Chapter 05 Testbank

Chapter 05 Testbank
Student: ___________________________________________________________________________
1. Wages paid to a supervisor in a factory are a part of:
Prime cost Conversion cost

A. Yes No
B. Yes Yes
C. No No
D. No Yes

2. Which of the following are components of conversion costs?

A. Direct labour and direct materials

B. Indirect materials and manufacturing overhead
C. Direct labour and manufacturing overhead
D. Direct labour and indirect labour

3. Which of the following represents a correct sequence in preparing a departmental production report?

A. Analysis of physical flow of units, computation of unit costs, calculation of equivalent units and analysis of total costs
B. Analysis of physical flow of units, calculation of equivalent units, computation of unit costs and analysis of total costs
C. Analysis of total costs, calculation of equivalent units, computation of unit costs and analysis of physical flow of units
D. Analysis of total costs, analysis of physical flow of units, computation of unit costs and calculation of equivalent units

4. Under Australian accounting standards, which methods can be used to prepare the departmental production report?

A. Weighted average, first in first out and standard costing

B. Last in first out, first in first out and standard costing
C. Last in first out, standard costing, weighted average
D. First in first out, last in first out, weighted average and standard costing

5. Rex Company Ltd had 4000 units in work in process at 1 April. During April, 11 000 units were completed. At 30 April, 5000
units remained in work in process. How many units were started during April?

A. 11 000
B. 5000
C. 12 000
D. 16 000

6. Assuming that there was no beginning work in process inventory and the ending work in process inventory is 50 per cent
complete as to conversion costs, the number of equivalent units as to conversion costs would be:

A. The same as the units completed.

B. The same as the units placed in process.
C. Less than the units completed.
D. Less than the units placed in process.

7. Which of the following represents the production units used to calculate equivalent units under the weighted average method?

A. Work to date on ending work in process + units started and completed.

B. All units completed + work to date on ending work in process.
C. Work to complete beginning work in process + work to date on ending work in process.
D. Work to complete beginning work in process + units completed – work done on ending work in process.

8. Rebex Chemical Company manufactures Compound 2 in two sequential departments. On June 1, Department 2 had 3000 units,
which were 50 per cent complete as to conversion cost. During June, 15 000 units were completed and transferred from
Department 1. On June 30, Department 2 had 4000 units, which were 20 per cent complete as to conversion costs. How many
units were completed and transferred from Department 2 during the month of June?

A. 11 000
B. 12 500
C. 14 000
D. 15 700

9. Softcloth Textile Pty Ltd manufactures a variety of fabrics. The Weaving Department had 1000 units in work in process on April
1, which were 20 per cent complete as to conversion costs. During April, 8000 units were completed and transferred. On April
30, 4000 units remained in work in process 50 per cent complete as to conversion costs. Using the weighted average method
process costing, calculate the equivalent units of conversion for the month of April.

A. 12 000
B. 9000
C. 9800
D. 10 000

10. Softcloth Textile Pty Ltd manufactures a variety of fabrics. The Weaving Department had 1000 units in work in process on April
1, which were 20 per cent complete as to conversion costs. During April, 8000 units were completed and transferred. On April
30, 4000 units remained in work in process 50 per cent complete as to conversion costs. Using the FIFO method of process
costing, calculate the equivalent units of conversion for the month of April.

A. 9000
B. 9800
C. 10 000
D. 12 000

11. What is the inventory formula that shows the physical flow of production units during a given month, under the weighted
average method?

A. Physical units in beginning work in process + units started – units completed and transferred out = units in ending work in
process.
B. Units in beginning work in process + units completed and transferred out + units started = units in ending work in process.
C. Units started + units completed and transferred out + units in ending work in process = units in beginning work in process.
D. Units in beginning work in process – units started + units completed and transferred out = units in ending work in process.

12. The major difference between weighted average and FIFO is:

A. how completed and transferred units are treated.

B. how ending inventory is treated.
C. how beginning inventory is treated.
D. how current period costs are treated.

13. A company starts work on 1000 physical units and completes 75 per cent of conversion activity. The costs are $1500 for
conversion and $5000 for direct material. What is the cost per equivalent unit for conversion?

A. $1.00 per unit

B. $1.50 per unit
C. $2.50 per unit
D. $2.00 per unit

conversion and $5000 for direct material. What is the cost per equivalent unit for direct material?

A. $10.00 per unit

B. $5.00 per unit
C. $6.00 per unit
D. $6.67 per unit

15. If the FIFO method is used, the cost of beginning work in process should be included in:
Unit Cost Cost of units transferred out

A. No Yes
B. No No
C. Yes No
D. Yes Yes

16.Which of the following are needed to calculate ending work in process under process costing?
Unit cost Equivalent units

Cost in beg.
work in process

A. No No Yes
B. Yes Yes No
C. Yes Yes Yes
D. Yes No No

17. Given the following information, use the weighted average method to calculate cost per equivalent unit for the following
materials.

A. $0.427
B. $0.4235
C. $0.55
D. $0.327

18. Equivalent unit calculations are necessary to allocate manufacturing costs between:

A. cost of goods manufactured and ending work in process

B. beginning work in process and units completed
C. cost of goods manufactured and beginning work in process
D. cost of goods manufactured and cost of goods sold

19. The FIFO method is a more accurate method than weighted average because:

A. it does not require the calculation of equivalent units

B. the costs of current period are not combined with the costs of the prior period
C. it considers prior period costs during the current period
D. it must be computerised in order to obtain accurate calculations

20. Costs are accumulated by a responsibility centre for control purposes when using:
Job order costing Process costing

A. Yes Yes
B. Yes No
C. No Yes
D. Costs are irrelevant for control purposes

21. In both job and process costing, the journal entry to record predetermined overhead is as follows.

A. Debit work in process and credit raw materials inventory, salaries payable and manufacturing overhead.
B. Debit work in process and credit manufacturing overhead applied.
C. Debit manufacturing overhead and credit work in process and raw materials inventory.
D. Debit manufacturing overhead and credit work in process inventory.

22. In both job and process costing, the journal entry to record completed goods is as follows.

A. Debit work in process and credit manufacturing overhead.

B. Credit finished goods inventory and debit cost of goods sold.
C. Debit finished goods inventory and credit work in process.
D. Debit work in process inventory and credit finished goods inventory.

23. In both job and process costing, the journal entry to record cost of goods sold is as follows.

A. Debit finished goods inventory and credit cost of goods sold.

B. Debit finished goods inventory and credit work in process.
C. Debit cost of goods sold and credit work in process.
D. Debit cost of goods sold and credit finished goods inventory.

24. Which of the following statements about operation costing is true?
i. Conversion costs are accumulated by department.
ii. Direct material costs are accumulated by batch.
iii. It is a hybrid product costing system.

A. i, ii and iii

B. ii and iii
C. i and iii
D. i and ii

25. South River Chemicals Pty Ltd manufactures a product called Zybek. Direct materials are added at the beginning of the process
and conversion activity occurs uniformly throughout the process. The following data pertains to the month of May.
Using the weighted average method of process costing, calculate the equivalent units of direct materials and conversion costs for
the month of May.

A. DM 75 000; CC 69 400

B. DM 75 000; CC 60 400
C. DM 60 000; CC 60 400
D. DM 68 000; CC 69 400

and conversion activity occurs uniformly throughout the process. The following data pertain to the month of May.
the month of May.

A. DM 75 000; CC 69 400

B. DM 75 000; CC 60 400
C. DM 60 000; CC 60 400
D. DM 68 000; CC 69 400

27. South River Chemicals Pty Ltd manufactures a product called Zybek. Direct materials are added at the end of the process and
conversion activity occurs uniformly throughout the process. The following data pertain to the month of May.
the month of May.

A. DM 75 000; CC 69 400

B. DM 75 000; CC 60 400
C. DM 60 000; CC 60 400
D. DM 68 000; CC 69 400

28. South River Chemicals Pty Ltd manufactures a product called Zybek. Direct materials are added at the end of the process and
conversion activity occurs uniformly throughout the process. The following data pertain to the month of May.
Using the FIFO method of process costing, calculate the equivalent units of direct materials and conversion activity for the
month of May.

A. DM 75 000; CC 69 400

B. DM 60 000; CC 60 400
C. DM 68 000; CC 69 400
D. None of the given answers

29. Healthy Flavour is a food processing company that makes a product called Health Nut soup in two processes—blending and
condensing. The output of the blending department is transferred to the condensing department. All materials are added at the
beginning of the blending process, and conversion activity occurs uniformly throughout both processes. The following data
pertain to the month of April in the blending department.
Using the FIFO method of process costing, calculate the equivalent units of direct materials for the month of April.

A. 60 000
B. 58 000
C. 55 000
D. 50 000

condensing. The output of the blending department is transferred to the condensing department. All materials are added at the
beginning of the blending process, and conversion activity occurs uniformly throughout both processes. The following data
pertain to the month of April in the blending department.
Using the FIFO method of process costing, calculate the cost per equivalent unit of conversion activity for the month of April.

A. $0.5048
B. $0.4169
C. $0.4381

31. In which of the following ways is normal spoilage accounted for?

A. Expensed in the period in which it occurred

B. Included as part of the unit cost of output
C. Written off to cost of goods sold
D. Included in inventory valuation until year-end and then written off

32. In which of the following ways is abnormal spoilage accounted for?



33. The following data apply to Zilch Ltd in its mixing department for the month of April. All material is introduced at the start of
the process and conversion occurs evenly through the process. Spoilage occurred at the mid point in the process.
Using the weighted average method, what are the equivalent units for conversion?

A. 85 000
B. 75 000
C. 77 000
D. 82 000

34. Abnormal spoilage costs assist management to:

A. control costs
B. control quality
C. hold supervisors responsible
D. All of the given answers

35. Operational costing is appropriate where:
i. there are different material inputs
ii. there are common material inputs
iii. processes are identical
iv. different combinations of specific processes apply to different products

A. i and ii
B. ii and iii
C. ii and iv
D. i and iv

36. Operation costing is appropriate for products with the following characteristics.
i. Repetitive mass production
ii. Individual products
iii. Large batches with repetitive processes
iv. Some unique features, some common features

A. i and iii

B. i and iv
C. ii and iii
D. iii and iv

37. Which of the following firms are more likely to use operational costing techniques?
i. Oil refineries
ii. Food processors
iii. Large scale clothing manufacturers
iv. Tourist operators

A. i and ii
B. ii and iii
C. i and iii
D. ii and iv

38. Inventory valuation in operation costing requires:

A. direct materials and conversion costs being traced to processes

B. direct material and conversion costs being traced to batches
C. direct materials traced to batches and conversion costs traced to processes
D. direct materials traced to processes and conversion costs traced to batches

39. Which of the following statement/s is/are true?

A. Weighted average costs provide a better basis for cost control than FIFO costs.
B. Weighted average costs provide a better basis for performance evaluation than standard costs.
C. Cost per equivalent unit provides a measure of production efficiency.
D. Weighted average costs provide a better basis for cost control than FIFO costs AND cost per equivalent unit provides a
measure of production efficiency.

40. The technical term for costs moving between one department and the next in a multidepartment process is:

A. transferred costs.
B. transferred out costs.
C. transferred in costs.
D. prior costs.

41. Which of the following inventory valuation method/s is/are less suited to cost control?

A. Weighted average costs

B. First in first out cost
C. Standard costs
D. Weighted average costs AND standard costs

42. Process costing systems are suitable for firms that produce:
i. homogeneous products
ii. heterogeneous products
iii. individual products
iv. repetitive products

A. i and iii

B. i and iv
C. ii and iv
D. i and ii

43. The establishment of predetermined conversion costs for operation costing requires which of the following.
i. Budgeted level of the cost driver
ii. Budgeted direct labour costs
iii. Budgeted manufacturing overhead costs

A. i
B. i and ii
C. i, ii and iii
D. i and iii

44. Assume material is added at the beginning of a process, and the beginning WIP inventory is 30 per cent complete as to
conversion costs. Using the FIFO method of costing, the total equivalent units for material for this process during this period is
equal to:

A. units started this period in this process

B. units started this period in this process plus 70 per cent of beginning inventory
C. beginning inventory this period for the process
D. units started this period in this process plus the beginning inventory

45. Assume material is added at the beginning of a process, and the beginning WIP inventory is 30 per cent complete as to
conversion costs. Using the weighted average method of costing, the total equivalent units for material for this process during
this period is equal to:

A. units started this period in this process.

B. units started this period in this process plus 70 per cent of beginning inventory.
C. beginning inventory this period for the process.
D. units started this period in this process plus the beginning inventory.

46. In a process costing system the cost of abnormal spoilage should be:

A. prorated between units transferred out and ending inventory.

B. included in the cost of units transferred out.
C. treated as a loss in the period incurred.
D. ignored.

47. For a firm, which produces its product through two processes, the costs in opening work in process for Process 2 are best
described as:

A. prior process costs

B. transferred in costs
C. prior period costs
D. conversion costs

48. For a firm, which produces its product through two processes, the costs transferred into Process 2 from Process 1 can be
described as:

A. prior process costs

B. transferred in costs
C. prior period costs
D. prior process costs AND transferred in costs

49. Raphael's Refining uses a weighted average process costing system. For a particular period, its opening inventory consisted of
100 items (60 per cent complete as to conversion costs) whose costs were $1600 made up of material $300 and conversion cost
$1300. During the month, 1000 items were started and 950 were completed. Ending inventory of WIP was complete. There
was no spoilage. Costs placed in process during the month were materials $1600 and conversion costs $13 700. Materials are
added at the halfway point. What is the amount of cost that would be allocated to goods completed in the period?

A. $14 615
B. $16 513
C. $16 900
D. $16 150

50. Raphael's Refining uses a FIFO process costing system. For a particular period, its opening inventory consisted of 100 items (60
per cent complete as to conversion costs) whose costs were $1600 made up of material $300 and conversion cost $1300. During
the month, 1000 items were started and 950 were completed. Ending inventory of WIP was complete. There was no spoilage.
Costs placed in process during the month were materials $1785 and conversion costs $13 865. Materials are added at the halfway
point. What is the amount of cost that would be allocated to goods completed in the period?

A. $16 513
B. $16 900
C. $16 150
D. $14 913

and conversion activity occurs uniformly throughout the process. The following selected data pertain to the month of May.
What are the unit costs for the period (rounded to two decimal places) assuming weighted average costing?

A. DM $7.38; CC $17.03

B. DM $6; CC $14.78
C. DM $7.38; CC $14.78
D. DM $6; CC $17.03

and conversion activity occurs uniformly throughout the process. The following data pertain to the month of May.
What are the unit costs for the period (rounded to two decimal places) assuming FIFO costing?

A. DM $7.25; CC $15.62

B. DM $5.90; CC $13.55
C. DM $5.90; CC $15.62

53. Collins Chemicals produces a compound through two processes. For its second process for a particular period, Collins had an
opening WIP inventory of 100 units halfway through the process; 2300 units completed in the period; and a closing WIP
inventory of 400 units ¾ of the way through the process. Materials are added at the beginning of the process and conversion
costs are incurred uniformly. Calculate the equivalent units for transferred in costs for the period if the firm used weighted
average costing.

A. 2300
B. 2500
C. 2600
D. 2700

54. Collins Chemicals produces a compound through two processes. For its second process for a particular period, Collins had an
opening WIP inventory of 100 units halfway through the process; 2300 units completed in the period; and a closing WIP
inventory of 400 units ¾ of the way through the process. Materials are added at the beginning of the process and conversion
costs are incurred uniformly. Calculate the equivalent units for transferred in costs for the period if the firm used FIFO costing.

A. 2300
B. 2400
C. 2500
D. 2600

55. Heara Ltd manufactures metal sheets and uses the weighted average method process costing. On 1 May the Rolling Department
had 2 000 units work in progress, which were 20 per cent completed as to conversion costs. During May 10 000 units were
completed and transferred out. The remaining work in progress on 30 May was 50 per cent complete in terms of conversion rate.
If the equivalent unit is 12 000 units, what is the 30 May work in progress?

A. 4000 units
B. 2000 units
C. 8000 units
D. 5000 units

56. Heara Ltd manufactures metal sheets, and uses the weighted average method process costing. On 1 May the Rolling Department
had 3000 units work in progress, which were 50 per cent completed as to conversion costs. During May 8000 units were
completed and transferred out. The remaining work in progress on 30 May was 2000 units, at 50 per cent complete in terms of
conversion rate. What is the equivalent unit of conversion?

A. 1000 units
B. 2000 units
C. 7500 units
D. 9000 units

57. Heara Ltd manufactures metal sheets, and uses the FIFO process costing. On 1 May the Rolling Department had 3000 units work
in progress, which were 50 per cent completed as to conversion costs. During May 8000 units were completed and transferred
out. The remaining work in progress on 30 May was 2000 units at 50 per cent complete in terms of conversion rate. What is the
equivalent unit of conversion?

A. 2000 units
B. 7500 units
C. 9000 units
D. 10 500 units

58. The difference in cost per equivalent units between the weighted average method and the FIFO method…

A. will be higher if there is no beginning work in process

B. will be higher if there is no ending work in process
C. will disappear if there is no beginning work in process
D. will be lower if there is no ending work in process

59. Latta Coffee Ltd has two main processes: roasting and packaging. Roasted coffee beans are transferred to the packaging
department before the final product is shipped to customers. The following information for the month of April for the Roasting
department is available: total cost of goods completed and transferred from Roasting department to Packaging department is $25
000; ending work in progress in April is $1000; number of equivalent units of conversion is $5000 units.
Which of the following journal entries is appropriate at the end of April?

A. Debit Packaging Department $26 000, Credit Roasting Department $26 000
B. Debit Packaging Department $25 000, Credit Roasting Department $25 000
C. Debit Roasting Department $26 000, Credit Packaging Department $26 000
D. Debit Roasting Department $25 000, Credit Packaging Department $25 000

60. Eldervale Winery produces premium wine in the Hunter Valley. Jasmine Droll, the vineyard manager who is responsible for
overseeing the grape harvest, ignores company guidelines and decides to hire some inexperienced harvest workers. As a result a
lot of good grapes are wasted. For the purpose of product costing, the losses associated with this grape wastage should be treated
as:

A. Unethical spoilage
B. Abnormal spoilage
C. Normal spoilage
D. Overhead labour costs

61. Eldervale Winery produces premium wine in the Hunter Valley. During the bottling process, small amount of spillage is often
unavoidable. How should the costs associated with the spillage be treated?

A. It should be included in the work in progress.

B. It should be expensed in the period the cost is incurred.
C. It should be ignored in the work in progress account and reported only in the internal production reports.
D. It should be expensed immediately under the FIFO method, but included in the work in progress in the weighted average
method.

62. Owl's Hours produces herbal tea and prides itself in having one of the largest ranges of herbal teas in Australia. It sells more than
50 varieties of tea leaves with a wide range of prices (depending on where the tea leaves are grown). The production processes of
its products is simple, but vary depending on whether the tea is sold as loose leaves (which requires packing tea leaves in various
sized boxes) or tea bags (which requires additional process in packaging tea in specially designed tea bags). Owl's Hours decides
to use an operation costing system. This decision is:

A. Correct, because the company uses a large variety of tea leaves as direct materials and yet has simple production processes.
B. Correct, because the company uses a large variety of tea leaves as direct materials and the different products require different
sequences of processes.
C. Incorrect, because the different production lines require the tea leaves to be packaged in very distinctive methods.
D. Incorrect, because the company has a very homogenous product – it produces and sells only tea.

63. Banana Shirts produces t-shirts in large batches. Most of its t-shirts are made of regular cotton, although some are made from
ethically produced cotton. The manufacturing process is relatively simple; most t-shirts go through similar processes; the main
difference is whether the t-shirt requires embroidery or printing. The most appropriate costing system for Banana Shirts is:

A. Process costing system

B. Job costing system.
C. Operation costing systems.
D. Both job costing system and operation costing system are appropriate.

64. Which of the following is not required when calculating the equivalent units for conversion?
i percentage of conversion for ending work in progress
ii percentage of conversion for physical units that have been completed and transferred out of the department
iii. cost of direct materials

A. i only
B. i and ii
C. i, ii and iii
D. i and iii

65. In process costing, equivalent units are the same under both the weighted average method and the FIFO method.

True False

66. Operation costing is just another name for process costing as both systems trace all production costs to processes or
departments.

True False

67. Abnormal spoilage is identified to assist managers in tracking the costs of wasted resources.

True False

68. A standard cost is a budgeted cost per unit.

True False

69. To calculate equivalent units, multiply the partially completed physical units in the process by the percentage of completion.

True False

70. Process costing can be used in service businesses if the service is routine and repetitive.

True False

71. Where a process has two departments [A and B], the first new debit entry in the work in process inventory account for
Department B in any period will be transferred-in costs.

True False

72. Conversion costs are generally added at specific points throughout a process.

True False

73. Normal spoilage can always be avoided by a more efficient approach to production.

True False

Chapter 05 Testbank Key

1. Wages paid to a supervisor in a factory are a part of:
(p. 183)
Prime cost Conversion cost

A. Yes No
B. Yes Yes
C. No No
D. No Yes

Difficulty: Easy
Learning Objective: 05-01 Describe the principles of process costing where work in process (WIP) inventories are involved

2. Which of the following are components of conversion costs?
(p. 183)
A. Direct labour and direct materials

B. Indirect materials and manufacturing overhead
C. Direct labour and manufacturing overhead
D. Direct labour and indirect labour

Difficulty: Medium

3. Which of the following represents a correct sequence in preparing a departmental production report?
(p. 183)
A. Analysis of physical flow of units, computation of unit costs, calculation of equivalent units and analysis of total costs
B. Analysis of physical flow of units, calculation of equivalent units, computation of unit costs and analysis of total costs
C. Analysis of total costs, calculation of equivalent units, computation of unit costs and analysis of physical flow of units
D. Analysis of total costs, analysis of physical flow of units, computation of unit costs and calculation of equivalent units

Difficulty: Easy

4. Under Australian accounting standards, which methods can be used to prepare the departmental production report?
(p. 186)
A. Weighted average, first in first out and standard costing

B. Last in first out, first in first out and standard costing
C. Last in first out, standard costing, weighted average
D. First in first out, last in first out, weighted average and standard costing

AACSB: Analytical
Difficulty: Medium
Graduate Attribute: Problem Solving
Learning Objective: 05-02 Assign total production costs for a department to completed units and WIP inventory using the weighted average method of process costing

5. Rex Company Ltd had 4000 units in work in process at 1 April. During April, 11 000 units were completed. At 30 April,
(p. 186) 5000 units remained in work in process. How many units were started during April?

A. 11 000
B. 5000
C. 12 000
D. 16 000

AACSB: Analytical
Difficulty: Medium

6. Assuming that there was no beginning work in process inventory and the ending work in process inventory is 50 per cent
(p. 186) complete as to conversion costs, the number of equivalent units as to conversion costs would be:

A. The same as the units completed.

B. The same as the units placed in process.
C. Less than the units completed.
D. Less than the units placed in process.

AACSB: Analytical
Difficulty: Medium

7. Which of the following represents the production units used to calculate equivalent units under the weighted average
(p. 186) method?

A. Work to date on ending work in process + units started and completed.
B. All units completed + work to date on ending work in process.
C. Work to complete beginning work in process + work to date on ending work in process.
D. Work to complete beginning work in process + units completed – work done on ending work in process.

Difficulty: Easy

8. Rebex Chemical Company manufactures Compound 2 in two sequential departments. On June 1, Department 2 had 3000
(p. 186) units, which were 50 per cent complete as to conversion cost. During June, 15 000 units were completed and transferred
from Department 1. On June 30, Department 2 had 4000 units, which were 20 per cent complete as to conversion costs. How
many units were completed and transferred from Department 2 during the month of June?

A. 11 000
B. 12 500
C. 14 000
D. 15 700

AACSB: Analytical
Difficulty: Medium

9. Softcloth Textile Pty Ltd manufactures a variety of fabrics. The Weaving Department had 1000 units in work in process on
(p. 186) April 1, which were 20 per cent complete as to conversion costs. During April, 8000 units were completed and transferred.
On April 30, 4000 units remained in work in process 50 per cent complete as to conversion costs. Using the weighted
average method process costing, calculate the equivalent units of conversion for the month of April.

A. 12 000
B. 9000
C. 9800
D. 10 000

AACSB: Analytical
Difficulty: Medium

10. Softcloth Textile Pty Ltd manufactures a variety of fabrics. The Weaving Department had 1000 units in work in process on
(p. 190) April 1, which were 20 per cent complete as to conversion costs. During April, 8000 units were completed and transferred.
On April 30, 4000 units remained in work in process 50 per cent complete as to conversion costs. Using the FIFO method of
process costing, calculate the equivalent units of conversion for the month of April.

A. 9000
B. 9800
C. 10 000
D. 12 000

AACSB: Analytical
Difficulty: Medium
Learning Objective: 05-03 Assign total production costs for a department to completed units and WIP inventory using the FIFO method of process costing

11. What is the inventory formula that shows the physical flow of production units during a given month, under the weighted
(p. 186) average method?

A. Physical units in beginning work in process + units started – units completed and transferred out = units in ending work
in process.
B. Units in beginning work in process + units completed and transferred out + units started = units in ending work in
process.
C. Units started + units completed and transferred out + units in ending work in process = units in beginning work in
process.
D. Units in beginning work in process – units started + units completed and transferred out = units in ending work in
process.

Difficulty: Easy

12. The major difference between weighted average and FIFO is:
(p. 190)
A. how completed and transferred units are treated.

B. how ending inventory is treated.
C. how beginning inventory is treated.
D. how current period costs are treated.

Difficulty: Easy

(p. 186) conversion and $5000 for direct material. What is the cost per equivalent unit for conversion?

A. $1.00 per unit

B. $1.50 per unit
C. $2.50 per unit
D. $2.00 per unit

AACSB: Analytical
Difficulty: Easy

(p. 186) conversion and $5000 for direct material. What is the cost per equivalent unit for direct material?

A. $10.00 per unit

B. $5.00 per unit
C. $6.00 per unit
D. $6.67 per unit

AACSB: Analytical
Difficulty: Easy

15. If the FIFO method is used, the cost of beginning work in process should be included in:
(p. 190)
Unit Cost Cost of units transferred out

A. No Yes
B. No No
C. Yes No
D. Yes Yes

Difficulty: Easy

16. Which of the following are needed to calculate ending work in process under process costing?
(p. 186
)
Unit cost Equivalent units
Cost in beg.
work in process

A. No No Yes
B. Yes Yes No
C. Yes Yes Yes
D. Yes No No

Difficulty: Easy

17. Given the following information, use the weighted average method to calculate cost per equivalent unit for the following
(p. 186) materials.

A. $0.427
B. $0.4235
C. $0.55
D. $0.327

AACSB: Analytical
Difficulty: Easy

18. Equivalent unit calculations are necessary to allocate manufacturing costs between:
(p. 186)
A. cost of goods manufactured and ending work in process

B. beginning work in process and units completed
C. cost of goods manufactured and beginning work in process
D. cost of goods manufactured and cost of goods sold

Difficulty: Easy

19. The FIFO method is a more accurate method than weighted average because:
(p. 190)
A. it does not require the calculation of equivalent units

B. the costs of current period are not combined with the costs of the prior period
C. it considers prior period costs during the current period
D. it must be computerised in order to obtain accurate calculations

AACSB: Reflective
Difficulty: Easy

20. Costs are accumulated by a responsibility centre for control purposes when using:
(p. 204)
Job order costing Process costing

A. Yes Yes

B. Yes No
C. No Yes
D. Costs are irrelevant for control purposes

Difficulty: Medium
Learning Objective: 05-06 Recognise and explain important issues that influence the design of process costing and operation costing, including the use of
predetermined overhead and conversion costs and standard costs; determining the degree of completion; and the relevance of process costing for responsibility
accounting and for service firms

21. In both job and process costing, the journal entry to record predetermined overhead is as follows.
(p. 183)
A. Debit work in process and credit raw materials inventory, salaries payable and manufacturing overhead.
B. Debit work in process and credit manufacturing overhead applied.
C. Debit manufacturing overhead and credit work in process and raw materials inventory.
D. Debit manufacturing overhead and credit work in process inventory.

Difficulty: Easy

22. In both job and process costing, the journal entry to record completed goods is as follows.
(p. 183)
A. Debit work in process and credit manufacturing overhead.

B. Credit finished goods inventory and debit cost of goods sold.
C. Debit finished goods inventory and credit work in process.
D. Debit work in process inventory and credit finished goods inventory.

Difficulty: Easy

23. In both job and process costing, the journal entry to record cost of goods sold is as follows.
(p. 183)
A. Debit finished goods inventory and credit cost of goods sold.
B. Debit finished goods inventory and credit work in process.
C. Debit cost of goods sold and credit work in process.
D. Debit cost of goods sold and credit finished goods inventory.

Difficulty: Easy

24. Which of the following statements about operation costing is true?
(p. 197) i. Conversion costs are accumulated by department.
ii. Direct material costs are accumulated by batch.
iii. It is a hybrid product costing system.

A. i, ii and iii

B. ii and iii
C. i and iii
D. i and ii

Difficulty: Easy
Learning Objective: 05-05 Assign total production costs for a department to completed units and WIP inventory under a common hybrid costing system called
‘operation costing’

25. South River Chemicals Pty Ltd manufactures a product called Zybek. Direct materials are added at the beginning of the
(p. 186) process and conversion activity occurs uniformly throughout the process. The following data pertains to the month of May.
Using the weighted average method of process costing, calculate the equivalent units of direct materials and conversion
costs for the month of May.

A. DM 75 000; CC 69 400

B. DM 75 000; CC 60 400
C. DM 60 000; CC 60 400
D. DM 68 000; CC 69 400

AACSB: Analytical
Difficulty: Medium

26. South River Chemicals Pty Ltd manufactures a product called Zybek. Direct materials are added at the beginning of the
(p. 190) process and conversion activity occurs uniformly throughout the process. The following data pertain to the month of May.

A. DM 75 000; CC 69 400

B. DM 75 000; CC 60 400
C. DM 60 000; CC 60 400
D. DM 68 000; CC 69 400

AACSB: Analytical
Difficulty: Medium

27. South River Chemicals Pty Ltd manufactures a product called Zybek. Direct materials are added at the end of the process
(p. 186) and conversion activity occurs uniformly throughout the process. The following data pertain to the month of May.

A. DM 75 000; CC 69 400

B. DM 75 000; CC 60 400
C. DM 60 000; CC 60 400
D. DM 68 000; CC 69 400

AACSB: Analytical
Difficulty: Medium

28. South River Chemicals Pty Ltd manufactures a product called Zybek. Direct materials are added at the end of the process
(p. 190) and conversion activity occurs uniformly throughout the process. The following data pertain to the month of May.
Using the FIFO method of process costing, calculate the equivalent units of direct materials and conversion activity for the
month of May.

A. DM 75 000; CC 69 400

B. DM 60 000; CC 60 400
C. DM 68 000; CC 69 400

AACSB: Analytical
Difficulty: Medium

(p. 210) condensing. The output of the blending department is transferred to the condensing department. All materials are added at
the beginning of the blending process, and conversion activity occurs uniformly throughout both processes. The following
data pertain to the month of April in the blending department.
Using the FIFO method of process costing, calculate the equivalent units of direct materials for the month of April.

A. 60 000
B. 58 000
C. 55 000
D. 50 000

AACSB: Analytical
Difficulty: Easy
Learning Objective: 05-07 Calculate product costs and prepare journal entries to record the flow of costs in a process costing system with sequential production
departments

(p. 210) condensing. The output of the blending department is transferred to the condensing department. All materials are added at
the beginning of the blending process, and conversion activity occurs uniformly throughout both processes. The following
data pertain to the month of April in the blending department.
Using the FIFO method of process costing, calculate the cost per equivalent unit of conversion activity for the month of
April.

A. $0.5048
B. $0.4169
C. $0.4381

AACSB: Analytical
Difficulty: Medium
departments

31. In which of the following ways is normal spoilage accounted for?
(p. 194)


AACSB: Reflective
Difficulty: Medium
Learning Objective: 05-04 Account for the costs of normal and abnormal spoilage under the weighted average method of process costing

32. In which of the following ways is abnormal spoilage accounted for?
(p. 194)


Difficulty: Easy

33. The following data apply to Zilch Ltd in its mixing department for
(p. 194) the month of April. All material is introduced at the start of the
process and conversion occurs evenly through the process.
Spoilage occurred at the mid point in the process.
Using the weighted average method, what are the equivalent units
for conversion?

A. 85
000
B. 75
000
C. 77
000
D. 82
000

AACSB: Analytical
Difficulty: Medium

34. Abnormal spoilage costs assist management to:
(p. 194)
A. cont
rol
cost
s
B. cont
rol
qual
ity
C. hold
sup
ervi
sors
resp
onsi
ble
D. All
of
the
give
n
ans
wer
s

AACSB: Reflective
Difficulty: Medium

35. Operational costing is appropriate where:
(p. 197) i. there are different material inputs
ii. there are common material inputs
iii. processes are identical
iv. different combinations of specific processes apply to different
products

A. i
and
ii
B. ii
and
iii
C. ii
and
iv
D. i
and
iv

AACSB: Reflective
Difficulty: Medium

36. Operation costing is appropriate for products with the following
(p. 197) characteristics.
i. Repetitive mass production
ii. Individual products
iii. Large batches with repetitive processes
iv. Some unique features, some common features

A. i
and
iii
B. i
and
iv
C. ii
and
iii
D. iii
and
iv

Difficulty: Easy

37. Which of the following firms are more likely to use operational
(p. 197) costing techniques?
i. Oil refineries
ii. Food processors
iii. Large scale clothing manufacturers
iv. Tourist operators

A. i
and
ii
B. ii
and
iii
C. i
and
iii
D. ii
and
iv

AACSB: Reflective
Difficulty: Medium

38. Inventory valuation in operation costing requires:
(p. 197)
A. dire
ct
mat
erial
s
and
con
vers
ion
cost
s
bein
g
trac
ed
to
proc
esse
s
B. dire
ct
mat
erial
and
con
vers
ion
cost
s
bein
g
trac
ed
to
batc
hes
C. dire
ct
mat
erial
s
trac
ed
to
batc
hes
and
con
vers
ion
cost
s
trac
ed
to
proc
esse
s
D. dire
ct
mat
erial
s
trac
ed
to
proc
esse
s
and
con
vers
ion
cost
s
trac
ed
to
batc
hes

AACSB: Reflective
Difficulty: Easy

39. Which of the following statement/s is/are true?
(p. 183)
A. Wei
ghte
d
aver
age
cost
s
pro
vide
a
bett
er
basi
s
for
cost
cont
rol
than
FIF
O
cost
s.
B. Wei
ghte
d
aver
age
cost
s
pro
vide
a
bett
er
basi
s
for
perf
orm
anc
e
eval
uati
on
than
stan
dard
cost
s.
C. Cos
t
per
equi
vale
nt
unit
pro
vide
sa
mea
sure
of
pro
duct
ion
effi
cien
cy.
D. Wei
ghte
d
aver
age
cost
s
pro
vide
a
bett
er
basi
s
for
cost
cont
rol
than
FIF
O
cost
s
AN
D
cost
per
equi
vale
nt
unit
pro
vide
sa
mea
sure
of
pro
duct
ion
effi
cien
cy.

AACSB: Reflective
Difficulty: Easy

40. The technical term for costs moving between one department and
(p. 210) the next in a multidepartment process is:

A. tran
sfer
red
cost
s.
B. tran
sfer
red
out
cost
s.
C. tran
sfer
red
in
cost
s.
D. prio
r
cost
s.

Difficulty: Easy
departments

41. Which of the following inventory valuation method/s is/are less
(p. 190) suited to cost control?

A. Wei
ghte
d
aver
age
cost
s
B. Firs
t in
first
out
cost
C. Stan
dard
cost
s
D. Wei
ghte
d
aver
age
cost
s
AN
D
stan
dard
cost
s

AACSB: Reflective
Difficulty: Medium

42. Process costing systems are suitable for firms that produce:
(p. 183) i. homogeneous products
ii. heterogeneous products
iii. individual products
iv. repetitive products

A. i
and
iii
B. i
and
iv
C. ii
and
iv
D. i
and
ii

Difficulty: Easy

43. The establishment of predetermined conversion costs for operation
(p. 183) costing requires which of the following.
i. Budgeted level of the cost driver
ii. Budgeted direct labour costs
iii. Budgeted manufacturing overhead costs

A. i
B. i
and
ii
C. i, ii
and
iii
D. i
and
iii

AACSB: Reflective
Difficulty: Easy

44. Assume material is added at the beginning of a process, and the
(p. 194) beginning WIP inventory is 30 per cent complete as to conversion
costs. Using the FIFO method of costing, the total equivalent units
for material for this process during this period is equal to:

A. unit
s
start
ed
this
peri
od
in
this
proc
ess
B. unit
s
start
ed
this
peri
od
in
this
proc
ess
plus
70
per
cent
of
begi
nnin
g
inve
ntor
y
C. begi
nnin
g
inve
ntor
y
this
peri
od
for
the
proc
ess
D. unit
s
start
ed
this
peri
od
in
this
proc
ess
plus
the
begi
nnin
g
inve
ntor
y

AACSB: Reflective
Difficulty: Medium

45. Assume material is added at the beginning of a process, and the
(p. 190) beginning WIP inventory is 30 per cent complete as to conversion
costs. Using the weighted average method of costing, the total
equivalent units for material for this process during this period is
equal to:

A. unit
s
start
ed
this
peri
od
in
this
proc
ess.
B. unit
s
start
ed
this
peri
od
in
this
proc
ess
plus
70
per
cent
of
begi
nnin
g
inve
ntor
y.
C. begi
nnin
g
inve
ntor
y
this
peri
od
for
the
proc
ess.
D. unit
s
start
ed
this
peri
od
in
this
proc
ess
plus
the
begi
nnin
g
inve
ntor
y.

AACSB: Reflective
Difficulty: Medium

46. In a process costing system the cost of abnormal spoilage should
(p. 194) be:

A. pror
ated
bet
wee
n
unit
s
tran
sfer
red
out
and
endi
ng
inve
ntor
y.
B. incl
ude
d in
the
cost
of
unit
s
tran
sfer
red
out.
C. treat
ed
as a
loss
in
the
peri
od
incu
rred
.
D. igno
red.

AACSB: Reflective
Difficulty: Easy

47. For a firm, which produces its product through two processes, the
(p. 210) costs in opening work in process for Process 2 are best described
as:

A. prio
r
proc
ess
cost
s
B. tran
sfer
red
in
cost
s
C. prio
r
peri
od
cost
s
D. con
vers
ion
cost
s

Difficulty: Easy
departments

48. For a firm, which produces its product through two processes, the
(p. 210) costs transferred into Process 2 from Process 1 can be described as:
A. prio
r
proc
ess
cost
s
B. tran
sfer
red
in
cost
s
C. prio
r
peri
od
cost
s
D. prio
r
proc
ess
cost
s
AN
D
tran
sfer
red
in
cost
s

Difficulty: Easy
departments

49. Raphael's Refining uses a weighted average process costing
(p. 186) system. For a particular period, its opening inventory consisted of
100 items (60 per cent complete as to conversion costs) whose
costs were $1600 made up of material $300 and conversion cost
$1300. During the month, 1000 items were started and 950 were
completed. Ending inventory of WIP was complete. There was
no spoilage. Costs placed in process during the month were
materials $1600 and conversion costs $13 700. Materials are added
at the halfway point. What is the amount of cost that would be
allocated to goods completed in the period?

A. $14
615
B. $16
513
C. $16
900
D. $16
150

AACSB: Analytical
Difficulty: Difficult

50. Raphael's Refining uses a FIFO process costing system. For a
(p. 190) particular period, its opening inventory consisted of 100 items (60
per cent complete as to conversion costs) whose costs were $1600
made up of material $300 and conversion cost $1300. During the
month, 1000 items were started and 950 were completed. Ending
inventory of WIP was complete. There was no spoilage. Costs
placed in process during the month were materials $1785 and
conversion costs $13 865. Materials are added at the halfway point.
What is the amount of cost that would be allocated to goods
completed in the period?

A. $16
513
B. $16
900
C. $16
150
D. $14
913

AACSB: Analytical

51. South River Chemicals Pty Ltd manufactures a product called
(p. 183) Zybek. Direct materials are added at the beginning of the process
and conversion activity occurs uniformly throughout the process.
The following selected data pertain to the month of May.
What are the unit costs for the period (rounded to two decimal
places) assuming weighted average costing?

A. DM
$7.3
8;
CC
$17.
03
B. DM
$6;
CC
$14.
78
C. DM
$7.3
8;
CC
$14.
78
D. DM
$6;
CC
$17.
03

AACSB: Analytical
Difficulty: Medium

52. South River Chemicals Pty Ltd manufactures a product called
(p. 194) Zybek. Direct materials are added at the beginning of the process
and conversion activity occurs uniformly throughout the process.
The following data pertain to the month of May.
What are the unit costs for the period (rounded to two decimal
places) assuming FIFO costing?

A. DM
$7.2
5;
CC
$15.
62
B. DM
$5.9
0;
CC
$13.
55
C. DM
$5.9
0;
CC
$15.
62
D. Non
e of
the
give
n
ans
wer
s

AACSB: Analytical
Difficulty: Medium

53. Collins Chemicals produces a compound through two processes.
(p. 210) For its second process for a particular period, Collins had an
opening WIP inventory of 100 units halfway through the process;
2300 units completed in the period; and a closing WIP inventory of
400 units ¾ of the way through the process. Materials are added at
the beginning of the process and conversion costs are incurred
uniformly. Calculate the equivalent units for transferred in costs
for the period if the firm used weighted average costing.

A. 230
0
B. 250
0
C. 260
0
D. 270
0

AACSB: Reflective
Difficulty: Medium
departments

54. Collins Chemicals produces a compound through two processes.
(p. 210) For its second process for a particular period, Collins had an
opening WIP inventory of 100 units halfway through the process;
2300 units completed in the period; and a closing WIP inventory of
400 units ¾ of the way through the process. Materials are added at
the beginning of the process and conversion costs are incurred
uniformly. Calculate the equivalent units for transferred in costs
for the period if the firm used FIFO costing.

A. 230
0
B. 240
0
C. 250
0
D. 260
0

AACSB: Reflective
Difficulty: Medium
departments

55. Heara Ltd manufactures metal sheets and uses the weighted
(p. 186) average method process costing. On 1 May the Rolling Department
had 2 000 units work in progress, which were 20 per cent
completed as to conversion costs. During May 10 000 units were
completed and transferred out. The remaining work in progress on
30 May was 50 per cent complete in terms of conversion rate. If
the equivalent unit is 12 000 units, what is the 30 May work in
progress?

A. 400
0
unit
s
B. 200
0
unit
s
C. 800
0
unit
s
D. 500
0
unit
s

AACSB: Analytical

56. Heara Ltd manufactures metal sheets, and uses the weighted
(p. 186) average method process costing. On 1 May the Rolling Department
had 3000 units work in progress, which were 50 per cent
completed as to conversion costs. During May 8000 units were
completed and transferred out. The remaining work in progress on
30 May was 2000 units, at 50 per cent complete in terms of
conversion rate. What is the equivalent unit of conversion?

A. 100
0
unit
s
B. 200
0
unit
s
C. 750
0
unit
s
D. 900
0
unit
s

AACSB: Analytical
Difficulty: Medium

57. Heara Ltd manufactures metal sheets, and uses the FIFO process
(p. 186) costing. On 1 May the Rolling Department had 3000 units work in
progress, which were 50 per cent completed as to conversion costs.
During May 8000 units were completed and transferred out. The
remaining work in progress on 30 May was 2000 units at 50 per
cent complete in terms of conversion rate. What is the equivalent
unit of conversion?

A. 200
0
unit
s
B. 750
0
unit
s
C. 900
0
unit
s
D. 10
500
unit
s

AACSB: Analytical
Difficulty: Medium

58. The difference in cost per equivalent units between the weighted
(p. 190) average method and the FIFO method…

A. will
be
high
er if
ther
e is
no
begi
nnin
g
wor
k in
proc
ess
B. will
be
high
er if
ther
e is
no
endi
ng
wor
k in
proc
ess
C. will
disa
ppe
ar if
ther
e is
no
begi
nnin
g
wor
k in
proc
ess
D. will
be
low
er if
ther
e is
no
endi
ng
wor
k in
proc
ess

AACSB: Reflective
Difficulty: Easy

59. Latta Coffee Ltd has two main processes: roasting and packaging.
(p. 186) Roasted coffee beans are transferred to the packaging department
before the final product is shipped to customers. The following
information for the month of April for the Roasting department is
available: total cost of goods completed and transferred from
Roasting department to Packaging department is $25 000; ending
work in progress in April is $1000; number of equivalent units of
conversion is $5000 units.
Which of the following journal entries is appropriate at the end of
April?

A. Deb
it
Pac
kagi
ng
Dep
art
men
t
$26
000,
Cre
dit
Roa
stin
g
Dep
art
men
t
$26
000
B. Deb
it
Pac
kagi
ng
Dep
art
men
t
$25
000,
Cre
dit
Roa
stin
g
Dep
art
men
t
$25
000
C. Deb
it
Roa
stin
g
Dep
art
men
t
$26
000,
Cre
dit
Pac
kagi
ng
Dep
art
men
t
$26
000
D. Deb
it
Roa
stin
g
Dep
art
men
t
$25
000,
Cre
dit
Pac
kagi
ng
Dep
art
men
t
$25
000

AACSB: Reflective
Difficulty: Easy

60. Eldervale Winery produces premium wine in the Hunter Valley.
(p. 194) Jasmine Droll, the vineyard manager who is responsible for
overseeing the grape harvest, ignores company guidelines and
decides to hire some inexperienced harvest workers. As a result a
lot of good grapes are wasted. For the purpose of product costing,
the losses associated with this grape wastage should be treated as:

A. Une
thic
al
spoi
lage
B. Abn
orm
al
spoi
lage
C. Nor
mal
spoi
lage
D. Ove
rhea
d
labo
ur
cost
s

AACSB: Reflective
Difficulty: Medium

61. Eldervale Winery produces premium wine in the Hunter Valley.
(p. 194) During the bottling process, small amount of spillage is often
unavoidable. How should the costs associated with the spillage be
treated?

A. It
sho
uld
be
incl
ude
d in
the
wor
k in
pro
gres
s.
B. It
sho
uld
be
exp
ense
d in
the
peri
od
the
cost
is
incu
rred
.
C. It
sho
uld
be
igno
red
in
the
wor
k in
pro
gres
s
acc
ount
and
repo
rted
only
in
the
inte
rnal
pro
duct
ion
repo
rts.
D. It
sho
uld
be
exp
ense
d
im
med
iatel
y
und
er
the
FIF
O
met
hod,
but
incl
ude
d in
the
wor
k in
pro
gres
s in
the
wei
ghte
d
aver
age
met
hod.

AACSB: Reflective
Difficulty: Medium

62. Owl's Hours produces herbal tea and prides itself in having one of
(p. 197) the largest ranges of herbal teas in Australia. It sells more than 50
varieties of tea leaves with a wide range of prices (depending on
where the tea leaves are grown). The production processes of its
products is simple, but vary depending on whether the tea is sold
as loose leaves (which requires packing tea leaves in various sized
boxes) or tea bags (which requires additional process in packaging
tea in specially designed tea bags). Owl's Hours decides to use an
operation costing system. This decision is:

A. Cor
rect,
bec
ause
the
com
pan
y
uses
a
larg
e
vari
ety
of
tea
leav
es
as
dire
ct
mat
erial
s
and
yet
has
sim
ple
pro
duct
ion
proc
esse
s.
B. Cor
rect,
bec
ause
the
com
pan
y
uses
a
larg
e
vari
ety
of
tea
leav
es
as
dire
ct
mat
erial
s
and
the
diff
eren
t
pro
duct
s
requ
ire
diff
eren
t
seq
uen
ces
of
proc
esse
s.
C. Inco
rrec
t,
bec
ause
the
diff
eren
t
pro
duct
ion
line
s
requ
ire
the
tea
leav
es
to
be
pac
kag
ed
in
very
disti
ncti
ve
met
hod
s.
D. Inco
rrec
t,
bec
ause
the
com
pan
y
has
a
very
hom
oge
nou
s
pro
duct
– it
pro
duc
es
and
sells
only
tea.

AACSB: Reflective
Difficulty: Medium

63. Banana Shirts produces t-shirts in large batches. Most of its t-shirts
(p. 197) are made of regular cotton, although some are made from ethically
produced cotton. The manufacturing process is relatively simple;
most t-shirts go through similar processes; the main difference is
whether the t-shirt requires embroidery or printing. The most
appropriate costing system for Banana Shirts is:

A. Pro
cess
cost
ing
syst
em
B. Job
cost
ing
syst
em.
C. Ope
rati
on
cost
ing
syst
ems
.
D. Bot
h
job
cost
ing
syst
em
and
oper
atio
n
cost
ing
syst
em
are
appr
opri
ate.

AACSB: Reflective
Difficulty: Medium

64. Which of the following is not required when calculating the
(p. 183) equivalent units for conversion?
i percentage of conversion for ending work in progress
ii percentage of conversion for physical units that have been
completed and transferred out of the department
iii. cost of direct materials

A. i
only
B. i
and
ii
C. i, ii
and
iii
D. i
and
iii

AACSB: Reflective
Difficulty: Medium

65. In process costing, equivalent units are the same under both the
(p. 190, 194) weighted average method and the FIFO method.

FALSE

AACSB: Reflective
Difficulty: Easy

66. Operation costing is just another name for process costing as both
(p. 197) systems trace all production costs to processes or departments.

FALSE

AACSB: Reflective
Difficulty: Easy

67. Abnormal spoilage is identified to assist managers in tracking the
(p. 194) costs of wasted resources.

TRUE

AACSB: Reflective
Difficulty: Easy

68. A standard cost is a budgeted cost per unit.
(p. 204)
TRUE

Difficulty: Easy
Learning Objective: 05-06 Recognise and explain important issues that influence the design of process costing and operation costing, including the use of
predetermined overhead and conversion costs and standard costs; determining the degree of completion; and the relevance of process costing for responsibility
accounting and for service firms

69. To calculate equivalent units, multiply the partially completed
(p. 183) physical units in the process by the percentage of completion.

TRUE

Difficulty: Easy

70. Process costing can be used in service businesses if the service is
(p. 183) routine and repetitive.

TRUE

AACSB: Reflective
Difficulty: Easy

71. Where a process has two departments [A and B], the first new
(p. 210) debit entry in the work in process inventory account for
Department B in any period will be transferred-in costs.

TRUE

Difficulty: Easy
departments

72. Conversion costs are generally added at specific points throughout
(p. 183) a process.

FALSE

Difficulty: Easy

73. Normal spoilage can always be avoided by a more efficient
(p. 194) approach to production.

FALSE

AACSB: Reflective
Difficulty: Easy

Chapter 05 Testbank Summary

Cat # o
ego f Q
ry ues
tio
ns
AA 23
CS
B:
An
alyt
ical
AA 26
CS
B:
Ref
lect
ive
Dif 3
ficu
lty:
Dif
ficu
lt
Dif 38
ficu
lty:
Eas
y
Dif 32
ficu
lty:
Me
diu
m
Gra 39
dua
te
Attr
ibut
e: P
robl
em
Sol
vin
g
Lea 14
rnin
g O
bje
ctiv
e: 0
5-
01
Des
crib
e th
e pr
inci
ples
of p
roc
ess
cost
ing
wh
ere
wor
k in
pro
ces
s (
WI
P) i
nve
ntor
ies
are
inv
olv
ed
Lea 19
rnin
g O
bje
ctiv
e: 0
5-
02
Ass
ign
tota
l pr
odu
ctio
n c
osts
for
a d
epa
rtm
ent
to c
om
plet
ed
unit
s an
d
WI
P in
ven
tory
usi
ng t
he
wei
ght
ed
ave
rag
e m
eth
od
of p
roc
ess
cost
ing
Lea 11
rnin
g O
bje
ctiv
e: 0
5-
03
Ass
ign
tota
l pr
odu
ctio
n c
osts
for
a d
epa
rtm
ent
to c
om
plet
ed
unit
s an
d
WI
P in
ven
tory
usi
ng t
he
FIF
O
met
hod
of p
roc
ess
cost
ing
Lea 12
rnin
g O
bje
ctiv
e: 0
5-
04
Acc
oun
t fo
r th
e c
osts
of n
orm
al a
nd
abn
orm
al s
poil
age
und
er t
he
wei
ght
ed
ave
rag
e m
eth
od
of p
roc
ess
cost
ing
Lea 8
rnin
g O
bje
ctiv
e: 0
5-
05
Ass
ign
tota
l pr
odu
ctio
n c
osts
for
a d
epa
rtm
ent
to c
om
plet
ed
unit
s an
d
WI
P in
ven
tory
und
er a
co
mm
on
hyb
rid
cost
ing
syst
em
call
ed ‘
ope
rati
on
cost
ing’
Lea 2
rnin
g O
bje
ctiv
e: 0
5-
06
Rec
ogn
ise
and
exp
lain
imp
orta
nt i
ssu
es t
hat
infl
uen
ce t
he
desi
gn
of p
roc
ess
cost
ing
and
ope
rati
on
cost
ing,
incl
udi
ng t
he
use
of p
red
eter
min
ed
ove
rhe
ad
and
con
ver
sio
n c
osts
and
stan
dar
d c
osts
; de
ter
min
ing
the
deg
ree
of c
om
plet
ion;
and
the
rele
van
ce
of p
roc
ess
cost
ing
for
res
pon
sibi
lity
acc
oun
ting
and
for
ser
vic
e fi
rms
Lea 8
rnin
g O
bje
ctiv
e: 0
5-
07
Cal
cul
ate
pro
duc
t co
sts
and
pre
par
e jo
urn
al e
ntri
es t
o re
cor
d th
e fl
ow
of c
osts
in a
pro
ces
s co
stin
g s
yste
m
wit
h se
que
ntia
l pr
odu
ctio
n d
epa
rtm
ents

Chapter 05 Testbank

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Chapter 05 Testbank

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Chapter 05 Testbank

1. Wages paid to a supervisor in a factory are a part of:

Prime cost Conversion cost

A. Direct labour and direct materials

A. Weighted average, first in first out and standard costing

A. The same as the units completed.

A. Work to date on ending work in process + units started and completed.

A. how completed and transferred units are treated.

A. $1.00 per unit

A. $10.00 per unit

Unit Cost Cost of units transferred out

Unit cost Equivalent units

A. cost of goods manufactured and ending work in process

A. it does not require the calculation of equivalent units

Job order costing Process costing

A. Debit work in process and credit manufacturing overhead.

A. Debit finished goods inventory and credit cost of goods sold.

A. i, ii and iii

A. DM 75 000; CC 69 400

A. DM 75 000; CC 69 400

A. DM 75 000; CC 69 400

A. DM 75 000; CC 69 400

A. Expensed in the period in which it occurred

A. Expensed in the period in which it occurred

A. i and iii

A. direct materials and conversion costs being traced to processes

A. Weighted average costs

A. i and iii

A. units started this period in this process

A. units started this period in this process.

A. prorated between units transferred out and ending inventory.

A. prior process costs

A. prior process costs

A. DM $7.38; CC $17.03

A. DM $7.25; CC $15.62

A. will be higher if there is no beginning work in process

A. It should be included in the work in progress.

A. Process costing system

Prime cost Conversion cost

A. Direct labour and direct materials

A. Weighted average, first in first out and standard costing

A. The same as the units completed.

A. how completed and transferred units are treated.

A. $1.00 per unit

A. $10.00 per unit

Unit Cost Cost of units transferred out

A. cost of goods manufactured and ending work in process

A. it does not require the calculation of equivalent units

Job order costing Process costing

A. Yes Yes

A. Debit work in process and credit manufacturing overhead.

A. i, ii and iii

A. DM 75 000; CC 69 400

A. DM 75 000; CC 69 400

A. DM 75 000; CC 69 400

A. DM 75 000; CC 69 400

A. Expensed in the period in which it occurred

A. Expensed in the period in which it occurred

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