A 325
A 325
A 325
CH-08
Multiple Choice Quiz
1 In order to compute equivalent units of production, which of the following must be reasonably
estimated?
A)
Units completed
B)
The percentage of completion
C)
Direct material cost
D)
Units started and completed
E)
None of the above.
2
Total costs to be accounted for include:
A)
the manufacturing costs added this period only.
B)
costs associated with beginning work in process plus current period costs.
C)
costs associated with beginning work in process plus the manufacturing costs added
this period plus the costs associated with the ending work in process.
D)
the costs associated with ending work in process plus the manufacturing costs
added this period.
E)
None of the above.
3
Zahn Industries uses process costing system. During October, the finishing department had
30,000 units in beginning work in process and 45,000 units in ending work in process. During the
month, 95,000 units were transferred in from the previous department. Materials are added at
the end of the process and conversion costs are added uniformly throughout the process.
Beginning work in process was 20% complete with respect to conversion costs; ending inventory
was 40% complete with respect to conversion costs. If Zahn uses weighted-average costing, the
equivalent units of production for materials and conversion costs are:
A)
80,000 and 95,000.
B)
80,000 and 92,000.
C)
0 and 92,000.
D)
80,000 and 98,000.
E)
None of the above.
2
A)
B)
C)
D)
E)
$1.15; $1.56.
$1.76; $1.94.
$2.30; $2.48.
$3.45; $4.04.
None of the above.
When computing the cost per equivalent unit (EU) using weighted-average costing, the beginning work in
process costs and the manufacturing costs added this period are both included in the numerator and
divided by the current period EU. Total cost per EU for materials = cost of $138,000 EU of 40,000 for
materials = $3.45. Total cost per EU for conversion = cost of $202,000 EU of 50,000 for conversion =
$4.04.
3
7/ Rybak Company manufactures paint and uses a process costing system and uses FIFO costing.
During February, the company had 38,000 gallons in beginning inventory and 26,000 gallons in
ending inventory. During the month, the company started 80,000 gallons of paint and completed
92,000 gallons and transferred them to the mixing department. Included in that amount were the
42,000 gallons that were both started and completed. The equivalent units for conversion costs
were 85,800 for February. Materials are added at the beginning of the process and conversion
costs are added evenly throughout the process. Beginning work in process was 30% complete as
to conversion costs and ending work in process was 20% complete as to conversion costs. The
cost data for February follow:
During February, the cost per equivalent unit for materials was $1.875, the cost per equivalent
units for conversion was $4.00, and the total cost per equivalent unit was $5.875. What was the
cost of the gallons that were transferred to the mixing department?
A)
$450,500
B)
$479,350
C)
$489,850
D)
$502,300
E)
None of the above.
8 If computational and recordkeeping costs are about the same under both FIFO and weightedaverage costing, which method, if any, will generally be preferred?
A)
Weighted-average costing
B)
FIFO costing
C)
Both methods offer the same degree of information.
D)
The answer cannot be determined with so little information.
E)
None of the above.
Feedback: Learning Objective 8-6 The FIFO costing method will provide additional
information. So, if the computational and recordkeeping costs are essentially the
same, the FIFO costing method will provide greater decision-making benefits and, as
such, will be preferred over the weighted-average costing method.
9 Process costing is characterized by:
A)
the assumption that that each unit produced is different.
B)
less detailed recordkeeping.
C)
the collection of costs for each unit produced.
D)
higher record-keeping costs.
E)
None of the above.
4
Process costing assumes that each unit produced is relatively uniform. Process costing does not maintain
a record of the cost of each unit produced. Process costing has less detailed recordkeeping; hence, if a
company were choosing between job and process costing, it would generally find lower recordkeeping
costs under process costing. Process costing does not provide as much information as job costing because
it does not record the cost of each unit produced. The choice of a costing system involves a comparison of
the costs and benefits of each system. The production process being utilized is also a major factor in
choosing a cost system.
1
A five-step process is used to assign costs to products in a process costing system.
