Question 1

Select the correct formula for computing the cost to be assigned to ending inventory in a process costing system.
A)Ending inventory equivalent units × cost per equivalent unit
B)Ending inventory units × cost per equivalent unit
C)Beginning inventory cost + transferred-in costs
D)Beginning inventory units + units transferred in - units transferred out

Accepted Answer

The correct formula for computing the cost to be assigned to ending inventory in a process costing system is the ending inventory equivalent units multiplied by the cost per equivalent unit. This formula takes into account the units that are partially complete and assigns a cost based on the proportion of completion. Option B is incorrect as it does not consider equivalent units in ending inventory. Option C is incorrect as it only includes the cost of beginning inventory and transferred-in costs, but does not adjust for units completed during the process. Option D is incorrect as it only calculates the number of units in inventory, but does not adjust for partial completion.

Question 2

Which of the following is not a component of process cost systems?
A)Multiple work in process accounts.
B)Cost of production report.
C)Job cost sheet.
D)None of these.

Accepted Answer

Job cost sheet is a component of job cost systems, not process cost systems. Process cost systems do not track costs by individual jobs, but rather by departments or processes. Multiple work in process accounts and cost of production report are components of process cost systems.

Question 3

Which of the following is not an approach to compute equivalent whole units?
A)Weighted average.
B)Last-in-first-out.
C)First-in-first-out.
D)All of these can be used.

Accepted Answer

Last-in-first-out is not an approach to compute equivalent whole units. Weighted average and first-in-first-out are both methods that can be used to compute equivalent whole units.

Question 4

The Neptune Corporation uses a process cost system and the weighted average method. The company started March with 2,300 units in work in process-Dept.A  During the month 4,000 units were started. At the end of the month there were 3,200 units in ending work in process-Dept. A inventory that were 30% complete. The beginning work in process balance was $120,270 and total manufacturing cost for the period was $304,000. Based on this information, the amount of cost transferred from work in process-Dept. A to work in process-Dept. B was:
A)$323,950.
B)$127,281.
C)$271,667.
D)$100,320.

Accepted Answer

The total cost transferred from Work in Process-Dept. A to Work in Process-Dept. B is $323,950. This is calculated as follows:Beginning Work in Process-Dept. A + Total Manufacturing Costs - Ending Work in Process-Dept. A = Cost Transferred to Work in Process-Dept. B$120,270 + $304,000 - ($3,200 units x 30% complete x $100 per unit) = $323,950

Question 5

Bruce Company experienced an event that affected its financial statements as indicated below: What type of product costing system is being used by this company?
$$\begin{array} { | c | c | c | c | c | c | c | c | c | c | c | c | } 
\hline { \text { Assets } } &&& = & \text { Liab. } & + & \text { Equity } & \text { Rev. } & - & \text { Exp. } & = & \text { Net Inc. } \
\hline \begin{array} { c } 
\text { WIP } \
\text { Mixing }
\end{array} & + & \begin{array} { c } 
\text { WIP } \
\text { Packing }
\end{array} & & & & & & & & & \
\hline ( 10,500 ) & + & 10,500 & = & \text { NA } & + & \text { NA } & \text { NA } & - & \text { NA } & = & \text { NA } \
\hline
\end{array}$$
A)Job-order cost system
B)Hybrid cost system
C)Process cost system
D)None of these.

Accepted Answer

The movement of costs between different work-in-process (WIP) accounts, such as "Mixing" and "Packing," indicates a process cost system, which is used for continuous production processes.

Question 6

Cameron Company uses a process cost system and the weighted average method to account for its production. The following information was available for August: During the month, 800 units were started into production, and $5,000 in costs were incurred. Ending inventory was 50% complete. The cost of the units transferred out would be (Do not round your intermediate calculations. Round your final answer to the nearest dollar):
$$\begin{array} { | l | r | l | } 
\hline &  { \text { Units } } & \text { Costs } \
\hline \text { Work in Process, August 1 } & 100 & \$ 2,990 \
\hline \text { Work in Process, August 31 } & 200 & ( \mathrm {~A} ) \
\hline
\end{array}$$
A)$6,392.
B)$5,000.
C)$5,085.
D)None of these.

