Process Costing
Question 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 |
E. | not possible to determine. |
Question 2. Which of the following are components of conversion costs?
Question 3. Which of the following is a key document in a typical process costing system?
Question 4. Which of the following represents a correct sequence in preparing a departmental production report?
Question 5. Which of the following is the correct order of calculation in process costing?
Question 6. Under Australian accounting standards, which methods can be used to prepare the departmental production report?
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?
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:
Question 9. Which of the following represents a correct sequence for calculating equivalent units under the weighted average method:
Question 10. Which of the following represents a correct sequence for calculating equivalent units under FIFO?
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?
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?
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.
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.
Question 15. What is the inventory formula that shows the physical flow of production units during a given month, under the weighted average method?
Question 16. The major difference between weighted average and FIFO is:
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?
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.
Question 19. 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 |
E. | None of the above. |
Question 20. 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 | Yes |
E. | Yes | No | No |
Question 21. Which of the following are needed to calculate beginning work in process under the FIFO method?
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 | Yes |
E. | Yes | No | No |
Question 22. In the calculation of manufacturing cost per equivalent unit, the weighted average method of process costing considers:
Question 23. The units transferred in from the first department to the second department should be used to calculate equivalent units for which method?
FIFO | Weighted Average | |
A. | Yes | Yes |
B. | Yes | No |
C. | No | Yes |
D. | No | No |
E. | None of the above |
Question 24. Given the following information, use the weighted average method to calculate cost per equivalent unit for materials:
No. of units |
Cost of materials |
|
Beginning work in process |
30,000 |
$11,000 |
Started in May |
80,000 |
$36,000 |
Units completed |
85,000 |
|
Ending work in process |
25,000 |
Question 25. Equivalent unit calculations are necessary to allocate manufacturing costs between:
Question 26. The FIFO method is superior to the weighted average because:
Question 27. In a normal costing system:
Question 28. 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 | No |
D. | No | Yes |
E. | costs are irrelevant for control purposes |
Question 29. Which of the following is not usually an example of a cost driver under process costing?
Question 30. The journal entry to record predetermined overhead is as follows:
Question 31. The journal entry to record completed goods is as follows:
Question 32. The journal entry to record cost of goods sold is:
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.
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.
Total |
Direct Materials |
Conversion Cost |
|
Units |
|||
Work in process, May 1 – 60% |
15,000 | ||
Units started during May |
60,000 | ||
Units completed and transferred out |
68,000 | ||
Work in process, May 31 – 20% |
7,000 | ||
Costs |
|||
Work in process, May 1 |
$41,250 | $16,500 | $24,750 |
Costs incurred during May |
234,630 | 72,000 | 162,630 |
Total |
$275,880 | $88,500 | $187,380 |
Using the weighted average method of process costing, calculate the equivalent units of direct materials for the month of May.
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.
Total |
Direct Materials |
Conversion Cost |
|
Units | |||
Work in process, May 1 – 60% | 15,000 | ||
Units started during may | 60,000 | ||
Units completed and transferred out | 68,000 | ||
Work in process, May 31 – 20% | 7,000 | ||
Costs | |||
Work in process, May 1 | $41,250 |
$16,500 |
$24,750 |
Costs incurred during May | 234,630 |
72,000 |
162,630 |
Total | $275,880 |
$88,500 |
$187,380 |
Using the weighted average method of process costing, calculate the equivalent units of conversion activity for the month of May.
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.
Total |
Direct Materials |
Conversion Cost |
|
Units | |||
Work in process, May 1 – 60% |
15,000 |
||
Units started during may |
60,000 |
||
Units completed and transferred out |
68,000 |
||
Work in process, May 31 – 20% |
7,000 |
||
Costs |
|||
Work in process, May 1 |
$41,250 | $16,500 | $24,750 |
Costs incurred during May |
234,630 | 72,000 | 162,630 |
Total |
$275,880 | $88,500 | $187,380 |
Using the weighted average method of processing costing, calculate the cost of goods completed and transferred during May.
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.
Total | Direct Materials | Conversion Costs | |
Units |
|||
Work in process, April 1 (30%) |
10,000 | ||
Units started during April |
50,000 | ||
Units completed and transferred out |
55,000 | ||
Work in process, April 30 (90%) |
5,000 | ||
Costs |
|||
Work in process, April 30 |
$ 4,500 |
$3,000 |
$ 1,500 |
Costs incurred during April |
42,250 |
17,500 |
24,750 |
Total |
$46,750 |
$20,500 |
$26,250 |
Using the FIFO method of process costing, calculate the equivalent units of direct materials for the month of April.
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.
