Session 6 - Process Costing

MULTIPLE CHOICE

1. A production report is divided into two sections:

a. work in process and completed goods
b. a unit information section and a cost information section
c. finished good and cost of goods sold
d. goods produced and goods in process
2. The cost of production report
a. provides information about the physical units processed by the department and provides
information about the manufacturing costs incurred by the department
b. provides information about the manufacturing costs incurred by the department
c. provides information about the physical units processed by the department
d. none of these answers
3. Process accounting can be appropriate for
a. service firms.
b. manufacturing firms with JIT orientation.
c. traditional manufacturing firms.
d. all of these.
4. Equivalent production expresses all activity of the period in terms of
a. work in process
b. materials labor and overhead
c. fully completed units
d. partially completed units
5. How should the costs and work of beginning work in process be treated?
a. Weighted average method
b. FIFO method
c. sequential processing method
d. Both the weighted average and FIFO method can be used
6. Which statement best describes the concept of equivalent units of production?
a. Equivalent units are the measure of a period's output
b. Equivalent units are the units completed in a department
c. Equivalent units are the total of the units produced by all departments
d. Equivalent units are the number of units completed at the end of the last process
7. What does the accountant need to know to calculate unit cost?
a. materials cost plus overhead
b. the output for a period and the manufacturing costs for the department for that period
c. conversion costs and prime costs
d. total units produced by all departments
8. Simplicity is the main advantage of which of the following process costing methods?
a. LIFO
b. FIFO
c. Weighted average
d. Exact cost method
 9. When computing equivalent units of production, the method that combines partially completed units in
beginning inventory with current period production is the
a. FIFO method
b. LIFO method
c. weighted average method
d. actual cost method
10. What is the major advantage of the weighted average cost method?
a. Simplicity
b. Accuracy
c. it is the required method
d. it is the preferred method
11. Process costing would be most appropriate for which of the following?
a. soft drink bottler
b. custom home builder
c. Caterer
d. photocopy shop
12. Which of the following methods considers the percentage of completion of ending work-in-process?
a. FIFO
b. weighted average
c. neither FIFO or weighted average
d. both weighted average and FIFO
13. The Fox Company uses the weighted average method. The beginning work in process consists of 20,000 units
(100% completed as to materials and 50% complete as to conversion costs). The number of units completed
was 80,000. The ending work in process consists of 10,000 units (100% complete as to materials and 20%
complete as to conversion costs). The equivalent units of production for conversion costs was:
a. 110,000
b. 82,000
c. 80,000
d. 90,000

14. Beginning inventory for the month contained 2,000 units that were 70 percent complete with respect to
materials. During the month, 60,000 units were completed and transferred out. Ending inventory contained
3,000 units, 20 percent complete with respect to materials. The weighted average equivalent units of
production for materials for the month would be
a. 62,400
b. 63,000
c. 60,600
d. 60,000
 Figure 6-1.
The following information is available for Department Z for the month of July:

Units Cost
Work in process, July 1 (70% complete) 5,000
Direct materials $ 6,000
Direct labor 3,000
Manufacturing overhead 4,000
Total work in process, July 1 $13,000

Started in production during July 20,000

Costs added:
Direct materials $18,000
Direct labor 8,000
Manufacturing overhead 10,000
Total costs added during July $36,000

Work in process, July 31, (80% complete) 2,000

Materials are added at the beginning of the process. (Round unit costs to two decimal places.)

15. Refer to Figure 6-1. Department Z's cost per equivalent unit of production for materials using the FIFO
method would be
a. $1.20
b. $1.04
c. $0.96
d. $0.90

16. Refer to Figure 6-1. Department Z's cost per equivalent unit of production for conversion costs using the
FIFO method would be
a. $1.18
b. $1.02
c. $0.85
d. $0.73
17. Refer to Figure 6-1. Department Z's cost of goods transferred out using the FIFO method would be
a. $40,250
b. $45,540
c. $44,500
d. $45,775
18. Refer to Figure 6-1. Department Z's cost of ending work in process using the FIFO method would be
a. $3,960
b. $3,552
c. $3,500
d. $3,160
19. Refer to Figure 6-2. Units started in the second department during April for Corn Corporation would be
a. 40,000
b. 29,000
c. 32,000
d. 48,000
20. Refer to Figure 6-2. Units completed in the second department during April for Corn Corporation would be
a. 48,000
b. 37,000
c. 19,000
d. 55,000

21. Refer to Figure 6-2. Units started and completed in Corn Corporation's second department during June would
be
a. 48,000
b. 37,000
c. 29,000
d. 55,000

Figure 6-3.
Kramer, Inc., manufactures a product that passes through two processes: mixing and molding. All
manufacturing costs are added uniformly in the mixing department.

Information for the mixing department for April follows:

Work in process, April 1:

Units (35% complete) 5,000
Direct materials $24,000
Direct labor $30,000
Overhead $10,000

During April, 25,000 units were completed and transferred to the molding department. The following costs
were incurred by the mixing department during April:

Direct materials $ 90,000

Direct labor 120,000
Overhead 30,000

By April 30, 2,500 units that were 80 percent complete remained in Mixing. Kramer uses the weighted
average method.

22. Refer to Figure 6-3. Kramer's equivalent units of production using the weighted average method would be
a. 28,750
b. 20,000
c. 27,000
d. 23,000
23. Refer to Figure 6-3. Kramer's total costs to account for would be
a. $304,000
b. $264,000
c. $240,000
d. $176,000
24. Refer to Figure 6-3. Kramer's total cost per equivalent unit of production would be
a. $12.16
b. $9.76
c. $11.26
d. $6.52
25. Refer to Figure 6-3. Kramer's cost of goods transferred to the molding department during April would be
a. $210,000
b. $261,050
c. $281,500
d. $294,000
26. Refer to Figure 6-3. Kramer's cost of April's ending work in process for the mixing department would be
a. $17,500
b. $19,200
c. $22,520
d. $21,400
27. Beginning inventory for the month contained 3,000 units that were 60 percent complete with respect to
materials. During the month, 50,000 units were completed and transferred out. Ending inventory contained
5,000 units, 30 percent complete with respect to materials. The weighted average equivalent units of
production for materials for the month would be
a. 50,000
b. 51,500
c. 50,300
d. 49,500

Figure 6-4.
The following information is available for Department X for August:

Work in process, August 1:

Materials $ 8,000
Conversion costs $15,000

Costs added during August:

Materials $28,000
Conversion costs $25,000

Equivalent units of production (weighted average):

Materials 4,000
Conversion 5,000

28 Refer to Figure 6-4. Department X's cost per equivalent unit for materials using the weighted average method
would be
a. $2.00
b. $7.00
c. $8.00
d. $9.00
29. Refer to Figure 6-4. Department X's cost per equivalent unit for conversion using the weighted average
method would be
a. $8.00
b. $5.00
c. $3.00
d. $9.00

30. Burgundy Manufacturing uses a process cost system and computes cost using the weighted average method.
During the current period, the beginning work-in-process inventory cost was $13,525. Manufacturing cost
added was $57,000. If Burgundy's ending work-in-process inventory was valued at $15,100, then cost of
goods transferred must have been
a. $70,525
b. $55,425
c. $84,625
d. $58,575

31. The following information is provided:

Units
Work in process, May 1 (10% complete) 4,000
Started in May 17,000
Work in process, May 31 (20% complete) 3,000

Materials and conversion are incurred uniformly throughout the process.

Equivalent units of production for conversion using the weighted average method would be
a. 17,400
b. 18,600
c. 21,000
d. 22,000
32. The following information is provided:

Units
Work in process, June 1 (20% complete) 4,000
Started in June 32,000
Work in process, June 30 (30% complete) 12,000

Materials are added at the beginning of the process.

Equivalent units of production for conversion costs using the weighted average method would be
a. 35,600
b. 34,800
c. 36,000
d. 27,600
33. Beginning inventory for the month contained 3,000 units that were 60 percent complete with respect to
materials. During the month, 50,000 units were completed and transferred out. Ending inventory contained
5,000 units, 30 percent complete with respect to materials. The weighted average equivalent units of
production for materials for the month would be
a. 50,000
b. 51,500
c. 50,300
d. 49,500
OPEN ENDED PROBLEMS

1. Davidson Company manufactures a product that passes through two processes. The following information is
available for the first department for October.

All materials are added at the beginning of the process.

Beginning work in process consisted of 20,000 units that were 80 percent complete with respect to
conversion.

Ending work in process consisted of 15,000 units that were 40 percent complete with respect to conversion.

During the month, 90,000 units were started in process.

Required:
A. Prepare a physical flow schedule.
B. Compute equivalent units using the FIFO method.

ANS:

A. Physical flow schedule:

Units to account for:

Units in beginning work in process 20,000
Units started 90,000
Total units to account for 110,000

Units accounted for:

Units completed and transferred out:
Started and completed 75,000
From beginning work in process 20,000 95,000
Units in ending work in process 15,000
Total units accounted for 110,000

B. Equivalent units:
Conversion
Materials Cost
Units started and completed 75,000 75,000
Units in BWIP × Fraction complete:
Conversion (20,000 × 20%) 4,000
Units in EWIP × Fraction complete:
Materials (15,000 × 100%) 15,000
Conversion (15,000 × 40%) 6,000
Equivalent units of output 90,000 85,000
2. Barr, Inc., manufactures a product that passes through two processes: mixing and packaging. All
manufacturing costs are added uniformly in the mixing department.

Information for the mixing department for June follows:

Work in process, June 1

Units (60% complete) 5,000
Direct materials $20,000
Direct labor $24,000
Overhead $ 4,000

During June, 80,000 units were completed and transferred to packaging.

The following costs were incurred by the mixing department during June:

Direct materials $180,000

Direct labor 200,000
Overhead 59,200

At June 30, 12,000 units that were 10 percent complete remained in the mixing department.

Use the weighted average method, and round unit costs to two decimal places.

Required:
A. Determine equivalent units of production for June.
B. Determine June's total costs to account for.
C. Determine total cost per equivalent unit of production.
D. Determine the cost of goods transferred to the packaging department.
E. Determine the cost of June's ending work in process for the mixing department.

ANS:

A. 81,200
Units accounted for:
Physical Equivalent
Flow Units
Units completed 80,000 80,000
Units in EWIP (10% complete) 12,000 1,200
Total units accounted for 92,000 81,200

B. $487,200
Costs to account for:
Manufacturing
Costs
Beginning work in process
($20,000 + $24,000 + $4,000) $ 48,000
Incurred during the period
($180,000 + $200,000 + $59,200) 439,200
Total costs to account for $487,200
C. $6.00 ($487,200/81,200)

D. $480,000 (80,000 × $6.00)

E. $7,200 (1,200 × $6.00)

3. King Corporation produces a product that passes through two departments. For December, the following
equivalent unit schedule was prepared for the first department:

Materials Conversion
Cost
Units completed 10,000 10,000
Units in EWIP × Fraction complete:
Materials (2,000 × 100%) 2,000
Conversion (2,000 × 25%) 500
Equivalent units of output 12,000 10,500

Costs assigned to beginning work in process:

Materials: $14,000
Conversion: $20,000

Manufacturing costs incurred during the month:

Materials: $34,000
Conversion: $43,000

Required:
A. Compute the unit cost for December using the weighted average method.
B. Determine the cost of goods transferred out.
C. Determine the cost of ending work in process.

ANS:

A. Cost per equivalent unit:

Materials = ($14,000 + $34,000)/12,000 = $4.00
Conversion = ($20,000 + $43,000)/10,500 = $6.00
Total unit cost = $10.00 per equivalent unit

B. Cost of goods transferred out = $10 × 10,000 = $100,000

C. Cost of ending work in process = (2,000 × $4) + (500 × $6)

= $8,000 + $3,000 = $11,000