CHAPTER 5—PROCESS COST ACCOUNTING--GENERAL PROCEDURES

MULTIPLE CHOICE

1. A cost center in a process cost system is a:

a. Unit to which costs are accumulated.
b. Job.
c. Specific product.
d. Employee.
ANS: A
A cost center is a unit to which costs are accumulated.

PTS: 1 DIF: Easy REF: P. OBJ: 1

NAT: IMA 2B - Cost CenterTOP: AACSB - Analytic

2. Which of the following firms is least likely to use process costing?

a. A yogurt manufacturer.
b. A refiner of petroleum products.
c. A computer manufacturer.
d. A manufacturer of concrete products.
ANS: C
Makers of computers use job costing due to diversified product lines. The other firms produce
homogeneous products in continuous production.

PTS: 1 DIF: Moderate REF: P. OBJ: 1

NAT: IMA 2B - Cost Management TOP: AACSB - Reflective

3. Process costing techniques should be used in assigning costs to products:

a. If the product is manufactured on the basis of each order received.
b. In all manufacturing situations.
c. When production is only partially completed during the accounting period.
d. If the product is composed of mass-produced homogeneous units.
ANS: D
Process costing techniques should be used in assigning costs to products if the product is composed of
mass-produced homogeneous units.

PTS: 1 DIF: Easy REF: P. OBJ: 1

NAT: IMA 2B - Cost Management TOP: AACSB - Reflective

4. Which of the following characteristics applies to process costing?

a. Differentiated products are provided on a special order basis.
b. Cost are accumulated by department.
c. Cost are accumulated by jobs.
d. Direct labor workers must keep detailed records as to the jobs on which they worked.
ANS: B
In a process costing system, costs may be accumulated by department, not by job; therefore requiring
more detailed labor records. Job costing would be used for special order items.

PTS: 1 DIF: Easy REF: P. OBJ: 1

NAT: IMA 2B - Cost Management TOP: AACSB - Reflective
5. Characteristics that job order costing and process costing have in common include all of the
following except:
a. The use of predetermined factory overhead rates.
b. Each can be used by service firms.
c. The costs of materials and labor are charged to the departments where they are incurred.
d. The primary objective is to complete a unit cost for products.
ANS: C
Charging the costs of material and labor to the departments in which they are incurred is a
characteristic of process costing. In job order costing, these costs are charged directly to jobs.

PTS: 1 DIF: Moderate REF: P. OBJ: 1

NAT: IMA 2B - Cost Management TOP: AACSB - Reflective

6. A true process costing system could make use of each of the following except:
a. Predetermined factory overhead rates.
b. Individual jobs.
c. Cost centers.
d. General ledger control accounts.
ANS: B
A true process costing system would not make use of individual jobs. Both process and job order cost
accounting systems can use predetermined factory overhead rates, cost centers, and responsibility
accounting.

PTS: 1 DIF: Easy REF: P. OBJ: 1

NAT: IMA 2B - Cost Management TOP: AACSB - Reflective

7. All of the following could be included in the cost of a product located in the final production
department of a multi-step process except:
a. The costs of materials, labor and overhead identifiable with that department.
b. Marketing and distribution costs.
c. The costs of service departments that have been allocated to production departments.
d. The costs of prior production departments.
ANS: B
Marketing and distribution costs are not product costs.

PTS: 1 DIF: Easy REF: P. OBJ: 2

NAT: IMA 2B - Cost Management TOP: AACSB - Reflective

8. Daniel LLC incurred cost of $43,000 for material, $26,000 for labor, and $23,000 for factory overhead.
There was no beginning or ending work in process. 5,000 units were completed and transferred out.
The unit cost for labor is:

a. $ 8.60
b. $ 5.20
c. $ 18.40
d. $ 4.60
ANS: B
Labor unit cost: $26,000 / 5,000 = 5.20

PTS: 1 DIF: Easy REF: P. OBJ: 2

 NAT: IMA 2B - Cost Management TOP: AACSB - Analytic

9. Daniel LLC incurred cost of $43,000 for material, $26,000 for labor, and $23,000 for factory overhead.
There was no beginning or ending work in process. 5,000 units were completed and transferred out.
The cost per unit is:

a. $ 8.60
b. $ 5.20
c. $ 18.40
d. $ 4.60
ANS: C
Material $43,000
Labor 26,000
Factory overhead 23,000
Total costs $92,000
Divided by the number of units 5,000
Cost per unit $18.40

PTS: 1 DIF: Easy REF: P. OBJ: 2

NAT: IMA 2B - Cost Management TOP: AACSB - Analytic

10. Using the average cost method of process costing, the computation of manufacturing cost per
equivalent unit considers:
a. Current costs only.
b. Current costs plus cost of beginning work in process inventory.
c. Current costs plus cost of ending work in process inventory.
d. Current costs less cost of beginning work in process inventory.
ANS: B
The average cost method of process costing considers current cost plus cost of beginning work in
process inventory.

PTS: 1 DIF: Moderate REF: P. OBJ: 3

NAT: IMA 2B - Cost Management TOP: AACSB - Reflective

11. The number of whole units that could have been completed during a period, using the production costs
incurred during that period is called:
a. Standard production.
b. Equivalent production.
c. Total units.
d. Manufactured units.
ANS: B
The number of whole units that could have been completed during a period, using the production costs
incurred during that period is called equivalent production.

PTS: 1 DIF: Easy REF: P. OBJ: 3

NAT: IMA 2B - Cost Management TOP: AACSB - Analytic

12. A characteristic of a process cost accounting system is:

a. Costs are accumulated by order.
b. Work in process inventory is restated in terms of equivalent production.
c. It is used by a company manufacturing custom machinery.
 d. None of these is correct.
ANS: B
With a process costing system, work in process inventory is restated in terms of equivalent production,
which represents the number of whole units that could have been completed during the period. Costs
are accumulated by order in a job order cost system, which would be used, for example, by a company
manufacturing custom machinery. Standard costs can be used with job order or process systems.

PTS: 1 DIF: Moderate REF: P. OBJ: 3

NAT: IMA 2B - Cost Management TOP: AACSB - Analytic

13. All of the following are characteristics of a production report except:

a. It includes the number of units completed during the period.
b. It includes the costs incurred by the department during the period.
c. It includes the number of units in ending work-in-process and the estimated stage of
completion.
d. The department manager completes the report on a monthly basis.
ANS: B
The production report is prepared by the department manager monthly and contains information about
the number of units completed and on hand. It does not contain information about department costs.

PTS: 1 DIF: Moderate REF: P. OBJ: 3

NAT: IMA 2B - Cost Management TOP: AACSB - Analytic

14. The cost of an equivalent unit is equal to:

a. A unit of work in process inventory.
b. The amount of cost necessary to start a unit of production into work in process.
c. The cost necessary to complete one unit of production.
d. A unit of work in process inventory.
ANS: C
An equivalent unit of cost is equal to the amount of cost necessary to complete one unit of production.
An equivalent of material or conversion cost is the amount of these elements that is required to
complete one unit of a manufactured product. For example, if 10 units are 50 percent completed, in
terms of equivalency, they are equivalent to 5 units 100 percent completed.

PTS: 1 DIF: Moderate REF: P. OBJ: 3

NAT: IMA 2B - Cost Management TOP: AACSB - Analytic

15. The production report for Phillips Industries, which had no beginning inventory at the beginning of the
month, included the following information for September:

Number of Units Completion

Units started in production 81,000
Units transferred to finished goods 72,000

If the equivalent units for September’s production were 77,400, how many units were in process at the
end of the month, and how complete were they?
a. 9,000; 30%
b. 9,000; 60%
c. 3,000; 90%
d. 6,000; 90%
ANS: B
 Units started in production 81,000
Less: Units transferred to finished goods 72,000
Ending units in process 9,000

If Phillips started 81,000 units during the month, and transferred 72,000 to finished goods, 9,000 units
would be left in ending inventory. Further, if equivalent units of production are equal to 77,400, the
equivalent units of ending Work in Process would be 5,400 (77,400 - 72,000).

