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Chapter 4 Systems Design: Process Costing True/False Questions 1. When materials are purchased in a process costing system, a work in process account is debited with the cost of the materials. Answer: False Level: Easy LO: 1 2. Any difference in the equivalent units calculated under the weighted-average and the FIFO methods is due to the units in the ending work in process inventory. Answer: False Level: Easy LO: 2,6 Appendix: 4 3. The equivalent units in beginning work in process inventory plus the equivalent units for the work done during the period equals the units transferred out plus the equivalent units in ending work in process inventory. Answer: True Level: Hard LO: 2 4. There is no difference in the unit costs computed under the weighted-average and FIFO methods of process costing if there are no beginning work in process inventories. Answer: True Level: Hard LO: 4,8 Appendix: 4 5. Under the weighted-average method of process costing, costs from the prior period are averaged with those of the current period in computing unit costs. Answer: True Level: Medium LO: 4 6. In a process costing production report, the “Cost to be accounted for” will be the same whether the weighted-average or the FIFO method is used. Answer: True Level: Medium LO: 5,9 Appendix: 4 7. Under the FIFO method of product costing, equivalent units of production consider units in the beginning inventory as if they were started and completed during the current period. Answer: False Level: Medium LO: 6 Appendix: 4

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Chapter 4 Systems Design: Process Costing 8. The production report of a company using the FIFO cost method likely would show goods transferred from a department in two parts--one part consisting of units from the beginning inventory completed and transferred, and the other part consisting of units that were both started and completed during the month. Answer: True Level: Medium LO: 7 Appendix: 4 9. In computing the cost per equivalent unit on the production report, costs in the beginning work in process inventory are kept separate from current period costs when the FIFO method is used. Answer: True Level: Medium LO: 8 Appendix: 4 10. A major advantage of the FIFO method is that it allows managers to judge the performance of the current period independently of the performance of the prior period. Answer: True Level: Medium LO: 9,10 Appendix: 4 11. Under a JIT inventory system, the differences between FIFO and weighted-average costing methods are reduced. Answer: True Level: Easy LO: 9,10 Appendix: 4 12. When the FIFO method is used to prepare a production report, costs to the next department are accounted for in two separate blocks. Answer: True Level: Easy LO: 9 Appendix: 4 13. Costs are accumulated by department in a process costing system. Answer: True Level: Easy LO: 10 14. Operation costing is a hybrid system that employs certain aspects of both job-order and process costing. Answer: True Level: Easy LO: 10 15. Under job-order costing, costs are accumulated by department and are assigned equally to all units passing through the department during the period. Answer: False Level: Easy LO: 10

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Chapter 4 Systems Design: Process Costing Multiple Choice Questions 16. Which of the following journal entries would be used to record direct labor costs in a company having two processing departments (Department A and Department B)? A) B) C) D)

Work in Process Salaries and Wages Payable Salaries and Wages Expense Salaries and Wages Payable Work in Process-Department A Work in Process-Department B Salaries and Wages Payable Salaries and Wages Payable Work in Process

XXX XXX XXX XXX XXX XXX XXX XXX XXX

Answer: C Level: Medium LO: 1 17. Which of the following journal entries would be used to record application of manufacturing overhead to work in process in a process costing system with two processing departments, department A and department B? A)

B) C) D)

Manufacturing Overhead Work in Process–Department A Work in Process–Department B Work in Process–Department A Work in Process–Department B Manufacturing Overhead Work in Process–Department B Work in Process–Department A Manufacturing Overhead Work in Process–Department A Work in Process–Department B Manufacturing Overhead

XXX XXX XXX XXX XXX XXX XXX XXX XXX XXX XXX XXX

Answer: B Level: Easy LO: 1 18. Costs in an operation costing system are accumulated by: A) department. B) by individual job. C) by both job and departments. D) by neither job nor department. Answer: C Level: Easy LO: 1

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Chapter 4 Systems Design: Process Costing 19. A process costing system was used for a department that began operations in January. Approximately the same number of physical units, at the same degree of completion were in work in process at the end of both January and February. Monthly conversion costs are allocated between ending work in process and units completed. Compared to the FIFO method, would the weighted-average method use the same or a greater number of equivalent units to calculate the monthly allocations?

A) B) C) D)

Equivalent units for weighted average compared to FIFO January February Same Same Greater number Greater number Greater number Same Same Greater number

Answer: D Level: Hard LO: 2,6 Source: CPA, adapted Appendix: 4 20. The FIFO method provides a major advantage over the weighted-average method in that: A) the calculation of equivalent units is less complex under the FIFO method. B) the FIFO method treats units in the beginning inventory as if they were started and completed during the current period. C) the FIFO method provides measurements of work done during the current period. D) the weighted-average method ignores units in the beginning and ending work in process inventories. Answer: C Level: Medium LO: 2,6 Appendix: 4 21. The weighted-average method of process costing differs from the FIFO method of process costing in that the weighted-average method: A) can be used under any cost flow assumption. B) does not require the use of predetermined overhead rates. C) keeps costs in the beginning inventory separate from current period costs. D) does not consider the degree of completion of units in the beginning work in process inventory when computing equivalent units of production. Answer: D Level: Medium LO: 2,6 Appendix: 4