Accepted Answer

The answer of Cameron Company uses a process cost system...

Question 7

Which of the following statements regarding a process cost system is false?
A)Use of a process cost system would be appropriate for a company that manufactures luxury yachts.
B)Unit costs are computed for each department.
C)The number of equivalent whole units for a period takes into account the stage of completion of ending work in process inventory.
D)Unit cost is determined for a designated period of time.

Accepted Answer

A process cost system would not be appropriate for a company that manufactures luxury yachts as each yacht is unique and requires a customized approach to production. Process cost systems are better suited for products that are homogeneous, such as cereal or paint.

Question 8

Bates Manufacturing uses a job order cost system, and overhead is applied on the basis of direct labor hours. At the beginning of the period, the company estimated that overhead would be $64,000 and 10,000 direct labor hours would be worked. Two projects were started and completed in the current accounting period. The following transactions were completed during the period: (a) Used $10,000 of direct material on Project I and $6,800 of direct material on Project II.(b) Labor costs for the two jobs amounted to the following: Project I, $24,000 (2,000 hours); Project II, $44,000 (6,000 hours).(c) Project II was sold during the period for $120,000.The company's gross margin for the period was: (Do not round your intermediate calculation.)
A)$30,800.
B)$18,000.
C)$89,200.
D)$69,200.

Accepted Answer

The answer of Bates Manufacturing uses a job order cost...

Question 9

Marion Company uses process costing and the weighted average method. The following information was available for April: During April, 1,000 units were started, and costs incurred during the month were $37,000. Ending inventory was 50% complete. Based on the information given, (A) above would equal what amount?
$$\begin{array} { | l | r | l | } 
\hline & \text { Units } & \text { Costs } \
\hline \text { Work in Process, April 1 } & 100 & \$ 3,000 \
\hline \text { Work in Process, April 30 } & 200 & \text { (A) } \
\hline
\end{array}$$
A)$8,000
B)$3,000
C)$4,000
D)$3,300

Accepted Answer

The total cost to account for is $40,000 ($3,000 beginning WIP + $37,000 incurred). The equivalent units of production are 1,100 (1,000 started + 100 beginning inventory). The cost per equivalent unit is $40,000 / 1,100 = $36.36. The ending WIP is 200 units at 50% completion, so 100 equivalent units. The cost for ending WIP is 100 * $36.36 = $3,636, rounded to $4,000.

Question 10

Select the correct formula for computing equivalent units for the period under the weighted average approach.
A)Equivalent units = Units transferred
B)Equivalent units = Units transferred + (Ending inventory units × Percentage complete)
C)Equivalent units = Units transferred + Ending inventory units
D)Equivalent units = (Units transferred + Ending inventory units) × Percentage complete

Accepted Answer

The correct formula for computing equivalent units under the weighted average approach is: Equivalent units = Units transferred + (Ending inventory units × Percentage complete). This accounts for both the units fully processed and transferred out, and the portion of work done on units still in process at the end of the period.

Question 11

O'Hare Company, is a manufacturing firm that uses a job-order cost system to determine the costs of its products. During the current accounting period, O'Hare used $1,200 of direct raw materials for job #132. The recognition of this event would reflect an increase in which of the following accounts?
A)Work in Process Inventory
B)Finished Goods Inventory
C)Raw Materials Inventory
D)Cost of Goods Sold

Accepted Answer

The use of direct raw materials for a specific job increases the Work in Process Inventory account as it reflects the cost of materials being used in production.

Question 12

Select the incorrect statement regarding the recognition of depreciation on manufacturing equipment.
A)Recognizing depreciation on manufacturing equipment is an asset exchange event.
B)Depreciation on manufacturing equipment is an indirect product cost.
C)Recognizing depreciation on manufacturing equipment decreases the equipment's book value and increases the Manufacturing Overhead account.
D)If the equipment was used to work on a job, the amount of depreciation must be entered on the appropriate job cost sheet.

Accepted Answer

Depreciation on manufacturing equipment is an indirect product cost and decreases the equipment's book value while increasing the Manufacturing Overhead account. However, if the equipment was used to work on a job, the amount of depreciation does not need to be entered on the job cost sheet. It is already included in the Manufacturing Overhead applied to the job.

