Process Cost Accounting Multiple Choice Questions

CHAPTER 6—PROCESS COST ACCOUNTING--ADDITIONAL PROCEDURES
MULTIPLE CHOICE
1. The following information is available for the month of April from the First department of the Armque
Corporation:
Units
Work in process, April 1 (50% complete) 90,000
Started in April 250,000
Transferred to Second Department in April 280,000
Materials are added in the beginning of the process in the First department. Using the average cost
method, what are the equivalent units of production for the month of April?
Materials Conversion
a. 310,000 250,000
b. 250,000 295,000
c. 340,000 316,000
d. 340,000 304,000
ANS: D
Equivalent production:
Materials:
Finished and transferred during month 280,000
Equivalent units of work in process, end of month (60,000 units, 40%
completed, all materials) 60,000
Total 340,000
Labor and factory overhead:
Finished and transferred during April 280,000
Work in process, end of April (70,000 units, 40% completed) 24,000
Total 304,000
PTS: 1 DIF: Moderate REF: P. OBJ: 1

NAT: IMA 2B - Cost Management TOP: AACSB - Analytic
2. The following information is available for the month of August from the First department of the Twigg
Corporation:
Units
Work in process, August 1 (60% complete) 50,000
Started in August 190,000
Materials are added in the beginning of the process in the First department. Using the average cost
method, what are the equivalent units of production for the month of August?
a. 192,000 240,000
b. 190,000 192,000
c. 240,000 208,000
d. 240,000 192,000
ANS: D
Work in process, August 1 50,000
Total processed during August 240,000
Finished and transferred during August 160,000
Materials:
Total 240,000
Work in process, end of August (80,000 units, 40% completed) 32,000
Total 192,000
PTS: 1 DIF: Hard REF: P. OBJ: 1

3. Information concerning Department A of Ali Company for the month of June is as follows:
Materials
Units Costs
Work in process, beginning of month 20,000 $14,550
Started in June 85,000 $66,300
Units completed 90,000
Work in process, end of month 15,000
All materials are added at the beginning of the process. Using the average cost method, the cost
(rounded to two places) per equivalent unit for materials for June is:
a. $0.74.
b. $0.90.
c. $0.77.
d. $0.78.
ANS: C
Units completed during June 90,000
Units in process, June 30 with all materials 15,000
Equivalent production for materials 105,000
Materials cost:
Work in process, beginning of June $14,550
Added during June 66,300
Total materials cost $80,850
$80,850 / 105,000 units = cost per equivalent unit $ .77

4. Plemmon Company adds materials at the beginning of the process in the forming department, which is
the first of two stages of its production cycle. Information concerning the materials used in the
forming department in April follows:
Materials
Units Costs
Work in process at April 1 15,000 $ 8,000
Units started during April 60,000 $38,500
Units completed and transferred to next department
during April 65,000
Using the average cost method, what is the materials cost of the work in process at April 30 (rounded
to nearest dollar)?
a. $7,154
b. $6,200
c. $7,750
d. $6,417
ANS: B
Units
Beginning work in process 15,000
Started 60,000
Total 75,000
Less completed 65,000
Ending work in process (complete as to material) 10,000
Unit cost (See calculation below) $ .62
Materials cost in ending work in process $ 6,200
Units completed during April 65,000

Units in process, April 30 with all materials 10,000
Materials cost:
Work in process, April 1 $ 8,000
Costs added during April 38,500
Total materials cost for period $46,500

Corporation:
Units
Materials are added at the end of the process in the First department. Using the average cost method,
what are the equivalent units of production for the month of April?
a. 304,000 250,000
b. 280,000 295,000
c. 340,000 316,000
d. 280,000 304,000
ANS: D
Materials:
completed, no materials) 0
Total 280,000
Finished and transferred during April 280,000
Total 304,000

6. The following information is available for the month of August from the First department of the Twigg
Corporation:
Units
Materials are added at the end of the process in the First department. Using the average cost method,
what are the equivalent units of production for the month of August?
a. 192,000 160,000
b. 160,000 192,000
c. 160,000 208,000
d. 240,000 192,000
ANS: B
Total processed during August 240,000
Materials:
Total 160,000
Work in process, end of August (80,000 units, 40% completed) 32,000
Total 192,000

7. During June, Birch Bay Company's Department B equivalent unit product costs computed under the
average cost method were as follows:
Materials $2
Conversion $3
Transferred-in $5
Materials are introduced at the end of the process in Department B. There were 4,000 units (60 %
complete as to conversion costs) in work in process at June 30. The total costs assigned to the June 30
work in process inventory should be:
a. $20,000.
b. $24,800.
c. $27,200.
d. $35,200.
ANS: C
Transferred-in costs:
4,000 units @ $5 $20,000
Conversion costs:
4,000 units (60% complete) @ $3 7,200
$27,200
Because materials are introduced at the end of the process, no materials cost would be included in the
ending work in process.