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Chapter 4 Systems Design: Process Costing 22. Which of the following statements about process costing system is incorrect? A) In a process costing system, each processing department has a work in process account. B) In a process costing system, equivalent units are separately computed for materials and for conversion costs. C) In a process costing system, overhead can be under- or overapplied just as in joborder costing. D) In a process costing system, materials costs are traced to units of products. Answer: D Level: Hard LO: 2,10 23. When the weighted-average method of process costing is used, a department's equivalent units are computed by: A) subtracting the equivalent units in beginning inventory from the equivalent units in ending inventory. B) subtracting the equivalent units in beginning inventory from the equivalent units for work performed during the period. C) adding the units transferred out to the equivalent units in ending inventory. D) subtracting the equivalent units in beginning inventory from the sum of the units transferred out and the equivalent units in ending inventory. Answer: C Level: Medium LO: 2 24. Equivalent units for a process costing system using the FIFO method would be equal to: A) units completed during the period plus equivalent units in the ending work in process inventory. B) units started and completed during the period plus equivalent units in the ending work in process inventory. C) units completed during the period and transferred out. D) units started and completed during the period plus equivalent units in the ending work in process inventory plus work needed to complete units in the beginning work in process inventory. Answer: D Level: Medium LO: 6 Appendix: 4

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Chapter 4 Systems Design: Process Costing 25. Which of the following types of entities would be most likely to use a process costing system? A) a shipbuilder B) a furniture manufacturer C) a law firm D) a utility producing natural gas Answer: D Level: Easy LO: 10 26. Darvin Company uses the weighted-average method in its process costing system. The first processing department, the Welding Department, started the month with 20,000 units in its beginning work in process inventory that were 10% complete with respect to conversion costs. The conversion cost in this beginning work in process inventory was $7,000. An additional 63,000 units were started into production during the month. There were 10,000 units in the ending work in process inventory of the Welding Department that were 10% complete with respect to conversion costs. A total of $237,600 in conversion costs were incurred in the department during the month. What would be the cost per equivalent unit for conversion costs for the month? (Round off to three decimal places.) A) $3.255 B) $3.771 C) $3.500 D) $3.305 Answer: D Level: Medium LO: 2,3,4 27. Dedra Company uses the weighted-average method in its process costing system. The first processing department, the Welding Department, started the month with 10,000 units in its beginning work in process inventory that were 50% complete with respect to conversion costs. The conversion cost in this beginning work in process inventory was $37,500. An additional 98,000 units were started into production during the month. There were 17,000 units in the ending work in process inventory of the Welding Department that were 80% complete with respect to conversion costs. A total of $727,080 in conversion costs were incurred in the department during the month. What would be the cost per equivalent unit for conversion costs for the month? (Round off to three decimal places.) A) $6.322 B) $7.419 C) $7.500 D) $7.310 Answer: D Level: Medium LO: 2,3,4

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Chapter 4 Systems Design: Process Costing 28. Luster Company uses the weighted-average method in its process costing system. Operating data for the first processing department for the month of June appear below:

Units Beginning work in process inventory .............. 13,000 Started into production during June ................ 98,000 Ending work in process inventory ................... 11,000

Percentage complete 40% 30%

According to the company's records, the conversion cost in beginning work in process inventory was $39,364 at the beginning of June. Additional conversion costs of $721,035 were incurred in the department during the month. What was the cost per equivalent unit for conversion costs for the month? (Round off to three decimal places.) A) $6.615 B) $7.358 C) $7.361 D) $7.570 Answer: C Level: Medium LO: 2,3,4 29. Lumdal Company uses the weighted-average method in its process costing system. Operating data for the first processing department for the month of June appear below: Units Beginning work in process inventory .............. 10,000 Started into production during June ................ 75,000 Ending work in process inventory ................... 17,000

Percentage complete 90% 40%

According to the company's records, the conversion cost in beginning work in process inventory was $77,490 at the beginning of June. Additional conversion costs of $552,062 were incurred in the department during the month. What was the cost per equivalent unit for conversion costs for the month? (Round off to three decimal places.) A) $8.610 B) $7.361 C) $6.001 D) $8.416 Answer: D Level: Medium LO: 2,3,4

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Chapter 4 Systems Design: Process Costing 30. Boml Company uses the weighted-average method in its process costing system. The Assembly Department started the month with 4,000 units in its beginning work in process inventory that were 20% complete with respect to conversion costs. An additional 62,000 units were transferred in from the prior department during the month to begin processing in the Assembly Department. There were 14,000 units in the ending work in process inventory of the Assembly Department that were 30% complete with respect to conversion costs. What were the equivalent units for conversion costs in the Assembly Department for the month? A) 56,200 B) 55,400 C) 72,000 D) 52,000 Answer: A Level: Medium LO: 2,3 31. Bricker Company uses the weighted-average method in its process costing system. The Assembly Department started the month with 5,000 units in its beginning work in process inventory that were 60% complete with respect to conversion costs. An additional 81,000 units were transferred in from the prior department during the month to begin processing in the Assembly Department. There were 18,000 units in the ending work in process inventory of the Assembly Department that were 80% complete with respect to conversion costs. What were the equivalent units for conversion costs in the Assembly Department for the month? A) 79,400 B) 82,400 C) 94,000 D) 68,000 Answer: B Level: Medium LO: 2,3

