Deck 4: How Is Process Costing Used to Track Production Costs

Question 1

When units are transferred from one production process to another,the journal entry will include a debit and a credit to two different Work-in-Process Inventory accounts.

Answer 1

True

Question 2

In a process costing system,partially completed units in Work-in-Process Inventory are typically converted to equivalent completed units.

Answer 2

True

Question 3

A company that uses process costing may use several Work-in-Process Inventory accounts.

Answer 3

True

Question 4

When using a process costing system,product costs are tracked by department rather than by job.

Question 5

When using process costing,only one companywide Work-in-Process account is allowed for tracking product costs.

Question 6

The unit cost information for process costing comes from the departmental production cost report.

Question 7

In a process costing system,the department where production begins will never have transferred-in costs from another department.

Question 8

Process costing is typically used by service companies that have one department.

Question 9

In a process costing system,the first step is to summarize the physical flow of units so that Units to be accounted for equals Units sold.

Question 10

Because direct materials,direct labor,and overhead may enter a process at varying stages,equivalent units in Work-in-Process Inventory may be different for each of these components of production.

Question 11

A job costing system would be appropriate for an oil refinery.

Question 12

If 10 physical units of product are 30 percent complete at the end of the period,an equivalent of 3 completed units will be used for process costing calculations.

Question 13

The production cost report is often prepared using computerized software to minimize math errors and to speed up the process.

Question 14

A process costing system is used by companies that produce similar or identical units of product.

Question 15

A bike repair shop would most likely use a process costing system.

Question 16

For a manufacturing company using process costing,cost per equivalent unit is only calculated for direct labor and direct materials.

Question 17

Two important double-checks included in a production cost report are: (1)units to be accounted for matches units accounted for and (2)total costs to be accounted for matches total costs accounted for.

Question 18

A company producing the following product will likely not use process costing?

A)Milk
B)Custom built yachts
C)Oil
D)soda
E)None of the answer choices is correct.

Question 19

Most companies use either the weighted average or specific identification method to assign costs to inventory in a process costing environment.

Question 20

Both process costing and job costing typically include three product costs direct materials,direct labor,and manufacturing overhead.

Question 21

Frost Company produces cupcakes in large batches.Three departments are involved in the production process -- Mixing,Baking,and Packaging.Frost uses a process costing system.If products with a cost of $10,000 are transferred from the Mixing Department to the Baking Department for further processing,which of the following journal entries is needed to record this transaction?

A)Finished Inventory - Mixing 10,000
Finished Inventory - Baking 10,000
B)WIP Inventory - Baking 10,000
WIP Inventory - Mixing 10,000
C)WIP Inventory - Mixing 10,000
WIP Inventory - Baking 10,000
D)Finished Inventory - Baking 10,000
Finished Inventory - Mixing 10,000
E)None of the answer choices is correct.

Question 22

Diaz Company uses process costing in its two processing departments;-Assembly and Finishing.If the Assembly Department requisitioned direct materials to be used in production,totaling $80,000,which one of the following journal entries would be made to record this transaction?

A)WIP Inventory - Assembly 80,000
WIP Inventory - Materials 80,000
B)Raw Materials Inventory 80,000
WIP Inventory - Assembly 80,000
C)WIP Inventory - Assembly 80,000
Raw Materials Inventory 80,000
D)Cost of Goods sold 80,000
Finished Goods Inventory 80,000
E)None of the answer choices is correct.

Question 23

The Packaging Department at Vail Incorporated had 51,000 units in beginning inventory.These units contained $105,000 in direct materials,$120,000 in direct labor,and $90,000 in overhead.During the period,the department incurred costs of $480,000 in direct materials,$600,000 in direct labor and $300,000 in overhead and started 240,000 units.Ending inventory consisted of 18,000 units which were 100% complete with respect to direct materials and 70% complete with respect to direct labor and overhead.How many units were transferred out?

A)309,000
B)291,000
C)282,000
D)273,000
E)None of the answer choices is correct.

Question 24

Diaz Company uses process costing in its two processing departments-Assembly and Finishing.If the direct labor costs incurred for the Assembly Department totaling $15,000 are to be paid next month,which one of the following journal entries would be made to record this transaction?

A)Wages Payable 15,000
Wages Expense 15,000
B)WIP Inventory - Assembly 15,000
Wages Payable 15,000
C)Wages Payable 15,000
WIP Inventory - Assembly 15,000
D)Wages Expense 15,000
WIP Inventory - Assembly 15,000
E)None of the answer choices is correct.