5,400 / 9,000 = 60% The units in ending Work in Process are 60% complete.

PTS: 1 DIF: Moderate REF: P. OBJ: 3

NAT: IMA 2B - Cost Management TOP: AACSB - Analytic

16. If there is no beginning work in process inventory and the ending work in process inventory is 90
percent complete, the number of equivalent units would be:
a. The same as the units placed in process.
b. The same as the units completed.
c. Less than the units placed in process.
d. Less than the units completed.
ANS: C
Proof: Units
In process, beginning of period None
Placed in process 10,000
Completed and transferred 9,000
Work in process, end of period 1,000
Stage of completion 90%

Equivalent production:
Completed during period 9,000
Equivalent units of work in process, end of period (1,000 units, 90%
completed) 900
Total equivalent production 9,900

PTS: 1 DIF: Hard REF: P. OBJ: 3

NAT: IMA 2B - Cost Management TOP: AACSB - Reflective

17. An error was made in the computation of the stage of completion of the current year's ending work in
process inventory. The error resulted in assigning a lower stage of completion to each component of
the inventory than actually was the case. What is the resultant effect of this error upon:

(1) The computation of equivalent units in total?

(2) The computation of costs per equivalent unit?
(3) Costs assigned to cost of goods completed for the period?

(1) (2) (3)

a. Understate Overstate Overstate

b. Understate Understate Overstate
c. Overstate Understate Understate
d. Overstate Overstate Understate

ANS: A
As computed
 Proof: Actual incorrectly
Equivalent units in ending work in process 2,000 1,000
Equivalent units in goods completed 20,000 20,000
Total equivalent units 22,000 21,000 (u)
Production cost $462,000 $462,000
Unit cost (Production cost / Total equivalent units) $ 21.00 $ 22.00 (o)
Cost of goods completed: 20,000 units  $21 unit
cost $420,000
20,000 units  $22 unit cost $440,000 (o)

PTS: 1 DIF: Hard REF: P. OBJ: 3

NAT: IMA 2B - Cost Management TOP: AACSB - Reflective

18. Which of the following is not a duty of the cost accountant in a process cost system?
a. Estimating the stage of completion of in-process units at the end of the month.
b. Collecting the periodic production costs.
c. Preparing the journal entries to record the factory operations.
d. Computing the amount of equivalent units.
ANS: A
The production supervisor prepares the production report which contains estimates of the stage of
completion of ending work in process.

PTS: 1 DIF: Moderate REF: P. OBJ: 4

NAT: IMA 2B - Cost Management TOP: AACSB - Reflective

19. The cost of production summary for Maha Industries follows:

Maha Industries
Cost of Production Summary
For the Month Ended May 31, 20--
Cost of production for month:
Materials $ 8,000
Labor 4,000
Factory overhead 3,000
Total costs to be accounted for $15,000
Unit output for month:
Finished and transferred to Finished goods
during month 3,500
Equivalent units of work in process, end of
month (2,000 units, 25% completed) 500
Total equivalent production 4,000
Unit cost for month:
Materials ($8,000 / 4,000) $2.00
Labor ($4,000 / 4,000) 1.00
Factory overhead ($3,000 / 4,000) .75
Total $3.75
Inventory costs:
Cost of goods finished and transferred to
Finished goods during month: (3,500  $3.75) $13,125
Cost of work in process, end of month:
Materials (2,000  .25  $2.00) $1,000
Labor (2,000  .25  $1.00) 500
Factory overhead (1,000  .25  $.75) 375 1,875
 Total production costs accounted for $15,000

What is the journal entry to record materials issued into production?

a. Finished goods 8,000
Materials 8,000

b. Work-in-process 8,000
Materials 8,000

c. Work-in-process 1,000
Materials 1,000

d. Materials 8,000
Accounts payable 8,000

ANS: B
The entry to record materials issued into production is:
Work-in-process 8,000
Materials 8,000

PTS: 1 DIF: Moderate REF: P. OBJ: 4

NAT: IMA 2B - Cost Management TOP: AACSB - Analytic

20. The cost of production summary for Maha Industries follows:

Maha Industries
Cost of Production Summary
For the Month Ended May 31, 20--
Cost of production for month:
Materials $ 8,000
Labor 4,000
Factory overhead 3,000
Total costs to be accounted for $15,000
Unit output for month:
Finished and transferred to Finished goods
during month 3,500
Equivalent units of work in process, end of
month (2,000 units, 25% completed) 500
Total equivalent production 4,000
Unit cost for month:
Materials ($8,000 / 4,000) $2.00
Labor ($4,000 / 4,000) 1.00
Factory overhead ($3,000 / 4,000) .75
Total $3.75
Inventory costs:
Cost of goods finished and transferred to
Finished goods during month: (3,500  $3.75) $13,125
Cost of work in process, end of month:
Materials (2,000  .25  $2.00) $1,000
Labor (2,000  .25  $1.00) 500
Factory overhead (1,000  .25  $.75) 375 1,875
Total production costs accounted for $15,000

What is the journal entry to record the distribution of labor to production?

a. Finished goods 4,000
Payroll 4,000
 b. Work in process 4,000
Overhead 4,000

c. Work in process 4,000

Payroll 4,000

d. Payroll 4,000
Accrued payroll 4,000

ANS: C
The entry to record the distribution of labor to production is:
Work in process 4,000
Payroll 4,000

PTS: 1 DIF: Moderate REF: P. OBJ: 4

NAT: IMA 2B - Cost Management TOP: AACSB - Analytic

21. The cost of production summary for Maha Industries follows:

Maha Industries
Cost of Production Summary
For the Month Ended May 31, 20--
Cost of production for month:
Materials $ 8,000
Labor 4,000
Factory overhead 3,000
Total costs to be accounted for $15,000
Unit output for month:
Finished and transferred to Finished goods
during month 3,500
Equivalent units of work in process, end of
month (2,000 units, 25% completed) 500
Total equivalent production 4,000
Unit cost for month:
Materials ($8,000 / 4,000) $2.00
Labor ($4,000 / 4,000) 1.00
Factory overhead ($3,000 / 4,000) .75
Total $3.75
Inventory costs:
Cost of goods finished and transferred to
Finished goods during month: (3,500  $3.75) $13,125
Cost of work in process, end of month:
Materials (2,000  .25  $2.00) $1,000
Labor (2,000  .25  $1.00) 500
Factory overhead (1,000  .25  $.75) 375 1,875
Total production costs accounted for $15,000

What is the journal entry to record factory overhead applied to production?

a. Work in process 3,000
Factory overhead 3,000

b. Factory overhead 3,000

Various accounts 3,000

c. Work-in-process 375
 Factory overhead 375

d. Factory overhead 375

Work in process 375

ANS: A
The entry to record factory overhead applied to production is:
Work in process 3,000
Factory overhead 3,000

