Balance 4,590
Assume that materials are added at the beginning of the production process and that direct
labor and overhead are applied uniformly. If the started and completed units cost $41,850,
what was the cost of completing the units in the beginning Work in Process inventory?
A. $12,150.
B. $ 2,160.
C. $ 7,560.
D. $54,000.
E. $37,260.
115. Wyman Corporation uses a process costing system. The company manufactured certain
goods at a cost of $800 and sold them on credit to Percy Corporation for $1,075. The
complete journal entry to be made by Wyman at the time of this sale is:
A. Debit Accounts Receivable $1,075; credit Sales $1,075; debit Cost of Goods Sold $800;
credit Finished Goods Inventory $800.
B. Debit Accounts Receivable $1,075; credit Sales $275; credit Finished Goods Inventory
$800.
C. Debit Cost of Goods Sold $1,075; credit Sales $1,075.
D. Debit Finished Goods Inventory $800; debit Sales $1,075; credit Accounts Receivable
$1,075; credit Cost of Goods Sold $800.
E. Debit Accounts Receivable $1,075; debit Selling expense $800; credit Sales $1,075; credit
Cost of Goods Sold $800.
116. Luker Corporation uses a process costing system. The company had $160,500 of
beginning Finished Goods Inventory on October 1. It transferred in $837,000 of goods
completed during the period. The ending Finished Goods Inventory balance on October 31
was $158,200. The entry to account for the cost of goods sold in October is:
A. Debit Cost of Goods Sold $837,000; credit Finished Goods Inventory $837,000.
B. Debit Cost of Goods Sold $839,300; credit Work in Process Inventory $839,300.
C. Debit Finished Goods Inventory $837,000; credit Work in Process Inventory $837,000.
D. Debit Finished Goods Inventory $158,200; credit Cost of Goods Sold $158,200.
E. Debit Cost of Goods Sold $839,300; credit Finished Goods Inventory $839,300.
117. Luker Corporation uses a process costing system. The company had $160,500 of
beginning Finished Goods Inventory on October 1. It transferred in $837,000 of goods
completed during the period. The ending Finished Goods Inventory balance on October 31
was $158,200. The entry to account for the cost of goods manufactured during October is:
A. Debit Cost of Goods Sold $837,000; credit Finished Goods Inventory $837,000.
B. Debit Cost of Goods Sold $839,300; credit Work in Process Inventory $839,300.
C. Debit Finished Goods Inventory $837,000; credit Work in Process Inventory $837,000.
D. Debit Finished Goods Inventory $158,200; credit Cost of Goods Sold $158,200.
E. Debit Cost of Goods Sold $839,300; credit Finished Goods Inventory $839,300.
118. Dazzle, Inc. produces beads for jewelry making use. The following information
summarizes production operations for June. The journal entry to record June production
activities for direct material usage is:
Direct materials used $87,000
Direct labor used 160,000
Predetermined overhead rate (based on direct labor) 155%
Goods transferred to finished goods 432,000
Cost of goods sold 444,000
Credit sales 810,000
A. Debit Raw Materials Inventory $87,000; credit Accounts Payable $87,000.
B. Debit Raw Materials Inventory $87,000; credit Finished Goods Inventory $87,000.
C. Debit Cost of Goods Sold $87,000; credit Finished Goods Inventory $87,000.
D. Debit Work in Process Inventory $87,000; credit Raw Materials Inventory $87,000.
E. Debit Work in Process Inventory $87,000; credit Cost of Goods Sold $87,000.
119. Dazzle, Inc. produces beads for jewelry making use. The following information
summarizes production operations for June. The journal entry to record June production
activities for direct labor usage is:
Direct materials used $87,000
Direct labor used 160,000
Predetermined overhead rate (based on direct labor) 155%
Goods transferred to finished goods 432,000
Cost of goods sold 444,000
Credit sales 810,000
A. Debit Factory Payroll Payable $160,000; credit Cash $160,000.
B. Debit Work in Process Inventory $160,000; credit Factory Payroll Payable $160,000.
C. Debit Cost of Goods Sold $160,000; credit Factory Payroll Payable $160,000.
D. Debit Work in Process Inventory $160,000; credit Raw Materials Inventory $160,000.
E. Debit Work in Process Inventory $160,000; credit Cash $160,000.
120. Dazzle, Inc. produces beads for jewelry making use. The following information
summarizes production operations for June. The journal entry to record June production
activities for overhead allocation is:
