ch03.doc

CHAPTER 3 PROCESS COSTING SUMMARY OF QUESTIONS BY STUDY OBJECTIVES AND BLOOM’S TAXONOMY Item

SO

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7 8 8 8 8 8 1 2

K K K K K K K K

104. 105. 106. 107. 108. 109. 110. 111. 112. 113. 114. 115. 116. 117. 118. 119. 120. 121. 122. 123. 124. 125.

6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 7 7

AP AP AP AP AP AP AP C AP AP AP AP AP AP AP AP AP AP AP AP K K

156. 157. a 158.

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33. 34. sg 35. sg 36. sg, a 37.

3 4 5 6 8

C K K K K

126. 127. a 128. a 129. a 130. a 131. a 132. a 133. a 134. st 135. sg 136. st 137. sg 138. sg 139. st 140. sg 141. st 142. sg 143. sg 144. st 145. sg 146.

7 8 8 8 8 8 8 8 8 1 2 2 5 5 5 6 6 6 6 6 7

K AP AP AP AP AP AP AP AP K K K K K K AP K C AP K K

True-False Statements 1. 2. 3. 4. 5. 6. 7. 8.

1 1 1 2 2 2 2 4

K K C C K K K C

9. 10. 11. 12. 13. 14. 15. 16.

4 4 4 5 5 5 5 5

K K K C K K K AP

17. 18. 19. 20. 21. 22. 23. 24.

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K C K K C K K K

25. 26. a 27. a 28. a 29. a 30. sg 31. sg 32. a

sg sg

Multiple Choice Questions 38. 39. 40. 41. 42. 43. 44. 45. 46. 47. 48. 49. 50. 51. 52. 53. 54. 55. 56. 57. 58. 59.

1 1 1 1 1 2 2 2 2 2 2 2 4 4 4 4 4 4 5 5 5 5

C C K K K C K C K K C K C C C C K C AP AP AP AP

60. 61. 62. 63. 64. 65. 66. 67. 68. 69. 70. 71. 72. 73. 74. 75. 76. 77. 78. 79. 80. 81.

5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 6 6

AP K AP AP AP C AP AP AP AP AP AP AP AP AP AP AP AP AP AP AP AP

82. 83. 84. 85. 86. 87. 88. 89. 90. 91. 92. 93. 94. 95. 96. 97. 98. 99. 100. 101. 102. 103.

6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6

AP AP AP AP AP AP AP AP AP AP AP AP AP AP AP AP AP AP C C AP K

Brief Exercises 147. 148. 149. sg st a

5 5 5

AP AP AP

150. 151. 152.

6 6 6

AP AP AP

153. 154. 155.

6 6 6

AP AP AP

a

This question also appears in the Study Guide. This question also appears in a self-test at the student companion website. This topic is dealt with in an Appendix to the chapter.

a

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Test Bank for Managerial Accounting, Fifth Edition

SUMMARY OF QUESTIONS BY STUDY OBJECTIVES AND BLOOM’S TAXONOMY Exercises 159. 160. 161. 162. 163. 164.

4 4 4 4 4 5

AP AP AP AP AP AP

165. 166. 167. 168. 169. 170.

5 5,6 5,6 5,6 5,6 5,6

AP AP AN AP AP AP

171. 172. 173. 174. 175. 176.

5,6 5,6 5,6 5,6 5,6 5,6

AP AP AP AP AP AP

177. 178. 179. 180. 181. 182.

5,6 6 6 6 7 7

AP AP AP AP AP AP

183. 184. a 185. a 186.

7 7 8 8

AP AP AP AP

6 6

AP K

195.

7

K

6

S

201.

1

S

Completion Statements 187. 188.

1 2

K K

189. 190.

2 4

K K

191. 192.

5 6

K K

193. 194.

Matching Statements 196.

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K

Short-Answer Essay 197.

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198.

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199.

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SUMMARY OF STUDY OBJECTIVES BY QUESTION TYPE Item

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TF TF

3. 31.

TF TF

38. 39.

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TF TF TF

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TF TF MC

44. 45. 46.

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TF

8. 9. 10.

TF TF TF

11. 34. 50.

TF TF MC

51. 52. 53.

12. 13. 14. 15. 16. 35. 56. 57.

TF TF TF TF TF TF MC MC

58. 59. 60. 61. 62. 63. 64. 65.

MC MC MC MC MC MC MC MC

66. 67. 68. 69. 70. 71. 72. 73.

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Study Objective 1 MC 40. MC 42. MC 41. MC 135. Study Objective 2 MC 47. MC 136. MC 48. MC 137. MC 49. MC 138. Study Objective 3 Study Objective 4 MC 54. MC 159. MC 55. MC 160. MC 138. MC 161. Study Objective 5 MC 74. MC 147. MC 75. MC 148. MC 76. MC 149. MC 77. MC 164. MC 78. MC 165. MC 79. MC 166. MC 139. MC 167. MC 140. MC 168.

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MC MC

187. 197.

C SA

199. 201.

SA SA

MC MC C

189. 196.

C MA

Ex Ex Ex

162. 163. 190.

Ex Ex C

BE BE BE Ex Ex Ex Ex Ex

169. 170. 171. 172. 173. 174. 175. 176.

Ex Ex Ex Ex Ex Ex Ex Ex

177. 191.

Ex C

17. 18. 19. 20. 21. 22. 36. 80. 81. 82. 83. 84.

TF TF TF TF TF TF TF MC MC MC MC MC

85. 86. 87. 88. 89. 90. 91. 92. 93. 94. 95. 96.

MC MC MC MC MC MC MC MC MC MC MC MC

97. 98. 99. 100. 101. 102. 103. 104. 105. 106. 107. 108.

23. 24.

TF TF

25. 124.

TF MC

125. 126.

26. 27. 28.

TF TF TF

29. 30. 127.

TF TF MC

128. 129. 130.

Note: TF = True-False MC = Multiple Choice SA = Short-Answer Essay

Study Objective 6 MC 109. MC 121. MC 110. MC 122. MC 111. MC 123. MC 112. MC 141. MC 113. MC 142. MC 114. MC 143. MC 115. MC 144. MC 116. MC 145. MC 117. MC 150. MC 118. MC 151. MC 119. MC 152. MC 120. MC 153. Study Objective 7 MC 151. MC 182. MC 181. Ex 183. a Study Objective 8 MC 131. MC 134. MC 132. MC 157. MC 133. MC 158.

Process Costing

3-3

MC MC MC MC MC MC MC MC BE BE BE BE

154. 155. 156. 170. 171. 172. 173. 174. 175. 176. 177. 178.

BE BE BE Ex Ex Ex Ex Ex Ex Ex Ex Ex

179. 180. 192. 193. 194. 198. 200.

Ex Ex Cx Cx Cx SA SA

Ex Ex

184. 195.

Ex C

MC BE BE

185. 186. 198.

Ex Ex C

208.

SA

BE = Brief Exercise Ex = Exercise

C = Completion MA = Matching

The chapter also contains one set of ten Matching questions and five Short-Answer Essay questions.

CHAPTER STUDY OBJECTIVES 1. Understand who uses process cost systems. 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. 2. Explain the similarities and differences between job order cost and process cost systems. Job order cost systems are similar to process cost systems in three ways: (1) Both systems track the same cost elements—direct materials, direct labor, and manufacturing overhead. (2) Costs are accumulated in the same accounts—Raw Materials Inventory, Factory Labor, and Manufacturing Overhead. (3) Accumulated costs are assigned to the same accounts—Work in Process, Finished Goods Inventory, and Cost of Goods Sold. However, the method of assigning costs differs significantly.

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Test Bank for Managerial Accounting, Fifth Edition There are four main differences between the two cost systems: (1) A process cost system uses separate accounts for each production process department or manufacturing process, rather than only one work in process account used in a job order cost system. (2) Process cost system summarizes costs in a production cost report for each department. A job cost system, costs are charged to individual jobs and summarizes them in a job cost sheet. (3) Costs are totaled at the end of a time period in a process cost system, but at the completion of a job in a job cost system. (4) A process cost system, calculates unit cost as: Total manufacturing costs for the period ÷ Units produced during the period. A job cost system, unit cost is: Total cost per job ÷ Units produced.

3. Explain the flow of costs in a process cost system. A process cost system assigns manufacturing costs for raw materials, labor, and overhead to work in process accounts for various departments or manufacturing processes. It transfers the costs of units completed from one department to another as those units move through the manufacturing process. The system transfers the costs of completed work to Finished Goods Inventory. Finally, when inventory is sold, the system transfers costs to Cost of Goods Sold. 4. Make the journal entries to assign manufacturing costs in a process cost system. Entries to assign the costs of raw materials, labor, and overhead consist of a credit to Raw Materials Inventory, Factory Labor, and Manufacturing Overhead, and a debit to Work in Process for each department. Entries to record the cost of good transferred to another department are a credit to Work in Process for the department whose work is finished and a debit to the department to which the goods are transferred. The entry to record units completed and transferred to the warehouse is a credit for the department whose work is finished and a debit to Finished Goods Inventory. The entry to record the sale of goods is a credit to Finished Goods Inventory and a debit to Cost of Goods Sold. 5. 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. 6. Explain the four steps necessary 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 unit production costs, expressed in terms of equivalent units of production. (4) Prepare a cost reconciliation schedule, which shows that the total costs accounted for equal the total costs to be accounted for. 7. Prepare a production cost report. The production cost report contains both quantity and cost data for a production department. There are four sections in the report: (1) number of physical units, (2) equivalent units determination, (3) unit costs, and (4) cost reconciliation schedule. a

8. Explain just-in-time (JIT) processing. JIT is a manufacturing technique dedicated to producing the right products at the right time as needed. One of the principal accounting effects is that a Raw and In-Process Inventory account replaces both the raw materials and work in process inventory accounts.

Process Costing

3-5

TRUE-FALSE STATEMENTS 1.

Process cost accounting focuses on the process involved in mass-producing products that are very similar in nature.

Ans: T, SO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: Cost Management

2.

Process cost systems are used to apply costs to a specific job, such as the manufacturing of a specialized machine.

Ans: F, SO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: Cost Management

3.

A company that produces motion pictures would likely use a process cost system.

Ans: F, SO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: Cost Management

4.

In a process cost system, costs are tracked through a series of connected manufacturing processes or departments, rather than by individual jobs.

Ans: T, SO: 2, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: Cost Management

5.

In a process cost system, total costs are determined at the end of a month or year.

Ans: T, SO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: Cost Management

6.

Separate work in process accounts are maintained for each production department or manufacturing process in a process cost system.

Ans: T, SO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: FSA

7.

In a process cost system, materials, labor and overhead are only added in the first production department.

Ans: F, SO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: Cost Management

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.

Ans: F, SO: 4, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: Cost Management

9.

Fewer materials requisitions are generally required in a process cost system than in a job order cost system.

Ans: T, SO: 4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: Cost Management

10.

In a process cost system, labor costs incurred maybe captured on time tickets.

Ans: T, SO: 4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: Cost Management

11.

A primary driver of overhead costs in continuous manufacturing operations is machine time used.

Ans: T, SO: 4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: Cost Management

3-6 12.

Test Bank for Managerial Accounting, Fifth Edition Equivalent units of production are used to determine the cost per unit of completed products.

Ans: T, SO: 5, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: Cost Management

13.

Equivalent units of production measure the work done during a period, expressed in fully completed units.

Ans: T, SO: 5, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: Cost Management

14.

Equivalent units of production is the sum of units completed and transferred out plus equivalent units of beginning work in process.

Ans: F, SO: 5, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: Cost Management

15.

The weighted-average method of computing equivalent units is the most widely used method in practice.

Ans: T, SO: 5, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: Cost Management

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.

Ans: F, SO: 5, Bloom: AP, Difficulty: Easy, Min: 2, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: Cost Management

17.

The first step performed in preparing a production cost report is computing the equivalent units of production.

Ans: F, SO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting

18.

Equivalent units of production must be calculated before the unit production costs can be computed.

Ans: T, SO: 6, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: Cost Management

19.

The physical units in a department are another name for the equivalent units of production.

Ans: F, SO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting

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.

Ans: F, SO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: Cost Management

21.

When equivalent units of production are different for materials and conversion costs, unit costs are computed for materials, conversion, and total manufacturing.

Ans: T, SO: 6, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting

22.

The total manufacturing cost per unit is used in costing the units completed and transferred during the period.

Ans: T, SO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: Cost Management

Process Costing 23.

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A production cost report is an internal document for management that shows production quantity and cost data for a particular job.

Ans: F, SO: 7, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting

24.

Production cost reports provide a basis for evaluating the productivity of a department.

Ans: T, SO: 7, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting

25.

Companies often use a combination of a process cost and a job order cost system, called operations costing.

Ans: T, SO: 7, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: Cost Management a

26.

The FIFO method is easier to understand and use than the weighted-average method.

Ans: F, SO: 8, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Leverage Technology, AICPA PC: None, IMA: Cost Management a

27.

The FIFO method is conceptually superior to the weighted-average method.

Ans: T, SO: 8, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Leverage Technology, AICPA PC: None, IMA: Cost Management a

28.

When comparing the FIFO with the weighted-average method, the FIFO method provides current cost information.

Ans: T, SO: 8, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Leverage Technology, AICPA PC: None, IMA: Cost Management a

29.

There are no units in ending work in process at the end of the period under the FIFO method.

Ans: F, SO: 8, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Leverage Technology, AICPA PC: None, IMA: Cost Management a

30.

Companies using the weighted-average method do not complete units left over from the previous accounting periods, they start new units.

Ans: F, SO: 8, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Leverage Technology, AICPA PC: None, IMA: Cost Management

31.

In continuous process manufacturing, generally once the production begins, it continues until the finished product emerges.

Ans: T, SO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Leverage Technology, AICPA PC: None, IMA: Cost Management

32.

One similarity of process cost accounting with job order cost accounting is that both determine total manufacturing costs after each job.

Ans: F, SO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Leverage Technology, AICPA PC: None, IMA: Cost Management

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.

Ans: F, SO: 3, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: Cost Management

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.

Ans: F, SO: 4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: FSA

3-8 35.

Test Bank for Managerial Accounting, Fifth Edition 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.

Ans: T, SO: 5, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: Cost Management

36.

In order to compute the physical unit flow, a company must first compute unit production costs.

Ans: F, SO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting

37.

Under the FIFO method, it is assumed that the beginning work in process is completed before new work is started.

Ans: T, SO: 8, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting

Answers to True-False Statements Item

1. 2. 3. 4. 5. 6.

Ans.

T F F T T T

Item

7. 8. 9. 10. 11. 12.

Ans.

F F T T T T

Item

13. 14. 15. 16. 17. 18.

Ans.

T F T F F T

Item

19. 20. 21. 22. 23. 24.

Ans.

Item

Ans.

F F T T F T

25. a 26. a 27. a 28. a 29. a 30.

T F T T F F

Item

31. 32. 33. 34. 35. 36.

Ans.

T F F F T F

Item

37.

Ans.

T

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.

Ans: C, SO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: Business Applications

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.

Ans: A, SO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: Cost Management

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.

Ans: C, SO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: Business Applications

Process Costing 41.

3-9

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.

Ans: C, SO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting

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.

Ans: D, SO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Business Applications

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.

Ans: C, SO: 2, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Business Applications

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.

Ans: B, SO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: Business Applications

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

Ans: C, SO: 2, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: Business Applications

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.

Ans: B, SO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: Business Economics

3 - 10 47.

Test Bank for Managerial Accounting, Fifth Edition 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.

Ans: C, SO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting

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.

Ans: D, SO: 2, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: Business Economics

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.

Ans: B, SO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting

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. the Work in Process account.

Ans: D, SO: 4, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: FSA

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.

Ans: C, SO: 4, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: FSA

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.

Ans: D, SO: 4, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: FSA

Process Costing 53.

3 - 11

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.

Ans: C, SO: 4, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: Cost Management

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.

Ans: C, SO: 4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: Cost Management

55.

Price Manufacturing assigns overhead based on machine hours. The Milling Department logs 1,800 machine hours and Cutting Department shows 3,000 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 $24,000. b. credit to Work in Process—Cutting Department for $15,000. c. debit to Work in Process for $15,000. d. credit to Manufacturing Overhead for $24,000.

Ans: D, SO: 4, Bloom: C, Difficulty: Medium, Min: 2, AACSB: Analytic, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA

56.

Barnes and Miller Manufacturing is trying to determine the equivalent units for conversion costs with 5,000 units of ending work in process at 80% completion and 14,000 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. 19,000. b. 18,000. c. 4,000. d. 13,000.

Ans: D, SO: 5, Bloom: AP, Difficulty: Medium, Min: 2, AACSB: Analytic, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA

57.

9,000 units in a process that are 70% complete are referred to as: a. 9,000 equivalent units of production. b. 2,700 equivalent units of production. c. 6,300 equivalent units of production. d. 2,700 equivalent units of production.

Ans: C, SO: 5, Bloom: AP, Difficulty: Medium, Min: 2, AACSB: Analytic, AICPA BB: Industry/Sector Perspective, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting

58.

A process with no beginning work in process, completed and transferred out 75,000 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. 75,000 equivalent units. b. 125,000 equivalent units. c. 90,000 equivalent units. d. 37,500 equivalent units.

Ans: C, SO: 5, Bloom: AP, Difficulty: Medium, Min: 2, AACSB: Analytic, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Business Economics

3 - 12 59.

Test Bank for Managerial Accounting, Fifth Edition 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; 60,000 units were started into production in January; and there were 15,000 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. 66,000 equivalent units. b. 54,000 equivalent units. c. 45,000 equivalent units. d. 60,000 equivalent units.

Ans: D, SO: 5, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Industry/Sector Perspective, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting

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; 60,000 units were started into production in January; and there were 15,000 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. 45,000 equivalent units. b. 54,000 equivalent units. c. 51,000 equivalent units. d. 60,000 equivalent units.

Ans: C, SO: 5, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Industry/Sector Perspective, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting

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.

Ans: C, SO: 5, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: Cost Management

62.

Minor Company had the following department data: Physical Units Work in process, July 1 18,000 Completed and transferred out 81,000 Work in process, July 31 27,000 Materials are added at the beginning of the process. What is the total number of equivalent units for materials in July? a. 81,000. b. 90,000. c. 126,000. d. 108,000.

Ans: D, SO: 5, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Industry/Sector Perspective, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting

Process Costing 63.

3 - 13

Corsi Company had the following department data: Physical Units Work in process, beginning -0Completed and transferred out 50,000 Work in process, ending 5,000 Materials are added at the beginning of the process. What is the total number of equivalent units for materials during the period? a. 50,000. b. 5,000. c. 55,000. d. 45,000.

Ans: C, SO: 5, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Industry/Sector Perspective, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting

64.

Gantner Company had the following department information about physical units and percentage of completion: Physical Units Work in process, May 1 (60%) 48,000 Completed and transferred out 120,000 Work in process, May 31 (40%) 40,000 If materials are added at the beginning of the production process, what is the total number of equivalent units for materials during May? a. 168,000. b. 160,000. c. 155,200. d. 136,000.

Ans: B, SO: 5, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Industry/Sector Perspective, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting

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.

Ans: B, SO: 5, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: Cost Management

66.

In the month of June, a department had 12,000 units in beginning work in process that were 70% complete. During June, 48,000 units were transferred into production from another department. At the end of June there were 6,000 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. 48,000 units. b. 42,000 units. c. 54,000 units. d. 60,000 units.

Ans: C, SO: 5, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Management

3 - 14 67.

Test Bank for Managerial Accounting, Fifth Edition In the month of June, a department had 12,000 units in beginning work in process that were 70% complete. During June, 48,000 units were transferred into production from another department. At the end of June there were 6,000 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. 54,000 equivalent units. b. 60,000 equivalent units. c. 62,400 equivalent units. d. 48,000 equivalent units.

Ans: B, SO: 5, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Industry/Sector Perspective, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting

68.

In the month of June, a department had 12,000 units in beginning work in process that were 70% complete. During June, 48,000 units were transferred into production from another department. At the end of June there were 6,000 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. 48,000 equivalent units. b. 56,400 equivalent units. c. 54,000 equivalent units. d. 60,000 equivalent units.

Ans: B, SO: 5, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Management

69.

A process with no beginning work in process, completed and transferred out 14,000 units during a period and had 7,000 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. 17,500 equivalent units. b. 21,000 equivalent units. c. 24,500 equivalent units. d. 10,500 equivalent units.

Ans: A, SO: 5, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Management

70.

A process with 1,200 units of beginning work in process, completed and transferred out 15,000 units during a period. There were 7,500 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. 18,000 equivalent units. b. 22,500 equivalent units. c. 16,500 equivalent units. d. 21,000 equivalent units.

Ans: D, SO: 5, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Management

Process Costing 71.

3 - 15

Hanker Company had the following department data on physical units: Work in process, beginning Completed and transferred out Work in process, ending

2,000 8,000 1,600

Materials are added at the beginning of the process. What is the total number of equivalent units for materials during the period? a. 8,400. b. 1,600. c. 9,600. d. 6,000. Ans: C, SO: 5, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Management

72.

Super-Tech Industries had the following department information about physical units and percentage of completion: Physical Units Work in process, June 1 (75%) 6,000 Completed and transferred out 13,500 Work in process, June 30 (50%) 9,000 If materials are added at the beginning of the production process, what is the total number of equivalent units for materials during June? a. 11,250. b. 22,500. c. 24,000. d. 18,000.

Ans: B, SO: 5, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Industry/Sector Perspective, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting

73.

Gloria Company had no beginning work in process. During the period, 8,000 units were completed, and there were 800 units of ending work in process. How many units were started into production? a. 8,800. b. 8,000. c. 7,200. d. 800.

Ans: A, SO: 5, Bloom: AP, Difficulty: Medium, Min: 2, AACSB: Analytic, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Management

74.

Cohen Manufacturing is trying to determine the equivalent units for conversion costs with 3,000 units of ending work in process at 80% completion and 21,000 physical 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. 24,000. b. 23,400. c. 2,400. d. 20,400.

Ans: B, SO: 5, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA

3 - 16 75.

Test Bank for Managerial Accounting, Fifth Edition If beginning work in process is 4,000 units, ending work in process is 2,000 units, and the units accounted for equals 10,000 units, what must units started into production be? a. 14,000. b. 12,000. c. 6,000. d. 8,000.

Ans: C, SO: 5, Bloom: AP, Difficulty: Medium, Min: 2, AACSB: Analytic, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Management

76.

The Molding Department of Kennett Company has the following production data: beginning work in process 25,000 units (60% complete), started into production 425,000 units, completed and transferred out 400,000 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. 450,000. b. 375,000. c. 400,000. d. 475,000.

Ans: A, SO: 5, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Management

77.

The Molding Department of Kennett Company has the following production data: beginning work in process 25,000 units (60% complete), started into production 425,000 units, completed and transferred out 400,000 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. 450,000. b. 405,000. c. 420,000. d. 400,000.

Ans: C, SO: 5, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Management

78.

The Molding Department of Boswell Company has the following production data: beginning work process 30,000 units (60% complete), started into production 510,000 units, completed and transferred out 480,000 units, and ending work in process 60,000 units (40% complete). Assuming materials are entered at the beginning of the process, equivalent units for materials are: a. 540,000. b. 450,000. c. 480,000. d. 570,000.

Ans: A, SO: 5, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Management

79.

The Molding Department of Boswell Company has the following production data: beginning work process 30,000 units (60% complete), started into production 510,000 units, completed and transferred out 480,000 units, and ending work in process 60,000 units (40% complete). Assuming conversion costs are incurred uniformly during the process, the equivalent units for conversion costs are: a. 540,000. b. 570,000. c. 504,000. d. 450,000.

Ans: C, SO: 5, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Management

Process Costing 80.

3 - 17

Crawford Company has the following equivalent units for July: materials 10,000 and conversion costs 9,000. Production cost data are: Work in process, July 1 Costs added in July

Materials $ 3,200 25,200

Conversion $ 1,500 21,000

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 Ans: D, SO: 6, Bloom: AP, Difficulty: Medium, Min: 5, AACSB: Analytic, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Management

81.

In Moyer Company, the Cutting Department had beginning work in process of 6,000 units, transferred out 14,000 units, and had an ending work in process of 3,000 units. How many units were started by Moyer during the month? a. 9,000. b. 11,000. c. 14,000. d. 17,000.

Ans: B, SO: 6, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Management

82.

In the Shaping Department of Rollins Company the unit materials cost is $5.00 and the unit conversions cost is $3.00. The department transferred out 12,000 units and had 1,500 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. 2,400. b. 7,500. c. 8,400. d. 12,000.

Ans: C, SO: 6, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Management

83.

Holton Company has the following equivalent units for July: materials 10,000 and conversion 9,000. Production cost data are: Work in process, July 1 Costs added in July

Materials $ 4,800 37,800

Conversion $ 2,250 31,500

The unit production costs for July are: a. b. c. d.

Materials $3.78 4.26 3.78 4.26

Conversion Costs $3.75 3.50 3.50 3.75

Ans: D, SO: 6, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Industry/Sector Perspective, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting

3 - 18 84.

Test Bank for Managerial Accounting, Fifth Edition In Kapler Company, the Cutting Department had beginning work in process of 8,000 units, transferred out 18,000 units, and had an ending work in process of 4,000 units. How many units were started by Kapler during the month? a. 12,000. b. 14,000. c. 18,000. d. 22,000.

Ans: B, SO: 6, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Management

85.

In the Shaping Department of Jenkins Company the unit materials cost is $2.50 and the unit conversion cost is $1.50. The department transferred out 8,000 units and had 1,000 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. 800. b. 2,500. c. 2,800. d. 4,000.

Ans: C, SO: 6, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Industry/Sector Perspective, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting

86.

Cinder Company had the following department information for the month: Total materials costs Equivalent units of materials Total conversion costs Equivalent units of conversion costs

$ 80,000 8,000 $120,000 16,000

How much is the total manufacturing cost per unit? a. $17.50. b. $8.33. c. $7.50. d. $10.00. Ans: A, SO: 6, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Management

87.

Materials costs of $300,000 and conversion costs of $321,300 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. $276,000. b. $586,500. c. $621,300. d. $637,800.

Ans: B, SO: 6, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Management

Process Costing 88.

3 - 19

Materials costs of $300,000 and conversion costs of $321,300 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. $24,000. b. $10,800. c. $20,400. d. $34,800.

Ans: D, SO: 6, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Industry/Sector Perspective, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting

89.

Charley Company’s Assembly Department has materials cost at $3 per unit and conversion cost at $6 per unit. There are 15,000 units in ending work in process, all of which are 70% complete as to conversion costs. How much are total costs to be assigned to inventory? a. $63,000. b. $108,000. c. $94,500. d. $135,000.

Ans: B, SO: 6, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Industry/Sector Perspective, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting

90.

Byrd Manufacturing 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 $70,000? a. $4.38. b. $17.50. c. $5.60. d. $2.80.

Ans: C, SO: 6, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Management

91.

Long Manufacturing 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 $30,000? a. $5.00. b. $5.26. c. $18.75. d. $4.69.

Ans: A, SO: 6, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Management

3 - 20 92.

Test Bank for Managerial Accounting, Fifth Edition Conversion cost per unit equals $9.00. Total materials costs are $60,000. Equivalent units are 20,000. How much is the total manufacturing cost per unit? a. $12.00. b. $9.00. c. $6.00. d. $3.00.

Ans: A, SO: 6, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Management

93.

Physical units are 40,000. Total conversion costs are $316,000. There are 1,000 units in ending inventory which are 50% complete as to conversion costs. How much are conversion costs per unit? a. $8.00. b. $7.89. c. $15.81. d. $7.71.

Ans: A, SO: 6, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Management

94.

Madison Industries has equivalent units of 2,000 for materials and for conversion costs. Total manufacturing costs are $160,000. Total materials costs are $120,000. How much is the conversion cost per unit? a. $8.00. b. $20.00. c. $80.00. d. $16.00.

Ans: B, SO: 6, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Management

95.

Equivalent units for materials total 20,000. There were 16,000 units completed and transferred out. Equivalent units for conversion costs equals 18,000. How much are the physical units for conversion costs if ending work in process is 50% complete? a. 18,000. b. 20,000. c. 4,000. d. 16,000.

Ans: B, SO: 6, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Management

96.

If equivalent units are 9,000 for conversion costs and units transferred out equals 6,000, what stage of completion should the ending work in process be for the 12,000 units remaining? a. 75%. b. 25%. c. 10%. d. 20%.

Ans: B, SO: 6, Bloom: AP, Difficulty: Medium, Min: 2, AACSB: Analytic, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Management

Process Costing 97.

3 - 21

In the month of April, a department had 500 units in the beginning work in process inventory that were 60% complete. These units had $30,000 of materials costs and $22,500 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 $690,000; Conversion costs $765,000. The cost assigned to the units transferred to finished goods during April was a. $1,350,000. b. $1,357,500. c. $1,410,000. d. $1,342,500.

Ans: A, SO: 6, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Management

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 $30,000 of materials costs and $22,500 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 $690,000; Conversion costs $765,000. The cost assigned to the units in the ending work in process inventory on April 30 was a. $180,000. b. $157,500. c. $120,000. d. $217,500.

Ans: B, SO: 6, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Industry/Sector Perspective, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting

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.

Ans: B, SO: 6, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Management

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.

Ans: D, SO: 6, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: Cost Management

3 - 22 101.

Test Bank for Managerial Accounting, Fifth Edition 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.

Ans: C, SO: 6, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting

102.

Honrad Company's Assembly Department has materials cost at $4 per unit and conversion cost at $8 per unit. There are 15,000 units in ending work in process, all of which are 70% complete as to conversion costs. How much are total costs to be assigned to inventory? a. $84,400. b. $144,000. c. $126,600. d. $180,000.

Ans: B, SO: 6, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Industry/Sector Perspective, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting

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.

Ans: C, SO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: Cost Management

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.

Ans: C, SO: 6, Bloom: AP, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting

105.

The Slicing Department production process shows: Beginning Work in Process Ending Work in Process Total units to be accounted for

Units 10,000 50,000 140,000

How many units were started into production in Department 1? a. 50,000. b. 90,000. c. 140,000. d. 130,000. Ans: D, SO: 6, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Management

Process Costing 106.

3 - 23

Department 1 of a two department production process shows: Beginning Work in Process Ending Work in Process Total units to be accounted for

Units 10,000 50,000 140,000

How many units were transferred out to Department 2? a. 50,000. b. 90,000. c. 140,000. d. 130,000. Ans: B, SO: 6, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Management

107.

The Assembly Department shows the following information: Beginning Work in Process Ending Work in Process Units Transferred Out

Units 20,000 50,000 11,000

How many total units are to be accounted for by the Assembly Department? a. 61,000. b. 50,000. c. 90,000. d. 140,000. Ans: A, SO: 6, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Management

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 175,000 Ending Work in Process 50,000 How many units have been transferred out to finished goods during the period? a. 175,000. b. 200,000. c. 225,000. d. 150,000.

Ans: D, SO: 6, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Management

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 12,000 units were completed and transferred out of the process during the month, how many units were started into production during the month? a. 11,000. b. 13,000. c. 12,000. d. 10,000.

Ans: A, SO: 6, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Management

3 - 24 110.

Test Bank for Managerial Accounting, Fifth Edition If 100,000 units are started into production there was no beginning work in process, and 40,000 units are in process at the end of the period, how many units were completed and transferred out? a. 100,000. b. 40,000. c. 60,000. d. 140,000.