Question 25

The journal entry to record the transfer of units from one processing department to another processing department includes:

A)a debit to WIP Inventory.
B)a debit to Finished Goods Inventory.
C)a credit to WIP Inventory.
D)Both a and c are correct.
E)None of the answer choices is correct.

Question 26

Diaz Company uses process costing in its two processing departments-Assembly and Finishing.If the Finishing Department is the final production department and completes product with a production cost of $15,000,which one of the following journal entries would be made to record this transaction?

A)Cost of Goods Sold 15,000
WIP Inventory - Finishing 15,000
B)Finished Goods Inventory 15,000
Cost of Goods Sold 15,000
C)WIP Inventory - Finishing 15,000
Finished Goods Inventory 15,000
D)Finished Goods Inventory 15,000
WIP Inventory - Finishing 15,000
E)None of the answer choices is correct.

Question 27

Using a process costing system,the journal entry to record the use of direct labor in the Finishing Department includes:

A)a credit to Wages Payable.
B)a debit to Wages Expense.
C)a credit to Work in Process Inventory - Finishing.
D)a credit to Finished Goods Inventory.
E)None of the answer choices is correct.

Question 28

Frost Company produces cupcakes in large batches.Three departments are involved in the production process -- Mixing,Baking,and Packaging.Frost uses a process costing system.Assume products with a cost of $9,000 are sold to customers.Which of the following journal entries is needed to record this transaction?

A)Cost of Goods Sold 9,000
Finished Goods Inventory 9,000
B)WIP Inventory - Packaging 9,000
Finished Goods Inventory 9,000
C)Finished Goods Inventory 9,000
Sales Revenue 9,000
D)Finished Goods Inventory 9,000
Cost of Goods Sold 9,000
E)None of the answer choices is correct.

Question 29

Equivalent units are usually applied to:

A)only direct materials and direct labor.
B)only direct materials and overhead.
C)only direct labor.
D)direct materials,direct labor,and overhead.
E)None of the answer choices is correct.

Question 30

Using a process costing system,the journal entry to record the cost of completed goods when sold includes:

A)a debit to Finished Goods Inventory.
B)a credit to Cost of Goods Sold.
C)a debit to Work in Process Inventory.
D)a credit to Finished Goods Inventory.
E)None of the answer choices is correct.

Question 31

Using a process costing system,the journal entry to record the requisition of direct materials to be used in production includes:

A)a debit to Raw Materials Inventory
B)a debit to Manufacturing Overhead
C)a credit to Raw Material Inventory
D)a credit to Work in Process Inventory
E)None of the answer choices is correct.

Question 32

The Molding Department at Miley Corporation had 10,000 units in process on July 1 and 6,000 units in process on July 31.During July,it started 46,000 units.The cost per equivalent unit produced in July was $2.50.If the equivalent units produced in July were 48,000,what were the costs incurred during the month?

A)$105,000
B)$115,000
C)$120,000
D)$150,000
E)None of the answer choices is correct.

Question 33

Diaz Company uses process costing in its two processing departments-Assembly and Finishing.If completed goods with a cost of $62,000 are sold,which one of the following journal entries would be made to record this transaction?

A)Cost of Goods Sold 62,000
Finished Goods Inventory 62,000
B)Cost of Goods Sold 62,000
Sales Revenue 62,000
C)WIP Inventory - Assembly 62,000
WIP Inventory - Finishing 62,000
D)Finished Goods Inventory 62,000
Cost of Goods Sold 62,000
E)None of the answer choices is correct.

Question 34

Which of the following statements is true regarding cost per equivalent unit?

A)This calculation only includes variable costs.
B)This measure is used to assign costs to units transferred out.
C)This measure always stays the same from one month to the next regardless of different levels of production.
D)The formula to calculate this measure uses total equivalent units accounted for divided by total costs to be accounted for.
E)None of the answer choices is correct.

Question 35

If ending inventory in the Distilling Department consists of 6,000 units which are 100% complete with respect to direct materials and 40% complete with respect to direct labor and overhead,what are the number of equivalent units for direct materials,direct labor,and overhead?

A)Direct materials = 6,000 units;direct labor = 6,000 units;overhead = 6,000 units
B)Direct materials = 2,400 units;direct labor = 2,400 units;overhead = 2,400 units
C)Direct materials = 6,000 units;direct labor = 2,400 units;overhead = 2,400 units
D)Direct materials = 6,000 units;direct labor = 2,400 units;overhead = 6,000 units
E)None of the answer choices is correct.

Question 36

Frost Company produces cupcakes in large batches.Three departments are involved in the production process -- Mixing,Baking,and Packaging.Frost uses a process costing system.If the Mixing Department requisitioned direct materials to be used in production totaling $3,500,which of the following journal entries is needed to record this transaction?

A)Raw Materials Inventory 3,500
WIP Inventory - Mixing 3,500
B)Finished Goods Inventory 3,500
Raw Materials Inventory 3,500
C)WIP Inventory - Mixing 3,500
Manufacturing Overhead 3,500
D)WIP Inventory - Mixing 3,500
Raw Materials Inventory 3,500
E)None of the answer choices is correct.

Question 37

If a processing department has no beginning WIP Inventory,and the ending WIP Inventory is 100% complete as to material costs,the number of equivalent units for material costs is:

A)always equal to zero.
B)equal to the units completed.
C)less than the units placed into the process.
D)equal to the units placed into the process.
E)None of the answer choices is correct.

Question 38

The following information is available for the current year for Pike company.

If Pike Company uses the weighted average process costing method,what is the total equivalent completed units transferred out and in WIP Inventory?

A)166,000
B)190,000
C)166,600
D)142,000
E)None of the answer choices is correct.

Question 39

Diaz Company uses process costing in its two processing departments-Assembly and Finishing.If the Assembly Department completes a batch of products with production costs of $30,000 and moves it to the Finishing Department,which one of the following journal entries would be made to record this transaction?

A)WIP Inventory - Finishing 30,000
WIP Inventory - Assembly 30,000
B)WIP Inventory - Assembly 30,000
WIP Inventory - Finishing 30,000
C)Finished Goods Inventory 30,000
WIP Inventory - Assembly 30,000
D)WIP Inventory - Assembly 30,000
Cost of Goods Sold 30,000
E)None of the answer choices is correct.

Question 40

The number of equivalent units for any input (direct materials,direct labor,or overhead)cannot be greater than:

A)units completed.
B)units to account for.
C)units started.
D)total costs to account for.
E)None of the answer choices is correct.

Question 41

The cost per equivalent unit in the production cost report equals the "costs to be accounted for" divided by the number of:

A)units sold.
B)equivalent units produced.
C)units completed.
D)units started.
E)None of the answer choices is correct.

Question 42

Calculate the number of equivalent units for each of the following independent cases.

Question 43

Exhibit 4-1
Silva Coporation uses the weighted average process costing method.The Mixing Department at Silva had 17,000 units in beginning inventory.These units contained $70,000 in direct materials,$80,000 in direct labor,and $60,000 in overhead.During the period,the department incurred costs of $320,000 in direct materials,$400,000 in direct labor and $200,000 in overhead and started 80,000 units.Ending inventory consisted of 6,000 units which were 100% complete with respect to direct materials and 50% complete with respect to direct labor and overhead.
Refer to Exhibit 4-1.What is the cost per equivalent unit for overhead (rounded to the nearest cent)?

A)$2.77
B)$0.64
C)$2.52
D)$2.68
E)None of the answer choices is correct.

Question 44

Holder Incorporated uses the weighted average method for its process costing system.The Assembly Department at began March with 24,000 units in Work in Process (WIP)Inventory,all of which were completed and transferred out during March.An additional 32,000 units were started during the month,12,000 of which were completed and transferred out during March.A total of 20,000 units remained in Work in Process Inventory at the end of March,and were at varying levels of completion as follows:
Direct materials: 80 percent complete
Direct labor: 60 percent complete
Overhead: 70 percent complete

Question 45

Mathews Company uses the weighted average process costing method.The company had no units in beginning WIP Inventory.Mathews has calculated that 45,000 total equivalent units were completed during the year.If 53,000 units were started in the current period and 10,000 units were in ending WIP Inventory,what percentage of completion existed in the ending inventory units?

A)20%
B)22%
C)56%
D)81%
E)None of the answer choices is correct.

Question 46

When preparing a production cost report using the weighted average process costing method,"units to be accounted for" include:

A)units in beginning WIP Inventory plus units started during the period.
B)units transferred out plus units in beginning WIP Inventory.
C)units started during the period plus units transferred out.
D)units in beginning WIP Inventory plus units in ending WIP Inventory.
E)None of the answer choices is correct.

Question 47

Exhibit 4-2
Chem Company makes chemicals and uses the weighted average process costing method.The company has two processing departments - Mixing and Packaging.They had no beginning inventories for April and the percentages of completion were 50% for direct materials,direct labor,and overhead.

Refer to Exhibit 4-2.What is the cost per gallon for the packaging process?

A)$1.66
B)$1.78
C)$1.70
D)$1.56
E)None of the answer choices is correct.