Total | Direct Materials | Conversion Costs | |
Units |
|||
Work in process, April 1 (30%) |
10,000 | ||
Units started during April |
50,000 | ||
Units completed and transferred out |
55,000 | ||
Work in process, April 30 (90%) |
5,000 | ||
Costs |
|||
Work in process, April 30 |
$ 4,500 |
$3,000 |
$ 1,500 |
Costs incurred during April |
42,250 |
17,500 |
24,750 |
Total |
$46,750 |
$20,500 |
$26,250 |
Using the FIFO method of process costing, calculate the cost per equivalent unit of conversion activity for the month of April.
Question 39. Normal spoilage is accounted for in which of the following ways
Question 40. Abnormal spoilage is accounted for in which of the following ways
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.
Units |
||
Work in process 1 April |
10,000 |
20% |
Units commenced |
80,000 |
|
Units completed |
65,000 |
|
Units spoilt |
10,000 |
|
Work in process 30 April |
15,000 |
33.3 % |
Using weighted average method, what are the equivalent units for conversion
Question 42. Normal spoilage is part of the cost completed units, which of the following reasons might justify the separate calculate of spoilage costs.
Question 43. Spoilage costs under a First in First out system require calculations for:
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.
Costs |
direct material |
conversion |
Work in process 1 April |
$26,000 |
$15,600 |
Costs for April |
235,000 |
127,400 |
Equivalent units |
300,000 |
270,000 |
What is the total unit cost?
Question 45. Abnormal spoilage costs assist management to:
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.
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.
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.
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.
Question 50. Inventory valuation in operation costing requires:
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.
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.
Question 53. In industries which process products in more than one department, the cost centres are known as:
Question 54. Costs between one department and the next in a multi department process are known as:
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.
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.
Question 57. Process costing systems are suitable for firms that produce:
1. Homogeneous products.
2. Heterogeneous products.
3. Individual products.
4. Repetitive products.
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.
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.
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.
Question 61. Physical flow of units
In each case below, fill in the missing amount.
1.
Work in process, January 1 ……………………………. |
5,000 units |
Units started during January …………………………… |
1,000 units |
Units completed during January ………………………. |
4,500 units |
Work in process, January 31 ………………………….. |
? |
2.
Work in process, September 1 ……………………….. |
4,500 tons |
Units started during September ……………………… |
? |
Units completed during September ………………….. |
9,500 tons |
Work in process, September 30 ……………………… |
1,000 tons |
3.
Work in process, January 1 …………………………. |
50,000 gallons |
Units started during the year ………………………... |
425,000 gallons |
Units completed during the year …………………….. |
? |
Work in process, December 31 ……………………… |
100,000 gallons |
The missing amounts are:
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.
Work in process, August 1 |
1,000,000 litres |
|
Direct material |
100% complete |
|
Conversion |
25% complete |
|
Units started in process during August |
475,000 litres |
|
Work in process, August 31 |
120,000 litres |
|
Direct material |
100% complete |
|
Conversion |
80% complete |
REQUIRED:
1. Weighted average:
Direct material: |
1,475,000 |
Conversion: |
1,451,000 |
See the total equivalent units row in the following schedule.
2. FIFO:
Direct material: |
475,000 |
Conversion: |
1,201,000 |
See the new equivalent units row in the following schedule.
Calculation of Equivalent Units: Altona Plant
Units |
Percentage Completion |
Material |
Conversion Cost |
|
Work in process, August 1 |
1,000,000 |
25% |
||
Units started during August |
475,000 |
|||
Total units to account for |
1,475,000 |
|||
Units completed and transferred out during August |
1,355,000 |
100% | 1,355,000 | 1,355,000 |
Work in process, August 31 |
120,000 |
80% | 120,000 | 96,000 |
Total units accounted for |
1,475,000 |
_____ | _____ | |
(1) |
||||
Total equivalent units |
1,475,000 | 1,451,000 | ||
Less: equivalent units represented in August 1 work in process |
1,000,000 | 250,000 | ||
(2) |
||||
New equivalent units accomplished in August only |
475,000 | 1,201,000 |
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.
Units |
||
Work in process on November 1 | ||
(60% complete as to conversion) |
500 |
|
Units started during November |
2,500 |
|
Total units to account for |
3,000 |
|
Units completed and transferred out during November |
500 |
|
Units started and completed during November |
1,500 |
|
Work in process on November 30 |
||
(20% complete as to conversion) |
1,000 |
|
Total units accounted for |
3,000 |
REQUIRED:
Calculate each of the following amounts.
