Cost Acctg Reviewer

11.A total variance is best defined as the difference between total a. actual cost and total cost applied for the standard output of the period. b. standard cost and total cost applied to production. c. actual cost and total standard cost of the actual input of the period. d. actual cost and total cost applied for the actual output of the period. 12. The term “standard hours allowed” measures a. budgeted output at actual hours. b. budgeted output at standard hours. c. actual output at standard hours. d. actual output at actual hours. 13. A large labor efficiency variance is prorated to which of the following at year-end? Cost of Goods Sold

14.

15.

16.

17.

WIP Inventory

FG Inventory

no no no a. no yes yes b. yes no no c. yes yes yes d. Which of the following factors should not be considered when deciding whether to investigate a variance? a. magnitude of the variance b. trend of the variances over time c. likelihood that an investigation will reduce or eliminate future occurrences of the variance d. whether the variance is favorable or unfavorable At the end of a period, a significant material quantity variance should be a. closed to Cost of Goods Sold. b. allocated among Raw Material, Work in Process, Finished Goods, and Cost of Goods Sold. c. allocated among Work in Process, Finished Goods, and Cost of Goods Sold. d. carried forward as a balance sheet account to the next period. When computing variances from standard costs, the difference between actual and standard price multiplied by actual quantity used yields a a. combined price-quantity variance. b. price variance. c. quantity variance. d. mix variance. A company wishing to isolate variances at the point closest to the point of responsibility will determine its material price variance when a. material is purchased. b. material is issued to production. c. material is used in production. d. production is completed.

18. The material price variance (computed at point of purchase) is a. the difference between the actual cost of material purchased and the standard cost of material purchased. b. the difference between the actual cost of material purchased and the standard cost of material used. c. primarily the responsibility of the production manager. d. both a and c.

20. A company would most likely have an unfavorable labor rate variance and a favorable labor efficiency variance if a. the mix of workers used in the production process was more experienced than the normal mix. b. the mix of workers used in the production process was less experienced than the normal mix. c. workers from another part of the plant were used due to an extra heavy production schedule. d. the purchasing agent acquired very high quality material that resulted in less spoilage. 21. If actual direct labor hours (DLHs) are less than standard direct labor hours allowed and overhead is applied on a DLH basis, a(n) a. favorable variable overhead spending variance exists. b. favorable variable overhead efficiency variance exists. c. favorable volume variance exists. d. unfavorable volume variance exists. 22. The total labor variance can be subdivided into all of the following except a. rate variance. b. yield variance. c. learning curve variance. d. mix variance. 23. The standard predominantly used in Western cultures for motivational purposes is a(n) ____ standard. a. expected annual b. ideal c. practical d. theoretical 24. Which of the following standards can commonly be reached or slightly exceeded by workers in a motivated work environment? Ideal

Practical

Expected annual

no no a. no yes yes b. no yes no c. yes no yes no d. 25. Management would generally expect unfavorable variances if standards were based on which of the following capacity measures?

Ideal

Practical

Expected annual

no no a. yes no no no b. yes yes c. no yes no d. yes 26. Which of the following capacity levels has traditionally been used to compute the fixed overhead application rate? a. expected annual b. normal c. theoretical d. prior year

29. A variable overhead spending variance is caused by a. using more or fewer actual hours than the standard hours allowed for the production achieved. b. paying a higher/lower average actual overhead price per unit of the activity base than the standard price allowed per unit of the activity base. c. larger/smaller waste and shrinkage associated with the resources involved than expected. d. both b and c are causes. 30. Which of the following are considered controllable variances? VOH spending

Total overhead budget

Volume

yes yes a. yes no yes b. no yes no c. no yes no d. yes 33. Fixed overhead costs are a. best controlled on a unit-by-unit basis of products produced. b. mostly incurred to provide the capacity to produce and are best controlled on a total basis at the time they are originally negotiated. c. constant on a per-unit basis at all different activity levels within the relevant range. d. best controlled as to spending during the production process. 34. The variance most useful in evaluating plant utilization is the a. variable overhead spending variance. b. fixed overhead spending variance. c. variable overhead efficiency variance. d. fixed overhead volume variance. 35. A favorable fixed overhead volume variance occurs if a. there is a favorable labor efficiency variance. b. there is a favorable labor rate variance. c. production is less than planned. d. production is greater than planned.

36. The fixed overhead application rate is a function of a predetermined activity level. If standard hours allowed for good output equal the predetermined activity level for a given period, the volume variance will be a. zero. b. favorable. c. unfavorable. d. either favorable or unfavorable, depending on the budgeted overhead. 37. Actual fixed overhead minus budgeted fixed overhead equals the a. fixed overhead volume variance. b. fixed overhead spending variance. c. noncontrollable variance. d. controllable variance. 38. Total actual overhead minus total budgeted overhead at the actual input production level equals the a. variable overhead spending variance. b. total overhead efficiency variance. c. total overhead spending variance. d. total overhead volume variance.

39. A favorable fixed overhead spending variance indicates that a. budgeted fixed overhead is less than actual fixed overhead. b. budgeted fixed overhead is greater than applied fixed overhead. c. applied fixed overhead is greater than budgeted fixed overhead. d. actual fixed overhead is less than budgeted fixed overhead. 40. An unfavorable fixed overhead volume variance is most often caused by a. actual fixed overhead incurred exceeding budgeted fixed overhead. b. an over-application of fixed overhead to production. c. an increase in the level of the finished inventory. d. normal capacity exceeding actual production levels. 41. In a standard cost system, when production is greater than the estimated unit or denominator level of activity, there will be a(n) a. unfavorable capacity variance. b. favorable material and labor usage variance. c. favorable volume variance. d. unfavorable manufacturing overhead variance. 42. In analyzing manufacturing overhead variances, the volume variance is the difference between the a. amount shown in the flexible budget and the amount shown in the debit side of the overhead control account. b. predetermined overhead application rate and the flexible budget application rate times actual hours worked. c. budget allowance based on standard hours allowed for actual production for the period and the amount budgeted to be applied during the period. d. actual amount spent for overhead items during the period and the overhead amount applied to production during the period. 43. Variance analysis for overhead normally focuses on a. efficiency variances for machinery and indirect production costs. b. volume variances for fixed overhead costs. c. the controllable variance as a lump-sum amount. d. the difference between budgeted and applied variable overhead. 44. The efficiency variance computed on a three-variance approach is a. equal to the efficiency variance computed on the four-variance approach. b. equal to the variable overhead spending variance plus the efficiency variance computed on the four-variance approach. c. computed as the difference between applied variable overhead and actual variable overhead. d. computed as actual variable overhead minus the flexible budget for variable overhead based on actual hours worked. 45. The use of separate variable and fixed overhead rates is better than a combined rate because such a system a. is less expensive to operate and maintain. b. does not result in underapplied or overapplied overhead. c. is more effective in assigning overhead costs to products. d. is easier to develop. 46. Under the two-variance approach, the volume variance is computed by subtracting ____ based on standard input allowed for the production achieved from budgeted overhead. a. applied overhead b. actual overhead c. budgeted fixed overhead plus actual variable overhead

d. budgeted variable overhead 47. The overhead variance calculated as total budgeted overhead at the actual input production level minus total budgeted overhead at the standard hours allowed for actual output is the a. efficiency variance. b. spending variance. c. volume variance. d. budget variance. Crichton Company The following information is for Crichton Company’s July production: Standards: Material Labor

3.0 feet per unit @ $4.20 per foot 2.5 hours per unit @ $7.50 per hour

Actual: Production 2,750 units produced during the month Material 8,700 feet used; 9,000 feet purchased @ $4.50 per foot Labor 7,000 direct labor hours @ $7.90 per hour (Round all answers to the nearest dollar.) 50. Refer to Crichton Company. What is the material price variance (calculated at point of purchase)? Material Price Variance = (AP - SP) * AQ = ($4.50 - $4.20) * 9,000 feet purchased = $2,700 U 51. Refer to Crichton Company. What is the material quantity variance? Material Quantity Variance = (AQ - SQ) * SP = (8,700 - (2,750 * 3)) * $4.20 = $1,890 U 52. Refer to Crichton Company. What is the labor rate variance? Labor Rate Variance = (AP - SP) * AQ = ($7.90 - $7.50) * 7,000 hr used = $2,800 U 53. Refer to Crichton Company. What is the labor efficiency variance? Labor Efficiency Variance = (AQ - SQ) * SP = (7,000 hr - (2.5 hr/unit * 2,750 units)) * $7.50 = $938 U (rounded) Reichs Company The following information is for Reichs Company’s September production: Standards: Material Labor

4.0 feet per unit @ $3.75 per foot 3.0 hours per unit @ $8.25 per hour

Actual: Production 3,500 units produced during the month Material 14,200 feet used; 14,700 feet purchased @ $3.70 per foot Labor 10,400 direct labor hours @ $8.35 per hour (Round all answers to the nearest dollar.) 54. Refer to Reichs Company. What is the material price variance (calculated at point of purchase)? Material Price Variance = (AP - SP) * AQ = ($3.70 - $3.75) * 14,700 feet purchased = $735 F 55. Refer to Reichs Company. What is the material quantity variance? Material Quantity Variance = (AQ - SQ) * SP = (14,200 - (3,500 * 4)) * $3.75 = $750 U 56. Refer to Reichs Company. What is the labor rate variance? Labor Rate Variance = (AP - SP) * AQ = ($8.35 - $8.25) *10,400 hr used = $1,040 U 57. Refer to Reichs Company. What is the labor efficiency variance? Labor Efficiency Variance = (AQ - SQ) * SP = (10,400 hr - (3 hr/unit * 3,500 units)) * $8.25 = $825 F

Hazelton Company Hazelton Company has the following information available for December when 3,500 units were produced (round answers to the nearest dollar). Standards: Material Labor

3.5 pounds per unit @ $4.50 per pound 5.0 hours per unit @ $10.25 per hour

Actual: Material purchased 12,300 pounds @ $4.25 Material used 11,750 pounds 17,300 direct labor hours @ $10.20 per hour 58. Refer to Hazelton Company. What is the labor rate variance? Labor Rate Variance = (AP - SP) * AQ = ($10.20 - $10.25) * 17,300 hrs. = $865 F 59. Refer to Hazelton Company. What is the labor efficiency variance? Labor efficiency variance = (AQ - SQ)* SP =(17,300 hrs -(3,500 units * 5.0 hr/unit)) * $10.25/hr

= $2,050 F 60. Refer to Hazelton Company. What is the material price variance (based on quantity purchased)? Material price variance = (AP - SP) * AQ = ($4.25 - $4.50) * 12,300 = $3,075 F 61. Refer to Hazelton Company. What is the material quantity variance? Material quantity variance = (AQ - SQ) * SP = (11,750 - (3,500 units * 3.5 hr/unit)) * $4.25 = $2,250 F 62. Refer to Hazleton Company. Assume that the company computes the material price variance on the basis of material issued to production. What is the total material variance? Total Variance = (11,750 * $4.25) - (3,500 * 3.5 * $4.50) = $49,937.00 - $55,125.00 = $5188 F Wimberly Company Wimberly Company has the following information available for March when 4,200 units were produced (round answers to the nearest dollar). Standards: Material Labor

4.0 pounds per unit @ $5.25 per pound 6.0 hours per unit @ $10.00 per hour

Actual: Material purchased 17,500 pounds @ $5.10 Material used 16,700 pounds 25,500 direct labor hours @ $9.85 per hour 63. Refer to Wimberly Company. What is the labor rate variance? Labor Rate Variance = (AP - SP) * AQ = ($9.85 - $10.00) * 25,500 hrs. = $3,825 F 64. Refer to Wimberly Company. What is the labor efficiency variance? Labor efficiency variance = (AQ - SQ)* SP =(25,500 hrs -(4,200 units * 6.0 hr/unit)) * $10.00/hr = $3,000 U 65. Refer to Wimberly Company. What is the material price variance (based on quantity purchased)? Material price variance = (AP - SP) * AQ = ($5.10 - $5.25) * 17,500 = $2,625 F 66. Refer to Wimberly Company. What is the material quantity variance? Material quantity variance = (AQ - SQ) * SP

= (16,700 - (4,200 units * 4.0 lb/unit)) * $5.25 = $525 F 67. Refer to Wimberly Company. Assume that the company computes the material price variance on the basis of material issued to production. What is the total material variance? Total Variance = (16,700 * $5.10) - (4,200 * 4.0 * $5.25) = $85,170.00 - $88,200.00 = $3,030 F Strong Manufacturing The following information is available for Strong Manufacturing Company for the month of June when the company produced 2,100 units: Standard: Material Labor

2 pounds per unit @ $5.80 per pound 3 direct labor hours per unit @ $10.00 per hour

Actual: Material Labor

4,250 pounds purchased and used @ $5.65 per pound 6,300 direct labor hours at $9.75 per hour

68. Refer to Strong Manufacturing Company. What is the material price variance? Material price variance = (AP - SP) * AQ = ($5.65 - $5.80) * 4,250 lbs = $637.50 F 69. Refer to Strong Manufacturing Company. What is the material quantity variance? Material quantity variance = (AQ - SQ) * SP = (4,250 - (2 lbs/unit * 2,100 units))* $5.80/unit = $290 U 70. Refer to Strong Manufacturing Company. What is the labor rate variance? Labor Rate Variance = (AP - SP) * AQ =($9.75 - $10.00) * 6,300 hrs = $1,575 F 71. Refer to Strong Manufacturing Company. What is the labor efficiency variance? Labor efficiency variance = (AQ - SQ) * SP = (6,300 - (2,100 units * 3 hrs/unit) * $10.00 = $0 Fleetwood Company Fleetwood Company uses a standard cost system for its production process and applies overhead based on direct labor hours. The following information is available for May when Fleetwood produced 4,500 units: Standard: 2.50 DLH per unit $1.75 Variable overhead per DLH $3.10 Fixed overhead per DLH

Budgeted variable overhead Budgeted fixed overhead

$21,875 $38,750

Actual: Direct labor hours Variable overhead Fixed overhead

10,000 $26,250 $38,000

72. Refer to Fleetwood Company. Using the one-variance approach, what is the total overhead variance? Total Variance = Actual Overhead - Applied Overhead = $(26,250 + 38,000) - ($(1.75 + 3.10) * 2.50 hrs/unit * 4,500 units) = $64,250.00 - $54,462.50 = $9,687.50U 73. Refer to Fleetwood Company. Using the two-variance approach, what is the controllable variance? Controllable Variance = Actual Overhead - Budgeted Overhead Based on Standard Quantity = $64,250.00 - $((4,500 units * 2.5 DLH/unit * $1.75) + 38,750) = $(64,250 - $58,437.50) = $5,812.50 U 74. Refer to Fleetwood Company. Using the two-variance approach, what is the noncontrollable variance? Uncontrollable Variance = Budgeted Overhead Based on SQ - Applied Overhead = $(58,437.50 - 54,562.50) = $3,875.00 U 75. Refer to Fleetwood Company. Using the three-variance approach, what is the spending variance? OH Spending Variance = Actual OH - Budgeted OH based upon Inputs Used = $64,250 - ((10,000 hrs * $1.75) + $38,750) = $(64,250 - 56,250) = $8,000.00 U 76. Refer to Fleetwood Company. Using the three-variance approach, what is the efficiency variance? OH Efficiency Variance = Budgeted OH based on Actual - Budgeted OH based on Standard = ((10,000 * $1.75)+ $38,750) - ((4,500 * 2.50 * $1.75) + $38,750) = $(56,250.00 - 58,437.50) = $2,187.50 F 77. Refer to Fleetwood Company. Using the three-variance approach, what is the volume variance? Volume Variance = Budget Based on Standard Quantity - Overhead Applied = $(58,437.50 - 54,562.00) = $3,875.00 U 78. Refer to Fleetwood Company. Using the four-variance approach, what is the variable overhead spending variance? Variable Overhead Spending Variance = Actual VOH - Budgeted VOH/Actual Quantity = $26,250.00 - (10,000 * $1.75/VOH hr) = $(26,250.00 - 17,500.00)

= $8,750.00 U 79. Refer to Fleetwood Company. Using the four-variance approach, what is the variable overhead efficiency variance? VOH Efficiency Variance = Budgeted VOH based on Actual - Budgeted VOH/Standard Qty = ((10,000 * $1.75/hr) - ((4,500 * 2.50hrs/unit * $1.75/hr)) = $(17,500.00 - 19,687.50) = $2,187.50 F 80. Refer to Fleetwood Company. Using the four-variance approach, what is the fixed overhead spending variance? Fixed OH Spending Variance = Actual Fixed OH - Applied Fixed OH = $(38,000 - 38,750) = $750.00 F 81. Refer to Fleetwood Company. Using the four-variance approach, what is the volume variance? Volume Variance = Budget Based on Standard Quantity - Overhead Applied = $(58,437.50 - 54,562.00) = $3,875.00 U Genesis Company Genesis Company uses a standard cost system for its production process and applies overhead based on direct labor hours. The following information is available for September when Genesis produced 5,000 units: Standard: 3.00 DLH per unit $1.80 Variable overhead per DLH $3.25 Fixed overhead per DLH $27,250 Budgeted variable overhead $49,500 Budgeted fixed overhead

82.