PTS: 1 DIF: Moderate REF: P. OBJ: 4

NAT: IMA 2B - Cost Management TOP: AACSB - Analytic

22. The cost of production summary for Maha Industries follows:

Maha Industries
Cost of Production Summary
For the Month Ended May 31, 20--
Cost of production for month:
Materials $ 8,000
Labor 4,000
Factory overhead 3,000
Total costs to be accounted for $15,000
Unit output for month:
Finished and transferred to Finished goods
during month 3,500
Equivalent units of work in process, end of
month (2,000 units, 25% completed) 500
Total equivalent production 4,000
Unit cost for month:
Materials ($8,000 / 4,000) $2.00
Labor ($4,000 / 4,000) 1.00
Factory overhead ($3,000 / 4,000) .75
Total $3.75
Inventory costs:
Cost of goods finished and transferred to
Finished goods during month: (3,500  $3.75) $13,125
Cost of work in process, end of month:
Materials (2,000  .25  $2.00) $1,000
Labor (2,000  .25  $1.00) 500
Factory overhead (1,000  .25  $.75) 375 1,875
Total production costs accounted for $15,000

What is the journal entry to record completed production and transfer to the warehouse?
a. Work in process 13,125
Finished goods 13,125

b. Finished goods 1,875

Work in process 1,875

c. Finished goods 3,000

Factory overhead 3,000

d. Finished goods 13,125

Work in process 13,125

ANS: D
 The entry to completed production and transfer to the warehouse is:
Finished goods 13,125
Work in process 13,125

PTS: 1 DIF: Moderate REF: P. OBJ: 4

NAT: IMA 2B - Cost Management TOP: AACSB - Analytic

23. In a given process costing system, the equivalent units of production are computed using the average
cost method. The percentage of completion for the current period only is included in the calculation of
the:

Beginning Work in Ending Work in

Process Inventory Process Inventory

a. No No
b. No Yes
c. Yes No
d. Yes Yes

ANS: B
In computing equivalent units of production, the percentage of completion of the current period is used
only in the calculation of the ending work in process inventory.

PTS: 1 DIF: Moderate REF: P. OBJ: 5

NAT: IMA 2B - Cost Management TOP: AACSB - Reflective

24. Lily Corporation uses process costing to calculate the cost of manufacturing pool systems. Beginning
work in process included 7,000 units 50 percent complete. During the month 15,000 units were
completed, 1,400 units remain in work in process at 80 percent complete. Using the average cost
method, the equivalent units are:
a. 14,000
b. 18,720
c. 16,120
d. 19,900
ANS: C
Units output for the month:
Finished during month 15,000
Equivalent units of work in process, end of
month (1,400 x 80% completed) 1,120
16,120

PTS: 1 DIF: Moderate REF: P. OBJ: 5

NAT: IMA 2B - Cost Management TOP: AACSB - Analytic

25. Norma Company had 10,000 units in work in process at January 1 that were 50 percent complete.
During January, 25,000 units were completed. At January 31, 6,000 units remained in work in process
that were 75 percent complete. Using the average cost method, the equivalent units for January were:
a. 31,000.
b. 29,500.
c. 35,000.
d. 36,000.
ANS: B
Unit output for month:
 Finished during month 25,000
Equivalent units of work in process, end of month
(6,000 units, 75% completed) 4,500
29,500

PTS: 1 DIF: Moderate REF: P. OBJ: 5

NAT: IMA 2B - Cost Management TOP: AACSB - Analytic

26. The records of Andrews Company reflect the following data:

Work in process, beginning of the month - 4,500 units; 1 / 3 completed at a cost of $2,400 for
materials, $825 for labor, and $3,000 for overhead.

Production costs for the month - materials - $20,695; labor - $13,050; overhead - $41,500

Units completed and transferred to finished goods - 35,000

Work in process, end of month - 3,000 units; 3 / 4 completed

Compute the equivalent units of production.

a. 32,750
b. 37,250
c. 38,000
d. 36,500
ANS: B
Units completed and transferred to finished goods (35,000 x 100%) 35,000
Ending in process (3,000 x 3 / 4) 2,250
Equivalent units of production 37,250

PTS: 1 DIF: Easy REF: P. OBJ: 5

NAT: IMA 2B - Cost Management TOP: AACSB - Analytic

27. The beginning work in process inventory is 60 percent complete, and the ending work in process
inventory is 45 percent complete. The dollar amount of the production cost included in the ending
work in process inventory (using the average cost method) is determined by multiplying the average
unit costs by what percentage of the total units in the ending work in process inventory?
a. 100 percent
b. 60 percent
c. 55 percent
d. 45 percent
ANS: D
The dollar amount of production cost included in the ending work in process inventory is determined
by multiplying the average unit costs by the percentage of completion of the ending work in process
inventory (45 percent).

PTS: 1 DIF: Moderate REF: P. OBJ: 5

NAT: IMA 2B - Cost Management TOP: AACSB - Analytic

28. The Kluesner Company started the month of June with 3,000 units in process which were 60%
completed. The company started 25,000 units during June, and at the end of the month had 2,500 units
on hand which were 40% completed. The number of units transferred to finished goods during June
was:
 a. 25,000
b. 28,500
c. 24,500
d. 25,500
ANS: D
Beginning units in process 3,000
Plus: Units started in production 25,000
Total units to account for 28,000
Less: Units transferred to finished goods ???
Ending units in process 2,500

If Kluesner started the month with 3,000 units in process and started 25,000 more, there are 28,000
units to account for. Those units were either completed and transferred to finished goods during the
month or still in process at the end of the month. The number of units transferred would have been
25,500 (28,000 - 2,500).

PTS: 1 DIF: Moderate REF: P. OBJ: 5

NAT: IMA 2B - Cost Management TOP: AACSB - Analytic

29. The production report for Marck Company included the following information for August:

Number of Units Completion

Units started in production 44,500
Units transferred to finished goods 46,200
Ending units in process 2,700 70%

How many units were in process at the beginning of the month?

a. 1,700
b. 1,000
c. 4,400
d. 5,400
ANS: C
Beginning units in process ???
Plus: Units started in production 44,500
Total units to account for 48,900
Less: Units transferred to finished goods 46,200
Ending units in process 2,700

If Marck transferred 46,200 units to finished goods during the month and had 2,700 units in process at
the end of the month, there were 48,900 units to account for during the month (46,200 + 2,700). If
Marck started 44,500 units during the month, it must have had 4,400 in beginning in process (48,900 -
44,500).

PTS: 1 DIF: Moderate REF: P. OBJ: 5

NAT: IMA 2B - Cost Management TOP: AACSB - Analytic

30. The production report for Matthews, Inc. included the following information for May:

Number of Units Completion

Beginning units in process 7,800 20%
Units transferred to finished goods 45,300
Ending units in process 5,600 40%
 How many units were started during the period?
a. 43,100
b. 58,700
c. 47,500
d. 50,900
ANS: A
Beginning units in process 7,800
Plus: Units started in production ???
Total units to account for 50,900
Less: Units transferred to finished goods 45,300
Ending units in process 5,600

If Matthews transferred 45,300 units to finished goods during the month and had 5,600 units in process
at the end of the month, there were 50,900 units to account for during the month (45,300 + 5,600). If
Matthews started the month with 7,800 units in process, it must have started 43,100 (50,900 - 7,800).

PTS: 1 DIF: Moderate REF: P. OBJ: 5

NAT: IMA 2B - Cost Management TOP: AACSB - Analytic

31. Michael Company had 2,000 units in work in process at January 1 that were 80 percent complete.
During January, 15,000 units were completed. At January 31, 4,000 units remained in work in process
that were 40 percent complete. Using the average cost method, how many units were started during
January?
a. 21,000
b. 18,200
c. 17,000
d. 19,000
ANS: C
Units in beginning work-in-process 2,000
Units started during month ???
Total units worked on during month 19,000
Units completed during month 15,000
Units in ending work-in-process 4,000

Ending work-in-process and units completed during the month total 19,000 units. 19,000 units less
2,000 units equal 17,000 units.

