CHAPTER 3
PROCESS COSTING
SUMMARY OF QUESTIONS BY LEARNING OBJECTIVES AND BLOOM’S TAXONOMY
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Multiple Choice Questions
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Brief Exercises
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st This question also appears in a self-test at the student companion website.
a This topic is dealt with in an Appendix to the chapter.
Test Bank for Managerial Accounting, Seventh Edition
3 – 2
SUMMARY OF QUESTIONS BY LEARNING OBJECTIVES AND BLOOM’S TAXONOMY
Exercices
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Short-Answer Essay
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SUMMARY OF LEARNING OBJECTIVES BY QUESTION TYPE
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Learning Objective 1
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Learning Objective 2
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Learning Objective 3
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Process Costing
3 – 3
Learning Objective 4
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Learning Objective a5
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Note: TF = True-False BE = Brief Exercise C = Completion
MC = Multiple Choice Ex = Exercise MA = Matching
SA = Short-Answer Essay
The chapter also contains one set of ten Matching questions and five Short-Answer Essay
questions.
CHAPTER LEARNING OBJECTIVES
1. Discuss the uses of a process cost system and how it compares to a job order cost
system. Companies that mass-produce similar products in a continuous fashion use
process cost systems. Once production begins, it continues until the finished product
emerges. Each unit of finished product is indistinguishable from every other unit. Job order
2. Explain the flow of costs in a process cost system and the journal entries to assign
manufacturing costs. A process cost system assigns manufacturing costs for raw
Test Bank for Managerial Accounting, Seventh Edition
3 – 4
materials, labor, and overhead to work in process accounts for various departments or
3. Compute equivalent units. Equivalent units of production measure work done during a
period, expressed in fully completed units. Companies use this measure to determine the
cost per unit of completed product. Equivalent units are the sum of units completed and
transferred out plus equivalent units of ending work in process.
4. Complete the four steps to prepare a production cost report. The four steps to
complete a production cost report are: (1) Compute the physical unit flow—that is, the total
units to be accounted for. (2) Compute the equivalent units of production. (3) Compute the
a5. Compute equivalent units using the FIFO method. Equivalent units under the FIFO
method are the sum of the work performed to: (1) Finish the units of beginning work in
process inventory, if any; (2) complete the units started into production during the period;
and (3) start, but only partially complete, the units in ending work in process inventory.
TRUE-FALSE STATEMENTS
1. Process cost accounting focuses on the process involved in mass-producing products that
are very similar in nature.
2. Process cost systems are used to apply costs to a specific job, such as the manufacturing
of a specialized machine.
3. A company that produces motion pictures would likely use a process cost system.
Process Costing
3 – 5
4. In a process cost system, costs are tracked through a series of connected manufacturing
processes or departments, rather than by individual jobs.
5. In a process cost system, total costs are determined at the end of a month or year.
6. Separate work in process accounts are maintained for each production department or
manufacturing process in a process cost system.
7. In a process cost system, materials, labor and overhead are only added in the first
production department.
8. The assignment of the three manufacturing cost elements to Work in Process in a process
cost system is the same as in a job order cost system.
9. Fewer materials requisitions are generally required in a process cost system than in a job
order cost system.
10. In a process cost system, labor costs incurred may be captured on time tickets.
11. A primary driver of overhead costs in continuous manufacturing operations is machine time
used.
12. Equivalent units of production are used to determine the cost per unit of completed products.
13. Equivalent units of production measure the work done during a period, expressed in fully
completed units.
14. Equivalent units of production is the sum of units completed and transferred out plus
equivalent units of beginning work in process.
15. The weighted-average method of computing equivalent units is the most widely used method
in practice.
Test Bank for Managerial Accounting, Seventh Edition
3 – 6
16. There are no units in process at the beginning of the period, 1,500 units in process at the end
of the period that are 40% complete, and 15,000 units transferred out during the period. Based
on this information, there were 14,400 equivalent units of production during the period.
17. The first step performed in preparing a production cost report is computing the equivalent
units of production.
18. Equivalent units of production must be calculated before the unit production costs can be
computed.
19. The physical units in a department are another name for the equivalent units of
production.
20. Unit material cost is computed by taking total material costs charged to the department for
the period and dividing by the physical units in the process during the period.
21. When equivalent units of production are different for materials and conversion costs, unit
costs are computed for materials, conversion, and total manufacturing.
22. The total manufacturing cost per unit is used in costing the units completed and
transferred during the period.
23. A production cost report is an internal document for management that shows production
quantity and cost data for a particular job.
24. Production cost reports provide a basis for evaluating the productivity of a department.
25. Companies often use a combination of a process cost and a job order cost system, called
operations costing.
a26. The FIFO method is easier to understand and use than the weighted-average method.
a27. The FIFO method is conceptually superior to the weighted-average method.
Process Costing
3 – 7
a28. When comparing the FIFO with the weighted-average method, the FIFO method provides
current cost information.
a29. There are no units in ending work in process at the end of the period under the FIFO
method.
a30. Companies using the weighted-average method do not complete units left over from the
previous accounting periods, they start new units.
31. In continuous process manufacturing, generally once the production begins, it continues
until the finished product emerges.
32. One similarity of process cost accounting with job order cost accounting is that both
determine total manufacturing costs after each job.
33. The flow of costs in a process costing system requires that materials be added in one
department, labor added in another department and manufacturing overhead in a third
department.
34. When finished goods are sold, the entry to record the cost of goods sold is a debit to
Finished Goods Inventory and a credit to Cost of Goods Sold.
35. When there is no beginning work in process and materials are entered at the beginning of
the process, equivalent units of materials are the same as the units started into
production.
36. In order to compute the physical unit flow, a company must first compute unit production
costs.
a37. Under the FIFO method, it is assumed that the beginning work in process is completed
before new work is started.
Test Bank for Managerial Accounting, Seventh Edition
3 – 8
Answers to True-False Statements
MULTIPLE CHOICE QUESTIONS
38. A process cost accounting system is most appropriate when
a. a variety of different products are produced, each one requiring different types of
materials, labor, and overhead.
b. the focus of attention is on a particular job or order.
c. similar products are mass-produced.
d. individual products are custom made to the specification of customers.
39. A characteristic of products that are mass-produced in a continuous fashion is that
a. the products are identical or very similar in nature.
b. they are grouped in batches.
c. they are produced at the time an order is received.
d. their costs are accumulated on job cost sheets.
40. A process cost system would be used for all of the following products except
a. chemicals.
b. computer chips.
c. motion pictures.
d. soft drinks.
41. In a process cost system,
a. a Work in Process account is maintained for each product.
b. a materials requisition must identify the job on which the materials will be used.
c. a Work in Process account is maintained for each process.
d. one Work in Process account is maintained for all the processes, similar to a job order
cost system.
42. Differences between a job order cost system and a process cost system include all of the
following except the
a. documents used to track costs.
b. point at which costs are totaled.
c. unit cost computations.
d. flow of costs.
Process Costing
3 – 9
43. Which of these best reflects a distinguishing factor between a job order cost system and a
process cost system?
a. The detail at which costs are calculated.
b. The time period each covers.
c. The number of work in process accounts.
d. The manufacturing cost elements included.
44. Which of the following is a true statement about process cost systems?
a. In process cost systems, costs are accumulated but not assigned.
b. A process cost system has one work in process account for each process.
c. In process cost systems, costs are summarized on job cost sheets.
d. Unit costs are not computed in process cost systems.
45. Which of the following is correct regarding cost systems?
Job Order Process
a. Work in process account several one for each process
b. Work in process account one one
c. Work in process account one one for each process
d. Work in process account several one
46. In a process cost system, unit costs are determined using a
a. numerator of costs of each job.
b. denominator of units produced during the period.
c. denominator of units produced for the job.
d. denominator of units produced for the day.
47. In process cost accounting, manufacturing costs are summarized on a
a. job order cost sheet.
b. process order cost sheet.
c. production cost report.
d. manufacturing cost sheet.
48. Which of the following manufacturing cost elements occurs in a process cost system?
a. Direct materials.
b. Direct labor.
c. Manufacturing overhead.
d. All of these.
Test Bank for Managerial Accounting, Seventh Edition
3 – 10
49. In a process cost system, product costs are summarized:
a. on job cost sheets.
b. on production cost reports.
c. after each unit is produced.
d. when the products are sold.
50. When manufacturing overhead costs are assigned to production in a process cost system,
they are debited to
a. the Finished Goods Inventory account.
b. Cost of Goods Sold.
c. a Manufacturing Overhead account.
d. a Work in Process account.
51. A product requires processing in two departments, the Baking Department and then the
Packaging Department, before it is completed. Costs transferred out of the Baking
Department will be transferred to:
a. Finished Goods Inventory.
b. Cost of Goods Sold.
c. Work in Process—Packaging Department.
d. Manufacturing Overhead.
52. Which of the following would not appear as a debit in the Work in Process account of a
second department in a two stage production process?
a. Materials used.
b. Overhead applied.
c. Labor assigned.
d. Cost of products transferred out.
53. Materials requisitions are:
a. not used in process costing.
b. generally used more frequently in process costing than job order costing.
c. generally used less frequently in process costing than job order costing.
d. used more frequently by latter stage production departments.
54. A primary driver of overhead costs in continuous manufacturing operations is:
a. direct labor dollars.
b. direct labor hours.
c. machine hours.
d. machine maintenance dollars.
Process Costing
3 – 11
55. Price Company assigns overhead based on machine hours. The Milling Department logs
2,400 machine hours and Cutting Department shows 4,000 machine hours for the period. If
the overhead rate is $5 per machine hour, the entry to assign overhead will show a
a. debit to Manufacturing Overhead for $32,000.
b. credit to Work in Process—Cutting Department for $20,000.
c. debit to Work in Process for $20,000.
d. credit to Manufacturing Overhead for $32,000.
56. Barnes and Miller Manufacturing is trying to determine the equivalent units for conversion
costs with 10,000 units of ending work in process at 80% completion and 32,000 physical
units. There are no beginning units in the department. Conversion costs occur evenly
throughout the entire production period. What are the equivalent units for conversion costs
for the current period?
a. 42,000.
b. 40,000.
c. 8,000.
d. 30,000.
57. 20,000 units in a process that are 70% complete are referred to as:
a. 20,000 equivalent units of production.
b. 8,000 equivalent units of production.
c. 14,000 equivalent units of production.
d. 6,000 equivalent units of production.
58. A process with no beginning work in process, completed and transferred out 85,000 units
during a period and had 50,000 units in the ending work in process inventory that were
30% complete. The equivalent units of production for the period were:
a. 85,000 equivalent units.
b. 135,000 equivalent units.
c. 100,000 equivalent units.
d. 70,000 equivalent units.
59. A department adds raw materials to a process at the beginning of the process and incurs
conversion costs uniformly throughout the process. For the month of January, there were
no units in the beginning work in process inventory; 90,000 units were started into
production in January; and there were 20,000 units that were 40% complete in the ending
work in process inventory at the end of January. What were the equivalent units of
production for materials for the month of January?
a. 98,000 equivalent units.
b. 82,000 equivalent units.
c. 70,000 equivalent units.
d. 90,000 equivalent units.
Test Bank for Managerial Accounting, Seventh Edition
3 – 12
60. A department adds raw materials to a process at the beginning of the process and incurs
conversion costs uniformly throughout the process. For the month of January, there were
no units in the beginning work in process inventory; 90,000 units were started into
production in January; and there were 20,000 units that were 40% complete in the ending
work in process inventory at the end of January. What were the equivalent units of
production for conversion costs for the month of January?
a. 70,000 equivalent units.
b. 82,000 equivalent units.
c. 78,000 equivalent units.
d. 90,000 equivalent units.
61. Equivalent units are calculated by
a. multiplying the percentage of work done by the equivalent units of output.
b. dividing physical units by the percentage of work done.
c. multiplying the percentage of work done by the physical units.
d. dividing equivalent units by the percentage of work done.
62. Minor Company had the following department data:
Physical Units
Work in process, July 1 30,000
Completed and transferred out 165,000
Work in process, July 31 45,000
Materials are added at the beginning of the process. What is the total number of
equivalent units for materials in July?
a. 165,000.
b. 180,000.
c. 240,000.
d. 210,000.
63. Corsi Company had the following department data:
Physical Units
Work in process, beginning -0-
Completed and transferred out 90,000
Work in process, ending 7,000
Materials are added at the beginning of the process. What is the total number of
equivalent units for materials during the period?
a. 90,000.
b. 9,000.
c. 97,000.
d. 83,000.
Process Costing
3 – 13
64. Gantner Company had the following department information about physical units and
percentage of completion:
Physical Units
Work in process, May 1 (60%) 60,000
Completed and transferred out 180,000
Work in process, May 31 (40%) 50,000
If materials are added at the beginning of the production process, what is the total number
of equivalent units for materials during May?
a. 240,000.
b. 230,000.
c. 224,000.
d. 200,000.
65. It is necessary to calculate equivalent units of production in a department because
a. a physical count of units is impossible.
b. some units worked on in the department are not fully complete.
c. the physical units in the department are always 100% complete.
d. at times a department may use a job order cost system and then switch to a process
cost system.
66. In the month of June, a department had 20,000 units in beginning work in process that
were 70% complete. During June, 90,000 units were transferred into production from
another department. At the end of June there were 10,000 units in ending work in process
that were 40% complete. Materials are added at the beginning of the process, while
conversion costs are incurred uniformly throughout the process. How many units were
transferred out of the process in June?
a. 90,000 units.
b. 80,000 units.
c. 100,000 units.
d. 110,000 units.
67. In the month of June, a department had 20,000 units in beginning work in process that
were 70% complete. During June, 90,000 units were transferred into production from
another department. At the end of June there were 10,000 units in ending work in process
that were 40% complete. Materials are added at the beginning of the process, while
conversion costs are incurred uniformly throughout the process. The equivalent units of
production for materials for June were
a. 100,000 equivalent units.
b. 110,000 equivalent units.
c. 114,000 equivalent units.
d. 90,000 equivalent units.
Test Bank for Managerial Accounting, Seventh Edition
3 – 14
68. In the month of June, a department had 20,000 units in beginning work in process that
were 70% complete. During June, 90,000 units were transferred into production from
another department. At the end of June there were 10,000 units in ending work in process
that were 40% complete. Materials are added at the beginning of the process, while
conversion costs are incurred uniformly throughout the process. The equivalent units of
production for conversion costs for June were
a. 90,000 equivalent units.
b. 104,000 equivalent units.
c. 100,000 equivalent units.
d. 110,000 equivalent units.
69. A process with no beginning work in process, completed and transferred out 35,000 units
during a period and had 14,000 units in the ending work in process that were 50%
complete. How much is equivalent units of production for the period for conversion costs?
a. 42,000 equivalent units.
b. 49,000 equivalent units.
c. 56,000 equivalent units.
d. 28,000 equivalent units.
70. A process with 1,600 units of beginning work in process, completed and transferred out
25,000 units during a period. There were 10,000 units in the ending work in process that
were 50% complete as to conversion costs. Materials are added 80% at the beginning of
the process and 20% when the units are 90% complete. How much is equivalent units of
production for the period for material costs?
a. 29,000 equivalent units.
b. 35,000 equivalent units.
c. 27,000 equivalent units.
d. 33,000 equivalent units.
71. Hanker Company had the following department data on physical units:
Work in process, beginning 3,000
Completed and transferred out 18,000
Work in process, ending 2,400
Materials are added at the beginning of the process. What is the total number of
equivalent units for materials during the period?
a. 18,600.
b. 2,400.
c. 20,400.
d. 15,000.
Process Costing
3 – 15
72. Super-Tech Industries had the following department information about physical units and
percentage of completion:
Physical Units
Work in process, June 1 (75%) 8,000
Completed and transferred out 22,000
Work in process, June 30 (50%) 12,000
If materials are added at the beginning of the production process, what is the total number
of equivalent units for materials during June?
a. 19,000.
b. 34,000.
c. 36,000.
d. 28,000.
73. Gloria Company had no beginning work in process. During the period, 16,000 units were
completed, and there were 1,200 units of ending work in process. How many units were
started into production?
a. 17,200.
b. 16,000.
c. 14,800.
d. 1,200.
74. Cohen Company is trying to determine the equivalent units for conversion costs with
5,000 units of ending work in process at 80% completion and 45,000 units that are 100%
complete as to materials. There are no beginning units in the department. Materials are
added at the beginning of the process, and conversion costs occur evenly throughout the
entire production period. What is the equivalent units of production for conversion costs
for the current period?
a. 50,000.
b. 49,000.
c. 4,000.
d. 44,000.
75. If beginning work in process is 4,000 units, ending work in process is 2,000 units, and the
units accounted for equals 15,000 units, what must units started into production be?
a. 19,000.
b. 17,000.
c. 11,000.
d. 13,000.
Test Bank for Managerial Accounting, Seventh Edition
3 – 16
76. The Molding Department of Kennett Company has the following production data:
beginning work in process 25,000 units (60% complete), started into production 475,000
units, completed and transferred out 450,000 units, and ending work in process 50,000
units (40% complete). Assuming materials are entered at the beginning of the process,
equivalent units for materials are:
a. 500,000.
b. 425,000.
c. 450,000.
d. 525,000.
77. The Molding Department of Kennett Company has the following production data:
beginning work in process 25,000 units (60% complete), started into production 475,000
units, completed and transferred out 450,000 units, and ending work in process 50,000
units (40% complete). Assuming conversion costs are incurred uniformly during the
process, the equivalent units for conversion costs are:
a. 500,000.
b. 455,000.
c. 470,000.
d. 450,000.
78. The Molding Department of Boswell Company has the following production data:
beginning work process 40,000 units (60% complete), started into production 730,000
units, completed and transferred out 690,000 units, and ending work in process 80,000
units (40% complete). Assuming materials are entered at the beginning of the process,
equivalent units for materials are:
a. 770,000.
b. 650,000.
c. 690,000.
d. 810,000.
79. The Molding Department of Boswell Company has the following production data:
beginning work process 40,000 units (60% complete), started into production 730,000
units, completed and transferred out 690,000 units, and ending work in process 80,000
units (40% complete). Assuming conversion costs are incurred uniformly during the
process, the equivalent units for conversion costs are:
a. 770,000.
b. 810,000.
c. 722,000.
d. 650,000.
Process Costing
3 – 17
80. Crawford Company has the following equivalent units for July: materials 20,000 and
conversion costs 18,000. Production cost data are:
Materials Conversion
Work in process, July 1 $ 6,400 $ 3,000
Costs added in July 50,400 42,000
The unit production costs for July are:
Materials Conversion Costs
a. $2.52 $2.50
b. 2.84 2.33
c. 2.52 2.33
d. 2.84 2.50
81. In Moyer Company, the Cutting Department had beginning work in process of 6,000 units,
transferred out 24,000 units, and had an ending work in process of 3,000 units. How many
units were started by Moyer during the month?
a. 18,000.
b. 21,000.
c. 24,000.
d. 27,000.
82. In the Shaping Department of Rollins Company the unit materials cost is $5.00 and the
unit conversion cost is $3.00. The department transferred out 40,000 units and had 5,000
units in ending work in process 20% complete. If all materials are added at the beginning
of the process, the total cost to be assigned to the ending work in process is
a. $8,000.
b. $25,000.
c. $28,000.
d. $40,000.
83. Holton Company has the following equivalent units for July: materials 20,000 and
conversion 18,000. Production cost data are:
Materials Conversion
Work in process, July 1 $ 8,000 $ 3,750
Costs added in July 63,000 52,500
The unit production costs for July are:
Materials Conversion Costs
a. $3.15 $3.13
b. 3.55 2.92
c. 3.15 2.92
d. 3.55 3.13
Test Bank for Managerial Accounting, Seventh Edition
3 – 18
84. In Kapler Company, the Cutting Department had beginning work in process of 8,000 units,
transferred out 25,000 units, and had an ending work in process of 4,000 units. How many
units were started by Kapler during the month?
a. 17,000.
b. 21,000.
c. 25,000.
d. 29,000.
85. In the Shaping Department of Jenkins Company the unit materials cost is $3.00 and the
unit conversion cost is $1.80. The department transferred out 8,000 units and had 2,000
units in ending work in process 20% complete. If all materials are added at the beginning
of the process, the total cost to be assigned to the ending work in process is
a. $1,920.
b. $6,000.
c. $6,720.
d. $9,600.
86. Cinder Company had the following department information for the month:
Total materials costs $ 60,000
Equivalent units of materials 10,000
Total conversion costs $90,000
Equivalent units of conversion costs 20,000
How much is the total manufacturing cost per unit?
a. $10.50.
b. $5.00.
c. $4.50.
d. $6.00.
87. Materials costs of $600,000 and conversion costs of $642,600 were charged to a
processing department in the month of September. Materials are added at the beginning
of the process, while conversion costs are incurred uniformly throughout the process.
There were no units in beginning work in process, 100,000 units were started into
production in September, and there were 8,000 units in ending work in process that were
40% complete at the end of September.
What was the total amount of manufacturing costs assigned to those units that were
completed and transferred out of the process in September?
a. $552,000.
b. $1,173,000.
c. $1,242,600.
d. $1,275,600.
Process Costing
3 – 19
88. Materials costs of $600,000 and conversion costs of $642,600 were charged to a
processing department in the month of September. Materials are added at the beginning
of the process, while conversion costs are incurred uniformly throughout the process.
There were no units in beginning work in process, 100,000 units were started into
production in September, and there were 8,000 units in ending work in process that were
40% complete at the end of September.
What was the total amount of manufacturing costs assigned to the 8,000 units in the
ending work in process?
a. $48,000.
b. $21,600.
c. $40,800.
d. $69,600.
89. Charley Company’s Assembly Department has materials cost at $2 per unit and
conversion cost at $4 per unit. There are 20,000 units in ending work in process, all of
which are 70% complete as to conversion costs and 100% complete as to materials. How
much are total costs to be assigned to inventory?
a. $56,000.
b. $96,000.
c. $84,000.
d. $120,000.
90. Byrd Company decided to analyze certain costs for June of the current year. Units started
into production equaled 14,000 and ending work in process equaled 2,000 units. With no
beginning work in process inventory, how much is the conversion cost per unit if ending
work in process was 25% complete and total conversion costs equaled $52,500?
a. $3.28.
b. $4.38.
c. $4.20.
d. $2.10.
91. Long Company has recently tried to improve its analysis for its manufacturing process.
Units started into production equaled 6,000 and ending work in process equaled 400
units. Long had no beginning work in process inventory. Conversion costs are applied
equally throughout production, and materials are applied at the beginning of the process.
How much is the materials cost per unit if ending work in process was 25% complete and
total materials costs equaled $18,000?
a. $3.00.
b. $3.16.
c. $11.25.
d. $2.81.
Test Bank for Managerial Accounting, Seventh Edition
3 – 20
92. Conversion cost per unit equals $7.00. Total materials costs are $80,000. Equivalent units
are 20,000. How much is the total manufacturing cost per unit?
a. $11.00.
b. $7.00.
c. $4.00.
d. $3.00.
93. Physical units are 40,000. Total conversion costs are $158,000. There are 1,000 units in
ending inventory which are 50% complete as to conversion costs. How much are
conversion costs per unit?
a. $4.00.
b. $3.95.
c. $7.90.
d. $3.85.
94. Madison Industries has equivalent units of 8,000 for materials and for conversion costs.
Total manufacturing costs are $200,000. Total materials costs are $150,000. How much is
the conversion cost per unit?
a. $2.50.
b. $6.25.
c. $25.00.
d. $5.00.
95. Equivalent units for materials total 40,000. There were 32,000 units completed and
transferred out. Equivalent units for conversion costs equal 36,000. How much are the
physical units for conversion costs if ending work in process is 50% complete?
a. 36,000.
b. 40,000.
c. 8,000.
d. 32,000.
96. If equivalent units are 15,000 for conversion costs and units transferred out equals
10,000, what stage of completion should the ending work in process be for the 20,000
units remaining?
a. 75%.
b. 25%.
c. 10%.
d. 20%.
Process Costing
3 – 21
97. In the month of April, a department had 500 units in the beginning work in process
inventory that were 60% complete. These units had $60,000 of materials costs and
$45,000 of conversion costs. Materials are added at the beginning of the process and
conversion costs are added uniformly throughout the process. During April, 10,000 units
were completed and transferred to the finished goods inventory and there were 2,000
units that were 25% complete in the ending work in process inventory on April 30. During
April, manufacturing costs charged to the department were: Materials $1,380,000;
Conversion costs $1, 530,000.
The cost assigned to the units transferred to finished goods during April was
a. $2,700,000.
b. $2,715,000.
c. $2,820,000.
d. $2,685,000.
