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CHAPTER 6—PROCESS COST ACCOUNTING--ADDITIONAL PROCEDURESMULTIPLE CHOICE The following information is available for the month of April from the First department of the Armque Corporation: Units Work in process, April 1 (50% complete) 90, Started in April 250, Transferred to Second Department in April...

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CHAPTER 6—PROCESS COST ACCOUNTING--ADDITIONAL PROCEDURES

MULTIPLE CHOICE 1. The following information is available for the month of April from the First department of the Armque Corporation: Units Work in process, April 1 (50% complete) Started in April Transferred to Second Department in April Work in process, April 30 (40% complete)

90,000 250,000 280,000 60,000

Materials are added in the beginning of the process in the First department. Using the average cost method, what are the equivalent units of production for the month of April? Materials Conversion a. 310,000 250,000 b. 250,000 295,000 c. 340,000 316,000 d. 340,000 304,000

Equivalent production: Materials: Finished and transferred during month 280,000 Equivalent units of work in process, end of month (60,000 units, 40% completed, all materials) 60,000 Total 340,000 Labor and factory overhead: Finished and transferred during April 280,000 Work in process, end of April (60,000 units, 40% completed) 24,000 Total 304,000 2. The following information is available for the month of August from the First department of the Twigg Corporation: Units Work in process, August 1 (60% complete) Started in August Work in process, August 30 (40% complete)

50,000 190,000 80,000

Materials are added in the beginning of the process in the First department. Using the average cost method, what are the equivalent units of production for the month of August? Materials Conversion a. 192,000 240,000 b. 190,000 192,000 c. 240,000 208,000 d. 240,000 192,000 Work in process, August 1 50,000 Started in August 190,000 Total processed during August 240,000 Work in process, August 30 80,000 Finished and transferred during August 160,000 Equivalent production: Materials: Finished and transferred during month 160,000 Equivalent units of work in process, end of month (80,000 units, 40% completed, all materials) 80,000 Total 240,000 Labor and factory overhead: Finished and transferred during August 160,000 Work in process, end of August (80,000 units, 40% completed) 32,000 Total 192,000 3. Information concerning Department A of Ali Company for the month of June is as follows:

Work in process, beginning of month Started in June Units completed Work in process, end of month

Units Materials

Costs

20,000 85,000 90,000 15,000

$14,550 $66,300

All materials are added at the beginning of the process. Using the average cost method, the cost (rounded to two places) per equivalent unit for materials for June is: a. $0.74. b. $0.90. c. $0.77. ($80,850 / 105,000 units = cost per equivalent unit $ .77) d. $0.78.

Units completed during June 90,000 Units in process, June 30 with all materials 15,000 Equivalent production for materials 105,000 Materials cost: Work in process, beginning of June $14,550 Added during June 66,300 Total materials cost $80,850 4. Plemmon Company adds materials at the beginning of the process in the forming department, which is the first of two stages of its production cycle. Information concerning the materials used in the forming department in April follows:

Units Work in process at April 1 Units started during April Units completed and transferred to next department during April

Materials 15,000 60,000

Costs $ 8,000 $38,500

65,000

Using the average cost method, what is the materials cost of the work in process at April 30 (rounded to nearest dollar)? a. $7,154 b. $6,200 c. $7,750 d. $6,417 Units Beginning work in process 15,000 Started 60,000 Total 75,000 Less completed 65,000 Ending work in process (complete as to material) 10,000 Unit cost (See calculation below) $ .62 Materials cost in ending work in process $ 6,200 Units completed during April 65,000 Units in process, April 30 with all materials 10,000 Equivalent production for materials 75,000 Materials cost: Work in process, April 1 $ 8,000 Costs added during April 38,500 Total materials cost for period $46,500 $38,500 / 60,000 units = cost per equivalent unit $ .62