PTS: 1 DIF: Moderate REF: P. OBJ: 5

NAT: IMA 2B - Cost Management TOP: AACSB - Analytic

32. The records of Andrews Company reflect the following data:

Work in process, beginning of the month - 4,500 units; 1 / 3 completed at a cost of $2,400 for
materials, $825 for labor, and $5,000 for overhead.

Production costs for the month - materials - $20,695; labor - $13,050; overhead - $41,500

Units completed and transferred to finished goods - 35,000

Work in process, end of month - 3,000 units; 3 / 4 completed

 What is the unit cost for material?
a. $.66
b. $.59
c. $.56
d. $.62
ANS: D
Cost of material in beginning work in process $ 2,400
Material costs for the current month 20,695
Total material costs $23,095

Units completed and transferred to finished goods (35,000 x 100%) 35,000

Ending in process (3,000 x 3 / 4) 2,250
Equivalent units of production 37,250

Unit cost of material = $23,095 / 37,250 = $.62

PTS: 1 DIF: Moderate REF: P. OBJ: 5

NAT: IMA 2B - Cost Management TOP: AACSB - Analytic

33. The records of Andrews Company reflect the following data:

Work in process, beginning of the month - 4,500 units; 1 / 3 completed at a cost of $2,400 for
materials, $825 for labor, and $5,000 for overhead.

Production costs for the month - materials - $20,695; labor - $13,050; overhead - $41,500

Units completed and transferred to finished goods - 35,000

Work in process, end of month - 3,000 units; 3 / 4 completed

What is the cost per equivalent unit?

a. $2.24
b. $2.02
c. $2.38
d. $2.15
ANS: A
Cost of beginning work in process:
Material $ 2,400
Labor 825
Factory Overhead 5,000 $ 8,225

Production costs for the current month:

Material $20,695
Labor 13,050
Factory Overhead 41,500 75,245
$83,470

Units completed and transferred to finished goods (35,000 x 100% ) 35,000

Ending in process (3,000 x 3 / 4) 2,250
Equivalent units of production 37,250

Cost per equivalent unit = $83,470 / 37,250 = $2.24

 PTS: 1 DIF: Moderate REF: P. OBJ: 5
NAT: IMA 2B - Cost Management TOP: AACSB - Analytic

34. Information concerning the materials used in the Mixing Department in October is as follows:

Units Materials Costs

Work in Process, October 1 11,700 $ 4,100
Units started during October 43,300 22,900
Units completed and transferred to next department 45,00
during October 0
Work in Process, October 31 10,000

If the ending work-in-process inventory is 50% complete, using the average cost method, what was the
materials cost in Work in Process at October 31?
a. $2,644
b. $2,700
c. $4,330
d. $4,811
ANS: B
(B) Units in Work in Process, October 31:

Units in process, October 31 10,000

Percentage of completion 50%
Equivalent units in process 5,000

Total materials cost

=
Units completed plus ending inventory

($4,100 + $22,900) = $27,000 = $.54 per unit

(45,000 + 5,000) 50,000

Materials cost for Work in Process, October 31:

5,000 units  $.54 = $2,700

PTS: 1 DIF: Moderate REF: P. OBJ: 5

NAT: IMA 2B - Cost Management TOP: AACSB - Analytic

35. Information for the month of January concerning Department A, the first stage of Cando Corporation's
production cycle, follows:

Materials Conversion
Beginning work in process $17,200 $16,400
Current costs 50,000 34,000
Total costs $67,200 $50,400
Equivalent units using average cost method 112,000 112,000
Average unit costs $ 0.60 $ 0.45
Goods completed 100,000 units
Ending work in process 24,000 units
 The ending work in process is 50 percent complete. How would the total costs accounted for be
distributed using the average cost method?

Goods Ending Work

Completed in Process

a. $105,000 $12,600
b. $ 67,200 $14,400
c. $ 67,200 $50,400
d. $105,000 $14,400

ANS: A
Cost of the completed goods:
Materials (100,000  $.60) $ 60,000
Conversion costs (100,000  $.45) 45,000
Total cost of completed goods $105,000
Cost of ending work in process:
Materials (24,000 x 50%  $.60) $ 7,200
Conversion costs (24,000 units  50%  $.45) 5,400
Total cost of ending work in process $ 12,600

PTS: 1 DIF: Moderate REF: P. OBJ: 5

NAT: IMA 2B - Cost Management TOP: AACSB - Analytic

36. Howell Company uses the average cost method of process costing. Howell had 1,000 units in
beginning work-in-process which were 75% complete. Costs associated with this inventory were
$3,200. When calculating the cost per equivalent unit for the month of June, Howell’s controller
should:
a. Not consider the $3,200 as those costs were incurred in a prior period.
b. Calculate the cost to complete the 1,000 items in beginning work-in-process separately.
c. Include the $3,200 with the current month’s cost to arrive at total cost for production to
date.
d. Include the equivalent units to complete the beginning work-in-process inventory to arrive
at the equivalent units for the period.
ANS: C
When using the average cost method, the costs associated with the beginning work-in-process
inventory should be added to the current month’s cost to arrive at the total cost of production to date.
This amount is then divided by the equivalent production for the month. The equivalent production is
amount of units completed added to the equivalent units of ending inventory (units in ending work-in-
process x the stage of completion).

PTS: 1 DIF: Moderate REF: P. OBJ: 5

NAT: IMA 2B - Cost Management TOP: AACSB - Reflective

37. Information concerning the materials used in the Mixing Department in October is as follows:

Units Materials Costs

Work in Process, October 1 11,700 $ 4,100
Units started during October 43,300 22,900
Units completed and transferred to next department
during October 45,000
 If the ending work-in-process inventory is 50% complete, using the average cost method, what was the
materials cost in Work in Process at October 31?
a. $2,644
b. $2,700
c. $4,330
d. $4,811
ANS: B
(B) Units in Work in Process, October 31:

In process, October 1 11,700

Started during October 43,300
Total units to account for 55,000
Units transferred 45,000
Units in process, October 31 10,000
Percentage of completion 50%
Equivalent units in process 5,000

Total materials cost

=
Units completed plus ending inventory

($4,100 + $22,900) = $27,000 = $.54 per unit

(45,000 + 5,000) 50,000

Materials cost for Work in Process, October 31:

5,000 units  $.54 = $2,700

PTS: 1 DIF: Hard REF: P. OBJ: 5

NAT: IMA 2B - Cost Management TOP: AACSB - Analytic

38. In a production cost report using process costing, transferred-in costs are similar to:
a. Material added at the beginning of the process.
b. Conversion costs added during the process.
c. Costs transferred to the next process.
d. Costs included in beginning inventory.
ANS: A
The costs transferred in from another department are treated in a manner similar to materials added in
a department at the very beginning of processing in the department. They are finished units of the
preceding department but will require additional processing in the department to which they were
transferred.

PTS: 1 DIF: Moderate REF: P. OBJ: 6

NAT: IMA 2B - Cost Management TOP: AACSB - Reflective

39. What are transferred-in costs as used in a process cost accounting system?
a. Labor that is transferred from another department within the same plant instead of hiring
temporary workers from the outside
b. Costs that have been incurred in a prior department on units that have been moved into a
subsequent department
c. Supervisory salaries that are transferred from an overhead cost center to a production cost
center
 d. Ending work in process inventory of a previous process that will be used in a succeeding
process
ANS: B
Transferred-in costs, as used in a process cost system, represent the cost of the production of a
previous internal process or department subsequently used in a succeeding internal process.