98. In the month of April, a department had 500 units in the beginning work in process
inventory that were 60% complete. These units had $60,000 of materials costs and
$45,000 of conversion costs. Materials are added at the beginning of the process and
conversion costs are added uniformly throughout the process. During April, 10,000 units
were completed and transferred to the finished goods inventory and there were 2,000
units that were 25% complete in the ending work in process inventory on April 30. During
April, manufacturing costs charged to the department were: Materials $1,380,000;
Conversion costs $1,530,000.
The cost assigned to the units in the ending work in process inventory on April 30 was
a. $360,000.
b. $315,000.
c. $240,000.
d. $435,000.
99. Zibba Company enters materials at the beginning of the process. In January, there was no
beginning work in process, but there were 200 units in the ending work in process
inventory. The number of units completed equals the number of
a. units started.
b. units started less 200.
c. units started plus 200.
d. equivalent units.
100. If there are no units in process at the beginning of the period, then
a. the company must be using a job order cost system.
b. only one computation of equivalent units of production will be necessary.
c. the units started into production will equal the number of units transferred out.
d. the units to be accounted for will equal the units transferred out and the units in
process at the end of the period.
Test Bank for Managerial Accounting, Seventh Edition
3 – 22
101. Which of the following is not a necessary step in preparing a production cost report?
a. Compute the equivalent units of production.
b. Compute the physical unit flow.
c. Prepare the job order cost sheet.
d. Prepare a cost reconciliation schedule.
102. Honrad Company’s Assembly Department has materials cost at $4 per unit and
conversion cost at $8 per unit. There are 30,000 units in ending work in process, all of
which are 70% complete as to conversion costs. Materials are added at the beginning of
the process. How much are total costs to be assigned to inventory?
a. $168,000.
b. $288,000.
c. $253,200.
d. $360,000.
103. In a process cost system, units to be accounted for in a department are equal to the
a. number of units started or transferred into the department.
b. number of units transferred out of the department.
c. units in the beginning inventory plus the units started or transferred into the department.
d. ending inventory plus the units started or transferred into the department.
104. The total units accounted for equals units in
a. beginning work in process – units transferred out.
b. beginning work in process + ending work in process.
c. ending work in process + units transferred out.
d. ending work in process – units started into production.
105. The Slicing Department production process shows:
Units
Beginning Work in Process 10,000
Ending Work in Process 50,000
Total units to be accounted for 180,000
How many units were started into production in Department 1?
a. 190,000.
b. 130,000.
c. 180,000.
d. 170,000.
Process Costing
3 – 23
106. Department 1 of a two department production process shows:
Units
Beginning Work in Process 10,000
Ending Work in Process 50,000
Total units to be accounted for 180,000
How many units were transferred out to Department 2?
a. 50,000.
b. 130,000.
c. 180,000.
d. 170,000.
107. The Assembly Department shows the following information:
Units
Beginning Work in Process 20,000
Ending Work in Process 65,000
Units Transferred Out 31,000
How many total units are to be accounted for by the Assembly Department?
a. 96,000.
b. 65,000.
c. 85,000.
d. 76,000.
108. The last department in a production process shows the following information at the end of
the period:
Units
Beginning Work in Process 25,000
Started into Production 240,000
Ending Work in Process 50,000
How many units have been transferred out to finished goods during the period?
a. 240,000.
b. 265,000.
c. 290,000.
d. 215,000.
109. A process began the month with 3,000 units in the beginning work in process inventory
and ended the month with 2,000 units in the ending work in process. If 22,000 units were
completed and transferred out of the process during the month, how many units were
started into production during the month?
a. 21,000.
b. 23,000.
c. 22,000.
d. 20,000.
Test Bank for Managerial Accounting, Seventh Edition
3 – 24
110. If 150,000 units are started into production there was no beginning work in process, and
50,000 units are in process at the end of the period, how many units were completed and
transferred out?
a. 150,000.
b. 50,000.
c. 100,000.
d. 200,000.
111. Total units to be accounted for less units in beginning work in process equals
a. total units accounted for.
b. units transferred out.
c. units started into production.
d. equivalent units.
112. If 180,000 units are transferred out of a department, there was no beginning work in
process, and there are 30,000 units still in process at the end of a period, the number of
units that were started into production during the period is
a. 210,000.
b. 180,000.
c. 150,000.
d. 30,000.
113. A department adds materials at the beginning of the process and incurs conversion costs
uniformly throughout the process. For the month of July, there was no beginning work in
process; 40,000 units were completed and transferred out; and there were 20,000 units in
the ending work in process that were 40% complete. During July, $120,000 materials
costs and $105,000 conversion costs were charged to the department.
The unit production costs for materials and conversion costs for July was
Materials Conversion Costs
a. $2.00 $1.75
b. $2.00 $2.19
c. $2.50 $1.75
d. $3.00 $2.66
114. Conversion cost per unit equals $6. Total materials cost equal $90,000. Equivalent units
for materials are 10,000. How much is the total manufacturing cost per unit?
a. $15.
b. $6.
c. $12.
d. $9.
Process Costing
3 – 25
115. The following department data are available:
Total materials costs $180,000
Equivalent units of materials 60,000
Total conversion costs $105,000
Equivalent units of conversion costs 30,000
What is the total manufacturing cost per unit?
a. $3.00.
b. $3.50.
c. $6.50.
d. $4.75.
116. Byers Company had the following department information for the month:
Total materials costs $48,000
Equivalent units of materials 10,000
Total conversion costs $80,000
Equivalent units of conversion costs 20,000
What is the total manufacturing cost per unit?
a. $4.26.
b. $4.00.
c. $4.80.
d. $8.80.
117. Physical units accounted for are 160,000. Total conversion costs are $387,100. There are
4,000 units in ending inventory which are 50% complete as to conversion costs. How
much is the conversion cost per unit?
a. $2.45.
b. $2.42.
c. $2.39.
d. $2.36.
118. A department had the following information for the month:
Total materials costs $300,000
Conversion cost per unit $3.00
Total manufacturing cost per unit $5.00
What are the equivalent units of production for materials?
a. 150,000.
b. 100,000.
c. 60,000.
d. Cannot be determined
Test Bank for Managerial Accounting, Seventh Edition
3 – 26
119. Maisley Company decided to analyze certain costs for June of the current year. Units
started into production equaled 28,000 and ending work in process equaled 4,000. With
no beginning work in process inventory, how much is the conversion cost per unit if
ending work in process was 25% complete and total conversion costs equaled $140,000?
a. $4.40.
b. $5.00.
c. $5.60.
d. $2.80.
120. Materials costs of $1,200,000 and conversion costs of $1,530,000 were charged to a
processing department in the month of September. Materials are added at the beginning
of the process, while conversion costs are incurred uniformly throughout the process.
There were no units in beginning work in process, 20,000 units were started into
production in September, and there were 5,000 units in ending work in process that were
40% complete at the end of September.
What was the total amount of manufacturing costs assigned to those units that were
completed and transferred out of the process in September?
a. $2,250,000.
b. $3,000,000.
c. $2,409,750.
d. $2,047,500.
121. Materials costs of $1,200,000 and conversion costs of $1,530,000 were charged to a
processing department in the month of September. Materials are added at the beginning
of the process, while conversion costs are incurred uniformly throughout the process.
There were no units in beginning work in process, 20,000 units were started into
production in September, and there were 5,000 units in ending work in process that were
40% complete at the end of September.
What was the total amount of manufacturing costs assigned to the 5,000 units in the
ending work in process?
a. $682,500.
b. $750,000.
c. $480,000.
d. $300,000.
122. Mayer Company has recently tried to improve its analysis for its manufacturing process. Units
started into production equaled 18,000 and ending work in process equaled 1,200 units.
Mayer had no beginning work in process inventory. Conversion costs are applied equally
throughout production, and materials are applied at the beginning of the process. How much is
the materials cost per unit if ending work in process was 25% complete and total materials
costs equaled $72,000?
a. $4.00.
b. $4.21.
c. $16.00.
d. $3.75.
Process Costing
3 – 27
123. Madison Industries has equivalent units of 8,000 for materials and for conversion costs.
Total manufacturing costs are $128,000. Total materials costs are $96,000. How much is
the conversion cost per unit?
a. $2.
b. $4.
c. $16.
d. $3.
