Deck 8: Process-Costing Systems

Question 1

In process-costing, material costs are not traced to individual units of output, as in job costing.

Answer 1

True

Question 2

Companies that produce products in continuous-flow production, such as paint and cereals use process-costing.

Answer 2

True

Question 3

Process-costing is used to help set selling prices, but is not used to determine inventory values for financial accounting.

Answer 3

False

Question 4

Conversion costs of resources used by processes generally occur at the unit-level of output.

Question 5

Conversion costs of resources used by processes can apply to all levels of the cost hierarchy.

Question 6

Temporary labor is normally a batch-level conversion cost.

Question 7

In process costing, material costs are traced to individual units of output.

Question 8

The first step in the process costing system is to compute the number of equivalent units produced.

Question 9

The first step in the process costing system is to summarize the physical flow of units.

Question 10

The basic cost flow model to help account for units processed during the period is beginning inventory plus transfers in minus transfers out equals ending inventory.

Question 11

Equivalent units represent the amount of physical units transferred to finished goods.

Question 12

Equivalent units represent the amount of work actually accomplished, expressed as the number of units that could have been fully completed.

Question 13

In process costing, two half-finished units equal one equivalent unit.

Question 14

Cost per equivalent unit is calculated by dividing the number of equivalent units by the total cost.

Question 15

Weighted-average costing combines the cost in beginning inventory with costs incurred during the period to compute unit costs.

Question 16

For weighted-average costing, it is not necessary to know which of the finished units were from the beginning inventory in order to compute the number of finished equivalent units.

Question 17

Weighted-average process costing provides detailed information to management to assess worker productivity for the current period.

Question 18

Overstating the percentage of completion of the ending inventory under weighted-average process-costing will result in overstated profits for the period.

Question 19

Under weighted-average process-costing, all costs of material and conversion are averaged together in determining cost per finished equivalent unit.

Question 20

If the degree of completion of the ending inventory is underestimated, a company's profits will be overstated for the period.

Question 21

Prior department costs should be excluded from a department's costs for purposes of performance evaluations.

Question 22

In a multiple department process, the costs of units transferred out of one department and into another are called prior department costs.

Question 23

Prior department process costs are always assigned an equivalent unit percent complete of 0%.

Question 24

The cost of normal spoilage should be written off as an expense account during the accounting period.

Question 25

The cost of abnormal spoilage should be written off as a cost of the period rather than added to inventory.

Question 26

Companies that have a zero defect policy might treat all spoilage as abnormal.

Question 27

The entry to account for abnormal spoilage consists of a debit to work-in-process inventory and a credit to an expense account.

Question 28

Lost units are goods that evaporate or otherwise disappear during a production process.

Question 29

All lost units should be written off as an expense for the period.

Question 30

Total costs to be accounted for are the same for both the weighted-average and FIFO methods.

Question 31

The weighted-average method is usually more accurate in matching actual costs to the period of production.

Question 32

Only the weighted-average method is allowed for external financial reporting.

Question 33

If both the number of physical units in the beginning and ending inventory and their degrees of completion are equal, then the number of units started will equal the number of units transferred out.

Question 34

If there are no units in beginning inventory, weighted-average and FIFO will result in the same number of finished equivalent units.

Question 35

If there are no units in ending inventory, weighted-average and FIFO will result in the same number of finished equivalent units.

Question 36

If materials are added at the end of the process and assuming no spoilage, under FIFO process costing, the equivalent units will always be equal to the number of units transferred out during the period.

Question 37

The FIFO method differs from the weighted-average method in that the FIFO method allocates costs based on whole units whereas the weighted-average method uses equivalent units.

Question 38

The weighted-average method differs from the FIFO method in that the weighted-average method does not consider the degree of completion for the beginning work-in-process inventory whereas FIFO does.

Question 39

Prior process costs are always assigned an equivalent unit percent complete of 100% under both the FIFO and weighted-average methods.

Question 40

In computing the cost per equivalent unit, the weighted-average-method considers current costs only, while the FIFO Method considers prior period costs and current costs.

Question 41

Under FIFO process-costing, if materials are added at the end of the process, the materials portion of the ending inventory of work-in-process will always be assigned a cost of zero.

Question 42

In operation costing, direct materials for each work order or batch passing through a particular operation are different, while conversion costs are the same.

Question 43

A company using operation costing typically uses different materials for products that pass through the same operations.

