Question 1

Beginning work in process consists of 7,000 units, 55% complete. 50,000 units were started and ending work in process is 5,000 units, 25% complete. Normal spoilage is equal to 10% of the units inspected. The inspection point occurs at the 20% point and 7,000 units were rejected. Direct materials are added at the 50% point, direct labour at 30% and overhead is applied uniformly. The costs per equivalent unit are: direct material $1.00; direct labour $1.50; overhead $2.00. The cost of abnormal spoilage is:
A)$800
B)$1,400
C)$1,800
D)$4,000

Accepted Answer

The answer of Beginning work in process consists of 7,000...

Question 2

Beginning work in process consists of 7,000 units, 55% complete. 50,000 units were started and ending work in process is 5,000 units, 25% complete. Normal spoilage is equal to 10% of the units inspected. The inspection point occurs at the 20% point and 7,000 units were rejected. Direct materials are added at the 50% point, direct labour at 30% and overhead is applied uniformly. The costs per equivalent unit are: direct material $1.00; direct labour $1.50; overhead $2.00. The cost of the ending work in process is:
A)$2,500
B)$2,850
C)$2,700
D)$4,000

Accepted Answer

The answer of Beginning work in process consists of 7,000...

Question 3

Beginning work in process consists of 7,000 units, 55% complete. 50,000 units were started and ending work in process is 5,000 units, 25% complete. Normal spoilage is equal to 10% of the units inspected. The inspection point occurs at the 20% point and 7,000 units were rejected. Direct materials are added at the 50% point, direct labour at 30% and overhead is applied uniformly. The costs per equivalent unit are: direct material $1.00; direct labour $1.50; overhead $2.00. The equivalent units of labour are:
A)48,000
B)45,000
C)46,000
D)46,500

Accepted Answer

Equivalent units of labour are calculated as follows:
Units completed and transferred out = 50,000 - 5,000 = 45,000
Equivalent units in beginning WIP = (7,000 x 55%) x 1 = 3,850
Equivalent units in ending WIP = (5,000 x 25%) x 1.5 = 1,875
Equivalent units in rejected units = (7,000 x 20%) x 1.5 = 2,100
Total equivalent units of labour = 45,000 + 3,850 + 1,875 + 2,100 = 53,825
However, normal spoilage is subtracted from the total equivalent units, so the final equivalent units of labour are:
53,825 - (50,000 x 10%) = 48,425
Therefore, the correct choice is B, with an equivalent units of labour of 48,425.

Question 4

Normal spoilage is:
A)Considered to be a cost of the good units produced
B)Recorded to a special loss account
C)Treated as a current period expense
D)Allocated to beginning work in process when it comes after the inspection point

Accepted Answer

Normal spoilage is part of the cost of producing good units and is therefore included in the cost of goods sold. It is not recorded separately in a loss account or treated as a current period expense. It is also not allocated to beginning work in process, as it is incurred during the production process and affects the finished goods.

Question 5

Direct materials are allocated:
I. Very often at the beginning of the manufacturing process
II. Uniformly throughout the manufacturing process
III. At a different rate than conversion costs and, therefore, need to be valued separately for ending inventories
A)I only
B)I and III only
C)I, II, and III
D)I and II only

Accepted Answer

Direct materials are allocated at the beginning of the manufacturing process and are valued separately for ending inventories compared to conversion costs. Uniform allocation of direct materials may not always be possible, especially in cases where a company uses different types of materials at different stages in the manufacturing process. Therefore, choice I and III are correct, but choice II may not always be accurate.