83.

84.

85.

Actual: 16,000 Direct labor hours $31,325 Variable overhead $49,750 Fixed overhead Refer to Genesis Company. Using the one-variance approach, what is the total overhead variance? Total Variance = Actual Overhead - Applied Overhead = $(31,325 + 49,750) - ($(1.80 + 3.25) * 3.00 hrs/unit * 5,000 units) = $81,075.00 - $75,750.00 = $5,325.00 U Refer to Genesis Company. Using the two-variance approach, what is the controllable variance? Controllable Variance = Actual Overhead - Budgeted Overhead Based on Standard Quantity = $81,075 - $((5,000 units * 3.0 DLH/unit * $1.80) + 49,500) = $(81,075 - $76,500) = $4,575 U Refer to Genesis Company. Using the two-variance approach, what is the noncontrollable variance? Uncontrollable Variance = Budgeted Overhead Based on SQ - Applied Overhead = $(76,500 - 75,750) = $750 U Refer to Genesis Company. Using the three-variance approach, what is the spending variance? OH Spending Variance = Actual OH - Budgeted OH based upon Inputs Used = $81,075 - ((16,000 hrs * $1.80) + $49,500)

= $(81,075 - 78,300) = $2,775 U 86. Refer to Genesis Company. Using the three-variance approach, what is the efficiency variance? OH Efficiency Variance = Budgeted OH based on Actual - Budgeted OH based on Standard = ((16,000 * $1.80)+ $49,500) - ((5,000 * 3.00 * $1.80) + $49,500) = $(78,300.00 - 76,500.00) = $1,800.00 U 87. Refer to Genesis Company. Using the three-variance approach, what is the volume variance? Volume Variance = Budget Based on Standard Quantity - Overhead Applied = $(76,500.00 - 75,750.00) = $750 U 88. Refer to Genesis Company. Using the four-variance approach, what is the variable overhead spending variance? Variable Overhead Spending Variance = Actual VOH - Budgeted VOH/Actual Quantity = $31,325 - (16,000 * $1.80/VOH hr) = $(31,325 - 28,800) = $2,525 U 89. Refer to Genesis Company. Using the four-variance approach, what is the variable overhead efficiency variance? VOH Efficiency Variance = Budgeted VOH based on Actual - Budgeted VOH/Standard Qty = ((16,000 * $1.80/hr) - ((5,000 * 3 hrs/unit * $1.80/hr)) = $(28,800 - 27,000) = $1,800 U 90. Refer to Genesis Company. Using the four-variance approach, what is the fixed overhead spending variance? Fixed OH Spending Variance = Actual Fixed OH - Applied Fixed OH = $(49,750 - 49,500) = $250 U 91. Refer to Genesis Company. Using the four-variance approach, what is the volume variance? Volume Variance = Budget Based on Standard Quantity - Overhead Applied = $(49,500 - (5,000 x 3 x 3.25)) = $49,500 - $48,750 = $750 U Ritchie Company Ritchie Company uses a standard cost system for its production process. Ritchie Company applies overhead based on direct labor hours. The following information is available for July: Standard: 2.20 Direct labor hours per unit $2.50 Variable overhead per hour Fixed overhead per hour $3.00 (based on 11,990 DLHs) Actual: Units produced Direct labor hours

4,400 8,800

Variable overhead Fixed overhead

$29,950 $42,300

92. Refer to Ritchie Company Using the four-variance approach, what is the variable overhead spending variance? Variable OH Spending Variance = Actual VOH - Budgeted VOH/Actual = $(29,950 - 22,000) = $7,950 93. Refer to Ritchie Company Using the four-variance approach, what is the variable overhead efficiency variance? VOH Efficiency Variance = Budgeted OH/Actual - Budgeted OH/Standard = (8,800 DLH * $2.50/DLH) - (4400 units*2.20 DLH/unit * $2.50) = $(22,000 - 24,200) = $2,200 F 94. Refer to Ritchie Company Using the four-variance approach, what is the fixed overhead spending variance? Fixed OH Spending Variance = Actual OH - Standard Fixed OH = $42,300 - (11,990 DLH’s * $3.00/DLH) = $(42,300 - 35,970) = $6,330 U 95. Refer to Ritchie Company Using the four-variance approach, what is the volume variance? Volume Variance = Budgeted OH/Standard Quantity - Standard Overhead Applied =( 4,400 units * $2.50/hr*2.20 hrs/unit + $35,970)- (4,400 units*$5.50/hr*2.20 DLH/unit) = $60,170 - $53,240 = $6,930 U 96. Refer to Ritchie Company Using the three-variance approach, what is the spending variance? Spending Variance = Actual Overhead - Budget OH/Actual Use = $72,250 - ((8,800 hrs * $2.50/hr) + $35,970) = $(72,250 - 57,970) = $14,280 U 97. Refer to Ritchie Company Using the three-variance approach, what is the efficiency variance? Efficiency Variance = Budget OH/Actual Use - Budgeted OH/Standard Quantity - Standard Overhead Applied = ((8,800 hrs * $2.50/hr) + $35,970)-( 4,400 units * $2.50/hr*2.20 hrs/unit + $35,970) = $(57,970 - 60,170) = $2,200 F 98. Refer to Ritchie Company Using the three-variance approach, what is the volume variance? Volume Variance = Budgeted OH/Standard Quantity - Standard Overhead Applied =( 4,400 units * $2.50/hr*2.20 hrs/unit + $35,970)- (4,400 units*$5.50/hr*2.20 DLH/unit) = $60,170 - $53,240 = $6,930 U 99. Refer to Ritchie Company Using the two-variance approach, what is the controllable variance? Controllable Variance = Actual Overhead - Budgeted Overhead Based on Standard Quantity = $72,250.00 - ( 4,400 units * $2.50/hr*2.20 hrs/unit + $35,970)

= $(72,250- 60,170) = $12,080 U

100. Refer to Ritchie Company Using the two-variance approach, what is the noncontrollable variance? Noncontrollable Variance = Budgeted OH/Standard Quantity - Standard Overhead Applied =( 4,400 units * $2.50/hr*2.20 hrs/unit + $35,970)- (4,400 units*$5.50/hr*2.20 DLH/unit) = $60,170 - $53,240 = $6,930 U 101. Refer to Ritchie Company Using the one-variance approach, what is the total variance? Total Variance = Actual Overhead - Applied Overhead =$72,250 - (4,400 * 2.20 *($2.50 + $3.00)) =$72,250 - $53,240 =$19,010 U

102. Actual fixed overhead is $33,300 (12,000 machine hours) and fixed overhead was estimated at $34,000 when the predetermined rate of $3.00 per machine hour was set. If 11,500 standard hours were allowed for actual production, applied fixed overhead is 11,500 hrs. * $3.00/hr. = $34,500 103. One unit requires 2 direct labor hours to produce. Standard variable overhead per unit is $1.25 and standard fixed overhead per unit is $1.75. If 330 units were produced this month, what total amount of overhead is applied to the units produced? 330 units * ($1.25 + $1.75) = $990 104. Ponca City Company uses a standard cost accounting system. The following overhead costs and production data are available for September: Standard fixed OH rate per DLH Standard variable OH rate per DLH Budgeted monthly DLHs Actual DLHs worked Standard DLHs allowed for actual production Overall OH variance-favorable

$1 $4 40,000 39,500 39,000 $2,000

The total applied manufacturing overhead for September should be 39,000 DL hrs * $5.00/hr = $195,000 105. Luther Manufacturing Company uses a standard cost system and prepared the following budget at normal capacity for October: Direct labor hours Variable OH Fixed OH Total OH per DLH Actual data for October were as follows: Direct labor hours worked

24,000 $48,000 $108,000 $6.50

22,000

Total OH Standard DLHs allowed for capacity attained

$147,000 21,000

Using the two-way analysis of overhead variances, what is the controllable variance for October? ANS: A Controllable Variance = Actual Overhead - Budget Based on SQ for Actual Output = $147,000 - ((21,000 * $2.00/hr) + $108,000) = $(147,000 - 150,000) = $3,000 F 106. The following information is available from the Fitzgerald Company: Actual OH Fixed OH expenses, actual Fixed OH expenses, budgeted Actual hours Standard hours Variable OH rate per DLH

$15,000 $7,200 $7,000 3,500 3,800 $2.50

Assuming that Fitzgerald uses a three-way analysis of overhead variances, what is the overhead spending variance? Spending Variance = Actual Overhead - Budgeted Overhead/Actual Hours = $15,000 - ((3,500 * $2.50) + $7,000) = $(15,000 - 15,750) = $750 F 107. Norris Company uses a two-way analysis of overhead variances. Selected data for the March production activity are as follows: Actual variable OH incurred Variable OH rate per MH Standard MHs allowed Actual MHs

$196,000 $6 33,000 32,000

Assuming that budgeted fixed overhead costs are equal to actual fixed costs, the controllable variance for March is ANS: A Controllable Variance = Actual OH - Budgeted OH based on Standard Qty = $196,000 - (33,000 * $6/hr) = $2,000 F PTS: 1 DIF: Moderate OBJ: 7-3 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting 108. Superior Fuel Company uses a standard cost system. Overhead cost information for January is as follows: Total actual overhead incurred Fixed overhead budgeted Total standard overhead rate per MH

$12,600 $3,300 $4

Variable overhead rate per MH Standard MHs allowed for actual production

$3 3,500

What is the total overhead variance? a. $1,200 F b. $1,200 U c. $1,400 F d. $1,400 U ANS: C Total Overhead Variance = Actual Overhead - Standard Overhead = $(12,600 - (3,500 MH * $4/MH)) = $(12,600 - 14,000) = $1,400 F PTS: 1 DIF: Easy OBJ: 7-3 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting National Toy Company National Toy Company has developed standard overhead costs based on a capacity of 180,000 machine hours as follows: Standard costs per unit: Variable portion Fixed portion

2 hours @ $3 = 2 hours @ $5 =

$ 6 10 $16

During November, 85,000 units were scheduled for production, but only 80,000 units were actually produced. The following data relate to November: Actual machine hours used were 165,000. Actual overhead incurred totaled $1,378,000 ($518,000 variable plus $860,000 fixed). All inventories are carried at standard cost. 109. Refer to National Toy Company. The variable overhead spending variance for November was a. $15,000 U. b. $23,000 U. c. $38,000 F. d. $38,000 U. ANS: B Variable OH Spending Variance = Actual VOH - Budgeted FOH/Actual Input = $518,000 - (165,000 DLH * $3/hr) = $(518,000 - 495,000) = $23,000 U PTS: 1 DIF: Moderate OBJ: 7-3 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting 110. Refer to National Toy Company. The variable overhead efficiency variance for November was

a. b. c. d.

$15,000 U. $23,000 U. $38,000 F. $38,000 U.

ANS: A Variable OH Efficiency Variance = Budgeted VOH/Actual - Budgeted VOH/Standard = $495,000 - (80,000 units * 2 hrs/unit * $3) = $(495,000 - 480,000) = $15,000 U PTS: 1 DIF: Moderate OBJ: 7-3 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting 111. Refer to National Toy Company. The fixed overhead spending variance for November was a. $40,000 U. b. $40,000 F. c. $60,000 F. d. $60,000 U. ANS: B Fixed Overhead Spending Variance = Actual Fixed OH - Budgeted Fixed OH = $(860,000 - (180,000 MH * $5/hr) = $(860,000 - $900,000) = $40,000 F PTS: 1 DIF: Moderate OBJ: 7-3 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting 112. Refer to National Toy Company. The fixed overhead volume variance for November was a. $60,000 U. b. $60,000 F. c. $100,000 F. d. $100,000 U. ANS: D Fixed FOH Volume Variance = Budgeted Fixed FOH - Applied FOH = $(900,000 - 800,000) = $100,000 U PTS: 1 DIF: Moderate OBJ: 7-3 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting Classic Cleaning Company Classic Cleaning Company manufactures a cleaning solvent. The company employs both skilled and unskilled workers. To produce one 55-gallon drum of solvent requires Materials A and B as well as skilled labor and unskilled labor. The standard and actual material and labor information is presented below: Standard:

Material A: 30.25 gallons @ $1.25 per gallon Material B: 24.75 gallons @ $2.00 per gallon Skilled Labor: 4 hours @ $12 per hour Unskilled Labor: 2 hours @ $ 7 per hour Actual: Material A: 10,716 gallons purchased and used @ $1.50 per gallon Material B: 17,484 gallons purchased and used @ $1.90 per gallon Skilled labor hours: 1,950 @ $11.90 per hour Unskilled labor hours: 1,300 @ $7.15 per hour During the current month Classic Cleaning Company manufactured 500 55-gallon drums. Round all answers to the nearest whole dollar. 113. Refer to Classic Cleaning Company. What is the total material price variance? a. $877 F b. $877 U c. $931 U d. $931 F ANS: C Total Material Price Variance = Actual Mix,Qty,Price - Actual Mix,Quantity,Std Price = $(49,294 - 48,363) = $931 U PTS: 1 DIF: Moderate OBJ: 7-7 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting 114. Refer to Classic Cleaning Company. What is the total material mix variance? a. $3,596 F b. $3,596 U c. $4,864 F d. $4,864 U ANS: B Total Material Mix Variance = Actual Mix,Qty, Std Price - Std Mix, Price,Actual Qty = $(48,363 - 44,767) = $3,596 U PTS: 1 DIF: Difficult OBJ: 7-7 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting 115. Refer to Classic Cleaning Company. What is the total material yield variance? a. $1,111 U b. $1,111 F c. $2,670 U d. $2,670 F

ANS: A Material Yield Variance = Std Mix, Std Price,Actual Qty - Std Mix, Qty, Price = $(44,767 - $43,656) = $1,111 U PTS: 1 DIF: Difficult OBJ: 7-7 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting 116. Refer to Classic Cleaning Company. What is the labor rate variance? a. $0 b. $1,083 U c. $2,583 U d. $1,083 F ANS: A Labor Rate Variance = Actual Mix, Qty,Price - Actual Mix,Qty,Std Price = $(32,500 - 32,500) = $0 PTS: 1 DIF: Moderate OBJ: 7-7 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting 117. Refer to Classic Cleaning Company. What is the labor mix variance? a. $1,083 U b. $2,588 U c. $1,083 F d. $2,588 F ANS: C Labor Mix Variance = Actual Mix,Qty, Std Price - Std Mix, Actual Qty, Std Price = $(32,500 - 33,583) = $1,083 F PTS: 1 DIF: Difficult OBJ: 7-7 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting 118. Refer to Classic Cleaning Company. What is the labor yield variance? a. $2,583 U b. $2,583 F c. $1,138 F d. $1,138 U ANS: A Labor Yield Variance = Std Mix, Act Qty, Std Price - Std Mix, Qty, Price = $(33,583 - $31,000) = $2,583 U PTS: 1 DIF: Difficult OBJ: 7-7 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting 119. The sum of the material mix and material yield variances equals

a. b. c. d.

the material purchase price variance. the material quantity variance. the total material variance. none of the above.