Ans: C, SO: 6, Bloom: AP, Difficulty: Medium, Min: 2, AACSB: Analytic, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Management

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.

Ans: C, SO: 6, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: Cost Management

112.

If 100,000 units are transferred out of a department there was no beginning work in process, and there are 20,000 units still in process at the end of a period, the number of units that were started into production during the period is a. 120,000. b. 100,000. c. 80,000. d. 20,000.

Ans: A, SO: 6, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Management

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; 20,000 units were completed and transferred out; and there were 10,000 units in the ending work in process that were 40% complete. During July, $96,000 materials costs and $84,000 conversion costs were charged to the department. The unit production costs for materials and conversion costs for July was a. b. c. d.

Materials $3.20 $3.20 $4.00 $4.80

Conversion Costs $2.80 $3.50 $2.80 $4.25

Ans: B, SO: 6, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Management

114.

Conversion cost per unit equals $6.00. Total materials costs equal $80,000. Equivalent units for materials are 20,000. How much is the total manufacturing cost per unit? a. $10.00. b. $6.00. c. $14.00. d. $4.00.

Ans: A, SO: 6, Bloom: AP, Difficulty: Medium, Min: 2, AACSB: Analytic, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Management

Process Costing 115.

3 - 25

The following department data are available: Total materials costs Equivalent units of materials Total conversion costs Equivalent units of conversion costs

$180,000 60,000 $105,000 30,000

What is the total manufacturing cost per unit? a. $3.00. b. $3.50. c. $6.50. d. $3.17. Ans: C, SO: 6, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Management

116.

Byers Company had the following department information for the month: Total materials costs Equivalent units of materials Total conversion costs Equivalent units of conversion costs

$36,000 5,000 $60,000 10,000

What is the total manufacturing cost per unit? a. $6.40. b. $6.00. c. $7.20. d. $13.20. Ans: D, SO: 6, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Management

117.

Physical units are 80,000. Total conversion costs are $276,500. There are 2,000 units in ending inventory which are 50% complete as to conversion costs. How much is the conversion cost per unit? a. $3.50. b. $3.46. c. $3.42. d. $3.37.

Ans: A, SO: 6, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Management

118.

A department had the following information for the month: Total materials costs Conversion cost per unit Total manufacturing cost per unit

$150,000 $3.00 $5.00

What are the equivalent units of production for materials? a. 75,000. b. 50,000. c. 30,000. d. Cannot be determined Ans: A, SO: 6, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Management

3 - 26 119.

Test Bank for Managerial Accounting, Fifth Edition Maisley Manufacturing 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 $70,000? a. $2.20. b. $8.75. c. $2.80. d. $1.40.

Ans: C, SO: 6, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Management

120.

Materials costs of $600,000 and conversion costs of $765,000 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. $1,125,000. b. $1,500,000. c. $1,204,875. d. $1,023,750.

Ans: A, SO: 6, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Management

121.

Materials costs of $600,000 and conversion costs of $765,000 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. $341,250. b. $375,000. c. $240,000. d. $150,000.

Ans: C, SO: 6, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Management

Process Costing 122.

3 - 27

Mayer Manufacturing has recently tried to improve its analysis for its manufacturing process. Units started into production equaled 9,000 and ending work in process equaled 600 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 $90,000? a. $10.00. b. $10.53. c. $37.50. d. $9.37.

Ans: A, SO: 6, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Management

123.

Madison Industries has equivalent units of 4,000 for materials and for conversion costs. Total manufacturing costs are $160,000. Total materials costs are $120,000. How much is the conversion cost per unit? a. $30. b. $10. c. $40. d. $8.

Ans: B, SO: 6, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Management

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.

Ans: C, SO: 7, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting

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.

Ans: C, SO: 7, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting

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.

Ans: B, SO: 7, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting

3 - 28 a

127.

Test Bank for Managerial Accounting, Fifth Edition The Cutting Department’s output during the period consists of 16,000 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. 18,300 b. 16,500 c. 19,300 d. 18,000

Ans: B, SO: 8, Bloom: AP, Difficulty: medium, Min: 3, AACSB: Analytic, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Management a

128. The Wrapping Department’s output during the period consists of 15,000 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. 16,035 b. 16,515 c. 15,675 d. 15,315

Ans: D, SO: 8, Bloom: AP, Difficulty: medium, Min: 3, AACSB: Analytic, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Management

Use the following information to answer questions 129–130. Chicotti Company has 6,000 units in beginning work in process, 30% complete as to conversion costs, 50,000 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. a

129.

How much are equivalent units for conversion costs if the FIFO method is used? a. 50,400 b. 54,600 c. 46,000 d. 48,600

Ans: D, SO: 8, Bloom: AP, Difficulty: medium, Min: 3, AACSB: Analytic, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Management a

130.

How much are equivalent units for materials if the FIFO method is used? a. 50,400 b. 52,000 c. 46,000 d. 58,000

Ans: C, SO: 8, Bloom: AP, Difficulty: medium, Min: 3, AACSB: Analytic, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Management a

131. Schiller Company has unit costs of $5 for materials and $15 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 assignable to the ending work in process inventory if the FIFO method is used? a. 49,000 b. 112,000 c. 28,000 d. 21,000

Ans: A, SO: 8, Bloom: AP, Difficulty: medium, Min: 3, AACSB: Analytic, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Management

Process Costing a

132.

3 - 29

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, 50,000 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. 50,800 b. 50,000 c. 52,800 d. 54,000

Ans: A, SO: 8, Bloom: AP, Difficulty: medium, Min: 3, AACSB: Analytic, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Management a

133.

Special Company had the following department information about physical units and percentage of completion: Physical Units Work in process, May 1 (60%) 21,600 Completed and transferred out 39,000 Work in process, May 31 (50%) 18,000 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. 78,600 b. 48,000 c. 35,400 d. 65,640

Ans: C, SO: 8, Bloom: AP, Difficulty: medium, Min: 3, AACSB: Analytic, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Management a

134.

Hanker Company had the following department data on physical units: Work in process, beginning Completed and transferred out Work in process, ending

2,500 10,000 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. 10,500 b. 9,500 c. 12,000 d. 7,500 Ans: B, SO: 8, Bloom: AP, Difficulty: medium, Min: 3, AACSB: Analytic, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Management

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.

Ans: B, SO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: Cost Management

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.

3 - 30

Test Bank for Managerial Accounting, Fifth Edition c. The accumulation of the costs of materials, labor, and overhead. d. The flow of costs.

Ans: B, SO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: Cost Management

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.

Ans: C, SO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: Cost Management

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.

Ans: D, SO: 5, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: Cost Management

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.

Ans: B, SO: 5, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: Cost Management

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.

Ans: B, SO: 5, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: Cost Management

141.

In Saint-Simon, Inc., the Assembly Department started 18,000 units and completed 21,000 units. If beginning work in process was 9,000 units, how many units are in ending work in process? a. 0. b. 3,000. c. 6,000. d. 12,000.

Ans: C, SO: 6, Bloom: AP, Difficulty: Medium, Min: 2, AACSB: Analytic, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: Cost Management

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.

Ans: C, SO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: Cost Management

Process Costing 143.

3 - 31

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.

Ans: A, SO: 6, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: Cost Management

144.

For the Assembly Department, unit materials cost is $8 and unit conversion cost is $12. If there are 8,000 units in ending work in process 75% complete as to conversion costs, the costs to be assigned to the inventory are a. $160,000. b. $136,000. c. $120,000. d. $144,000.

Ans: B, SO: 6, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Management

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.

Ans: C, SO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting

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.

Ans: D, SO: 7, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting

Answers to Multiple Choice Questions Item

38. 39. 40. 41. 42. 43. 44. 45. 46. 47. 48. 49. 50. 51. 52. 53.

Ans.

c a c c d c b c b c d b d c d c

Item

54. 55. 56. 57. 58. 59. 60. 61. 62. 63. 64. 65. 66. 67. 68. 69.

Ans.

c d d c c d c c d c b b c b b a

Item

70. 71. 72. 73. 74. 75. 76. 77. 78. 79. 80. 81. 82. 83. 84. 85.

Ans.

Item

Ans.

Item

Ans.

Item

Ans.

d c b a b c a c a c d b c d b c

86. 87. 88. 89. 90. 91. 92. 93. 94. 95. 96. 97. 98. 99. 100. 101.

a b d b c a a a b b b a b b d c

102. 103. 104. 105. 106. 107. 108. 109. 110. 111. 112. 113. 114. 115. 116. 117.

b c c d b a d a c c a b a c d a

118. 119. 120. 121. 122. 123. 124. 125. 126. a 127. a 128. a 129. a 130. a 131. a 132. a 133.

a c a c a b c c b b d d c a a c

Item a

134. 135. 136. 137. 138. 139. 140. 141. 142. 143. 144. 145. 146.

Ans.

b b b c d b b c c a b c d

3 - 32

Test Bank for Managerial Accounting, Fifth Edition

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, 6,000, 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. Ans: N/A, SO: 5, Bloom: AP, Difficulty: Medium, Min: 4, AACSB: Analytic, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Management

Solution 147

(4 min.)

QUANTITIES

Physical Units

Units to be accounted for Work in process, January 1 Started into production Total units

0 41,000 41,000

Units accounted for Transferred out Work in process, January 31 Total units

35,000 6,000 41,000

Materials

Equivalent Units Conversion Costs

35,000 6,000 41,000

35,000 1,800 (6,000 × 30%) 36,800

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, 8,000, 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. Ans: N/A, SO: 5, Bloom: AP, Difficulty: Medium, Min: 4, AACSB: Analytic, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Management

Solution 148

(4 min.)

QUANTITIES Units to be accounted for Work in process, March 1 Started into production Total units

Physical Units 2,000 48,000 50,000

Equivalent Units Materials Conversion Costs

Process Costing BE 148

3 - 33

(Cont.)

Units accounted for Transferred out Work in process, March 31 Total units

42,000 8,000 50,000

42,000 8,000 50,000

42,000 6,400 (8,000 × 80%) 48,400

BE 149 The Kirkland Department of Delta Manufacturing 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 3,000 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. Ans: N/A, SO: 5, Bloom: AP, Difficulty: Medium, Min: 4, AACSB: Analytic, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Management

Solution 149

(4 min.)

QUANTITIES

Physical Units

Equivalent Units Materials Conversion Costs

Units to be accounted for Work in process, December 1 4,000 Started into production 9,000 Total units 13,000 Units accounted for Transferred out 10,000 Work in process, December 31 3,000 Total units 13,000

10,000 3,000 13,000

10,000 1,800 (3,000 × 60%) 11,800

BE 150 White Supplies’ total material costs are $50,000 and total conversion costs are $65,000. 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. Ans: N/A, SO: 6, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Management

Solution 150

(3 min.)

