Deck 3: Process Costing

Question 1

The number of equivalent units for conversion costs is always equal to or less than the number of equivalent units for materials.

Answer 1

False

Question 2

The cost transferred out is the cost of the inventory that was started and completed during the period.

Answer 2

False

Question 3

Materials are always added at the beginning of every process.

Answer 3

False

Question 4

In process costing, a transferred-in cost is handled in the same manner as a material cost added at the beginning of the process.

Question 5

Transferred-in costs are the costs of the direct materials that are transferred into the company when materials are purchased from a supplier.

Question 6

A significant disadvantage of a process costing system is that it requires the use of actual overhead costs rather than predetermined overhead rates.

Question 7

In the manufacturing operations of a company using process costing, a product must typically pass through two or more departments.

Question 8

Material is generally added evenly throughout the production process.

Question 9

Materials and labor are often grouped together and called conversion costs.

Question 10

The cost per equivalent unit is determined by dividing the cost incurred in the current period by the total equivalent units produced.

Question 11

An essential calculation in a process costing system is to calculate the average unit cost, also known as the cost per equivalent unit.

Question 12

Process costing systems are commonly used by companies that produce homogeneous items using a continuous production process.

Question 13

A company such as Proctor & Gamble that produces large quantities of identical items, such as shampoo and toothpaste, is likely to use a process costing system.

Question 14

In a process costing system, costs are transferred from the Work in Process inventory account directly to the Cost of Goods Sold account.

Question 15

The number of equivalent units for materials is the same as the equivalent units for conversion costs in each department, but will often differ from equivalent units of other departments.

Question 16

The denominator in the formula for determining the cost per equivalent unit is determined by adding the number of units completed to the equivalent units in the ending Work in Process inventory.

Question 17

Recording transferred-in costs requires a debit to the Finished Goods inventory account and a credit to a Work in Process account.

Question 18

The number of fully complete units of product that could have been produced with the materials used and processing costs in a particular accounting period is referred to as equivalent units.

Question 19

In order to calculate the cost per equivalent unit, one must know the number of equivalent units in beginning inventory, ending inventory, units completed during the period, along with the total product costs incurred during the period.

Question 20

In a process costing system, each department has a separate Work in Process account.

Question 21

If beginning inventory consisted of 400 units, ending inventory was 600 units, and 7,700 units were started during the period, the number of units completed during the period was 8,700.

Question 22

Which of the following describes the differences between job-order and process costing?

A)Job-order costing is used in financial accounting, while process costing is used in managerial accounting.
B)Job-order costing can only be used by manufacturers; only service enterprises use process costing.
C)Job-order costing is voluntary, while process costing is required by GAAP.
D)Job-order costing traces costs to jobs, while process costing traces costs to departments and averages the costs among the units worked on during the period.

Question 23

When computing the cost of the ending Work in Process Inventory, the number of equivalent units in Work in Process inventory is multiplied by the cost per equivalent unit separately for material, and separately for conversion costs.

Question 24

Labor and overhead are often grouped together and referred to as

A)prime costs.
B)conversion costs.
C)total manufacturing costs.
D)equivalent unit costs.

Question 25

In a process costing system, when raw materials are put into process, the cost of the materials is moved from

A)Work in Process to Finished Goods.
B)Finished Goods to Cost of Goods Sold.
C)Raw Materials to Work in Process.
D)Finished Goods to Work in Process.

Question 26

Which of the following sequences describes the typical flow of costs in a company that is using process costing?

A)Raw Materials Inventory, Work in Process, Finished Goods, Cost of Goods Sold
B)Work in Process, Finished Goods, Raw Materials Inventory, Cost of Goods Sold
C)Raw Materials Inventory, Cost of Goods Sold, Work in Process, Finished Goods
D)Finished Goods, Raw Materials Inventory, Work in Process, Cost of Goods Sold

Question 27

Which one of the following is a costing system commonly used by companies that produce a large number of homogeneous units in a continuous production process?

A)Unit costing system
B)Job-order system
C)Incremental analysis cost system
D)Process costing system

Question 28

Which of the following costs is not a cost added to the Work in Process account in a process costing system?

A)Manufacturing overhead
B)Direct materials
C)Direct labor
D)Cost of goods sold

Question 29

In a process costing system with three departments, when items are sold, the cost of the items is moved from

A)Work in Process to Finished Goods.
B)Work in Process to Cost of Goods Sold.
C)Cost of Goods Sold to Finished Goods.
D)Finished Goods to Cost of Goods Sold.