Direct materials used $87,000
Direct labor used 160,000
Predetermined overhead rate (based on direct labor) 155%
Goods transferred to finished goods 432,000
Cost of goods sold 444,000
Credit sales 810,000
A. Debit Factory Overhead $248,000; credit Cash $248,000.
B. Debit Work in Process Inventory $160,000; credit Factory Payroll $160,000.
C. Debit Work in Process Inventory $248,000; credit Factory Overhead $248,000.
D. Debit Work in Process Inventory $160,000; credit Factory Overhead $160,000.
E. Debit Work in Process Inventory $160,000; credit Cash $160,000.
121. Dazzle, Inc. produces beads for jewelry making use. The following information
summarizes production operations for June. The journal entry to record June production
activities for goods transfered from production to finished goods is:
Direct materials used $87,000
Direct labor used 160,000
Predetermined overhead rate (based on direct labor) 155%
Goods transferred to finished goods 432,000
Cost of goods sold 444,000
Credit sales 810,000
A. Debit Finished Goods Inventory $432,000; credit Work in Process Inventory $432,000.
B. Debit Work in Process Inventory $444,000; credit Finished Goods Inventory $444,000.
C. Debit Work in Process Inventory $432,000; credit Finished Goods Inventory $432,000.
D. Debit Finished Goods Inventory $444,000; credit Work in Process Inventory $444,000.
E. Debit Work in Process Inventory $432,000; credit Cash $432,000.
122. Dazzle, Inc. produces beads for jewelry making use. The following information
summarizes production operations and sales activities for June. The journal entry to record
June sales is:
Direct materials used $87,000
Direct labor used 160,000
Predetermined overhead rate (based on direct labor) 155%
Goods transferred to finished goods 432,000
Cost of goods sold 444,000
Credit sales 810,000
A. Debit Accounts Receivable $810,000; credit Cost of Goods Sold $810,000.
B. Debit Accounts Receivable $810,000; credit Sales $366,000; credit Finished Goods
Inventory $444,000.
C. Debit Cost of Goods Sold $444,000; credit Sales $444,000.
D. Debit Finished Goods Inventory $444,000; debit Sales $810,000; credit Accounts
Receivable $810,000; credit Cost of Goods Sold $444,000.
E. Debit Accounts Receivable $810,000; credit Sales $810,000; debit Cost of Goods Sold
$444,000; credit Finished Goods Inventory $444,000.
123. Andrews Corporation uses a process costing system for manufacturing. The following
information is available for the February in its Polishing Department:
Equivalent units of production—direct materials 110,000 EUP
Equivalent units of production—conversion 95,000 EUP
Costs in beginning Work in Process—direct materials $49,000
Costs in beginning Work in Process—conversion $36,000
Costs incurred in February—direct materials $414,000
Costs incurred in February—conversion 520,000
The cost per equivalent unit of production for conversion is:
A. $9.26
B. $4.21
C. $5.85
D. $5.05
E. $4.97
124. Andrews Corporation uses a process costing system for manufacturing. The following
information is available for the February in its Polishing Department:
Equivalent units of production—direct materials 110,000 EUP
Equivalent units of production—conversion 95,000 EUP
Costs in beginning Work in Process—direct materials $49,000
Costs in beginning Work in Process—conversion $36,000
Costs incurred in February—direct materials $414,000
Costs incurred in February—conversion 520,000
The cost per equivalent unit of production for direct materials is:
A. $9.26
B. $4.21
C. $4.97
D. $5.05
E. $5.85
125. During March, the production department of a process operations system completed and
transferred to finished goods 25,000 units that were in process at the beginning of March and
110,000 units that were started and completed in March. March’s beginning inventory units
were 100% complete with respect to materials and 55% complete with respect to conversion.
At the end of March, 30,000 additional units were in process in the production department and
were 100% complete with respect to materials and 30% complete with respect to conversion.
Compute the number of physical units transferred to finished goods.
A. 110,000.
B. 135,000.
C. 105,000.
D. 165,000.
E. 144,000.
126. During March, the production department of a process operations system completed and
transferred to finished goods 25,000 units that were in process at the beginning of March and
110,000 units that were started and completed in March. March’s beginning inventory units
were 100% complete with respect to materials and 55% complete with respect to conversion.
At the end of March, 30,000 additional units were in process in the production department and
were 100% complete with respect to materials and 30% complete with respect to conversion.
Compute the number of equivalent units with respect to both materials and conversion
respectively for March using the weighted-average method.
A. 165,000; 165,000.
B. 135,000; 119,000.
C. 140,000; 130,250.
D. 165,000; 144,000.
E. 144,000; 144,000.
127. During November, the production department of a process operations system completed
and transferred to finished goods 35,000 units that were in process at the beginning of
November and 110,000 units that were started and completed in November. November’s
beginning inventory units were 100% complete with respect to materials and 55% complete
with respect to conversion. At the end of November, 40,000 additional units were in process
in the production department and were 100% complete with respect to materials and 30%
complete with respect to conversion. Compute the number of equivalent units with respect to
materials for November using the weighted-average method.
A. 145,000.
B. 40,000.
C. 105,000.
D. 112,000.
E. 185,000.
128. During November, the production department of a process operations system completed
and transferred to finished goods 35,000 units that were in process at the beginning of
November and 110,000 that were started and completed in November. November’s beginning
inventory units were 100% complete with respect to materials and 55% complete with respect
to conversion. At the end of November, 40,000 additional units were in process in the
production department and were 100% complete with respect to materials and 30% complete
with respect to conversion. Compute the number of equivalent units with respect to
conversion for November using the weighted-average method.
A. 145,000.
B. 157,000.
C. 55,500.
D. 83,500.
E. 185,000.
129. During March, the production department of a process operations system completed and
transferred to finished goods 25,000 units that were in process at the beginning of March and
110,000 units that were started and completed in March. March’s beginning inventory units
were 100% complete with respect to materials and 55% complete with respect to labor. At the
end of March, 30,000 additional units were in process in the production department and were
100% complete with respect to materials and 30% complete with respect to labor. The
production department incurred direct materials cost of $253,000 and its beginning inventory
included materials cost of $93,500. Compute the direct materials cost per equivalent unit for
the department using the weighted-average method.