PTS: 1 DIF: Moderate REF: P. OBJ: 6

NAT: IMA 2B - Cost Management TOP: AACSB - Analytic

40. The Columbus Company has three departments A, B and C. Material requisitions amounted to
$10,000, $8,000 and $5,000, respectively, for departments A, B and C. In addition, $2,000 of indirect
materials were used during the period. What is the entry to record the materials used during the
period?
a. Work-in-process 23,000
Materials - Department A 10,000
Materials - Department B 8,000
Materials - Department C 5,000

b. Work-in-process - Department A 10,000

Work-in-process - Department B 8,000
Work-in-process - Department C 5,000
Materials 23,000

c. Work-in-process - Department A 10,000

Work-in-process - Department B 8,000
Work-in-process - Department C 5,000
Factory overhead 2,000
Materials 25,000

d. Work-in-process 23,000
Factory overhead 2,000
Materials 25,000

ANS: C
The entry to record the use of the materials in departments A, B and C and the indirect materials is:

Work-in-process - Department A 10,000

Work-in-process - Department B 8,000
Work-in-process - Department C 5,000
Factory overhead 2,000*
Materials 25,000

*Indirect materials

PTS: 1 DIF: Moderate REF: P. OBJ: 6

NAT: IMA 2B - Cost Management TOP: AACSB - Analytic

41. Wolf Company has two departments, Mixing and Curing. The following information is available for
September:
Cost per
Mixing Department: Number of units equivalent unit
Transferred to the curing department 9,000 $2.00
Ending work in process inventory
70 % completed 4,000 $2.00

Curing Department:
 Completed and transferred out 8,000 $3.00
Ending work in process inventory
30% completed 5,000 $3.00

The entry to record the transfer of inventory from the mixing to the curing department is:
a. Work in process - Curing 18,000
Work in process - Mixing 18,000

b. Finished goods 18,000

Work in process - Mixing 18,000

c. Work in process - Mixing 5,600

Work in process - Curing 5,600

d. Work in process - Curing 18,000

Transferred in costs 18,000

ANS: A
The entry to transfer the cost of inventory from the mixing to the curing department is:

Work in process - Curing 18,000*

Work in process - Mixing 18,000

* 9,000 x $2.00

PTS: 1 DIF: Moderate REF: P. OBJ: 6

NAT: IMA 2B - Cost Management TOP: AACSB - Analytic

42. Wolf Company has two departments, Mixing and Curing. The following information is available for
September:
Cost per
Mixing Department: Number of units equivalent unit
Transferred to the curing department 9,000 $2.00
Ending work in process inventory
70 % complete 4,000 $2.00

Curing Department:
Completed and transferred out 8,000 $3.00
Ending work in process inventory
30% complete 5,000 $3.00

The entry to record the transfer of inventory from the curing department to the warehouse is:
a. Finished goods 18,000
Work in process - Mixing 18,000

b. Finished goods 24,000

Work in process - Curing 24,000

c. Work in process - Curing 24,000

Work in process - Mixing 24,000

d. Work in process - Curing 4,500

Finished goods 4,500

ANS: B
The entry to record the completion of production and transfer of the goods to the finished goods
warehouse is:
 Finished goods 24,000*
Work in process - Curing 24,000

* 8,000 x $3.00

PTS: 1 DIF: Moderate REF: P. OBJ: 6

NAT: IMA 2B - Cost Management TOP: AACSB - Analytic

43. The Assembly Department is the second stage of Pine Company's production cycle. On May 1, the
beginning work in process contained 15,000 units that were 40 percent complete. During May, 85,000
units were transferred in from the first stage of Pine's production cycle and 80,000 units were
completed and transferred to Finished Goods. On May 31, the ending work in process contained
20,000 units that were 75 percent complete. Using the average cost method, the equivalent units of the
Assembly Department are:

Transferred-In Conversion
Costs Materials Costs

a. 85,000 70,000 70,000

b. 100,000 80,000 80,000
c. 100,000 95,000 95,000
d. 120,000 100,000 100,000

ANS: C
Units
Transferred-in costs:
Units completed and transferred out 80,000
Ending work in process: (20,000 x 100% completed) 20,000
Equivalent units 100,000
Material and Conversion Costs:
Units completed and transferred (see above) 80,000
Ending work in process: (20,000 x 75% complete) 15,000
Equivalent units 95,000

PTS: 1 DIF: Moderate REF: P. OBJ: 7

NAT: IMA 2B - Cost Management TOP: AACSB - Analytic

44. The Assembly Department is the second stage of Pine Company's production cycle. On May 1, the
beginning work in process contained 15,000 units that were 40 percent complete. During May, 85,000
units were transferred in from the first stage of Pine's production cycle. On May 31, the ending work
in process contained 20,000 units that were 75 percent complete. Using the average cost method, the
equivalent units of the Assembly Department are:

Transferred-In Conversion
Costs Materials Costs

a. 85,000 70,000 70,000

b. 100,000 80,000 80,000
c. 100,000 95,000 95,000
d. 120,000 100,000 100,000

ANS: C
Units
 Cost flow analysis:
Units in beginning work in process 15,000
Transferred in during month 85,000
Total units worked on 100,000
Less ending work-in-process 20,000
Units transferred out 80,000
Transferred-in costs:
Units completed and transferred out (see above) 80,000
Ending work in process: (20,000 x 100% completed) 20,000
Equivalent units 100,000
Material and Conversion Costs:
Units completed and transferred (see above) 80,000
Ending work in process: (20,000 x 75% complete) 15,000
Equivalent units 95,000

PTS: 1 DIF: Hard REF: P. OBJ: 7

NAT: IMA 2B - Cost Management TOP: AACSB - Analytic

45. Department B had 1,000 units in beginning work-in-process which had transferred in costs of $2,500
from Department A associated with them. During the period, 12,000 more units having costs of
$36,000 were transferred in to Department B from Department A. What is the unit cost for the period
of costs transferred from Department A.
a. $2.00
b. $2.75
c. $2.96
d. $3.00
ANS: C
When costs transferred in have different unit costs in different periods, these costs must be averaged as
follows:
Units Costs
Beginning work-in-process 1,000 $ 2,500
Current period 12,000 36,000
13,000 $38,500

Cost per unit = 38,500 / 13,000 = $2.96

PTS: 1 DIF: Moderate REF: P. OBJ: 8

NAT: IMA 2B - Cost Management TOP: AACSB - Analytic

PROBLEM

1. Daniel LLC incurred the following cost in the month of October:

Material $55,000
Labor $46,000
Factory Overhead $23,000

There was no beginning inventory. Ending work in process was 10,000 units at 50 percent complete.
15,000 units were completed and transferred out.

Prepare a cost of production summary for the month, assuming Daniel uses the average cost method of
process costing.
 ANS:

Daniel LLC
Cost of Production Summary
For the Month Ended October 31, 20--

Cost of production for month:

Materials $ 55,000
Labor 46,000
Factory Overhead 23,000
Total cost to be accounted for $124,000

Unit output for the month

Finished during month 15,000
Equivalent units of work in process, end
of month (10,000 units, one-half completed) 5,000
Total equivalent production 20,000

Unit cost for month:

Material ($55,000 /20,000) $2.75
Labor (46,000 / 20,000) 2.30
Factory Overhead (23,000 / 20,000) 1.15
Total $6.20

Inventory Costs:
Cost of goods finished during month (15,000 x 6.20) $ 93,000
Cost of work in process, end of month:
Material (10,000 x 1/2 x 2.75) $ 13,750
Labor ( 10,000 1/2 2.30) 11,500
Factory Overhead ( 10,000 1/2 1.15) 5,750 31,000
Total production cost accounted for $124,000

PTS: 1 DIF: Moderate REF: P. OBJ: 4

NAT: IMA 2B - Cost Management TOP: AACSB - Analytic

2. Using the data presented below, determine the figures that should be inserted in the blank spaces.

Beginning Units Equivalent

units in Units started transferred to units of
process in production finished goods Ending units in process production
a 700 3,200 ________ 600 - 1/3 completed ______
b _____ 2,300 ________ 400 - 1/2 completed 2,450
c 1,200 4,500 5,100 __________________ 5,500
d 1,000 _______ 8,200 ___ - 1/2 completed 8,800
e 2,200 _______ 2,400 500 - 4/5 completed ______

ANS:
(a) Stage of
Units completion Equivalent Units
Beginning units in process 700
+ Units started in production 3,200
= Total units to account for 3,900
- Units transferred to finished goods __??? 100% ???
= Ending units in process 600 1/3 200
???