Question 30

When direct labor costs are incurred in the Mixing Department, the journal entry to record the transaction includes a

A)debit to Wages Payable.
B)credit to Manufacturing Overhead.
C)credit to Work in Process, Mixing Department.
D)debit to Work in Process, Mixing Department.

Question 31

Which of the following statements about process costing is true?

A)Total transferred-in cost is equal to the total transferred-out cost during a period.
B)The costs of inventory completed in its final department in the manufacturing process will be transferred to Finished Goods inventory.
C)If a department has transferred-in costs, it means that the inventory accounts were not closed correctly at the end of the last period.
D)None of the answer choices are correct.

Question 32

A cost incurred by the Baking Department that is transferred to the Packaging Department is called a

A)conversion cost by the Baking Department.
B)transferred-out cost by the Packaging Department.
C)equivalent unit cost by the Baking Department.
D)transferred-in cost by the Packaging Department.

Question 33

The cost of the items completed and transferred out of a department is the total cost per equivalent unit times the number of units completed.

Question 34

Total cost accounted for is the sum of the cost of the units transferred out of the department plus the cost of the ending Work in Process inventory.

Question 35

In a process costing system, manufacturing overhead is added to Work in Process

A)using a predetermined overhead rate or based on actual overhead.
B)only in the final production department.
C)at the same rate as the direct materials are added.
D)only when Work in Process is transferred to Finished Goods.

Question 36

In which of the following industries are companies least likely to use a process costing system?

A)Canned vegetables
B)Wooden pencils
C)Shampoo
D)Office cleaning services

Question 37

Which of the following companies will most likely use a process costing system?

A)A law office
B)A custom home builder
C)A car repair business
D)A food manufacturer

Question 38

The cost per equivalent unit used in process costing is the average of fixed and variable costs.

Question 39

Which one of the following is true of the manufacturing operations of a company using process costing?

A)A product typically must pass through two or more finished goods departments.
B)Manufacturing overhead and direct labor costs are referred to as conversion costs.
C)Transferred-in costs occur only in departments that have no direct labor costs.
D)Costs transferred in must equal total costs transferred out of each work in process department.

Question 40

Conversion costs

A)are often assumed to be added at the beginning of the production process in each department.
B)are the sum of the direct materials and direct labor costs.
C)are rarely a part of the cost transferred out of a process department.
D)are often assumed to be added evenly throughout the process within a department.

Question 41

The amount used to determine the 'cost' in the cost per equivalent unit amount is the sum of the

A)cost of beginning Work in Process inventory and the cost of ending Work in Process inventory.
B)cost of beginning Work in Process inventory and the costs incurred in the current period.
C)costs incurred in the current period and the cost of ending Work in Process inventory.
D)cost of beginning Work in Process inventory, the cost of ending Work in Process inventory, and the costs incurred in the current period.

Question 42

HTC Calculators uses process costing.At the beginning June, there were 1,100 units in
Process, 70% complete with respect to material and 60% complete with respect to conversion costs.During June, 24,000 units were started and 23,600 units were completed.The units in ending Work in Process inventory were 90% complete with respect to material and 30% complete with respect to conversion costs.How many equivalent units will be used in calculating the cost per unit for materials during June?

A)24,950 units
B)24,050 units
C)25,720 units
D)22,950 units

Question 43

The Shaping Department began June with 5,000 units which were 50% complete.During
June, the department received another 60,000 units from the prior department and completed 62,000 units.The remaining units were 75% complete as to conversion costs.Materials are added at the beginning of the process.How much are equivalent units for conversion costs in the Shaping Department's Work in Process inventory at the end of June?

A)3,000 units
B)5,250 units
C)2,250 units
D)1,250 units

Question 44

Hanover Glassware produces crystal serve ware and uses process costing.At the start of May, 2,300 units were in process.During May, 11,000 units were completed and 2,000 units were in process at the end of May.These units in process were 80% complete with respect to material and 30% complete with respect to conversion costs.Other information is as follows: $\begin{array}{l}\text { Work in process, May } 1:\\\text { Direct material } & \$ 28,800 \\\text { Conversion costs } & 48,000\\\text { Costs incurred during May: }\\\text { Direct material } & \$ 198,000 \\\text { Conversion costs } & 242,000\end{array}$ Calculate the cost per equivalent unit for conversion costs during May.

A)$43.00
B)$25.00
C)$39.75
D)$17.45

Question 45

Why may the number of equivalent units in Work in Process inventory differ for material and for conversion costs?

A)A mistake was made in counting or recording the inventory amounts.
B)Material and conversion costs enter the production process at different times and at different rates.
C)Conversion costs are calculated at the end of the accounting period.
D)Some units may have been transferred in from previous departments.