A. $1.53.
B. $2.48.
C. $2.10.
D. $2.57.
E. $2.40.
130. During April, the production department of a process operations system completed and
transferred to finished goods 18,000 units that were in process at the beginning of April and
90,000 units that were started and completed in April. April’s beginning inventory units were
100% complete with respect to materials and 40% complete with respect to labor. At the end
of April, 30,000 additional units were in process in the production department and were 100%
complete with respect to materials and 60% complete with respect to labor. The beginning
inventory included materials cost of $107,000 and the production department incurred direct
materials cost of $329,000 during the month. Compute the direct materials cost per equivalent
unit for the department using the weighted-average method.
A. $4.03.
B. $3.05.
C. $2.38.
D. $3.16.
E. $2.57.
131. During December, the production department of a process operations system completed
and transferred to finished goods a total of 65,000 units of product. At the end of March,
15,000 additional units were in process in the production department and were 80% complete
with respect to materials. The beginning inventory included materials cost of $57,500 and the
production department incurred direct materials cost of $183,000 during December. Compute
the direct materials cost per equivalent unit for the department using the weighted-average
method.
A. $3.70.
B. $2.38.
C. $2.82.
D. $3.12.
E. $4.79.
132. During March, the production department of a process operations system completed and
transferred to finished goods 25,000 units that were in process at the beginning of March and
110,000 that were started and completed in March. March’s beginning inventory units were
100% complete with respect to materials and 55% complete with respect to labor. At the end
of March, 30,000 additional units were in process in the production department and were
100% complete with respect to materials and 30% complete with respect to labor. The
production department incurred direct labor cost of $578,900 and its beginning inventory
included labor cost of $54,700. Compute the direct labor cost per equivalent unit for the
department using the weighted-average method.
A. $4.69.
B. $3.84.
C. $4.86.
D. $4.28.
E. $4.40.
133. During July, the production department of a process operations system completed and
transferred to finished goods 10,000 units that were in process at the beginning of July and
76,000 that were started and completed in July. July’s beginning inventory units were 100%
complete with respect to materials and 30% complete with respect to labor. At the end of July,
15,000 additional units were in process in the production department and were 100%
complete with respect to materials and 25% complete with respect to labor. The beginning
inventory included labor cost of $52,100 and the production department incurred direct labor
cost of $450,750 during July. Compute the direct labor cost per equivalent unit for the
department using the weighted-average method.
A. $1.72.
B. $5.60.
C. $.84.
D. $5.02.
E. $5.85.
134. During January, the production department of a process operations system completed and
transferred to finished goods a total of 78,000 units. At the end of January, 9,000 additional
units were in process in the production department and were 65% complete with respect to
labor. The beginning inventory included labor cost of $37,100 and the production department
incurred direct labor cost of $294,300 during January. Compute the direct labor cost per
equivalent unit for the department using the weighted-average method.
A. $6.34.
B. $3.77.
C. $3.51.
D. $4.25.
E. $3.95.
135. Following is a partial process cost summary for Mitchell Manufacturing’s Canning
Department.
Equivalent Units of Production Direct
Materials
Conversion
Units Completed and transferred out 50,000 50,000
Units in Ending Work in Process:
Direct Materials (15,000 * 100%) 15,000
Conversion (15,000 * 80%) 12,000
Equivalent Units of Production 65,000 62,000
Cost per Equivalent Unit
Costs of beginning work in process $40,500 $59,700
Costs incurred this period 136,000 183,100
Total costs $176,500 $242,800
Cost per equivalent unit $2.71 per EUP $3.92 per EUP
The total materials costs transferred out of the Canning Department should be:
A. $135,500.
B. $136,000.
C. $176,500.
D. $176,150.
E. $196,000.
136. Following is a partial process cost summary for Mitchell Manufacturing’s Canning
Department.
Equivalent Units of Production Direct
Materials
Conversion
Units Completed and transferred out 50,000 50,000
Units in Ending Work in Process:
Direct Materials (15,000 * 100%) 15,000
Conversion (15,000 * 80%) 12,000
Equivalent Units of Production 65,000 62,000
Cost per Equivalent Unit
Costs of beginning work in process $40,500 $59,700
Costs incurred this period 136,000 183,100
Total costs $176,500 $242,800
Cost per equivalent unit $2.71 per EUP $3.92 per EUP
The total conversion costs transferred out of the Canning Department should be:
A. $243,040.
B. $242,800.
C. $183,100.
D. $176,150.
E. $196,000.
137. Following is a partial process cost summary for Mitchell Manufacturing’s Canning
Department.
Equivalent Units of Production Direct
Materials
Conversion
Units Completed and transferred out 50,000 50,000
Units in Ending Work in Process:
Direct Materials (15,000 * 100%) 15,000
Conversion (15,000 * 80%) 12,000
Equivalent Units of Production 65,000 62,000
Cost per Equivalent Unit
Costs of beginning work in process $40,500 $59,700
Costs incurred this period 136,000 183,100
Total costs $176,500 $242,800
Cost per equivalent unit $2.71 per EUP $3.92 per EUP
If the units completed were transferred to the Labeling Department, what is the appropriate
journal entry to transfer the direct materials?
A. Work in Process—Labeling $135,500; Work in Process—Canning $135,500.
B. Work in Process—Labeling $176,500; Work in Process—Canning $176,500.
C. Finished Goods—Labeling $135,500; Finished Goods—Canning $135,500.
D. Work in Process—Labeling $176,500; Finished Goods—Canning $176,500
E. Finished Goods $136,000; Work in Process $136,000
138. Following is a partial process cost summary for Mitchell Manufacturing’s Canning
Department.
Equivalent Units of Production Direct
Materials
Conversion
Units Completed and transferred out 50,000 50,000
Units in Ending Work in Process:
Direct Materials (15,000 * 100%) 15,000
Conversion (15,000 * 80%) 12,000
Equivalent Units of Production 65,000 62,000
Cost per Equivalent Unit
Costs of beginning work in process $40,500 $59,700
Costs incurred this period 136,000 183,100
Total costs $176,500 $242,800
Cost per equivalent unit $2.71 per EUP $3.92 per EUP
If the units completed were transferred to the Labeling Department, what is the appropriate
journal entry to transfer the conversion costs?
A. Work in Process—Labeling $183,100; Work in Process—Canning $183,100.
B. Work in Process—Labeling $196,000; Work in Process—Canning $196,000.
C. Finished Goods—Labeling $183,100; Finished Goods—Canning $183,100.
D. Work in Process—Labeling $196,000; Finished Goods—Canning $196,000
E. Finished Goods $242,800; Work in Process $242,800
139. Williams Company computed its cost per equivalent unit for direct materials to be $2.60
and its cost per equivalent unit for conversion to be $3.75. A total of 250,000 units of product
were completed and transferred out as finished goods during the month, and 36,000 of
equivalent units remained unfinished at the end of the month. The amount that should be
reported in ending Work in Process Inventory is:
A. $93,600.
B. $135,000.
C. $1,816,100.
D. $1,587,500
E. $228,600
140. Williams Company computed its cost per equivalent unit for direct materials to be $2.60
and its cost per equivalent unit for conversion to be $3.75. A total of 250,000 units of product
were completed and transferred out as finished goods during the month, and 36,000 of
equivalent units remained unfinished at the end of the month. The amount that should be
reported in Finished Goods Inventory is:
A. $650,000.
B. $135,000.
C. $1,816,100.
D. $1,587,500
E. $228,600
141. During March, the production department of a process operations system completed and
transferred to finished goods 25,000 units that were in process at the beginning of March and
110,000 that were started and completed in March. March’s beginning inventory units were
100% complete with respect to materials and 55% complete with respect to conversion. At the
end of March, 30,000 additional units were in process in the production department and were
100% complete with respect to materials and 30% complete with respect to conversion.
Compute the number of equivalent units with respect to both materials and conversion
respectively for March using the FIFO method.
A. 165,000; 165,000.
B. 135,000; 119,000.
C. 140,000; 130,250.
D. 165,000; 144,000.
E. 144,000; 144,000.
142. A company uses the weighted average method for inventory costing. At the beginning of
a period the production department had 20,000 units in beginning Work in Process inventory
which were 40% complete; the department completed and transferred 165,000 units. At the
end of the period, 22,000 units were in the ending Work in Process inventory and are 75%
complete. Compute the number of equivalent units produced by the department.
A. 181,500.
B. 165,000.
C. 173,500.
D. 145,000.
E. 187,000.
143. A company uses the FIFO method for inventory costing. At the beginning of a period, the
production department had 20,000 units in beginning Work in Process inventory which were
40% complete; the department completed and transferred 165,000 units. At the end of the
period, 22,000 units were in the ending Work in Process inventory and are 75% complete.
Compute the number of equivalent units produced by the department.
A. 181,500.
B. 165,000.
C. 173,500.
D. 145,000.
E. 187,000.
144. A company uses the weighted average method for inventory costing. At the start of a
period the production department had 20,000 units in beginning Work in Process inventory
which were 40% complete; the department completed and transferred 165,000 units. At the
end of the period, 22,000 units were in the ending Work in Process inventory and are 75%
complete. The production department had conversion costs in the beginning goods is process
inventory of $99,000 and total conversion costs added during the period are $726,825.
Compute the conversion cost per equivalent unit.
A. $4.40.
B. $4.76.
C. $4.19.
D. $4.55.
E. $4.61.
145. A company uses the FIFO method for inventory costing. At the start of the period the
production department had 20,000 units in beginning Work in Process inventory which were
40% complete; the department completed and transferred 165,000 units. At the end of the
period, 22,000 units were in the ending Work in Process inventory and are 75% complete. The
production department had labor costs in the beginning goods is process inventory of $99,000
and total labor costs added during the period are $726,825. Compute the equivalent cost per
unit for labor.
A. $4.40.
B. $4.76.
C. $4.19.
D. $4.55.
E. $4.61.
146. A company uses the weighted-average method for inventory costing. At the end of the
period, 22,000 units were in the ending Work in Process inventory and are 100% complete for
materials and 75% complete for conversion. The equivalent costs per unit are materials, $2.65
and conversion $5.35. Compute the cost that would be assigned to the ending Work in Process
inventory for the period.
