Process Costing

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

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

1. Direct labour and direct materials
2. Indirect materials and manufacturing overhead
3. Direct labour and manufacturing overhead
4. Direct materials and manufacturing overhead
5. Direct labour and indirect labour.

Question 3. Which of the following is a key document in a typical process costing system?

1. Departmental Production Report.
2. Master Schedule.
3. Production Budget.
4. Sequential Product Report.
5. Materials Requirement Reports.

Question 4. Which of the following represents a correct sequence in preparing a departmental production report?

1. Analysis of physical flow of units, computation of unit costs, calculation of equivalent units and analysis of total costs.
2. Analysis of physical flow of units, calculation of equivalent units, computation of unit costs and analysis of total costs.
3. Calculation of equivalent units, analysis of physical flow of units, analysis of total costs and computation of unit costs.
4. Analysis of total costs, calculation of equivalent units, computation of unit costs and analysis of physical flow of units.
5. Analysis of total costs, analysis of physical flow of units, computation of unit costs, and calculation of equivalent units.

Question 5. Which of the following is the correct order of calculation in process costing?

1. Physical units, unit costs, equivalent units.
2. Unit costs, equivalent units, physical units.
3. Physical units, equivalent units, unit costs.
4. Equivalent units, physical units, unit costs.
5. Equivalent units, unit costs, physical units.

Question 6. Under Australian accounting standards, which methods can be used to prepare the departmental production report?

1. Weighted average, first in first out and last in first out.
2. Weighted average, first in first out and standard costing.
3. Last in first out, first in first out and standard costing.
4. Last in first out, standard costing, weighted average.
5. First in first out, last in first out, weighted average and standard costing.

Question 7. Rex Co. Ltd. had 4,000 units in work in process at April 1, 19xl. During April, 11,000 units were completed. At April 30, 5,000 units remained in work in process. How many units were started during April?

1. 11,000
2. 10,800
3. 5,000
4. 12,000
5. 16,000

Question 8. Assuming that there was no beginning work in process inventory, and the ending work in process inventory is 50% complete as to conversion costs, the number of equivalent units as to conversion costs would be:

1. The same as the units completed.
2. The same as the units placed in process.
3. Less than the units completed.
4. Less than the units placed in process.
5. Half of the units completed.

Question 9. Which of the following represents a correct sequence for calculating equivalent units under the weighted average method:

1. Work to date on ending work in process + units started and completed
2. All units completed + work to date on ending work in process
3. Work to complete beginning work in process + work to date on ending work in process
4. Work to complete beginning work in process + units completed ‑ work done on ending work in process
5. All units completed + work to complete beginning work in process

Question 10. Which of the following represents a correct sequence for calculating equivalent units under FIFO?

1. Work to complete beginning work in process + units started and completed + work to date on ending work in process.
2. Work to date on ending work in process + units started and completed + work to complete beginning work in process.
3. Work to complete beginning work in process + work to date on ending work in process
4. Work done at the start of the period on beginning inventory + units started and completed + work to date on ending work in process.
5. Work to complete beginning work in process + units started and completed + work remaining to be done on ending work in process.

Question 11. ABC Co. Ltd. had 3,000 units in work in process on April 1 which were 60% complete. During April, 10,000 units were completed. On April 30, 4,000 units remained in work in process which were 40% complete as to conversion cost. How many units were started during April?

1. 9,000
2. 9,800
3. 10,000
4. 11,000
5. 13,000

Question 12. Rebex Chemical Co. manufactures Compound 2 in two sequential departments. On June 1, Department 2 had 3,000 units which were 50% complete as to conversion cost. During June, 15,000 units were completed and transferred from Department 1. On June 30, Department 2 had 4,000 units which were 20% complete as to conversion costs. How many units were completed and transferred from Department 2 during the month of June?

1. 11,000
2. 12,500
3. 14,000
4. 15,700
5. 17,200

Question 13. Softcloth Textile Pty. Ltd. manufactures a variety of fabrics. The Weaving Dept. had 1,000 units in work in process on April 1 which were 20% complete as to conversion costs. During April, 8,000 units were completed and transferred. On April 30, 4,000 units remained in work in process 50% complete as to conversion costs. Using the weighted average method process costing, calculate the equivalent units of conversion for the month of April.