124. In a process cost system, a production cost report is prepared
a. only for the first processing department.
b. for all departments in the aggregate.
c. for each processing department.
d. only for the last processing department.
125. A production cost report
a. is prepared for each product.
b. is prepared from a job cost sheet.
c. will show quantity and cost data for a production department.
d. will not identify a specific department if more than one department is involved in the
production process.
126. In the production cost report, the total
a. physical units accounted for equals the costs accounted for.
b. physical units accounted for equals the units to be accounted for.
c. costs charged equals the units to be accounted for.
d. costs accounted for equals the costs of the units started into production.
a127. The Cutting Department’s output during the period consists of 22,000 units completed and
transferred out, and 4,000 units in ending work in process that were 25% complete as to
materials and conversion costs. Beginning inventory was 2,000 units that were 25%
complete as to materials and conversion costs. Under the FIFO method, what are the
equivalent units of production for materials?
a. 24,300
b. 22,500
c. 25,300
d. 24,000
Test Bank for Managerial Accounting, Seventh Edition
3 – 28
a128. The Wrapping Department’s output during the period consists of 21,000 units completed
and transferred out, and 900 units in ending work in process that were 75% complete as
to materials and conversion costs. Beginning inventory was 1,200 units that were 30%
complete as to materials and conversion costs. Under the FIFO method, what are the
equivalent units of production for materials?
a. 22,035
b. 22,515
c. 21,675
d. 21,315
Problem Solving, IMA: Cost Management
a129. Chicotti Company has 6,000 units in beginning work in process, 30% complete as to conversion
costs, 75,000 units transferred out to finished goods, and 2,000 units in ending work in process
20% complete as to conversion costs. The beginning and ending inventory is fully complete as
to materials costs. How much are equivalent units for conversion costs if the FIFO method
is used?
a. 75,400
b. 79,600
c. 71,000
d. 73,600
a130. Chicotti Company has 6,000 units in beginning work in process, 30% complete as to conversion
costs, 75,000 units transferred out to finished goods, and 2,000 units in ending work in process
20% complete as to conversion costs. The beginning and ending inventory is fully complete as
to materials costs. How much are equivalent units for materials if the FIFO method is used?
a. 75,400
b. 77,000
c. 71,000
d. 73,000
a131. Schiller Company has unit costs of $2 for materials and $6 for conversion costs. There are
5,600 units in ending work in process which are 25% complete as to conversion costs,
and fully complete as to materials cost. How much is the total cost assigned to the ending
work in process inventory if the FIFO method is used?
a. $19,600
b. $44,800
c. $11,200
d. $8,400
Process Costing
3 – 29
a132. Solis Company uses the FIFO method to compute equivalent units. It has 4,000 units in
beginning work in process, 20% complete as to conversion costs and 50% complete as to
materials costs, 66,000 units started, and 6,000 units in ending work in process, 30%
complete as to conversion costs, and 80% complete as to materials cost. How much are
the equivalent units for materials under the FIFO method?
a. 66,800
b. 66,000
c. 68,800
d. 70,000
a133. Special Company had the following department information about physical units and
percentage of completion:
Physical Units
Work in process, May 1 (60%) 36,000
Completed and transferred out 85,000
Work in process, May 31 (50%) 30,000
Materials are added at the beginning of the production process. Conversion costs are
added equally throughout production. What is the total number of equivalent units during
May for conversion costs if the FIFO method is used?
a. 151,000
b. 100,000
c. 78,400
d. 129,400
a134. Hanker Company had the following department data on physical units:
Work in process, beginning 2,500
Completed and transferred out 18,000
Work in process, ending 2,000
Materials are added at the beginning of the process. What is the total number of
equivalent units for materials if the FIFO method is used?
a. 18,500
b. 17,500
c. 20,000
d. 15,500
135. A process cost system would be used by all of the following except a(n)
a. chemical company.
b. advertising company.
c. oil company.
d. computer chip company.
Test Bank for Managerial Accounting, Seventh Edition
3 – 30
136. Which of the following is considered a difference between a job order cost and a process
cost system?
a. The manufacturing cost elements.
b. Documents used to track costs.
c. The accumulation of the costs of materials, labor, and overhead.
d. The flow of costs.
137. The basic similarities between job order cost and process cost systems include all of the
following except the
a. manufacturing cost elements.
b. flow of costs.
c. point at which costs are totaled.
d. accumulation of the costs of materials, labor, and overhead.
138 Equivalent units of production are a measure of
a. units completed and transferred out.
b. units transferred out.
c. units in ending work in process.
d. the work done in a period expressed in fully completed units.
139. Total physical units to be accounted for are equal to the units
a. started (or transferred) into production.
b. started (or transferred) into production plus the units in beginning work in process.
c. started (or transferred) into production less the units in beginning work in process.
d. completed and transferred out.
140. In computing equivalent units, ___________ is not part of the equivalent units of
production formula.
a. units transferred out
b. beginning work in process
c. ending work in process
d. None of these is correct.
141. In Saint-Simon, Inc., the Assembly Department started 60,000 units and completed
70,000 units. If beginning work in process was 30,000 units, how many units are in ending
work in process?
a. 0.
b. 10,000.
c. 20,000.
d. 40,000.
Process Costing
3 – 31
142. The total units to be accounted for is computed by adding
a. beginning units in process to units transferred out.
b. ending units in process to units started into production.
c. beginning units in process to units started into production.
d. ending units in process to total units accounted for.
143. In the Camria Company, materials are entered at the beginning of the process. If there is
no beginning work in process, but there is an ending work in process inventory, the
number of equivalent units as to materials costs will be
a. the same as the units started.
b. the same as the units completed.
c. less than the units started.
d. less than the units completed.
144. For the Assembly Department, unit materials cost is $6 and unit conversion cost is $9. If
there are 10,000 units in ending work in process 75% complete as to conversion costs,
the costs to be assigned to the inventory are
a. $150,000.
b. $127,500.
c. $112,500.
d. $135,000.
145. The total costs accounted for in a production cost report equal the
a. cost of units completed and transferred out only.
b. cost of units started into production.
c. cost of units completed and transferred out plus the cost of ending work in process.
d. cost of beginning work in process plus the cost of units completed and transferred out.
146. In a production cost report, which one of the following sections is not shown under Costs?
a. Unit costs.
b. Costs to be accounted for.
c. Costs during the period.
d. Units accounted for.
Test Bank for Managerial Accounting, Seventh Edition
3 – 32
Answers to Multiple Choice Questions
Item
Ans.
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BRIEF EXERCISES
BE 147
Tip Top Painting Company has the following production data for January:
• Beginning work in process, 0 units
• Units transferred out, 35,000
• Units in ending work in process, 10,000, which are 30% complete for conversion costs
Materials are added only at the beginning of the process.
Instructions
Compute equivalent units of production for both materials and conversion costs.
Process Costing
3 – 33
BE 148
Lowman Painting Company has the following production data for March:
• Beginning work in process, 2,000 units
• Units transferred out, 42,000
• Units in ending work in process, 15,000, which are 80% complete for conversion costs
Materials are added only at the beginning of the process.
Instructions
Compute equivalent units of production for both materials and conversion costs.
BE 149
The Kirkland Department of Delta Company began the month of December with beginning work
in process of 4,000 units that are 100% complete as to materials and 30% complete as to
conversion costs. Units transferred out are 10,000 units. Ending work in process contains 8,000
units that are 100% complete as to materials and 60% complete as to conversion costs.
Instructions
Compute the equivalent units of production for materials and conversion costs for the month of
December.
Test Bank for Managerial Accounting, Seventh Edition
3 – 34
BE 150
White Supplies’ total material costs are $30,000 and total conversion costs are $20,000.
Equivalent units of production for materials are 10,000, and 5,000 for conversion costs.
Instructions
Compute the unit costs for materials, conversion costs, and total manufacturing costs for the
month.
BE 151
Apoly Company has the following production data for January.
Ending Work in Process
Beginning
Work in Process
Units Started into
Production
Units
% Complete as to
Conversion Cost
-0-
8,500
1,200
30%
Instructions
Compute the physical units for January.
Process Costing
3 – 35
BE 152
Sandusky Widget Company has the following production data for March.
Ending Work in Process
Month
Beginning
Work in Process
Units
Transferred Out
Units
% Complete as to
Conversion Cost
March
1,200
8,100
1,000
20%
Instructions
Compute the physical units for March.