Question 46

The cost per equivalent unit calculation is

A)the cost carried forward from beginning inventory plus the current production costs divided by equivalent units.
B)based on the costs incurred in this period divided by the equivalent units.
C)current period costs plus costs of beginning inventory multiplied by the equivalent units.
D)the total of all transferred-in costs plus beginning inventory costs minus ending inventory costs, all divided by equivalent units.

Question 47

Equivalent units

A)are used in calculating actual physical units completed in a process costing system.
B)are partially completed units that have been converted to a comparable number of completed units.
C)represent the cost of producing one unit of product.
D)All of these answer choices are correct.

Question 48

Which of the following will never be a component of the cost of Work in Process in a company's initial production department?

A)Direct material
B)Direct labor
C)Transferred-in costs
D)Manufacturing overhead

Question 49

The Baking Department began the period with 16,000 units which were 45% complete.During the period, the department received another 78,000 units from the previous department, and at the end of the period, 9,000 units remained which were 40% complete.Conversion costs are added evenly throughout the process and materials are added at the beginning of the process.How much are equivalent units for conversion costs in the Baking Department's Work in Process inventory at the end of the period?

A)5,400 units
B)3,600 units
C)3,000 units
D)9,000 units

Question 50

Which of the following is not needed in order to calculate the cost per equivalent unit in process costing?

A)Equivalent units in beginning Work in Process Inventory
B)Cost added during the period
C)Units completed and transferred out of the department
D)Equivalent units in ending inventory

Question 51

Transferred-in costs are recorded with a journal entry that includes a credit to

A)Raw Materials.
B)Manufacturing Overhead.
C)Work in Process.
D)Finished Goods.

Question 52

Cost per equivalent unit amounts are usually calculated for

A)direct materials, direct labor, and administrative costs.
B)current period costs incurred only.
C)direct material, direct labor, manufacturing overhead, and transferred-in costs.
D)units transferred in by the suppliers and units transferred out as sales returns.

Question 53

Hanover Glassware produces crystal serve ware and uses process costing.At the start of May, 2,300 units were in process.During May, 11,000 units were completed and 2,000 units were in process at the end of May.The units in process at the end of May were 80% complete with respect to material and 30% complete with respect to conversion costs.Other information is as follows: $$\begin{array} { c r } \text { Work in process, May 1: } & \\\text { Direct material } & \$ 28,800 \\\text { Conversion costs } & 48,000 \\\text { Costs incurred during May: } & \\\text { Direct material } &\$ 198,000 \\\text { Conversion costs } &242,000 \end{array}$$ How much is the cost per equivalent unit for direct materials during May?

A)$18.00
B)$25.00
C)$15.71
D)$39.75

Question 54

Cost per equivalent unit in the Blending Department in July is used to determine the cost of the

A)July 1 Work in Process inventory for the Blending Department.
B)Materials added to production in the Blending Department in July.
C)July 31 Work in Process inventory in the Blending Department.
D)Total costs added in the Blending Department during July.

Question 55

The Molding Department's Work in Process inventory on May 1 consists of 1,400 units and its Work in Process inventory on May 31 consists of 1,100 units.If 22,000 units were completed during the period, how many units were started in the Molding Department during the month of May?

A)21,700 units
B)23,100 units
C)24,800 units
D)21,400 units

Question 56

When partially completed units are converted to a comparable number of completed units, they are referred to as

A)conversion units.
B)transferred-out units.
C)equivalent units.
D)units to be accounted for.

Question 57

How are equivalent units calculated in a process costing system?

A)By adding the units started to the equivalent units in beginning and ending inventory
B)By adding the units completed to the equivalent units in ending Work in Process
C)By subtracting the equivalent units in beginning inventory from the total units to account for
D)By adding the units started to the equivalent units in ending inventory

Question 58

In the calculation of the cost per equivalent unit, the denominator

A)is the total work done during the period plus the equivalent units in ending inventory.
B)includes both the number of units completed and the number of equivalent units in ending Work in Process.
C)equals the work done during the period less the work remaining to finish ending inventory.
D)is the work done for the current and preceding departments.

Question 59

The number of equivalent units for an input cannot exceed the

A)units started.
B)units completed.
C)units to account for.
D)total cost to account for.

Question 60

Mash Company uses process costing.During March, its Varnishing Department incurred costs of $63,250 for conversion.The beginning inventory was 1,500 units and 9,700 units were transferred to the Varnishing Department from the Sanding Department during March.The Varnishing Department's conversion costs in beginning inventory totaled $5,550.The ending inventory consisted of 1,200 units that were 25% complete with respect to conversion costs.Materials are added at the beginning of the process.What is the cost per equivalent unit for conversion costs during March?