The units transferred to finished goods is equal to 3,300 (3,900 - 600), therefore the equivalent units of
production is equal to 3,500 (3,300 + 200).

(b) Stage of
Units completion Equivalent Units
Beginning units in process ???
+ Units started in production 2,300
= Total units to account for ???
- Units transferred to finished goods __??? 100% ???
= Ending units in process 400 1/2 200
2,450

The number of units transferred to finished goods is 2,250 (2,450 - 200).

The total number of units to account for is 2,650 (2,250 + 400), therefore the number of units in
beginning work-in-process is 350 (2,650 - 2,300).

(c) Stage of
Units completion Equivalent Units
Beginning units in process 1,200
+ Units started in production 4,500
= Total units to account for 5,700
- Units transferred to finished goods 5,100 100% 5,100
= Ending units in process ??? ??? ???
5,500

The number of equivalent units for ending work-in-process is 400 (5,500 - 5,100).
The number of units in ending work-in-process is 600 (5,700 - 5,100), therefore, the stage of
completion of the ending work-in-process is 2/3 (400 / 600).

(d) Stage of
Units completion Equivalent Units
Beginning units in process 1,000
+ Units started in production ???
= Total units to account for ???
- Units transferred to finished goods 8,200 100% 8,200
= Ending units in process ??? 1/2 ???
8,800

The number of equivalent units for ending work-in-process is 600 (8,800 - 8,200).
The number of units in ending work-in-process is 1,200 (600 / (1/2)), therefore, the number of units to
account for is 9,400 (8,200 + 1,200) and the number of units started in production is
8,400 (9,400 - 1,000).

(e) Stage of
Units completion Equivalent Units
Beginning units in process 2,200
+ Units started in production ???
= Total units to account for ???
 - Units transferred to finished goods 2,400 100% 2,400
= Ending units in process 500 4/5 400
???

The number of equivalent units is 2,800 (2,400 + 400).

The total number of units to account for is 2,900 (2,400 + 500), therefore the number of units started in
production is 700 (2,900 - 2,200).

PTS: 1 DIF: Moderate REF: P. OBJ: 5

NAT: IMA 2B - Cost Management TOP: AACSB - Analytic

3. The records of Jordan Company reflect the following data:

Work in process, beginning of the month - 4,500 units; 30% completed at a cost of $16,700 for
materials, $7,600 for labor, and $10,400 for overhead.

Production costs for the month - materials - $54,300 labor; - $25,400; overhead - $34,600

Units completed and transferred to finished goods - 18,000

Work in process, end of month - 5,000 units; 40% completed

Calculate the unit cost for the month for materials, labor and factory overhead.

ANS:
Units completed and transferred to finished goods (18,000 x 100% ) 18,000
Ending in process (5,000 x 40%) 2,000
Equivalent units of production 20,000

Factory
Material Labor Overhead
Costs in beginning in process $16,700 $ 7,600 $10,400
Production costs for month 54,300 25,400 34,600
Total costs $71,000 $33,000 $45,000
Equivalent units - 20,000
Cost per unit $3.55 $1.65 $2.25

PTS: 1 DIF: Moderate REF: P. OBJ: 5

NAT: IMA 2B - Cost Management TOP: AACSB - Analytic

4. Consider the following cost of production summary for Carrigan Products for May. Prepare the
journal entries to record the production activity.

Carrigan Products
Cost of Production Summary
For the Month Ended May 31, 20--
Cost of work in process, beginning of month:
Materials $ 8,200
Labor 5,500
Factory overhead 2,000 $15,700
Cost of production for month:
Materials $24,000
Labor 17,600
 Factory overhead 16,900 58,500
Total costs to be accounted for $74,200
Unit output for month:
Finished and transferred to Finished goods
during month 2,000
Equivalent units of work in process, end of
month (1,000 units, 80% completed) 800
Total equivalent production 2,800
Unit cost for month:
Materials [($8,200 + $24,000) / 2,800] $ 11.50
Labor [($5,500 + $17,600) / 2,800] 8.25
Factory overhead [($2,000 + $16,900) / 2,800] 6.75
Total $ 26.50
Inventory costs:
Cost of goods finished and transferred to
Finished goods during month: (2,000  $26.50) $53,000
Cost of work in process, end of month:
Materials (1,000  .8  $11.50) $ 9,200
Labor (1,000  .8  $8.25) 6,600
Factory overhead (1,000  .8  $6.75) 5,400 21,200
Total production costs accounted for $74,200

ANS:
Work-in-process 24,000
Materials 24,000
To record requisition of materials

Work-in-process 17,600
Payroll 17,600
To record distribution of labor

Work-in-process 16,900
Factory overhead 16,900
To record application of factory overhead

Finished goods 53,000

Work-in-process 53,000
To record the completion of goods

PTS: 1 DIF: Moderate REF: P. OBJ: 5

NAT: IMA 2B - Cost Management TOP: AACSB - Analytic

5. The Paul Manufacturing Company uses the process cost system and the average cost method. The
following production data are for the month of April, 20--.

Production Costs

Work in process, beginning of month:

Materials $ 4,350
Labor 3,200
Factory overhead 1,902 $ 9,452
Costs incurred during month:
Materials $43,200
 Labor 32,304
Factory overhead 19,020 94,524
Total $103,976

Production Report
Units
In process, beginning of month 500
Finished and transferred during month 11,900
Work in process, end of month 1,200
Stage of completion 65%

Prepare a cost of production summary for the month.

ANS:

Paul Manufacturing Company

Cost of Production Summary
For the Month Ended April 30, 20--
Cost of work in process, beginning of month:
Materials $ 4,350
Labor 3,200
Factory overhead 1,902 $ 9,452
Cost of production for month:
Materials $43,200
Labor 32,304
Factory overhead 19,020 94,524
Total costs to be accounted for $103,976
Unit output for month:
Finished and transferred to finished goods during month 11,900
Equivalent units of work in process, end of month
(1,200 units, 65% completed) 780
Total equivalent production 12,680
Unit cost for month:
Materials [($4,350 + $43,200) / 12,680] $3.75
Labor [($3,200 + $32,304) / 12,680] 2.80
Factory overhead [($1,902 + $19,020) / 12,680] 1.65
Total $8.20
Inventory costs:
Cost of goods finished and transferred to finished goods
during month (11,900  $8.20) $ 97,580
Cost of work in process, end of month:
Materials (1,200  .65  $3.75) $2,925
Labor (1,200  .65  $2.80) 2,184
Factory overhead (1,200  .65  $1.65) 1,287 6,396
Total production costs accounted for $103,976

PTS: 1 DIF: Moderate REF: P. OBJ: 5

NAT: IMA 2B - Cost Management TOP: AACSB - Analytic

6. The Joan Company uses the process cost system and average cost method. The following production
data are for the month of July, 20--.
 Production Costs

Work in process, beginning of month:

Materials $18,500
Labor 8,750
Factory overhead 4,850 $ 32,100
Costs incurred during month:
Materials $93,500
Labor 42,450
Factory overhead 33,550 169,500
Total $201,600

Production Report
Units
In process, beginning of month 4,000
Finished and transferred during month 28,000
Work in process, end of month 10,000
Stage of completion 40%

(a) Prepare a cost of production summary for the month.