BE 153
Sequal Company has the following production data for June: units transferred out 50,000, and
ending work in process 6,000 units that are 100% complete for materials and 30% complete for
conversion costs. Unit materials cost is $5 and unit conversion cost is $7.
Instructions
Determine the costs to be assigned to the units transferred out and the units in ending work in
process.
Test Bank for Managerial Accounting, Seventh Edition
3 – 36
BE 154
Tomlinson Company has the following production data for May:
• Beginning work in process, 0 units
• Units started, 62,000
• Ending work in process, 5,000 units that are 100% complete for materials and 60% complete
for conversion costs
• Unit materials cost, $5
• Unit conversion cost, $8
Instructions
Determine the costs to be assigned to the units transferred out and the units in ending work in
process.
BE 155
Dirt Cleaners, Inc. has the following production data for January:
Transferred out 50,000 units
Ending work in process 6,000 units
The units in ending work in process are 100% complete for materials and 60% complete for
conversion costs. There is no beginning work in process. Materials cost is $4 per unit and
conversion costs are $11 per unit.
Instructions
Determine the costs to be assigned to the units transferred out and the units in ending work in
process.
Process Costing
3 – 37
BE 156
Production costs chargeable to the Sanding Department in July for Joyful Art are $30,000 for
materials, $26,000 for labor, and $10,000 for manufacturing overhead. Equivalent units of
production are 25,000 for materials and 20,000 for conversion costs.
Instructions
Compute the unit costs for materials and conversion costs.
aBE 157
Tip Top Painting Company has the following production data for March:
Beginning work in process, 2,000 units, which are 30% complete for conversion costs
Units transferred out, 44,000
Units in ending work in process, 9,000, which are 80% complete for conversion costs
Materials are added only at the beginning of the process.
Instructions
Compute equivalent units of production for both materials and conversion costs using the FIFO
method.
aBE 158
The Kirkland Department of Delta Company began the month of December with beginning work
in process of 4,000 units that are 100% complete as to materials and 20% complete as to
conversion costs. Units transferred out are 12,000 units. Ending work in process contains 2,000
units that are 100% complete as to materials and 60% complete as to conversion costs.
Test Bank for Managerial Accounting, Seventh Edition
3 – 38
aBE 158 (Cont.)
Instructions
Compute equivalent units of production for both materials and conversion costs for the month of
December using the FIFO method.
EXERCISES
Ex. 159
Lutz Company produces a product in two departments: (1) Mixing and (2) Finishing. The
company uses a process cost accounting system.
(a) Purchased raw materials for $50,000 on account.
(b) Raw materials requisitioned for production were:
Direct materials
Mixing department $20,000
Finishing department 14,000
(c) Incurred labor costs of $74,000.
(d) Factory labor used:
Mixing department $44,000
Finishing department 30,000
(e) Manufacturing overhead is applied to the product based on machine hours used in each
department:
Mixing department—400 machine hours at $30 per machine hour.
Finishing department—500 machine hours at $20 per machine hour.
Process Costing
3 – 39
(f) Units costing $56,000 were completed in the Mixing Department and were transferred to the
Finishing Department.
Ex. 159 (Cont.)
(g) Units costing $70,000 were completed in the Finishing Department and were transferred to
finished goods.
(h) Finished goods costing $40,000 were sold on account for $55,000.
Instructions
Prepare the journal entries to record the preceding transactions for Lutz Company.
Test Bank for Managerial Accounting, Seventh Edition
3 – 40
(To record cost of goods sold)
Ex. 160
Sanders Company has two production departments: Fabricating and Finishing. Beginning
inventories are: Work in Process—Fabricating, $6,030; Work in Process—Finishing, $4,100; and
Finished Goods, $5,600. During the month the following transactions occurred:
1. Purchased $40,000 of raw materials on account.
2. Incurred $75,000 of factory labor. Wages are unpaid.
3. Incurred $50,000 of manufacturing overhead; $40,000 was paid and the remainder is unpaid.
4. Requisitioned materials for Fabricating, $10,000 and Finishing, $8,000.
5. Used factory labor for Finishing, $60,000 and Fabricating, $15,000.
6. Applied $45,000 of overhead based on machine hours used in each department. The
Finishing Department used twice as many machine hours as did Fabricating.
Instructions
Journalize the transactions for the month.
Ex. 161
The Pasta Factory manufactures spaghetti sauce through two production departments: Cooking
and Packaging. For the month of February, the work in process accounts show the following
debits:
Process Costing
3 – 41
Cooking Packaging
Beginning work in process $ -0- $ 6,000
Materials 40,000 26,000
Labor 20,000 9,000
Overhead 30,000 15,000
Costs transferred in 65,000
Ex. 161 (Cont.)
Instructions
Journalize the February transactions that involved the work in process accounts.
Ex. 162
Benson Industries uses a process cost system. Products are processed first by Department A,
second by Department B, and then they are transferred to the finished goods warehouse. Shown
below is the cost information for Department B during the month of October:
Costs of units transferred in $120,000
Manufacturing costs added in Department B:
Direct materials $50,000
Direct labor 12,000
Manufacturing overhead 19,000 81,000
Total costs charged to Department B in October $201,000
The cost of work in process in Department B at October 1 is $25,000, and the cost of work in
process at October 31 has been determined to be $30,000.
Instructions
Prepare journal entries to record for the month of October:
(a) The transfer of production from Department A to B.
(b) The manufacturing costs incurred by Department B.
(c) The transfer of completed units from Department B to the finished goods warehouse.
Test Bank for Managerial Accounting, Seventh Edition
3 – 42
Solution 162 (8–11 min.)
Ex. 163
Hardy Company manufactures a single product by a continuous process, involving two production
departments. The records indicate that $140,000 of direct materials were issued to and $200,000
of direct labor was incurred by Department 1 in the manufacture of the product. The factory
overhead rate is $25 per machine hour; machine hours were 5,000 in Department 1. Work in
process in the department at the beginning of the period totaled $35,000; and work in process at
the end of the period was $25,000.
Instructions
Prepare entries to record
(a) The flow of costs into Department 1 for
(1) direct materials
(2) direct labor
(3) overhead
(b) The transfer of production costs to Department 2.
Ex. 164
Muffy Painting Company has the following production data for March.
Process Costing
3 – 43
Ending Work in Process
Beginning Units % Complete as to
Month Work in Process Transferred Out Units Conversion Cost
March 3,000 42,000 12,000 75%
Instructions
Compute equivalent units of production for March for both materials and conversion costs.
Materials are entered at the beginning of the process.
Ex. 165
The Nitrogen Fixation Department of Tomco Company began the month of December with
beginning work in process of 4,000 units that are 100% complete as to materials and 30%
complete as to conversion costs. Units transferred out are 12,000 units. Ending work in process
contains 10,000 units that are 100% complete as to materials and 40% complete as to conversion
costs.
Instructions
Compute the equivalent units of production for materials and conversion costs for the month of
December.
Test Bank for Managerial Accounting, Seventh Edition
3 – 44
Ex. 166
At Crenshaw Company, materials are entered at the beginning of each process. Work in process
inventories, with the percentage of work done on conversion, and production data for its Painting
Department in selected months are as follows:
Beginning Work In Process Ending Work In Process
Percentage Units Completed Percentage
Month Units Completed and Transferred Out Units Completed
July -0- — 11,000 1,500 90%
Sept. 2,500 20% 9,000 5,000 70%
Ex. 166 (Cont.)
Instructions
(a) Compute the physical units for July.
(b) Compute the equivalent units of production for materials and conversion costs for September.
Ex. 167
Watts Company adds materials at the beginning of the process and conversion costs are incurred
uniformly throughout the process.
Instructions
Complete the following calculation of equivalent units for materials and conversion costs.
Equivalent Units
Physical Units Materials Conversion Costs
Completed and transferred out 40,000
Ending work in process
Materials
Conversion costs, 75% complete 12,000
Process Costing
3 – 45
Solution 167 (4–7 min.)
Ex. 168
The general ledger of Oates Company has the following work in process account.
WORK IN PROCESS—FINISHING
6/1 Balance 8,000 6/30 Transferred out ?
6/30 Materials 1,800
6/30 Labor 3,800
6/30 Overhead 2,800
6/30 Balance ?
