Deck 15: Process-Costing Systems

Question 1

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.

Answer 1

D

Question 2

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.

Answer 2

True

Question 3

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

Answer 3

False

Question 4

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

Question 5

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 6

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 7

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 8

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 9

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

Question 10

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

Question 11

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 12

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 13

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

Question 14

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 15

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 16

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

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

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

Question 19

Conversion cost includes both direct material and indirect material.

Question 20

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

Question 21

Smith Manufacturing uses the weighted average process costs method.Smith has provided the follow data: $$\begin{array} { l r r r } & \text { Total Units/Cost } & \text { Material } & \text { Conversion } \\\hline \text { Beginning inventory } & 25,000 & & \\\text { Units started during period } & 175,000 & & \\\text { Units completed during period } & 185,000 & & \\\text { Costs from beginning inventory } & \$ 641,250 & \$ 561,250 & \$ 80,000 \\\text { Costs incurred during period } & \$ 6,868,750 & \$ 4,038,750 & \$ 2,830,000\end{array}$$ 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 22

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 23

Smith Manufacturing uses the weighted average process costs method.Smith has provided the follow data: $$\begin{array} { l r r r } & \text { Total Units/Cost } & \text { Material } & \text { Conversion } \\\hline \text { Beginning inventory } & 25,000 & & \\\text { Units started during period } & 175,000 & & \\\text { Units completed during period } & 185,000 & & \\\text { Costs from beginning inventory } & \$ 641,250 & \$ 561,250 & \$ 80,000 \\\text { Costs incurred during period } & \$ 6,868,750 & \$ 4,038,750 & \$ 2,830,000\end{array}$$ 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 24

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 25

Smith Manufacturing uses a standard costing system.For the current period, Smith allocated the following costs using a predetermined overhead rate: $$\begin{array} { l r r r } & \text { Material } & \text { Conversion } & \text { Total } \\\text { Allocated Costs: } & & & \\\text { Units completed } & \$ 40,000 & \$ 20,000 & \$ 60,000 \\\text { Units in process end of period } & \$ 5,000 & \$ 3,000 & \$ 8,000 \\& \$ 45,000 & \$ 23,000 & \$ 68,000 \\& & & \\\text { Actual Costs: } & \$ 50,000 & \$ 22,000 & \$ 72,000\end{array}$$ 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.

Question 26

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 27

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.