Question 48

Jasper Company uses the weighted average process costing method.The Mixing Department at Jasper had 17,000 units in beginning inventory.These units contained $88,000 in direct materials,$80,000 in direct labor,and $60,000 in overhead.During the period,the department incurred costs of $300,000 in direct materials,$400,000 in direct labor and $200,000 in overhead and started 80,000 units.Ending inventory consisted of 6,000 units which were 100% complete with respect to direct materials and 50% complete with respect to direct labor and overhead.What is the cost per equivalent unit for materials (rounded to the nearest cent)?

A)$4.12
B)$4.26
C)$3.76
D)$4.00
E)None of the answer choices is correct.

Question 49

Alloy Manufacturing produces aluminum products in three processing departments -- Molding,Cutting,and Packaging.Transactions for the month of March are shown below:

Prepare journal entries to record transactions (1)through (7).

Question 50

Everlast Inc.had 12,000 units in WIP Inventory at December 1 that were 70% complete with respect to direct labor and overhead.During December,40,000 units were completed.On December 31,the 14,000 units in WIP Inventory were 30% complete as to direct labor and overhead.Direct materials are added at the beginning of the process.How many units were started during December?

A)42,000
B)66,000
C)38,000
D)32,000
E)None of the answer choices is correct.

Question 51

The ending WIP Inventory in the Assembly Department contains 800 units that are 100% complete with respect to direct materials and 80% complete with respect to direct labor and overhead.The cost per equivalent unit for inventory is $3.00,which consists of $2.00 for materials,$0.80 for labor,and $0.20 for overhead.What dollar value is assigned to the ending WIP Inventory?

A)$1,600
B)$512
C)$128
D)$2,240
E)None of the answer choices is correct.

Question 52

Using the weighted average process costing method,which of the following are included in the calculation of "units accounted for" on the departmental production cost report?

A)Units in beginning WIP Inventory plus units started.
B)Units started plus units in ending WIP Inventory.
C)Units completed and transferred out plus units in ending WIP Inventory.
D)Units in beginning WIP Inventory plus units in ending WIP Inventory.
E)None of the answer choices is correct.

Question 53

Exhibit 4-2
Chem Company makes chemicals and uses the weighted average process costing method.The company has two processing departments - Mixing and Packaging.They had no beginning inventories for April and the percentages of completion were 50% for direct materials,direct labor,and overhead.

Refer to Exhibit 4-2.What is the amount of ending WIP Inventory in the Mixing Department?

A)$6,000
B)$4,000
C)$2,000
D)$3,300
E)None of the answer choices is correct.

Question 54

Exhibit 4-1
Silva Coporation uses the weighted average process costing method.The Mixing Department at Silva had 17,000 units in beginning inventory.These units contained $70,000 in direct materials,$80,000 in direct labor,and $60,000 in overhead.During the period,the department incurred costs of $320,000 in direct materials,$400,000 in direct labor and $200,000 in overhead and started 80,000 units.Ending inventory consisted of 6,000 units which were 100% complete with respect to direct materials and 50% complete with respect to direct labor and overhead.
Refer to Exhibit 4-1.What is the cost per equivalent unit for direct labor (rounded to the nearest cent)?

A)$5.28
B)$5.11
C)$4.94
D)$0.86
E)None of the answer choices is correct.

Question 55

Exhibit 4-1
Silva Coporation uses the weighted average process costing method.The Mixing Department at Silva had 17,000 units in beginning inventory.These units contained $70,000 in direct materials,$80,000 in direct labor,and $60,000 in overhead.During the period,the department incurred costs of $320,000 in direct materials,$400,000 in direct labor and $200,000 in overhead and started 80,000 units.Ending inventory consisted of 6,000 units which were 100% complete with respect to direct materials and 50% complete with respect to direct labor and overhead.
Refer to Exhibit 4-1.What is the total cost of units transferred out?

A)$1,221,580
B)$1,150,420
C)$1,079,260
D)$1,082,900
E)None of the answer choices is correct.

Question 56

Exhibit 4-2
Chem Company makes chemicals and uses the weighted average process costing method.The company has two processing departments - Mixing and Packaging.They had no beginning inventories for April and the percentages of completion were 50% for direct materials,direct labor,and overhead.

Refer to Exhibit 4-2.What is the cost per gallon for the mixing process?

A)$5.88
B)$0.50
C)$0.48
D)$0.54
E)None of the answer choices is correct.

Question 57

Use the following information to calculate the cost per equivalent unit for direct materials,direct labor,overhead,and in total for the Assembly Department of Dessert Company for the month of June.

Question 58

The production cost report does all the following except:

A)calculates production for the next period.
B)shows the equivalent units of production.
C)helps in controlling costs.
D)shows the costs to transfer out.
E)None of the answer choices is correct.