Chapter 20—Process Cost Systems Key
1. Process cost systems use job order cost cards to accumulate cost data.
2. Both process and job order cost systems maintain perpetual inventory accounts with subsidiary ledgers.
3. If the principal products of a manufacturing process are identical, a process cost system is more appropriate
than a job order cost system.
4. If the products of a manufacturing process are produced to customer specifications, a process cost system is
more appropriate than a job order cost system.
5. Process manufacturers typically use large machines to process a continuous flow of raw materials into a
finished state.
6. Industries that typically use process cost systems include chemicals, oil, metals, food, paper, and
pharmaceuticals.
7. In a process cost system, product costs are accumulated by processing department rather than by job.
8. Conversion costs include materials, direct labor, and factory overhead.
9. The direct materials costs and direct labor costs incurred by a production department are referred to as
conversion costs.
10. The direct labor costs and factory overhead costs incurred by a production department are referred to as
conversion costs.
11. The first step in determining the cost of goods completed and ending inventory valuation using process
costing is to calculate equivalent units of production.
12. Conversion costs are usually incurred evenly throughout a process.
13. Equivalent units of production are the number of units that could have been manufactured from start to
finish during an accounting period.
14. Both job order and process cost accounting use equivalent units of production to determine costs.
15. If 30,000 units of materials enter production during the first year of operations, 25,000 of the units are
finished, and 5,000 are 50% completed, the number of equivalent units of production would be 28,500.
16. If 16,000 units of materials enter production during the first year of operations, 12,000 of the units are
finished, and 4,000 are 75% completed, the number of equivalent units of production would be 15,000.
17. If the costs for direct materials, direct labor, and factory overhead were $277,300, $52,600, and $61,000,
respectively, for 14,000 equivalent units of production, the total conversion cost was $390,900.
18. If the costs for direct materials, direct labor, and factory overhead were $60,000, $35,000, and $25,000,
respectively, for 20,000 equivalent units of production, the conversion cost per equivalent unit was $6.
19. If the costs for direct materials, direct labor, and factory overhead were $522,200, $82,700, and $45,300,
respectively, for 16,000 equivalent units of production, the conversion cost per equivalent unit was $8.00.
20. If 10,000 units which were 50% completed are in process at November 1, 90,000 units were completed
during November, and 20,000 were 20% completed at November 30, the number of equivalent units of
production for November was 90,000. (Assume no loss of units in production and that inventories are costed by
the first-in, first-out method.)
21. If 10,000 units which were 40% completed are in process at November 1, 80,000 units were completed
during November, and 12,000 were 20% completed at November 30, the number of equivalent units of
production for November was 75,600. (Assume no loss of units in production and that inventories are costed by
the first-in, first-out method.)
22. In applying the first-in, first-out method of costing inventories, if 8,000 units which are 30% completed are
in process at June 1, 28,000 units are completed during June, and 4,000 units were 75% completed at June 30,
the number of equivalent units of production for June was 33,400.
23. In applying the first-in, first-out method of costing inventories, if 8,000 units which are 30% completed are
in process at June 1, 28,000 units are completed during June, and 4,000 units were 80% completed at June 30,
the number of equivalent units of production for June was 28,600.
24. The cost of production report reports the cost of the goods sold.
25. The cost of production report reports the cost charged to production and the costs allocated to finished
goods and work in process.
26. The cost of production report summarizes (1) the units for which the department is accountable and the units
to be assigned costs and (2) the costs charged to the department and the allocation of those costs.
27. The amount journalized showing the cost added to finished goods is taken from the cost of production
report.
28. One of the differences in accounting for a process costing system compared to a job order system is that the
amounts used to transfer goods from one department to the next comes from the cost of production report
instead of job cost cards.
29. One of the primary uses of a cost of production report is to assist management in controlling production
costs.
30. Yield measures the ratio of the materials output quantity to the materials input quantity.
31. Companies recognizing the need to simultaneously produce products with high quality, low cost, and instant
availability have adopted a just-in-time processing philosophy.