I. Assign product cost to batches of work.
II. Compute the equivalent units of production.
III. Identify the product costs for which to account.
IV. Measure the physical flow of resources.
V. Compute the costs per equivalent unit.
The correct order in which these steps should be taken is:
A)
B)
C)
D)
III, II, V, I, IV
5
Use the following information to answer questions 2 and 3:
Greenwood Petroleum had 26,000 barrels of crude oil in beginning work-in-process (60%
complete with respect to conversion costs). The company started 67,000 barrels this period and
had 15,000 gallons (40% complete with respect to conversion costs) in ending work-in-process.
2
How many barrels were completed and transferred out of work-in-process this period?
A)
B)
C)
D)
67,000
78,000
82,000
93,000
None of the above
E) Feedback: Beginning inventory + units started this period ending inventory = units
transferred out this period (note: all without respect to percentage of completion).
26,000 + 67,000 15,000 = 78,000. This represents the physical flow of units
3 Feedback: Transferred out units are always 100 percent complete (78,000 x 1.00 = 78,000).
The ending work-in-process was 40 percent complete (EUP = 15,000 x .40 = 6,000). So, the
total work done during the period was 84,000 barrels.
Using a weighted-average cost flow assumption, calculate the equivalent units of production.
A)
B)
78,000
82,000
84,000
C)
D)
92,000
A)
B)
C)
D)
ending WIP plus beginning WIP plus the manufacturing costs added this period.
5
If the equivalent units of production under weighted average costing were 40,000 and 50,000
for materials and conversion costs, respectively, what are the costs per equivalent unit?
A)
$1.15, $1.56
B)
C)
D)
$1.76, $1.94
$2.30, $2.48
$3.45, $4.04
A)
B)
C)
D)
$1.15, $1.56
$1.76, $1.94
$2.30, $2.48
$3.45, $4.04
A)
B)
C)
D)
A)
B)
C)
D)
Units completed
9
Ending WIP inventory
5,000 units, 60% of labor added this period
Direct materials are added at the beginning of the process and direct labor is added uniformly
throughout the process.
9
The equivalent units for direct materials and direct labor under a weighted average cost are:
A)
B)
C)
D)
66,500; 66,500
66,500; 72,000
71,500; 69,500
64,000; 74,000
A)
B)
C)
66,500; 66,500
66,500; 72,000
71,500; 78,500
64,000; 65,000
D)
10
$150,000
343,200
1 Feedback: Either completed (92,000) not started this period (38,000) = 54,000 or started
1 (80,000) but not completed this period (26,000) = 54,000.
How many gallons were started and completed this period?
A)
B)
C)
D)
42,000
48,000
54,000
66,000
11
A)
B)
C)
D)
85,800
88,600
92,900
A)
B)
C)
D)
$37,560
$42,600
$45,550
$48,750
12
A)
B)
C)
D)
$20,800
$31,200
$34,400
$35,100
A)
B)
C)
D)
$450,500
$479,350
$489,850
$502,300
13
Zapper, Inc. manufactures a product that goes through two departments. In May 375,000
units of the product were transferred from Department 1 into Department 2. The beginning
inventory in Department 2 consisted of 47,000 units (25% complete as to conversion) and
ending inventory consisted of 33,000 units (45% complete as to conversion). Zapper uses a
weighted average process cost system. The equivalent units for transferred-in costs in
Department 2 are:
A)
B)
C)
D)
375,000
389,000
408,000
422,000
1 The transferred in units will always be 100% complete; since DM is added at the end of the
7 process, only those units completed will have any DM costs; and the conversion costs are
added uniformly, so the units in EWIP are multiplied by the percentage of completion
If Jones uses weighted average, the equivalent units of production for transferred-in costs,
direct material and conversion costs are:
A)
14
B)
C)
D)
125,000; 0; 92,000
A)
B)
C)
D)
125,000; 0; 92,000
15
A)
B)
C)
D)
Weighted Average
FIFO
A)
B)
C)
D)
16
3/ Willow Company accumulates costs for its product using process costing. Direct material is
added at the beginning of the production process, and conversion activity occurs uniformly
throughout the process.
17
It was determined that as of the end of October, the equivalent units of conversion activity were
(space needed) two thousand units fewer than the equivalent units of direct materials.
Determine the percentage of completion of the 10,000 units in ending WIP as to conversion
costs.