1. 8,800
2. 9,000
3. 9,800
4. 10,000
5. 12,000

Question 14. Softcloth Textile Pty. Ltd. manufactures a variety of fabrics. The Weaving Dept. had 1,000 units in work in process on April 1 which were 20% complete as to conversion costs. During April, 8,000 units were completed and transferred. On April 30, 4,000 units remained in work in process 50% complete as to conversion costs. Using the FIFO method of process costing, calculate the equivalent units of conversion for the month of April.

1. 8,800
2. 9,000
3. 9,800
4. 10,000
5. 12,000

Question 15. What is the inventory formula that shows the physical flow of production units during a given month, under the weighted average method?

1. Physical units in beginning work in process + units started ‑ units completed and transferred out = units in ending work in process.
2. Units in beginning work in process + units completed and transferred out + units started = units in ending work in process.
3. Units in ending work in process + units in beginning work in process = units started + units completed and transferred out.
4. Units started + units completed and transferred out + units in ending work in process = units in beginning work in process.
5. Units in beginning work in process ‑ units started + units completed and transferred out = units in ending work in process.

Question 16. The major difference between weighted average and FIFO is:

1. How completed and transferred units are treated.
2. How ending inventory is treated.
3. How beginning inventory is treated.
4. How current period costs are treated.
5. There is no major difference.

Question 17. A company starts work on 1,000 physical units and completes 75% of conversion activity. The costs are $1,500 for conversion and $5,000 for direct material. What is the cost per equivalent unit for conversion?

1. $1.00 per unit.
2. $1.50 per unit.
3. $2.50 per unit.
4. $2.00 per unit.
5. $0.50 per unit.

Question 18. A company starts work on 1,000 physical units and completes 75% of conversion activity. The costs are $1,500 for conversion and $5,000 for direct material What is the cost per equivalent unit for direct material.

1. $2.00 per unit.
2. $10.00 per unit.
3. $5.00 per unit.
4. $6.00 per unit.
5. $6.67 per unit.

Question 19. If the FIFO method is used, the cost of beginning work in process should be included in:

Question 20. Which of the following are needed to calculate ending work in process under process costing?

Question 21. Which of the following are needed to calculate beginning work in process under the FIFO method?

Question 22. In the calculation of manufacturing cost per equivalent unit, the weighted average method of process costing considers:

1. Current costs only.
2. Current costs + cost of ending work in process.
3. current costs + cost of beginning work in process.
4. current costs ‑ cost of beginning work in process.
5. cost of beginning work in process + cost of ending work in process.

Question 23. The units transferred in from the first department to the second department should be used to calculate equivalent units for which method?

Question 24. Given the following information, use the weighted average method to calculate cost per equivalent unit for materials:

1. $0.43
2. $0.45
3. $0.55
4. $0.59
5. $0.65

Question 25. Equivalent unit calculations are necessary to allocate manufacturing costs between:

1. Cost of goods manufactured and ending work in process.
2. Beginning work in process and units completed.
3. Cost of goods sold and ending work in process.
4. Cost of goods manufactured and beginning work in process.
5. Cost of goods manufactured and cost of goods sold.

Question 26. The FIFO method is superior to the weighted average because:

1. It does not involve cumbersome calculations.
2. It does not require the calculation of equivalent units.
3. Current period costs are not commingled with prior period costs.
4. It considers prior period costs during the current period.
5. It must be computerised in order to obtain accurate calculations.

Question 27. In a normal costing system:

1. Direct materials are applied to work in process using a predetermined rate.
2. Direct material and direct labour are applied to work in process at a predetermined rate.
3. Direct material and labour are applied to work in process at their actual amounts.
4. Manufacturing overhead is applied to work in process at the actual amount.
5. Direct materials and manufacturing overhead are applied to work in process at a predetermined rate.

Question 28. Costs are accumulated by a responsibility centre for control purposes when using:

Question 29. Which of the following is not usually an example of a cost driver under process costing?

1. Direct labour hours.
2. Direct labour cost.
3. Machine hours.
4. Indirect materials cost.
5. Number of units produced.

Question 30. The journal entry to record predetermined overhead is as follows:

1. Debit work in process and credit raw materials inventory, salaries payable and manufacturing overhead.
2. Debit work in process and credit manufacturing overhead applied debit manufacturing overhead and credit work in process and raw materials inventory.
3. Debit manufacturing overhead and credit work in process inventory.
4. Debit work in process inventory and finished goods inventory and credit manufacturing overhead.

Question 31. The journal entry to record completed goods is as follows:

1. Debit work in process and credit manufacturing overhead.
2. Credit finished goods inventory and debit cost of goods sold.
3. Debit finished goods inventory and credit work in process.
4. Debit cost of goods sold and credit work in process.
5. Debit work in process inventory and credit finished goods inventory.

Question 32. The journal entry to record cost of goods sold is:

1. Debit finished goods inventory and credit cost of goods sold.
2. Debit finished goods inventory and credit work in process.
3. Debit cost of goods sold and credit work in process.
4. Debit cost of goods sold and credit finished goods inventory.
5. Debit work in process inventory and credit cost of goods sold.

Question 33. Which of the following statements about operation costing is true?

1) Conversion costs are accumulated by department.

2) Direct material costs are accumulated by batch.

3) It is a hybrid product costing system.

1. 1, 2 and 3
2. 2 and 3
3. 1 and 3
4. 1 and 2
5. 1 only.

Question 34. 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 pertain to the month of May.

Using the weighted average method of process costing, calculate the equivalent units of direct materials for the month of May.

1. 68,000
2. 69,400
3. 74,000
4. 75,000
5. 75,400

Question 35. 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 pertain to the month of May.

Using the weighted average method of process costing, calculate the equivalent units of conversion activity for the month of May.

1. 60,400
2. 68,000
3. 69,400
4. 74,000
5. 75,000

Question 36. 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 pertain to the month of May.

Using the weighted average method of processing costing, calculate the cost of goods completed and transferred during May.

1. $249,560
2. $250,240
3. $258,400
4. $263,840
5. $275,880

Question 37. 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.

1. 60,000
2. 58,000
3. 57,000
4. 55,000
5. 50,000

Question 38. 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 cost per equivalent unit of conversion activity for the month of April.

1. $0.4125
2. $0.4169
3. $0.4381
4. $0.4605
5. $0.5048

Question 39. Normal spoilage is accounted for in which of the following ways

1. Expensed in the period in which it occurred.
2. Included as part of the unit cost of output.
3. Written off to cost of goods sold.
4. Included in inventory valuation until year end and then written off.
5. None of the above.

Question 40. Abnormal spoilage is accounted for in which of the following ways

1. Expensed in the period in which it occurred.
2. Included as part of the unit cost of output.
3. Written off to cost of goods sold.
4. Included in inventory valuation until year end and then written off.
5. None of the above.

Question 41. 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 weighted average method, what are the equivalent units for conversion

1. 73,000
2. 75,000
3. 77,000
4. 82,000
5. 85,000

Question 42. Normal spoilage is part of the cost completed units, which of the following reasons might justify the separate calculate of spoilage costs.

1. It provides useful information for cost control.
2. It provides useful information for quality control.
3. It avoids the problem of accepting spoilage as unavoidable.
4. B and C.
5. A, B and C

Question 43. Spoilage costs under a First in First out system require calculations for:

1. Spoilage in opening work in process plus units commenced during the period.
2. Spoilage in opening work in process.
3. Spoilage included in units commenced during the period.
4. Spoilage in closing work in process.
5. B and C

Question 44. . The following data apply to Filch 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.

What is the total unit cost?

1. $0.87
2. $0.90
3. $0.885
4. $1.77
5. $1. 85

Question 45. Abnormal spoilage costs assist management to:

1. Control costs.
2. Control quality.
3. Hold supervisors responsible.
4. Identify out of control processes.
5. All of the above.

Question 46. Operational costing is appropriate where:

1. There are different material inputs.

2. There are common material inputs.

3. Processes are identical.

4. Different combinations of specific processes apply to different products.

1. 1 and 2
2. 2 and 3
3. 1 and 3
4. 2 and 4
5. 1 and 4

Question 47. Operational costing is appropriate for products with the following characteristics:

1. Repetitive mass production.

2. Individual products.

3. Large batches with repetitive processes.

4. Some unique features, some common features.

1. 1 and 2
2. 1 and 3
3. 1 and 4
4. 2 and 3
5. 3 and 4

Question 48. which of the following firms are more likely to use operational costing techniques:

1. Oil refineries.

2. Food processors.

3. Large scale clothing manufacturers.

4. Tourist operators.

1. 1 and 2
2. 2 and 3
3. 1 and 3
4. 2 and 4
5. 3 and 4

Question 49. the distinguishing characteristics of operational costing are:

1. Direct material is assigned to departments.

2. Direct material is assigned to batches.

3. Direct labour and overhead is assigned to batches.

4. Direct labour and overhead is assigned to departments.

1. 1 and 4
2. 2 and 3
3. 1 and 3
4. 2 and 4
5. None of the above.

Question 50. Inventory valuation in operation costing requires:

1. Direct materials and conversion costs being traced to processes.
2. Direct material and conversion costs being traced to batches.
3. Direct materials traced to batches and conversion costs traced to processes.
4. Direct materials traced to process and conversion costs traced to batches.
5. Operation costing does not include inventories.

Question 51. Which of the following statements (is)are true?

1. Weighted average costs provide a better basis for cost control than FIFO costs.

2. Weighted average costs provide a better basis for performance evaluation than standard costs.

3. Cost per equivalent unit provides a measure of production efficiency.

1. 1
2. 2
3. 3
4. 1 and 2
5. 1 and 3

Question 52. which of the following statements is(are) false?

1. It is easier to estimate the percentage of completion for conversion costs than for direct labour.

2. Conversion costs are always applied uniformly during the production process.

3. Direct labour and overhead are combined as conversion costs because it si assumed that direct Labour drives overheads.

1. 1
2. 2
3. 3
4. 1 and 2
5. 1, 2 and 3

Question 53. In industries which process products in more than one department, the cost centres are known as:

1. Following departments.
2. Sequential departments.
3. Previous departments.
4. Separate departments.
5. Alternate departments.

Question 54. Costs between one department and the next in a multi department process are known as:

1. Transferred costs.
2. Transferred out costs.
3. Transferred in costs.
4. Prior costs.
5. Previous department costs.

Question 55. Which of the following inventory valuation methods may be used in process costing to evaluate performance?

1. Weighted average.

2. First in first out.

3. Standard costs.

1. 1 and 2
2. 2 and 3
3. 1 and 3
4. 1, 2 and 3
5. None of the above are use to evaluate performance.

Question 56. Which of the following inventory valuation methods is(are) less suited to cost control?

1. Weighted average costs.

2. First in first out cost.

3. Standard costs.

1. 1
2. 2
3. 3
4. 1 and 2
5. 1 and 3

Question 57. Process costing systems are suitable for firms that produce:

1. Homogeneous products.

2. Heterogeneous products.

3. Individual products.

4. Repetitive products.

1. 1 and 3
2. 1 and 4
3. 2 and 3
4. 2 and 4
5. 1 and 2

Question 58. Which of the following statements is (are) true?

1. Job costing traces all costs to batches.

2. Process costing traces all costs to production processes.

3. Operation costing traces all costs to production processes.

1. 1 and 3
2. 2 and 3
3. 1 and 2
4. 1, 2 and 3
5. 2

Question 59. The FIFO method of inventory valuation provides more useful information because:

1. It includes costs over several periods.

2. It includes costs over current period only.

3. It includes both direct material and conversion costs.

1. 1
2. 2
3. 3
4. 1 and 3
5. 2 and 3

Question 60. The establishment of a predetermined conversion costs for operation costing requires which of the following:

1. Budgeted level of the cost driver.

2. Budgeted direct labour costs.

3. Budgeted manufacturing overhead costs.

1. 1
2. 1 and 2
3. 1, 2 and 3
4. 2 and 3
5. 1 and 3

Question 61. Physical flow of units

In each case below, fill in the missing amount.

1.

2.

3.

The missing amounts are:

1. 1,500 units
2. 6,000 tons
3. 375,000 gallons

Question 62. Equivalent units; weighted average and FIFO.

The Superior Chemical Company Ltd. refines a variety of petrochemical products. The following data is from the firm’s Altona plant.

REQUIRED:

1. Calculate the equivalent units of direct material and conversion for the month of August. Use the weighted average method of process costing.
2. Repeat requirement (1) using the F FIFO method.

1. Weighted average:

See the total equivalent units row in the following schedule.

2. FIFO:

See the new equivalent units row in the following schedule.

Calculation of Equivalent Units: Altona Plant

Question 63. Equivalent units; FIFO and weighted average.

Crystal Ideas Pty Ltd manufactures a variety of decorative glass products. The firm employs a process costing system for its manufacturing operations. All direct materials are added at the beginning of the process, and conversion costs are incurred uniformly throughout the process. The company’s production quantity schedule for November is reproduced below.

REQUIRED:

Calculate each of the following amounts.

1. Equivalent units of direct material during November. Use the FIFO method.
2. Equivalent units of conversion activity during November. Use the FIFO method.
3. Equivalent units of direct material during November. Use the weighted average method.
4. Equivalent units of conversion activity during November. Use the weighted average method.

1. 2,500 equivalent units.
2. 1,900 equivalent units.
3. 3,000 equivalent units.
4. 2,200 equivalent units.

*These two lines in the table are used only for the FIFO method (requirements 1 and 2 in the exercise).

Question 64. Cost per equivalent unit

The Burnie Timber Company grows, harvests, and processes timber for use as building timber. The following data pertains to the company’s saw mill.

Work in process, June 1

Cost incurred during June

The equivalent units of activity for June were as follows:

REQUIRED:

1. Calculate the cost per equivalent unit, for both direct material and conversion, during the month of June. Use weighted average process costing.
2. Repeat requirement (1) using the FIFO method.

1.Weighted average method:

*$19.90 = $318,500/16,000

**$5.50 = $266,750/48,500

2. FIFO method:

*$20.00 = $300,000/15,000

**$5.23 = $230,000/44,000

Question 65. Calculation of equivalent units, unit costs, transfer and inventory.

The Dandy Company on May 1, 19X2, had a work in process inventory of 10,000 units. The units were 100% complete for material valued at $20,000. The units were also 30% complete for labour and manufacturing overhead valued at $7,000.

During the month 150,000 units were completed and transferred to finished goods. The ending work in process inventory on May 31, 19X2 consisted of 10,000 units. These units were 100% complete for materials and 80% complete for labour and manufacturing, and overhead.

Cost added during the month were $340,000 for materials and $500,000 for labour and overhead.

REQUIRED:

1. Calculate under weighted average cost:
1. Equivalent units.
2. Unit cost for materials.
3. Unit cost for labour and overhead.
4. The dollar value of goods transferred to finished goods.
5. The dollar value of ending work in process.
2. Repeat the above calculations under FIFO.

A. Average cost method:

1)

2) & 3)

4) Value of transfers to finished goods

5) Value of ending work in process

B. FIFO Method

1.

2)

4) Value of transfers to finished goods

5) Value of ending work in process

Ending work in process

Question 66. Cost flows in process costing; journal entries

The Adelaide Glass Company manufactures window glass in two sequential departments. The following cost data pertains to the month of October.

*Cost of goods transferred to Department 2.

**Cost of goods transferred to finished goods.

REQUIRED:

Prepare journal entries to record the following events:

1. Costs incurred for direct material and direct labour and application of manufacturing overhead in Department 1.
2. Transfer of goods from Department 1 to Department 2.
3. Costs incurred for direct material and direct labour and application of manufacturing overhead in Department 2.
4. Transfer of goods from Department 2 to finished goods inventory.

1. Work in Process Inventory: Department 1 2,200,000

2. Work in Process Inventory: Department 2 1,800,000

3. Work in Process Inventory: Department 2 1,440,000