A. $146,575.
B. $176,000.
C. $87,725.
D. $93,775.
E. $132,000.
147. Match the following terms with the definitions.
__________ (1) Equivalent units of production
__________ (2) Job order costing system
__________ (3) Hybrid costing system
__________ (4) Process operations
__________ (5) Process costing system
__________ (6) Materials consumption report
__________ (7) Process cost summary
A. Costing system that measures costs per unit upon completion of a job.
B. Document that summarizes the materials a department uses when inventory moves
continuously through the manufacturing process during a reporting period; replaces materials
requisition.
C. Report of total costs charged to a department, describes its equivalent units of production
achieved, and allocates costs among units worked on in the period.
D. A manufacturing system that contains features of both process costing and job order
costing systems.
E. Number of units that could have been started and completed given the costs incurred
during the period.
F. System of measuring unit costs at the end of a period by combining costs per equivalent
unit from each separate department.
G. Mass production of similar products in a continuous flow of sequential processess.
1. E; 2. A; 3. D; 4. G; 5. F; 6. B; 7. C
Blooms: Remember
AACSB: Analytic
AICPA BB: Industry
AICPA FN: Measurement
Difficulty: 1 Easy
Learning Objective: 16-A1
Learning Objective: 16-A2
Learning Objective: 16-C2
Learning Objective: 16-C3
Learning Objective: 16-P1
Topic: Comparing Process and Job Order Costing Systems
Topic: Hybrid Costing System
Topic: Equivalent Units of Production
Topic: Process Costing
Topic: Accounting for Materials Costs
Copyright © 2016 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
16-81
Short Answer Questions
148. What is meant by equivalent units of production, and why are they important when a
process costing system is used?
149. What are the four steps in accounting for production activity in a period?
150. Why is the Process Cost Summary important to management and how does the Process
Cost Summary accomplish its purposes?
151. Briefly explain the conditions under which job order cost accounting systems and
process costing systems are commonly applied.
152. Job order costing and process costing are two major costing systems used in
manufacturing. Briefly contrast the characteristics of these two systems.
153. What is a hybrid costing system? When is a hybrid costing system appropriate for a
manufacturer?
154. Describe the flow of materials in a process costing system, including accounts used.
155. Describe the flow of labor in a process costing system, including accounts used.
156. Describe the flow of overhead costs in a process costing system, including accounts
used.
157. A company’s January 1 Work in Process inventory contained 30,000 units that were 25%
complete with respect to direct labor. The beginning inventory was completed this year and
another 120,000 units were started. Of those started, 80,000 were finished and the remaining
40,000 were left 20% complete. Calculate the equivalent units of production for the year
using the weighted average method.
158. Sutton Company uses a process costing system. In May, 80,000 units were finished and
transferred to finished goods. Ending Work in Process included 20,000 unfinished units 30%
complete. Calculate the equivalent units of production for the year using the weighted average
method.
Copyright © 2016 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
16-85
159. The following data is available for Donaldson Corp. for the current year:
Beginning inventory of Work in Process 12,000 units, 60% completed
Ending inventory of Work in Process 18,000 units, 30% completed
Units completed and transferred to
finished goods during the year 144,000 units
Calculate the equivalent units of production for the year using the weighted average
method.
160. A company uses a process costing system and the weighted average method for
inventory costs. The following information is available regarding direct labor for the current
year:
Work in Process, January 1 5,500 units, 80% complete
Work in Process, December 31 8,800 units, 40% complete
Units completed and transferred to
finished goods 46,900 units
Direct labor costs during the year $266,300
(a) Calculate the equivalent units of production for direct labor for the year.
(b) Calculate the average cost per equivalent unit for direct labor (round to the nearest cent).
Blooms: Apply
AACSB: Analytic
AICPA BB: Industry
AICPA FN: Measurement
Difficulty: 3 Hard
Learning Objective: 16-C2
Topic: Equivalent Units of Production
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McGraw-Hill Education.
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161. A company uses a process costing system and the weighted average method for
inventory costs. The following information is available regarding conversion activities for the
current year:
Work in Process, January 1 5,500 units, 80% complete
Work in Process, December 31 7,800 units, 50% complete
Units completed and transferred to finished goods 46,900 units
Calculate the equivalent units of production for direct labor for the year.
AACSB: Analytic
AICPA BB: Industry
AICPA FN: Measurement
Difficulty: 2 Medium
Learning Objective: 16-C2
Topic: Equivalent Units of Production
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McGraw-Hill Education.
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162. A company uses a process costing system and the weighted average method for
inventory costs. The following information is available regarding direct labor for the current
year:
Ending Work in Process 5,300 units, 50% complete
Units completed and transferred to finished goods 28,700 units
Direct labor costs during the year $199,300
Calculate the average cost per equivalent unit for direct labor (round to the nearest cent).
Blooms: Apply
AACSB: Analytic
AICPA BB: Industry
AICPA FN: Measurement
Difficulty: 2 Medium
Learning Objective: 16-C2
Topic: Equivalent Units of Production
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McGraw-Hill Education.
16-89
163. Refer to the following information about the Finishing Department in the Davidson
Factory for the month of June. Davidson Factory uses the FIFO method of inventory costing.
Beginning Work in Process inventory:
Physical units…………………………………………… 5,000 units
% complete for materials………………………………. 70%
% complete for labor and overhead……………………. 25%
Materials cost from May……………………………….. $7,350
Labor and overhead cost from May……………………. $3,125
Product started and completed:
Physical units…………………………………………… 40,000 units
Ending Work in Process inventory:
Physical units……………………………………………. 4,000 units
% complete for materials………………………………. 40%
% complete for labor and overhead……………………. 10%
Manufacturing costs for June:
Materials………………………………………………… $96,975
Labor and overhead……………………………………… $79,470
Compute equivalent units for direct materials, direct labor and overhead for June.
164. Refer to the following information about the Finising Department in the Davidson
Factory for the month of June. Davidson Factory uses the FIFO method of inventory costing.
Beginning Work in Process inventory:
Physical units……………………………………………………….…….. 5,000 units
% complete for materials……………………….……………………. 70%
% complete for labor and overhead….…………………………… 25%
Materials cost from May…………………………….……………….. $7,350
Labor and overhead cost from May……………………………….. $3,125
Product started and completed:
Physical units……………………………………………………….…….. 40,000 units
Ending Work in Process inventory:
Physical units……………………………………………………….…….. 4,000 units
% complete for materials……………………….……………………. 40%
% complete for labor and overhead……….………………………. 10%
Manufacturing costs for June:
Materials…………………………………………………..……………….. $96,975
Labor and overhead………………………………………… $79,470
Compute the equivalent cost per unit for direct materials, direct labor and overhead for June.
165. Refer to the following information about the Finishing Department in the Davidson
Factory for the month of June. Davidson Factory uses the FIFO method of inventory costing.
Beginning Work in Process inventory:
Physical units……………………………………………………….…….. 5,000 units
% complete for materials……………………….……………………. 70%
% complete for labor and overhead….…………………………… 25%
Materials cost from May…………………………….……………….. $7,350
Labor and overhead cost from May……………………………….. $3,125
Product started and completed:
Physical units……………………………………………………….…….. 40,000 units
Ending Work in Process inventory:
Physical units……………………………………………………….…….. 4,000 units
% complete for materials……………………….……………………. 40%
% complete for labor and overhead……….………………………. 10%
Manufacturing costs for June:
Materials…………………………………………………..……………….. $96,975
Labor and overhead………………………………………… $79,470
Compute the total cost of all units that were completed and transferred to finished goods
during June. Compute the total cost of the ending Work in Process inventory.
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166. Refer to the following information about the Finishing Department in the Davidson
Factory for the month of June. Davidson Factory uses the weighted-average method of
inventory costing.
Beginning Work in Process inventory:
Physical units……………………………………………………….…….. 5,000 units
% complete for materials……………………….……………………. 70%
% complete for labor and overhead….…………………………… 25%
Materials cost from May…………………………….……………….. $7,350
Labor and overhead cost from May……………………………….. $3,125
Product started and completed:
Physical units……………………………………………………….…….. 40,000 units
Ending Work in Process inventory:
Physical units……………………………………………………….…….. 4,000 units
% complete for materials……………………….……………………. 40%
% complete for labor and overhead……….………………………. 10%
Manufacturing costs for June:
Materials…………………………………………………..……………….. $96,975
Labor and overhead………………………………………… $79,470
Compute the total cost of all units that were completed and transferred to finished goods
during June. Compute the total cost of the ending Work in Process inventory.
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167. A company’s January 1 Work in Process inventory contained 30,000 units that were 25%
complete with respect to direct labor. The beginning inventory was completed this year and
another 120,000 units were started. Of those started, 80,000 were finished and the remaining
40,000 were 30% complete. Calculate the equivalent units of production for the year using the
FIFO method.
168. Prepare the required general journal entries to record the following transactions for the
Ringer Company.
a. Purchased $40,000 of raw materials on account.
b. Used $12,000 of direct materials in the production department.
c. Used $5,000 of indirect materials.
169. Prepare the required general journal entry to record the following transactions for the
O’Harra Company.
a. Used $78,000 of direct labor in the production department.
b. Used $17,000 of indirect labor.
170. Wang Company provides the following data for the current year:
Estimated Factory Overhead 7,800
Factory Overhead Incurred $11,400
Factory Overhead Applied ?
Estimated Direct Labor Cost 12,000
Direct Labor Cost Incurred 11,800
Required:
a. Calculate the predetermined overhead allocation rate based on direct labor.
b. Determine the amount of overhead applied to production.
c. Prepare the journal entry to apply factory overhead to Work in Process.
171. Refer to the following information about the Shaping Department of the Minnesota
Factory for the month of August. Minnesota Factory uses the FIFO method of inventory
costing.
Equivalent
Units
Total
Cost
Beginning Work in Process:
Costs from prior month….……………………. $ 7,000
Materials added…………………………………... 300
Labor and overhead added…………………... 375
Started and completed goods:
Materials added…………………………………... 2,000
Labor and overhead added…………………... 2,000
Ending Work in Process:
Materials added…………………………………... 320
Labor and overhead added…………………... 360
The cost per equivalent unit of materials is $10.00, and the cost per equivalent unit of labor
and overhead is $22.00. Compute the cost that should be assigned to the beginning units that
were completed and transferred during August.
172. Refer to the following information about the Shaping Department of the Minnesota
Factory for the month of August. Minnesota Factory uses the weighted average method of
inventory costing.
Equivalent
Units
Total
Cost
Beginning Work in Process:
Costs from prior month….……………………. $ 7,000
Materials added…………………………………... 300
Labor and overhead added…………………... 375
Started and completed goods:
Materials added…………………………………... 2,000
Labor and overhead added…………………... 2,000
Ending Work in Process:
Materials added…………………………………... 320
Labor and overhead added…………………... 360
The cost per equivalent unit of materials is $10.00, and the cost per equivalent unit of labor
and overhead is $22.00. Compute the cost that should be assigned to the units that were
started and completed during August.
173. Refer to the following information about the Shaping Department of the Minnesota
Factory for the month of August. Minnesota Factory uses the FIFO method of inventory
costing.
The cost per
equivalent unit
of materials is
$10.00, and the
cost per
equivalent unit
of labor and
overhead is
$22.00.
Compute the
cost that should
be assigned all
units that were
completed and transferred during August.
Answer: Equivalent
Units
Cost
per Unit
Total
Cost
Beginning Work in Process:
Costs from prior month.…................ $ 7,000
Materials costs added…................... 300 $10.00 3,000
Labor and overhead cost added........ 375 $22.00 8,250
Total………………………………………….. $18,250
Started and completed goods:
Materials costs added…................... 2,000 $10.00 $20,000
Labor and overhead cost added........ 2,000 $22.00 44,000
Total………………………………………….. $64,000
Total cost of finished goods.…….......... $82,250
Blooms: Apply
AACSB: Analytic
AICPA BB: Industry
AICPA FN: Measurement
Difficulty: 3 Hard
Learning Objective: 16-C4
Topic: FIFO Method of Process Costing
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McGraw-Hill Education.
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Equivalent
Units
Total
Cost
Beginning Work in Process:
Costs from prior month….……………………. $ 7,000
Materials added…………………………………... 300
Labor and overhead added…………………... 375
Started and completed goods:
Materials added…………………………………... 2,000
Labor and overhead added…………………... 2,000
Ending Work in Process:
Materials added…………………………………... 320
Labor and overhead added…………………... 360
174. Refer to the following information about the Shaping Department of the Minnesota
Factory for the month of August. Minnesota Factory uses the FIFO method of inventory
costing.
Equivalent
Units
Total
Cost
Beginning Work in Process:
Costs from prior month….……………………. $ 7,000
Materials added…………………………………... 300
Labor and overhead added…………………... 375
Started and completed goods:
Materials added…………………………………... 2,000
Labor and overhead added…………………... 2,000
Ending Work in Process:
Materials added…………………………………... 320
Labor and overhead added…………………... 360
The cost per equivalent unit of materials is $10.00, and the cost per equivalent unit of labor
and overhead is $22.00. Compute the cost that should be assigned to the ending Work in
Process inventory for August.
175. Refer to the following information about the Shaping Department of the Minnesota
Factory for the month of August. Minnesota Factory uses the FIFO method of inventory
costing.
Equivalent
Units
Total
Cost
Beginning Work in Process:
Costs from prior month……………………….. $ 7,000
Materials added…………………………………... 300
Labor and overhead added…………………... 375
Started and completed goods:
Materials added…………………………………... 2,000
Labor and overhead added…………………... 2,000
Ending Work in Process:
Materials added…………………………………... 320
Labor and overhead added…………………... 360
The cost per equivalent unit of materials is $10.00, and the cost per equivalent unit of labor
and overhead is $22.00. Prepare a cost reconciliation for the month of August.
Cost
Total
176. Giga Company uses a weighted average process cost system. The department started and
finished 129,000 units during the current period. The ending inventory consists of 60,000
units that are 75% complete with respect to direct labor and overhead. All direct materials are
added at the beginning of the process. The department incurred direct labor costs of $262,500
and overhead costs of $126,000.
(a) Compute the equivalent cost per unit for direct labor.
(b) Compute the equivalent cost per unit for overhead.
177. Bagger, Inc. uses a process costing system. The following operating and cost data
occurred during October:
October 1, Inventory: 30,000 units
100% complete for materials
($60,000) and 50% complete
for direct labor ($7,500) and
overhead ($15,000)
October 31, Inventory: 20,000 units
100% complete for materials
and 30% complete for
direct labor and overhead
Units started during Oct.: 40,000 units
October production costs: Direct materials….……........ $110,100
Direct labor………………….… 28,900
Overhead………………………. 57,800
Materials are added at the beginning of the process. Direct labor and overhead are incurred
evenly throughout the process. Prepare the October process cost summary assuming the
weighted average method of inventory costing.
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178. Kominski Company completed and transferred 90,000 units during the current period.
Based on the following information, determine the cost of the goods completed during the
current reporting period and journalize the transfer.
Direct
Materials
Direct
Labor/OH
Costs of Beginning Work in Process: $576,000 $400,000
Costs incurred this period 2,400,000 5,120,000
Equivalent units of production 96,000 92,000
179. Grayson Company had 8,700 units in beginning inventory with accumulated costs for
direct materials of $17,900, $16,500 direct labor, and $13,200 of overhead. During July, the
company completed and transferred 50,000 units to finished goods. Costs incurred in the
current period included $45,000 of direct materials, $58,500 of direct labor, and $46,800 of
factory overhead. Ending inventory consisted of 12,000 units which were 90% complete with
respect to materials and 50% complete with respect to labor and overhead. Compute the value
assigned to ending inventory based on the weighted average method of inventory costing.