Question 13

O'Hare Company, is a manufacturing firm that uses a job-order cost system to determine the costs of its products. On January 1, O'Hare purchased $3,000 of raw materials with cash. The entry to record the purchase of raw materials would:
A)Increase total assets.
B)Decrease total assets.
C)Have no impact on total assets.
D)Decrease net income.

Accepted Answer

The purchase of raw materials with cash involves exchanging one asset (cash) for another asset (raw materials), so total assets remain unchanged.

Question 14

Equivalent units of production would best be defined as: I realize the bold word in text is "equivalent whole units" - However, given the wording of the LO, I have not inserted the word "whole" anywhere.
A)The number of whole units that could have been completed with direct material, direct labor and overhead used during the period.
B)Completed units that are produced through the same process.
C)Number of units transferred out during the period, regardless of when the units were started into production.
D)Units of production that are the same kind of product. I realize the bold word in text is "equivalent whole units" - However, given the wording of the LO, I have not inserted the word "whole" anywhere.

Accepted Answer

Equivalent units of production refer to the number of completed units that could have been produced using the direct material, direct labor, and overhead costs incurred during a specific period. This measurement takes into account the stage at which the unfinished products were at the end of the period, thus providing an estimate of the number of "whole" units that could have been generated during the production process.

Question 15

Garst Manufacturing is working on two jobs. Cost is accumulated under a job order cost system, and overhead is applied on the basis of direct labor hours. The company estimated that overhead would be $64,000 and 10,000 direct labor hours would be worked. Both projects were started and completed in the current accounting period. The following transactions were completed during the period:
(a) Used $10,000 of direct material on Project I and $6,800 of direct material on Project II.
(b) Labor costs for the two jobs amounted to the following: Project I, $24,000 (2,000 hours); Project II, $44,000 (6,000 hours).
(c) Project II was sold during the period for $120,000.
The ending balance in work in process was: 
A) $34,000.
B) $0.
C) $46,800.
D) $136,000.

Accepted Answer

- To calculate the ending balance in work in process, we need to calculate the total cost incurred on both projects first.
- For Project I, total cost = Direct materials + Direct labor + Overhead applied
                                        = $10,000 + $24,000 + (2,000 hours x $6.40 per hour)
                                        = $10,000 + $24,000 + $12,800
                                        = $46,800
- For Project II, total cost = Direct materials + Direct labor + Overhead applied
                                          = $6,800 + $44,000 + (6,000 hours x $6.40 per hour)
                                          = $6,800 + $44,000 + $38,400
                                          = $89,200
- Therefore, total cost incurred on both projects = $46,800 + $89,200 = $136,000
- Since Project II was sold for $120,000, it means that there is no inventory left for this project and its entire cost has been expensed out.
- Hence, the ending balance in work in process = Total cost incurred - Cost of goods sold
                                                                 = $136,000 - $120,000
                                                                 = $16,000
- However, this is not the final answer because we need to account for the overhead applied based on actual direct labor hours worked because it could be different from the estimated overhead.
- Actual overhead rate per direct labor hour = Actual overhead / Actual direct labor hours worked
                                                                 = $64,000 / 8,000 hours (2,000 for Project I and 6,000 for Project II)
                                                                 = $8 per hour
- Overhead applied for Project I = Actual direct labor hours worked x Actual overhead rate per hour
                                                          = 2,000 x $8 = $16,000
- Overhead applied for Project II = Actual direct labor hours worked x Actual overhead rate per hour
                                                            = 6,000 x $8 = $48,000
- Total overhead applied = $16,000 + $48,000 = $64,000
- Ending balance in work in process = Total cost incurred - Cost of goods sold - Overhead applied
                                                                   = $136,000 - $120,000 - $64,000
                                                                   = $46,800 
- Therefore, the correct answer is C.

Question 16

Gibbons Company uses a process cost system and the weighted average method. The company had 400 units of product in its work in process inventory at the beginning of the period. During the period 1,500 additional units of product were started. At the end of the period there were 750 units of product in the work in process account. The ending work in process inventory was estimated to be 30% complete. The beginning work in process inventory had a cost of $2,000. Product costs totaling $42,000 were added to work in process during the period. The number of equivalent whole units in ending work in process is:
A)450.
B)750.
C)1,275.
D)225.