A)
100% complete
B)
80% complete
C)
70% complete
D)
60% complete
E)
None of the above
Feedback:
Direct materials are added at the beginning of the production process; as such the equivalent
units of direct materials totaled 110,000 units (100,000 units transferred out and 10,000 units in
ending work in process). The equivalent units for conversion activity are two thousand fewer, or
108,000. The 100,000 units transferred out are complete with respect to conversion cost leaving
8,000 partially completed units in ending inventory, representing 80% completion (8,000
equivalent/10,000 total).
18
D)
12,450
E)
11,500
Feedback:
Equivalent units are equal to the units completed and transferred out (1,500 + 10,000 2,000)
plus the ending work in process multiplied by its percentage of completion (2,000 x 0.20).
Equivalent units of conversion are 9,900 (= (1,500 + 10,000 2,000) + (2,000 x 0.20)).
7/ The beginning work-in-process inventory consists of 1,500 units that are 30% complete with
respect to conversion costs and 100% complete with respect to direct material costs. Ten
thousand units were started during the period. There are 2,000 units in process at the end of the
accounting period, which are 20% complete with respect to conversion costs, and 100%
complete with respect to direct material costs. Under the weighted-average method of process
costing, what are the equivalent units of direct materials?
A)
13,500
B)
12,000
C)
10,450
D)
11,500
E)
9,900
Feedback: Equivalent units are equal to the units completed and transferred out (1,500 + 10,000
2,000) plus the ending work in process multiplied by its percentage of completion (2,000 x
1.00). Equivalent units of direct materials are 11,500 (= (1,500 + 10,000 2,000) + (2,000 x
1.00)).
8/ What is the key document in a typical process-costing system called?
A)
Job-cost Record or Job-cost Sheet
B)
Schedule of Cost of Goods Manufactured
C)
Departmental Production Report
D)
Income Statement
E)
Balance Sheet
Feedback:
The key document in a typical process-costing system is the departmental production report in
which units transferred in and out of the department and costs transferred in and out of the
department are reconciled.
9/ When using the weighted-average method of process costing, how are the beginning work-inprocess units and costs treated?
A)
As units and costs of the current period
B)
As units and costs of the subsequent period
C)
As units and costs of a previous period
D)
Ignored in the calculation of the cost per equivalent unit
E)
None of the above
Feedback: A key feature of the weighted-average method is the number of equivalent units of
activity is calculated without making a distinction as to whether the activity occurred in the
current accounting period or the preceding accounting period.
10/
19
What is the
A)
B)
C)
D)
E)
12/
20
Continue with the Portsmouth Storage Company fact pattern. Assume that completed units are
transferred from the Cutting department to the Finishing department. Which of the following
would be included in the entry to transfer the completed units out of the Cutting department and
in to the Finishing department?
A)
Work in Process-Cutting (debit) $462,360
B)
Work in Process-Finishing (debit) $555,750
C)
Finished Goods (debit) $503,950
D)
Cost of Goods Sold (debit) $503,950
E)
None of the above
13/
What is the value of the units transferred out, if there are 5,000 units in ending work-in-process
inventory that are 100% complete as to direct materials and 60% complete as to conversion
costs?
A)
$402,000
21
B)
$420,000
C)
$380,000
D)
$358,000
E)
$240,000
Feedback: Direct material cost, per equivalent unit is $2 (= $140,000/70,000). Conversion cost
per equivalent unit is $4 (= $240,000/60,000) Cost of ending work in process is $22,000 (=
(5,000 x $2) + (5,000 x 0.60 x $4) ) Cost of goods completed and transferred out is $358,000 (=
($80,000 + $300,000) $22,000).
14/ Under an operation costing system, when direct labor is recorded at the end of the pay
period the journal entry will include a debit to which account?
A)
Manufacturing Overhead
B)
Direct Labor
C)
Work in Process
D)
Applied Conversion Costs
E)
Finished Goods Inventory
Feedback: Direct labor and manufacturing overhead are accumulated in the Applied Conversion
Costs account. At the end of the period these conversion costs are allocated to the separate
production departments on a predetermined rate, which is based on an activity or cost driver.