(b) Prepare the journal entries to record production for the month

ANS:
(a)
Joan Company
Cost of Production Summary
For the Month Ended July 31, 20--
Cost of work in process, beginning of month:
Materials $ 18,500
Labor 8,750
Factory overhead 4,850 $ 32,100
Cost of production for month:
Materials $ 93,500
Labor 42,450
Factory overhead 33,550 169,500
Total costs to be accounted for $201,600
Unit output for month:
Finished and transferred to finished goods during month 28,000
Equivalent units of work in process, end of month
(10,000 units, one-half completed) 4,000
Total equivalent production 32,000
Unit cost for month:
Materials [($18,500 + $93,500) / 32,000] $3.50
Labor [($8,750 + $42,450) / 32,000] 1.60
Factory overhead [($4,850 + $33,550) / 32,000] 1.20
Total $6.30
Inventory costs:
Cost of goods finished and transferred to finished goods
during month (28,000  $6.30) $176,400
Cost of work in process, end of month:
Materials (10,000  .4  $3.50) $14,000
Labor (10,000  .4  $1.60) 6,400
 Factory overhead (10,000  .4  $1.20) 4,800 25,200
Total production costs accounted for $201,600

(b)
Work-in-process 93,500
Materials 93,500
To record requisition of materials

Work-in-process 42,450
Payroll 42,450
To record distribution of labor

Work-in-process 33,550
Factory overhead 33,550
To record application of factory overhead

Finished goods 176,400

Work-in-process 176,400
To record the completion of goods

Note to instructor: The difficulty of this problem can be reduced by eliminating requirement (b).

PTS: 1 DIF: Hard REF: P. OBJ: 5

NAT: IMA 2B - Cost Management TOP: AACSB - Analytic

7. Asia, Inc., manufactures one product in two departments on a continuous basis and uses the average
cost method of process cost accounting. The following information was reported for the month of
August, 20--:

Production Costs
Cutting Assembly
Department Department
Work in process, beginning of month:
Cost in Cutting Department $ 8,700
Materials $ 8,600 $ 585
Labor 4,200 1,600
Factory overhead 3,500 $ 16,300 1,000 3,185
Costs incurred during month:
Materials $61,400 $ 5,595
Labor 26,425 12,820
Factory overhead 22,750 110,575 8,064 28,570
Total $126,875

In addition, the cost of production summary for the Assembly Department follows:
Asia, Inc.
Cost of Production Summary--Assembly Department
For the Month Ended August 31, 20--
Cost of work in process, beginning of month:
Cost in Cutting Department $ 8,700
Cost in Assembly Department:
Materials $ 585
Labor 1,600
Factory overhead 1,000 3,185 $ 11,885
Cost of goods received from Cutting
Department during month 116,000

Cost of production for month:

Materials $ 5,595
Labor 12,820
Factory overhead 8,064 26,479
Total costs to be accounted for $154,364
Unit output for month:
Finished and transferred to stockroom 8,000
during month
Equivalent units of work in process, end
of month (600 units, 40% completed) 240
Total equivalent production 8,240
Unit cost for month:
Materials [($585 + $5,595) / 8,240] $ .75
Labor [($1,600 + $12,820) / 8,240] 1.75
Factory overhead [($1,000 + $8,064) / 8,240] 1.10
Total $ 3.60
Inventory costs:
Cost of goods finished and transferred
to stockroom during month:
Cost in Cutting Dept. (8,000 x $14.50) $116,000
Cost in Assembly Dept. (8,000 x $ 3.60) 28,800
Total (8,000 x $18.10) $144,800
Cost of work in process, end of month:
Cost in Cutting Dept. (600  $14.50) $ 8,700
Cost in Assembly Dept.:
Materials (600  40%  $.75) $180
Labor (600  40%  $1.75) 420
Factory overhead (600  40%  $1.10) 264 864 9,564
Total production costs accounted for $154,364

Prepare the journal entries to record production.

ANS:
Work-in-process - Cutting Department 61,400
Work-in-process - Assembly Department 5,595
Materials 66,995
To record requisition of materials

Work-in-process - Cutting Department 26,425

Work-in-process - Assembly Department 12,820
Payroll 39,245
To record distribution of labor

Work-in-process - Cutting Department 22,750

Work-in-process - Assembly Department 8,064
Factory overhead 30,814
To record application of factory overhead

Work-in-process - Assembly Department 116,000

Work-in-process - Cutting Department 116,000
 To record transfer of production from
Department A to Department B

Finished goods 144,800

Work-in-process - Assembly Department 144,800
To record the completion of goods

PTS: 1 DIF: Moderate REF: P. OBJ: 7

NAT: IMA 2B - Cost Management TOP: AACSB - Analytic

8. Asia, Inc., manufactures one product in two departments on a continuous basis and uses the average
cost method of process cost accounting. The following information was reported for the month of
August, 20--:

Production Costs
Cutting Assembly
Department Department
Work in process, beginning of month:
Cost in Cutting Department $ 8,700
Materials $ 8,600 $ 585
Labor 4,200 1,600
Factory overhead 3,500 $ 16,300 1,000 3,185
Costs incurred during month:
Materials $61,400 $ 5,595
Labor 26,425 12,820
Factory overhead 22,750 110,575 8,064 28,570
Total $126,875

Production Report
Cutting Assembly
Department Department
In process, beginning of month 1,100 600
Finished and transferred during month 8,000 8,000
Work in process, end of month 1,500 600
Stage of completion 50% 40%

Prepare a cost of production summary for each department for the month.

ANS:

Asia, Inc.
Cost of Production Summary--Cutting Department
For the Month Ended August 31, 20--
Cost of work in process, beginning of month:
Materials $ 8,600
Labor 4,200
Factory overhead 3,500 $ 16,300
Cost of production for month:
Materials $61,400
Labor 26,425
Factory overhead 22,750 110,575
Total costs to be accounted for $126,875
Unit output for month:
Finished and transferred to Assembly Department
during month 8,000
Equivalent units of work in process, end of
month (1,500 units, 50% completed) 750
Total equivalent production 8,750
Unit cost for month:
Materials [($8,600 + $61,400)/ 8,750] $ 8.00
Labor [($4,200 + $26,425) / 8,750] 3.50
Factory overhead [($3,500 + $22,750) / 8,750] 3.00
Total $14.50
Inventory costs:
Cost of goods finished and transferred
to Assembly Department during month (8,000  $14.50)
$116,000
Cost of work in process, end of month:
Materials (1,500  50%  $8.00) $ 6,000
Labor (1,500  50%  $3.50) 2,625
Factory overhead (1,500  50%  $3.00) 2,250 10,875
Total production costs accounted for $126,875

Asia, Inc.
Cost of Production Summary--Assembly Department
For the Month Ended August 31, 20--
Cost of work in process, beginning of month:
Cost in Cutting Department $ 8,700
Cost in Assembly Department:
Materials $ 585
Labor 1,600
Factory overhead 1,000 3,185 $ 11,885
Cost of goods received from Cutting
Department during month 116,000

Cost of production for month:

Materials $ 5,595
Labor 12,820
Factory overhead 8,064 26,479
Total costs to be accounted for $154,364
Unit output for month:
Finished and transferred to stockroom 8,000
during month
Equivalent units of work in process, end
of month (600 units, 40% completed) 240
Total equivalent production 8,240
Unit cost for month:
Materials [($585 + $5,595) / 8,240] $ .75
Labor [($1,600 + $12,820) / 8,240] 1.75
Factory overhead [($1,000 + $8,064) / 8,240] 1.10
Total $3.60
Inventory costs:
Cost of goods finished and transferred
to stockroom during month:
 Cost in Cutting Dept. (8,000 x $14.50) $116,000
Cost in Assembly Dept. (8,000 x $ 3.60) 28,800
Total (8,000 x $18.10) $144,800
Cost of work in process, end of month:
Cost in Cutting Dept. (600  $14.50) $ 8,700
Cost in Assembly Dept.:
Materials (600  40%  $.75) $180
Labor (600  40%  $1.75) 420
Factory overhead (600  40%  $1.10) 264 864 9,564
Total production costs accounted for $154,364

Note to instructor: Difficulty could be modified by requiring the cost of production summary for one
department only.

