Fundamentals of Cost Accounting, 6e (Lanen)
Chapter 8 Process Costing
1) Process costing assumes all units are homogeneous and follow the same path through the
production process.
2) The equivalent unit concept refers to the actual amount of work during the period stated in
terms of the work required to complete an equal number of whole units.
3) The number of units in the beginning Work-in-Process Inventory plus the units transferred out
during the period equals the number of units started during the period plus the number of units in
the ending Work-in-Process Inventory.
4) If materials are added continuously throughout the production process, then the equivalent
units for materials will always equal the equivalent units for the conversion costs.
5) If materials are only added at the beginning of the production process, then the degree of
completion for materials in the ending Work-in-Process Inventory is always 100%.
6) If materials are only added at the beginning of the production process, then the degree of
completion for materials in the ending Work-in-Process Inventory will be the same as the degree
of completion for the conversion costs.
7) If materials are only added at the end of the production process, then the degree of completion
for materials of units in the ending Work-in-Process Inventory is always 0%.
8) In the weighted-average approach, the number of physical units transferred out cannot be
greater than the equivalent number of units produced during the period.
9) The weighted-average approach to process costing combines the work and costs done in prior
periods with the work and costs done in the current period.
10) In a weighted-average process costing system, the costs in the beginning Work-in-Process
Inventory are not used to compute the costs transferred-out.
11) First-in, first-out (FIFO) process costing transfers out the costs in beginning inventory before
transferring out the costs associated with units started and completed.
12) If the beginning Work-in-Process inventory is zero, first-in, first-out (FIFO) and weighted-
average process costing will assign the same amount to the units transferred out.
13) In general, the ending Work-in-Process Inventory value computed using first-in, first-out
(FIFO) will be the same as the ending value computed using weighted-average process costing.
14) It is possible for units in the beginning Work-in-Process Inventory to also be part of the
ending Work-in-Process Inventory.
15) The more prices change, the greater the difference between the costs assigned to units
transferred out using weighted-average costing and the costs assigned to units transferred out
using first-in, first-out (FIFO).
16) In general, weighted-average costing is simpler to use while first-in, first-out (FIFO) costing
provides greater decision-making benefits to managers.
17) The degree of completion associated with prior department costs is always 100%.
18) Job costing requires more detailed record keeping than process costing.
19) Operation costing is used in manufacturing goods that have some common characteristics
and some individual characteristics.
20) Operation costing accounts for material costs like job costing and conversion costs like
process costing.
21) In process 2, material G is added when a batch is 60% complete. Ending work-in-process
units, which are 50% complete, would be included in the computation of equivalent units for:
(CPA adapted)
Conversion Costs Material G
A. Yes No
B. No Yes
C. No No
D. Yes Yes
A) Option A.
B) Option B.
C) Option C.
D) Option D.
22) The following examples briefly describe the manufacture of two different products. Which
costing method (job-order or process) would be the best method to use for each project?
I. Steven Lawless manufactures Lawless Fine Wine Coolers. Steven once made the statement,
“People can have any flavor of Lawless Fine Wine Coolers they want as long it’s strawberry.”
II. Northridge Spacetronics is manufacturing three space shuttles for the country of Xanadu.
Each shuttle is slightly different and production will last approximately two years.
I II
A. Process Process
B. Job-Order Job-Order
C. Process Job-Order
D. Job-Order Process
A) Option A.
B) Option B.
C) Option C.
D) Option D.
23) Which of the following statements is (are) true regarding product costing?
(A) Twenty cans of paint that are 25% full are equivalent to four cans of paint that are
completely full.
(B) The equivalent unit concept refers to the actual amount of work during the period stated in
terms of whole units.
A) Only A is true.
B) Only B is true.
C) Both of these are true.
D) Neither of these is true.
24) A company should use process costing, rather than job costing, if:
A) production is only partially completed during the accounting period.
B) the product is manufactured in batches only as orders are received.
C) the product is composed of mass-produced homogeneous units.
D) the product goes through several steps of production.
25) Which of the following characteristics applies to process costing, but does not apply to job
order costing?
A) the need for averaging.
B) the use of equivalent units of production.
C) separate, identifiable jobs.
D) the use of predetermined overhead rates.
26) Equivalent units for a process costing system, using the weighted-average method, would be
equal to:
A) units completed during the period and transferred out.
B) units started and completed during the period plus equivalent units in the ending work-in–
process inventory.
C) units completed during the period less equivalent units in the beginning inventory, plus
equivalent units in the ending work-in-process inventory.
D) units completed during the period plus equivalent units in the ending work-in-process
inventory.
27) The Fremont Company uses the weighted-average method in its process costing system. The
company recorded 29,500 equivalent units for conversion costs for November in a particular
department. There were 6,000 units in the ending work-in-process inventory on November 30,
75% complete with respect to conversion costs. The November 1 work-in-process inventory
consisted of 8,000 units, 50% complete with respect to conversion costs. A total of 25,000 units
were completed and transferred out of the department during the month. The number of units
started during November in the department was:
A) 24,500 units.
B) 23,000 units.
C) 27,000 units.
D) 21,000 units.
28) In a process costing system, the application of factory overhead usually would be recorded as
an increase in: (CPA adapted)
A) Finished goods inventory control.
B) Factory overhead control.
C) Cost of goods sold.
D) Work-in-process inventory control.