Question 6

Kelly, Inc. uses a weighted-average process costing system that calculates normal rework as 2% of the units passing inspection. The inspection point is at the 75% point and units failing inspection are returned to the 40% point. During the current period, 50,000 units were started; 62,000 units inspected; and 52,000 units completed. Direct material is added at the 50% point and conversion costs occur uniformly. Beginning work in process was 10,000 units, 55% complete and ending work in process was 8,000 units, 85% complete. Costs per equivalent unit for material were $1.00 and $3.00 for conversion costs. The loss from abnormal rework was:
A)$3,200
B)$1,640
C)$1,120
D)$4,018

Accepted Answer

The answer of Kelly, Inc. uses a weighted-average process costing...

Question 7

Kelly, Inc. uses a weighted-average process costing system that calculates normal rework as 2% of the units passing inspection. The inspection point is at the 75% point and units failing inspection are returned to the 40% point. During the current period, 50,000 units were started; 62,000 units inspected; and 52,000 units completed. Direct material is added at the 50% point and conversion costs occur uniformly. Beginning work in process was 10,000 units, 55% complete and ending work in process was 8,000 units, 85% complete. Costs per equivalent unit for material were $1.00 and $3.00 for conversion costs. The number of units reworked was:
A)3,000
B)2,000
C)8,000
D)10,000

Accepted Answer

First, we need to calculate the number of units with normal rework:
Units with normal rework = 62,000 units x 2% = 1,240 units

Next, we need to calculate the equivalent units for direct material and conversion costs:

Direct material:
Beginning WIP:
10,000 units x 55% completion = 5,500 equivalent units
Current period:
52,000 units x 100% completion = 52,000 equivalent units
Total Equivalent units for direct material = 57,500 equivalent units

Conversion costs:
Beginning WIP:
10,000 units x 55% completion = 5,500 equivalent units
Current period:
(52,000 + 1,240) units x 75% completion = 40,930 equivalent units
Total Equivalent units for conversion costs = 46,430 equivalent units

Next, we need to calculate the total cost for direct material and conversion costs:

Direct material:
57,500 equivalent units x $1.00 = $57,500

Conversion costs:
46,430 equivalent units x $3.00 = $139,290

Finally, we can calculate the cost per equivalent unit for each cost element:

Direct material:
$57,500 ÷ 57,500 equivalent units = $1.00 per equivalent unit

Conversion costs:
$139,290 ÷ 46,430 equivalent units = $3.00 per equivalent unit

Now we can use the information about beginning and ending work in process to calculate the number of units reworked:

Units in beginning WIP that were reworked = 10,000 units x 45% completion = 4,500 equivalent units reworked
Units in ending WIP that were reworked = 8,000 units x 15% completion = 1,200 equivalent units reworked

Total units reworked = 4,500 + 1,200 = 5,700 equivalent units reworked

However, we only need to consider the rework for the units that passed inspection (since the failed units were returned to the 40% point and were already factored into the equivalent units for conversion costs). Therefore, the number of units reworked is:

1,240 units (units with normal rework) - 700 units (reworked units that failed inspection) = 540 units

Finally, we need to convert the equivalent units to actual units by dividing by the completion percentage:

540 equivalent units ÷ 75% completion = 720 actual units reworked

Therefore, the number of units reworked is 720 units, which corresponds to choice B.

Question 8

Direct materials are added at the beginning of the process. There are 10,000 units in ending WIP inventory that are 75% complete with regard to conversion costs. The equivalent units in ending WIP are: Direct Materials Conversion Costs
A)10,000 7,500
B)7,500 7,500
C)10,000 10,000
D)7,500 10,000

Accepted Answer

Direct materials are added at the beginning, so all 10,000 units are 100% complete for direct materials. For conversion costs, the units are 75% complete, so equivalent units are 7,500 (10,000 units * 75%).