8. Van Pelt Company uses the average cost method of process costing. The production report for the
Mixing department follows:
In process, beginning of period 1,000 units

800 units - materials 50% complete; conversion costs 40% complete
Placed in process during period 5,000 units
Transferred to packing department 4,800 units
In process, end of period 1,200 units
What are the equivalent units for:
Materials Conversion Costs

a. 5,650 5,450
b. 5,450 5,250
c. 4,850 4,400
d. 5,400 5,220
ANS: B
Conversion
Material Costs
Completed and transferred to packing department 4,800 4,800
Ending work-in-process:
700 x 75% - Material 525
700 x 50% - Conversion costs 350
500 x 25% - Material 125
500 x 20% - Conversion costs 100
5,450 5,250

9. Normal losses that occur in the manufacturing process are properly classified as:
a. Extraordinary items.
b. Product costs.
c. Period costs.
d. Deferred charges.
ANS: B
Normal losses are properly classified as product costs and considered as part of the total cost of
production.
PTS: 1 DIF: Easy REF: P. OBJ: 2

10. Stanley Company adds materials at the beginning of the process in Department M. Data concerning
the materials used in the March production follows:
Units
Work in process at March 1 15,000
Started during March 38,000
Completed and transferred to next department during March 37,000
Normal spoilage incurred 2,000
Work in process at March 31 14,000
Using the average cost method, the equivalent units for the materials unit cost calculation are:
a. 38,000.
b. 51,000.
c. 55,000.
d. 37,000.
ANS: B
Units completed and transferred 37,000
Ending work in process with all materials 14,000
51,000

11. Materials are added at the start of the process in McKay Company's blending department, the first
stage of the production cycle. The following information is available for the month of July:
Units
Work in process, July 1 (60% complete as to conversion costs) 50,000
Started in July 200,000
Transferred to the next department 195,000
Lost in production 15,000
Work in process, July 31 (50% complete as to conversion costs) 40,000
Under McKay's cost accounting system, the costs incurred on the lost units are absorbed by the
remaining good units. Using the average cost method, what are the equivalent units for the materials
unit cost calculation?
a. 210,000
b. 195,000
c. 250,000
d. 235,000
ANS: D
Units completed and transferred 195,000
Ending work in process with all materials 40,000
235,000

12. In a process cost system, the cost attributable to abnormal losses that occur due to unexpected
circumstances such as machine operator error should be assigned to:
a. Ending work in process inventory.
b. Cost of goods manufactured and ending work in process inventory in the ratio of units
worked on during the period to units remaining in work in process inventory.
c. A separate loss account in order to highlight production inefficiencies
d. Cost of good manufactured (transferred out)
ANS: C
Losses from abnormal spoilage should be assigned to a separate account. These should be treated as a
period cost.

13. If the amount of loss in a manufacturing process is abnormal, it should be classified as a:

a. Period cost.
b. Deferred charge.
c. Joint cost.
d. Product cost.
ANS: A
Abnormal loss should be classified as a period cost (charged to expense of the current period and
reflected separately on the income statement).

NAT: IMA 2E - External Financial Reporting TOP: AACSB - Analytic
14. What losses should not affect the recorded cost of inventories?
a. Normal losses
b. Abnormal losses
c. Seasonal losses
d. Standard losses
ANS: B
Abnormal losses should not affect the recorded cost of inventories because they are charged off as a
period cost rather than being included in the cost of manufactured goods.

NAT: IMA 2B - Cost Management TOP: AACSB - Reflective
15. In a process cost system, how is the unit cost affected in a production cost report when materials are
added in a department subsequent to the first department and the added materials result in additional
units?
a. It causes an increase in the preceding department's unit cost that necessitates an
adjustment of the transferred-in unit cost.
b. It causes a decrease in the preceding department's unit cost that necessitates an adjustment
of the transferred-in unit cost.
c. It causes an increase in the preceding department's unit cost but does not necessitate an
d. It causes a decrease in the preceding department's unit cost but does not necessitate an
ANS: B
If added materials result in additional units, it causes a decrease in the preceding department's unit cost
and necessitates an adjustment of the transferred-in cost because there are more units over which to
spread this cost.

16. Boyce Company manufactures chemicals. Chemical agent ABX is refined in the Refining department
and, after it is transferred to the Mixing department, a reactive agent is added to it. In May, 25,000
gallons of ABX having a cost of $100,000 were transferred from the refining to the Mixing department
where 15,000 gallons of the reactive agent were added. When calculating the inventory costs in the
Mixing department, what will the cost per unit relating to gallons transferred in from the Refining
department be?
a. $4.00
b. $2.50
c. $3.75
d. $6.67
ANS: B
Gallons transferred in from the Refining Department 25,000
Additional gallons of reactive agent added in Mixing 15,000
Total gallons 40,000
Cost of ABX - $100,000 / 40,000 gallons = $2.50

17. In order to compute equivalent units of production using the FIFO method of process costing, work for
the period must be broken down to units:
a. Completed from beginning inventory, started and completed during the month, and units
in ending inventory.
b. Completed during the period and units in ending inventory.
c. Started during the period and units transferred out during the period.
d. Processed during the period and units completed during the period.
ANS: A
In computing equivalent production under the FIFO method, work for the period must be broken down
to units completed from beginning inventory, units started and completed during the month, and units
in ending inventory.