A)$6.14
B)$6.88
C)$5.42
D)$6.38

Question 61

Wilson Inc.uses process costing.Its Sanitizing Department had no beginning Work in Process inventory, though it added materials of $120,000 and conversion costs totaling $160,000 during May.Materials are added at the beginning of the process and conversion costs are added evenly throughout the process.During May, 75,000 units were completed.The May 31 Work in Process inventory balance consisted of 25,000 units that were 20% complete.What is the cost of the ending Work in Process inventory for May?

A)$240,000
B)$56,000
C)$280,000
D)$40,000

Question 62

Weed Wackers uses process costing and has provided data for its Processing Department for June as follows: $\begin{array}{lrr}&\text { Units }&\text { Cost of Materials }\\\text { Beginning Work in Process inventory } & 2,000 & \$ 21,020 \\\text { Units started in June } & 77,000 & 48,500 \\\text { Units completed } & 75,600 & \\\text { Ending Work in Process inventory } & 3,400 &\end{array}$ All materials are added at the beginning of the manufacturing process.How much is the cost per equivalent unit for materials during June?

A)$0.88
B)$1.03
C)$0.61
D)Some other answer

Question 63

Which of the following is true as it pertains to the ending Work in Process Inventory?

A)It is determined by adding the cost in the beginning Work in Process Inventory and the costs incurred in the current period and subtracting the cost of goods transferred out of the department.
B)It is the actual costs incurred plus the costs added during the period.
C)It is always greater than the costs transferred into the department.
D)It is greater than the ending inventory in the previous process department.

Question 64

Parnelli Tires uses a process costing system and has 1,600 tires remaining in its Belting Department's Work in Process inventory at month end.These tires are 90% and 40% complete with regard to materials and conversion costs, respectively.There were 6,500 tires completed and transferred out during the period.Conversion costs during the beginning of the month were $69,300 and added during the period were $116,340.How much is the conversion cost of the ending Work in Process?

A)$7,140
B)$16,640
C)$36,700
D)$24,960

Question 65

In any department, the cost of beginning Work in Process inventory plus the costs incurred during the current period must be

A)less than the costs transferred to the next department.
B)less than the costs in ending Work in Process inventory in the department.
C)equal to the costs transferred to the next department and the costs in ending Work in Process inventory
D)less than the costs incurred in the next department.

Question 66

ColorWorks' Painting Department uses a process costing system.It had a beginning Work in Process Inventory of 160 units, which had direct material costs of $17,215.During June, 8,600 units were started and costs of $213,600 were incurred for direct materials.Ending inventory consists of 250 units, which are 80% complete with respect to direct materials.What is the cost per equivalent unit for direct materials during June?

A)$26.09
B)$26.23
C)$26.35
D)$26.50

Question 67

The ending Work in Process inventory in the Mixing Department contains 500 units that are 25% complete with respect to conversion costs.The beginning inventory of units totaled 350 units that were 40% complete with respect to conversion costs.During the period, 7,000 units were started.How many equivalent units for conversion costs are present in the ending inventory?

A)6,850 units
B)125 units
C)6,975 units
D)500 units

Question 68

For the month of June, Starlight Chocolates had a cost per equivalent unit of $2.50 for materials and $0.40 for conversion costs in its Mixing Department.The company began June with 12,000 pounds of chocolate in production.By the end of the month, the company had completed 180,000 pounds of chocolate, and 9,000 pounds were in process.The in-process units were 100 percent complete with respect to material and 40 percent complete with respect to labor and overhead.How much is the cost of the ending Work in Process Inventory in the Mixing Department?

A)$23,940
B)$26,100
C)$22,500
D)$10,440

Question 69

Department Alpha had no beginning inventory.The department added direct materials costing $55,040 and conversion costs of $88,660 during the month of July.Materials are added at the beginning of the process and conversion costs are added evenly throughout the process in this department.During the month, 40,000 units were completed.At the end of July, 3,000 units remained which were 10% complete with respect to conversion costs.Which one of the following is the correct cost per equivalent unit for materials for July?

A)$1.28
B)$3.48
C)$6.98
D)$2.20

Question 70

In the Assembly Department, all the direct materials are added at the beginning of processing.Beginning Work in Process Inventory consists of 2,000 units with a direct materials cost of $31,860.During the period, 15,000 units are started and direct materials costing $250,000 are charged to the department.If there are 1,000 units in ending inventory, what is the cost per equivalent unit for materials during the period, assuming the company uses a process costing system?