Question 44

Use the following to answer questions:
Diamond Company has a process costing system using the weighted-average cost flow method. All
materials are introduced at the beginning of the process in Department 1. The following information is
available for the month of January:


-The number of equivalent units of production for material costs for the month of January is:

A) 28,000
B) 23,200
C) 24,000
D) 22,000

Question 45

Use the following to answer questions:
Diamond Company has a process costing system using the weighted-average cost flow method. All
materials are introduced at the beginning of the process in Department 1. The following information is
available for the month of January:


-The number of equivalent units of production for conversion costs for the month of January is:

A) 21,600
B) 24,000
C) 22,000
D) 23,200

Question 46

Use the following to answer questions:
Carlton Manufacturing Company has the following information available for its process-costing system for the month of May in the finishing department. The finishing department is the second of a multiple-department manufacturing plant. Materials are added at the end of the process in finishing.

Beginning inventory is 30% complete as to conversion costs; ending inventory is 80% complete as to conversion costs.

-The number of units transferred out of the finishing department is:

A) 250,000
B) 50,000
C) 300,000
D) 100,000

Question 47

Use the following to answer questions:
Carlton Manufacturing Company has the following information available for its process-costing system for the month of May in the finishing department. The finishing department is the second of a multiple-department manufacturing plant. Materials are added at the end of the process in finishing.

Beginning inventory is 30% complete as to conversion costs; ending inventory is 80% complete as to conversion costs.

-The number of finished equivalent units of materials under weighted-average is:

A) 300,000
B) 250,000
C) 200,000
D) 50,000

Question 48

Use the following to answer questions:
Carlton Manufacturing Company has the following information available for its process-costing system for the month of May in the finishing department. The finishing department is the second of a multiple-department manufacturing plant. Materials are added at the end of the process in finishing.

Beginning inventory is 30% complete as to conversion costs; ending inventory is 80% complete as to conversion costs.

-The cost per finished equivalent unit for materials under weighted-average is:

A) $0.75
B) $2.00
C) $0.90
D) $0.94

Question 49

Use the following to answer questions:
Carlton Manufacturing Company has the following information available for its process-costing system for the month of May in the finishing department. The finishing department is the second of a multiple-department manufacturing plant. Materials are added at the end of the process in finishing.

Beginning inventory is 30% complete as to conversion costs; ending inventory is 80% complete as to conversion costs.

-The value assigned to the materials portion of ending inventory under weighted-average is:

A) $140,000
B) $100,000
C) $45,000
D) $0

Question 50

The total cost of the units transferred out under weighted-average is:

A) $225,000
B) $1,190,500
C) $1,365,000
D) $174,500

Question 51

An error was made in the computation of the percentage of completion of the current year ending Work-in-Process inventory. The error resulted in assigning a higher percentage of completion to each component than was actually the case. Assume that there was no beginning inventory. The effect of this error on equivalent units, cost per equivalent unit and costs assigned to the goods transferred out would be:

A) Item A
B) Item B
C) Item C
D) Item D

Question 52

Use the following to answer questions:
The following information is available for Sulmonter Manufacturing Company for the current period:

32,000 units were started during the period
The ending inventory has 8,000 units, which are 45% complete with respect to direct materials and 65% complete with respect to conversion costs. FIFO costing is used.

-What are the total units to be accounted for?

A) 32,000
B) 40,000
C) 44,000
D) 52,000

Question 53

Use the following to answer questions:
The following information is available for Sulmonter Manufacturing Company for the current period:

32,000 units were started during the period
The ending inventory has 8,000 units, which are 45% complete with respect to direct materials and 65% complete with respect to conversion costs. FIFO costing is used.

-How many units were started and completed during the current period?

A) 20,000
B) 24,000
C) 32,000
D) 40,000

Question 54

Use the following to answer questions:
The following information is available for Sulmonter Manufacturing Company for the current period:

32,000 units were started during the period
The ending inventory has 8,000 units, which are 45% complete with respect to direct materials and 65% complete with respect to conversion costs. FIFO costing is used.

-What are the equivalent units produced for materials using FIFO?

A) 29,200
B) 30,000
C) 37,200
D) 38,000

Question 55

Use the following to answer questions:
The following information is available for Sulmonter Manufacturing Company for the current period:

32,000 units were started during the period
The ending inventory has 8,000 units, which are 45% complete with respect to direct materials and 65% complete with respect to conversion costs. FIFO costing is used.