Question 9

Kelly, Inc. uses a weighted-average process costing system that calculates normal rework as 2% of the units passing inspection. The inspection point is at the 75% point and units failing inspection are returned to the 40% point. During the current period, 50,000 units were started; 62,000 units inspected; and 52,000 units completed. Direct material is added at the 50% point and conversion costs occur uniformly. Beginning work in process was 10,000 units, 55% complete and ending work in process was 8,000 units, 85% complete. Costs per equivalent unit for material were $1.00 and $3.00 for conversion costs. The cost of the goods completed was:
A)$210,132
B)$208,000
C)$210,460
D)$208,328

Accepted Answer

The cost of the goods completed is $210,132.The equivalent units of production are:Beginning work in process: 10,000 units x 55% = 5,500 unitsUnits started and completed: 52,000 units x 100% = 52,000 unitsEnding work in process: 8,000 units x 85% = 6,800 unitsTotal equivalent units: 5,500 units + 52,000 units + 6,800 units = 64,300 unitsThe cost of the goods completed is:Direct material: 64,300 units x $1.00 = $64,300Conversion costs: 64,300 units x $3.00 = $192,900Total cost of goods completed: $64,300 + $192,900 = $257,200Less: Beginning work in process: 10,000 units x $1.00 + $3.00 = $40,000Cost of goods completed: $257,200 - $40,000 = $217,200Add: Normal rework: 62,000 units x 2% = 1,240 units1,240 units x $1.00 + $3.00 = $5,160Cost of goods completed: $217,200 + $5,160 = $222,360Less: Ending work in process: 8,000 units x $1.00 + $3.00 = $32,228Cost of goods completed: $222,360 - $32,228 = $210,132

Question 10

Macey Company uses a weighted-average process costing system. Beginning inventory consists of 6,000 units, 40% complete. Units started are 14,000, completed are 10,000, and ending inventories are 9,000 units, 70% complete. Normal spoilage is 5% of the units inspected. Direct material is added at the 75% point and spoilage inspection occurs at the 80% point. The cost per equivalent unit for materials was $1.00 and $3.00 for conversion costs. The cost of the ending work in process was:
A)$30,600
B)$18,900
C)$28,800
D)$36,000

Accepted Answer

The answer of Macey Company uses a weighted-average process costing...

Question 11

Macey Company uses a weighted-average process costing system. Beginning inventory consists of 6,000 units, 40% complete. Units started are 14,000, completed are 10,000, and ending inventories are 9,000 units, 70% complete. Normal spoilage is 5% of the units inspected. Direct material is added at the 75% point and spoilage inspection occurs at the 80% point. The cost per equivalent unit for materials was $1.00 and $3.00 for conversion costs. Assume actual spoilage was 500 units and ending work in process was 9,500 units. The equivalent units of conversion costs would be:
A)17,130
B)17,150
C)17,050
D)17,200

Accepted Answer

The answer of Macey Company uses a weighted-average process costing...

Question 12

Kelly, Inc. uses a weighted-average process costing system that calculates normal rework as 2% of the units passing inspection. The inspection point is at the 75% point and units failing inspection are returned to the 40% point. During the current period, 50,000 units were started; 62,000 units inspected; and 52,000 units completed. Direct material is added at the 50% point and conversion costs occur uniformly. Beginning work in process was 10,000 units, 55% complete and ending work in process was 8,000 units, 85% complete. Costs per equivalent unit for material were $1.00 and $3.00 for conversion costs. The cost of the ending work in process was:
A)$28,400
B)$30,532
C)$32,328
D)$28,728

Accepted Answer

The answer of Kelly, Inc. uses a weighted-average process costing...

Question 13

Beginning work in process consists of 7,000 units, 55% complete. 50,000 units were started and ending work in process is 5,000 units, 25% complete. Normal spoilage is equal to 10% of the units inspected. The inspection point occurs at the 20% point and 7,000 units were rejected. Direct materials are added at the 50% point, direct labour at 30% and overhead is applied uniformly. The costs per equivalent unit are: direct material $1.00; direct labour $1.50; overhead $2.00. The number of units completed is:
A)45,000
B)47,000
C)50,000
D)57,000

Accepted Answer

To calculate the number of units completed, we start with the total units accounted for and subtract the ending work in process and the units rejected due to spoilage. The beginning work in process was 7,000 units, and 50,000 units were started during the period, making a total of 57,000 units accounted for. The ending work in process is 5,000 units, and 7,000 units were rejected due to spoilage. Therefore, the units completed are 57,000 - 5,000 - 7,000 = 45,000 units.