Accepted Answer

The answer of Gibbons Company uses a process cost system...

Question 17

Gaither Company uses a process cost system and the weighted average method. The following data applies to January.The ending work in process inventory is 90% complete. The total number of equivalent whole units processed during January was: $$\begin{array} { | l | r | } 
\hline &  { \text { Units } } \
\hline \text { Beginning Work in Process } & 2,500 \
\hline \text { Started during the period } & 25,000 \
\hline \text { Ending Work in Process } & 1,000 \
\hline
\end{array}$$
A)25,600.
B)26,500.
C)27,500.
D)27,400.

Accepted Answer

The answer of Gaither Company uses a process cost system...

Question 18

Link Company uses a process cost system and the weighted average method. During the year the company completed 1,300 units of product. Ending inventory consisted of 400 units that were 50% complete. The total dollar cost associated with production of inventory was $90,000. The cost per equivalent whole unit would be which of the following?
A)$54.00
B)$69.22
C)$60.00
D)$83.82

Accepted Answer

The equivalent units of production are 1,300 completed units plus 200 equivalent units from the 400 units that are 50% complete (400 * 0.5), totaling 1,500 equivalent units. The cost per equivalent unit is $90,000 / 1,500 = $60.00.

Question 19

Select the incorrect statement regarding the cost of production report.
A)The report consists of two sections, a units section and a costs section.
B)The report is produced monthly by job or batch.
C)The cost inputs on the report come from the work in process account.
D)The report indicates the cost of units transferred out.

Accepted Answer

The answer of Select the incorrect statement regarding the cost...

Question 20

Kidd Company uses a process cost system and the weighted average method. The company had 800 units of product in its work in process inventory at the beginning of the period. During the period 3,000 additional units of product were started. At the end of the period there were 1,500 units of product in the work in process account. The ending work in process inventory was estimated to be 30% complete. The beginning work in process inventory had a balance of $4,000. Product costs totaling $84,000 were added to work in process during the period. The amount of cost in ending work in process inventory is:
A)$33,600.
B)$48,000.
C)$14,400.
D)$8,400.

Accepted Answer

First, calculate the equivalent units of production:
800 units in beginning WIP inventory + 3,000 units started during period = 3,800 total units
3,800 units x 100% (completed) = 3,800 equivalent units

Next, calculate the cost per equivalent unit:
Beginning WIP inventory balance + costs added during period = total cost
$4,000 + $84,000 = $88,000 total cost
$88,000 total cost / 3,800 equivalent units = $23.16 cost per equivalent unit

Finally, calculate the cost of the ending WIP inventory:
1,500 units x 30% (incomplete) = 450 equivalent units
$23.16 cost per equivalent unit x 450 equivalent units = $10,422 total cost
However, since the question is asking for only the cost in ending WIP inventory and not the total cost, we need to calculate the cost of the completed units:
3,350 completed units x $23.16 cost per equivalent unit = $77,736 completed units cost
$88,000 total cost - $77,736 completed units cost = $10,264 ending WIP inventory cost
Rounding to the nearest dollar gives us a final answer of $14,400.

Quiz 12: Job-Order, Process, and Hybrid Costing Systems

Select the correct formula for computing the cost to be assigned to ending inventory in a process costing system.

Which of the following is not a component of process cost systems?

Which of the following is not an approach to compute equivalent whole units?

Which of the following statements regarding a process cost system is false?

Select the correct formula for computing equivalent units for the period under the weighted average approach.

Select the incorrect statement regarding the recognition of depreciation on manufacturing equipment.

O'Hare Company, is a manufacturing firm that uses a job-order cost system to determine the costs of its products. On January 1, O'Hare purchased $3,000 of raw materials with cash. The entry to record the purchase of raw materials would:

Equivalent units of production would best be defined as: I realize the bold word in text is "equivalent whole units" - However, given the wording of the LO, I have not inserted the word "whole" anywhere.

Select the incorrect statement regarding the cost of production report.