-What are the equivalent units produced for conversion costs using FIFO Costing?

A) 32,200
B) 35,800
C) 36,000
D) 38,200

Question 56

Use the following to answer questions:
The following information is available for Sulmonter Manufacturing Company for the current period:

32,000 units were started during the period
The ending inventory has 8,000 units, which are 45% complete with respect to direct materials and 65% complete with respect to conversion costs. FIFO costing is used.

-What is the prior department cost per equivalent unit, using FIFO costing (rounded to the nearest cent?)

A) $0.60
B) $0.80
C) $0.655
D) $0.50

Question 57

Use the following to answer questions:
The following information is available for Sulmonter Manufacturing Company for the current period:

32,000 units were started during the period
The ending inventory has 8,000 units, which are 45% complete with respect to direct materials and 65% complete with respect to conversion costs. FIFO costing is used.

-What is the material cost per equivalent unit using FIFO costing?

A) $1.16
B) $1.10
C) $1.35
D) $1.09

Question 58

Use the following to answer questions:
The following information is available for Sulmonter Manufacturing Company for the current period:

32,000 units were started during the period
The ending inventory has 8,000 units, which are 45% complete with respect to direct materials and 65% complete with respect to conversion costs. FIFO costing is used.

-What is the total cost of the units transferred out under FIFO?

A) $88,360
B) $77,520
C) $50,400
D) $67,566

Question 59

Use the following to answer questions:
The following information is available for Sulmonter Manufacturing Company for the current period:

32,000 units were started during the period
The ending inventory has 8,000 units, which are 45% complete with respect to direct materials and 65% complete with respect to conversion costs. FIFO costing is used.

-What is the total cost of the ending inventory under FIFO?

A) $10,840
B) $11,212
C) $12,720
D) $6,412

Question 60

Use the following to answer questions:
Vassel Company has a process-costing system using the Weighted-Average cost flow method. All materials are introduced at the beginning of the process in Department 1. The following information is available for the month of December.


-The number of equivalent units of production for materials for the month of December is:

A) 8,000
B) 7,500
C) 9,000
D) 7,800

Question 61

Use the following to answer questions:
Vassel Company has a process-costing system using the Weighted-Average cost flow method. All materials are introduced at the beginning of the process in Department 1. The following information is available for the month of December.


-The number of equivalent units of production for conversion costs for the month of December is:

A) 8,000
B) 7,500
C) 9,000
D) 7,800

Question 62

In computing the cost per equivalent unit, the FIFO method considers:

A) Current costs less costs in beginning Work-in-Process Inventory
B) Current costs only
C) Current costs plus costs in beginning Work-in-Process Inventory
D) Current costs plus costs of ending Work-in-Process Inventory

Question 63

Use the following to answer questions:
The following information pertains to Yiannis Oil Company for the month of June:

All materials are added at the beginning of the process. Beginning inventory is 80% complete for conversion costs; ending inventory is 20% complete for conversion costs. Yiannis uses the weighted-average method.

-The number of finished equivalent units of materials for June is:

A) 1,600,000
B) 1,840,000
C) 1,540,000
D) 1,348,000

Question 64

Use the following to answer questions:
The following information pertains to Yiannis Oil Company for the month of June:

All materials are added at the beginning of the process. Beginning inventory is 80% complete for conversion costs; ending inventory is 20% complete for conversion costs. Yiannis uses the weighted-average method.

-The number of finished equivalent units of conversion costs for June is:

A) 1,540,000
B) 1,840,000
C) 1,600,000
D) 1,348,000

Question 65

Use the following to answer questions:
The following information pertains to Yiannis Oil Company for the month of June:

All materials are added at the beginning of the process. Beginning inventory is 80% complete for conversion costs; ending inventory is 20% complete for conversion costs. Yiannis uses the weighted-average method.

-The cost per finished equivalent unit for materials for June is:

A) $24.31
B) $21.82
C) $21.00
D) $20.35

Question 66

Use the following to answer questions:
The following information pertains to Yiannis Oil Company for the month of June:

All materials are added at the beginning of the process. Beginning inventory is 80% complete for conversion costs; ending inventory is 20% complete for conversion costs. Yiannis uses the weighted-average method.

-The total material cost of the ending inventory for June is:

A) $6,105,000
B) $6,300,000
C) $5,478,261
D) $7,293,000

Question 67

Materials are added at the beginning of the process in Department A. What are the equivalent units of
Production for materials and conversion, using the weighted-average method?

