Tutorial Questions- Acc 104
Chapter III : Process COSTING and analysis
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I- True( T) / False ( F) Questions
1- Manufacturers that utilize process operations produce large quantities of identical
products. T
2- Equivalent units of production refer to the number of units that could have been started
and completed given the costs incurred during the period. T
3- In a process costing system, companies typically end each period with only Finished
Goods Inventory. F
4- Equivalent units of production for direct materials and direct labor are always the
same. F
5- Conversion cost per equivalent unit is the combined costs of direct materials and
factory overhead. F
6- The process cost summary is an important managerial accounting report produced by
a process costing system. T
7- The FIFO method of computing equivalent units focuses on production activity in the
current period only. T
8- If a department that uses process costing starts the reporting period with 100,000
physical units that were 20% complete with respect to direct labor, the equivalent units
of direct labor in beginning Work in Process are 20,000. T
9- The FIFO method of computing equivalent units includes the beginning inventory costs
in computing the cost per equivalent unit for the current period. F
10- The FIFO method of computing equivalent units excludes the beginning inventory
costs in computing the cost per equivalent unit for the current period. F
11- Process and job order manufacturing operations both combine materials, labor, and
overhead items in the process of producing products. T
12- Process costing typically uses only one Work in Process Inventory account, while job
order costing typically uses a separate Work in Process Inventory account for each
department. F
13- Process costing is applied to operations with repetitive production and customized
products. F
14- Process costing is applied to operations with repetitive production and non-customized
products. T
15- Conversion cost per equivalent unit is the combined cost of direct labor and factory
overhead per equivalent unit. T
II- Multiple Choice Questions
1- Which of the following products is most likely to be produced in a process operations
system?
A. Airplanes
B. Cereal
C. Bridges
D. Designer bridal gowns
E. Custom cabinets
2- Which of the following characteristics applies to process costing but not to job order
cost accounting?
A. Use of a predetermined overhead rate.
B. Identifiable units of production.
C. Equivalent units of production.
D. Determining cost of goods manufactured.
E. Use of a single Work in Process Inventory account.
3- The combined costs of direct labor and factory overhead per equivalent unit used by
many businesses with process operations is called:
A. Physical cost per equivalent unit
B. Overhead cost per equivalent unit
C. Combined cost per equivalent unit
D. Conversion cost per equivalent unit
E. Finished cost per equivalent unit
4- Using conversion cost per equivalent unit is appropriate for many businesses that use
process costing because:
A. Direct materials and direct labor are usually entered into the production process at
the same rate.
B. All manufacturing costs are entered into the production process in the same period.
C. Equivalent cost per unit is not sufficient measurement of production activity.
D. The weighted average method of calculating equivalent units requires it.
E. Direct labor and factory overhead enter the production process at the same rate.
5- A production department's output for the most recent month consisted of 10,000 units
completed and transferred to the next stage of production and 10,000 units in ending
Work in Process inventory. The units in ending Work in Process inventory were 50%
complete with respect to both direct materials and conversion costs. There were 1,000
units in beginning Work in Process inventory, and they were 70% complete with
respect to both direct materials and conversion costs. Calculate the equivalent units of
production for the month, assuming the company uses the weighted average method.
A. 10,000 units.
B. 10,300 units.
C. 15,000 units.
D. 15,300 units.
E. 10,700 units.
6- The Fabricating Department started the current month with a beginning Work in
Process inventory of $10,000. During the month, it was assigned the following costs:
direct materials, $76,000; direct labor, $24,000; and factory overhead, 50% of direct
labor cost. Also, inventory with a cost of $109,000 was transferred out of the
department to the next phase in the process. The ending balance of the Work in Process
Inventory account for the Fabricating Department is:
A. $ 13,000.
B. $ 56,000.
C. $ 59,000.
D. $110,000.
E. $165,000.
Feedback: $10,000 + $76,000 + $24,000 + $12,000 – $109,000 = $13,000
7- A company uses the weighted average method for inventory costing. During a period,
Department B finished and transferred 50,000 units to Department C. Also in
Department B during the period, 10,000 units were started but brought only to a stage
of being 60% completed. The number of equivalent units produced by Department B
during the period was:
8- A. 44,000units.
B. 50,000units.
C. 54,000units.
D. 56,000units.
E. 60,000units.
Completed and transferred ................... 50,000
EWIP (10,000 * 60%) ........................... 6,000
Total ...................................................... 56,000
9- At the beginning of the month, the Painting Department of Skye Manufacturing had
20,000 units in inventory, 70% complete as to materials, and 20% complete as to
conversion. During the month the department started 115,000 units and transferred
120,000 units to the next manufacturing department. At the end of the month, the
department had 15,000 units in inventory, 40% complete as to materials and 10%
complete as to conversion. If Skye Manufacturing uses the weighted average method
of process costing, compute the equivalent units for materials and conversion
respectively for the Painting Department.
A. 126,000 materials; 121,500 conversion.
B. 112,000 materials; 117,500 conversion .
C. 126,000 materials; 117,500 conversion.
D. 121,500 materials; 126,000 conversion.
E. 112,000 materials; 121,500 conversion.
Feedback: Equivalent units of production:
Materials Conversion
Completed and Transferred
Out 120,000 120,000
Ending WIP
Direct materials (15,000 x
40%) 6,000
Conversion (15,000 x
10%) 1,500
Equivalent units of
production 126,000 121,500
10- Sparky Corporation uses the weighted-average method of process costing. The
following information is available for February in its Molding Department:
Units:
Beginning Inventory: 25,000 units, 100% complete as to materials and
55% complete as to conversion.
Units started and completed: 110,000.
Units completed and transferred out: 135,000.
Ending Inventory: 30,000 units, 100% complete as to materials and
30% complete as to conversion.
Costs:
Costs in beginning Work in Process - Direct Materials: $43,000.
Costs in beginning Work in Process - Conversion: $48,850.
Costs incurred in February - Direct Materials: $287,000.
Costs incurred in February - Conversion: $599,150.
Calculate the equivalent units of materials.
A. 165,000
B. 144,000
C. 140,000
D. 130,250
E. 110,000
Feedback: EUP
Materials
Completed and Transferred Out 135,000
Ending WIP
Direct materials (30,000 x 100%) 30,000
Equivalent units of production 165,000
11- Sparky Corporation uses the weighted-average method of process costing. The
following information is available for February in its Molding Department:
Units:
Beginning Inventory: 25,000 units, 100% complete as to materials and
55% complete as to conversion.
Units started and completed: 110,000.
Units completed and transferred out: 135,000.
Ending Inventory: 30,000 units, 100% complete as to materials and
30% complete as to conversion.
Costs:
Costs in beginning Work in Process - Direct Materials: $43,000.
Costs in beginning Work in Process - Conversion: $48,850.
Costs incurred in February - Direct Materials: $287,000.
Costs incurred in February - Conversion: $599,150.
Calculate the equivalent units of conversion.
A. 165,000
B. 130,250
C. 140,000
D. 144,000
E. 110,000
Feedback: EUP
Conversion
Completed and Transferred Out 135,000
Ending WIP
Conversion (30,000 x 30%) 9,000
Equivalent units of production 144,000
III- Exercises
BE4-1 Quality Brick Company produces bricks in two processing departments—Moulding and
Firing. Information relating to the company’s operations in March follows:
a- Raw materials were issued for use in production: Moulding Department, $25,000;
Firing Department, $10,000.
b- Direct labour costs were incurred: Moulding Department, $15,000; Firing
Department, $10,000.
c- Manufacturing overhead was applied: Moulding Department, $29,000; Firing
Department, $40,000.
d- Unfired, moulded bricks were transferred from the Moulding Department to the
Firing Department. Accordingto the company’s process costing system, the cost
of the unfired moulded bricks was $61,000.
e- Finished bricks were transferred from the Firing Department to the finished goods
warehouse. According to the company’s process costing system, the cost of the
finished bricks was $110,000.
f- Finished bricks were sold to customers. According to the company’s process
costing system, the cost of the finished bricks sold was $107,000.
Prepare journal entries to record items (a) through (f).
BE4-2 Clonex Labs, Inc. uses a process costing system. The following data are available for
one department for October:
The department started 175,000 units into production during the month and transferred 200,000
completed units to the next department.
Required:
Compute the equivalent units of production for October, assuming that the company uses the
weighted average cost method of accounting for units and costs.
BE4-3 Hielta Oy, a Finnish company, processes wood pulp for various manufacturers of
paper products. Data relating to tonnes of pulp processed during June are provided below:
1- Compute the number of tonnes of pulp completed and transferred out during June.
2- Prepare a quantity schedule for June assuming that the company uses the weighted
average cost method.
3- Prepare a quantity schedule for June assuming that Hielta Oy uses the FIFO method.
BE4-5 Superior Micro Products uses the weighted average cost method in its process costing
system. During January, the Delta Assembly Department completed its processing of 25,000
units and transferred them to the next department. The cost of beginning inventory and the costs
added during January amounted to $599,780 in total. The ending inventory in January consisted
of 3,000 units, which were 80% complete with respect to materials and 60% complete with
respect to labour and overhead. The costs per equivalent unit for the month were as follows:
BE 4-8 Victor Company had 30,000 units in process on December 31, 2014, 80% complete as
to materials and 40% complete as to conversion costs. The company’s records show that 60,000
units were transferred to the finished goods inventory during 2015. Furthermore, 22,500 units
were on hand at the end of 2015, 60% complete as to materials and 30% complete as to
conversion costs.
Required:
Calculate the equivalent units of production for direct materials and conversion costs for the
FIFO method from the WACM equivalent units.
E4-9 The Mixing Department of Saiorise Ltd., a producer of fabric for Broadway shows, has
the following information regarding costs and output for March:
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