Chapter 17—Process Costing Key
1. Process costing accumulates costs by individual jobs.
2. Process costing is most appropriate for manufacturers of homogeneous products.
3. Process costing is appropriate for companies providing services.
4. Process costing is most useful in situations when relatively homogeneous products are produced.
5. Large manufacturing plants, such as chemical, food, and tire manufacturers, use process costing.
6. Parallel processing requires that units pass through one process before they can be worked on in the next
process.
7. In process costing, each producing department has its own work-in-process account.
8. A production report contains information on costs transferred in from prior departments as well as costs
added in the department such as direct materials, direct labor, and overhead.
9. Any product or service that is basically homogeneous and repetitively produced can take advantage of a
process-costing approach.
10. Firms that offer services cannot have work-in-process inventories.
11. Manufacturing firms may operate without significant work-in-process inventories.
12. Process-costing systems are specifically designed to support costing of mass-produced homogeneous
products.
13. The presence of beginning and ending work-in–process inventories leads to much of the complication
surrounding process costing.
14. The production report is the document that summarizes the manufacturing activity that takes place in a
process department for a given period of time.
15. The costs transferred from a prior process to a subsequent process are referred to as transferred-in costs.
16. Transferred-in costs are a type of raw material cost.
17. The FIFO costing method separates work and costs of the equivalent units in beginning inventory from
work and costs of the equivalent units produced during the current period. Only current work and costs are used
to calculate this period’s unit cost.
18. The FIFO method is the only method used to calculate equivalent units in process costing.
19. To calculate the equivalent units of production, the number of physical units is multiplied by the percentage
of completion.
20. Equivalent units of output are the complete units that could have been produced given the total amount of
manufacturing effort expended during the period.
21. There are two approaches for dealing with the prior-period output and prior-period costs found in beginning
work in process: the weighted average method and the FIFO method.
22. The major benefit of the FIFO method is simplicity.
23. A production report provides information about the physical units processed in a department and also about
the manufacturing costs associated with them.
24. The unit information section of the production report has two major subdivisions: (1) units to account for
and (2) units accounted for.
25. The cost information section of the production report has two major subdivisions: (1) costs to account for
and (2) costs accounted for.
26. The weighted average costing method combines beginning inventory costs and work done with current
period costs and work to calculate this period’s unit cost.
27. In process costing, it is unreasonable to assume uniform application of material costs.
28. Different percentage completion figures for manufacturing inputs pose a problem for the calculation of
equivalent units, unit cost, and valuation of ending work in process.
29. The solution for different percentage completion figures for manufacturing inputs is to calculate equivalent
units for one category of manufacturing input.
30. The usual approach is to treat transferred-in goods as a separate conversion category when calculating
equivalent units.
31. If changes occur in the prices of the manufacturing inputs from one period to the next, then the weighted
average method produces a more accurate unit cost than does the FIFO method.
32. Since FIFO excludes prior-period work and costs, it is necessary to create three categories of completed
units.
33. FIFO assumes that units in beginning work in process are completed last.
34. Under the FIFO method, for the beginning work-in-process units, the total associated manufacturing costs
are the sum of the prior-period costs plus the costs incurred in the current period to finish the units.
35. Select the appropriate definition for each of the items listed below
1. combines beginning inventory costs and work
done with current-period costs and work to calculate
2. works well whenever relatively homogeneous
products pass through a series of processes and
3. units pass through one process before they can be
4. partially completed units can be worked on
simultaneously in different processes then brought
weighted-average
36. Match the five steps involved in creating the department production report with the steps below in the
proper order.
37. Select the appropriate definition for each of the items listed below
activity that takes place in a process department for a
1. The document that summarizes the manufacturing
2. The costs transferred from a prior process to a
transferred-in
the total amount of manufacturing effort expended for
3. Complete units that could have been produced given
4. Separates work and costs of the equivalent units in
beginning inventory from work and costs of the
38. ___________________ requires that units pass through one process before they can be worked on in the
next process.