32. In a just-in-time system, processing functions are combined into work centers, sometimes called
departments.
33. The FIFO method of process costing is simpler than the Average cost method.
34. Companies that use the average costing method for process costing have unit costs that include costs from
more that one accounting period.
35. If a company uses average costing instead of FIFO they will still get the same unit costs.
36. The closer a company moves towards Just in Time production, the differences in unit costs between average
costing and FIFO will be reduced.
37. Custom-made goods would be accounted for using a process costing system.
38. In a process costing system, a separate work in process inventory account is maintained for each customer’s
job.
39. Direct materials, direct labor, and factory overhead are assigned to each manufacturing process in a process
costing system.
40. In a process costing system, costs flow into finished goods inventory only from the work in process
inventory of the last manufacturing process.
41. Equivalent units are the sum of direct materials used and direct labor incurred.
42. Conversion costs are generally added evenly throughout the process.
43. Equivalent units should be computed separately for direct materials and conversion costs.
44. Costs are transferred, along with the units, from one work in process inventory account to the next in a
process costing system.
45. In a process costing system, each process will have a work in process inventory account.
46. In a process costing system, the cost per equivalent unit is computed before computing equivalent units.
47. Costs of ending work in process inventory are included in the cost per equivalent unit computation.
48. Conversion and direct materials are generally both added at the end of the production process.
49. Gilbert Corporation had 25,000 finished units and 8,000 units were 35% complete. The equivalent units
totaled 30,200.
50. The entry to transfer goods in process from Department X to Department Y includes a debit to Work in
Process-Department X.
51. Process manufacturing usually reflects a manufacturer that produces small quantities of unique items.
52. Equivalent units of production are always the same as the total number of physical units finished during the
period.
53. The last step in the accounting procedure for process costing is the calculation of equivalent units of
production.
54. The FIFO method separates work done on beginning inventory in the previous period from work done on it
in the current period.
55. When a process cost accounting system records the purchase of materials, the Materials account is credited.
56. In a process costing system, indirect materials are charged to Work in Process.
57. A process cost accounting system records all actual factory overhead costs directly in the Work in Process
account.
58. Once equivalent units are calculated for materials, this number will also be used for direct labor and factory
overhead.
59. If a department that applies FIFO 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 conversion, it must add
12,500 equivalent units of direct materials and 20,000 equivalent units to direct labor to complete them.
60. All costs of the processes in a process costing system ultimately pass through the Cost of Goods Sold
account.
61. For which of the following businesses would a process cost system be appropriate?
62. Which of the following is NOT a way in which process and job order cost systems are similar?
63. The cost system best suited to industries that manufacture a large number of identical units of commodities
on a continuous basis is:
64. In a process cost system, the amount of work in process inventory is valued by:
65. In process cost accounting, the costs of direct materials and direct labor are charged directly to:
66. The two categories of cost comprising conversion costs are:
67. In a process cost system, the cost of completed production in Department A is transferred to Department B
by which of the following entries?
68. The three categories of manufacturing costs comprising the cost of work in process are direct labor, direct
materials, and:
69. For which of the following businesses would a process cost system be appropriate?
70. Which of the following is not characteristic of a process cost system?
71. Which of the following entities would probably use a process costing system?
72. Which of the following is not a characteristic of a process cost system?
73. If a company uses a process costing system to account for the costs in its four production departments, how
many Work-in-Process will it use?
74. The four steps necessary to determine the cost of goods completed and the ending inventory valuation in a
process cost system are:
1.
allocate costs to transferred and partially completed units
2.
determine the units to be assigned costs
3.
determine the cost per equivalent unit
4.
calculate equivalent units of production
The correct ordering of the steps is:
75. Which of the following costs incurred by a paper manufacturer would be included in the group of costs
referred to as conversion costs?
76. Which of the following costs incurred by a paper manufacturer would NOT be included in the group of
costs referred to as conversion costs?
77. In the manufacture of 15,000 units of a product, direct materials cost incurred was $165,000, direct labor
cost incurred was $105,000, and applied factory overhead was $53,500. What is the total conversion cost?