15/
Actual conversion costs and actual production are the same as the budgeted conversion costs
and budgeted production. The firm produced 20,000 Professional baseball bats and 30,000
Amateur baseball bats. The cost driver for each of the three types of conversion activity is the
number of units produced. Use an operation costing approach and determine the per-unit cost for
each Professional and Amateur bat, respectively.
A)
$6.74 and $1.74, respectively
B)
$4.54 and $4.54, respectively
C)
$4.54 and $3.74, respectively
D)
$7.54 and $4.54, respectively
E)
$5.74 and $3.74, respectively
Feedback: The application rate for each conversion cost, respectively, is $0.60 for lathing, $0.90
for sanding, and $0.24 for lacquer and sanding. The cost of each Professional baseball bat is
$5.74 (= $4.00 + $0.60 + $0.90 + $0.24). The cost of each Amateur baseball bat is $3.74 (=
$2.00 + $0.60 + $0.90 + $0.24). Total cost of both grades of baseball bats is $227,000 (= ($5.74
x 20,000) + ($3.74 x 30,000) = ($114,800 + $112,200) = $227,000).
CH-07
22
1/ A control account:
A)
B)
C)
D)
is a temporary account.
A)
B)
C)
D)
$158,000
$167,000
$180,000
$193,000
23
Feedback: Learning Objective 7-2 Amount used = beginning inventory of
$35,000 + purchases of $145,000 ending inventory of $22,000 =
$158,000.
3
INCORREC
T
A)
B)
C)
D)
50%
52%
120%
200%
During the current year, Esterhazy, Inc. estimated manufacturing overhead for
the year to be $896,000. The company uses direct labor hours to apply
manufacturing overhead to work-in-process. The budgeted direct labor hours
for the current year totaled 80,000 hours and the actual hours worked were
82,000. The actual overhead incurred during the year was $924,000. What is
the amount of overapplied or underapplied overhead?
A)
$28,000 overapplied
$28,000 underapplied
24
B)
C)
D)
$5,600 overapplied
$5,600 underapplied
Feedback: Learning Objective 7-3 The journal entry to close overhead to cost
of goods sold will always include a debit to the Applied Overhead account and a
credit to the Overhead Control account. If overhead is overapplied, that means
that the amount applied is greater than (or over) the actual amount and a
credit will be required to balance the entry. The credit will be to the Cost of
Goods Sold account.
Creedence Company uses a Manufacturing Overhead Control account and a
Manufacturing Overhead Applied account. If overhead is overapplied during the
period, the journal entry to write it off to cost of goods sold will include:
A)
B)
C)
25
D)
6
CORRECT
Wiedlin Inc. worked on three jobs (jobs 102, 103, and 104) in March. The
amount of overhead applied to the jobs during March was $42,000 to job 102,
$37,000 to job 103, and $21,000 to job 104. At the end of March, the company
had overapplied overhead of $12,000. If the company uses the value in the
individual inventory accounts to allocate overapplied or underapplied overhead,
what amount of overapplied overhead would then be charged to Job 103?
A)
B)
C)
D)
$2,520
$4,440
$5,040
$6,220
26
7
INCORREC
T
What type of cost is composed of actual direct material and labor cost plus
overhead applied using a predetermined rate and an actual allocation base?
A)
B)
C)
D)
Actual
Normal
Standard
Real
A)
B)
C)
D)
27
E)
Feedback: Learning Objective 7-4 The three primary differences between
service companies and manufacturing companies include: (1) service
companies use less direct materials; (2) for overhead names, service
companies use Service Overhead, Service Overhead Applied, etc.; and (3)
finished goods are charged to Cost of Services rather than to Cost of
Goods Sold.
9
INCORREC
T
Which of the following statements regarding ethical issues and job costing is
not correct?
The contracted price in a "cost-plus fixed fee" contract equals the cost of
A) the product or service minus an amount that represents the vendor's profit.
Job supervisors who report the stage of completion of their jobs can be
B) tempted to overstate it.
Choosing to allocate overhead costs using the cost allocation method that
C) provides the most favorable result could be unethical.
10
CORRECT
Which of the following terms is used to describe a complex task that often
takes months or years to complete and requires the work of many different
departments, divisions, or subcontractors?
A)
Jobs
Tasks
28
B)
C)
D)
Projects
Ventures