29) Sigman Co.’s inventories in process were at the following stages of completion at April 30:
No. of Units Percent Complete
100 90
50 80
200 10
Equivalent units of production in ending inventory amounted to: (CPA adapted)
A) 150.
B) 180.
C) 330.
D) 350.
30) An error was made by Marrow Company in computing the percentage-of-completion of the
current year’s ending Work-in-Process Inventory. The error resulted in the assignment of a lower
percentage of completion to each component of the inventory than actually was the case. There
was no beginning Work-in-Process Inventory. What is the effect of this error on (1) cost
assigned to cost of goods completed for the period and (2) the computation of costs per
equivalent unit?
A) Understated; Understated
B) Understated; Overstated
C) Overstated; Understated
D) Overstated; Overstated
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31) Which of the following organizations would most likely use a process costing system?
A) Gasoline refinery.
B) Automobile retailer.
C) Airplane manufacturer.
D) Public accounting firm.
32) An equivalent unit of conversion costs is equal to the amount of conversion costs required to:
A) start a unit.
B) start and complete a unit.
C) transfer a unit in.
D) transfer a unit out.
33) Of the following process costing steps, which must be done last?
A) Compute the equivalent units of production.
B) Compute the costs per equivalent unit of production.
C) Measure the physical flow of resources.
D) Identify the product costs to account for.
34) The Phantom Corporation started 4,800 units during February. Phantom started the month
with 700 units in process (40% complete) and ended the month with 400 units in process (40%
complete). How many units were transferred to the Finished Goods Inventory during February?
A) 5,500 units
B) 5,380 units
C) 5,100 units
D) 4,400 units
35) If the units in the beginning Work-in-Process Inventory are greater than the units in the
ending Work-in-Process Inventory, then the units transferred out are:
A) more than the units started during the period.
B) equal to the equivalent units of production.
C) less than the units started during the period.
D) equal to the actual work done during the period.
36) Phantom Company has beginning and ending Work-in-Process Inventories that are 45% and
10% complete, respectively. Materials are added at the beginning of the process. If first-in, first-
out (FIFO) process costing is used, the total equivalent units for materials will equal the number
of units:
A) transferred out during the period.
B) started and completed during the period.
C) started into the process during the period.
D) started into the process plus the units in the ending inventory.
37) Which of the following statements concerning a process cost accounting system is false?
A) The units in beginning inventory plus the units transferred out during the month should equal
the units in the ending inventory plus the units transferred in during the month.
B) If material is used evenly throughout a process, the number of equivalent material units will
equal the number of equivalent units for the conversion (processing) costs.
C) Actual costing may be used in a process costing system to assign indirect overhead costs to
departments.
D) The units in beginning inventory plus the units transferred in during the month should equal
the units in the ending inventory plus the units transferred out during the month.
38) The weighted-average method of process costing differs from the FIFO method of process
costing in that the weighted-average method:
A) can be used under any cost flow assumption.
B) does not require the use of predetermined overhead rates.
C) keeps costs in the beginning inventory separate from current period costs.
D) does not consider the degree of completion of units in the beginning work-in-process
inventory when computing equivalent units of production.
39) The Miracle Company had 20,000 units in process on December 31, 2020 which was 80%
complete as to materials but only 40% complete as to conversion costs. The company’s records
show 40,000 units were transferred to the Finished Goods Inventory during January 2021. On
January 31, 2021, 15,000 units were on hand which were 30% complete as to conversion costs
and 60% complete as to materials. What are the equivalent units of production (EUPs) for the
conversion costs in January, assuming Miracle uses first-in, first-out (FIFO)?
A) 34,000 EUPs
B) 35,000 EUPs
C) 36,500 EUPs
D) 41,500 EUPs
40) The Townson Manufacturing Company has gathered the following information for the month
of September:
• 6,000 units in the beginning Work–in-Process Inventory (75% complete as to materials, 1/3
complete with respect to the conversion costs).
• 60,000 units were started into production.
• 50,000 units were completed and transferred to the next department.
• The ending Work–in-Process Inventory is complete as to materials but only 3/8 complete with
respect to conversion costs.
What are the equivalent units of production (EUPs) for materials in the month of September
assuming Townson uses weighted-average process costing?
A) 52,000 EUPs
B) 64,500 EUPs
C) 66,000 EUPs
D) 61,500 EUPs
41) The Townson Manufacturing Company has gathered the following information for the month
of September:
• 6,000 units in the beginning Work–in-Process Inventory (75% complete as to materials, 1/3
complete with respect to the conversion costs).
• 60,000 units were started into production.
• 50,000 units were completed and transferred to the next department.
• The ending Work–in-Process Inventory is complete as to materials but only 3/8 complete with
respect to conversion costs.
What are the equivalent units of production (EUPs) for the conversion costs in the month of
September assuming Townson uses weighted-average process costing?
A) 64,500 EUPs
B) 56,000 EUPs
C) 61,500 EUPs
D) 54,000 EUPs
42) Haberdashery Company has a beginning Work-in-Process Inventory of 25,000 units (40%
complete). During the period, 110,000 units were started and the ending Work-in-Process
Inventory consisted of 20,000 units (80% complete). What are the equivalent units for
conversion costs using weighted-average process costing?
A) 110,000 EUPs
B) 115,000 EUPs
C) 121,000 EUPs
D) 131,000 EUPs