Production records show that there were 2,000 units in beginning inventory, 50% complete; 8,000
units started, and 4,500 units transferred out. The beginning work in process had conversion
costs of $3,150. The units in ending inventory were 60% complete. Materials are added at the
beginning of the process.
Instructions
Answer the following questions.
(a) How many units are in process at June 30?
(b) What is the unit conversion cost for June?
(c) What is the conversion cost in the June 30 inventory?
Test Bank for Managerial Accounting, Seventh Edition
3 – 46
Ex. 169
The Assembly Department uses a process cost accounting system and a weighted-average cost
flow assumption. The department adds materials at the beginning of the process and incurs
conversion costs uniformly throughout the process. During July, $190,000 of materials costs and
$137,100 in conversion costs were charged to the department. The beginning work in process
inventory was $93,000 on July 1, comprised of $80,000 of materials costs and $13,000 of
conversion costs.
Other data for the month of July are as follows:
Beginning work in process inventory, 7/1 25,000 units (40% complete)
Units completed and transferred out 70,000 units
Ending work in process inventory, 7/31 30,000 units (30% complete)
Instructions
Answer the following questions and show computations to support your answers.
1. How many physical units have to be accounted for in July?
2. What are the equivalent units of production for materials and for conversion costs for the
month of July?
3. What is the total cost assigned to the 70,000 units that were transferred out of the process in
July?
4. What is the total cost of the July 31 inventory?
Process Costing
3 – 47
Ex. 170
The Finishing Department of Edwards Company has the following production and cost data for
July:
1. Transferred out, 8,000 units.
2. Ending work in process, 2,000 units that are 40% completed at July 31.
3. Materials added, $30,000; conversion costs incurred, $17,600.
Materials are entered at the beginning of the process. Conversion costs are incurred uniformly
during the process.
Instructions
(a) Compute the equivalent units of production for materials and conversion costs for the month
of July.
(b) Compute unit costs and prepare a cost reconciliation schedule.
Ex. 171
Massey Corporation uses a process cost system and the weighted-average cost flow assumption.
Production begins in the Fabricating Department where materials are added at the beginning of
the process and conversion costs are incurred uniformly throughout the process. On March 1, the
beginning work in process inventory consisted of 20,000 units which were 60% complete and had
a cost of $175,000, $145,000 of which were materials costs. During March, the following
occurred:
Materials added $305,000
Conversion costs incurred $120,000
Units completed and transferred out in March 50,000
Units in ending work in process March 31 (40% complete) 25,000
Test Bank for Managerial Accounting, Seventh Edition
3 – 48
Ex. 171 (Cont.)
Instructions
Answer the following questions and show the computations that support your answers.
1. What are the equivalent units of production for materials and conversion costs in the Fabricating
Department for the month of March?
2. What are the costs assigned to the ending work in process inventory on March 31?
3. What are the costs assigned to units completed and transferred out during March?
Ex. 172
Given below are the production data for Department No. 1 for the first month of operation:
Costs charged to Department 1:
Materials $12,000
Labor 2,600
Overhead 15,900
During this first month of operations, 4,000 units were started into production; 3,500 units were
transferred out; and the remaining 500 units are 100% completed with respect to materials and 40%
complete with respect to conversion costs.
Instructions
Compute the following:
(a) Unit materials cost.
(b) Equivalent units of conversion costs.
(c) Unit conversion cost.
(d) Total cost of 500 units in process at end of month.
(e) Total cost of 3,500 units transferred out.
Process Costing
3 – 49
Solution 172 (14–18 min.)
Ex. 173
The ledger of Kinsler Company has the following work in process account.
Work in Process—Painting
5/1
5/31
5/31
5/31
Balance
Materials
Labor
Overhead
5,300
7,740
4,110
2,470
5/31
Transferred out
?
5/31
Balance
?
Production records show that there were 700 units in the beginning inventory, 30% complete,
3,800 units started, and 4,000 units transferred. The beginning work in process had materials
cost of $3,060 and conversion costs of $2,240. The units in ending inventory were 40% complete.
Materials are entered at the beginning of the painting process.
Instructions
(a) How many units are in process at May 31?
(b) What is the unit materials cost for May?
(c) What is the unit conversion cost for May?
(d) What is the total cost of units transferred out in May?
(e) What is the cost of the May 31 inventory?
Test Bank for Managerial Accounting, Seventh Edition
3 – 50
Solution 173 (Cont.)
Ex. 174
The Cutting Department of Sanderson Company has the following production and cost data for
July.
Production
Costs
1. Transferred out 15,000
units
2. Ending work in process,
5,000 units that are
60% complete as to
conversion costs and
100% complete as to
materials at July 31.
Beginning work in process
Materials
Labor
Manufacturing overhead
$ -0-
70,000
21,600
25,200
Materials are entered at the beginning of the process. Conversion costs are incurred uniformly
during the process.
Instructions
(a) Determine the equivalent units of production for (1) materials and (2) conversion costs.
(b) Compute unit costs and prepare a cost reconciliation schedule.
Process Costing
3 – 51
Solution 174 (8 min.)
Ex. 175
Wilkinson Company has gathered the following information.
Units in beginning work in process -0-
Units started into production 54,000
Units in ending work in process 10,000
Percent complete for conversion costs in
ending work in process 60%
Costs incurred:
Direct materials $ 81,000
Direct labor $ 99,000
Overhead $131,000
Instructions
(a) Compute equivalent units of production for materials and for conversion costs.
(b) Determine the unit costs of production.
(c) Show the assignment of costs to units transferred out and in process.
Test Bank for Managerial Accounting, Seventh Edition
3 – 52
Solution 175 (8 min.)
Ex. 176
Carlton Company has gathered the following information
Units in beginning work in process 25,000
Units started into production 115,000
Units in ending work in process 30,000
Percent complete for conversion costs in
ending work in process 40%
Costs incurred:
Direct materials $175,000
Direct labor $235,400
Overhead $191,600
Materials are added at the beginning of the process.
Instructions
(a) Compute equivalent units of production for materials and for conversion costs.
(b) Determine the unit costs of production.
(c) Show the assignment of costs to units transferred out and in process.
Process Costing
3 – 53
Solution 176 (Cont.)
Ex. 177
The Polishing Department of Estaban Company has the following production and manufacturing
cost data for September. Materials are entered at the beginning of the process.
Production: Beginning inventory 2,000 units that are 100% complete as to materials and 40%
complete as to conversion costs; units started during the period are 48,000, ending inventory of
6,000 units 30% complete as to conversion costs.
Manufacturing costs: Beginning inventory costs, comprised of $18,000 of materials and
$13,000 of conversion costs; materials costs added in Polishing during the month, $202,000
labor and overhead applied in Polishing during the month $178,300 and $312,500 respectively.
Instructions
(a) Compute the equivalent units of productions for materials and conversion costs for the
month of September.
(b) Compute the unit costs for materials and conversion costs for the month.
(c) Determine the costs to be assigned to the units transferred out and in process.
Test Bank for Managerial Accounting, Seventh Edition
3 – 54
Solution 177 (Cont.)
Ex. 178
Grey Building Supplies’ total materials costs are $30,000 and total conversion costs are $33,000.
Equivalent units of production for materials are 10,000, and 5,000 for conversion costs.
Instructions
Compute the unit costs for materials, conversion costs, and total manufacturing costs for the
month.
Process Costing
3 – 55
Ex. 179
Glazer, Inc. has the following production data for June:
Transferred out 50,000 units
Ending work in process 5,000 units
The units in work in process are 100% complete for materials and 60% complete for conversion
costs. Materials costs are $3 per unit and conversion costs are $6 per unit.
Instructions
Determine the costs to be assigned to the units transferred out and the units in ending work in
process.
Ex. 180
Production costs chargeable to the Sanding Department in July in Magnum Company are
$30,000 for materials, $17,000 for labor, and $13,000 for manufacturing overhead. Equivalent
units of production are 30,000 for materials and 20,000 for conversion costs.
Instructions
Compute the unit costs for materials and conversion costs.
Ex. 181
Mayer Company uses a process cost system. The Molding Department adds materials at the
beginning of the process and conversion costs are incurred uniformly throughout the process.
Work in process on May 1 was 75% complete and work in process on May 31 was 60%
complete.
Test Bank for Managerial Accounting, Seventh Edition
3 – 56
Ex. 181 (cont.)
Instructions
Complete the Production Cost Report for the Molding Department for the month of May using the
above information and the information below.
