66. 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.
67. The cost of units transferred from Goods in Process Inventory to Finished Goods
Inventory is called the cost of goods manufactured.
68. The Packing 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
Goods in Process Inventory, Packing Dept. 74,000
69. Which of the following products is least likely to be produced in a process manufacturing
system?
A. Compact disks
B. Slacks for casual wear
C. Baseball hats
D. Calculators
E. Custom cabinets
70. Which of the following characteristics does not usually apply to process manufacturing
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. All of the choices include characteristics of process manufacturing systems.
71. Hou Company applies factory overhead to its production departments on the basis of 90%
of direct labor costs. In the Assembly Department, Hou had $125,000 of direct labor cost, and
in the Finishing Department, Hou 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 Goods in Process Inventory $144,000.
B. Debit Factory Overhead $144,000; credit Goods in Process Inventory – Assembly
$112,500; credit Goods in Process – Finishing $31,500.
C. Debit Factory Overhead $144,000; credit Factory Payroll $144,000.
D. Debit Goods in Process Inventory – Assembly $112,500; debit Goods in Process Inventory
– Finishing $31,500; credit Factory Overhead $144,000.
E. Debit Factory Payroll $144,000; credit Cash $144,000.
72. Which of the following characteristics applies to process cost accounting but not to job
order cost accounting?
A. Use of a predetermined overhead rate.
B. Identifiable lots of production.
C. Equivalent units of production.
D. Labor time ticket for each employee.
E. Use of a single Goods in Process Inventory account.
73. A measure of the productivity of a process with respect to its use of direct materials, direct
labor, or overhead, and an expression of the activity of a process as the number of units that
would have been processed during a period if all effort had been applied to units that were
started and finished during the period, is called:
A. Manufacturing overhead.
B. Units in process.
C. A job cost sheet.
D. Equivalent units of production.
E. Process cost summary.
74. Equivalent units of production are equal to:
A. The number of units that could have been completed if all effort had been applied to units
that were started and completed during a period.
B. The number of finished units actually produced during a period.
C. The number of units introduced 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.
75. 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.
76. 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 equivalent units of production.
D. Compute the cost per equivalent unit.
E. Assign and reconcile costs.
77. 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 weighted average method uses the stage of completion of the current period’s
beginning goods in process inventory account in calculating equivalent units.
C. The weighted average method focuses on the total costs and total equivalent units
completed to date; this is the major difference between the weighted average method and the
FIFO method of calculating equivalent units of production.
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.
78. 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 goods in
process inventory. The units in ending goods in process inventory were 50% complete with
respect to both direct materials and conversion costs. There were 1,000 units in beginning
goods 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.
79. The Machining Department started the current month with a beginning goods 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 Goods in Process Inventory account for the Machining
Department is:
A. $ 13,000.
B. $ 56,000.
C. $ 59,000.
D. $110,000.
E. $165,000.
80. A company uses a process cost accounting system. Its Assembly Department’s beginning
inventory consisted of 50,000 units, 3/4 complete with respect to direct labor and overhead.
The department completed and transferred out 127,500 units this period. The ending
inventory consists of 40,000 units that are 1/4 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. $0.17.
D. $0.30.
E. $0.37.
81. A company’s beginning work in process inventory consisted of 20,000 units that were 1/5
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 1/3 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. 90,000.
E. 96,000.
20–28
82. At the beginning of the recent period, there were 900 units of product in a department,
one-third 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, one-
fourth 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.
83. A company uses the weighted average method for inventory costing. During a period,
Department A finished and transferred 50,000 units to Department B. Also, during the period,
10,000 units were started but brought only to a stage of being 3/5 completed. The number of
equivalent units produced by Department A during the period was:
A. 44,000 units.
B. 50,000 units.
C. 54,000 units.
D. 56,000 units.
E. 60,000 units.
84. Medina 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 inventory of goods in process (40% complete, $1,100)
Ending inventory of goods in process (80% complete) …………….
Total units started during the year ………………………………………….