39. _________________ works well whenever relatively homogeneous products pass through a series of
processes and receives similar amounts of manufacturing costs.
40. Firms that have adopted a __________ approach try to reduce WIP inventories to very low levels.
41. The processing pattern in which partially completed units can be worked on simultaneously in different
processes and then brought together in a final process for completion is known as ____________________.
42. In process costing, each producing department has its own ________________ account.
43. Direct materials used in production, direct labor, and applied overhead are charged to the _______________
account.
44. _________________________ are costs transferred from a prior process to a subsequent process.
45. The _______________________ is the document that summarizes the manufacturing activity that takes
place in a process department for a given period of time.
46. ___________ costs are a type of raw material cost.
47. __________________________ are the complete units that could have been produced given the total
amount of manufacturing effort expended for the period under consideration.
48. The _________________________ combines beginning inventory costs and work done with current-period
costs and work to calculate this period’s unit cost.
49. The number of physical units is multiplied by the _____________________ to calculate equivalent units.
50. The _______________________ separates work and costs of the equivalent units in beginning inventory
from work and costs of the equivalent units produced during the current period.
51. The _____________________ provides an analysis of the physical flow of units.
52. If great accuracy in computing unit costs is desired, a company should use the _________ method to
determine unit cost.
53. _____________________ checks to see if the costs to account for are exactly assigned to inventories.
54. Under the _______________ method equivalent units of output are computed by adding units completed to
equivalent units in ending working-in-process.
55. When inputs are added _______________, equivalent units and unit cost are calculated for each separate
input category.
56. If changes occur in the ________ of the manufacturing inputs from one period to the next, then FIFO
produces a more accurate unit cost than does the weighted average method.
57. Under the _________________ method there are two categories of completed units; units started and
completed during the period and units from beginning inventory.
58. Which type of costing system works best with a large number of homogeneous products?
59. Which of the following businesses is most likely to use process costing?
60. Which of the following businesses is most likely to use process costing?
61. Manufacturers that produce a large number of homogeneous products are most likely to use which of the
following?
62. Which of the following companies would be least likely to use a process costing system?
63. What types of costs are normally found in a process accounting system?
64. The cost of units finished at the last (final) department will flow from work in process to:
65. Which of the following best describes sequential processing?
66. Which of the following best describes parallel processing?
67. Which is the best description of the production report?
68. Process accounting can be appropriate for
69. Process costing would be most appropriate for which of the following?
70. In process costing, the cost of units finished in the last department will be transferred from work in process
to
71. Process accounting is most probably used by a(n)
72. When should process costing techniques be used in assigning costs to products?
73. At the time they are used, raw materials, direct labor, and applied overhead costs are recorded in
74. What does the accountant need to know to calculate unit cost?
75. How is unit cost calculated?
76. A cost transferred from a prior process to a subsequent process is referred to as
77. Units transferred from a prior process to a subsequent process are referred to as
78. Equivalent production expresses all activity of the period in terms of
79. Two methods used to determine equivalent units of production in process costing are
80. Which of the following methods uses costs and work of beginning work in process?
81. Which statement best describes the concept of equivalent units of production?
82. When computing equivalent units of production, the method that combines partially completed units in
beginning inventory with current period production is the
83. The Fox Company uses the weighted average method. The beginning work in process consists of 20,000
units (100% completed as to materials and 50% complete as to conversion costs). The number of units
completed was 80,000. The ending work in process consists of 10,000 units (100% complete as to materials and
20% complete as to conversion costs). Calculate the equivalent units of production for conversion costs.
84. Beginning inventory for the month contained 2,000 units that were 70 percent complete with respect to
materials. During the month, 60,000 units were completed and transferred out. Ending inventory contained
3,000 units, 20 percent complete with respect to materials. The weighted average equivalent units of production
for materials for the month would be
85. The two methods used to determine equivalent units of production in process costing are
86. Beginning inventory for the month contained 3,000 units that were 60 percent complete with respect to
materials. During the month, 50,000 units were completed and transferred out. Ending inventory contained
5,000 units, 30 percent complete with respect to materials. The weighted average equivalent units of production
for materials for the month would be
87. The following information is provided:
Units
Work in process, June 1 (20% complete)
4,000
Started in June
32,000
Work in process, June 30 (30% complete)
12,000
Materials are added at the beginning of the process.
Equivalent units of production for conversion costs using the weighted average method would be
88. The following information concerns Schroeder’s equivalent units in May:
Units
Beginning work-in-process (50% complete)
2,000
Units started during May
8,000
Units completed and transferred
7,000
Ending work-in-process (80% complete)
2,500
Using the weighted average method, what are Schroeder’s equivalent units for May?
89. Figure 6-5.
For the current period, Haley Co. started 20,000 units and completed 8,000 units, leaving 12,000 units in
process 40 percent complete.
Refer to Figure 6-5. How many equivalent units of production did Haley Co. have for the period?
90. Figure 6-5.
For the current period, Haley Co. started 20,000 units and completed 8,000 units, leaving 12,000 units in
process 40 percent complete.
Refer to Figure 6-5. If Haley Co. incurred $31,800 in production costs what was Haley’s cost per equivalent
unit for the period?
91. The following information is provided:
Units
Work in process, May 1 (10% complete)
4,000
Started in May
17,000
Work in process, May 31 (20% complete)
3,000
Materials and conversion are incurred uniformly throughout the process.
Equivalent units of production for conversion using the weighted average method would be
92. Figure 6-6.
The Martin Company uses the weighted average method. The beginning work in process consists of 6,000 units
(100% completed as to materials and 50% complete as to conversion costs). The number of units completed was
120,000. The ending work in process consists of 10,000 units (100% complete as to materials and 20%
complete as to conversion costs).
Refer to Figure 6-6. What are the equivalent units of production for conversion costs?
93. Figure 6-6.
The Martin Company uses the weighted average method. The beginning work in process consists of 6,000 units
(100% completed as to materials and 50% complete as to conversion costs). The number of units completed was
120,000. The ending work in process consists of 10,000 units (100% complete as to materials and 20%
complete as to conversion costs).
Refer to Figure 6-6. Calculate the number of units started during the period.
94. Simplicity is the main advantage of which of the following process costing methods?
95. Which of the following does not appear in the production report?
96. A production report is divided into two sections:
97. The production report
98. What is the major advantage of the weighted average cost method?
99. Burgundy Manufacturing uses a process cost system and computes cost using the weighted average method.
During the current period, the beginning work-in-process inventory cost was $13,525. Manufacturing cost
added was $57,000. If Burgundy’s ending work-in-process inventory was valued at $15,100, then cost of goods
transferred must have been
100. Which step is cost reconciliation in the general pattern of a process-costing production report?
101. Which step is physical flow analysis in the general pattern of a process-costing production report?
102. The following amounts were selected from the production report of Chandon Corporation:
Actual units in production
42,000
Equivalent units (materials)
42,000
Equivalent units (conversion)
39,000
Cost per equivalent unit (materials)
$1.10
Cost per equivalent unit (conversion)
$0.90
Chandon uses the weighted average method in preparing its production reports. Chandon’s total production cost to be accounted for must have been
103. Garcia Company uses the weighted average method in its costing system. For the month of May in the
Assembly Department, the equivalent units for conversion costs amounted to 35,000. There were 5,000 units in
beginning work-in-process that were 50% complete. During the month, 33,000 units were started and 31,400
were completed and transferred. The ending work in process consists of:
104. Beginning inventory for the month contained 3,000 units that were 60 percent complete with respect to
materials. During the month, 50,000 units were completed and transferred out. Ending inventory contained
5,000 units, 30 percent complete with respect to materials. The weighted average equivalent units of production
for materials for the month would be
105. Figure 6-3.
Kelley Inc., manufactures a product that passes through two processes: mixing and molding. All manufacturing
costs are added uniformly in the mixing department.
Information for the mixing department for October follows:
Work in process, October 1:
Units (55% complete)
6,000
Direct materials
$35,000
Direct labor
$42,000
Overhead
$12,000
During October, 32,000 units were completed and transferred to the molding department. The following costs were incurred by the mixing
department during October:
Direct materials
$120,000
Direct labor
$160,000
Overhead
$50,000
By October 31, 3,000 units that were 75 percent complete remained in Mixing. Kelley uses the weighted average method.
Refer to Figure 6-3. Kelley’s equivalent units of production using the weighted average method would be
106. Figure 6-3.
Kelley Inc., manufactures a product that passes through two processes: mixing and molding. All manufacturing
costs are added uniformly in the mixing department.
Information for the mixing department for October follows:
Work in process, October 1:
Units (55% complete)
6,000
Direct materials
$35,000
Direct labor
$42,000
Overhead
$12,000
During October, 32,000 units were completed and transferred to the molding department. The following costs were incurred by the mixing
department during October:
Direct materials
$120,000
Direct labor
$160,000
Overhead
$50,000
By October 31, 3,000 units that were 75 percent complete remained in Mixing. Kelley uses the weighted average method.
Refer to Figure 6-3. Kelley’s total costs to account for would be:
107. Figure 6-3.
Kelley Inc., manufactures a product that passes through two processes: mixing and molding. All manufacturing
costs are added uniformly in the mixing department.
Information for the mixing department for October follows:
Work in process, October 1:
Units (55% complete)
6,000
Direct materials
$35,000
Direct labor
$42,000
Overhead
$12,000
During October, 32,000 units were completed and transferred to the molding department. The following costs were incurred by the mixing
department during October:
Direct materials
$120,000
Direct labor
$160,000
Overhead
$50,000
By October 31, 3,000 units that were 75 percent complete remained in Mixing. Kelley uses the weighted average method.
Refer to Figure 6-3. Kelley’s total cost per equivalent unit of production would be
108. Figure 6-3.
Kelley Inc., manufactures a product that passes through two processes: mixing and molding. All manufacturing
costs are added uniformly in the mixing department.
Information for the mixing department for October follows:
Work in process, October 1:
Units (55% complete)
6,000
Direct materials
$35,000
Direct labor
$42,000
Overhead
$12,000
During October, 32,000 units were completed and transferred to the molding department. The following costs were incurred by the mixing
department during October:
Direct materials
$120,000
Direct labor
$160,000
Overhead
$50,000
By October 31, 3,000 units that were 75 percent complete remained in Mixing. Kelley uses the weighted average method.
Refer to Figure 6-3. Kelley’s cost of goods transferred to the molding department during October would be
109. Figure 6-3.
Kelley Inc., manufactures a product that passes through two processes: mixing and molding. All manufacturing
costs are added uniformly in the mixing department.
Information for the mixing department for October follows:
Work in process, October 1:
Units (55% complete)
6,000
Direct materials
$35,000
Direct labor
$42,000
Overhead
$12,000
During October, 32,000 units were completed and transferred to the molding department. The following costs were incurred by the mixing
department during October:
Direct materials
$120,000
Direct labor
$160,000
Overhead
$50,000
By October 31, 3,000 units that were 75 percent complete remained in Mixing. Kelley uses the weighted average method.
Refer to Figure 6-3. Kelley’s cost of October’s ending work in process for the mixing department would be
110. Figure 6-4.
The following information is available for Department X for August:
Work in process, August 1:
Materials
$ 8,000
Conversion costs
$15,000
Costs added during August:
Materials
$28,000
Conversion costs
$25,000
Equivalent units of production (weighted average):
Materials
4,000
Conversion
5,000
Refer to Figure 6-4. Department X’s cost per equivalent unit for materials using the weighted average method would be