Units |
Percentage Completion |
Material |
Conversion Cost |
|
Work in process, November 1 |
500 |
60% |
||
Units started during November |
2,500 |
|||
Total units to account for |
3,000 |
|||
Units completed and transferred out during November |
2,000 |
100% |
2,000 |
2,000 |
Work in process, November 30 |
1,000 |
20% |
1,000 |
200 |
Total units accounted for |
3,000 |
|||
Total equivalent units |
3,000 |
2,200 |
||
*Less: equivalent units represented in November 1 work in process |
500 |
300 |
||
*New equivalent units accomplished in November only |
2,500 |
1,900 |
*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
Direct materials |
$ 18,500 |
Conversion |
36,750 |
Cost incurred during June
Direct material |
$300,000 |
Conversion |
230,000 |
The equivalent units of activity for June were as follows:
Weighted Average |
FIFO |
|
Direct material |
16,000 |
15,000 |
Conversion |
48,500 |
44,000 |
REQUIRED:
1.Weighted average method:
Direct Material |
Conversion |
Total |
|
Work in process, June 1 |
$ 18,500 |
$ 36,750 |
$ 55,250 |
Costs incurred during June |
300,000 |
230,000 |
530,000 |
Total costs to account for |
$318,500 |
$266,750 |
$585,250 |
Equivalent units |
16,000 |
48,500 |
|
Cost per equivalent unit |
$19.90* |
$5.50** |
$25.40 |
*$19.90 = $318,500/16,000
**$5.50 = $266,750/48,500
2. FIFO method:
Direct material |
conversion |
total |
|
Work in process, June 1 |
These costs of $55,250 are not included in the unit cost calculation. |
||
Cost incurred during June |
$300,000 |
$230,000 |
$530,000 |
Total costs to account for |
$585,250 |
||
Equivalent units |
15,000 |
44,000 |
|
Costs per equivalent unit |
$20. 00* |
$5.23** |
$25.23 |
*$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:
A. Average cost method:
1)
Equivalent Units |
Material |
Labour & overhead |
Transferred to finished goods |
150,000 |
150,000 |
+ Ending work in process |
10,000 |
8,000 |
= Equivalent units |
160,000 units |
158,000 units |
2) & 3)
Total Cost |
Material |
Labour & Overhead |
Beginning work in process |
$20,000 |
$7,000 |
Cost added during the month |
340,000 |
500,000 |
Total |
$360,000 |
$507,000 |
Unit Cost |
Material |
Labour & Overhead |
a) Total cost |
$360,000 |
$507,000 |
b) Equivalent units |
160, 000 |
158,000 |
Unit cost |
$2.25 per unit |
$3.21 per unit |
4) Value of transfers to finished goods
Materials (150,000) ($2.25) |
$337,500 |
Labour & overhead (150,000) ($3.21) |
$481,500 |
Total value of transfers |
$819,000 |
5) Value of ending work in process
Ending work in process |
||
Materials |
$ 22,500 |
|
Labour & manufacturing overhead |
25,680 |
|
Total |
$ 48,180 |
B. FIFO Method
1.
Equivalent Units |
Material |
Labour & Overhead |
Transferred to finished goods |
150,000 |
150,000 |
+ Ending work in process |
10,000 |
8,000 |
= Total possible |
160,000 |
158,000 |
- Beginning work in process |
10,000 |
3,000 |
= Equivalent units |
150,000 units |
155,000 units |
2)
Unit Cost` |
Materials |
3) Labour & Overhead |
Cost added during month |
$340,000 |
$500,000 |
Unit cost |
$2.27 per unit |
$3.23 per unit |
4) Value of transfers to finished goods
Beginning work in process |
$27,000 |
Cost to complete beginning work in process |
22,610 |
Remainder |
770,000 |
Total |
$819,610 |
5) Value of ending work in process
Ending work in process
Materials |
$22,700 |
Labour & overhead |
25,840 |
Total |
$48,540 |
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.
Department 1 |
Department 2 |
|
Direct material entered into production |
$ 160,000 |
$40,000 |
Direct labour |
680,000 |
560,000 |
Applied manufacturing overhead |
1,360,000 |
840,000 |
Cost of goods completed and transferred out |
1,800,000* |
800,000** |
*Cost of goods transferred to Department 2.
**Cost of goods transferred to finished goods.
REQUIRED:
Prepare journal entries to record the following events:
1. Work in Process Inventory: Department 1 2,200,000
Raw Material Inventory |
160,000 |
Wages Payable |
680,000 |
Manufacturing Overhead |
1,360,000 |
2. Work in Process Inventory: Department 2 1,800,000
Work in Process Inventory: Department 1 |
1,800,000 |
3. Work in Process Inventory: Department 2 1,440,000
Raw Material Inventory |
40,000 |
Wages Payable |
560,000 |
Manufacturing Overhead |
840,000 |
Finished Goods Inventory |
800,000 |
Work in Process Inventory: Department 2 |
800,000 |
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