18. Material is added at the beginning of a process in a process costing system. The beginning work in
process inventory for this process this period was 30 percent complete as to conversion costs. Using
the first-in, first-out method of costing, the total equivalent units for material for this process during
this period are equal to the:
a. Units started this period in this process.
b. Beginning inventory this period for this process.
c. Units started this period in this process plus the beginning inventory.
d. Units started this period in this process plus 70 percent of the beginning inventory.
ANS: A
With the FIFO method of costing, equivalent units for materials would be the units started in process
this period because the beginning work in process would have been complete as to materials. The
proof follows:
Beginning work in process, 20% completed 5,000

Units started 25,000
30,000
Units transferred out 22,000
Ending work in process 8,000

Units started and completed (25,000 started
less 8,000 remaining in ending work in 17,000
process
Ending work in process 8,000
Equivalent units of material:

Needed to complete beginning work in 0
process
Started and completed (17,000 x 100%) 17,000
Ending work in process (8,000 x 100%) 8,000
Equivalent units of material 25,000
.

19. Under which of the following conditions will the first-in, first-out method of process costing produce
the same cost of goods manufactured amount as the average cost method?
a. When goods produced are homogeneous in nature
b. When there is no beginning inventory
c. When there is no ending inventory
d. When beginning and ending inventories are each 50 percent complete
ANS: B
When there is no beginning inventory, the FIFO method and the average cost method will both
produce the same cost of goods manufactured amount because equivalent production and unit costs
will be the same.

20. The average cost method of process costing differs from the FIFO method of process costing in that
the average cost method:
a. Requires that ending work in process inventory be stated in terms of equivalent units of
production.
b. Can be used under any cost-flow assumption.
c. Does not consider the degree of completion of beginning work in process inventory when
computing equivalent units of production.
d. Considers the ending work in process inventory only partially complete.
ANS: C
The average cost method of process costing does not consider the degree of completion of beginning
work in process inventory when computing equivalent units of production, while the FIFO method
does.

21. Regina Manufacturing uses the FIFO method of process costing. The production report for the Curing
Department, where the materials are added at the beginning of the period, for September was as
follows:
In process, beginning of the period 3,000 units

Stage of completion 30 %
Transferred to stockroom during period 12,000 units

In process, end of the period 6,000 units
The number of units started and completed during the period was:
a. 12,000
b. 9,000
c. 15,000
d. 6,000
ANS: B
Units finished during the period 12,000
Less units in process at beginning of period 3,000
Units started and completed during period 9,000

22. Regina Manufacturing uses the FIFO method of process costing. The production report for the Curing
Department, where the materials are added at the beginning of the period, for September was as
follows:
In process, beginning of the period 3,000 units

Transferred to stockroom during period 12,000 units

In process, end of the period 6,000 units
The number of equivalent units for conversion costs during the period was:
a. 13,500
b. 16,500
c. 12,300
d. 14,700
ANS: A
Units finished during the period 12,000
Less units in process at beginning of period 3,000
Units started and completed during period 9,000
Needed to finish beginning work in process

(3,000 x 70%) 2,100
Started and completed during period 9,000
Ending work in process (6,000 x 40%) 2,400
Equivalent units for conversion costs 13,500

Corporation:
Units
Materials are added in the beginning of the process in the First department. Using the first-in, first-out
a. 250,000 259,000
b. 340,000 259,000
c. 280,000 271,000
d. 250,000 271,000
ANS: A
Materials:
To complete beginning units in process (materials were 100% complete) 0
Units started and finished during the month (250,000 started - 60,000 in ending 190,000
WIP)
Total 250,000
To complete beginning units in process (conversion costs were 50% complete) 45,000
WIP)
Total 259,000

24. Information concerning Department A of Ali Company for the month of June is as follows:
Materials
Units Costs
Work in process, beginning of month 20,000 $14,550
Started in June 85,000 $66,300
Units completed 90,000
Work in process, end of month 15,000
All materials are added at the beginning of the process. Using the first-in, first-out method, the cost
(rounded to two places) per equivalent unit for materials for June is:
a. $0.63.
b. $0.90.
c. $0.77.
d. $0.78.
ANS: D
To complete beginning units in process (all had 100% of materials) 0
Units started and completed during the month (85,000 started - 15,000 in ending 70,000
WIP)
Units in process, June 30 with all materials 15,000
Equivalent production for materials in period 85,000
Materials cost:
Added during June $66,300

25. Plemmon Company adds materials at the beginning of the process in the forming department, which is
the first of two stages of its production cycle. Information concerning the materials used in the
forming department in April follows:
Materials
Units Costs
Work in process at April 1 15,000 $ 8,000
Units started during April 60,000 $38,500
Units completed and transferred to next department
during April 65,000
Using the FIFO method, what is the materials cost of the work in process at April 30 (rounded to
nearest dollar)?
a. $7,154
b. $6,200
c. $7,750
d. $6,417
ANS: D
Units
Started 60,000
Total 75,000
Less completed 65,000
Ending work in process (complete as to material) 10,000
Unit cost (See calculation below) $ .6417
Materials cost in ending work in process $ 6,417
To complete beginning in process units (materials all 100%) 0

Units started and finished during month (60,000 started - 10,000 in ending WIP) 50,000
Units in process, April 30 with all materials 10,000
Materials cost:
Costs added during June $38,500

Corporation:
Units
Materials are added at the end of the process in the First department. Using the first-in, first-out
a. 250,000 259,000
b. 280,000 259,000
c. 340,000 271,000
d. 280,000 271,000
ANS: B
Materials:
To complete beginning units in process (materials were 0% complete) 90,000
WIP)
Total 280,000
To complete beginning units in process (conversion costs were 50% complete) 45,000
WIP)
Total 259,000

27. During June, Birch Bay Company's Department B equivalent unit product costs computed under the
FIFO method were as follows:
Materials $2
Conversion $3
Transferred-in $5
Materials are introduced at the end of the process in Department B. There were 4,000 units (60 %
complete as to conversion costs) in work in process at June 30. The total costs assigned to the June 30
work in process inventory should be:
a. $20,000.
b. $24,800.
c. $27,200.
d. $35,200.
ANS: C
Transferred-in costs:
4,000 units @ $5 $20,000
Conversion costs:
4,000 units (60% complete) @ $3 7,200
$27,200
Because materials are introduced at the end of the process, no materials cost would be included in the
ending work in process.

28. When two products are produced during a common process, what is the factor that determines whether
the products are joint products or one principal product and a by-product?
a. Potential marketability for each product
b. Amount of work expended in the production of each product
c. Management policy
d. Relative total sales value
ANS: D
The relative total sales value is the determining factor in deciding whether a product is a joint product
or a by-product. Products with relatively little value are by-products.

29. If two or more products share a common process before they are separated, the joint costs should be
allocated in a manner that:
a. Assigns a proportionate amount of the total cost to each product by means of a
quantitative basis.
b. Maximizes total earnings.
c. Minimizes variations in a unit of production cost.
d. Does not introduce an element of estimation into the process of accumulating costs for
each product.
ANS: A
An allocation method is usually selected that will assign a portion of a given total cost to each of the
products that are sharing a physical part of the total item. A quantitative method is chosen that will
least affect the gross profit percentage differences among these products.

30. Each of the following is a method by which to allocate joint costs except:
a. Chemical or engineering analysis.
b. Relative sales value.
c. Relative weight, volume, or linear measure.
d. Relative marketing costs.
ANS: D
Joint costs would not be allocated according to relative marketing costs because marketing costs are
not necessarily incurred directly in proportion to production costs.

31. Joint costs are commonly allocated based upon relative:

a. Sales value.
b. Marketing costs.
c. Conversion costs.
d. Prime costs.
ANS: A
Joint costs are commonly allocated based upon relative sales value. Profitability, conversion costs, and
prime costs do not necessarily have a direct relationship to production costs.

32. Budde Chemicals produces two industrial chemical compounds, X15 and Z24, from the same process,
which last year, cost $300,000. Budde produced 15,000 gallons of X15, which sells for $40 per gallon
and 45,000 gallons of Z24, which sells for $20 per gallon. Using the relative sales method, how much
of the joint cost should be allocated to X15?
a. $100,000
b. $200,000
c. $60,000
d. $75,000
ANS: A
Percent Assignment
Selling Ultimate sales of joint
Product Gallons price sales value value costs
X15 15,000 $40 $ 400,000 33.3% $100,000
Z24 45,000 $20 800,000 66.7% 200,000
$1,200,000 $300,000

33. If a company produces two products, A and B, from a joint process, and B requires additional
processing after the split-off in order to be salable, how is the joint cost allocated to B determined?
a. The costs of the additional processing are ignored in allocating joint costs.
b. The costs of the additional processing are subtracted from the joint costs allocated to B.
c. The relative sales value used to allocate the joint cost are determined after the costs of
further processing are subtracted from the ultimate sales value of B.
d. None of these are correct.
ANS: C
The relative sales value used to determine joint costs is determined by subtracting the costs of further
processing from the ultimate sales value of B.

and 45,000 gallons of Z24, which sells for $20 per gallon. After the split-off point, X15 required
additional processing costing $200,000 to make it salable. Using the adjusted sales method, how much
a. $100,000
b. $240,000
c. $60,000
d. $75,000
ANS: C
Percent Assignment
Selling Ultimate Costs after Sales value at sales of joint
Product Gallons price sales split-off split-off value costs
value
X15 10,000 $40 $400,000 $200,000 $ 200,000 20% $ 60,000
Z24 40,000 $20 800,000 0 800,000 80% 240,000

$1,200,000 $200,000 $1,000,000 $300,000

and 45,000 gallons of Z24, which sells for $20 per gallon. Using the physical units method, how much
a. $100,000
b. $225,000
c. $60,000
d. $75,000
ANS: D
Assignment of
Selling Percentage of joint
Product price Gallons total gallons costs
X15 $40 15,000 25% $ 75,000
Z24 $20 45,000 75% 225,000
60,000 $300,000

36. Which of the following statements best describes a by-product?

a. A product with a value that can easily and accurately be determined.
b. A product that has a greater value than the main product.
c. A product created along with the main product whose sales value does not cover the cost
of its production.
d. A product that usually produces a small amount of revenue when compared to the main
product revenue.
ANS: D
A by-product is a product that usually produces a small amount of revenue when compared to the main
product revenue.