ANS: B PTS: 1 DIF: Easy OBJ: 7-7 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting 120. The sum of the labor mix and labor yield variances equals a. the labor efficiency variance. b. the total labor variance. c. the labor rate variance. d. nothing because these two variances cannot be added since they use different costs. ANS: A PTS: 1 DIF: Easy OBJ: 7-7 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting

PROBLEM Moore Company Moore Company has the following information available for the current year: Standard: Material Labor Actual: Material Labor

3.5 feet per unit @ $2.60 per foot 5 direct labor hours @ $8.50 per unit 95,625 feet used (100,000 feet purchased @ $2.50 per foot) 122,400 direct labor hours incurred per unit @ $8.35 per hour 25,500 units were produced

1. Refer to Moore Company. Compute the material purchase price and quantity variances. ANS: Material price variance: 100,000 × $2.50 = 100,000 × $2.60 = Material quantity variance: 95,625 × $2.60 = 89,250 × $2.60 =

$250,000 260,000 $ 10,000

F

$248,625 232,050 $ 16,575

U

PTS: 1 DIF: Moderate OBJ: 7-3 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting

2. Refer to Moore Company. Compute the labor rate and efficiency variances. ANS: Labor rate variance: 122,400 × $8.35 = 122,400 × $8.50 = Labor efficiency variance: 122,400 × $8.50 = 127,500 × $8.50 =

$1,022,040 1,040,400 $ 18,360

F

$1,040,400 1,083,750 $ 43,350

F

PTS: 1 DIF: Moderate OBJ: 7-3 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting Hoover Company Hoover Company applies overhead based on direct labor hours and has the following available for the current month: Standard: Direct labor hours per unit Variable overhead per DLH Fixed overhead per DLH (based on 8,900 DLHs) Actual: Units produced Direct labor hours Variable overhead Fixed overhead

5 $.75 $1.90

1,800 8,900 $6,400 $17,500

3. Refer to Hoover Company. Compute all the appropriate variances using the two-variance approach. ANS: Actual ($6,400 + $17,500) Budget Variance: BFOH (8,900 × $1.90) VOH (1,800 × 5 × $.75) Volume Variance: Applied OH: (1,800 × 5 × $2.65)

$23,900 $240 U $16,910 6,750

$23,660 $190 F

$23,850

PTS: 1 DIF: Moderate OBJ: 7-3 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting

4. Refer to Hoover Company. Compute all the appropriate variances using the three-variance approach. ANS: Actual Spending Variance: Flexible Budget Based on Actual Input BFOH VOH (8,900 × $.75) Efficiency Variance: Flexible Budget Based on Standard DLHs BFOH VOH (1,800 × 5 × $.75) Volume Variance: Applied OH: (1,800 × 5 × $2.65)

$23,900 $315 U $16,910 6,675

$23,585 $75 F

$16,910 6,750

$23,660 $190 F

$23,850

PTS: 1 DIF: Moderate OBJ: 7-3 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting 5. Refer to Hoover Company. Compute all the appropriate variances using the four-variance approach. ANS: Actual VOH Variable Spending Variance: Flex. Bud. Based on Actual Input Hours (8,900 × $.75) Variable Efficiency Variance: Applied VOH (1,800 × 5 × $.75) Actual FOH FOH Spending Variance: BUDGETED FOH FOH Volume Variance: Applied FOH (1,800 × 5 × $1.90)

$6,400 $275 F $6,675 $75 F $6,750 $17,500 $590 U $16,910 $190 F $17,100

PTS: 1 DIF: Moderate OBJ: 7-3 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting Truman Company Truman Company applies overhead based on direct labor hours and has the following available for the current month: Standard: Direct labor hours per unit Variable overhead per DLH Fixed overhead per DLH (based on 11,900 DLHs)

6 $.80 $2.10

Actual: Units produced Direct labor hours Variable overhead Fixed overhead

2,000 11,900 $9,900 $25,500

6. Refer to Truman Company. Compute all the appropriate variances using the two-variance approach. ANS: Actual ($9,900 + $25,500) Budget Variance: BFOH (11,900 × $2.10) VOH (2000 × 6 × $.80) Volume Variance: Applied OH: (2,000 × 6 × $2.90)

$35,400 $810 U $24,990 9,600

$34,590 $210 F $34,800

PTS: 1 DIF: Moderate OBJ: 7-3 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting 7. Refer to Truman Company. Compute all the appropriate variances using the three-variance approach. ANS: Actual Spending Variance: Flexible Budget Based on Actual Input BFOH VOH (11,900 × $.80) Efficiency Variance: Flexible Budget Based on Standard DLHs BFOH VOH (2,000 × 6 × $.80) Volume Variance: Applied OH: (2,000 × 6 × $2.90)

$35,400 $890 U $24,990 9,520

$34,510 $80 F

$24,990 9,600

$34,590 $210 F $34,800

PTS: 1 DIF: Moderate OBJ: 7-3 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting 8. Refer to Truman Company. Compute all the appropriate variances using the four-variance approach. ANS: Actual VOH Variable Spending Variance: Flex. Bud. Based on Actual Input Hours (11,900 × $.80) Variable Efficiency Variance: Applied VOH (2,000 × 6 × $.80)

$9,900 $380 U $9,520 $80 F $9,600

Actual FOH FOH Spending Variance: BUDGETED FOH (11,900 x $2.10) FOH Volume Variance: Applied FOH (2,000 × 6 × $2.10)

$25,500 $510 U $24,990 $210 F $25,200

PTS: 1 DIF: Moderate OBJ: 7-3 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting 4.A process costing system is used by a company that a. produces heterogeneous products. b. produces items by special request of customers. c. produces homogeneous products. d. accumulates costs by job. ANS: C PTS: 1 DIF: Easy OBJ: 6-1 NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Measurement, Reporting 5. Which is the best cost accumulation procedure to use for continuous mass production of like units? a. actual b. standard c. job order d. process 6. Equivalent units of production are equal to the a. units completed by a production department in the period. b. number of units worked on during the period by a production department. c. number of whole units that could have been completed if all work of the period had been used to produce whole units. d. identifiable units existing at the end of the period in a production department. 7. In a process costing system using the weighted average method, cost per equivalent unit for a given cost component is found by dividing which of the following by EUP? a. only current period cost b. current period cost plus the cost of beginning inventory c. current period cost less the cost of beginning inventory d. current period cost plus the cost of ending inventory 8. The weighted average method is thought by some accountants to be inferior to the FIFO method because it a. is more difficult to apply. b. only considers the last units worked on. c. ignores work performed in subsequent periods. d. commingles costs of two periods.

9. The first step in determining the cost per EUP per cost component under the weighted average method is to a. add the beginning Work in Process Inventory cost to the current period's production cost. b. divide the current period's production cost by the equivalent units. c. subtract the beginning Work in Process Inventory cost from the current period's production cost. d. divide the current period's production cost into the EUP. 10. The difference between EUP calculated using FIFO and EUP calculated using weighted average is the equivalent units a. started and completed during the period. b. residing in beginning Work in Process Inventory. c. residing in ending Work in Process Inventory. d. uncompleted in Work in Process Inventory. ANS: B PTS: 1 DIF: Moderate OBJ: 6-3 NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Measurement, Reporting 11. EUP calculations for standard process costing are the same as a. the EUP calculations for weighted average process costing. b. the EUP calculations for FIFO process costing. c. LIFO inventory costing for merchandise. d. the EUP calculations for LIFO process costing. ANS: B PTS: 1 DIF: Moderate OBJ: 6-5 NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Measurement, Reporting 12. In a FIFO process costing system, which of the following are assumed to be completed first in the current period? a. units started this period b. units started last period c. units transferred out d. units still in process ANS: B PTS: 1 DIF: Easy OBJ: 6-4 NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Measurement, Reporting 13. To compute equivalent units of production using the FIFO method of process costing, work for the current period must be stated in units a. completed during the period and units in ending inventory. b. completed from beginning inventory, units started and completed during the period, and units partially completed in ending inventory. c. started during the period and units transferred out during the period. d. processed during the period and units completed during the period. ANS: B PTS: 1 DIF: Moderate OBJ: 6-4 NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Measurement, Reporting

14. The FIFO method of process costing will produce the same cost of goods transferred out amount as the weighted average method when a. the goods produced are homogeneous. b. there is no beginning Work in Process Inventory. c. there is no ending Work in Process Inventory. d. beginning and ending Work in Process Inventories are each 50 percent complete. ANS: B PTS: 1 DIF: Easy OBJ: 6-4 NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Measurement, Reporting 15. The primary difference between the FIFO and weighted average methods of process costing is a. in the treatment of beginning Work in Process Inventory. b. in the treatment of current period production costs. c. in the treatment of spoiled units. d. none of the above. ANS: A PTS: 1 DIF: Easy OBJ: 6-4 NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Measurement, Reporting 16. Material is added at the beginning of a process in a process costing system. The beginning Work in Process Inventory for the process was 30 percent complete as to conversion costs. Using the FIFO method of costing, the number of equivalent units of material for the process during this period is equal to the a. beginning inventory this period for the process. b. units started and completed this period in the process. c. units started this period in the process plus the beginning Work in Process Inventory. d. units started and completed this period plus the units in ending Work in Process Inventory. ANS: D PTS: 1 DIF: Moderate OBJ: 6-4 NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Measurement, Reporting 17. In a cost of production report using process costing, transferred-in costs are similar to the a. cost of material added at the beginning of production. b. conversion cost added during the period. c. cost transferred out to the next department. d. cost included in beginning inventory. ANS: A PTS: 1 DIF: Easy OBJ: 6-3 NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Measurement, Reporting 18. In a process costing system, the journal entry to record the transfer of goods from Department #2 to Finished Goods Inventory is a a. debit Work in Process Inventory #2, credit Finished Goods Inventory. b. debit Finished Goods Inventory, credit Work in Process Inventory #1. c. debit Finished Goods Inventory, credit Work in Process Inventory #2. d. debit Cost of Goods Sold, credit Work in Process Inventory #2. ANS: C PTS: 1 DIF: Easy OBJ: 6-3 NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Measurement, Reporting

19. Transferred-in cost represents the cost from a. the last department only. b. the last production cycle. c. all prior departments. d. the current period only. ANS: C PTS: 1 DIF: Easy OBJ: 6-3 NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Measurement, Reporting 20. Which of the following is(are) the same between the weighted average and FIFO methods of calculating EUPs? Units to account for a. b. c. d.

no yes yes yes

EUP calculations yes yes no no

Total cost to account for no yes no yes

ANS: D PTS: 1 DIF: Easy OBJ: 6-4 NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Measurement, Reporting 21. Process costing techniques should be used in assigning costs to products a. if a product is manufactured on the basis of each order received. b. when production is only partially completed during the accounting period. c. if a product is composed of mass-produced homogeneous units. d. whenever standard-costing techniques should not be used. ANS: C PTS: 1 DIF: Easy OBJ: 6-1 NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Measurement, Reporting 22. Averaging the total cost of completed beginning work-in-process inventory and units started and completed over all units transferred out is known as a. strict FIFO. b. modified FIFO. c. weighted average costing. d. normal costing. ANS: B PTS: 1 DIF: Moderate OBJ: 6-3 NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Measurement, Reporting

23. A process costing system a. cannot use standard costs. b. restates Work in Process Inventory in terms of completed units. c. accumulates costs by job rather than by department. d. assigns direct labor and manufacturing overhead costs separately to units of production. ANS: B PTS: 1 DIF: Easy OBJ: 6-2 NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Measurement, Reporting 24. A process costing system does which of the following? Calculates EUPs a. b. c. d.

Assigns costs to inventories

no no yes yes

no yes yes no

ANS: C PTS: 1 DIF: Easy OBJ: 6-3 NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Measurement, Reporting 25. A process costing system Calculates average cost per whole unit a. b. c. d.

yes no yes no

Determines total units to account for yes no no yes

ANS: D PTS: 1 DIF: Easy OBJ: 6-2 NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Measurement, Reporting 26. A hybrid costing system combines characteristics of a. job order and standard costing systems. b. job order and process costing systems. c. process and standard costing systems. d. job order and normal costing systems. ANS: B PTS: 1 DIF: Easy OBJ: 6-6 NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Measurement, Reporting

27. When standard costs are used in process costing, a. variances can be measured during the production period. b. total costs rather than current production and current costs are used. c. process costing calculations are made simpler. d. the weighted average method of calculating EUPs makes computing transferred-out costs easier. ANS: D PTS: 1 DIF: Moderate OBJ: 6-5 NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Measurement, Reporting 28. Which of the following is subtracted from weighted average EUP to derive FIFO EUP? a. beginning WIP EUP completed in current period b. beginning WIP EUP produced in prior period c. ending WIP EUP not completed d. ending WIP EUP completed ANS: B PTS: 1 DIF: Easy OBJ: 6-4 NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Measurement, Reporting 29. The cost of abnormal continuous losses is a. considered a product cost. b. absorbed by all units in ending inventory and transferred out on an equivalent unit basis. c. written off as a loss on an equivalent unit basis. d. absorbed by all units past the inspection point. ANS: C PTS: 1 DIF: Easy OBJ: 6-8 NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Measurement, Reporting 30. Abnormal spoilage can be continuous

discrete

a. b. c. d.

no no yes yes

yes no yes no

ANS: C PTS: 1 DIF: Easy OBJ: 6-8 NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Measurement, Reporting 31. When the cost of lost units must be assigned, and those same units must be included in an equivalent unit schedule, these units are considered a. normal and discrete. b. normal and continuous. c. abnormal and discrete. d. abnormal and continuous. ANS: D

PTS: 1

DIF: Moderate

OBJ: 6-8

NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Measurement, Reporting 32. A continuous loss a. occurs unevenly throughout a process. b. never occurs during the production process. c. always occurs at the same place in a production process. d. occurs evenly throughout the production process. ANS: D PTS: 1 DIF: Easy OBJ: 6-8 NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Measurement, Reporting 33. Which of the following would be considered a discrete loss in a production process? a. adding the correct ingredients to make a bottle of ketchup b. putting the appropriate components together for a stereo c. adding the wrong components when assembling a stereo d. putting the appropriate pieces for a bike in the box ANS: C PTS: 1 DIF: Easy OBJ: 6-8 NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Measurement, Reporting 34. The method of neglect handles spoilage that is a. discrete and abnormal. b. discrete and normal. c. continuous and abnormal. d. continuous and normal. ANS: D PTS: 1 DIF: Moderate OBJ: 6-8 NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Measurement, Reporting 35. The cost of normal discrete losses is a. absorbed by all units past the inspection point on an equivalent unit basis. b. absorbed by all units in ending inventory. c. considered a period cost. d. written off as a loss on an equivalent unit basis. ANS: A PTS: 1 DIF: Easy OBJ: 6-8 NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Measurement, Reporting 36. The cost of abnormal continuous losses is a. considered a product cost. b. absorbed by all units in ending inventory and transferred out on an equivalent unit basis. c. written off as a loss on an equivalent unit basis. d. absorbed by all units past the inspection point. ANS: C PTS: 1 DIF: Easy OBJ: 6-8 NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Measurement, Reporting

37. Normal spoilage units resulting from a continuous process a. are extended to the EUP schedule. b. result in a higher unit cost for the good units produced. c. result in a loss being incurred. d. cause estimated overhead to increase. ANS: B PTS: 1 DIF: Easy OBJ: 6-8 NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Measurement, Reporting 38. When the cost of lost units must be assigned, and those same units must be included in an equivalent unit schedule, these units are considered a. normal and discrete. b. normal and continuous. c. abnormal and discrete. d. abnormal and continuous. ANS: D PTS: 1 DIF: Moderate OBJ: 6-8 NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Measurement, Reporting 39. Which of the following accounts is credited when abnormal spoilage is written off in an actual cost system? a. Miscellaneous Revenue b. Loss from Spoilage c. Finished Goods d. Work in Process ANS: D PTS: 1 DIF: Easy OBJ: 6-8 NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Measurement, Reporting 40. The cost of abnormal discrete units must be assigned to good units

lost units

a. b. c. d.

yes no no yes

yes no yes no

ANS: D PTS: 1 DIF: Easy OBJ: 6-8 NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Measurement, Reporting

41. Which of the following statements is false? The cost of rework on defective units, if a. abnormal, should be assigned to a loss account. b. normal and if actual costs are used, should be assigned to material, labor and overhead costs of the good production. c. normal and if standard costs are used, should be considered when developing the overhead application rate. d. abnormal, should be prorated among Work In Process, Finished Goods, and Cost of Goods Sold. ANS: D PTS: 1 DIF: Moderate OBJ: 6-8 NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Measurement, Reporting 42. If normal spoilage is detected at an inspection point within the process (rather than at the end), the cost of that spoilage should be a. included with the cost of the units sold during the period. b. included with the cost of the units completed in that department during the period. c. allocated to ending work in process units and units transferred out based on their relative values. d. allocated to the good units that have passed the inspection point. ANS: D PTS: 1 DIF: Moderate OBJ: 6-8 NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Measurement, Reporting 43. Dallas Co. has a production process in which the inspection point is at 65 percent of conversion. The beginning inventory for July was 35 percent complete and ending inventory was 80 percent complete. Normal spoilage costs would be assigned to which of the following groups of units, using FIFO costing? Beginning Inventory a. b. c. d.

no yes no yes

Ending Inventory yes yes no no

Units Started & Completed yes yes yes no

ANS: B PTS: 1 DIF: Moderate OBJ: 6-8 NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Measurement, Reporting 44. Which of the following is not a question that needs to be answered with regard to quality control? a. What happens to the spoiled units? b. What is the actual cost of spoilage? c. How can spoilage be controlled? d. Why does spoilage happen? ANS: A PTS: 1 DIF: Moderate OBJ: 6-8 NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Measurement, Reporting

45. Normal spoilage units resulting from a continuous process a. are extended to the EUP schedule. b. result in a higher unit cost for the good units produced. c. result in a loss being incurred. d. cause estimated overhead to increase. ANS: B PTS: 1 DIF: Easy OBJ: 6-8 NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Measurement, Reporting 46. The addition of material in a successor department that causes an increase in volume is called a. accretion. b. reworked units. c. complex procedure. d. undetected spoilage. ANS: A PTS: 1 DIF: Easy OBJ: 6-8 NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Measurement, Reporting 47. Wood Company transferred 5,500 units to Finished Goods Inventory during October. On October 1, the company had 300 units on hand (40 percent complete as to both material and conversion costs). On October 31, the company had 800 units (10 percent complete as to material and 20 percent complete as to conversion costs). The number of units started and completed during October was: a. 5,200. b. 5,380. c. 5,500. d. 6,300. ANS: A Units Transferred Out Less: Units in Beginning Inventory Units Started and Completed