COSTS Unit costs Costs incurred Equivalent units Unit costs

Materials $50,000 10,000 $ 5.00

Conversion Costs $65,000 5,000 $ 13.00

Total $115,000 $18.00

Test Bank for Managerial Accounting, Fifth Edition

3 - 34 BE 151

Apoly Manufacturing 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

700

30%

Instructions Compute the physical units for January. Ans: N/A, SO: 6, Bloom: AP, Difficulty: Medium, Min: 4, AACSB: Analytic, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Management

Solution 151

(4 min.)

Beginning work in process Started into production Total units to be accounted for

-08,500 8,500

Transferred out Ending work in process Total units accounted for

7,800 700 8,500

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

7,100

800

20%

Instructions Compute the physical units for March. Ans: N/A, SO: 6, Bloom: AP, Difficulty: Medium, Min: 4, AACSB: Analytic, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Management

Solution 152

(4 min.)

Beginning work in process Started into production Total units to be accounted for

1,200 6,700 7,900

Transferred out Ending work in process Total units accounted for

7,100 800 7,900

Process Costing

3 - 35

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 $11. Instructions Determine the costs to be assigned to the units transferred out and the units in ending work in process. Ans: N/A, SO: 6, Bloom: AP, Difficulty: Medium, Min: 4, AACSB: Analytic, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Management

Solution 153

(4 min.)

Work in process, June 30 Materials (6,000 × $5) Conversion costs (6,000 × 30% × $11) Total cost of work in process Units transferred out (50,000 × $16)

$30,000 19,800 $49,800 $800,000

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, 7,000 units that are 100% complete for materials and 60% complete for conversion costs  Unit materials cost, $5  Unit conversion cost, $10 Instructions Determine the costs to be assigned to the units transferred out and the units in ending work in process. Ans: N/A, SO: 6, Bloom: AP, Difficulty: Medium, Min: 4, AACSB: Analytic, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Management

Solution 154

(4 min.)

Work in process, May 31 Materials (7,000 × $5) Conversion costs (7,000 × 60% × $10) Total cost of work in process Units transferred out (55,000 × $17)

$35,000 42,000 $77,000 $825,000

3 - 36

Test Bank for Managerial Accounting, Fifth Edition

BE 155 Dirt Cleaners, Inc. has the following production data for January: Transferred out Ending work in process

50,000 units 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 $8 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. Ans: N/A, SO: 6, Bloom: AP, Difficulty: Medium, Min: 4, AACSB: Analytic, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Management

Solution 155

(4 min.)

Cost Reconciliation Schedule Costs accounted for Transferred out (50,000 × $19) Work in process, June 30 Materials (6,000 × $8) Conversion costs (3,600* × $11) Total costs *(6,000 x 60%)

$ 950,000 $ 48,000 39,600

87,600 $1,037,600

BE 156 Production costs chargeable to the Sanding Department in July for Joyful Art are $12,500 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. Ans: N/A, SO: 6, Bloom: AP, Difficulty: Medium, Min: 4, AACSB: Analytic, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Management

Solution 156

(4 min.)

COSTS Unit costs Costs in July Equivalent units Unit costs a

Materials $12,500 25,000 $0.50

Conversion Costs $36,000 20,000 $1.80

Total $48,500 $2.30

BE 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, 42,000 Units in ending work in process, 6,000, which are 80% complete for conversion costs Materials are added only at the beginning of the process.

Process Costing a

3 - 37

BE 157 (Cont.)

Instructions Compute equivalent units of production for both materials and conversion costs using the FIFO method. Ans: N/A, SO: 8, Bloom: AP, Difficulty: Medium, Min: 5, AACSB: Analytic, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Management

Solution 157

(5 min.)

QUANTITIES

Physical Units

Units to be accounted for Work in process, March 1 Started into production Total Units

2,000 46,000 48,000

Units accounted for Work in process, March 1 Transferred out Work in process, March 31 Total units

2,000 40,000 6,000 48,000

a

Equivalent Units Materials

0 40,000 6,000 46,000

Conversion Costs

1,400 40,000 4,800 46,200

(2,000 × 70%) (6,000 × 80%)

BE 158

The Kirkland Department of Delta Manufacturing 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 10,000 units. Ending work in process contains 1,000 units that are 100% complete as to materials and 60% complete as to conversion costs. Instructions Compute equivalent units of production for both materials and conversion costs for the month of December using the FIFO method. Ans: N/A, SO: 8, Bloom: AP, Difficulty: Medium, Min: 5, AACSB: Analytic, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Management a

Solution 158

(5 min.)

QUANTITIES

Physical Units

Units to be accounted for Work in process, December 1 Started into production Total Units

4,000 7,000 11,000

Units accounted for Work in process, December 1 Transferred out Work in process, December 31 Total units

4,000 6,000 1,000 11,000

Equivalent Units Materials

0 6,000 1,000 7,000

Conversion Costs

3,200 6,000 600 9,800

(4,000 × 80%) (1,000 × 60%)

3 - 38

Test Bank for Managerial Accounting, Fifth Edition

EXERCISES Ex. 159 Lutz Manufacturing 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 Finishing department

$20,000 14,000

(c) Incurred labor costs of $64,000. (d) Factory labor used: Mixing department Finishing department

$39,000 25,000

(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. (f)

Units costing $56,000 were completed in the Mixing Department and were transferred to the Finishing Department.

(g) Units costing $60,000 were completed in the Finishing Department and were transferred to finished goods. (h) Finished goods costing $30,000 were sold on account for $45,000. Instructions Prepare the journal entries to record the preceding transactions for Lutz Manufacturing Company. Ans: N/A, SO: 4, Bloom: AP, Difficulty: Medium, Min: 20, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA

Solution 159 (a)

(b)

(c)

(20–28 min.)

Raw Materials Inventory............................................................... Accounts Payable................................................................ (Purchase of raw materials on account)

50,000

Work in Process—Mixing.............................................................. Work in Process—Finishing.......................................................... Raw Materials Inventory...................................................... (To record materials used in production)

20,000 14,000

Factory Labor............................................................................... Wages Payable.................................................................... (To record payroll liability)

64,000

50,000

34,000

64,000

Process Costing Solution 159 (d)

(e)

(f)

(g)

(h)

3 - 39

(Cont.)

Work in Process—Mixing.............................................................. Work in Process—Finishing.......................................................... Factory Labor....................................................................... (To assign factory labor to production)

39,000 25,000

Work in Process—Mixing (400 × $30).......................................... Work in Process—Finishing (500 × $20)...................................... Manufacturing Overhead..................................................... (To assign overhead to processes)

12,000 10,000

Work in Process—Finishing.......................................................... Work in Process—Mixing..................................................... (To record transfer of units to the Finishing Department)

56,000

Finished Goods Inventory............................................................. Work in Process—Finishing................................................. (To record transfer of units to finished goods)

60,000

Accounts Receivable.................................................................... Sales.................................................................................... (To record sale of finished goods on account)

45,000

Cost of Goods Sold...................................................................... Finished Goods Inventory.................................................... (To record cost of goods sold)

30,000

64,000

22,000

56,000

60,000

45,000

30,000

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 $65,000 of factory labor. Wages are unpaid. 3. Incurred $35,000 of manufacturing overhead; $30,000 was paid and the remainder is unpaid. 4. Requisitioned materials for Fabricating, $10,000 and Finishing, $8,000. 5. Used factory labor for Finishing, $52,000 and Fabricating, $13,000. 6. Applied $30,000 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. Ans: N/A, SO: 4, Bloom: AP, Difficulty: Medium, Min: 12, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA

3 - 40

Test Bank for Managerial Accounting, Fifth Edition

Solution 160

(12–16 min.)

1. Raw Materials Inventory.................................................................. Accounts Payable...................................................................

40,000

2. Factory Labor.................................................................................. Wages Payable.......................................................................

65,000

3. Manufacturing Overhead................................................................. Accounts Payable................................................................... Cash.......................................................................................

35,000

4. Work in Process—Fabricating......................................................... Work in Process—Finishing............................................................. Raw Materials Inventory.........................................................

10,000 8,000

5. Work in Process—Fabricating......................................................... Work in Process—Finishing............................................................. Factory Labor.........................................................................

13,000 52,000

6. Work in Process—Fabricating......................................................... Work in Process—Finishing............................................................. Manufacturing Overhead........................................................

10,000 20,000

40,000 65,000 5,000 30,000

18,000

65,000

30,000

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: Cooking Packaging Beginning work in process $ -0$ 6,000 Materials 40,000 21,000 Labor 16,000 9,000 Overhead 25,000 19,000 Costs transferred in 65,000 Instructions Journalize the February transactions that involved the work in process accounts. Ans: N/A, SO: 4, Bloom: AP, Difficulty: Medium, Min: 10, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA

Solution 161

(10–15 min.)

Work in Process—Cooking................................................................... Work in Process—Packaging................................................................ Raw Materials Inventory...............................................................

40,000 21,000

Work in Process—Cooking................................................................... Work in Process—Packaging................................................................ Factory Labor...............................................................................

16,000 9,000

Work in Process—Cooking................................................................... Work in Process—Packaging................................................................ Manufacturing Overhead..............................................................

25,000 19,000

61,000

25,000

44,000

Process Costing Solution 161

3 - 41

(Cont.)

Work in Process—Packaging................................................................ Work in Process—Cooking...........................................................

65,000 65,000

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 Manufacturing costs added in Department B: Direct materials Direct labor Manufacturing overhead Total costs charged to Department B in October

$120,000 $60,000 6,000 19,000

85,000 $205,000

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. Ans: N/A, SO: 4, Bloom: AP, Difficulty: Medium, Min: 8, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA

Solution 162

(8–11 min.)

(a) Work in Process—Dept. B............................................................. Work in Process—Dept. A......................................................

120,000

(b) Work in Process—Dept. B............................................................. Factory Labor......................................................................... Raw Materials Inventory......................................................... Manufacturing Overhead........................................................

85,000

(c) Finished Goods Inventory ($25,000 + $205,000 – $30,000).......... Work in Process—Dept. B......................................................

200,000

120,000 6,000 60,000 19,000 200,000

Ex. 163 Hardy Company manufactures a single product by a continuous process, involving two production departments. The records indicate that $120,000 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 $20 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.

3 - 42 Ex. 163

Test Bank for Managerial Accounting, Fifth Edition (Cont.)

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. Ans: N/A, SO: 4, Bloom: AP, Difficulty: Medium, Min: 7, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA

Solution 163 (a)

(1) (2) (3)

(b)

(7–10 min.)

Work in Process—Dept. 1.................................................... Raw Materials Inventory..............................................

120,000

Work in Process—Dept. 1.................................................... Factory Labor..............................................................

200,000

Work in Process—Dept. 1.................................................... Manufacturing Overhead (5,000 × $20)......................

100,000

120,000 200,000 100,000

Work in Process—Dept. 2............................................................ 430,000* Work in Process—Dept. 1....................................................

430,000

*$35,000 + $120,000 + $200,000 + $100,000 – $25,000 = $430,000 Ex. 164 Muffy Painting Company has the following production data for March.

Month March

Beginning Units Work in Process Transferred Out 3,000 42,000

Ending Work in Process % Complete as to Units Conversion Cost 5,000 80%

Instructions Compute equivalent units of production for March for both materials and conversion costs. Materials are entered at the beginning of the process. Ans: N/A, SO: 5, Bloom: AP, Difficulty: Medium, Min: 10, AACSB: Analytic, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Management

Solution 164

(10 min.)

Quantities Units to be accounted for Work in process, March 1 Started into production Total units Units accounted for Transferred out Work in process, March 31 Total units

Physical Units

Equivalent Units Materials Conversion Costs

3,000 44,000 47,000 42,000 5,000 47,000

42,000 5,000 47,000

42,000 4,000 (5,000 × 80%) 46,000

Process Costing

3 - 43

Ex. 165 The Nitrogen Fixation Department of Tomco Manufacturing 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 5,000 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. Ans: N/A, SO: 5, Bloom: AP, Difficulty: Medium, Min: 10, AACSB: Analytic, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Management

Solution 165

(10 min.)

Quantities Physical Units Units to be accounted for Work in process, December 1 4,000 Started into production 11,000 Total units 15,000 Units accounted for Transferred out Work in process, December 31 Total units

10,000 5,000 15,000

Equivalent Units Materials Conversion Costs

10,000 5,000 15,000

10,000 3,000 13,000

(5,000 × 60%)

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:

Month July Sept.

Beginning Work In Process Percentage Units Completed -0— 2,500 20%

Units Completed and Transferred Out 10,000 9,000

Ending Work In Process Percentage Units Completed 500 90% 2,000 70%

Instructions (a) Compute the physical units for July. (b) Compute the equivalent units of production for materials and conversion costs for September. Ans: N/A, SO: 5,6, Bloom: AP, Difficulty: Medium, Min: 10, AACSB: Analytic, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Management

3 - 44

Test Bank for Managerial Accounting, Fifth Edition

Solution 166 (a)

(b)

(10–14 min.)

COMPUTATION OF PHYSICAL UNITS Beginning work in process Started into production Total units to be accounted for

July -010,500 10,500

Transferred out Ending work in process Total units accounted for

10,000 500 10,500

COMPUTATION OF EQUIVALENT UNITS Units accounted for Transferred out Work in process, Sept. 30 Total equivalent units

Physical Units 9,000 2,000 11,000

Equivalent Units Materials Conversion Costs 9,000 9,000 2,000 1,400 (2,000 × .70) 11,000 10,400

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. Physical Units Completed and transferred out

Equivalent Units Materials Conversion Costs

40,000

Ending work in process Materials Conversion costs, 75% complete

6,000

Total units Ans: N/A, SO: 5,6, Bloom: AN, Difficulty: Medium, Min: 4, AACSB: Analytic, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Management

Solution 167

(4–7 min.)

Completed and transferred out Ending work in process Materials Conversion costs—75% complete Total units *6,000 ÷ .75

Physical Units 40,000 8,000*

Equivalent Units Materials Conversion Costs 40,000 40,000 8,000* 48,000

6,000 46,000

Process Costing

3 - 45

Ex. 168 The general ledger of Oates Company has the following work in process account. WORK IN PROCESS—FINISHING 6/1 6/30 6/30 6/30 6/30

Balance Materials Labor Overhead Balance

8,000 1,800 2,400 2,800 ?

6/30

Transferred out

?

Production records show that there were 2,000 units in beginning inventory, 50% complete; 4,000 units started, and 3,500 units transferred out. The beginning work in process had conversion costs of $3,300. 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? Ans: N/A, SO: 5,6, Bloom: AP, Difficulty: Hard, Min: 10, AACSB: Analytic, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Management

Solution 168

(10–14 min.)

(a)

Work in process, June 1 Started into production Units to be accounted for Less: Transferred out Work in process, June 30

2,000 4,000 6,000 3,500 2,500

(b)

Conversion costs Transferred out Work in process, June 30 Total

Physical Units 3,500 2,500 6,000

Equivalent Units 3,500 1,500 (2,500 × .60) 5,000

Unit conversion cost = $1.70 ($3,300 + $5,200) ÷ 5,000 = $1.70 (c)

Conversion cost in June 30 inventory: 1,500 × $1.70 = $2,550

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 $135,000 in conversion costs were charged to the department. The beginning work in process inventory was $103,000 on July 1, comprised of $80,000 of materials costs and $23,000 of conversion costs. Other data for the month of July are as follows: Beginning work in process inventory, 7/1 Units completed and transferred out Ending work in process inventory, 7/31

25,000 units 70,000 units 30,000 units

(40% complete) (30% complete)

3 - 46 Ex. 169

Test Bank for Managerial Accounting, Fifth Edition (Cont.)

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 90,000 units that were transferred out of the process in July? 4. What is the total cost of the July 31 inventory? Ans: N/A, SO: 5,6, Bloom: AP, Difficulty: Hard, Min: 15, AACSB: Analytic, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Management

Solution 169

(15–20 min.)

1. Units transferred out Work in process, July 31 Units accounted for

70,000 30,000 100,000

2. Equivalent units of production: Transferred out Work in process, July 31 Total

Physical Units 70,000 30,000 100,000

Equivalent Units Materials Conversion Costs 70,000 70,000 30,000 9,000* 100,000 79,000

*(30,000 × .30) 3. Materials cost per unit = Conversion cost per unit = Total unit cost *($80,000 + $190,000)

$2.70 $2.00 $4.70

($270,000* ÷ 100,000 units) ($158,000** ÷ 79,000 units)

**($23,000 + $135,000)

Total cost assigned to units transferred out: 70,000 × $4.70 = $329,000 4. Total cost of July 31 inventory: (30,000 × $2.70) + (9,000 × $2.00) = $99,000 Ex. 170 The Finishing Department of Edwards Manufacturing has the following production and cost data for July: 1. Transferred out, 3,000 units. 2. Started 2,000 units that are 40% completed at July 31. 3. Materials added, $30,000; conversion costs incurred, $19,000. Materials are entered at the beginning of the process. Conversion costs are incurred uniformly during the process.

Process Costing Ex. 170

3 - 47

(Cont.)

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. Ans: N/A, SO: 5,6, Bloom: AP, Difficulty: Medium, Min: 15, AACSB: Analytic, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Management

Solution 170

(15–20 min.)

(a) Transferred Out Work in Process, July 31 Total

Physical Units 3,000 2,000 5,000

Equivalent Units Materials Conversion Costs 3,000 3,000 2,000 800* 5,000 3,800

*(2,000 × .40) (b)

Materials cost per unit = Conversion cost per unit =

$ 6 5 $11

Cost Reconciliation Schedule Costs accounted for Transferred out (3,000 × $11) Work in process, July 31 Materials (2,000 × $6) Conversion costs (800 × $5) Total costs

($30,000 ÷ 5,000 units) ($19,000 ÷ 3,800 units)

$33,000 $12,000 4,000

$16,000 $49,000

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 $190,000, $145,000 of which were materials costs. During March, the following occurred: Materials added Conversion costs incurred Units completed and transferred out in March Units in ending work in process March 31 (20% complete)

$305,000 $120,000 50,000 25,000

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? Ans: N/A, SO: 5,6, Bloom: AP, Difficulty: Hard, Min: 15, AACSB: Analytic, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Management

3 - 48

Test Bank for Managerial Accounting, Fifth Edition

Solution 171

(15–20 min.)

1. Equivalent units of production: Transferred out Work in process, March 31 Total

Physical Units 50,000 25,000 75,000

Equivalent Units Materials Conversion Costs 50,000 50,000 25,000 5,000* 75,000 55,000

*(25,000 × .20) 2.

Materials unit cost Conversion unit cost Total unit cost *($145,000 + $305,000)

$6 3 $9

($450,000* ÷ 75,000 units) ($165,000** ÷ 55,000 units)

**[($190,000 – $145,000) + $120,000]

Costs assigned to work in process, March 31 Materials costs $150,000 (25,000 units × $6) Conversion costs 15,000 (5,000 units × $3) Total $165,000 3. Costs assigned to units completed and transferred out: 50,000 × $9 = $450,000 Ex. 172 Given below are the production data for Department No. 1 for the first month of operation: Costs charged to Department 1: Materials $15,000 Labor 2,600 Overhead 17,000 During this first month of operations, 3,000 units were started into production; 2,500 units were transferred out; and the remaining 500 units are 100% completed with respect to materials and 60% 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 2,500 units transferred out. Ans: N/A, SO: 5,6, Bloom: AP, Difficulty: Hard, Min: 14, AACSB: Analytic, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Management

Process Costing Solution 172

3 - 49

(14–18 min.)

(a)

Unit materials cost: $15,000 ÷ 3,000 equivalent units for materials = $5.00.

(b)

Equivalent units of conversion costs: 2,500 completed + (60% × 500) = 2,800 equivalent units of conversion costs.

(c)

Unit conversion cost: ($2,600 + $17,000) ÷ 2,800 equivalent units = $7.00.

(d)

Total cost of 500 units in work in process Materials, 500 × $5.00 = Conversion costs, 300 × $7.00 = Total

(e)

$2,500 2,100 $4,600

Total cost of 2,500 transferred out units: 2,500 × ($5.00 + $7.00) = $30,000.

Ex. 173 The ledger of Kinsler Company has the following work in process account. 5/1 5/31 5/31 5/31 5/31

Balance Materials Labor Overhead Balance

Work in Process—Painting 5,390 5/31 Transferred out 7,740 4,110 2,470 ?

?

Production records show that there were 700 units in the beginning inventory, 30% complete, 2,300 units started, and 2,500 units transferred. The beginning work in process had materials cost of $3,060 and conversion costs of $2,330. 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? Ans: N/A, SO: 5,6, Bloom: AP, Difficulty: Hard, Min: 10, AACSB: Analytic, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Management

Test Bank for Managerial Accounting, Fifth Edition

3 - 50

Solution 173 (a)

(10 min.)

Work in process, May 1 Started into production Total units to be accounted for Less: Transferred out Work in process, May 31

700 2,300 3,000 2,500 500

(b) Units transferred out Work in process, May 31 500  100% 500  40%

Materials 2,500

Equivalent Units Conversion Costs 2,500

500 200 2,700

3,000

Work in process, May 1 Costs added Total materials cost

Direct Materials $3,060 7,740 10,800

Conversion Costs $2,330 6,580 8,910

$10,800 ÷ 3,000 = $3.60 (c)

$8,910 ÷ 2,700 = 3.30

(d)

Transferred out (2,500  6.90)

(e)

Work in process Materials (500  $3.60) Conversion costs (200  $3.30)

$17,250

$1,800 660 $2,460

Ex. 174 The Cutting Department of Sanderson Manufacturing has the following production and cost data for July. Production 1. Transferred out 15,000 units 2. Started 5,000 units that are 60% complete as to conversion costs and 100% complete as to materials at July 31.

Costs Beginning work in process Materials Labor Manufacturing overhead

$ -060,000 21,600 25,200

Process Costing Ex. 174

3 - 51

(Cont.)

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. Ans: N/A, SO: 5,6, Bloom: AP, Difficulty: Medium, Min: 8, AACSB: Analytic, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Management

Solution 174

(8 min.)

Units transferred out Work in process, July 31 5,000  100% 5,000  40%

(b)

Materials 15,000

Conversion Costs 15,000

5,000

3,000

20,000

18,000

Materials: $60,000 ÷ 20,000 = $3.00 Conversion costs: ($21,600 + $25,200) ÷ 18,000 = $2.60 Costs accounted for Transferred out (15,000  $5.60) Work in process, July 31 Materials (5,000  $3.00) Conversion costs (3,000  $2.60) Total costs

$ 84,000 $15,000 7,800

22,800 $106,800

Ex. 175 Wilkinson Company has gathered the following information. Units in beginning work in process Units started into production Units in ending work in process Percent complete for conversion costs in ending work in process Costs incurred: Direct materials Direct labor Overhead

-054,000 9,000 40% $ 81,000 $ 99,000 $119,700

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. Ans: N/A, SO: 5,6, Bloom: AP, Difficulty: Medium, Min: 8, AACSB: Analytic, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Management

Test Bank for Managerial Accounting, Fifth Edition

3 - 52

Solution 175

(8 min.)

(a)

Materials: 45,000 + 9,000= 54,000 Conversion costs: 45,000 + (9,000  40%) = 48,600

(b)

Materials: $81,000/54,000 = $1.50 Conversion costs: ($99,000 + $119,700)/48,600 = $4.50

(c)

Units transferred out: 45,000  $6.00 = $270,000 Units in ending work in process: 9,000  $1.50 = $13,500 3,600  $4.50 = 16,200 $29,700

Ex. 176 Carlton Company has gathered the following information Units in beginning work in process Units started into production Units in ending work in process Percent complete for conversion costs in ending work in process Costs incurred: Direct materials Direct labor Overhead

25,000 90,000 30,000 60% $161,000 $235,400 $176,600

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. Ans: N/A, SO: 5,6, Bloom: AP, Difficulty: Medium, Min: 8, AACSB: Analytic, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Management

Solution 176

(8 min.)

(a)

Materials: 85,000(1) + 30,000 = 115,000 Conversion costs: 85,000 + (30,000  60%) = 103,000 (1) 25,000 + 90,000 – 30,000

(b)

Materials: $161,000/115,000 = $1.40 Conversion costs: ($235,400 + $176,600)/103,000 = $4.00

Process Costing Solution 176 (c)

3 - 53

(Cont.)

Units transferred out: 85,000  $5.40= $459,000 Units in ending work in process: 30,000  $1.40 = $ 42,000 18,000  $4.00 = 72,000 $114,000

Ex. 177 The Polishing Department of Estaban Manufacturing 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 30% complete as to conversion costs; units started during the period are 23,000, ending inventory of 6,000 units 10% 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 $125,300 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. Ans: N/A, SO: 5,6, Bloom: AP, Difficulty: Medium, Min: 14, AACSB: Analytic, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Management

Solution 177

(14–18 min.)

(a) Work in process, September 1 Units started into production

Units transferred out Work in process, September 30

Units transferred out Work in process 6,000  100% 6,000  10%

Physical Units 2,000 23,000 25,000 19,000 6,000 25,000

Materials 19,000

Equivalent Units Conversion Costs 19,000

6,000 25,000

600 19,600

Test Bank for Managerial Accounting, Fifth Edition

3 - 54

Solution 177

(Cont.)

(b)

Materials Work in process, September 1 Direct materials..................................

$ 18,000

Costs added to production during September................................. Total materials cost...................................

202,000 $220,000

$220,000  25,000 = $8.80 (Materials cost per unit) Conversion Costs Work in process, September 1 Conversion costs................................

$ 13,000

Costs added to production during September Conversion costs................................. Total conversion costs.................................

437,800 $450,800

$450,800  19,600 = $23.00 (c)

Costs accounted for Transferred out (19,000  $31.80)............... Work in process, September 30 Materials (6,000  $8.80).......................... Conversion costs (600  23.00)................. Total costs.................................................

$604,200 $52,800 13,800

66,600 $670,800

Ex. 178 Grey Building Supplies' total materials costs are $50,000 and total conversion costs are $39,000. Equivalent units of production for materials are 10,000, and 6,000 for conversion costs. Instructions Compute the unit costs for materials, conversion costs, and total manufacturing costs for the month. Ans: N/A, SO: 6, Bloom: AP, Difficulty: Medium, Min: 6, AACSB: Analytic, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Management

Solution 178

(6–8 min.)

COSTS Unit Costs Costs incurred Equivalent units Unit costs

Materials $50,000 10,000 $5.00

Conversion Costs $39,000 6,000 $6.50

Total $89,000 $11.50

Process Costing

3 - 55

Ex. 179 Glazer, Inc. has the following production data for June: Transferred out Ending work in process

50,000 units 5,000 units

The units in work in process are 100% complete for materials and 60% complete for conversion costs. Materials costs are $6 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. Ans: N/A, SO: 6, Bloom: AP, Difficulty: Medium, Min: 8, AACSB: Analytic, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Management

Solution 179

(8 min.)

Cost Reconciliation Schedule Costs accounted for Transferred out (50,000 × $17) Work in process, June 30 Materials (5,000 × $6) Conversion costs (3,000* × $11) Total costs *(5,000 × 60%)

$ 850,000 $30,000 33,000

63,000 $913,000

Ex. 180 Production costs chargeable to the Sanding Department in July in Magnum Company are $25,000 for materials, $17,000 for labor, and $10,000 for manufacturing overhead. Equivalent units of production are 25,000 for materials and 15,000 for conversion costs. Instructions Compute the unit costs for materials and conversion costs. Ans: N/A, SO: 6, Bloom: AP, Difficulty: Medium, Min: 6, AACSB: Analytic, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Management

Solution 180

(6-8 min.)

COSTS Unit Costs Costs in July Equivalent units Unit costs

Materials $25,000 25,000 $1.00

Conversion Costs $27,000 15,000 $1.80

Total $52,000 $2.80

Ex. 181 Mayer Manufacturing 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 40% complete. Instructions Complete the Production Cost Report for the Molding Department for the month of May using the above information and the information below.

3 - 56 Ex. 181

Test Bank for Managerial Accounting, Fifth Edition (cont.) MAYER MANUFACTURING COMPANY Molding Department Production Cost Report For the Month Ended May 31, 2011

QUANTITIES Units to be accounted for Work in process, May 1 Started into production Total units Units accounted for Transferred out Work in process, May 31 Total units COSTS Unit costs Costs in May Equivalent units Unit costs

Physical Units

Materials

8,000 20,000 28,000 23,000 5,000 28,000

Materials $140,000 $

Conversion Costs $100,000 $

Costs to be accounted for Work in process, May 1 Started into production Total costs Cost Reconciliation Schedule Costs accounted for Transferred out Work in process, May 31 Materials Conversion costs Total costs

Equivalent Units Conversion Costs

Total $240,000 $ $ 60,000 180,000 $240,000

$ $ $240,000

Ans: N/A, SO: 7, Bloom: AP, Difficulty: Hard, Min: 12, AACSB: Analytic, AICPA BB: Industry/Sector Perspective, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting

Process Costing Solution 181

3 - 57

(12–16 min.) MAYER MANUFACTURING COMPANY Molding Department Production Cost Report For the Month Ended May 31, 2011

QUANTITIES Units to be accounted for Work in process, May 1 Started into production Total units Units accounted for Transferred out Work in process, May 31 Total units

Physical Units

Materials

Equivalent Units Conversion Costs

8,000 20,000 28,000 23,000 5,000 28,000

COSTS Unit costs Costs in May Equivalent units Unit costs

23,000 5,000 28,000

Materials $140,000 28,000 $ 5

23,000 2,000 (5,000 × 40%) 25,000

Conversion Costs $100,000 25,000 $ 4

Costs to be accounted for Work in process, May 1 Started into production Total costs Cost Reconciliation Schedule Costs accounted for Transferred out (23,000 × $9) Work in process, May 31 Materials (5,000 × $5) Conversion costs (2,000 × $4) Total costs

Total $240,000 $

9

$ 60,000 180,000 $240,000

$207,000 $ 25,000 8,000

33,000 $240,000

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 2011 are presented below: Cost data Beginning work in process inventory Materials Conversion costs Total costs

$ 37,000 ($30,000 of materials cost) 390,000 155,000 $582,000

3 - 58 Ex. 182

Test Bank for Managerial Accounting, Fifth Edition (cont.)

Production data Beginning work in process (gallons) Gallons started into production Ending work in process (gallons)

5,000 (40%) 55,000 8,000 (25%)

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. Ans: N/A, SO: 7, Bloom: AP, Difficulty: Medium, Min: 17, AACSB: Analytic, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Management

Solution 182

(17–25 min.)

(a) Transferred out Ending work in process Total

Physical Units 52,000* 8,000 60,000

Equivalent Units Materials Conversion Costs 52,000 52,000 8,000 2,000 (8,000 × .25) 60,000 54,000

*(5,000 + 55,000) – 8,000 (b) Unit Production Costs: Materials Conversion costs Total unit cost *($30,000 + $390,000)

$ 7 ($420,000* ÷ 60,000) 3 ($162,000** ÷ 54,000) $10 **[($37,000 – $30,000) + $155,000]

(c) Costs assigned to units transferred out and ending work in process: Transferred out (52,000 × $10) Ending work in process Materials (8,000 × $7) Conversion costs (2,000 × $3)

Total Costs Assigned $520,000 $56,000 6,000

62,000 $582,000

Ex. 183 The Assembly Department of Nitz Company has the following production and cost data at the end of May, 2011. 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. Ans: N/A, SO: 7, Bloom: AP, Difficulty: Medium, Min: 22, AACSB: Analytic, AICPA BB: Industry/Sector Perspective, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting

Process Costing Solution 183

3 - 59

(22–30 min.) NITZ COMPANY Assembly Department—Production Cost Report For the Month Ended May 31, 2011 Physical Units

QUANTITIES Units to be accounted for Work in process, May 1 Started into production Total units

0 30,000 30,000

Units accounted for Transferred out Work in process, May 31 Total units accounted for

25,000 5,000 30,000

COSTS Unit costs Costs in May Equivalent units Unit costs

Materials $90,000 30,000 $ 3.00

Equivalent Units Materials Conversion Costs

25,000 5,000 30,000 Conversion Costs $135,000 27,000 $5.00

Costs to be accounted for Work in process, May 1 Started into production Total costs Cost Reconciliation Schedule Costs accounted for Transferred out (25,000 × $8) Work in process, May 31 Materials (5,000 × $3) Conversion Costs (2,000 × $5) Total costs

25,000 2,000 27,000 Total $225,000 $8.00 $ 0 225,000 $225,000

$200,000 15,000 10,000

25,000 $225,000

Ex. 184 Romero Company—Perth Division is a new state of the art production facility that manufactures landing gears for airplanes. The ending September 30th 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:

3 - 60 Ex. 184

Test Bank for Managerial Accounting, Fifth Edition (cont.) ROMERO COMPANY—Perth Division Assimilation Department Production Cost Report For the Month Ended September 30, 2011

QUANTITIES Physical Units 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 Work in process, September 30 Total units COSTS Unit Costs Costs in September Equivalent units Unit costs

900 500 1,400 Materials $840,000 $

Equivalent Units Materials Conversion Costs

900 500 1,400 Conversion Costs $ $

220

Costs to be accounted for Work in process, Sept. 1 Started into production Total costs Cost Reconciliation Schedule Costs accounted for Transferred out Work in process, September Materials Conversion costs Total costs

900

Total $1,104,000 $ $ 243,400 $

$ $ 66,000 $1,104,000

Ans: N/A, SO: 7, Bloom: AP, Difficulty: Medium, Min: 10, AACSB: Analytic, AICPA BB: Industry/Sector Perspective, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting

Solution 184

(10-15 min.) ROMERO COMPANY—Perth Division Assimilation Department Production Cost Report For the Month Ended September 30, 2011

QUANTITIES Physical Units Units to be accounted for Work in process, September 1 300 Started into production 1,100 Total units 1,400

Equivalent Units Materials Conversion Costs

Process Costing Solution 184

(Cont.)

Units accounted for Transferred out Work in process, September 30 Total units

900 500 1,400

COSTS Unit Costs Costs in September Equivalent units Unit costs

Materials $840,000 1,400 $ 600

900 500 1,400

900 300 1,200

Conversion Costs $264,000 1,200 $ 220

Costs to be accounted for Work in process, Sept. 1 Started into production Total costs

Total $1,104,000 $820 $ 243,400 860,600 $1,104,000

Cost Reconciliation Schedule Costs accounted for Transferred out (900 × $820) Work in process, September Materials (500 × $600) Conversion costs (300 × $220) Total costs a

3 - 61

$ 738,000 $300,000 66,000

366,000 $1,104,000

Ex. 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:

Month March

Beginning Work in Process Percentage Units Completed 2,100 60%

Units Completed and Transferred Out 16,500

Ending Work in Process Percentage Units Completed 500 90%

Instructions (a) Compute the physical units for March. (b) Compute the equivalent units of production for materials and conversion costs for March. Ans: N/A, SO: 8, Bloom: AP, Difficulty: Medium, Min: 5, AACSB: Analytic, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost management a

Solution 185

(5–7 min.)

(a) COMPUTATION OF PHYSICAL UNITS Beginning work in process 2,100 Started into production 15,150 Total units to be accounted for 17,250 Transferred out Ending work in process Total units accounted for

16,500 750 17,250

3 - 62 a

Test Bank for Managerial Accounting, Fifth Edition

Solution 185

(Cont.)

(b) COMPUTATION OF EQUIVALENT UNITS Units accounted for Physical Units Work in process, March 1 2,100 Transferred out 14,400 Work in process, March 30 750 Total equivalent units 17,250 a

Equivalent Units Materials Conversion Costs 0 840 (2,100 × .40) 14,400 14,400 750 675 (750 × .90) 15,150 15,915

Ex. 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 Conversion costs incurred Units completed and transferred out in November Units in ending work in process November 30 (20% complete)

$315,000 $63,000 40,000 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? Ans: N/A, SO: 8, Bloom: AP, Difficulty: Medium, Min: 10, AACSB: Analytic, AICPA BB: Industry/Sector Perspective, AICPA FN: Measuement, AICPA PC: Problem Solving, IMA: Cost management a

Solution 186

(10–12 min.)

(a) Equivalent units of production: Physical Units Work in process, November 1 10,000 Transferred out 30,000 Work in process, November 30 25,000 Total 65,000 (b) Materials unit cost Conversion unit cost Total unit cost

$5.73 1.62 $7.35

Costs to be accounted for Work in process, November 1 Started in production Total costs

Equivalent Units Materials Conversion Costs 0 4,000 (10,000 × .40) 30,000 30,000 25,000 5,000 (25,000 × .20) 55,000 39,000

($315,000 ÷ 55,000 units) ($63,000 ÷ 39,000 units)

$266,000 378,000 $644,000

Process Costing a

Solution 186

3 - 63

(cont.)

Costs assigned to work in process, November 30 Materials costs $143,250 (25,000 units × $5.73) Conversion costs 8,100 (5,000 units × $1.62) Total $151,350 (c) Costs assigned to units completed and transferred out: Transferred out Work in Process, November 1 $266,000 Cost to complete beginning work in process 6,480 Total costs $272,480 Units started and completed 220,500 Total costs transferred out $492,980

(4,000 × $1.62) (30,000 × $7.35)

COMPLETION STATEMENTS 187.

Process cost systems are used to apply costs to similar products that are ____________ in a ____________ fashion.

Ans: N/A, SO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Cost Management

188.

Separate _________________ accounts are maintained for each production department or manufacturing process in a process cost system.

Ans: N/A, SO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting

189.

In a process cost system, manufacturing costs are summarized in a ________________ report for each department.

Ans: N/A, SO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting

190.

A primary driver of overhead costs in continuous manufacturing operations is _______________.

Ans: N/A, SO: 4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting

191.

Equivalent units of production measure the work done during the period, expressed in fully ________________ units.

Ans: N/A, SO: 5, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: Cost Management

192.

Unit production costs are expressed in terms of _____________ units of production.

Ans: N/A, SO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: Cost Management

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.

Ans: N/A, SO: 6, Bloom: AP, Difficulty: Medium, Min: 2, AACSB: Analytic, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Management

3 - 64 194.

Test Bank for Managerial Accounting, Fifth Edition A cost reconciliation schedule is prepared to assign total costs to units ______________, and to the units in the _________________ work in process.

Ans: N/A, SO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting

195.

The production cost report is an internal document that shows production quantity and ______________ for a production department.

Ans: N/A, SO: 7, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting

Answers to Completion Statements 187. 188. 189. 190. 191.

mass-produced, continuous work in process production cost machine hours completed

192. 193. 194. 195.

equivalent 81,000 transferred out, ending cost data

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. B. C. D.

Total manufacturing cost per unit Equivalent units of production Total units accounted for Production cost report

E. F. G. H.

Cost reconciliation schedule Units transferred out Unit production costs 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.

Ans: N/A, SO: 2, Bloom: K, Difficulty: Easy, Min: 5, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting

Answers to Matching 1. 2. 3. 4.

D E B G

5. 6. 7. 8.

H C A F

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Test Bank for Managerial Accounting, Fifth Edition

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? Ans: N/A, SO: 1, Bloom: S, Difficulty: Easy, Min: 5, AACSB: Communication, AICPA BB: Industry/Sector Perspective, AICPA FN: Decision Modeling, AICPA PC: Project Management, IMA: Business Economics

Solution 197 Companies need a cost accounting system only if they need to measure, record, and report the costs of manufacturing products. The two basic types of cost accounting systems are job order costing and process costing. A job order cost system is appropriate when production consists of batches of unique products (jobs). A process cost system is used to apply costs to similar products that are mass-produced in a continuous fashion. 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. Ans: N/A, SO: 6, Bloom: S, Difficulty: Easy, Min: 5, AACSB: Communication, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting

Solution 198 The types of information found in a production cost report are units to be accounted for and units accounted for, unit costs, and costs to be accounted for and costs accounted for. Production cost reports provide a basis for evaluating the productivity of a department and so are used by production managers. In addition, the cost data can be used by middle management to assess whether unit costs and total costs are reasonable. When the quantity and cost data are compared with predetermined goals, top management can also ascertain whether current performance is meeting planned objectives. Of course, the information in the report is also used for recordkeeping and income determination by the accounting department. S-A E 199 Your roommate is curious about the features of process cost accounting. Identify and explain the distinctive features for your roommate. Ans: N/A, SO: 1, Bloom: S, Difficulty: Easy, Min: 5, AACSB: Communication, AICPA BB: Industry/Sector Perspective, AICPA FN: Decision Modeling, AICPA PC: Project Management, IMA: Business Economics

Solution 199 The features of process costing are: (1) separate work in process accounts for each process, (2) production cost reports, (3) product costs computed for each accounting period, and (4) unit costs computed based on total manufacturing costs.

Process Costing

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S-A E 200 What purposes are served by a production cost report? Ans: N/A, SO: 6, Bloom: S, Difficulty: Easy, Min: 5, AACSB: Communication, AICPA BB: Industry/Sector Perspective, AICPA FN: Reporting, AICPA PC: Project Management, IMA: Reporting

Solution 200 The production cost report provides the basis for evaluating: (1) the productivity of a department, (2) whether unit and total costs are reasonable, and (3) whether management's predetermined production and cost goals are being met. 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. Ans: N/A, SO: 1, Bloom: S, Difficulty: Easy, Min: 5, AACSB: Communication, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: Professional Demeanor, IMA: Business Economics

Solution 201 1. The stakeholders include:  Susie Rief and Karen Tate  Dolly's Dream Homes  possibly the present customer, or future customers 2. The company was not unethical in asking that the error not be corrected because it was too small in dollar amount to be considered material. In fact, ignoring small errors improves efficiency. 3. Susie would be failing in the obedience due to her superior if she went ahead and corrected the error. Whether it would be a serious fault depends upon how easily the error could be corrected. The superior probably would not care, either way, if the dollar amount is small and the correction procedure is minor. However, just letting the matter drop would be better.