37. Which of the following is most likely to be accounted for as a by-product?

a. Heating oil resulting from processing crude oil at a refinery.
b. Cream resulting from processing raw milk at a dairy.
c. Sawdust resulting from processing lumber at a lumber mill.
d. Ground beef resulting from processing beef at a meat packer.
ANS: C
Of the choices above, it is most likely that sawdust would have very little sales value compared to the
lumber being processed.

38. Which of the following is not an acceptable method for accounting for by-products in a joint
manufacturing process?
a. Costs before the split-off point are allocated to by-products.
b. The estimated sales value of the by-product reduces the cost of the main product.
c. The joint costs allocated to by-products are included in an account called “By-products
Inventory.”
d. In some instances, the revenue from selling by-products may be treated as “other income”
on the income statement.
ANS: A
Joint costs are not allocated to by-products. When accounting for by-products, the estimated sales
value of the by-product reduces the cost of the main product, and is recorded to an account called “By-
products Inventory.” Alternatively, if the sales value is not easily estimated, the sales may be recorded
as “Other Income.”

NAT: IMA 2E - External Financial Reporting TOP: AACSB - Reflective
39. Thomas Lumber Company produces furniture grade lumber and building grade lumber from a joint
process. Sawdust, a by-product of the manufacturing process is sold to a local toy manufacturer to
stuff leather toys for $10 per ton. In February, the company produced 3,000 tons of sawdust. What is
the entry to reduce the cost of the main products by the estimated sales value of the by-product?
a. By-product inventory $30,000
Work in process $30,000
b. Work in process $30,000

Other income $30,000
c. Cost of goods sold $30,000

By-product inventory $30,000
d. By-product inventory $30,000

Gain or loss on sale of by-product $30,000
ANS: A
If the sales value of the by-product can be estimated, the entry made at the point of separation to set up
the by-product inventory and reduce the joint cost of the main products is:
By-product inventory $30,000

Work in process $30,000
If the value is not readily estimated, an entry is made at the time of the sale, and is usually treated as
other income or a reduction in the cost of the main products.

PROBLEM
1. Information for Tyson Company in May for Department One, the first stage of the production cycle, is
as follows:
Conversion
Materials Costs
Beginning work in process $ 7,500 $ 6,000
Costs added during May 28,500 16,050
Total costs $36,000 $22,050
Goods completed 9,000 units

Ending work in process 1,000 units
Material costs are added at the beginning of the process. The ending work in process is 80 percent
complete as to conversion costs. How would the total costs accounted for be distributed using the
average cost method?
ANS:
Materials Labor
Equivalent units:
Goods completed 9,000 9,000
Ending in process:
Material (1,000 x 100% complete) 1,000
Conversion costs (1,000 x 80% complete) ______ 800
10,000 9,800
Material costs ($36,000 / 10,000 units) $3.60 unit cost

Conversion costs ($22,050 / 9,800 units) 2.25 unit cost
Total $5.85 unit cost
Cost of units completed (9,000 units  $5.85) $52,650

Ending work in process:
Materials (1,000 units  $3.60) $3,600
Conversion costs (1,000 units  80%  $2.25) 1,800 5,400
Total costs accounted for $58,050

2. Highlander Corporation is a manufacturer that uses the average cost method to account for costs of
production. Highlander manufactures a product that is produced in three separate departments:
molding, assembling, and finishing. The following information was obtained for the assembling
department for the month of June:
Work in process, June 1: 4,000 units composed of the following:
Percent of
Amount Completion
Transferred in from the molding department $60,000 100%
Costs added by the assembling department:
Direct materials $ 0 0%
Direct labor 12,300 60%
Factory overhead applied 4,700 50%
$17,000
Work in process, June 1 $77,000
The following activity occurred during the month of June:
(1) 20,000 units were transferred in from the molding department at a cost of $300,000.
(2) Costs were added by the assembling department as follows:
Direct materials $ 93,600

Direct labor 43,200
Factory overhead 19,420
$156,220
(3) Materials are added at the end of the process.

(4) 18,000 units were completed and transferred to the finishing department. At June
30, 6,000 units were still in process. The degree of completion of work in process at
June 30 follows:
Direct labor 70%

Factory overhead applied 35%
Prepare in good form a cost of production report for the assembling department for the month of June.
Show supporting computations in good form. The report should include:
a. Equivalent units of production.

b. Total manufacturing costs.
c. Cost per equivalent unit.
d. Dollar amount of ending work in process.
e. Dollar amount of inventory cost transferred out.
ANS:
Highlander Corporation
Cost of Production Summary--Assembling Department
For the Month Ended June 30, 20--
Cost of work in process, beginning of month:
Cost in molding dept. $60,000
Cost in assembling dept.:
Labor $12,300
Factory overhead 4,700 17,000 $ 77,000
Cost of goods received from molding
dept. during month 300,000
Cost of production for month:
Materials $93,600
Labor 43,200
Factory overhead 19,420 156,220
Total costs to be accounted for $533,220
Unit output for month:

Materials:
Finished and transferred to finishing
dept. during month 18,000
Equivalent units of work in process, end
of month (6,000 units, 0% completed)
0
Total equivalent production 18,000
Labor:
Finished and transferred to finishing dept. 18,000
during month
Equivalent units of work in process, end
of month (6,000 units, 70% completed) 4,200
Factory overhead:
Finished and transferred to finishing dept.
during month 18,000
Equivalent units of work in process, end of
month (6,000 units, 35% completed) 2,100
20,100
Unit cost for month:
Materials [($0 + $93,600) / 18,000] $ 5.20
Labor [($12,300 + $43,200) / 22,200] 2.50
Factory overhead [($4,700 + 19,420) / 20,100] 1.20
Total $8.90
Inventory costs:
Cost of goods finished and transferred
to finishing dept. during month:
Cost in molding dept. (18,000  $15.00*) $270,000
Cost in assembling dept. (18,000  $8.90) 160,200 $430,200
Cost of work in process, end of month:
Cost in molding dept. (6,000  $15.00) $90,000
Cost in assembling dept.
Materials (6,000  0%  $4.00) $ -0-
Labor (6,000  70%  $2.50) 10,500
Factory overhead (6,000  35% x
$1.20) 2,520 13,020 103,020
Total production cost accounted for $533,220
* Costs from Molding department ($60,000 + $300,000) /24,000 = $15.00

3. Logan, Inc., had 9,000 units of work in process in Department M on March 1 that were 50 percent
complete as to conversion costs. Materials are introduced at the beginning of the process. During
March, 18,000 units were started, 20,000 units were completed, and there were 1,000 units of normal
losses. Logan had 6,000 units of work in process at March 31 that were 60 percent complete as to
conversion costs. Under Logan's cost accounting system, lost units reduce the number of units over
which total cost can be spread. Using the average cost method, what were the equivalent units for
March for conversion costs?
ANS:
Unit output--Conversion costs:

Transferred out 20,000
Ending work in process (6,000 units  60%) 3,600
Equivalent production for conversion costs 23,600

4. Kyle, Inc., instituted a new process in October. During October, 18,000 units were started in
Department A. Of the units started, 2,000 were lost in the process, 12,000 were transferred to
Department B, and 4,000 remained in work in process at October 31. The work in process at October
31 was 100 percent complete as to material costs and 15% complete as to conversion costs. Material
costs of $78,400 and conversion costs of $52,920 were charged to Department A in October. What
were the total costs transferred to Department B and assigned to ending work in process using the
average cost method?
ANS:
Cost of production for month:

Materials $ 78,400
Conversion costs 52,920
Total costs to be accounted for $131,320
Unit output for month:
Materials:
Finished and transferred to Department B 12,000
Equivalent units of work in process,
end of month (all materials) 4,000
Conversion costs:
Finished and transferred to Department B 12,000
Equivalent units of work in process,
end of month (4,000 units, 15% completed) 600
Unit cost for month:

Materials ($78,400 / 16,000) $ 4.90
Conversion costs ($52,920 / 12,600) 4.20
Total $ 9.10
Inventory costs:
Cost of goods transferred to Department B (12,000  $9.10) $109,200

Material (4,000 x 4.90) 19,600
Labor (600 x 4.20) 2,520
Total ending work in process inventory 22,120
Total production costs accounted for $131,320

5. The Roberto Company had computed the flow of units for Department A for the month of May as
follows:
Work in process, May 1: 10,000

Started into production during May 39,000
Units to be accounted for 49,000
Beginning Added during the

work in process current month
Materials $20,800 $ 97,500
Labor 5,200 34,920
Total $30,800 $165,400
Materials are added at the beginning of the process. There were 8,000 units of work in process at May
31. The work in process at May 1 was 70 percent complete as to conversion costs and the work in
process at May 31 was 60 percent complete as to conversion costs. What was the cost of the goods
transferred out and in ending work in process using the FIFO method?
ANS:
Unit output for the month:
Conversion
Materials Costs
To complete beginning work in process:
Materials needed -0-
30%  10,000 units 3,000
Started and finished during month:
All costs added 31,000 31,000
All materials added 8,000
60%  8,000 4,800
Total 39,000 38,800
Unit costs for month:

Materials $97,500 / 39,000 $2.50
Labor $34,920 / 38,800 .90
Factory overhead $32,980 / 38,800 .85
Total $4.25
Inventory Costs:
Cost of goods finished and transferred out during month:
Beginning units in process:
Prior month’s cost $30,800
Current cost to complete:
Materials (already complete) 0
Labor (10,000 x 30% x $.90) 2,700
Factory overhead (10,000 x 30% x $.85) 2,550 $ 36,050
Units started and completed during month

(31,000 x $4.25) 131,750
Total cost transferred $167,800

Materials (8,000 x $2.50) $20,000
Labor (8,000 x 60% x $.90) 4,320
Factory overhead (8,000 x 60% x $.85) 4,080 28,400

6. The Roberto Company had computed the flow of units for Department A for the month of May as
follows:
Work in process, May 1: 10,000

Started into production during May 39,000
Units to be accounted for 49,000
Beginning Added during the
work in process current month
Materials $ -0- $235,750
Labor 12,660 166,320
Total $23,970 $552,550
Materials are added at the end of the process. There were 8,000 units of work in process at May 31.
The work in process at May 1 was 30 percent complete as to conversion costs and the work in process
at May 31 was 20 percent complete as to conversion costs. What was the cost of the goods transferred
out and in ending work in process using the FIFO method?
ANS:
Unit output for the month:
Conversion
Materials Costs
Materials needed 10,000
70%  10,000 units 7,000
All costs added 31,000 31,000
No materials added -0-
20%  8,000 1,600
Total 41,000 39,600
Unit costs for month:

Materials $235,750 / 41,000 $ 5.75
Labor $166,320 / 39,600 4.20
Factory overhead $150,480 / 39,600 3.80
Total $13.75
Inventory Costs:
Cost of goods finished and transferred out during month:
Beginning units in process:
Prior month’s cost $23,970
Current cost to complete:
Materials (10,000 x 5.75) 57,500
Labor (10,000 x 70% x $4.20) 29,400
Factory overhead (10,000 x 70% x $3.80) 26,600 $137,470
Units started and completed during month

(31,000 x $13.75) 426,250
Total cost transferred $563,720

Materials (None added) $ -0-
Labor (8,000 x 20% x $4.20) 6,720
Factory overhead (8,000 x 20% x $3.80) 6,080 12,800

7. Howard Poster Incorporated had 12,000 units of work in process in Department A on October 1.
These units were 60 percent complete as to conversion costs. Materials are added in the beginning of
the process. During the month of October, 38,000 units were started and 40,000 units were completed.
Howard had 10,000 units of work in process on October 31. These units were 75 percent complete as
to conversion costs.
1) Compute the equivalent units for materials and conversion costs for the month of October using the
FIFO method.
2) Using the average cost method determine the equivalent units for materials and conversion costs for
the month of October.
ANS:
FIFO equivalent units:
Conversion
Materials Costs
Materials added -0-
40%  12,000 4,800
40,000 units completed - 12,000 units in process,
beginning of month 28,000 28,000
75%  10,000 7,500
Total 38,000 40,300
Average cost equivalent units:

Finished during month 40,000 40,000
75%  10,000 7,500
Total 50,000 47,500
PTS: 1 DIF: Moderate REF: P. OBJ: 1, 4

8. Howard Poster Incorporated had 12,000 units of work in process in Department A on October 1.
These units were 60 percent complete as to conversion costs. Materials are added at the end of the
process. During the month of October, 38,000 units were started and 40,000 units were completed.
Howard had 10,000 units of work in process on October 31. These units were 75 percent complete as
to conversion costs.
1) Compute the equivalent units for materials and conversion costs for the month of October using the
FIFO method.
2) Using the average cost method determine the equivalent units for materials and conversion costs for
the month of October.
ANS:
FIFO equivalent units:
Conversion
Materials Costs
Materials added 12,000
40%  12,000 4,800
40,000 units completed - 12,000 units in process,
beginning of month 28,000 28,000
All materials added 0
75%  10,000 7,500
Total 40,000 40,300
Average cost equivalent units:

Finished during month 40,000 40,000
Materials added 0
75%  10,000 7,500
Total 40,000 47,500
PTS: 1 DIF: Moderate REF: P. OBJ: 1, 4

9. Keith Company manufactures Products A, B, and C from a joint process. Additional information is as
follows:
Product
A B C Total
Units produced 8,000 4,000 2,000 14,000
Joint costs $90,000 ? ? $150,000
Sales value at split off ? ? $30,000 $240,000
Assuming that joint costs are allocated using the relative sales value at split-off approach, what was the
sales value at split off for Product A?
ANS:
Joint cost allocated to Product A of $90,000 / Total joint cost of $150,000 = 60%, so sales value at split
off of Product A must be 60%  total sales value of $240,000, or $144,000.

10. Jim Davis Company processes hogs into three products, chops, bacon and sausage. Production and
selling price data follow:
Chops 100,000 lbs. $5.00/ lb.

Bacon 210,000 lbs. $4.00/ lb.
Sausage 410,000 lbs. $2.00/ lb.
Bacon was smoked, sliced and packaged after the split-off point. The cost incurred for these processes
was $100,000. Sausage was ground and formed into patties after the split-off. This process cost
$60,000.
If joint processing costs were $1,500,000, calculate the total cost of each product using the adjusted
sales value method.
ANS:
Ultimate Costs Sales value Percent Assignment

Selling sales after at sales of joint
Product Pounds price value split-off split-off value costs
Chops 100,000 $5.00 $ 500,000 $ 500,000 25% $ 375,000
Bacon 210,000 $4.00 840,000 $100,000 740,000 37% 555,000
Sausage 410,000 $2.00 820,000 60,000 760,000 38% 570,000
$2,260,000 $160,000 $2,000,000 $1,500,000
Total cost:
Chops $375,000
Bacon $555,000 + 100,000 = $655,000
Sausage $570,000 + 60,000 = $630,000

11. Nate Company manufactures Products A and B from a joint process that also yields a by-product, X.
Nate Company accounts for the revenue from its by-product sales as a deduction from the cost of its
main products. Additional information is as follows:
Product
A B X Total
Units produced 15,000 9,000 6,000 30,000
Joint costs ? ? ? $180,000
Sales value at split off $420,000 $140,000 $20,000 $580,000
(1) Assuming that joint product costs are allocated using the relative sales value at split-off approach,
what was the joint cost allocated to Products A and B?
(2) Prepare the journal entry to transfer the finished products to separate inventory accounts.
(3) Assuming the sales value of X is stable, prepare the journal entries to:
(a) place the by-product in stock
(b) record the sale of 3,000 units for $10,500 on account.
ANS:
(1) In accounting for by-products, the common practice is to make no allocation of the joint costs up
to the split-off point. First, the joint costs must be reduced by the $20,000 sales value of the by-
product X ($180,000 - $20,000 = $160,000).
Percent Assignment
Relative sales sales of joint
Product Units value value costs
A 10,000 $420,000 75% (160,000 x 75%) $120,000
B 40,000 140,000 25% (160,000 x 25%) 40,000
$560,000 $160,000
(2)
Finished goods inventory - A 120,000
Finished goods inventory - B 40,000
Work in process 160,000
(3)
By-product inventory 20,000
Work in process 20,000
Accounts receivable 10,500

By-product inventory 10,000 (3,000/6,000 x 20,000)
Gain on sale of by-product 500


Process Cost Accounting Multiple Choice Questions

Încărcat de

Informații document

Descriere originală:

Titlu original

Drepturi de autor

Formate disponibile

Partajați acest document

Partajați sau inserați document

Opțiuni de partajare

Vi se pare util acest document?

Este necorespunzător acest conținut?

Drepturi de autor:

Formate disponibile

Process Cost Accounting Multiple Choice Questions

Încărcat de

Drepturi de autor:

Formate disponibile

CHAPTER 6—PROCESS COST ACCOUNTING--ADDITIONAL PROCEDURES

PTS: 1 DIF: Moderate REF: P. OBJ: 1

PTS: 1 DIF: Hard REF: P. OBJ: 1

$80,850 / 105,000 units = cost per equivalent unit $ .77

PTS: 1 DIF: Moderate REF: P. OBJ: 1

Units completed during April 65,000

$38,500 / 60,000 units = cost per equivalent unit $ .62

PTS: 1 DIF: Hard REF: P. OBJ: 1

PTS: 1 DIF: Moderate REF: P. OBJ: 1

PTS: 1 DIF: Hard REF: P. OBJ: 1

PTS: 1 DIF: Moderate REF: P. OBJ: 1

In process, beginning of period 1,000 units

What are the equivalent units for:

Materials Conversion Costs

PTS: 1 DIF: Hard REF: P. OBJ: 1

PTS: 1 DIF: Easy REF: P. OBJ: 2

PTS: 1 DIF: Moderate REF: P. OBJ: 2

PTS: 1 DIF: Moderate REF: P. OBJ: 2

PTS: 1 DIF: Easy REF: P. OBJ: 2

13. If the amount of loss in a manufacturing process is abnormal, it should be classified as a:

PTS: 1 DIF: Easy REF: P. OBJ: 2

PTS: 1 DIF: Moderate REF: P. OBJ: 2

PTS: 1 DIF: Moderate REF: P. OBJ: 3

Cost of ABX - $100,000 / 40,000 gallons = $2.50

PTS: 1 DIF: Moderate REF: P. OBJ: 3

PTS: 1 DIF: Moderate REF: P. OBJ: 4

Beginning work in process, 20% completed 5,000

Beginning work in process 5,000

Equivalent units of material:

PTS: 1 DIF: Hard REF: P. OBJ: 4

PTS: 1 DIF: Easy REF: P. OBJ: 4

PTS: 1 DIF: Moderate REF: P. OBJ: 4

In process, beginning of the period 3,000 units

Transferred to stockroom during period 12,000 units

PTS: 1 DIF: Moderate REF: P. OBJ: 4

In process, beginning of the period 3,000 units

Transferred to stockroom during period 12,000 units

Needed to finish beginning work in process

PTS: 1 DIF: Moderate REF: P. OBJ: 4

PTS: 1 DIF: Moderate REF: P. OBJ: 4

$66,300 / 85,000 units = cost per equivalent unit $ .78

PTS: 1 DIF: Moderate REF: P. OBJ: 4

To complete beginning in process units (materials all 100%) 0

$38,500 / 60,000 units = cost per equivalent unit $ .6417

PTS: 1 DIF: Hard REF: P. OBJ: 4

PTS: 1 DIF: Moderate REF: P. OBJ: 4

PTS: 1 DIF: Moderate REF: P. OBJ: 4

PTS: 1 DIF: Moderate REF: P. OBJ: 5

PTS: 1 DIF: Moderate REF: P. OBJ: 5

PTS: 1 DIF: Easy REF: P. OBJ: 5

31. Joint costs are commonly allocated based upon relative:

PTS: 1 DIF: Easy REF: P. OBJ: 5

PTS: 1 DIF: Moderate REF: P. OBJ: 5

PTS: 1 DIF: Moderate REF: P. OBJ: 5

X15 10,000 $40 $400,000 $200,000 $ 200,000 20% $ 60,000

Z24 40,000 $20 800,000 0 800,000 80% 240,000

PTS: 1 DIF: Hard REF: P. OBJ: 5

PTS: 1 DIF: Hard REF: P. OBJ: 5

36. Which of the following statements best describes a by-product?

PTS: 1 DIF: Moderate REF: P. OBJ: 5

37. Which of the following is most likely to be accounted for as a by-product?

PTS: 1 DIF: Moderate REF: P. OBJ: 5