5,500 (300) 5,200

PTS: 1 DIF: Easy OBJ: 6-2 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting 48. Cole Company transferred 6,000 units to Finished Goods Inventory during August. On August 1, the company had 400 units on hand (35 percent complete as to both material and conversion costs). On August 31, the company had 750 units (20 percent complete as to material and 30 percent complete as to conversion costs). The number of units started and completed during August was: a. 5,600 b. 5,860 c. 6,000 d. 6,750 ANS: A Units Transferred Out Less: Units in Beginning Inventory Units Started and Completed

6,000 (400) 5,600

PTS: 1 DIF: Easy OBJ: 6-2 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting 49. Boggs Company started 9,000 units in March. The company transferred out 7,000 finished units and ended the period with 3,500 units that were 40 percent complete as to both material and conversion costs. Beginning Work in Process Inventory units were a. 500. b. 600. c. 1,500. d. 2,000. ANS: C Beginning Work in Process Add: Units Started Deduct: Units Transferred Out Ending Work in Process

1,500 9,000 (7,000) 3,500

PTS: 1 DIF: Easy OBJ: 6-2 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting 50. Williams Company started 8,600 units in April. The company transferred out 6,400 finished units and ended the period with 3,200 units that were 40 percent complete as to both material and conversion costs. Beginning Work in Process Inventory units were a. 400. b. 1,000. c. 1,280. d. 2,200. ANS: B Beginning Work in Process Add: Units Started Deduct: Units Transferred Out Ending Work in Process

1,000 8,600 (6,400) 3,200

PTS: 1 DIF: Easy OBJ: 6-2 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting 51. Lincoln Company had beginning Work in Process Inventory of 5,000 units that were 40 percent complete as to conversion costs. Lincoln Company started and completed 42,000 units this period and had ending Work in Process Inventory of 12,000 units. How many units were started this period? a. 42,000 b. 47,000 c. 54,000 d. 59,000 ANS: C Beginning Work in Process Add: Units Started Deduct: Units Transferred Out Ending Work in Process

5,000 54,000 ( 47,000) 12,000

PTS: 1 DIF: Moderate OBJ: 6-2 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting 52. Douglas Company had beginning Work in Process Inventory of 6,000 units that were 45 percent complete as to conversion costs. Douglas Company started and completed 46,000 units this period and had ending Work in Process Inventory of 11,000 units. How many units were started this period? a. 46,000 b. 52,000 c. 57,000 d. 63,000 ANS: C Beginning Work in Process Add: Units Started Deduct: Units Transferred Out Ending Work in Process

6,000 57,000 ( 52,000) 11,000

PTS: 1 DIF: Moderate OBJ: 6-2 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting 53. Streete Company uses a weighted average process costing system. Material is added at the start of production. Streete Company started 13,000 units into production and had 4,500 units in process at the start of the period that were 60 percent complete as to conversion costs. If Streete Company transferred out 11,750 units, how many units were in ending Work in Process Inventory? a. 1,250 b. 3,000 c. 3,500 d. 5,750 ANS: D Beginning Work in Process Add: Units Started Deduct: Units Transferred Out Ending Work in Process

4,500 13,000 ( 11,750) 5,750

PTS: 1 DIF: Easy OBJ: 6-2 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting 54. Roache Company uses a weighted average process costing system. Material is added at the start of production. Roache Company started 14,000 units into production and had 5,000 units in process at the start of the period that were 75 percent complete as to conversion costs. If Roache Company transferred out 12,250 units, how many units were in ending Work in Process Inventory? a. 1,750 b. 3,000 c. 5,500 d. 6,750 ANS: D Beginning Work in Process

5,000

Add: Units Started Deduct: Units Transferred Out Ending Work in Process

14,000 ( 12,250) 6,750

PTS: 1 DIF: Easy OBJ: 6-2 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting 55. Jones Company uses a weighted average process costing system and started 30,000 units this month. Jones had 12,000 units that were 20 percent complete as to conversion costs in beginning Work in Process Inventory and 3,000 units that were 40 percent complete as to conversion costs in ending Work in Process Inventory. What are equivalent units for conversion costs? a. 37,800 b. 40,200 c. 40,800 d. 42,000 ANS: B Beginning Work in Process + Completion of Units in Process + Units Started and Completed + Ending Work in Process Equivalent Units of Production

12,000 12,000 27,000 3,000

20% 80% 100% 40%

2,400 9,600 27,000 1,200 40,200

PTS: 1 DIF: Easy OBJ: 6-3 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting 56. Summers Company uses a weighted average process costing system and started 36,000 units this month. Jones had 15,000 units that were 25 percent complete as to conversion costs in beginning Work in Process Inventory and 6,000 units that were 35 percent complete as to conversion costs in ending Work in Process Inventory. What are equivalent units for conversion costs? a. 43,350 b. 47,100 c. 48,900 d. 51,000 ANS: B Beginning Work in Process + Completion of Units in Process + Units Started and Completed + Ending Work in Process Equivalent Units of Production

15,000 15,000 30,000 6,000

25% 75% 100% 35%

3,750 11,250 30,000 2,100 47,100

PTS: 1 DIF: Easy OBJ: 6-3 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting

57. Weston Company makes small metal containers. The company began April with 250 containers in process that were 30 percent complete as to material and 40 percent complete as to conversion costs. During the month, 5,000 containers were started. At month end, 1,700 containers were still in process (45 percent complete as to material and 80 percent complete as to conversion costs). Using the weighted average method, what are the equivalent units for conversion costs? a. 3,450 b. 4,560 c. 4,610 d. 4,910

ANS: D Beginning Work in Process + Completion of Units in Process + Units Started and Completed + Ending Work in Process Equivalent Units of Production

250 250 3,300 1,700

40% 60% 100% 80%

100 150 3,300 1,360 4,910

PTS: 1 DIF: Moderate OBJ: 6-3 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting 58. Meade Company makes small metal containers. The company began October with 300 containers in process that were 35 percent complete as to material and 45 percent complete as to conversion costs. During the month, 6,000 containers were started. At month end, 1,900 containers were still in process (40 percent complete as to material and 75 percent complete as to conversion costs). Using the weighted average method, what are the equivalent units for conversion costs? a. 4,265 b. 5,590 c. 5,825 d. 6,300 ANS: C Beginning Work in Process + Completion of Units in Process + Units Started and Completed + Ending Work in Process Equivalent Units of Production

300 300 4,100 1,900

45% 55% 100% 75%

135 165 4,100 1,425 5,825

PTS: 1 DIF: Moderate OBJ: 6-3 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting 59. Ormandy Company uses a FIFO process costing system. The company had 5,000 units that were 60 percent complete as to conversion costs at the beginning of the month. The company started 22,000 units this period and had 7,000 units in ending Work in Process Inventory that were 35 percent complete as to conversion costs. What are equivalent units for material, if material is added at the beginning of the process? a. 18,000 b. 22,000 c. 25,000 d. 27,000 ANS: B The material is added at the beginning of the process; therefore there are 22,000 equivalent units of material.

PTS: 1 DIF: Easy OBJ: 6-4 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting

60. Bernstein Company uses a FIFO process costing system. The company had 6,000 units that were 75 percent complete as to conversion costs at the beginning of the month. The company started 25,000 units this period and had 8,000 units in ending Work in Process Inventory that were 40 percent complete as to conversion costs. What are equivalent units for material, if material is added at the beginning of the process? a. 18,500 b. 25,000 c. 26,500 d. 31,000 ANS: B The material is added at the beginning of the process; therefore there are 25,000 equivalent units of material.

PTS: 1 DIF: Easy OBJ: 6-4 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting 61. Montgomery Company makes fabric-covered hatboxes. The company began July with 500 boxes in process that were 100 percent complete as to cardboard, 80 percent complete as to cloth, and 60 percent complete as to conversion costs. During the month, 3,300 boxes were started. On April 30, 350 boxes were in process (100 percent complete as to cardboard, 70 percent complete as to cloth, and 55 percent complete as to conversion costs). Using the FIFO method, what are equivalent units for cloth? a. 3,295 b. 3,395 c. 3,450 d. 3,595 ANS: A Beginning Work in Process (Ignored for FIFO) + Completion of Units in Process + Units Started and Completed + Ending Work in Process Equivalent Units of Production

500 500 2,950 350

0% 20% 100% 70%

100 2,950 245 3,295

PTS: 1 DIF: Moderate OBJ: 6-4 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting 62. Hahn Company makes fabric-covered storage totes. The company began July with 600 totes in process that were 100 percent complete as to cardboard, 75 percent complete as to cloth, and 65 percent complete as to conversion costs. During the month, 3,600 totes were started. On April 30, 450 totes were in process (100 percent complete as to cardboard, 60 percent complete as to cloth, and 50 percent complete as to conversion costs). Using the FIFO method, what are equivalent units for cloth? a. 3,570 b. 3,750 c. 3,870 d. 4,020 ANS: A Beginning Work in Process (Ignored for FIFO) + Completion of Units in Process

600 600

0% 25%

150

+ Units Started and Completed + Ending Work in Process Equivalent Units of Production

3,150 450

100% 60%

3,150 270 3,570

PTS: 1 DIF: Moderate OBJ: 6-4 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting Brewer Corporation Brewer Corporation. has the following information for August: Beginning Work in Process Inventory (70% complete as to conversion) Started Ending Work in Process Inventory (10% complete as to conversion)

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

Beginning WIP Inventory Costs: Material Conversion

$23,400 50,607

Current Period Costs: Material Conversion

$31,500 76,956

All material is added at the start of the process and all finished products are transferred out. 63. Refer to Brewer Corporation. How many units were transferred out in August? a. 15,500 b. 18,000 c. 21,500 d. 24,000 ANS: C Beginning Work in Process Add: Units Started Deduct: Units Transferred Out Ending Work in Process

6,000 24,000 (21,500) 8,500

PTS: 1 DIF: Easy OBJ: 6-2 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting 64. Refer to Brewer Corporation. Assume that weighted average process costing is used. What is the cost per equivalent unit for material? a. $0.55 b. $1.05 c. $1.31 d. $1.83 ANS: D

Material Costs: Beginning Current Period

$23,400 31,500 54,900 ÷ 30,000 units =

$ 1.83

PTS: 1 DIF: Moderate OBJ: 6-3 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting 65. Refer to Brewer Corporation. Assume that FIFO process costing is used. What is the cost per equivalent unit for conversion? a. $3.44 b. $4.24 c. $5.71 d. $7.03 ANS: B Conversion Costs: Beginning (Ignored for FIFO) Current Period

$ $

Equivalent Units Beginning Inventory (6,000 * 30%) Started and Completed (15,500) Ending Inventory (8,500 * 10%)

76,956 76,956 1,800 15,500 850 18,150 eq units

Cost per equivalent unit

$ 4.24

PTS: 1 DIF: Moderate OBJ: 6-4 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting Collins Corporation Collins Corporation. has the following information for May: Beginning Work in Process Inventory (75% complete as to conversion) Started Ending Work in Process Inventory (15% complete as to conversion)

7,500 units 27,000 units 9,400 units

Beginning WIP Inventory Costs: Material Conversion

$25,500 52,725

Current Period Costs: Material Conversion

$34,300 80,845

All material is added at the start of the process and all finished products are transferred out. 66. Refer to Collins Corporation. How many units were transferred out in May? a. 17,600 b. 19,500 c. 25,100 d. 27,000

ANS: C Beginning Work in Process Add: Units Started Deduct: Units Transferred Out Ending Work in Process

7,500 27,000 (25,100) 9,400

PTS: 1 DIF: Easy OBJ: 6-2 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting 67. Refer to Collins Corporation. Assume that weighted average process costing is used. What is the cost per equivalent unit for material? a. $0.99 b. $1.18 c. $1.64 d. $1.73 ANS: D Material Costs: Beginning Current Period

$25,500 _34,300 $59,800 ÷ 34,500 units =

$ 1.73

PTS: 1 DIF: Moderate OBJ: 6-3 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting 68. Refer to Collins Corporation. Assume that FIFO process costing is used. What is the cost per equivalent unit for conversion? a. $3.05 b. $3.87 c. $4.25 d. $6.40 ANS: B Conversion Costs: Beginning (Ignored for FIFO) Current Period

$ $

Equivalent Units Beginning Inventory (7,500 * 25%) Started and Completed (17,600) Ending Inventory (9,400 * 15%)

80,845 80,845 1,875 17,600 1,410 20,885 equivalent units

Cost per equivalent unit ($80,845/20885)

$ 3.87

PTS: 1 DIF: Moderate OBJ: 6-4 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting

Fantastic Decorations Corporation The Fantastic Decorations Corporation makes wreaths in two departments: Forming and Decorating. Forming began the month with 500 wreaths in process that were 100 percent complete as to material and 40 percent complete as to conversion. During the month, 6,500 wreaths were started. At month end, Forming had 2,100 wreaths that were still in process that were 100 percent complete as to material and 50 percent complete as to conversion. Assume Forming uses the weighted average method of process costing. Costs in the Forming Department are as follows: Beginning Work in Process Costs: Material Conversion Current Costs: Material Conversion

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

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

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

69. Refer to Fantastic Decorations Corporation. How many units were transferred to Decorating during the month? a. 600 b. 4,900 c. 5,950 d. 7,000 ANS: B Wreaths completed from BWIP Wreaths started and completed

500 4,400 4,900

PTS: 1 DIF: Easy OBJ: 6-2 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting 70. Refer to Fantastic Decorations Corporation. What was the cost transferred out of Forming during the month? a. $5,341 b. $6,419 c. $8,245

d. $8,330

ANS: D Units Transferred Out 4,900

Cost per Eq. Unit 1.70

Total $8,330

PTS: 1 DIF: Moderate OBJ: 6-3 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting 71. Refer to Fantastic Decorations Corporation. Assume 8,000 units were transferred to Decorating. Compute the number of equivalent units as to costs in Decorating for the transferred-in cost component. a. 7,400 b. 7,700 c. 8,000 d. 8,600 ANS: C The transferred-in cost component is the 8,000 units that were transferred in.

PTS: 1 DIF: Moderate OBJ: 6-4 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting 72. Refer to Fantastic Decorations Corporation. Assume 8,000 units were transferred to Decorating. Compute the number of equivalent units in Decorating for material. a. 7,970 b. 8,000 c. 8,330 d. 8,450 ANS: A Materials: Decorating: FIFO Beginning Work in Process + Units Started and Completed + Ending Work in Process Equivalent Units of Production

Units 600 7,700 300

% Complete 20% 100% 50%

Eqiv. Units 120 7,700 150 7,970

PTS: 1 DIF: Moderate OBJ: 6-4 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting 73. Refer to Fantastic Decorations Corporation. Assume 8,000 units were transferred to Decorating. Compute the number of equivalent units in Decorating for conversion. a. 7,925 b. 7,985 c. 8,360 d. 8,465

ANS: B Conversion: Decorating: FIFO

Units

Beginning Work in Process + Units Started and Completed + Ending Work in Process Equivalent Units of Production

% Complete

Equiv. Units

600

10%

60

7,700

100%

7,700

300

75%

225 7,985

PTS: 1 DIF: Moderate OBJ: 6-4 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting 74. Refer to Fantastic Decorations Corporation. Assume that 8,000 units were transferred to Decorating at a total cost of $16,000. What is the material cost per equivalent unit in Decorating? a. $8.50 b. $8.65 c. $8.80 d. $9.04 ANS: A When FIFO is used, consider only current costs. Current Costs $67,745

Equiv Units 7,970

Cost/ Equiv Unit $8.50

PTS: 1 DIF: Moderate OBJ: 6-4 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting 75. Refer to Fantastic Decorations Corporation. Assume that 8,000 units were transferred to Decorating at a total cost of $16,000. What is the conversion cost per equivalent unit in Decorating? a. $11.32 b. $11.46 c. $12.00 d. $12.78 ANS: C When FIFO is used, consider only current costs. Current Costs $95,820

Equiv Units 7,985

Cost/ Equiv Unit $12.00

PTS: 1 DIF: Moderate OBJ: 6-4 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting

76.

Refer to Fantastic Decorations Corporation. Assume the material cost per EUP is $8.00 and the conversion cost per EUP is $15 in Decorating. What is the cost of completing the units in beginning inventory? a. $ 960 b. $ 1,380 c. $ 1,860 d. $11,940 ANS: C Costs to Complete Beg Inv Materials Conversion Total Costs to Complete

Units 600 600

Percent to Complete

Cost per Unit 20% $8 10% $15

Total $960 $900 $1,860

PTS: 1 DIF: Moderate OBJ: 6-4 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting Four Seasons Company Four Seasons Company adds material at the start to its production process and has the following information available for August: Beginning Work in Process Inventory (40% complete as to conversion) Started this period Ending Work in Process Inventory (25% complete as to conversion) Transferred out

7,000 32,000

units units

2,500 ?

units

77. Refer to Four Seasons Company. Compute the number of units started and completed in August. a. 29,500 b. 34,500 c. 36,500 d. 39,000 ANS: A Units started this period Less: Ending Work in Process

32,000 2,500

Units started and completed this period

29,500

PTS: 1 DIF: Moderate OBJ: 6-2 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting 78. Refer to Four Seasons Company. Calculate equivalent units of production for material using FIFO. a. 32,000 b. 36,800 c. 37,125 d. 39,000

ANS: A Materials are added at the beginning of the process. 32,000 units were started in the current period; therefore there are 32,000 equivalent units for materials.

PTS: 1 DIF: Easy OBJ: 6-4 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting 79. Refer to Four Seasons Company. Calculate equivalent units of production for conversion using FIFO. a. 30,125 b. 34,325 c. 37,125 d. 39,000 ANS: B Equivalent Units for Conversion Beginning Inventory (7,000 * 60%) Started and Completed (29,500) Ending Inventory (2,500 * 25%)

4,200 29,500 625 34,325 eq. units

PTS: 1 DIF: Moderate OBJ: 6-4 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting 80. Refer to Four Seasons Company. Calculate equivalent units of production for material using weighted average. a. 32,000 b. 34,325 c. 37,125 d. 39,000 ANS: D Equivalent Units--Materials Beginning Inventory (7,000 units) Started this Period (32,000)

7,000 32,000 39,000 eq. units

PTS: 1 DIF: Easy OBJ: 6-3 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting 81. Refer to Four Seasons Company. Calculate equivalent units of production for conversion using weighted average. a. 34,325 b. 37,125 c. 38,375 d. 39,925 ANS: B Equivalent Units--Conversion Beginning Inventory (7,000 * 100%) Started and Completed (29,500) Ending Inventory (2,500 * 25%)

7,000 29,500 625

37,125 eq. units

PTS: 1 DIF: Moderate OBJ: 6-3 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting Simpson Company Simpson Company adds material at the start of production. The following production information is available for September: Beginning Work in Process Inventory (45% complete as to conversion) Started this period Ending Work in Process Inventory (80% complete as to conversion) Beginning Work in Process Inventory Costs: Material Conversion Current Period Costs: Material Conversion

10,000 120,000

units units

8,200

units

$24,500 68,905

$ 75,600 130,053

82. Refer to Simpson Company. How many units must be accounted for? a. 118,200 b. 128,200 c. 130,000 d. 138,200 ANS: C Beginning Work in Process Units Started Total Units

10,000 120,000 130,000

PTS: 1 DIF: Easy OBJ: 6-2 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting 83. Refer to Simpson Company. What is the total cost to account for? a. $ 93,405 b. $205,653 c. $274,558 d. $299,058 ANS: D BWIP: Materials BWIP: Conversion Current Period: Materials Current Period: Conversion Total Costs

$ 24,500 68,905 75,600 130,053 $299,058

PTS: 1 DIF: Easy OBJ: 6-2 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting

84. Refer to Simpson Company. How many units were started and completed in the period? a. 111,800 b. 120,000 c. 121,800 d. 130,000 ANS: A Units started this period Less: Ending Work in Process Units started and completed this period

120,000 8,200 111,800

PTS: 1 DIF: Easy OBJ: 6-2 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting 85. Refer to Simpson Company. What are the equivalent units for material using the weighted average method? a. 120,000 b. 123,860 c. 128,360 d. 130,000 ANS: D Equivalent Units Beginning Inventory (10,000 * 100%) Started and Completed (111,800) Ending Inventory (8,200 * 25%)

10,000 111,800 8,200 130,000 eq. units

PTS: 1 DIF: Easy OBJ: 6-3 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting 86. Refer to Simpson Company. What are the equivalent units for material using the FIFO method? a. 111,800 b. 120,000 c. 125,500 d. 130,000 ANS: B Equivalent Units Beginning Inventory (Ignored for FIFO) Started and Completed (111,800) Ending Inventory (8,200 * 25%)

0 111,800 8,200 120,000 eq. units

PTS: 1 DIF: Easy OBJ: 6-4 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting 87. Refer to Simpson Company. What are the equivalent units for conversion using the weighted average method? a. 120,000 b. 123,440

c. 128,360 d. 130,000 ANS: C Beginning Work in Process + Completion of Units in Process + Units Started and Completed + Ending Work in Process Equivalent Units of Production

10,000 10,000 111,800 8,200

45% 55% 100% 80%

4,500 5,500 111,800 6,560 128,360

PTS: 1 DIF: Moderate OBJ: 6-3 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting 88. Refer to Simpson Company. What are the equivalent units for conversion using the FIFO method? a. 118,360 b. 122,860 c. 123,860 d. 128,360 ANS: C Beginning Work in Process (ignored) + Completion of Units in Process + Units Started and Completed + Ending Work in Process Equivalent Units of Production

10,000 10,000 111,800 8,200

0% 55% 100% 80%

5,500 111,800 6,560 123,860

PTS: 1 DIF: Moderate OBJ: 6-4 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting 89. Refer to Simpson Company. What is the material cost per equivalent unit using the weighted average method? a. $.58 b. $.62 c. $.77 d. $.82 ANS: C Material Costs: Beginning Current Period

$ 24,500 75,600 100,100 ÷ 130,000 units=

$ 0.77 per unit

PTS: 1 DIF: Moderate OBJ: 6-3 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting 90. Refer to Simpson Company. What is the conversion cost per equivalent unit using the weighted average method? a. $1.01 b. $1.05 c. $1.55 d. $1.61

ANS: C Conversion Costs: Beginning Current Period

$ 68,905 130,053 198,958 ÷ 128,360 units=

$ 1.55 per unit

PTS: 1 DIF: Moderate OBJ: 6-3 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting 91. Refer to Simpson Company. What is the cost of units completed using the weighted average method? a. $237,510 b. $266,742 c. $278,400 d. $282,576 ANS: D Units Completed 121,800

Costs per Equivalent Unit (1.55 + .77) = $2.32

Total $282,576

PTS: 1 DIF: Difficult OBJ: 6-3 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting 92. Refer to Simpson Company. What is the conversion cost per equivalent unit using the FIFO method? a. $1.05 b. $.95 c. $1.61 d. $1.55 ANS: A Conversion Costs: Beginning (Ignored) Current Period

$130,053 $130,053 ÷ 123,860 units= $1.05 per unit

PTS: 1 DIF: Moderate OBJ: 6-4 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting 93. Refer to Simpson Company. What is the cost of all units transferred out using the FIFO method? a. $204,624 b. $191,289 c. $287,004 d. $298,029 ANS: C Beginning Inventory 10,000 units: Raw Materials (prior period) Direct Labor (prior period FOH (10,000 * .55 * $1.05) Units Started and Completed

$24,500 68,905 5,775 $99,180

111,800 units * $ (.63+1.05): Total

$187,824 $287,004

PTS: 1 DIF: Difficult OBJ: 6-4 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting Mercury Corporation Beginning inventory (30% complete as to Material B and 60% complete for conversion) Started this cycle Ending inventory (50% complete as to Material B and 80% complete for conversion)

700

units

2,000 500

units units

Beginning inventory costs: Material A Material B Conversion

$14,270 5,950 5,640

Current Period costs: Material A Material B Conversion

$40,000 70,000 98,100

Material A is added at the start of production, while Material B is added uniformly throughout the process. 94. Refer to Mercury Corporation. Assuming a weighted average method of process costing, compute EUP units for Materials A and B. a. 2,700 and 2,280, respectively b. 2,700 and 2,450, respectively c. 2,000 and 2,240, respectively d. 2,240 and 2,700, respectively ANS: B Weighted Average Beginning Work in Process Units Started and Completed Ending Work in Process EUP Materials

Material A 700 1,500 500 2,700

Material B 700 1,500 250 2,450

PTS: 1 DIF: Easy OBJ: 6-3 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting 95. Refer to Mercury Corporation Assuming a FIFO method of process costing, compute EUP units for Materials A and B. a. 2,700 and 2,280, respectively b. 2,700 and 2,450, respectively c. 2,000 and 2,240, respectively d. 2,450 and 2,880, respectively

ANS: C FIFO Beginning Work in Process Units Started and Completed Ending Work in Process EUP Materials

Material A 0 1,500 500 2,000

Material B 490 1,500 250 2,240

PTS: 1 DIF: Moderate OBJ: 6-4 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting 96. Refer to Mercury Corporation Assuming a weighted average method of process costing, compute EUP for conversion. a. 2,600 b. 2,180 c. 2,000 d. 2,700 ANS: A Weighted Average Beginning Work in Process Units Started and Completed Ending Work in Process

700 1,500 400 2,600

PTS: 1 DIF: Moderate OBJ: 6-3 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting 97. Refer to Mercury Corporation Assuming a FIFO method of process costing, compute EUP for conversion. a. 2,240 b. 2,180 c. 2,280 d. 2,700 ANS: B FIFO Beginning Work in Process (700 * 40%) Units Started and Completed Ending Work in Process (500 * 80%)

280 1,500 400 2,180

PTS: 1 DIF: Moderate OBJ: 6-4 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting 98. Refer to Mercury Corporation Assuming a weighted average method of process costing, compute the average cost per unit for Material A. a. $20.10 b. $20.00 c. $31.25 d. $31.00

ANS: A Weighted Average: Material A Beginning Current Period

$

14,270 40,000 54,270 ÷ 2,700 units=

$ 20.10 per unit

PTS: 1 DIF: Moderate OBJ: 6-3 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting 99. Refer to Mercury Corporation Assuming a FIFO method of process costing, compute the average cost per EUP for Material A. a. $31.25 b. $20.10 c. $20.00 d. $31.00 ANS: C Material A Costs (Current Period) $40,000

Equivalent Units

Average Cost per EUP

2,000

$20.00

PTS: 1 DIF: Moderate OBJ: 6-4 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting 100. Refer to Mercury Corporation Assuming a FIFO method of process costing, compute the average cost per EUP for Material B. a. $20.10 b. $31.25 c. $20.00 d. $31.00 ANS: B Material B Costs (Current Period) $70,000

Equivalent Units 2,240

Average Cost per EUP $31.25

PTS: 1 DIF: Moderate OBJ: 6-4 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting 101. Refer to Mercury Corporation Assuming a weighted average method of process costing, compute the average cost per EUP for Material B. a. $20.00 b. $31.25 c. $20.10 d. $31.00 ANS: D Material B Costs (Beginning Inventory and Current Period) $75,950

PTS: 1

DIF: Moderate

Equivalent Units 2,450

OBJ: 6-3

Average Cost per EUP $31.00

NAT: AACSB: Analytical Skills

LOC: AICPA Functional Competencies: Measurement, Reporting 102. Refer to Mercury Corporation Assuming a FIFO method of process costing, compute the average cost per EUP for conversion. a. $45.50 b. $45.00 c. $43.03 d. $47.59

ANS: B Conversion Costs (Current Period) $98,100

Equivalent Units

Average Cost per EUP 2,180

$45.00

PTS: 1 DIF: Moderate OBJ: 6-4 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting 103. Refer to Mercury Corporation Assuming a weighted average method of process costing, compute the average cost per EUP for conversion. a. $39.90 b. $45.00 c. $43.03 d. $47.59 ANS: A Conversion Costs (Beginning WIP and Current Period) $(98,100 + $5,640)=$103,640

Equivalent Units 2,600

Average Cost per EUP $39.90

PTS: 1 DIF: Moderate OBJ: 6-3 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting Guthrie Corporation The following information is available for Guthrie Corporation for the current year: Beginning Work in Process (75% complete) Started Ending Work in Process (60% complete) Abnormal spoilage Normal spoilage (continuous) Transferred out

Costs of Beginning Work in Process: $25,100 Material 50,000 Conversion Current Costs: 16,000 units $120,000 Material 2,500 units 300,000 Conversion 14,500 units 75,000 units

5,000 units 66,000 units

All materials are added at the start of production. 104. Refer to Guthrie Corporation. Using weighted average, what are equivalent units for material? a. 82,000 b. 89,500 c. 84,500 d. 70,000 ANS: C Materials: Weighted Average Beginning Work in Process + Units Started and Completed + Ending Work in Process + Abnormal Spoilage

Units 14,500 51,500 16,000 2,500

% Complete 100% 100% 100% 100%

Eq. Units 14,500 51,500 16,000 2,500

Equivalent Units of Production

84,500

PTS: 1 DIF: Easy OBJ: 6-8 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting 105. Refer to Guthrie Corporation. Using weighted average, what are equivalent units for conversion costs? a. 80,600 b. 78,100 c. 83,100 d. 75,600 ANS: B Conversion: Weighted Average Beginning Work in Process + Units Started and Completed + Ending Work in Process + Abnormal Spoilage Equivalent Units of Production

Units 14,500 51,500 16,000 2,500

% Complete 100% 100% 60% 100%

Eq Units 14,500 51,500 9,600 2,500 78,100

PTS: 1 DIF: Easy OBJ: 6-8 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting 106. Refer to Guthrie Corporation. What is the cost per equivalent unit for material using weighted average? a. $1.72 b. $1.62 c. $1.77 d. $2.07 ANS: A Weighted Average: Materials Beginning Current Period

$

25,100 120,000 145,100 ÷ 84,500 units= $1.72 per unit

PTS: 1 DIF: Moderate OBJ: 6-3 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting 107. Refer to Guthrie Corporation. What is the cost per equivalent unit for conversion costs using weighted average? a. $4.62 b. $4.21 c. $4.48 d. $4.34 ANS: C Weighted Average: Conversion Beginning Current Period

$ $

50,000 300,000 350,000 ÷ 78,100 units = $ 4.48 per unit

PTS: 1 DIF: Moderate OBJ: 6-3 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting

108. Refer to Guthrie Corporation. What is the cost assigned to normal spoilage using weighted average? a. $31,000 b. $15,500 c. $30,850 d. None of the responses are correct ANS: D No costs are assigned to normal, continuous spoilage. Higher costs are assigned to good units produced.

PTS: 1 DIF: Easy OBJ: 6-8 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting 109. Refer to Guthrie Corporation. Assume that the cost per EUP for material and conversion are $1.75 and $4.55, respectively. What is the cost assigned to ending Work in Process? a. $100,800 b. $87,430 c. $103,180 d. $71,680 ANS: D Equivalent Units 16,000 9,600

Cost per Equivalent Unit $1.75 $4.55

Total $28,000 $43,680 $71,680

PTS: 1 DIF: Easy OBJ: 6-3 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting 110. Refer to Guthrie Corporation. Using FIFO, what are equivalent units for material? a. 75,000 b. 72,500 c. 84,500 d. 70,000 ANS: D Materials: FIFO Beginning Work in Process + Units Started and Completed + Ending Work in Process + Abnormal Spoilage Equivalent Units of Production

51,500 16,000 2,500

0% 100% 100% 100%

51,500 16,000 2,500 70,000

PTS: 1 DIF: Easy OBJ: 6-8 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting 111. Refer to Guthrie Corporation. Using FIFO, what are equivalent units for conversion costs? a. 72,225 b. 67,225 c. 69,725

d. 78,100

ANS: B Conversion: FIFO Beginning Work in Process + Units Started and Completed + Ending Work in Process + Abnormal Spoilage Equivalent Units of Production

14,500 51,500 16,000 2,500

25% 100% 60% 100%

3,625 51,500 9,600 2,500 67,225

PTS: 1 DIF: Easy OBJ: 6-8 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting 112. Refer to Guthrie Corporation. Using FIFO, what is the cost per equivalent unit for material? a. $1.42 b. $1.66 c. $1.71 d. $1.60 ANS: C FIFO: Materials Current Period

$

120,000 120,000 ÷ 70,000 units = $1.71 per unit

PTS: 1 DIF: Easy OBJ: 6-4 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting 113. Refer to Guthrie Corporation. Using FIFO, what is the cost per equivalent unit for conversion costs? a. $4.46 b. $4.15 c. $4.30 d. $3.84 ANS: A FIFO: Conversion Current Period

$

300,000 300,000 ÷ 67,225 units =

$ 4.46 per unit

PTS: 1 DIF: Easy OBJ: 6-4 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting 114. Refer to Guthrie Corporation. Assume that the FIFO EUP cost for material and conversion are $1.50 and $4.75, respectively. Using FIFO what is the total cost assigned to the units transferred out? a. $414,194 b. $339,094 c. $445,444 d. $396,975 ANS: A Transferred Out Units: FIFO Beginning Work in Process + Completion of Beginning Inventory

Equiv Units (14,500 * 25%)

