Deck 15: Process Costing

Question 1

Which of the following companies would be most likely to use process costing: a. A catering company
B) A custom yacht maker
C) A tire manufacturer
D) An attorney's office

Answer 1

C

Question 2

The Custer Company began the period with no units in process and 80,000 units in finished goods inventory. During the period they sold 280,000 units and also had the following at the end of the period: Equivalent units for the period totaled: a. 314,000
B) 280,000
C) 240,000
D) 246,000

Answer 2

D

Question 3

Standard costing is simple to adapt to a job shop environment where each job is unique.

Answer 3

False

Question 4

To apply a standard process costing system, we use the standards for materials, labor and overhead to value Cost of Goods Manufactured and Work In Process.

Question 5

In a process costing system, in-process units are converted to physical units.

Question 6

The Carmello Company began the period with no units in process and or in finished goods inventory. During the period they began 96,000 units and completed 80,000 units. If equivalent units for the period totaled 90,000 then the units in process were what percent complete? (rounded) a. 62.5%
B) 83.3%
C) 88.9%
D) 75%

Question 7

Which of the following only applies to process costing? a. Separate and distinct jobs
B) The use of equivalent units
C) The use of predetermined overhead rates
D) Averaging

Question 8

A process costing system can accommodate more than two cost pools by calculating a separate equivalent unit basis for each cost pool.

Question 9

One difference in job costing and process costing is that we do not need to allocate costs between completed and in-process units in a job-costing system.

Question 10

A firm should employ standard costing only in those production environments where a firm makes similar or identical units in large quantities.

Question 11

Most process costing systems use weighted average process costs which do not distinguish between the costs from the prior period and costs incurred during the current period.

Question 12

An advantage of standard process costing is that it is cost effective and relatively simple to compute standard costs.

Question 13

An advantage of process costing is that all inputs are required at the beginning of the process.

Question 14

Typically in process costing, separate rates are computed for materials costs and for conversion costs.

Question 15

Conversion cost includes both direct material and indirect material.

Question 16

When using the weighted average method, equivalent units are: a. The number of units completed in a period
B) The number of units completed in a period plus the number of units in process at the end of the period multiplied by the percentage of which the units have been completed
C) The number of units in beginning inventory plus the number of units completed in a period
D) The number of units produced in a period less the number of units in process at the end of the period

Question 17

Because the predetermined rates in process costing come from company budgets, we refer to these rates as budgeted rates and to the system as a budgeted costing system.

Question 18

Process costing systems are suitable for firms that produce customized products in small amounts.

Question 19

The need to distribute the cost of making the batch of units that are still in process and to units that have been completed during the period is central to process costing.

Question 20

For units still in process, when using the weighted average method multiply the physical units by the percentage completion and add this amount to the units completed to obtain total equivalent units for the period.

Question 21

The Ortho Company began the month of September with 30,000 units in process which had a total materials cost of $120,000 and conversion costs of $300,000. During September 220,000 units were begun and 215,000 were completed and transferred to finished goods. The units in process were 30% complete. Material and conversion cost s for September were $280,000 and $647,100, respectively. The ending balance in the work-in-process inventory account totals: a. $188,594
B) $100,100
C) $69,331
D) $129,794

Question 22

In the mechanics of process costing, why is an allocation that computes costs based on the number of physical units not accurate?

A) A number based on physical units does not include fixed costs.
B) A number based on physical units does not include overhead costs.
C) It attaches too much variable costs to each unit.
D) It attaches the same value to a unit whether the unit is in process or is complete.
E) None of the above.

Question 23

When using a standard process costing system, under-applied overhead is:

A) Carried over to the next period.
B) Combined with period costs.
C) Disposed of.
D) Ignored.
E) None of the above.

Question 24

Suppose Smith started 100,000 units during the period, transfers 75,000 units to finished goods and estimates that 25,000 units still in process are only 20 percent complete. What is the number of equivalent units in WIP inventory at the end of the period?

A) 20,000
B) 5,000
C) 15,000
D) 60,000
E) 80,000

Question 25

Suppose Smith started 100,000 units during the period, transfers 75,000 units to finished goods and estimates that 25,000 units still in process. Smith has issued all the needed materials, but has completed only 20% of the assembly work. What is the number of total equivalent units in work in process for material and conversion at the end of the period?

A) 100,000 material/25,000 conversion.
B) 25,000 material/5,000 conversion.
C) 25,000 material/25,000 conversion.
D) 75,000 material/75,000 conversion.
E) 100,000 material/100,000 conversion.

Question 26

Which of the following is not a difference in a job-cost environment and a process-cost environment?

A) In a job-cost environment, only physical units are computed whereas in a process cost environment, equivalent units are computed.
B) In a job-cost environment, firms compute a predetermined rate for overhead costs alone as these are the only costs that the firm allocates whereas in a process cost environment a firm must also allocate the cost of materials and conversion.
C) A job-cost environment is appropriate for firms that produce customized products in small amounts whereas a process-cost environment is suitable in settings that involve mass production of like products.
D) In a job-cost environment, costs are assigned only to finished goods and cost of goods sold whereas in a process-cost environment costs are assigned to work-in-process, finished goods, and cost of goods sold.
E) All of the above are differences in a job-cost environment and a process-cost environment.

Question 27

Which of the following is not a step in preparing a process costing report?

A) Trace materials cost to individual jobs.
B) Track the physical flow.
C) Compute equivalent units.
D) Collect costs to allocate.
E) Calculate the rate per equivalent unit.

Question 28

A company should use process costing over job-order costing when: a. Many different products are manufactured
B) The product requires several different manufacturing processes to be completed
C) Products are manufactured as soon as orders are received
D) Most of the products are alike and can be mass-produced

Question 29

The Shickman Company provided the following information for the packaging department for the month of October: The company adds material costs at the beginning of the production process. Using the weighted-average method, the cost per equivalent unit for materials is: (rounded) a. $.38
B) $.49
C) $.36
D) $.56

Question 30

The Vegas Company began the month of March with no units in process or in finished inventory. During March 160,000 units were begun and 150,000 were completed and transferred to finished goods. The units in process were 60% complete. Material costs totaled $480,000 and conversion costs totaled $702,000. The materials and conversion cost per equivalent unit, respectively, is: (rounded)

Question 31

Most process costing systems use weighted average process costs. Which of the following is a characteristic of weighted average process costs systems?

A) These systems account only for costs incurred during the current period.
B) These systems are not appropriate for environments that involve mass production.
C) The weighted average process cost system is required by GAAP.
D) These systems do not distinguish between the costs from the prior period and costs incurred during the current period.
E) None of the above is a characteristic of weighted average process costs systems.

Question 32

Smith Manufacturing uses the weighted average process costs method. Smith has provided the follow data: Units still in process at the end of the period are 100% complete as to material and 60% complete as to conversion. What is the cost of materials allocated to units completed during the period?

A) $4,255,000
B) $4,600,000
C) $4,038,750
D) $6,868,750
E) None of the above.

Question 33

Suppose Hill Manufacturing began production in January with zero units in process. During January, Hill started production of 18,000 units and completed 15,500 units by January 31. Manufacturing costs totaled $68,800 ($43,200 for materials and $25,600 for labor and overhead). How much cost is allocated to WIP ending inventory?

A) $59,245
B) $19,600
C) $9,555
D) $68,800
E) None of the above.

Question 34

The Ortho Company began the month of September with 30,000 units in process which had a total materials cost of $120,000 and conversion costs of $300,000. During September 220,000 units were begun and 215,000 were completed and transferred to finished goods. The units in process were 30% complete. Material and conversion cost s for September were $280,000 and $647,100, respectively. Cost of goods manufactured for September totals: a. $1,158,506
B) $1,347,100
C) $1,247,000
D) $857,769

Question 35

If a company which use predetermined rates for materials and conversion costs overestimates its materials cost per equivalent unit then: a. Cost of goods manufactured will be overstated
B) Cost per equivalent unit will be understated
C) Net income will not be affected
D) The ending balance in work-in-process will be understated

Question 36

The Jetson Company began the month of May with no units completed or in-process. During the month the company began 210,000 units but only completed 185,000 units. The units still in process are 40% complete. The company incurred $1,575,600 in manufacturing costs. The cost per equivalent unit is: (rounded to the nearest cent) a. $8.08
B) $8.52
C) $7.50
D) $15.92

Question 37

Conversion costs include: a. Labor and overhead
B) Materials and labor
C) Materials and overhead
D) Labor, overhead, and materials

Question 38

Smith Manufacturing uses the weighted average process costs method. Smith has provided the follow data: Units still in process at the end of the period are 100% complete as to material and 60% complete as to conversion. What is the cost per equivalent unit for conversion costs?

A) $24.18
B) $34.34
C) $15.00
D) $14.55
E) $15.29

Question 39

In a process costing system, when manufacturing overhead is charged, what account is debited? a. Manufacturing overhead
B) Cost of goods sold
C) Work in process inventory
D) Finished goods inventory

Question 40

The Holtz Company uses a process costing system. Data from the Fabrication Department for the month of December is as follows: The equivalent units for conversion costs in the Fabrication Department for December are: a. 25,400
B) 26,600
C) 29,000
D) 30,600

Question 41

When using the weighted average costs method, the cost of beginning inventory is: a. Added to the cost for the current month to determine the cost per equivalent unit.
B) Considered separately from costs incurred during the current month.
C) Ignored in calculating the cost per equivalent unit for the current month.
D) Added only to the units completed during the period.
E) None of the above.

Question 42

Smith Manufacturing uses a standard costing system. For the current period, Smith allocated the following costs using a predetermined overhead rate: What are Smith's material and conversion variances for the month?

A) $10,000 Unfavorable materials variance/$2,000 Unfavorable conversion variance.
B) $20,000 Unfavorable materials variance/$2,000 Favorable conversion variance.
C) $5,000 Unfavorable materials variance/$1,000 Favorable conversion variance.
D) $12,000 materials variance/$50,000 conversion variance.
E) None of the above.