PTS: 1 DIF: Hard REF: P. OBJ: 7

NAT: IMA 2B - Cost Management TOP: AACSB - Analytic

9. Gordon Products manufactures one product in two departments on a continuous basis and uses the
average cost method of process cost accounting. The following information was reported for the
month of May, 20--:

Production Costs
Department A Department B
Work in process, beginning
of month:
Cost in Department A $ 1,900
Materials $ 4,200 $ 1,900
Labor 3,500 1,600
Factory overhead 1,800 $ 9,500 750 4,250
Costs incurred during month:
Materials $74,425 $60,225
Labor 56,625 51,650
Factory overhead 35,200 166,250 17,000 128,875
Total $175,750

Production Report
Department A Department B
In process, beginning of month 1,600 200
Finished and transferred
during month 18,000 17,000
Work in process, end of month 1,000 1,200
Stage of completion 50% 60%

a) Prepare a cost of production summary for Department A for the month.

b) Prepare a cost of production summary for Department B for the month.
c) Prepare the journal entries to record production.

ANS:
(a)
Gordon Products
Cost of Production Summary--Department A
For the Month Ended May 31, 20--
Cost of work in process, beginning of month:
Materials $ 4,200
Labor 3,500
Factory overhead 1,800 $ 9,500
Cost of production for month:
Materials $74,425
Labor 56,625
Factory overhead 35,200 166,250
Total costs to be accounted for $175,750
Unit output for month:
Finished and transferred to Department B
during month 18,000
Equivalent units of work in process, end of
month (1,000 units, 50% completed) 500
Total equivalent production 18,500
Unit cost for month:
Materials [($4,200 + $74,425) / 18,500] $4.25
Labor [($3,500 + $56,625) / 18,500] 3.25
Factory overhead [($1,800 + $35,200) / 18,500] 2.00
Total $9.50
Inventory costs:
Cost of goods finished and transferred to
Department B during month: (18,000  $9.50) $171,000
Cost of work in process, end of month:
Materials (1,000  .5  $4.25) $ 2,125
Labor (1,000  .5  $3.25) 1,625
Factory overhead (1,000  .5  $2.00) 1,000 4,750
Total production costs accounted for $175,750

(b)
Gordon Products
Cost of Production Summary--Department B
For the Month Ended May 31, 20--
Cost of work in process, beginning of month:
Cost in Dept. A $ 1,900
Cost in Dept. B:
Materials $1,900
Labor 1,600
Factory overhead 750 4,250 $ 6,150
Cost of goods received from Dept A.
during month 171,000
Cost of production for month:
Materials $60,225
Labor 51,650
Factory overhead 17,000 128,875
Total costs to be accounted for $306,025
Unit output for month:
Finished and transferred to stockroom
during month 17,000
Equivalent units of work in process, end 720
of month (1,200 units, 60% completed)
Total equivalent production 17,720
Unit cost for month:
 Materials [($1,900 + $60,225) / 17,720] $3.51
Labor [($1,600 + $51,650) / 17,720] 3.01
Factory overhead [($750 + $17,000) / 17,720] 1.00
Total $7.52
Inventory costs:
Cost of goods finished and transferred to
stockroom during month:
Cost in Dept. A (17,000  $9.50) $161,500
Cost in Dept. B (17,000  7.52) 127,840

Total (17,000  $17.02) $289,340

Cost of work in process, end of month:

Cost in Dept. A (1,200  $9.50) $ 11,400
Cost in Dept. B:
Materials (1,200  60%  $3.51) $2,527
Labor (1,200  60%  $3.01) 2,167
Factory overhead
(1,200  60%  $1.00) 720 5,414 16,814
Total production costs accounted for $306,154*

* Rounding Difference

(c)
Work-in-process - Department A 74,425
Work-in-process - Department B 60,225
Materials 134,650
To record requisition of materials

Work-in-process - Department A 56,625

Work-in-process - Department B 51,650
Payroll 108,275
To record distribution of labor

Work-in-process - Department A 35,200

Work-in-process - Department B 17,000
Factory overhead 52,200
To record application of factory overhead

Work-in-process - Department A 171,000

Work-in-process - Department B 171,000
To record transfer of production from
Department A to Department B

Finished goods 289,340

Work-in-process - Department B 289,340
To record the completion of goods

PTS: 1 DIF: Hard REF: P. OBJ: 7

NAT: IMA 2B - Cost Management TOP: AACSB - Analytic
10. Howard Corporation has two production departments. Curing has 12,000 units in process at the
beginning of the period, 3 / 4 complete. During the period, 45,000 units were received from Crushing,
48,000 units were transferred to Finished Goods, and 9,000 units were in process at the end of the
period, 2/ 3 complete. Cost information was as follows:

Cost of beginning Work in Process:

Cost in Crushing $ 21,640

Cost in Curing:
Materials 8,810
Labor 1,190
Factory overhead 2,420

Costs during the month:

Cost of goods received from Crushing $ 85,520

Cost in Curing:
Materials 53,830
Labor 10,690
Factory overhead 17,560
Total costs to be accounted for $201,660

a. Determine the unit cost for the month in Curing.

b. Determine the total cost of the products transferred to Finished Goods.
c. Determine the total cost of the ending Work in Process inventory.

ANS:
a.
Unit output for month:
Finished and transferred to Finished Goods 48,000
Equivalent units of production of Work in
Process (9,000 units x 2 / 3 completed) 6,000
Total equivalent production 54,000

Unit cost per month:

Cost from Crushing Department
Beginning inventory (12,000 units) $ 21,640
Transferred in this month (45,000 units) 85,520
Average cost per unit (57,000 units) 107,160 $1.88

Cost in Curing:
Materials {(8,810 + 53,830) / 54,000] $1.16
Labor [(1,190 + 10,690) / 54,000] .22
Factory overhead [(2,420 + 17,560) / 54,000] .37
$1.75
b.
Cost of goods transferred to Finished Goods:
Cost in Crushing (48,000 x 1.88) $ 90,240
Cost in Curing (48,000 x 1.75) 84,000
Total finished and transferred to Finished Goods $174,240
c.
Cost of Work in Process, end of month:
Cost in Crushing (9,000 x $1.88) $ 16,920
Materials (9,000 x 2 / 3 x $1.16) 6,960
 Labor (9,000 x 2 / 3 x $.22) 1,320
Factory overhead (9,000 x 2 / 3 x .37) 2,220
Total costs in Work in Process, end of month 27,420
Total production costs accounted for $201,660

PTS: 1 DIF: Moderate REF: P. OBJ: 8

NAT: IMA 2B - Cost Management TOP: AACSB - Analytic