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Chapter 4 Systems Design: Process Costing 32. Jinker Company uses the weighted-average method in its process costing system. Operating data for the Painting Department for the month of April appear below:

Units Beginning work in process inventory .............................. 6,700 Transferred in from the prior department during April ... 57,800 Ending work in process inventory ................................... 7,600

Percentage complete 50% 60%

What were the equivalent units for conversion costs in the Painting Department for April? A) 56,900 B) 61,460 C) 62,360 D) 58,700 Answer: B Level: Medium LO: 2,3 33. Jumil Company uses the weighted-average method in its process costing system. Operating data for the Painting Department for the month of April appear below: Units Beginning work in process inventory .............................. 4,700 Transferred in from the prior department during April ... 56,600 Ending work in process inventory ................................... 6,300

Percentage complete 40% 60%

What were the equivalent units for conversion costs in the Painting Department for April? A) 58,200 B) 60,380 C) 58,780 D) 55,000 Answer: C Level: Medium LO: 2,3

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Chapter 4 Systems Design: Process Costing 34. Hafner Company uses the weighted-average method in its process costing system. The first processing department, the Welding Department, started the month with 13,000 units in its beginning work in process inventory that were 80% complete with respect to conversion costs. The conversion cost in this beginning work in process inventory was $23,920. An additional 66,000 units were started into production during the month and 68,000 units were completed in the Welding Department and transferred to the next processing department. There were 11,000 units in the ending work in process inventory of the Welding Department that were 30% complete with respect to conversion costs. A total of $127,890 in conversion costs were incurred in the department during the month. What would be the cost per equivalent unit for conversion costs for the month? (Round off to three decimal places.) A) $2.129 B) $2.300 C) $1.661 D) $1.938 Answer: A Level: Medium LO: 2,4 35. Hall Company uses the weighted-average method in its process costing system. The first processing department, the Welding Department, started the month with 18,000 units in its beginning work in process inventory that were 60% complete with respect to conversion costs. The conversion cost in this beginning work in process inventory was $64,800. An additional 84,000 units were started into production during the month and 78,000 units were completed in the Welding Department and transferred to the next processing department. There were 24,000 units in the ending work in process inventory of the Welding Department that were 30% complete with respect to conversion costs. A total of $431,520 in conversion costs were incurred in the department during the month. What would be the cost per equivalent unit for conversion costs for the month? (Round off to three decimal places.) A) $5.825 B) $3.996 C) $5.137 D) $6.000 Answer: A Level: Medium LO: 2,4

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Chapter 4 Systems Design: Process Costing 36. Pajona Company uses the weighted-average method in its process costing system. The Molding Department is the second department in its production process. The data below summarize the department's operations in January.

Beginning work in process inventory ..................... Transferred in from the prior department during January ................................................................ Completed and transferred to the next department during January .................................................... Ending work in process inventory ..........................

Units 7,400

Percentage complete 60%

66,000 69,700 3,700

70%

The accounting records indicate that the conversion cost that had been assigned to beginning work in process inventory was $31,302 and a total of $497,341 in conversion costs were incurred in the department during January. What was the cost per equivalent unit for conversion costs for January in the Molding Department? (Round off to three decimal places.) A) $7.535 B) $7.050 C) $7.313 D) $7.135 Answer: C Level: Medium LO: 2,4

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Chapter 4 Systems Design: Process Costing 37. Pampin Company uses the weighted-average method in its process costing system. The Molding Department is the second department in its production process. The data below summarize the department's operations in January.

Units 9,600

Beginning work in process inventory .............................. Transferred in from the prior department during January ......................................................................... 43,000 Completed and transferred to the next department during January ............................................................. 45,500 Ending work in process inventory ................................... 7,100

Percentage complete 50%

10%

The accounting records indicate that the conversion cost that had been assigned to beginning work in process inventory was $17,328 and a total of $161,085 in conversion costs were incurred in the department during January. What was the cost per equivalent unit for conversion costs for January in the Molding Department? (Round off to three decimal places.) A) $3.610 B) $3.746 C) $3.215 D) $3.861 Answer: D Level: Medium LO: 2,4 38. Fabre Corporation uses the weighted-average method in its process costing system. The Assembly Department started the month with 3,000 units in its beginning work in process inventory that were 70% complete with respect to conversion costs. An additional 90,000 units were transferred in from the prior department during the month to begin processing in the Assembly Department. During the month 75,000 units were completed in the Assembly Department and transferred to the next processing department. There were 18,000 units in the ending work in process inventory of the Assembly Department that were 50% complete with respect to conversion costs. What we...