Richardson Corporation's production cycle starts in Department A. The following information is available
For May:

A) Item A
B) Item B
C) Item C
D) Item D

Question 68

Materials are added at the beginning of the process in Department A. What are the equivalent units of production for materials and conversion, using the FIFO method? (Appendix A)

Riordan Corporation's production cycle starts in Department A. The following information is available for May:

A) Item A
B) Item B
C) Item C
D) Item D

Question 69

Which of the following is true of abnormal spoilage?

A) It is prorated between cost of goods sold and inventory
B) It is normally treated as a part of good units produced
C) It is normally written off as an expense in the period incurred
D) It is considered to be part of production

Question 70

Which of the following statements is false about normal or tolerated spoilage?

A) It is expected as a natural outcome of an imperfect process and counted as a normal cost of good units produced
B) With wide acceptance of quality improvement initiatives, the idea is now in disfavor
C) For external financial reporting purposes, it is normally reported as a separate line item in the income statement
D) Regardless of the treatment and computation, it is usually desirable to internally report spoilage costs as . a separate item for management purposes

Question 71

Use the following to answer questions:
Winchester Salad Dressing had beginning work-in-process in July of $248,320 consisting of $101,640 of materials and $146,680 of conversion costs. There were 16,000 units (one unit equals one case of salad dressing) in beginning work-in-process, 40% complete as to conversion costs. Materials are added at the beginning of the process. During November, 34,000 were transferred out; 1,000 were spoiled and 9,000 remained in ending inventory. The spoiled units were 60% complete for conversion cost. The ending work-in-process was 70% complete for conversion cost. Costs during the period amounted to $781,200 for direct materials and $1,009,280 for conversion. Winchester uses the weighted-average-method and identifies all spoilage costs separately.

-The number of units started during July was:

A) 35,000
B) 53,000
C) 28,000
D) 34,000

Question 72

Use the following to answer questions:
Winchester Salad Dressing had beginning work-in-process in July of $248,320 consisting of $101,640 of materials and $146,680 of conversion costs. There were 16,000 units (one unit equals one case of salad dressing) in beginning work-in-process, 40% complete as to conversion costs. Materials are added at the beginning of the process. During November, 34,000 were transferred out; 1,000 were spoiled and 9,000 remained in ending inventory. The spoiled units were 60% complete for conversion cost. The ending work-in-process was 70% complete for conversion cost. Costs during the period amounted to $781,200 for direct materials and $1,009,280 for conversion. Winchester uses the weighted-average-method and identifies all spoilage costs separately.

-The number of finished equivalent units under weighted-average for materials is:

A) 44,000
B) 43,000
C) 39,600
D) 39,400

Question 73

Use the following to answer questions:
Winchester Salad Dressing had beginning work-in-process in July of $248,320 consisting of $101,640 of materials and $146,680 of conversion costs. There were 16,000 units (one unit equals one case of salad dressing) in beginning work-in-process, 40% complete as to conversion costs. Materials are added at the beginning of the process. During November, 34,000 were transferred out; 1,000 were spoiled and 9,000 remained in ending inventory. The spoiled units were 60% complete for conversion cost. The ending work-in-process was 70% complete for conversion cost. Costs during the period amounted to $781,200 for direct materials and $1,009,280 for conversion. Winchester uses the weighted-average-method and identifies all spoilage costs separately.

-The number of finished equivalent units under weighted-average for conversions costs is:

A) 44,000
B) 34,000
C) 40,300
D) 40,900

Question 74

Use the following to answer questions:
Winchester Salad Dressing had beginning work-in-process in July of $248,320 consisting of $101,640 of materials and $146,680 of conversion costs. There were 16,000 units (one unit equals one case of salad dressing) in beginning work-in-process, 40% complete as to conversion costs. Materials are added at the beginning of the process. During November, 34,000 were transferred out; 1,000 were spoiled and 9,000 remained in ending inventory. The spoiled units were 60% complete for conversion cost. The ending work-in-process was 70% complete for conversion cost. Costs during the period amounted to $781,200 for direct materials and $1,009,280 for conversion. Winchester uses the weighted-average-method and identifies all spoilage costs separately.