3,625

Cost per Equiv Unit 4.75

Total 75,100 17,219

+Units Started and Completed Equivalent Units of Production

51,500

6.25

321,875 414,194

PTS: 1 DIF: Difficult OBJ: 6-4 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting Crafton Corporation Crafton Corporation has the following information for the current month: Units started Beginning Work in Process: (35% complete) Normal spoilage (discrete) Abnormal spoilage Ending Work in Process: (70% complete) Transferred out Beginning Work in Process Costs: Material Conversion

100,000 20,000 3,500 5,000 14,500 97,000

units units units units units units

$15,000 10,000

All materials are added at the start of the production process. Crafton Corporation inspects goods at 75 percent completion as to conversion. 115. Refer to Crafton Corporation. What are equivalent units of production for material, assuming FIFO? a. 100,000 b. 96,500 c. 95,000 d. 120,000 ANS: A Materials: FIFO Beginning Work in Process + Units Started and Completed + Normal Spoilage--Discrete + Abnormal Spoilage + Ending Work in Process Equivalent Units of Production

77,000 3,500 5,000 14,500

0% 100% 100% 100% 100%

77,000 3,500 5,000 14,500 100,000

PTS: 1 DIF: Moderate OBJ: 6-8 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting 116. Refer to Crafton Corporation. What are equivalent units of production for conversion costs, assuming FIFO? a. 108,900 b. 103,900 c. 108,650 d. 106,525 ANS: D Conversion: FIFO Beginning Work in Process

20,000

65%

13,000

+ Units Started and Completed +Normal Spoilage--Discrete + Abnormal Spoilage + Ending Work in Process Equivalent Units of Production

77,000 3,500 5,000 14,500

100% 75% 75% 70%

77,000 2,625 3,750 10,150 106,525

PTS: 1 DIF: Moderate OBJ: 6-8 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting 117. Refer to Crafton Corporation. Assume that the costs per EUP for material and conversion are $1.00 and $1.50, respectively. What is the amount of the period cost for July using FIFO? a. $0 b. $9,375 c. $10,625 d. $12,500 ANS: C Abnormal spoilage is a period cost. Materials Conversion Costs Total Abnormal Spoilage

5,000 * $1.00/unit 3,750 * $1.50/unit

$5,000 5,625 $10,625

PTS: 1 DIF: Moderate OBJ: 6-8 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting 118. Refer to Crafton Corporation. Assume that the costs per EUP for material and conversion are $1.00 and $1.50, respectively. Using FIFO, what is the total cost assigned to the transferred-out units (rounded to the nearest dollar)? a. $245,750 b. $244,438 c. $237,000 d. $224,938 ANS: B Transferred Out Units: FIFO Beginning Work in Process + Completion of Beginning Inventory + Units Started and Completed +Normal Spoilage--Discrete-Materials +Normal Spoilage--Discrete-Conversion Equivalent Units of Production

(20,000 * 65%)

13,000 77,000 3,500 2,625

1.50 2.50 1.00 1.50

$ 25,000 19,500 192,500 3,500 3,938 $244,438

PTS: 1 DIF: Difficult OBJ: 6-8 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting 119. Refer to Crafton Corporation. What are equivalent units of production for material assuming weighted average is used? a. 107,000 b. 116,500 c. 120,000 d. 115,000

ANS: C Materials: Weighted Average Beginning Work in Process + Units Started and Completed + Normal Spoilage--Discrete + Abnormal Spoilage + Ending Work in Process Equivalent Units of Production

20,000 77,000 3,500 5,000 14,500

100% 100% 100% 100% 100%

20,000 77,000 3,500 5,000 14,500 120,000

PTS: 1 DIF: Easy OBJ: 6-8 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting 120. Refer to Crafton Corporation. What are equivalent units of production for conversion costs assuming weighted average is used? a. 113,525 b. 114,400 c. 114,775 d. 115,650 ANS: A Conversion: Weighted Average Beginning Work in Process + Units Started and Completed +Normal Spoilage--Discrete + Abnormal Spoilage + Ending Work in Process Equivalent Units of Production

20,000 77,000 3,500 5,000 14,500

100% 100% 75% 75% 70%

20,000 77,000 2,625 3,750 10,150 113,525

PTS: 1 DIF: Easy OBJ: 6-8 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting 121. Refer to Crafton Corporation. Assume that the costs per EUP for material and conversion are $1.00 and $1.50, respectively. What is the cost assigned to normal spoilage, using weighted average, and where is it assigned? Value a. b. c. d.

$7,438 $7,438 $8,750 $8,750

Assigned To Units transferred out and Ending Inventory Units transferred out Units transferred out and Ending Inventory Units transferred out

ANS: B Equivalent Units 3,500 2,625

Cost per Equivalent Unit $1.00 $1.50

This amount is transferred out.

Total $3,500 3,938 $7,438

PTS: 1 DIF: Easy OBJ: 6-8 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting 122. Refer to Crafton Corporation. Assume that the costs per EUP for material and conversion are $1.00 and $1.50, respectively. Assuming that weighted average is used, what is the cost assigned to ending inventory? a. $29,725.00 b. $37,162.50 c. $38,475.00 d. $36,250.00 ANS: A Ending Inventory: Weighted Average Materials 14,500 Conversion (14,500 * 70%) 10,150 Total

$1.00 1.50

$

14,500.00 15,225.00 $ 29,725.00

PTS: 1 DIF: Easy OBJ: 6-3 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting Knight Corporation Knight Corporation has the following information for the current month: Units started Beginning Work in Process: (30% complete) Normal spoilage (discrete) Abnormal spoilage Ending Work in Process: (75% complete) Transferred out Beginning Work in Process Costs: Material Conversion

95,000 15,000 3,000 4,000 15,000 88,000

units units units units units units

$18,000 14,000

All materials are added at the start of the production process. Knight Corporation inspects goods at 75 percent completion as to conversion. 123. Refer to Knight Corporation. What are equivalent units of production for material, assuming FIFO? a. 91,000 b. 92,000 c. 95,000 d. 110,000 ANS: C Materials: FIFO Beginning Work in Process + Units Started and Completed + Normal Spoilage--Discrete + Abnormal Spoilage + Ending Work in Process Equivalent Units of Production

73,000 3,000 4,000 15,000

0% 100% 100% 100% 100%

73,000 3,000 4,000 15,000 95,000

PTS: 1 DIF: Moderate OBJ: 6-8 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting

124. Refer to Knight Corporation. What are equivalent units of production for conversion costs, assuming FIFO? a. 97,750 b. 100,000 c. 101,750 d. 104,500 ANS: B Conversion: FIFO Beginning Work in Process + Units Started and Completed +Normal Spoilage--Discrete + Abnormal Spoilage + Ending Work in Process Equivalent Units of Production

15,000 73,000 3,000 4,000 15,000

70% 100% 75% 75% 75%

10,500 73,000 2,250 3,000 11,250 100,000

PTS: 1 DIF: Moderate OBJ: 6-8 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting 125. Refer to Knight Corporation. Assume that the costs per EUP for material and conversion are $2.00 and $2.25, respectively. What is the amount of the period cost for July using FIFO? a. $0 b. $12,750 c. $14,750 d. $17,000 ANS: C Abnormal spoilage is a period cost. Materials Conversion Costs Total Abnormal Spoilage

4,000 * $2.00/unit 3,000 * $2.25/unit

$ 8,000 6,750 $14,750

PTS: 1 DIF: Moderate OBJ: 6-8 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting 126. Refer to Knight Corporation. Assume that the costs per EUP for material and conversion are $2.00 and $2.25, respectively. Using FIFO, what is the total cost assigned to the transferred-out units (rounded to the nearest dollar)? a. $344,938 b. $365,875 c. $376,938 d. $378,625 ANS: C Transferred Out Units: FIFO Beginning Work in Process + Completion of Beginning Inventory + Units Started and Completed +Normal Spoilage--Discrete-Materials +Normal Spoilage--Discrete-Conversion Total Costs Assigned to Transferred Units

(15,000 * 70%)

(3,000 * 75%)

10,500 73,000 3,000 2,250

$2.25 4.25 2.00 2.25

$ 32,000 23,625 310,250 6,000 5,063 $376,938

PTS: 1 DIF: Difficult OBJ: 6-8 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting 127. Refer to Knight Corporation. What are equivalent units of production for material assuming weighted average is used? a. 105,500 b. 106,000 c. 107,000 d. 110,000 ANS: D Materials: Weighted Average Beginning Work in Process + Units Started and Completed + Normal Spoilage--Discrete + Abnormal Spoilage + Ending Work in Process Equivalent Units of Production

15,000 73,000 3,000 4,000 15,000

100% 100% 100% 100% 100%

15,000 73,000 3,000 4,000 15,000 110,000

PTS: 1 DIF: Easy OBJ: 6-8 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting 128. Refer to Knight Corporation. What are equivalent units of production for conversion costs assuming weighted average is used? a. 103,750 b. 104,500 c. 104,750 d. 105,500 ANS: B Conversion: Weighted Average Beginning Work in Process + Units Started and Completed +Normal Spoilage--Discrete + Abnormal Spoilage + Ending Work in Process Equivalent Units of Production

15,000 73,000 3,000 4,000 15,000

100% 100% 75% 75% 75%

15,000 73,000 2,250 3,000 11,250 104,500

PTS: 1 DIF: Easy OBJ: 6-8 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting 129. Refer to Knight Corporation. Assume that the costs per EUP for material and conversion are $2.00 and $2.25, respectively. What is the cost assigned to normal spoilage, using weighted average, and where is it assigned? Value a. b. c. d.

$11,063 $11,063 $12,750 $12,750

Assigned To Units transferred out and Ending Inventory Units transferred out Units transferred out and Ending Inventory Units transferred out

ANS: B Equivalent Units 3,000 2,250

Cost per Equivalent Unit $2.00 $2.25

Total $6,000 5,063 $11,063

This amount is transferred out.

PTS: 1 DIF: Easy OBJ: 6-8 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting 130. Refer to Knight Corporation. Assume that the costs per EUP for material and conversion are $2.00 and $2.25, respectively. Assuming that weighted average is used, what is the cost assigned to ending inventory? a. $55,312.50 b. $63,750.00 c. $66,375.00 d. $72,312.50 ANS: A Ending Inventory: Weighted Average Materials 15,000 Conversion (15,000 * 75%) 11,250 Total

$2.00 2.25

$

30,000.00 25,312.50 $ 55,312.50

PTS: 1 DIF: Easy OBJ: 6-3 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting Chapman Corporation The following information is available for Chapman Corporation for the current month: Started this month Beginning WIP (40% complete) Normal spoilage (discrete) Abnormal spoilage Ending WIP (70% complete) Transferred out Beginning Work in Process Costs: Material Conversion Current Costs: Material Conversion

80,000

units

7,500 1,100 900

units units units

13,000 72,500

units units

$10,400 13,800 $120,000 350,000

All materials are added at the start of production and the inspection point is at the end of the process.

131. Refer to Chapman Corporation. What are equivalent units of production for material using FIFO? a. 80,000 b. 79,100 c. 78,900 d. 87,500 ANS: A Materials: FIFO Beginning Work in Process + Units Started and Completed + Ending Work in Process + Normal Spoilage (discrete) + Abnormal Spoilage Equivalent Units of Production

0% 100% 100% 100% 100%

65,000 13,000 1,100 900

65,000 13,000 1,100 900 80,000

PTS: 1 DIF: Moderate OBJ: 6-8 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting 132. Refer to Chapman Corporation. What are equivalent units of production for conversion costs using FIFO? a. 79,700 b. 79,500 c. 81,100 d. 80,600 ANS: D % Complete

Conversion: FIFO

EUP

Units

Beginning Work in Process + Units Started and Completed + Ending Work in Process + Normal Spoilage (discrete) + Abnormal Spoilage Equivalent Units of Production

7,500 65,000 13,000 1,100 900

60% 100% 70% 100% 100%

4,500 65,000 9,100 1,100 900 80,600

PTS: 1 DIF: Moderate OBJ: 6-8 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting 133. Refer to Chapman Corporation. What are equivalent units of production for material using weighted average? a. 86,600 b. 87,500 c. 86,400 d. 85,500 ANS: B Materials: Weighted Average Beginning Work in Process + Units Started and Completed + Ending Work in Process + Normal Spoilage (discrete) + Abnormal Spoilage

Units

7,500 65,000 13,000 1,100 900

% Complete

100% 100% 100% 100% 100%

EUP

7,500 65,000 13,000 1,100 900

Equivalent Units of Production

87,500

PTS: 1 DIF: Easy OBJ: 6-8 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting 134. Refer to Chapman Corporation. What are equivalent units of production for conversion costs using weighted average? a. 83,600 b. 82,700 c. 82,500 d. 81,600 ANS: A Conversion: FIFO Beginning Work in Process + Units Started and Completed + Ending Work in Process + Normal Spoilage (discrete) + Abnormal Spoilage Equivalent Units of Production

Units

% Complete

7,500 65,000 13,000 1,100 900

EUP

100% 100% 70% 100% 100%

7,500 65,000 9,100 1,100 900 83,600

PTS: 1 DIF: Easy OBJ: 6-8 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting 135. Refer to Chapman Corporation. What is cost per equivalent unit for material using FIFO? a. $1.63 b. $1.37 c. $1.50 d. $1.56 ANS: C FIFO: Materials Current Period

$ 120,000 $ 120,000 ÷ 80,000 units=

$

1.50 per unit

PTS: 1 DIF: Easy OBJ: 6-4 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting 136. Refer to Chapman Corporation. What is cost per equivalent unit for conversion costs using FIFO? a. $4.00 b. $4.19 c. $4.34 d. $4.38 ANS: C FIFO: Conversion Current Period

PTS: 1

DIF: Easy

$ 350,000 $ 350,000 ÷ 80,600 units = $ 4.34 per unit

OBJ: 6-4

NAT: AACSB: Analytical Skills

LOC: AICPA Functional Competencies: Measurement, Reporting

137. Refer to Chapman Corporation. What is cost per equivalent unit for material using weighted average? a. $1.49 b. $1.63 c. $1.56 d. $1.44 ANS: A Weighted Average: Materials Beginning Current Period

$ 10,400 120,000 130,400 ÷ 87,500 units =

$

1.49 /unit

PTS: 1 DIF: Easy OBJ: 6-3 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting 138. Refer to Chapman Corporation. What is cost per equivalent unit for conversion costs using weighted average? a. $4.19 b. $4.41 c. $4.55 d. $4.35 ANS: D Weighted Average: Conversion Beginning Current Period

$ 13,800 350,000 363,800 ÷ 83,600 units = $4.35 per unit

PTS: 1 DIF: Easy OBJ: 6-3 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting 139. Refer to Chapman Corporation. What is the cost assigned to ending inventory using FIFO? a. $75,920 b. $58,994 c. $56,420 d. $53,144 ANS: B Ending Inventory: FIFO Materials Conversion (13,000 * 70%) Total

13,000 9,100

$ 1.50 4.34

$

19,500 39,494 $ 58,994

PTS: 1 DIF: Moderate OBJ: 6-4 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting 140. Refer to Chapman Corporation. What is the cost assigned to abnormal spoilage using FIFO? a. $1,350 b. $3,906

c. $5,256 d. $6,424 ANS: C Abnormal Spoiled Units 900

Price per Equivalent Unit $5.84 $5,256

Total

PTS: 1 DIF: Moderate OBJ: 6-8 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting 141. Refer to Chapman Corporation. What is the cost assigned to normal spoilage and how is it classified using weighted average? a. $6,193 allocated between WIP and Transferred Out b. $6,424 allocated between WIP and Transferred Out c. $6,193 assigned to loss account d. $6,424 assigned to units Transferred Out ANS: D Normal Spoiled Units 1,100

Price per Equivalent Unit Total $5.84 $6,424 Transferred Out

PTS: 1 DIF: Moderate OBJ: 6-8 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting 142. Refer to Chapman Corporation. What is the total cost assigned to goods transferred out using weighted average? a. $435,080 b. $429,824 c. $428,656 d. $423,400 ANS: B Goods Transferred Out/ Price per Eq Unit 73,600 $5.84

Total $429,824

PTS: 1 DIF: Difficult OBJ: 6-3 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting SHORT ANSWER

1.Discuss the assignment of costs to transferred-out inventories in both process costing methods. ANS: The assignment of costs in a process costing system first involves determining total production costs. These costs are then assigned to units completed and transferred out during the period and to the units in Work in Process Inventory at the end of the period. To assign costs, the cost per equivalent unit must be established using either the FIFO or weighted average method. The cost per EUP is then multiplied by the number of equivalent units in the component being costed. Transferred-out costs using the weighted average method are computed as the number of units transferred times the total price per equivalent unit. When using FIFO, transferred-out units are computed as follows: the costs in beginning WIP are added to the current period costs to complete the units which sums to the total cost of beginning WIP; the units started and completed are priced at current period costs; the total of the costs of beginning inventory and units started and completed are then transferred out. PTS: 1 DIF: Moderate OBJ: 6-3 | 6-4 NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Measurement, Reporting 2. Discuss process costing in a multi-department atmosphere. ANS: When a business has more than one department in its production process, products are transferred from Department A to Department B and so on. As the products are transferred from department to department so, too, must the costs be transferred. When products are transferred, the units and costs are treated as input material in the next department. The new department may add additional material or may simply add conversion costs and finish the products. The total cost of the products is a cumulative total from all departments within the process. PTS: 1 DIF: Moderate OBJ: 6-3 NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Measurement, Reporting 3. List and explain the six steps of cost assignment when using process costing. How does cost assignment differ between the weighted average and FIFO methods? ANS: Step 1--Determine the total physical units to account for by adding beginning work in process inventory in physical units and the physical units started. The result of this step should be identical for both weighted average and FIFO methods. Step 2--Determine the total physical units accounted for. The units will either be transferred out, spoiled (normal or abnormal) or remain in ending work in process inventory. The result of this step is identical for both weighted average and FIFO methods. It is also possible to compute Units started and completed by subtracting units in beginning inventory from units transferred out. At this point the results from Step 1 should equal the result from Step 2. Step 3--Calculate equivalent units of production (EUP):

Weighted Average: Beginning WIP Inventory in physical units + Units Started and Completed + (Units in Ending WIP Inventory x Percentage of Completion) FIFO: Beginning WIP inventory in physical units x Percentage of work done in CURRENT period) + Units Started and Completed + (Units in Ending WIP Inventory x Percentage of Completion) Note that the only difference between the weighted average and FIFO methods is the computation of the beginning inventory. Step 4--Calculate total costs to account for. This equals the total costs in beginning WIP inventory and the costs incurred during the current period. These costs are the same for both weighted average and FIFO. These costs will be separated into materials costs and conversion costs. Step 5--Calculate cost per equivalent unit for each cost component (materials and conversion). Weighted Average: (Costs in beginning inventory + Current period costs)/EUP (computed in step 3)-Note that all costs in beginning WIP inventory are included in this computation) FIFO: Current period inventory costs/EUP (computed in step 3). Do not include beginning inventory costs in computation of EUP. The sum of the individual components equal the total cost per completed EU. Step 6--Assign the costs (from Step 4) to goods transferred out, abnormal spoilage (if any), and ending WIP. The total costs assigned must equal the costs computed in Step 4. Weighted Average Transferred Out--Units Transferred Out x Total Cost per EUP Ending WIP Inventory--Sum of (EUP per component x Cost per EUP) FIFO Transferred Out--Beginning WIP Costs + (Units in BI x % completed during current period x Cost per EU Component) + Units Started and Completed during period x Total Cost per EUP) Ending WIP Inventory--Sum of (EUP per component x Cost per EUP)--The EUPs for each component are the same under the FIFO method and the weighted average method; however, the cost per EUP differs under weighted average. Therefore, the total ending WIP inventory will differ between FIFO and weighted average. PTS: 1 DIF: Moderate OBJ: 6-3 NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Measurement, Reporting 4. Discuss standard costing as used in conjunction with process costing. ANS: When standard costing is used in conjunction with process costing, the costing procedure is simplified. Standard costing eliminates the calculation in each new period of a new production cost because the standards are established as on-going norms for (at least) a one-year period of time. Standard costing in a process costing system is essentially a FIFO system that permits variances to be recognized during the period. PTS: 1 DIF: Moderate OBJ: 6-5 NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Measurement, Reporting

5. What are two alternative calculations that can be used to either verify the number of equivalent units or to obtain the number initially? ANS: One alternative method of calculating equivalent units for weighted average is to determine units transferred out and add to that the equivalent units of ending work in process. Another alternative method of calculating equivalent units for FIFO is to determine equivalent units of production under weighted average and subtract the beginning work in process equivalent units that were completed in the last period. Both of these methods may be used to "check" original answers. PTS: 1 DIF: Moderate OBJ: 6-7 NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Measurement, Reporting

6. When is a hybrid costing system appropriate in a manufacturing setting? ANS: A hybrid costing system combines characteristics of both job order and process costing systems. Such a system would be appropriate in a manufacturing setting where products can be mass produced up to a certain point and then must be customized after that point. For example an automobile manufacturer that sells a wide variety of options on vehicles would use a hybrid costing system--process for manufacturing the chassis and motor, then job order for the distinguishing features such as specialized interiors. Likewise a company that manufactured different types of clothes would use job order costing for the materials but process costing for processing the materials into finished products. PTS: 1 DIF: Moderate OBJ: 6-6 NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Measurement, Reporting 7. Discuss how spoilage is treated in EUP computations. ANS: If spoilage is normal and continuous, the calculations for EUP do not include this spoilage (method of neglect), and the good units simply absorb the cost of such spoilage. If spoilage is normal and discrete, the equivalent units are used in the EUP calculations, and the spoilage cost is assigned to all units that passed through the inspection point during the current period. If the spoilage is abnormal and either discrete or continuous, the equivalent units are used in EUP calculations and costed at the cost per EUP; the total cost is then assigned to a loss account. PTS: 1 DIF: Moderate OBJ: 6-8 NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Measurement, Reporting 8. Discuss why units are lost during production. ANS: In most production processes, losses are anticipated to a certain degree. Losses may be classified as normal and abnormal depending on management's expectations. A normal loss is one that is expected, while an abnormal loss is one that exceeds the normal loss. The losses may result in spoiled or defective units. Spoiled units cannot be economically reworked; defective units can be. Losses can occur on a continuous or a discrete basis. Quality control points are established at the end of and/or within the process to inspect goods and remove from further processing those units that are either spoiled or defective. PTS: 1 DIF: Moderate OBJ: 6-8 NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Measurement, Reporting 9. Distinguish between discrete and continuous production losses and the method of accounting for these losses. ANS:

Discrete production losses occur at a specific point in the production process. Such a loss is detectable only when a quality check is performed. The cost of normal discrete losses should be assigned only to units that have passed the inspection point in ending inventory and transferred out on an EUP basis as a product cost. Abnormal discrete losses should be treated as a period cost and written off on an EUP basis. Continuous production losses occur throughout the production process. Normal continuous production losses are handled through the method of neglect, which ignores the spoiled units in the EUP schedule. This results in a smaller EUP and a greater cost per equivalent unit. Abnormal discrete losses are treated as a period cost and written off on an EUP basis. PTS: 1 DIF: Moderate OBJ: 6-8 NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Measurement, Reporting PROBLEM Powers Corporation Powers Corporation has the following information available for May of the current year: Beginning Work in Process Inventory (25% complete as to conversion) Started Ending Work in Process Inventory (30% complete as to conversion) Beginning Work in Process Inventory Costs: Material Conversion Current Period Costs: Material Conversion

units units

30,000

units

$

10,000 120,000

2,100 2,030

$ 33,000 109,695

All material is added at the start of production and all products completed are transferred out. 1. Refer to Powers Corporation. Prepare an equivalent units schedule using the (a) FIFO and (b) weighted average method. ANS: Powers Corporation Schedule of Equivalent Units for FIFO and Weighted Average May 31, current year FIFO Beginning Work In Process Units Started

10,000

Beginning Work In Process 120,000 Units Started

Weighted Average 10,000 120,000

Units to Acct. For Beginning Work In Process Started & Completed

130,000 10,000 90,000

Ending Work in Process Units Accounted For

130,000

Units to Acct. For Transferred Out Ending Work in Process 30,000 Units Accounted For

130,000 100,000 30,000 130,000

(a) BWIP S&C EWIP EUP

FIFO Mat.

CC

0 90,000 30,000 120,000

7,500 90,000 9,000 106,500

(b) Weighted Average Mat. TO EI EUP

100,000 30,000 130,000

CC 100,000 9,000 109,000

PTS: 1 DIF: Moderate OBJ: 6-3 | 6-4 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting 2. Refer to Powers Corporation. Prepare a schedule showing the computation for cost per equivalent unit assuming the (a) FIFO and (b) weighted average method. ANS: Powers Corporation Schedule of Average Cost Per Unit FIFO and Weighted Average May 31, current year (a) FIFO Mat. Costs $33,000 Eq Units 120,000 $.275/eq unit Total cost/eq. unit

CC $109,695 106,500 $ 1.03/eq unit $ 1.305/eq unit

(b) Weighted Average Mat. CC $ 35,100 $111,725 130,000 109,000 $ .27/eq unit $ 1.025/eq unit $ 1.295/eq unit

PTS: 1 DIF: Moderate OBJ: 6-3 | 6-4 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting 3. Refer to Powers Corporation. Prepare a schedule showing the assignment of costs assuming the (a) FIFO and (b) weighted average method. ANS: Powers Corporation Schedule of Assigned Costs FIFO and Weighted Average May 31, current year (a) FIFO Beginning Work in Process To complete (7,500 × $1.03) = Started and Completed 90,000 × $1.305 = Total costs transferred out

$

4,130 7,725 $ 11,855 117,450 $129,305

Ending Work in Process 30,000 × $ .275 = 9,000 × $1.03 =

$

8,250 9,270 $ 17,520 $146,825

Total costs accounted for (b) Weighted Average Completed 100,000 × $1.295 = Ending Work in Process 30,000 × $ .27 = 9,000 × $1.025 =

$129,500 $

8,100 9,225 $ 17,325 $146,825

Total costs accounted for

PTS: 1 DIF: Difficult OBJ: 6-3 | 6-4 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting Crosson Corporation Crosson Corporation has the following information available for June of the current year: Beginning Work in Process Inventory (20% complete as to conversion) Started Ending Work in Process Inventory (25% complete as to conversion) Beginning Work in Process Inventory Costs: Material Conversion Current Period Costs: Material Conversion

units units

35,000

units

$

12,000 150,000

2,500 2,650

$ 36,000 112,750

All material is added at the start of production and all products completed are transferred out. 4. Refer to Crosson Corporation. Prepare an equivalent units schedule using the (a) FIFO and (b) weighted average method.

ANS: Crosson Corporation Schedule of Equivalent Units for FIFO and Weighted Average June 30, current year FIFO Beginning Work In Process

12,000

Units Started Units to Acct. For Beginning Work In Process Started & Completed

150,000 162,000 12,000 115,000

Ending Work in Process Units Accounted For

35,000 162,000

(a) BWIP S&C EWIP EUP

FIFO Mat.

CC

0 115,000 35,000 150,000

9,600 115,000 8,750 133,350

Weighted Average Beginning Work In Process Units Started Units to Acct. For Transferred Out Ending Work in Process Units Accounted For

(b) Weighted Average Mat. TO EI EUP

127,000 35,000 162,000

12,000 150,000 130,000 127,000 35,000 162,000

CC 127,000 8,750 135,750

PTS: 1 DIF: Moderate OBJ: 6-3 | 6-4 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting 5. Refer to Crosson Corporation. Prepare a schedule showing the computation for cost per equivalent unit assuming the (a) FIFO and (b) weighted average method. ANS: Crosson Corporation Schedule of Average Cost Per Unit FIFO and Weighted Average June 30, current year (a) FIFO Mat. Costs $36,000 Eq Units 150,000 $.24/eq unit Total cost/eq. unit

CC $112,750 133,350 $ .8455/eq unit $ 1.0855/eq unit

(b) Weighted Average Mat. $ 38,500 162,000 $ .2377/eq unit

CC $115,400 135,750 $ .850/eq unit $ 1.0877/eq unit

PTS: 1 DIF: Moderate OBJ: 6-3 | 6-4 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting

6.

Refer to Crosson Corporation. Prepare a schedule showing the assignment of costs assuming the (a) FIFO and (b) weighted average method. ANS: Crosson Corporation Schedule of Assigned Costs FIFO and Weighted Average June 30, current year (a) FIFO Beginning Work in Process To complete (9,600 × $.8455) =

$

5,150 8,117 $ 13,267

Started and Completed 115,000 × $1.0855 = Total costs transferred out Ending Work in Process 35,000 × $ .24 = 8,750 × $.8455 = Total costs accounted for (b) Weighted Average Completed 127,000 × $1.0877 = Ending Work in Process 35,000 × $ .2377 = 8,750 x $.850 Total costs accounted for

124,833 $138,100

$

(rounded)

8,400 7,400 $ 15,800 $153,900

rounded

$138,142 $

8,320 7,438 $ 15,758 $153,900

PTS: 1 DIF: Difficult OBJ: 6-3 | 6-4 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting 7. Spectacular Candy Corporation has two processing departments, Cooking and Packaging. Ingredients are placed into production at the beginning of the process in Cooking, where they are formed into various shapes. When finished, they are transferred into Packaging, where the candy is placed into heart and tuxedo boxes and covered with foil. All material added in Packaging is considered as one material for convenience. Since the boxes contain a variety of candies, they are considered partially complete until filled with the appropriate assortment. The following information relates to the two departments for the month of February: Cooking Department: 4,500 units Beginning WIP (30% complete as to conversion) 15,000 Units started this period units 2,400 units Ending WIP (60% complete as to conversion) Packaging Department: 1,000 units Beginning WIP (90% complete as to material, 80% complete as to conversion)

? 500

Units started during period Ending WIP (80% complete as to material and 80% complete as to conversion)

units

a. Determine equivalent units of production for both departments using the weighted average method. b. Determine equivalent units of production for both departments using the FIFO method. ANS: a. Cooking Department Materials 17,100 2,400 19,500

Transferred Out Ending Work in Process TOTAL EUP

Conversion Costs 17,100 1,440 18,540

Packaging Department Transferred In 17,600 500 18,100

Transferred Out Ending Work in Process TOTAL EUP b.

Materials.

Conversion Costs

17,600 400 18,000

17,600 400 18,000

Cooking Department Materials 0 12,600 2,400 15,000

Beginning Work in Process Transferred from Cooking Ending Work in Process TOTAL EUP

Conversion Costs 3,150 12,600 1,440 17,190

Packaging Department Transferred In 0 16,600 500 17,100

Beginning Work in Process Transferred from Cooking Ending Work in Process TOTAL EUP

Materials

Conversion Costs

100 16,600 400 17,100

200 16,600 400 17,200

PTS: 1 DIF: Difficult OBJ: 6-3 | 6-4 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting 8. The following costs were accumulated by Department 2 of Tulsa Company during November: Cost Transferred from Dept. 1 Beginning Inventory Current Period Cost

$ 17,050 184,000 $ 201,050

Material

Conversion Costs

0 $ 34,000 $ 34,000

$ 5,450 104,000 $ 109,450

Production for November in Department 2 (in units):

Total $ 22,500 322,000 $344,500

WIP-November 1 Complete period transferred WIP-November 30

2,000 60% complete 20,000 5,000 40% complete

Materials are not added in Department 2 until the very end of processing Department 2. Required: Compute the cost of units completed and the value of ending WIP for: a.

Weighted average inventory assumption

b.

FIFO inventory assumption

ANS: a. Weighted average inventory assumption Dept 1 MAT 20,000 20,000 Complete 5,000 0 Eq-End WIP 25,000 20,000 EP-WA Unit Cost

$201,050 = $8.042 25,000

End WIP

$34,000 = $1.70 20,000

CC 20,000 2,000 22,000

$109,450 = $4.975 22,000

= $14.717

= $40,210 = 9,950 $50,160

Dept 1 = 5,000 $8.042 CC = 2,000 units $4.975

COGM = $344,500 - $50,160 = $294,340 b.

FIFO inventory assumption Dept 1

Complete Eq-End WIP - Eq-Begin EP-FIFO

MAT

20,000 5,000 (2,000) 23,000

20,000 0 0 20,000

Unit Cost

$184,000 = $8.00 23,000

$34,000 = $1.70 20,000

End WIP

Dept 1 = 5,000 units × $8.00 CC = 2,000 units × $5.00

CC 20,000 2,000 (1,200) 20,800

$104,000 = $5.00 20,800

= $14.70

= $40,000 = 10,000 $50,000

COGM = $344,500 - $50,000 = $294,500 PTS: 1 DIF: Moderate OBJ: 6-3 | 6-4 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting

9. The formula for a chemical compound requires one pound of Chemical X and one pound of Chemical Y. One pound of Chemical X is processed in Department A and transferred to Department B for further processing where one pound of Chemical Y is added when the process is 50 percent complete. When the processing is complete in Department B, the finished compound is transferred to finished goods. The process is continuous, operating 24 hours a day. Normal spoilage occurs in Department A. Five percent of material is lost in the first few seconds of processing. No spoilage occurs in Department B. The following data are available for the month of October: Dept. A 8,000 3/4 50,000 46,500 ? 1/3

Units in process, October 1 Stage of completion of beginning inventory Units started or transferred in Units transferred out Units in process, October 31 Stage of completion of ending inventory Units of Chemical Y added in Department B

Dept. B 10,000 3/10 ? ? ? 1/5 44,500

Required: a. Prepare a schedule showing finished equivalents for Chemical X and for conversion cost for Department A using the FIFO method. b. Determine for Department B the number of units of good product completed during October and the number of units in process on October 31. c. Prepare a schedule for Department B showing finished equivalents for preceding department cost, cost of Chemical Y, and conversion cost using the FIFO method. ANS: a.

c. Materials 46,500 9,000 (8,000) 47,500

b.