A. 3,200 units.
B. 3,000 units.
C. 3,400 units.
D. 3,160 units.
E. 3,500 units.
200 units
400 units
3,200 units
85. Medina 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 goods in process (40% complete, $1,100) 200 units
Ending inventory of goods 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.
86. A company uses a process cost accounting system. Its Sewing Department completed and
transferred out 120,000 units during the current period. The ending inventory in the Sewing
Department consists of 40,000 units (20% complete with respect to direct materials and 60%
complete with respect to direct labor). Overhead is applied on the basis of direct labor.
Determine the equivalent units of production for the Sewing Department for direct materials,
direct labor and overhead assuming the weighted average method.
A. 120,000; 120,000; 120,000
B. 120,000; 160,000; 120,000
C. 128,000; 120,000; 120,000
D. 128,000; 144,000; 144,000
E. 128,000; 184,000; 160,000
87. A process cost summary is a managerial accounting report that describes:
A. The costs charged to a department.
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. All of the options are correct.
88. Aniston Enterprises manufactures stylish hats for sophisticated women. 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.
Goods in Process, May 1 (50,000 units, 100% complete for direct materials, 40% complete
with respect to direct labor and overhead (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
Goods 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 Aniston 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.
89. Aniston Enterprises manufactures stylish hats for sophisticated women. 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.
Goods 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
Goods 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 Aniston 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
90. The following data are available for a company’s manufacturing activities:
Beginning goods in process inventory ……….. 5,000 units, 1/4 of the labor added this period
Units started and completed …………………… . 15,000
Ending goods in process inventory …………… 6,000 units, 1/2 of the labor added this period
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.
91. A system of accounting in which the costs of each process are accumulated and then
assigned to the units of product that passed through the process is a:
A. General cost accounting system.
B. Process cost accounting system.
C. Job order cost accounting system.
D. Manufacturing cost accounting system.
E. Goods in process accounting system.
92. A company that applies process costing is most frequently characterized by:
A. Low standardization and high production volume.
B. Custom orders and homogeneous products.
C. Repetitive production and heterogeneous products.
D. Repetitive production and low production volume.
E. Homogeneous product and high production volume.
93. 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.
94. 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 of the choices would necessitate a hybrid costing system.
95. In a process cost accounting system, direct material costs incurred are recorded:
A. Indirectly to a Goods in Process Inventory account.
B. Indirectly to a Finished Goods Inventory account.
C. Directly to a Goods in Process Inventory account.
D. Directly to a Finished Goods Inventory account.
E. Directly to a Cost of Goods Sold account.
96. 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 Goods in Process Inventory and a credit to Accounts Payable.
20–37
97. 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 Goods 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.
98. Direct labor and indirect labor are recorded, respectively, to:
A. Factory Overhead and Goods in Process Inventory.
B. Goods in Process Inventory and Finished Goods Inventory.
C. Finished Goods Inventory and Goods in Process Inventory.
D. Goods in Process Inventory and Factory Overhead.
E. Cost of Goods Sold and Finished Goods Inventory.
99. 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 that labor that is recorded in the Factory Payroll account.
100. 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.
101. 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 Goods in Process Inventory account.
D. the Manufacturing Overhead account.
E. the Raw Materials Inventory account.
102. 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.
103. The following is an account for a production department, showing its costs for one
month:
Goods in Process Inventory
Balance 5,400
Direct materials 21,600
Direct labor 16,200
Overhead 10,800
Assume that materials are added at the beginning of the production process and that direct
labor and overhead are applied uniformly. If the units in ending goods in process inventory
cost $4,590, and the started and completed units cost $41,850, what was the cost of
completing the units in the beginning goods in process inventory?
A. $12,150.
B. $ 2,160.
C. $ 7,560.
D. $54,000.
E. $37,260.
20–40
104. Que Corporation uses a process cost accounting system. The company manufactured
certain goods at a cost of $800 and sold them on credit to Are Corporation for $1,075. The
complete journal entry to be made by Que 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.
105. Embark produces mulch for landscaping 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