MAYER COMPANY
Molding Department
Production Cost Report
For the Month Ended May 31, 2017
Equivalent Units
QUANTITIES Physical Units Materials Conversion Costs
Units to be accounted for
Work in process, May 1 8,000
Started into production 32,000
Total units 40,000
Units accounted for
Transferred out 35,000
Work in process, May 31 5,000
Total units 40,000
COSTS
Unit costs Materials Conversion Costs Total
Costs in May $140,000 $161,500 $301,500
Equivalent units
Unit costs $ $ $
Costs to be accounted for
Work in process, May 1 $ 60,000
Started into production 241,500
Total costs $301,500
Cost Reconciliation Schedule
Costs accounted for
Transferred out $
Work in process, May 31
Materials $
Conversion costs
Total costs $301,500
Process Costing
3 – 57
Solution 181 (12–16 min.)
Ex. 182
Baker Winery manufactures a fine wine in two departments, Fermenting and Bottling. In the
Fermenting Department, grapes are aged in casks for a period of 30 days. In the Bottling
Department, the wine is bottled and then sent to the finished goods warehouse. Labor and
overhead are incurred uniformly through both processes. Materials are entered at the beginning
of both processes. Cost and production data for the Fermenting Department for December 2016
are presented below:
Cost data
Beginning work in process inventory $ 37,000 ($30,000 of materials cost)
Materials 390,000
Conversion costs 116,000
Total costs $543,000
Test Bank for Managerial Accounting, Seventh Edition
3 – 58
Ex. 182 (cont.)
Production data
Beginning work in process (gallons) 5,000 (40%)
Gallons started into production 79,000
Ending work in process (gallons) 8,000 (75%)
Instructions
(a) Compute the equivalent units of production.
(b) Determine the unit production costs.
(c) Determine the costs to be assigned to units transferred out and ending work in process.
$543,000
Ex. 183
The Assembly Department of Nitz Company has the following production and cost data at the end
of May, 2017.
Production: 30,000 units started into production; 25,000 units transferred out and 5,000 units
100% completed as to materials and 40% completed as to conversion costs.
Manufacturing Costs: Materials added at beginning of process, $90,000; labor, $75,000;
overhead $60,000.
Instructions
Prepare a production cost report for the month of May.
Process Costing
3 – 59
Solution 183 (22–30 min.)
Ex. 184
Romero Company—Perth Division is a new state of the art production facility that manufactures
landing gears for airplanes. The September 30th ending work in process is comprised of labor
and overhead and is approximately 60% complete. All materials are assumed to be 100%
complete. Total materials costs during the period totaled $840,000.
Instructions
As the new plant accountant, you are asked to complete the production cost report which appears
as follows:
Test Bank for Managerial Accounting, Seventh Edition
3 – 60
Ex. 184 (cont.)
ROMERO COMPANY—Perth Division
Assimilation Department
Production Cost Report
For the Month Ended September 30, 2017
Equivalent Units
QUANTITIES Physical Units Materials Conversion Costs
Units to be accounted for
Work in process, September 1 300
Started into production 1,100
Total units 1,400
Units accounted for
Transferred out 900 900 900
Work in process, September 30 500 500
Total units 1,400 1,400
COSTS
Unit Costs Materials Conversion Costs Total
Costs in September $840,000 $ $1,104,000
Equivalent units
Unit costs $ $ 220 $
Costs to be accounted for
Work in process, Sept. 1 $ 243,400
Started into production
Total costs $
Cost Reconciliation Schedule
Costs accounted for
Transferred out $
Work in process, September
Materials $
Conversion costs 66,000
Total costs $1,104,000
Process Costing
3 – 61
Solution 184 (Cont.)
aEx. 185
At Oxley Company, materials are entered at the beginning of each process. The company uses
the FIFO method for process costing. Work in process inventories, with the percentage of work
done on conversion, and production data for its Finishing Department for March are as follows:
Beginning Work in Process Ending Work in Process
Percentage Units Completed Percentage
Month Units Completed and Transferred Out Units Completed
March 2,100 60% 21,500 750 80%
Instructions
(a) Compute the physical units for March.
(b) Compute the equivalent units of production for materials and conversion costs for March.
Test Bank for Managerial Accounting, Seventh Edition
3 – 62
aSolution 185 (Cont.)
aEx. 186
Taco Ranch uses a process cost system and the FIFO cost flow assumption. Production begins
in the Crafting Department where materials are added at the beginning of the process and
conversion costs are incurred uniformly throughout the process. On November 1, the beginning
work in process inventory consisted of 10,000 units, which were 60% complete and had a cost of
$266,000, $140,000 of which were materials costs. During November, the following occurred:
Materials added $315,000
Conversion costs incurred $67,500
Units completed and transferred out in November 55,000
Units in ending work in process November 30 (20% complete) 25,000
Instructions
Answer the following questions and show the computations that support your answers:
(a) What are the equivalent units of production for materials and conversion costs in the Crafting
Department for the month of November?
(b) What are the costs assigned to the ending work in process inventory on November 30?
(c) What are the costs assigned to units completed and transferred out during November?
Process Costing
3 – 63
aSolution 186 (cont.)
COMPLETION STATEMENTS
187. Process cost systems are used to apply costs to similar products that are ____________
in a ____________ fashion.
188. Separate _________________ accounts are maintained for each production department
or manufacturing process in a process cost system.
189. In a process cost system, manufacturing costs are summarized in a ________________
report for each department.
190. A primary driver of overhead costs in continuous manufacturing operations is
_______________.
191. Equivalent units of production measure the work done during the period, expressed in fully
________________ units.
192. Unit production costs are expressed in terms of _____________ units of production.
193. If a processing department has 27,000 units in process at the beginning of the period,
completes and transfers out 90,000 and has 18,000 units in process at the end of the
period, then the number of units started into production during the period was
______________ units.
194. A cost reconciliation schedule is prepared to assign total costs to units ______________,
and to the units in the _________________ work in process.
195. The production cost report is an internal document that shows production quantity and
______________ for a production department.
Answers to Completion Statements
Process Costing
3 – 65
MATCHING
196. Match the items in the two columns below by entering the appropriate code letter in the
space provided.
A. Total manufacturing cost per unit E. Cost reconciliation schedule
B. Equivalent units of production F. Units transferred out
C. Total units accounted for G. Unit production costs
D. Production cost report H. Physical units
____ 1. A summary of both production quantity and cost data for a production department.
____ 2. Shows that the total costs accounted for equal the total costs to be accounted for.
____ 3. Work done during a period expressed in fully completed units.
____ 4. Costs expressed in terms of equivalent units of production.
____ 5. Actual units to be accounted for during a period, irrespective of any work performed.
____ 6. Units transferred out during the period plus units in ending work in process.
____ 7. Unit materials costs plus unit conversion costs.
____ 8. Total units accounted for minus units in ending work in process.
Test Bank for Managerial Accounting, Seventh Edition
3 – 66
SHORT-ANSWER ESSAY QUESTIONS
S-A E 197
Why do some companies need a cost accounting system while others do not? What are the
determining characteristics or factors that influence the type of cost accounting system that is
appropriate for a company?
S-A E 198
The production cost report summarizes the activities that have taken place in a department or
process over a period of time. Identify the major types of information found on a production cost
report, and indicate who in the business organization uses this type of information and for what
purpose the information is used.
S-A E 199
Your roommate is curious about the features of process cost accounting. Identify and explain the
distinctive features for your roommate.
Process Costing
3 – 67
S-A E 200
What purposes are served by a production cost report?
S-A E 201 (Ethics)
Dolly’s Dream Homes, Inc. manufactures doll houses in a continuous process. Various
customizing features and furnishings are added at the end of the process to create the various
models that are sold. The basic design and floor plans of all the houses are identical, however.
During the most recent month, the lumber used in trimming the houses was inadvertently
recorded as direct materials. At month end, when the error was discovered, Susie Rief, the
accountant, was told by the accounting manager, Karen Tate, not to bother with correcting the
error, because the dollar amount of the error was not “worth it.” Susie believes that the dollar
amount is not as important as the quality of the reports. She wonders whether she would be
committing an unethical act if she were to make the changes anyway, despite her superior’s
telling her not to.
Required:
1. Who are the stakeholders in this situation?
2. Was it unethical for the company to ask that the error not be corrected? Explain briefly.
3. Would it be unethical for Susie to correct the error? Explain briefly.