Conversion Costs

Transferred In

46,500 3,000 (6,000) 43,500

44,500 12,000 (10,000) 46,500

Mat 44,500 0 0 44,500

CC 44,500 2,400 (3,000) 43,900

Since the material in the second department goes in at the 50 percent point and the ending WIP inventory is only at the 20 percent point, units complete is the same as the equivalents of material 44,500, given that units started plus units in beginning WIP are equal to units complete plus ending WIP 10,000 + 46,500 - 44,500 = 12,000 units in ending WIP.

PTS: 1 DIF: Moderate OBJ: 6-3 | 6-4 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting 10. Smithfield Company manufactures a specialized product. Department 2 adds new material to the units received from Department 1 at the end of process. A normal loss occurs early in processing. Production and cost data for Department 2 for the month of April are as follows: Production record (in units): In process, April 1-75% complete for processing cost

4,000

20,000 16,000 2,000 6,000

Received from Department 1 Completed and transferred to finished goods Lost in processing (normal) In process, April 30-2/3 complete for process cost Cost Record: Work in process inventory, April 1: Preceding department cost Processing cost Cost from preceding department in April Material cost for April Processing cost for April

$

620 2,000

$2,620 1,800 4,800 10,200

Required: Determine the following for Department 2 under (a) weighted average the method of costing and (b) the FIFO method of costing: (1) unit costs for each cost component, (2) cost of production transferred to finished goods, (3) cost of work in process inventory of April 30. ANS: Equivalent production Units complete + Equiv. ending WIP = Equiv. prod. average - Equiv. begin. WIP = Equiv. prod. FIFO

TI

Material

16,000 6,000 22,000 (4,000) 18,000

Unit Cost Average

$4,800 16,000

= $0.10

Mat = $4,800

20,000

CC

TI = $1,800 18,000

= $0.11

= $0.30

CC = $2,000 + 10,200 End. WIP-WA PD

16,000 4,000 20,000 (3,000) 17,000

Unit Cost FIFO

TI = $620 + 1,800 22,000

Mat =

Conv. cost

16,000 0 16,000 0 16,000

16,000

CC = $10,200

= $0.61

6,000 × $0.11 = 4,000 × $0.61 =

17,000

$

660.00 2,440.00

= $0.30

= $0.60

End. WIP-FIFO 6,000 × $0.10 = 4,000 × $0.60 =

$3,100.00

$

600.00 2,400.00

$3,000.00

Cost of Goods Complete WA $19,420 - 3,100 =

FIFO $16,320.00

$19,420 - 3,000 =

$16,420.00

PTS: 1 DIF: Moderate OBJ: 6-3 | 6-4 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting

11. Patterson Manufacturing employs a weighted average process costing system for its products. One product passes through three departments (Molding, Assembly, and Finishing) during production. The following activity took place in the Finishing Department during April:. 4,200 42,000 2,100 33,600

Units in beginning inventory Units transferred in from Assembly Units spoiled Good units transferred out

The costs per equivalent unit of production for each cost failure area as follows: $5.00 1.00 3.00 $9.00

Cost of prior departments Raw material Conversion Total cost per EUP

Raw material is added at the beginning of the Finishing process without changing the number of units being processed. Work in process inventory was 40 percent complete as to conversion on April 30. All spoilage was discovered at final inspection. Of the total units spoiled, 1,680 were within normal limits. Spoilage is considered discrete. Required: a. Calculate the equivalent units of production b. Determine the cost of units transferred out of Finishing c. Determine the cost of ending Work in Process Inventory d. The portion of the total transferred in cost associated with beginning Work in Process Inventory amounted to $18,900. What is the current period cost that was transferred in from Assembly to Finishing? e. Determine the cost associated with abnormal spoilage for the month. ANS:

a. TI Complete + Equiv Ending WIP + Normal Sp + Abnor Sp

Mat

33,600 10,500 1,680 420 46,200

b. 33,600 × $9 1,680 × $9

$302,400 15,120 $317,520

c. 10,500 × $5 10,500 × $1 4,200 × $3

$52,500 10,500 12,600 $75,600

33,600 10,500 1,680 420 46,200

TC = 46,200 × $5 46,200 × $1 39,900 × $3

COGM = $396,900 - 75,600 - 3,780 = $317,520

CC 33,600 4,200 1,680 420 39,900 $231,000 46,200 119,700 $396,900

d. $5 = $18,900 + X 46,200 X = $231,000 - 18,900 = $212,100 e. ABN = 420 × $9 = $3,780 PTS: 1 DIF: Moderate OBJ: 6-3 | 6-8 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting 12. Ellis Industries manufactures wood furniture. In the Lamination Department, varnish is added when the goods are 60 percent complete as to overhead. The units that are spoiled during processing are found upon inspection at the end of production. Spoilage is considered discrete.

Production Data for Current Month Beginning inventory (80% complete as to labor, 70% complete as to overhead) Transferred in during month Ending inventory (40% complete as to labor, 20% complete as to overhead) Normal spoilage (found during final quality inspection) Abnormal spoilage-found at 30% completion of direct labor and 15% of conversion; the sanding machine was misaligned and scarred the chairs

1,000

units

7,450 1,500 100 200

units units units units

All other units were transferred to finished goods Cost Data for Current Month Beginning work in process inventory: Prior department costs Varnish Direct labor Overhead Current period costs: Prior department costs Varnish Direct labor Overhead

$7,510 950 2,194 5,522

$ 16,176

$68,540 7,015 23,000 56,782

155,337 $171,513

Total costs to account for

Required: Determine the proper disposition of the current month costs for the Laminating Department using the weighted average method.

ANS: TI Complete + end + normal + abnormal

MAT

6,650 1,500 100 200 8,450

DL

6,650 0 100 0 6,750

6,650 600 100 60 7,410

Unit Cost

End WIP DL MOH TI

600 × $3.40 300 × $8.80 1,500 × $9.00

= = =

$ 2,040 2,640 13,500 $18,180

Abnormal Loss DL MOH TI

60 × $3.40 30 × $8.80 200 × $9.00

= = =

$

204 264 1,800 $ 2,268

MOH 6,650 300 100 30 7,080

COGM = $171,513 - 18,180 - 2,268 = $151,065 PTS: 1 DIF: Moderate OBJ: 6-3 | 6-8 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting 13. Consider the following data for a cooking department for the month of February: Physical Units 11,000 74,000 85,000

Work in process, beginning inventory* Started during current period To account for Good units completed and transferred out during current period: From beginning work in process Started and completed Good units completed Spoiled units Work in process, ending inventory~ Accounted for

11,000 50,000 61,000 8,000 16,000 85,000

*Direct material, 100% complete; conversion costs, 25% complete ~Direct material, 100% complete; conversion costs, 75% complete Inspection occurs when production is 100 percent completed. Normal spoilage is 11 percent of good units completed and transferred out during the current period. The following cost data are available: Work in process, beginning inventory: Direct material Conversion costs Costs added during current period: Direct material Conversion costs Costs to account for

$220,000 30,000

$

250,000

1,480,000 942,000 $2,672,000

Required: Prepare a detailed cost of production report. Use the FIFO method. Distinguish between normal and abnormal spoilage. ANS: Normal Sp = 11% × 61,000 = 6,710 units Abnormal Sp = 8,000 - 6,710 = 1,290 units Mat Complete + End + Ab Sp = Ave

61,000 16,000 1,290 78,290

CC 61,000 12,000 1,290 74,290

FIFO Mat =

CC =

$1,480,000 67,290

$942,000 71,540

= $22.00

=

13.17 $35.17

- Beg FIFO

(11,000) 67,290

(2,750) 71,540

WIP Material CC

16,000 × $22.00 12,000 × $13.17

Loss = 1,290 × $35.17

$352,000 158,040 $510,040 45,369

COGM = $2,672,000 - 510,040 - 45,369 = $2,116,591 PTS: 1 DIF: Moderate OBJ: 6-3 | 6-8 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting 14. Choctaw Industries has two departments. Department 1 uses FIFO costing and Department 2 uses weighted average. Units are introduced into the process in Department 1 (this is the only material added in Department 1). Spoilage occurs continuously through the department and normal spoilage should not exceed 10 percent of the units started. Department 2 adds material (packaging) at the 75 percent completion point; this material does not cause an increase in the number of units being processed. A quality control inspection takes place when the goods are 80 percent complete. Spoilage should not exceed 5 percent of the units transferred in from Department 1. The following production cost data are applicable for operations for August of the current year: Department 1 Production Data Beginning inventory (65% complete) Units started Units completed Units in ending inventory (40% complete) Department 1 Cost Data Beginning inventory: Material Conversion Current period: Material Conversion Total costs to account for Department 2 Production Data Beginning inventory (90% complete) Units transferred in Units completed Units in ending inventory (20% complete) Department 2 Cost Data Beginning inventory:

1,000 25,000 22,000 2,800

$ 1,550 2,300

$

$38,080 78,645

3,850

116,725 $120,575 8,000 22,000 24,000 4,500

$40,800 24,000 4,320

Transferred in Material Conversion Current period: Transferred in Material` Conversion Total costs to account for

$ 69,120*

$113,700 53,775 11,079

178,554 $247,674

*This may not be the same amount determined for Department 1; ignore any difference and use this figure. Required: a. Compute the equivalent units of production in each department. b. Determine the cost per equivalent unit in each department and compute the cost transferred out, the cost in ending inventory, and the cost of spoilage (if necessary). ANS: a. Complete + End WIP

- Beg WIP

Mat

CC

22,000 2,800

22,000 1,120

24,800

23,120

(1,000) 23,800

(650) 22,470

Mat =

$38,080 23,800

=

$

1.60

(2,800 × 4)

CC =

$78,645

=

$

3.50

(1,000 × .65)

End WIP =

=

$

4,480

22,470 2,800 × $1.60 1,120 × $3.50

3,920 $ 8,400 $112,175

COGM = $120,575 - 8,400

b. Complete + End WIP + Normal + Abnormal

TI

Mat

CC

24,000 4,500 1,100 400 30,000

24,000 0 1,100 400 25,500

24,000 900 880 320 26,100

End WIP 4,500 × $5.15 900 × $0.59

$23,175 531 $23,706

Abn Loss 400 × $3.05 320 × $0.59 400 × $5.15

COGM = $247,674 - 23,706 - 3,469 = $220,499

Mat =

$ 77,775 25,500

=

$

$3.05

CC =

$ 15,399 26,100

=

$

$0.59

TI =

$154,500 30,000

=

$1,220 189 2,060 $3,469

$

5.15

PTS: 1 DIF: Moderate OBJ: 6-3 | 6-8 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting

15. Hagler Company manufactures a single product. All material is added at the beginning of the process. Costs Beginning inventory Current period Total costs

Material

Conversion

$ 30,000 885,120 $915,120

Total

$

3,600 335,088 $338,688

UNITS Beginning inventory (30% complete-conversion) Started Completed Ending inventory (70% complete-conversion) Normal spoilage

$

33,600 1,220,208 $1,253,808

6,000 units 180,000 units 152,000 units 20,000 units 4,800 units

Required: Find ending WIP inventory, abnormal loss, and COGM. Assume that, for conversion costs, abnormal shrinkage is 60 percent.

ANS: Mat Units Complete + Equivalents Ending WIP + Abnormal Loss = Equivalent Production-WA = Equivalent Begin WIP = Equivalent Production-FIFO Unit Costs: WA Mat $915,120 = $5.05 181,200 CC

$338,688 = $1.97 171,520

Ending WIP Material CC Abnormal Spoilage Material CC

CC

152,000 20,000 9,200 181,200 (6,000) 175,200

FIFO Mat CC

20,000 × $5.05 14,000 × $1.97

9,200 × $5.05 5,520 × $1.97

152,000 14,000 5,520 171,520 (1,800) 169,720

(9,200 × .6)

$885,120 175,200

= $5.05

$335,088 169,720

= $1.97

$101,000 27,580 $128,580 $ 46,460 10,874 $ 57,334

Cost of Good Transferred 1,253,808 - 128,580 - 57,334 = $1,067,894 PTS: 1 DIF: Moderate OBJ: 6-3 | 6-8 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting

16. Incredible Ice Cream Company produces ice cream in two departments-Mixing and Finishing. In Mixing, all ingredients except fruit are added at the start of production. In Finishing, fruit is added and then the mixture is placed into containers. Adding the fruit to the basic ice cream mixture increases the volume transferred in by the number of gallons of fruit added. Any spoilage that occurs is in the Finishing Department. Spoilage is detected just before the ice cream is placed into containers or at the 98 percent completion point. All spoilage is abnormal. Finishing Department 5,000 5,500 1,200 1,700 9,000 1,000

BWIP (100% fruit, 0% container, 30% CC) Gallons transferred in Gallons of fruit added EWIP (100% fruit, 0% container, 60% CC) Gallons transferred out Abnormal spoilage BWIP Costs: Transferred In Fruit CC

$

Current Costs: Transferred In Fruit Containers CC Total Costs

gallons gallons

9,700 10,500 15,000

12,400 54,000 11,000 98,000 $ 210,600

Prepare a cost of production report for October 20XY. The company uses weighted average. ANS: Incredible Ice Cream Company Cost Report October 31, 20XY BWIP Trans. In Fruit Acctble. For

5,000 5,500 1,200 11,700

TI Transferred Out EWIP Abnormal Spoilage

9,000 1,700 1,000 11,700

Fruit 9,000 1,700 1,000 11,700

Container 9,000 0 0 9,000

CC 9,000 1,020 980 11,000

Costs: TI BWIP Current

$ 9,700 12,400 $22,100

Fruit $10,500 54,000 $64,500

Container $ 0 11,000 $11,000

CC $ 15,000 98,000 $113,000

11,700 $1.89

EUP Per unit

11,700 $5.51

9,000 $1.22

$ 3,213 9,367 10,475

$ 23,055

$ 1,890 5,510 10,065

17,465

11,000 $10.27

Cost Assignment: EWIP 1,700 × $1.89 = 1,700 × $5.51 = 1,020 × $10.27 = Spoilage 1,000 × $1.89 = 1,000 × $5.51 = 980 × $10.27 = Transferred Out $210,600 - 23,055 - 17,465 =

170,080 $210,600

Total accounted for

PTS: 1 DIF: Moderate OBJ: 6-3 | 6-8 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting Winthrop Company The following information is available for Winthrop Company for March of the current year. All materials are added at the start of production. 8,000 35,000 6,000 2,500 15,000 19,500

Beginning Work in Process: (80% complete) Started Normal spoilage (continuous) Abnormal spoilage Ending Work in Process: (55% complete) Transferred out Beginning Work in Process Costs: Material Conversion Current Costs: Material Conversion Total Costs

$

units units units units units units

14,000 45,000

50,000 175,000 $ 284,000

17. Refer to Winthrop Company. Prepare a cost of production report for March using FIFO. ANS: BI 8,000 + Started 35,000 = Accountable for 43,000 Winthrop Company Cost Report March 31, 20XY

Material 8,000 11,500 15,000 6,000 2,500 43,000

BWIP S&C EWIP Norm Abnorm. Acctd. for

CC

0 11,500 15,000 0 2,500 29,000

1,600 11,500 8,250 0 2,500 23,850

$ 25,800 60,555

$ 86,355

Material: $50,000/29,000 = $1.72 Conversion Costs: $175,000/23,850 = $7.34 Cost Assignment: Ending Work in Process 15,000 × $1.72 = 8,250 × $7.34 = Abnormal Spoilage 2,500 × $9.06 = Cost Transferred Out $284,000 - 86,355 - 22,650 =

22,650 174,995 $ 284,000

Total costs accounted for

PTS: 1 DIF: Moderate OBJ: 6-4 | 6-8 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting 18. Refer to Winthrop Company. Prepare the cost of production report assuming the weighted average method. ANS: BI 8,000 + Started 35,000 = Accountable for 43,000 Winthrop Company Cost Report March 31, 20XY Material Transferred Out Ending Work In Process Normal Spoilage Abnormal Spoilage Accounted For

19,500 15,000 6,000 2,500 43,000

CC

19,500 15,000 0 2,500 37,000

19,500 8,250 0 2,500 30,250

$25,950 59,978

$ 85,928

Material: $64,000/37,000 = $1.73 Conversion Costs: $220,000/30,250 = $ 7.27 Cost Assignment: Ending Work in Process 15,000 × $1.73 = 8,250 × $7.27 =

Abnormal Spoilage 2,500 × $9.00 = Transferred Out $284,000 - 85,928 - 22,500 = Total costs accounted for

22,500 175,572 $ 284,000

PTS: 1 DIF: Moderate OBJ: 6-3 | 6-8 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting