Ch06 Process CostingCh06 Process Costing PDF

Preview

Summary

6 – 1CHAPTER 6PROCESS COSTINGMULTIPLE CHOICE Which cost accumulation procedure is most applicable in continuous mass-production manufacturing environments? a. standard b. actual c. process d. job orderANSWER: c EASY Process costing is used in companies that a. engage in road and bridge construction....

Description

CHAPTER 6 PROCESS COSTING

ANSWER:

MULTIPLE CHOICE 1.

Which cost accumulation procedure is most applicable in continuous mass-production manufacturing environments? a. b. c. d.

ANSWER: 7.

engage in road and bridge construction. produce sailboats made to customer specifications. produce bricks for sale to the public. construct houses according to customer plans.

ANSWER:

c

EASY

d

8.

b

cost plus the cost of beginning inventory less the cost of beginning inventory plus the cost of ending inventory

EASY

is more difficult to apply. only considers the last units worked on. ignores work performed in subsequent periods. commingles costs of two periods.

A process costing system is used by a company that ANSWER: a. b. c. d.

produces heterogeneous products. produces items by special request of customers. produces homogeneous products. accumulates costs by job.

ANSWER:

c

9.

EASY

a.

Which is the best cost accumulation procedure to use for continuous mass production of like units? a. b. c. d.

c.

actual standard job order process

MEDIUM

d.

add the beginning Work in Process Inventory cost to the current period’s production cost. divide the current period’s production cost by the equivalent units. subtract the beginning Work in Process Inventory cost from the current period’s production cost. divide the current period’s production cost into the EUP.

ANSWER:

6–1

d

The first step in determining the cost per EUP per cost component under the weighted average method is to

b. 5.

MEDIUM

The weighted average method is thought by some accountants to be inferior to the FIFO method because it a. b. c. d.

EASY

c

only current period current period cost current period cost current period cost

ANSWER:

gasoline potato chips blank videotapes stained glass windows

ANSWER:

EASY

In a process costing system using the weighted average method, cost per equivalent unit for a given cost component is found by dividing which of the following by EUP? a. b. c. d.

A producer of ________ would not use a process costing system. a. b. c. d.

4.

EASY

Process costing is used in companies that a. b. c. d.

3.

c

d

Equivalent units of production are equal to the a. units completed by a production department in the period. b. number of units worked on during the period by a production department. c. number of whole units that could have been completed if all work of the period had been used to produce whole units. d. identifiable units existing at the end of the period in a production department.

standard actual process job order

ANSWER: 2.

6.

a

MEDIUM

6–2

10.

Chapter 6

The difference between EUP calculated using FIFO and EUP calculated using weighted average is the equivalent units a. b. c. d.

started and completed during the period. residing in beginning Work in Process Inventory. residing in ending Work in Process Inventory. uncompleted in Work in Process Inventory.

ANSWER: 11.

d. beginning and ending Work in Process Inventories are each 50 percent complete. ANSWER: 15.

MEDIUM

the EUP calculations for weighted average process costing. the EUP calculations for FIFO process costing. LIFO inventory costing for merchandise. the EUP calculations for LIFO process costing.

ANSWER:

b

16.

In a FIFO process costing system, which of the following are assumed to be completed first in the current period? a. b. c. d.

units units units units

ANSWER:

b

d.

EASY

To compute equivalent units of production using the FIFO method of process costing, work for the current period must be stated in units a. b.

c. d.

17.

completed during the period and units in ending inventory. completed from beginning inventory, units started and completed during the period, and units partially completed in ending inventory. started during the period and units transferred out during the period. processed during the period and units completed during the period.

14.

b

MEDIUM

The FIFO method of process costing will produce the same cost of goods transferred out amount as the weighted average method when a. b. c.

the goods produced are homogeneous. there is no beginning Work in Process Inventory. there is no ending Work in Process Inventory.

d

MEDIUM

In a cost of production report using process costing, transferred-in costs are similar to the a. b. c. d.

cost of material added at the beginning of production. conversion cost added during the period. cost transferred out to the next department. cost included in beginning inventory.

ANSWER: 18.

ANSWER:

EASY

beginning inventory this period for the process. units started this period in the process. units started this period in the process plus the beginning Work in Process Inventory. units started and completed this period plus the units in ending Work in Process Inventory.

ANSWER: 13.

a

Material is added at the beginning of a process in a process costing system. The beginning Work in Process Inventory for the process was 30 percent complete as to conversion costs. Using the FIFO method of costing, the number of equivalent units of material for the process during this period is equal to the a. b. c.

started this period started last period transferred out still in process

EASY

in the treatment of beginning Work in Process Inventory. in the treatment of current period production costs. in the treatment of spoiled units. none of the above.

ANSWER:

MEDIUM

b

The primary difference between the FIFO and weighted average methods of process costing is a. b. c. d.

EUP calculations for standard process costing are the same as a. b. c. d.

12.

b

Process Costing

a

EASY

In a process costing system, the journal entry to record the transfer of goods from Department #2 to Finished Goods Inventory is a a. debit Work in Process Inventory #2, credit Finished Goods Inventory. b. debit Finished Goods Inventory, credit Work in Process Inventory #1. c. debit Finished Goods Inventory, credit Work in Process Inventory #2.

Chapter 6

d. #2.

Process Costing

debit Cost of Goods Sold, credit Work in Process Inventory a. b.

ANSWER: 19.

EASY c. d.

the last department only. the last production cycle. all prior departments. the current period only.

ANSWER:

c

Units to account for no yes yes yes

ANSWER:

d

Total cost to account for no yes no yes

a. b. c. d.

EASY

ANSWER:

c

strict FIFO. modified FIFO. weighted average costing. normal costing.

ANSWER: 23.

b

A process costing system

d

Determines total units to account for yes no no yes

EASY

a. b. c. d.

job order and standard costing systems. job order and process costing systems. process and standard costing systems. job order and normal costing systems.

EASY

Averaging the total cost of completed beginning inventory and units started and completed over all units transferred out is known as a. b. c. d.

EASY

A hybrid costing system combines characteristics of

ANSWER: 22.

c

Assigns costs to inventories no yes yes no

Calculates average cost per whole unit yes no yes no

ANSWER: 26.

EASY

A process costing system

a. b. c. d.

Process costing techniques should be used in assigning costs to products a. if a product is manufactured on the basis of each order received. b. when production is only partially completed during the accounting period. c. if a product is composed of mass-produced homogeneous units. d. whenever standard-costing techniques should not be used.

Calculates EUPs no no yes yes

ANSWER: 25.

b

A process costing system does which of the following?

EASY

EUP calculations yes yes no no

cannot use standard costs. restates Work in Process Inventory in terms of completed units. accumulates costs by job rather than by department. assigns direct labor and manufacturing overhead costs separately to units of production.

ANSWER: 24.

Which of the following is(are) the same between the weighted average and FIFO methods of calculating EUPs?

a. b. c. d.

21.

c

Transferred-in cost represents the cost from a. b. c. d.

20.

6–3

MEDIUM

27.

b

EASY

When standard costs are used in process costing, a. b. c. d.

variances can be measured during the production period. total costs rather than current production and current costs are used. process costing calculations are made simpler. the weighted average method of calculating EUPs makes computing transferred-out costs easier.

ANSWER:

d

MEDIUM

6–4

28.

Chapter 6

Short Company transferred 5,500 units to Finished Goods Inventory during June. On June 1, the company had 300 units on hand (40 percent complete as to both material and conversion costs). On June 30, the company had 800 units (10 percent complete as to material and 20 percent complete as to conversion costs). The number of units started and completed during June was a. b. c. d.

29.

32.

EASY

c

a. b. c. d.

54,000 59,000 42,000 47,000

ANSWER:

34.

a

MEDIUM

Winn Co. uses a weighted average process costing system. Material is added at the start of production. Winn Co. started 13,000 units into production and had 4,500 units in process at the start of the period that were 60 percent complete as to conversion costs. If Winn transferred out 11,750 units, how many units were in ending Work in Process Inventory? a. b. c. d.

1,250 3,500 5,750 3,000

EASY

4,610 4,910 3,450 4,560

ANSWER:

31.

c

Kim Co. makes small metal containers. The company began December with 250 containers in process that were 30 percent complete as to material and 40 percent complete as to conversion costs. During the month, 5,000 containers were started. At month end, 1,700 containers were still in process (45 percent complete as to material and 80 percent complete as to conversion costs). Using the weighted average method, what are the equivalent units for conversion costs?

EASY

X Co. had beginning Work in Process Inventory of 5,000 units that were 40 percent complete as to conversion costs. X started and completed 42,000 units this period and had ending Work in Process Inventory of 12,000 units. How many units were started this period? a. b. c. d.

EASY

37,800 42,000 40,200 40,800

ANSWER: 33.

c

Murphy Co. uses a weighted average process costing system and started 30,000 units this month. Murphy had 12,000 units that were 20 percent complete as to conversion costs in beginning Work in Process Inventory and 3,000 units that were 40 percent complete as to conversion costs in ending Work in Process Inventory. What are equivalent units for conversion costs? a. b. c. d.

500. 600. 1,500. 2,000.

ANSWER: 30.

a

Brown Co. started 9,000 units in October. The company transferred out 7,000 finished units and ended the period with 3,500 units that were 40 percent complete as to both material and conversion costs. Beginning Work in Process Inventory units were a. b. c. d.

ANSWER:

5,200. 5,380. 5,500. 6,300.

ANSWER:

Process Costing

MEDIUM

Zammillo Co. uses a FIFO process costing system. The company had 5,000 units that were 60 percent complete as to conversion costs at the beginning of the month. The company started 22,000 units this period and had 7,000 units in ending Work in Process Inventory that were 35 percent complete as to conversion costs. What are equivalent units for material, if material is added at the beginning of the process? a. b. c. d.

18,000 22,000 25,000 27,000

ANSWER: 35.

b

b

EASY

Lisa Co. makes fabric-covered hatboxes. The company began August with 500 boxes in process that were 100 percent complete as to

Chapter 6

Process Costing

6–5

cardboard, 80 percent complete as to cloth, and 60 percent complete as to conversion costs. During the month, 3,300 boxes were started. On August 31, 350 boxes were in process (100 percent complete as to cardboard, 70 percent complete as to cloth, and 55 percent complete as to conversion costs). Using the FIFO method, what are equivalent units for cloth? a. b. c. d.

d.

38.

b

MEDIUM

$7.03 $3.44 $4.24 $5.71

ANSWER:

MEDIUM

a

Assume that FIFO process costing is used. What is the cost per equivalent unit for conversion? a. b. c. d.

3,450 3,295 3,395 3,595

ANSWER:

$1.31

ANSWER:

c

MEDIUM

Use the following information for questions 36–38.

Use the following information for questions 39–46.

Forte Co. has the following information for May:

The December 25th Co. makes wreaths in two departments: Forming and Decorating. Forming began the month with 500 wreaths in process that were 100 percent complete as to material and 40 percent complete as to conversion. During the month, 6,500 wreaths were started. At month end, Forming had 2,100 wreaths that were still in process that were 100 percent complete as to material and 50 percent complete as to conversion. Assume Forming uses the weighted average method of process costing. Costs in the Forming Department are as follows:

Beginning Work in Process Inventory (70% complete as to conversion) Started Ending Work in Process Inventory (10% complete as to conversion)

6,000 units 24,000 units 8,500 units

Beginning WIP Inventory Costs: Material Conversion

$23,400 50,607

Current Period Costs: Material Conversion

$31,500 76,956

All material is added at the start of the process and all finished products are transferred out. 36.

How many units were transferred out in May? a. b. c. d.

15,500 18,000 21,500 24,000

ANSWER: 37.

c

EASY

Assume that weighted average process costing is used. What is the cost per equivalent unit for material? a. b. c.

$1.83 $1.05 $0.55

Beginning Work in Process Costs: Material Conversion Current Costs: Material Conversion

$1,000 1,500 $3,200 5,045

The Decorating Department had 600 wreaths in process at the beginning of the month that were 80 percent complete as to material and 90 percent complete as to conversion. The department had 300 units in ending Work in Process that were 50 percent complete as to material and 75 percent complete as to conversion. Decorating uses the FIFO method of process costing, and costs associated with Decorating are: Beginning WIP Inventory: Transferred In Material Conversion Current Period: Transferred In Material Conversion 39.

$1,170 4,320 6,210 ? $67,745 95,820

How many units were transferred to Decorating during the month?

6–6

Chapter 6

a. b. c. d.

7,000 600 4,900 5,950

ANSWER:

c

EASY

Process Costing

Chapter 6

40.

Process Costing

6–7

What was the cost transferred out of Forming during the month? ANSWER: a. b. c. d.

$6,419 $5,341 $8,330 $8,245

ANSWER: 41.

45.

c

$12.00 $12.78 $11.32 $11.46

ANSWER: a. b. c. d.

7,700 8,000 8,600 7,400

ANSWER: 42.

46.

b

8,000 8,450 8,330 7,970

ANSWER: 43.

44.

d

MEDIUM Beginning Work in Process Inventory (40% complete as to conversion) Started this period Ending Work in Process Inventory (25% complete as to conversion) Transferred out 47.

a

$8.80 $8.65 $8.50 $9.04

units units

2,500 ?

units

29,500 39,000 36,500 34,500

ANSWER: 48.

7,000 32,000

Compute the number of units started and completed in November. a. b. c. d.

MEDIUM

Disregard your answer to question 40. Assume that 8,000 units were transferred to Decorating at a total cost of $16,000. What is the material cost per equivalent unit in Decorating? a. b. c. d.

MEDIUM

BCW Co. adds material at the start to its production process and has the following information available for November:

7,985 8,465 8,360 7,925

ANSWER:

d

Use the following information for questions 47–51.

Disregard your answer to question 39. Assume 8,000 units were transferred to Decorating. Compute the number of equivalent units in Decorating for conversion. a. b. c. d.

MEDIUM

$11,940 $960 $1,380 $1,860

ANSWER: a. b. c. d.

a

Assume the material cost per EUP is $8.00 and the conversion cost per EUP is $15 in Decorating. What is the cost of completing the units in beginning inventory? a. b. c. d.

DIFFICULT

Disregard your answer to question 39. Assume 8,000 units were transferred to Decorating. Compute the number of equivalent units in Decorating for material.

MEDIUM

Disregard your answer to question 40. Assume that 8,000 units were transferred to Decorating at a total cost of $16,000. What is the conversion cost per equivalent unit in Decorating? a. b. c. d.

MEDIUM

Disregard your answer to question 39. Assume 8,000 units were transferred to Decorating. Compute the number of equivalent units as to costs in Decorating for the transferred-in cost component.

c

a

MEDIUM

Calculate equivalent units of production for material using FIFO. a. b.

36,800 32,000

6–8

Chapter 6

c. d.

39,000 37,125

ANSWER: 49.

b

EASY

52.

a

MEDIUM

53.