A)$15.93
B)$15.63
C)$14.83
D)$16.58

Question 71

At the end of July, a journal entry is prepared to record the transfer of goods from the Mixing Department to the Baking Department.Which one of the following indicates the amount of this journal entry?

A)Total costs incurred by Mixing Department during July
B)Sum of the costs of the direct materials and nonmanufacturing overhead incurred in the Mixing Department during July
C)Number of units transferred from the Mixing Department to the Baking Department times the cost per unit
D)Number of equivalent units in the Mixing Department's July 31 inventory times the cost per equivalent unit

Question 72

Jeffery Ltd uses a process costing system.Its Spackling Department had no beginning Work in Process inventory.The department added direct materials of $200,000 and conversion costs of $321,300 during the period.Materials are added at the beginning of the process and conversion costs are added evenly throughout the process.During the period 75,000 units were completed, and at the end of the period, 5,000 units remained which were 30% complete.How much is transferred to the Finished Goods inventory account during the period?

A)$521,300
B)$488,719
C)$502,500
D)$556,053

Question 73

Cheese Heads Cheddar utilizes a process costing system.The beginning Work in Process Inventory in the Cutting Department consisted of 16,000 units which were 100% complete with respect to materials and 20% complete with respect to conversion costs.The ending Work in Process Inventory consisted of 12,000 units which were 100% complete with respect to materials and 50% complete with respect to conversion costs.The total cost in beginning inventory was $65,000 with an additional $270,400 added during the period.During the month, 62,000 units were transferred out to the next department.The equivalent cost per unit was $1.50 for materials and $3.30 for conversion costs.How much is the total cost of the inventory transferred out during the period?

A)$389,000
B)$224,400
C)$297,600
D)$93,000

Question 74

For the month of June, Starlight Chocolates had cost per equivalent unit of $2.50 for materials in its Mixing Department and $0.40 for conversion costs.The company began June with 12,000 pounds of chocolate in production.By the end of June, the company had completed 180,000 pounds, and 9,000 pounds were in process.The in-process units were 100 percent complete with respect to material and 40 percent complete with respect to labor and overhead.How much is the cost of the pounds completed and transferred out of the Mixing Department during June?

A)$522,000
B)$548,100
C)$219,240
D)$545,940

Question 75

Mickler Productions uses process costing.Its Mixing Department incurred conversion costs of $650,820 during January, and had a beginning Work in Process inventory of $30,430 for conversion costs.54,000 units were transferred out of the department, and the ending inventory consisted of 2,500 units that are 20% complete with respect to conversion costs.What is the conversion cost per equivalent unit during January?

A)$12.50
B)$12.05
C)$12.17
D)$12.62

Question 76

America Productions uses a process costing system.Its Belting Department's Work in Process inventory account at March 31 consists of 7,000 units that are 100% complete with respect to materials and 70% complete with respect to conversion costs.If the total conversion cost in the Work in Process inventory account is $552,000 at March 31 and the cost per equivalent unit for conversion costs is $6.00, how many units were completed and transferred out during March?

A)92,000 units
B)85,000 units
C)87,100 units
D)99,000 units

Question 77

Z-Bar Sweets uses a process costing system.During August, the Mixing Department transferred out 65,000 units.On August 31, the Mixing Department held 22,000 equivalent units of material and 20,150 equivalent units of labor and overhead.The cost per equivalent unit was $5.50 for materials and $5.00 for labor and overhead.How much was the total balance in the Work in Process inventory account on August 31?

A)$271,250
B)$463,750
C)$221,750
D)$192,500

Question 78

A company that uses process costing has 1,000 units in ending Work in Process Inventory that
Are 100% complete with respect to materials and 80% complete with respect to conversion costs.The cost per unit for inventory is $2.15 for materials and $1.65 for conversion costs.What is the cost assigned to the ending Work in Process inventory?

A)$3,470
B)$3,800
C)$3,040
D)$2,150

Question 79

If materials are entered into a production process at the beginning of the process, the number
Of units accounted for is

A)determined by dividing the total units transferred out into the total cost of the units.
B)equal to units to account for.
C)equal to the number of units completed and transferred out during the period.
D)equal to the number of equivalent units in beginning Work in Process.

Question 80

Zanzibar Metals utilizes a process costing system with three processing departments-melting, molding, and packaging.Its Melting Department had 500 units in Work in Process inventory at June 1.Ending Work in Process inventory on June 30 consisted of 400 units.Materials are added at the beginning of the process.The beginning cost of materials totaled $900.The cost of materials added during June was $3,960.If the material cost per unit for June was $1.35, how many units would have been completed and transferred out during the period?

A)3,600 units
B)3,200 units
C)2,933 units
D)3,100 units