-The cost per finished equivalent unit for materials under weighted-average is:

A) $17.75
B) $20.06
C) $20.53
D) $21.69

Question 75

Use the following to answer questions:
Winchester Salad Dressing had beginning work-in-process in July of $248,320 consisting of $101,640 of materials and $146,680 of conversion costs. There were 16,000 units (one unit equals one case of salad dressing) in beginning work-in-process, 40% complete as to conversion costs. Materials are added at the beginning of the process. During November, 34,000 were transferred out; 1,000 were spoiled and 9,000 remained in ending inventory. The spoiled units were 60% complete for conversion cost. The ending work-in-process was 70% complete for conversion cost. Costs during the period amounted to $781,200 for direct materials and $1,009,280 for conversion. Winchester uses the weighted-average-method and identifies all spoilage costs separately.

-The cost per finished equivalent unit for conversion costs under weighted-average is:

A) $24.68
B) $26.27
C) $28.68
D) $28.26

Question 76

Use the following to answer questions:
Winchester Salad Dressing had beginning work-in-process in July of $248,320 consisting of $101,640 of materials and $146,680 of conversion costs. There were 16,000 units (one unit equals one case of salad dressing) in beginning work-in-process, 40% complete as to conversion costs. Materials are added at the beginning of the process. During November, 34,000 were transferred out; 1,000 were spoiled and 9,000 remained in ending inventory. The spoiled units were 60% complete for conversion cost. The ending work-in-process was 70% complete for conversion cost. Costs during the period amounted to $781,200 for direct materials and $1,009,280 for conversion. Winchester uses the weighted-average-method and identifies all spoilage costs separately.

-The total cost of units transferred out assuming spoilage is written off as an expense under weighted-average was:

A) $1,680,000
B) $1,394,665
C) $1,642,880
D) $2,038,579

Question 77

Use the following to answer questions:
Winchester Salad Dressing had beginning work-in-process in July of $248,320 consisting of $101,640 of materials and $146,680 of conversion costs. There were 16,000 units (one unit equals one case of salad dressing) in beginning work-in-process, 40% complete as to conversion costs. Materials are added at the beginning of the process. During November, 34,000 were transferred out; 1,000 were spoiled and 9,000 remained in ending inventory. The spoiled units were 60% complete for conversion cost. The ending work-in-process was 70% complete for conversion cost. Costs during the period amounted to $781,200 for direct materials and $1,009,280 for conversion. Winchester uses the weighted-average-method and identifies all spoilage costs separately.

-The total cost assigned to spoiled units under weighted-average is:

A) $48,320
B) $20,060
C) $37,016
D) $28,260

Question 78

Use the following to answer questions:
Oliver Corporation's Department 2 had 1,600 units in the beginning inventory (60% complete for conversion costs). During July, 14,000 units were started into production; 14,400 good units were transferred to Department 3 and 400 units were left in the ending inventory, which were 40% complete for conversion costs. All materials are added at the end of the process in Department 2. Units are inspected at the completion of the process, at which point spoiled units are identified and disposed of. The cost of spoiled units is written off as an abnormal expense during the period. The following costs were assigned to Department 2 during the period:


-The number of units spoiled during July was:

A) 400
B) 800
C) 1,200
D) 0

Question 79

Use the following to answer questions:
Oliver Corporation's Department 2 had 1,600 units in the beginning inventory (60% complete for conversion costs). During July, 14,000 units were started into production; 14,400 good units were transferred to Department 3 and 400 units were left in the ending inventory, which were 40% complete for conversion costs. All materials are added at the end of the process in Department 2. Units are inspected at the completion of the process, at which point spoiled units are identified and disposed of. The cost of spoiled units is written off as an abnormal expense during the period. The following costs were assigned to Department 2 during the period:


-The number of finished equivalent units of materials under weighted-average and FIFO is:

A) Item A
B) Item B
C) Item C
D) Item D

Question 80

Use the following to answer questions:
Oliver Corporation's Department 2 had 1,600 units in the beginning inventory (60% complete for conversion costs). During July, 14,000 units were started into production; 14,400 good units were transferred to Department 3 and 400 units were left in the ending inventory, which were 40% complete for conversion costs. All materials are added at the end of the process in Department 2. Units are inspected at the completion of the process, at which point spoiled units are identified and disposed of. The cost of spoiled units is written off as an abnormal expense during the period. The following costs were assigned to Department 2 during the period:


-The number of finished equivalent units of conversion costs under weighted-average and FIFO is:

A) Item A
B) Item B
C) Item C
D) Item D