78. If Department H had 600 units, 60% completed, in process at the beginning of the period, 6,000 units were
completed during the period, and 700 units were 30% completed at the end of the period, what was the number
of equivalent units of production for conversion costs for the period, if the first-in, first-out method is used to
cost inventories?
79. If Department K had 2,000 units, 40% completed, in process at the beginning of the period, 12,000 units
were completed during the period, and 1,200 units were 25% completed at the end of the period, what was the
number of equivalent units of production for conversion costs for the period if the first-in, first-out method is
used to cost inventories?
80. Department G had 3,600 units, 25% completed at the beginning of the period, 11,000 units were completed
during the period, 3,000 units were one-fifth completed at the end of the period, and the following
manufacturing costs were debited to the departmental work in process account during the period:
Work in process, beginning of period
$40,000
Costs added during period:
Direct materials (10,400 at $8)
83,200
Direct labor
63,000
Factory overhead
25,000
Assuming that all direct materials are placed in process at the beginning of production and that the first-in, first-out method of inventory costing is
used, what is the total cost of the departmental work in process inventory at the end of the period (round unit cost calculations to four decimal
places)?
81. Department G had 3,600 units, 25% completed at the beginning of the period, 11,000 units were completed
during the period, 3,000 units were one-fifth completed at the end of the period, and the following
manufacturing costs were debited to the departmental work in process account during the period:
Work in process, beginning of period
$40,000
Costs added during period:
Direct materials (10,400 at $8)
83,200
Direct labor
63,000
Factory overhead
25,000
Assuming that all direct materials are placed in process at the beginning of production and that the first-in, first-out method of inventory costing is
used, what is the total cost of 3,600 units of beginning inventory which were completed during the period (round unit cost calculations to four
decimal places)?
82. Department G had 3,600 units, 25% completed at the beginning of the period, 11,000 units were completed
during the period, 3,000 units were one-fifth completed at the end of the period, and the following
manufacturing costs were debited to the departmental work in process account during the period:
Work in process, beginning of period
$40,000
Costs added during period:
Direct materials (10,400 at $8)
83,200
Direct labor
63,000
Factory overhead
25,000
Assuming that all direct materials are placed in process at the beginning of production and that the first-in, first-out method of inventory costing is
used, what is the total cost of the units “started and completed” during the period (round unit cost calculations to four decimal places)?
83. Department R had 5,000 units in work in process that were 75% completed as to labor and overhead at the
beginning of the period, 30,000 units of direct materials were added during the period, 32,000 units were
completed during the period, and 3,000 units were 40% completed as to labor and overhead at the end of the
period. All materials are added at the beginning of the process. The first-in, first-out method is used to cost
inventories. The number of equivalent units of production for conversion costs for the period was:
84. Department S had no work in process at the beginning of the period. 12,000 units of direct materials were
added during the period at a cost of $84,000, 9,000 units were completed during the period, and 3,000 units
were 30% completed as to labor and overhead at the end of the period. All materials are added at the beginning
of the process. Direct labor was $49,500 and factory overhead was $9,900.
85. Department S had no work in process at the beginning of the period. 12,000 units of direct materials were
added during the period at a cost of $84,000, 9,000 units were completed during the period, and 3,000 units
were 30% completed as to labor and overhead at the end of the period. All materials are added at the beginning
of the process. Direct labor was $49,500 and factory overhead was $9,900.
86. The following production data were taken from the records of the Finishing Department for June:
Inventory in process, 6-1,
25% completed
1,500 units
Transferred to finished goods
during June
5,000 units
Equivalent units of production
during June
5,200 units
Determine the number of equivalent units of production in the June 30 Finishing Department inventory, assuming that the first-in, first-out method is
used to cost inventories. Assume the completion percentage of 25% applies to both direct materials and conversion costs.
87. The debits to Work in Process—Assembly Department for April, together with data concerning production,
are as follows:
April 1, work in process:
Materials cost, 3,000 units
$ 8,000
Conversion costs, 3,000 units,
66.7% completed
6,000
Materials added during April, 10,000 units
30,000
Conversion costs during April
31,000
Goods finished during April, 11,500 units
—
April 30 work in process, 1,500 units,
50% completed
—
All direct materials are placed in process at the beginning of the process and the first-in, first-out method is used to cost inventories. The materials
cost per equivalent unit for April is:
88. Department E had 4,000 units in Work in Process that were 40% completed at the beginning of the period at
a cost of $12,500. 14,000 units of direct materials were added during the period at a cost of $28,700. 15,000
units were completed during the period, and 3,000 units were 75% completed at the end of the period. All
materials are added at the beginning of the process. Direct labor was $32,450 and factory overhead was
$18,710. The number of equivalent units of production for the period for conversion if the first-in, first-out
method is used to cost inventories was:
89. Department A had 1,000 units in Work in Process that were 60% completed at the beginning of the period at
a cost of $7,000. 4,000 units of direct materials were added during the period at a cost of $8,200. 4,500 units
were completed during the period, and 500 units were 40% completed at the end of the period. All materials are
added at the beginning of the process. Direct labor was $28,700 and factory overhead was $4,510. The cost of
the 500 units in process at the end of the period if the first-in, first-out method is used to cost inventories was:
90. In the manufacture of 10,000 units of a product, direct materials cost incurred was $145,800, direct labor
cost incurred was $82,000, and applied factory overhead was $45,500. What is the total conversion cost?
91. If Department H had 600 units, 60% completed, in process at the beginning of the period, 8,000 units were
completed during the period, and 500 units were 30% completed at the end of the period, what was the number
of equivalent units of production for the period for conversion if the first-in, first-out method is used to cost
inventories? Assume the completion percentage applies to both direct materials and conversion cost.
92. If Department K had 2,500 units, 45% completed, in process at the beginning of the period, 15,000 units
were completed during the period, and 1,200 units were 40% completed at the end of the period, what was the
number of equivalent units of production for the period for conversion if the first-in, first-out method is used to
cost inventories? Assume the completion percentage applies to both direct materials and conversion cost.
93. Department A had 4,000 units in work in process that were 60% completed as to labor and overhead at the
beginning of the period, 29,000 units of direct materials were added during the period, 31,000 units were
completed during the period, and 2,000 units were 80% completed as to labor and overhead at the end of the
period. All materials are added at the beginning of the process. The first-in, first-out method is used to cost
inventories.
94. Department A had 4,000 units in work in process that were 60% completed as to labor and overhead at the
beginning of the period, 29,000 units of direct materials were added during the period, 31,000 units were
completed during the period, and 2,000 units were 80% completed as to labor and overhead at the end of the
period. All materials are added at the beginning of the process. The first-in, first-out method is used to cost
inventories.
The number of equivalent units of production for material costs for the period was:
95. The following production data were taken from the records of the Finishing Department for June:
Inventory in process, 6-1 ( 30% completed)
4,000 units
Completed units during June
65,000 units
Ending inventory (60% complete)
7,000 units
Determine the number of conversion equivalent units of production in the June 30 Finishing Department inventory, assuming that the first-in,
first-out method is used to cost inventories.
96. The following production data were taken from the records of the Finishing Department for June:
Inventory in process, 6-1 ( 30% completed)
4,000 units
Completed units during June
65,000 units
Ending inventory (60% complete)
7,000 units
Determine the number of material equivalent units of production in the June 30 Finishing Department inventory, assuming that the first-in, first-out
method is used to cost inventories and materials were added at the beginning of the process.
97. The debits to Work in Process—Assembly Department for April, together with data concerning production,
are as follows:
April 1, work in process:
Materials cost, 3,000 units
$ 7,200
Conversion costs, 3,000 units,
60% completed
6,000
Materials added during April, 10,000 units
25,000
Conversion costs during April
35,750
Goods finished during April, 12,000 units
—
April 30 work in process, 1,000 units,
40% completed
—
All direct materials are placed in process at the beginning of the process and the first-in, first-out method is used to cost inventories. The materials
cost per equivalent unit for April is:
98. The debits to Work in Process—Assembly Department for April, together with data concerning production,
are as follows:
April 1, work in process:
Materials cost, 3,000 units
$ 7,200
Conversion costs, 3,000 units,
40% completed
6,000
Materials added during April, 10,000 units
25,000
Conversion costs during April
30,800
Goods finished during April, 12,000 units
—
April 30 work in process, 1,000 units,
40% completed
—
All direct materials are placed in process at the beginning of the process and the first-in, first-out method is used to cost inventories. The conversion
cost per equivalent unit for April is:
99. Department B had 3,000 units in Work in Process that were 25% completed at the beginning of the period at
a cost of $12,500. 13,700 units of direct materials were added during the period at a cost of $28,700. 15,000
units were completed during the period, and 1,700 units were 95% completed at the end of the period. All
materials are added at the beginning of the process. Direct labor was $32,450 and factory overhead was
$18,710.
The number of equivalent units of production for the period for conversion if the first-in, first-out method is
used to cost inventories was:
100. Department B had 3,000 units in Work in Process that were 25% completed at the beginning of the period
at a cost of $12,500. 13,700 units of direct materials were added during the period at a cost of $28,700. 15,000
units were completed during the period, and 1,700 units were 95% completed at the end of the period. All
materials are added at the beginning of the process. Direct labor was $32,450 and factory overhead was
$18,710.
The number of equivalent units of production for the period for materials if the first-in, first-out method is used
to cost inventories was:
101. The following unit data were assembled for the assembly process of the Super Co. for the month of June.
Direct materials are added at the beginning of the process. Conversion costs are added uniformly over the
production process. The company uses the FIFO process.
Beginning work in process
(60% complete)
Units started in September
Ending work in process
(30% complete)
The number of equivalent units produced with respect to conversion costs is:
102. The following unit data were assembled for the assembly process of the Super Co. for the month of June.
Direct materials are added at the beginning of the process. Conversion costs are added uniformly over the
production process. The company uses the FIFO process.
Beginning work in process
(60% complete)
Units started in September
Ending work in process
(30% complete)
The number of equivalent units produced with respect to direct materials costs is:
103. Carmelita Inc., has the following information available:
Costs from
Costs from
Beginning Inventory
Current Period
Direct materials
$2,500
$22,252
Conversion Costs
6,200
150,536
At the beginning of the period, there were 500 units in process that were 60 percent complete as to conversion costs and 100 percent complete as to
direct materials costs. During the period 4,500 units were started and completed. Ending inventory contained 340 units that were 30 percent complete
as to conversion costs and 100 percent complete as to materials costs. (Assume that the company uses the FIFO process cost method.)
The equivalent units of production for direct materials and conversion costs, respectively, were
104. Carmelita Inc., has the following information available:
Costs from
Costs from
Beginning Inventory
Current Period
Direct materials
$2,500
$22,252
Conversion Costs
6,200
150,536
At the beginning of the period, there were 500 units in process that were 60 percent complete as to conversion costs and 100 percent complete as to
direct materials costs. During the period 4,500 units were started and completed. Ending inventory contained 340 units that were 30 percent complete
as to conversion costs and 100 percent complete as to materials costs. (Assume that the company uses the FIFO process cost method.)
The cost of completing a unit during the current period was
105. Carmelita Inc., has the following information available:
Costs from
Costs from
Beginning Inventory
Current Period
Direct materials
$2,500
$22,252
Conversion Costs
6,200
150,536
At the beginning of the period, there were 500 units in process that were 60 percent complete as to conversion costs and 100 percent complete as to
direct materials costs. During the period 4,500 units were started and completed. Ending inventory contained 340 units that were 30 percent complete
as to conversion costs and 100 percent complete as to materials costs. (Assume that the company uses the FIFO process cost method. Round cost per
unit figures to two cents, i.e. $2.22 when calculating total costs.)
The total costs that will be transferred into Finished Goods for units started and completed were
106. Equivalent production units, usually are determined for