180. During the year, LT Corp. introduced 132,000 units into production and 144,000 units
were completed and transferred to finished goods. At the end of the year, the company had
13,600 units in process that were 80% complete. Determine how many units the company had
in Work in Process at the beginning of the year.
181. The following table of cost information is available for the Renaldo Company for the
month of November:
Goods in
Process
Inventory—
Mixing
Goods in
Process
Inventory—
Molding
Finished
Goods
Inventory
Beginning Inventory……….…..….....
$12,000
$15,000
$24,000
Costs incurred:
Direct materials……..……….........
22,000
14,000
Direct labor……………………………
32,000
17,000
Overhead applied………..............
47,000
24,500
Costs transferred out…..………....
(100,000)
(152,000)
Costs transferred in…………........
100,000
152,000
Cost of goods sold
(149,000)
Ending inventory……...................... 13,000 18,500 27,000
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Based on the table of cost information above, prepare the general journal entry required to
record the:
a. Transfer of goods from the molding department to the finished goods inventory.
b. Cost of goods sold for November.
182. Prepare general journal entries to record the following production activities for Oaks
Manufacturing.
a. Purchased $82,000 of raw materials on credit.
b. Used $63,500 of direct materials in production.
c. Used $12,800 of indirect materials.
183. Prepare journal entries to record the following production activities for Oaks
Manufacturing.
a. Used $93,900 of direct labor in the production department.
b. Used $11,200 of indirect labor.
184. Prepare journal entries to record the following production activities for Oaks
Manufacturing.
a. Incurred overhead costs of $79,000 (paid in cash).
b. Applied overhead at 110% of direct labor costs which are $93,900.
c. Transferred completed products with a cost of $258,200 to finished goods inventory.
d. Sold $602,000 of product on credit. Cost is $271,000.
185. Port Manufacturing Company uses a process costing system. Materials are added at the
beginning of the process. Direct labor and overhead are added evenly throughout the process.
The company uses monthly reporting periods for its weighted-average process costing. The
following are the operating and cost data information for October.
The October 1 beginning Work in Process Inventory consisted of 20,000 units. The costs for
this inventory are $82,500 of direct materials, $24,400 of direct labor, and $48,800 of factory
overhead. Factory overhead is applied at 200% of direct labor cost.
In addition to the beginning inventory costs, the company issued the following costs into
Work in Process Inventory; direct materials, $240,000; direct labor, $68,000; factory
overhead, $136,000.
During October, the company completed and transferred 60,000 units of its product to
finished goods. At the end of the month, the Work in Process inventory consisted of 15,000
units that were 40% complete with respect to direct labor and factory overhead and 100%
complete with respect to materials.
Prepare the company’s process cost summary for October using the weighted average method.
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186. Process operations, also called process manufacturing or process production, is the
___________ production of similar products in a _____________________ flow of
sequential steps.
187. An ____________________is the number of units that could have been started and
completed given the costs incurred during the period.
188. If a process has _______________ or _______________ inventory of partially
completed production, equivalent units must be calculated so that total costs incurred during
the period are assigned to all units worked on.
189. The second step in accounting for production activity in a period, after determining the
physical flow of units, is to compute ______________________.
190. The third step in accounting for production activity in a period, before assigning and
reconciling costs, is to compute the ______________________.
191. The fourth step in accounting for production activity in a period is to prepare a cost
reconciliation, which reconciles __________________ with the ___________________.
192. Materials and labor costs that are clearly associated with a specific process or department
are known as ___________________. Those costs that are not clearly associated with a
specific process or department are called ________________.
193. A ____________________ contains features of both process and job order costing
systems.
194. In a process costing system, direct materials used are debited to the __________ account,
and indirect materials used are debited to the ____________ account.
195. In a manufacturing operation with two process departments (1 and 2), the flow of costs
would proceed from Work in Process, Department #1 to ________________.
196. In a process costing accounting system, factory wages are debited to ___________, when
direct labor is used. When indirect labor is used, the ____________ account is debited. In
both cases the _____________ is credited.
Answer; Work in Process; Factory Overhead; Factory Payroll Payable (answers must appear
in this order)
Blooms: Understand
AACSB: Analytic
AICPA BB: Industry
AICPA FN: Measurement
Difficulty: 2 Medium
Learning Objective: 16-P2
Topic: Accounting for Labor Costs
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197. In process costing, factory overhead incurred does not usually equal that applied, which
yields either ____________________ or ___________________ overhead.
198. A process cost summary involves computations and analysis at four sequential steps.
These are (1) _________ (2) _____________, (3) _______________, and (4)
______________.
199. On a process cost summary, the total costs to account for (the processing costs for the
period plus the Work in Process at the end of the period) should equal ___________________
(____________________ plus _____________________).
200. When the final production department completes goods, the cost of the completed goods
are transferred to ____________________.
201. When the completed goods are sold, the cost of the completed goods are transferred to
____________________.