5. The following information is available for the month of April from the First department of the Armque Corporation: Units Work in process, April 1 (50% complete) 90,000 Started in April 250,000 Transferred to Second Department in April 280,000 Work in process, April 30 (40% complete) 60,000 Materials are added at the end of the process in the First department. Using the average cost method, what are the equivalent units of production for the month of April? Materials Conversion a. 304,000 250,000 b. 280,000 295,000 c. 340,000 316,000 d. 280,000 304,000 Equivalent production: Materials: Finished and transferred during month 280,000 Equivalent units of work in process, end of month (60,000 units, 40% completed, no materials) 0 Total 280,000 Labor and factory overhead: Finished and transferred during April 280,000 Work in process, end of April (70,000 units, 40% completed) 24,000 Total 304,000 6. The following information is available for the month of August from the First department of the Twigg Corporation:

Work in process, August 1 (60% complete) Started in August Work in process, August 30 (40% complete)

Units 50,000 190,000 80,000

Materials are added at the end of the process in the First department. Using the average cost method, what are the equivalent units of production for the month of August? Materials Conversion a. 192,000

160,000

b. 160,000 192,000 c. 160,000 208,000 d. 240,000 192,000 Work in process, August 1 50,000 Started in August 190,000 Total processed during August 240,000 Work in process, August 30 80,000 Finished and transferred during August 160,000 Equivalent production: Materials: Finished and transferred during month 160,000 Equivalent units of work in process, end of month (80,000 units, 40% completed, no materials) 0 Total 160,000 Labor and factory overhead: Finished and transferred during August 160,000 Work in process, end of August (80,000 units, 40% completed) 32,000 Total 192,000 7. During June, Birch Bay Company's Department B equivalent unit product costs computed under the average cost method were as follows: Materials Conversion Transferred-in

$2 $3 $5

Materials are introduced at the end of the process in Department B. There were 4,000 units (60 % complete as to conversion costs) in work in process at June 30. The total costs assigned to the June 30 work in process inventory should be: a. $20,000. b. $24,800. c. $27,200. d. $35,200. Transferred-in costs: 4,000 units @ $5 $20,000 Conversion costs: 4,000 units (60% complete) @ $3 7,200 $27,200 Because materials are introduced at the end of the process, no materials cost would be included in the ending work in process.

8. Van Pelt Company uses the average cost method of process costing. The production report for the Mixing department follows: In process, beginning of period 1,000 units 800 units - materials 50% complete; conversion costs 40% complete 200 units - materials 25% complete; conversion costs 15% complete Placed in process during period 5,000 units Transferred to packing department 4,800 units In process, end of period 1,200 units 700 units - materials 75% complete; conversion costs 50% complete 500 units - materials 25% complete; conversion costs 20% complete What are the equivalent units for:

a. b. c. d.

Materials 5,650 5,450 4,850 5,400

Conversion Costs 5,450 5,250 4,400 5,220

Material Conversion Costs Completed and transferred to packing department Ending work-in-process: 700 x 75% - Material 700 x 50% - Conversion costs 500 x 25% - Material 500 x 20% - Conversion costs

4,800

4,800

525 350 125 5,450

100 5,250

9. Normal losses that occur in the manufacturing process are properly classified as: a. Extraordinary items. b. Product costs. c. Period costs. d. Deferred charges. Normal losses are properly classified as product costs and considered as part of the total cost of production. 10. Stanley Company adds materials at the beginning of the process in Department M. Data concerning the materials used in the March production follows: Units Work in process at March 1

15,000

Started during March 38,000 Completed and transferred to next department during March 37,000 Normal spoilage incurred 2,000 Work in process at March 31 14,000 Using the average cost method, the equivalent units for the materials unit cost calculation are: a. 38,000. b. 51,000. c. 55,000. d. 37,000. Units completed and transferred 37,000 Ending work in process with all materials 14,000 51,000 11. Materials are added at the start of the process in McKay Company's blending department, the first stage of the production cycle. The following information is available for the month of July: Units Work in process, July 1 (60% complete as to conversion costs) 50,000 Started in July 200,000 Transferred to the next department 195,000 Lost in production 15,000 Work in process, July 31 (50% complete as to conversion costs) 40,000 Under McKay's cost accounting system, the costs incurred on the lost units are absorbed by the remaining good units. Using the average cost method, what are the equivalent units for the materials unit cost calculation? a. 210,000 b. 195,000 c. 250,000 d. 235,000 Units completed and transferred 195,000 Ending work in process with all materials 40,000 235,000 12. In a process cost system, the cost attributable to abnormal losses that occur due to unexpected circumstances such as machine operator error should be assigned to: a. Ending work in process inventory. b. Cost of goods manufactured and ending work in process inventory in the ratio of units worked on during the period to units remaining in work in process inventory.

c. A separate loss account in order to highlight production inefficiencies d. Cost of good manufactured (transferred out) Losses from abnormal spoilage should be assigned to a separate account. These should be treated as a period cost.

13. If the amount of loss in a manufacturing process is abnormal, it should be classified as a: a. Period cost. b. Deferred charge. c. Joint cost. d. Product cost. Abnormal loss should be classified as a period cost (charged to expense of the current period and reflected separately on the income statement).

14. What losses should not affect the recorded cost of inventories? a. Normal losses b. Abnormal losses c. Seasonal losses d. Standard losses Abnormal losses should not affect the recorded cost of inventories because they are charged off as a period cost rather than being included in the cost of manufactured goods. 15. In a process cost system, how is the unit cost affected in a production cost report when materials are added in a department subsequent to the first department and the added materials result in additional units? a. It causes an increase in the preceding department's unit cost that necessitates an adjustment of the transferred-in unit cost. b. It causes a decrease in the preceding department's unit cost that necessitates an adjustment of the transferred-in unit cost. c. It causes an increase in the preceding department's unit cost but does not necessitate an adjustment of the transferred-in unit cost. d. It causes a decrease in the preceding department's unit cost but does not necessitate an adjustment of the transferred-in unit cost. If added materials result in additional units, it causes a decrease in the preceding department's unit cost and necessitates an adjustment of the transferred-in cost because there are more units over which to spread this cost.

16. Boyce Company manufactures chemicals. Chemical agent ABX is refined in the Refining department and, after it is transferred to the Mixing department, a reactive agent is added to it. In May, 25,000 gallons of ABX having a cost of $100,000 were transferred from the refining to the Mixing department where 15,000 gallons of the reactive agent were added. When calculating the inventory costs in the Mixing department, what will the cost per unit relating to gallons transferred in from the Refining department be? a. $4.00 b. $2.50 c. $3.75 d. $6.67

Gallons transferred in from the Refining Department 25,000 Additional gallons of reactive agent added in Mixing 15,000 Total gallons 40,000 Cost of ABX - $100,000 / 40,000 gallons = $2.50 17. In order to compute equivalent units of production using the FIFO method of process costing, work for the period must be broken down to units: a. Completed from beginning inventory, started and completed during the month, and units in ending inventory. b. Completed during the period and units in ending inventory. c. Started during the period and units transferred out during the period. d. Processed during the period and units completed during the period. 18. Material is added at the beginning of a process in a process costing system. The beginning work in process inventory for this process this period was 30 percent complete as to conversion costs. Using the first-in, first-out method of costing, the total equivalent units for material for this process during this period are equal to the: a. Units started this period in this process. b. Beginning inventory this period for this process. c. Units started this period in this process plus the beginning inventory. d. Units started this period in this process plus 70 percent of the beginning inventory. With the FIFO method of costing, equivalent units for materials would be the units started in process this period because the beginning work in process would have been complete as to materials. The proof follows: Beginning work in process, 20% completed 5,000 Units started 25,000 30,000

Units transferred out 22,000 Ending work in process 8,000 Beginning work in process 5,000 Units started and completed (25,000 started less 8,000 remaining in ending work in process 17,000 Ending work in process 8,000 Equivalent units of material: Needed to complete beginning work in process 0 Started and completed (17,000 x 100%) 17,000 Ending work in process (8,000 x 100%) 8,000 Equivalent units of material 25,000 . 19. Under which of the following conditions will the first-in, first-out method of process costing produce the same cost of goods manufactured amount as the average cost method? a. When goods produced are homogeneous in nature b. When there is no beginning inventory c. When there is no ending inventory d. When beginning and ending inventories are each 50 percent complete When there is no beginning inventory, the FIFO method and the average cost method will both produce the same cost of goods manufactured amount because equivalent production and unit costs will be the same. 20. The average cost method of process costing differs from the FIFO method of process costing in that the average cost method: a. Requires that ending work in process inventory be stated in terms of equivalent units of production. b. Can be used under any cost-flow assumption. c. Does not consider the degree of completion of beginning work in process inventory when computing equivalent units of production. d. Considers the ending work in process inventory only partially complete. The average cost method of process costing does not consider the degree of completion of beginning work in process inventory when computing equivalent units of production, while the FIFO method does. 21. Regina Manufacturing uses the FIFO method of process costing. The production report for the Curing Department, where the materials are added at the beginning of the period, for September was as follows: In process, beginning of the period Stage of completion

3,000 units 30 %

Transferred to stockroom during period In process, end of the period Stage of completion

12,000 units 6,000 units 40 %

The number of units started and completed during the period was: a. 12,000 b. 9,000 c. 15,000 d. 6,000 Units finished during the period 12,000 Less units in process at beginning of period 3,000 Units started and completed during period 9,000

22. Regina Manufacturing uses the FIFO method of process costing. The production report for the Curing Department, where the materials are added at the beginning of the period, for September was as follows: In process, beginning of the period Stage of completion 30 %

3,000 units

Transferred to stockroom during period 12,000 units In process, end of the period 6,000 units Stage of completion 40 % The number of equivalent units for conversion costs during the period was: a. 13,500 b. 16,500 c. 12,300 d. 14,700 Units finished during the period 12,000 Less units in process at beginning of period 3,000 Units started and completed during period 9,000 Needed to finish beginning work in process (3,000 x 70%) 2,100 Started and completed during period 9,000 Ending work in process (6,000 x 40%) 2,400 Equivalent units for conversion costs 13,500

23. The following information is available for the month of April from the First department of the Armque Corporation: Units Work in process, April 1 (50% complete) Started in April Transferred to Second Department in April Work in process, April 30 (40% complete)

90,000 250,000 280,000 60,000

Materials are added in the beginning of the process in the First department. Using the firstin, first-out method, what are the equivalent units of production for the month of April? Materials Conversion a. 250,000 259,000 b. 340,000 259,000 c. 280,000 271,000 d. 250,000 271,000 Equivalent production: Materials: To complete beginning units in process (materials were 100% complete) 0 Units started and finished during the month (250,000 started - 60,000 in ending WIP) 190,000 Equivalent units of work in process, end of month (60,000 units, 40% completed, all materials) 60,000 Total 250,000 Labor and factory overhead: To complete beginning units in process (conversion costs were 50% complete) 45,000 Units started and finished during the month (250,000 started - 60,000 in ending WIP) 190,000 Work in process, end of April (70,000 units, 40% completed) 24,000 Total 259,000 24. Information concerning Department A of Ali Company for the month of June is as follows: Units Materials Costs Work in process, beginning of month 20,000 $14,550 Started in June 85,000 $66,300 Units completed 90,000 Work in process, end of month 15,000 All materials are added at the beginning of the process. Using the first-in, first-out method,

the cost (rounded to two places) per equivalent unit for materials for June is: a. $0.63. b. $0.90. c. $0.77. d. $0.78. To complete beginning units in process (all had 100% of materials) 0 Units started and completed during the month (85,000 started - 15,000 in ending WIP) 70,000 Units in process, June 30 with all materials 15,000 Equivalent production for materials in period 85,000 Materials cost: Added during June $66,300 Total materials cost for period $66,300 $66,300 / 85,000 units = cost per equivalent unit $ .78 25. Plemmon Company adds materials at the beginning of the process in the forming department, which is the first of two stages of its production cycle. Information concerning the materials used in the forming department in April follows: Units Materials Costs Work in process at April 1 15,000 $ 8,000 Units started during April 60,000 $38,500 Units completed and transferred to next department during April 65,000 Using the FIFO method, what is the materials cost of the work in process at April 30 (rounded to nearest dollar)? a. $7,154 b. $6,200 c. $7,750 d. $6,417 Units Beginning work in process 15,000 Started 60,000 Total 75,000 Less completed 65,000 Ending work in process (complete as to material) 10,000 Unit cost (See calculation below) $ .6417 Materials cost in ending work in process $ 6,417 To complete beginning in process units (materials all 100%) 0

Units started and finished during month (60,000 started - 10,000 in ending WIP) 50,000 Units in process, April 30 with all materials 10,000 Equivalent production for materials 60,000 Materi...