54) In some circumstances, a process costing system can classify wages paid to maintenance workers
as direct labor costs instead of factory overhead.
A) True
B) False
55) In a process costing system, factory labor costs incurred in a reporting period are presented on the
income statement as Factory Labor Expense.
A) True
B) False
56) 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 6,10
0
Work in Process Inventory 6,10
0
A) True
B) False
57) 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 53,00
0
Work in Process Inventory, Department M 21,00
0
Factory Payroll Payable 74,00
0
A) True
B) False
58) In a process costing system, factory overhead costs are allocated to production departments by
using a predetermined overhead allocation rate.
A) True
B) False
59) 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 37,50
0
Raw Materials Inventory 37,50
0
A) True
B) False
60) In process costing there is never a balance remaining in Factory Overhead that needs to be closed at
period end.
A) True
B) False
61) In process costing, all indirect materials are charged directly to Work in Process Inventory.
A) True
B) False
62) A process costing system records all factory overhead costs directly in the Work in Process
Inventory accounts.
A) True
B) False
63) 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. 50,00
0
Factory Overhead 50,00
0
A) True
B) False
64) 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 15,00
0
Work in Process Inventory, Assembly Dept 15,00
0
A) True
B) False
65) 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. 24,50
0
Factory Overhead 24,50
0
A) True
B) False
66) 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.
A) True
B) False
67) 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.
A) True
B) False
68) 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 must also
be 100.
A) True
B) False
69) Once equivalent units are calculated for materials, this number will also be used for direct labor
and factory overhead.
A) True
B) False
70) 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.
A) True
B) False
71) 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.
A) True
B) False
72) 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.
A) True
B) False
73) 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.
A) True
B) False
74) 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.
A) True
B) False
75) 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.
A) True
B) False
76) The cost of units transferred from Work in Process Inventory to Finished Goods Inventory is called
the cost of goods manufactured.
A) True
B) False
77) 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 74,00
0
Work in Process Inventory, Finishing Dept. 74,00
0
A) True
B) False
78) Which of the following products is least likely to be produced in a process operations system?
A) Slacks for casual wear
B) Custom cabinets
C) Compact disks
D) Calculators
E) Baseball hats
79) Which of the following products is most likely to be produced in a process operations system?
A) Custom cabinets
B) Bridges
C) Designer bridal gowns
D) Airplanes
E) Cereal
80) Which of the following characteristics does not usually apply to process operations systems?
A) Different managers are responsible for different processes.
B) The output of all processes except the final process is an input to the next process.
C) Each unit of product is separately identifiable.
D) Costs are computed using equivalent units.
E) Partially completed products are transferred between processes.
81) 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 $144,000; credit Work in Process Inventory—Assembly $112,500;
credit Work in Process—Finishing $31,500.
B) Debit Factory Overhead—Assembly $112,500; debit Factory Overhead—Finishing $31,500;
credit Work in Process Inventory $144,000.
C) Debit Factory Payroll $144,000; credit Cash $144,000.
D) Debit Factory Overhead $144,000; credit Factory Payroll $144,000.
E) Debit Work in Process Inventory—Assembly $112,500; debit Work in Process Inventory
—Finishing $31,500; credit Factory Overhead $144,000.
82) 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 Work in Process Inventory—Dept. A $93,000; debit Work in Process Inventory—Dept.
D $67,000; credit Accounts Payable $160,000.
B) Debit Raw Materials Inventory—Dept. A $93,000; debit Raw Materials Inventory—Dept. D
$67,000; credit Work in Process Inventory $160,000.
C) Debit Factory overhead $160,000; credit Raw Materials Inventory $160,000.
D) Debit Work in Process Inventory—Dept. A $93,000; debit Work in Process Inventory—Dept.
D $67,000; credit Raw Materials Inventory $160,000.
E) Debit Raw Materials Inventory $160,000; credit Accounts Payable $160,000.
83) Which of the following characteristics applies to process costing but not to job order cost
accounting?
A) Use of a single Work in Process Inventory account.
B) Determining cost of goods manufactured.
C) Identifiable units of production.
D) Equivalent units of production.
E) Use of a predetermined overhead rate.
84) 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) Equivalent units of production.
B) Process cost summary.
C) A job cost sheet.
D) Manufacturing overhead.
E) Units in process.
85) Equivalent units of production are equal to:
A) Physical units that were started and completed during a period.
B) The number of units that could have been started and completed given the costs incurred
during the period.
C) The number of finished units actually produced during a period.
D) The number of units still in process at the end of a period.
E) The number of units started into the process during a period.
86) 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 process costing systems, direct materials are added at the beginning of the process
while conversion costs are added evenly throughout the manufacturing process.
B) 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.
C) In most cases, there is no difference between physical units and equivalent units of
production.
D) Companies often use a combination of a process costing and job order costing systems.
E) In most manufacturing environments, it is not possible to conduct a physical count of units.
87) The combined costs of direct labor and factory overhead per equivalent unit used by many
businesses with process operations is called:
A) Combined cost per equivalent unit
B) Overhead cost per equivalent unit
C) Physical cost per equivalent unit
D) Finished cost per equivalent unit
E) Conversion cost per equivalent unit
88) Using conversion cost per equivalent unit is appropriate for many businesses that use process
costing because:
A) All manufacturing costs are entered into the production process in the same period.
B) Direct labor and factory overhead enter the production process at the same rate.
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 materials and direct labor are usually entered into the production process at the same
rate.
89) 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) Assign and reconcile costs.
B) Determine the physical flow of units.
C) Compute the cost per equivalent unit of production.
D) Determine over or underapplied overhead.
E) Compute the equivalent units of production.
90) Which of the following statements is most accurate?
A) 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.
B) 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.
C) The FIFO method includes the cost of the beginning Work in Process inventory account in
calculating cost per equivalent units.
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) In process costing, estimating the degree of completion of units is usually more accurate for
conversion costs than for direct materials.
91) 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) 15,000 units.
B) 10,700 units.
C) 10,300 units.
D) 10,000 units.
E) 15,300 units.