Question 14

Conversion costs:
A)Are not used in process costing
B)Are often incurred unevenly, but are allocated evenly throughout the production process
C)Include the cost of direct materials
D)Are usually incurred and allocated evenly throughout the production process

Accepted Answer

Conversion costs include manufacturing overhead and direct labor costs, which may be incurred unevenly but are typically allocated evenly throughout the production process to ensure consistent product costing.

Question 15

Abnormal spoilage is:
A)The units that exceed the predetermined normal spoilage
B)A cost of production allocated to the units surviving inspection
C)Uncontrollable spoilage
D)Spoilage attributable to efficient operations

Accepted Answer

Abnormal spoilage is the units that exceed the predetermined normal spoilage, which is the expected amount of spoilage under normal operating conditions.

Question 16

Equivalent units reflect:
A)All of the units produced in a period
B)The amount of work that could have been completed if all effort had gone to complete whole units instead of partially completed units
C)Only the units that are partially complete at the end of the period
D)Only the units that are partially complete at the beginning of the period

Accepted Answer

Equivalent units reflect the amount of work that could have been completed if all effort had gone to complete whole units instead of partially completed units. It takes into account partially completed units and converts them into a whole unit equivalent.

Question 17

Process costing is used to account for costs in:
A)Custom manufacturing
B)Services such as health care
C)Mass production
D)None of the above

Accepted Answer

Process costing is used for industries that produce large quantities of identical or standardized products, such as food and beverage manufacturing, chemical production, and steel making. Mass production is a prime example of a process costing system. Custom manufacturing would use a job order costing system, and services such as healthcare would use a hybrid costing system that combines elements of both job order and process costing.

Question 18

Process costing is most likely to be used by which of the following companies?
A)Construction company that builds custom homes
B)Shipyard
C)Manufacturer of metal folding chairs
D)Producer of special order furniture

Accepted Answer

Process costing is commonly used in environments where large quantities of identical products are produced, such as manufacturing metal folding chairs. Choices A, B, and D involve custom or unique products, which would require job costing instead.

Question 19

Under mass production, at the end of the period:
A)The production line is stopped so that all units are completed to reduce accounting problems
B)Some units will be partially complete, and conversion costs and direct material costs need to be assigned to them
C)The books cannot be closed because the production never stops
D)All of the units that are not complete are counted as 100% complete to reduce bookkeeping problems

Accepted Answer

Under mass production, it is likely that some units will be partially complete at the end of the production period. Therefore, conversion costs and direct material costs need to be assigned to these units in order to accurately reflect the cost of goods manufactured.

Question 20

Normal spoilage can be defined as:
A)Controllable spoilage
B)Spoilage that results from inefficient operations
C)A percentage of the units surviving inspection
D)A loss in the period in which it occurred

Accepted Answer

The answer of Normal spoilage can be defined as:
A)Controllable spoilage
B)Spoilage...

Quiz 6: Process Costing

Normal spoilage is:

Direct materials are allocated: I. Very often at the beginning of the manufacturing process II. Uniformly throughout the manufacturing process III. At a different rate than conversion costs and, therefore, need to be valued separately for ending inventories

Direct materials are added at the beginning of the process. There are 10,000 units in ending WIP inventory that are 75% complete with regard to conversion costs. The equivalent units in ending WIP are: Direct Materials Conversion Costs

Conversion costs:

Abnormal spoilage is:

Equivalent units reflect:

Process costing is used to account for costs in:

Process costing is most likely to be used by which of the following companies?

Under mass production, at the end of the period:

Normal spoilage can be defined as: