Chapter 04 - Process Costing and Hybrid Product-Costing Systems

Chapter 04 Process Costing and Hybrid Product-Costing Systems Answer Key

 

True / False Questions

 

1. The flow of costs through the manufacturing accounts is essentially the same in both
process costing and job-order costing. 
TRUE

2. Companies that use a process-cost accounting system would establish a separate Work-in-
Process Inventory account for each manufacturing department. 
TRUE

3. CFF, Inc. overstated the percentage of work completed with respect to conversion cost on
the ending work-in-process inventory. This overstatement caused conversion-cost equivalent
units to be overstated. 
TRUE
 

4. Equivalent-unit calculations are necessary to allocate manufacturing costs between units

sold and ending work in process. 
FALSE

5. Operation costing tends to parallel job-order costing with respect to the treatment of
conversion cost. 
FALSE

Multiple Choice Questions

 6. Process costing is usedto account for: 
A. large numbers of identical products that are produced in a continuous manufacturing
environment.
B. small numbers of products that are produced in batches.
C. raw materials that are converted directly to finished goods.
D. finished goods that are refined and processed further.
E. large numbers of products that are produced in a non-repetitive process.

7. Which of the following manufacturers would most likely not use a process-cost accounting
system? 
A. A producer of computer monitors.
B. A paint manufacturer.
C. A producer of frozen orange juice.

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D. A builder of customized yachts.
E. A lumber mill.
 
 

8. Process costing would likely be used in all of the following industries except: 
A. petroleum refining.
B. chemicals.
C. truck tire manufacturing.
D. wood pulp production.
E. automobile repair.

9. Which of the following companies would likely use a process-costing system?

    
A. Choice A
B. Choice B
C. Choice C
D. Choice D
E. Choice E

  10. Which of the following statements about similarities between process costing and job-
order costing are true?
I. Both systems assign production costs to units of output.
II. Both systems require extensive knowledge of financial accounting.
III. The flow of costs through the manufacturing accounts is essentially the same. 
A. I only.
B. I and III.
C. II and III.
D. III only.
E. I, II, and III.
 
 

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11. Companies that use a process-cost accounting system would: 

A. establish a separate Work-in-Process Inventory account for each manufacturing
department.
B. establish a separate Finished-Goods Inventory account for each manufacturing department.
C. pass completed production directly to Cost of Goods Sold.
D. charge goods produced with actual overhead amounts rather than applied overhead
amounts.
E. eliminate the need for the Finished-Goods Inventory account.

 
12. Which of the following statements is false? 
A. In job-order costing, costs are accumulated by job order.
B. In process costing, costs are accumulated by department.
C. In process costing, the cost per unit in a department is found by spreading the period's
manufacturing costs over the production activity.
D. In process costing, the total cost of each unit is found by dividing the total factory costs by
the number of units completed.
E. In job-order costing, the unit cost is found by dividing the job's total cost by the job's total
units.13. In a process-costing system, manufacturing costs are accumulated by: 
A. batch.
B. batch and time period.
C. department.
D. department and time period.
E. department or process, and time period.
 

14. Which of the following choices correctly shows how costs are accumulated in a process-
costing system?

    
A. Choice A
B. Choice B
C. Choice C
D. Choice D
E. Choice E

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15. Masterson, Inc., which uses a process-cost accounting system, passes completed

production from Department A to Department B for further manufacturing. The journal entry
to record completed production in Department A requires: 
A. a debit to Work-in-Process Inventory and a credit to Finished-Goods Inventory.
B. a debit to Finished-Goods Inventory and a credit to Work-in-Process Inventory.
C. a debit to Finished-Goods Inventory and a credit to Work-in-Process Inventory:
Department A.
D. a debit to Work-in-Process Inventory: Department A and a credit to Work-in-Process
Inventory: Department B.
E. a debit to Work-in-Process Inventory: Department B and a credit to Work-in-Process
Inventory: Department A.

16. Griswold, Inc., which uses a process-costing system, transfers completed production from
Department no. 1 to Department no. 2 for further work. Which of the following best describes
the account that would be debited to record this transfer? 
A. Cost of Goods Transferred.
B. Finished-Goods Inventory: Department no. 1.
C. Finished-Goods Inventory: Department no. 2.
D. Work-in-Process Inventory: Department no. 1.
E. Work-in-Process Inventory: Department no. 2.

17. Barnett, Inc., which uses a process-costing system, transfers completed production from
Department no. 1 to Department no. 2 for further work. Which of the following best describes
the account that would be credited to record this transfer? 
A. Cost of Goods Transferred.
B. Finished-Goods Inventory: Department no. 1.
C. Finished-Goods Inventory: Department no. 2.
D. Work-in-Process Inventory: Department no. 1.
E. Work-in-Process Inventory: Department no. 2.

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18. Hamilton, which uses a process-costing system, had a balance in its Work-in-Process
account of $68,000 on January 1. The account was charged with direct materials, direct labor,
and manufacturing overhead of $450,000 throughout the year. If a review of the accounting
records determined that $86,000 of goods were still in production at year-end, Hamilton
should make a journal entry on December 31 that includes: 
A. a debit to Cost of Goods Sold for $432,000.
B. a credit to Finished-Goods Inventory for $432,000.
C. a credit to Work-in-Process Inventory for $432,000.
D. a debit to Finished-Goods Inventory for $86,000.
E. a credit to Work-in-Process Inventory for $86,000.

19. Hammett has a single production department, and uses a process-costing system. The
balance in its Work-in-Process account on January 1 was $68,000. The account was charged
with direct materials, direct labor, and manufacturing overhead of $450,000 throughout the
year. If a review of the accounting records determined that $86,000 of goods were still in
production at year-end, Hammett should make a journal entry on December 31 that includes: 
A. a debit to Cost of Goods Sold for $432,000.
B. a debit to Finished-Goods Inventory for $432,000.
C. a debit to Work-in-Process Inventory for $432,000.
D. a debit to Finished-Goods Inventory for $86,000.
E. a credit to Work-in-Process Inventory for $86,000.

20. Unit costs in a process-costing system are derived by using: 

A. in-process units.
B. completed units.
C. physical units.
D. equivalent units.
E. a measure of activity other than those listed above.

21. Barrett Corporation had 6,500 units of work in process on April 1. During April, 19,100
units were completed and as of April 30, 5,100 units remained in production. How many units
were started during April? 
A. 11,600.
B. 17,700.
C. 20,500.
D. 30,700.
E. None of these.
 

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22. Lester Corporation had 8,200 units of work in process on November 1. During November,
26,800 units were started and as of November 30, 7,900 units remained in production. How
many units were completed during November? 
A. 16,100.
B. 26,500.
C. 27,100.
D. 42,800.
E. None of these.

23. Xin Co., had 3,000 units of work in process on April 1 that were 60% complete. During
April, 10,000 units were completed and as of April 30, 4,000 units that were 40% complete
remained in production. How many units were started during April? 
A. 8,600.
B. 9,800.
C. 11,000.
D. 12,200.
E. None of these.

24. Yes! Co., had 3,000 units of work in process on April 1 that were 60% complete. During
April, 11,000 units were started and as of April 30, 4,000 units that were 40% complete
remained in production. How many units were completed during April? 
A. 10,000.
B. 9,800.
C. 11,000.
D. 12,200.
E. None of these.

25. Ohio, Inc., which uses a process-cost accounting system, began operations on January 1 of
the current year. The company incurs conversion cost evenly throughout manufacturing. If
Ohio started work on 3,000 units during the period and these units were 70% of the way
through manufacturing, it would be correct to say that the company has: 
A. 3,000 physical units in production.
B. 2,100 completed units.
C. 900 in-process units.
D. 900 equivalent units of production.
E. 3,000 equivalent units of production.

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26. Which of the following data are needed to calculate total equivalent units under the
weighted-average method? 
A. Work-to-date on ending work in process, units started during the period.
B. Units completed during the period, work-to-date on ending work in process.
C. Work to complete beginning work in process, work-to-date on ending work in process.
D. Work to complete beginning work in process, units completed, and work done on ending
work in process.
E. Units completed, work to complete beginning work in process.

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27. Kentucky Corporation uses a process-cost accounting system. The company adds direct
materials at the start of its production process; conversion cost, on the other hand, is incurred
evenly throughout manufacturing. The firm has no beginning work-in-process inventory; its
ending work in process is 40% complete. Which of the following sets of percentages would
be used to calculate the correct number of equivalent units in the ending work-in-process
inventory? 
A. Materials, 40%; conversion cost, 40%.
B. Materials, 40%; conversion cost, 100%.
C. Materials, 100%; conversion cost, 40%.
D. Materials, 100%; conversion cost, 60%.
E. Materials, 100%; conversion cost, 100%.
 

28. Kendra Corporation uses a process-cost accounting system. The company adds direct
materials and direct labor at the start of its production process; overhead cost is incurred
evenly throughout manufacturing. The firm has no beginning work-in-process inventory; its
ending work in process is 40% complete. Which of the following sets of percentages would
be used to calculate the correct number of equivalent units in the ending work-in-process
inventory? 
A. Materials, 100%; labor, 100%; overhead cost, 40%.
B. Materials, 100%; labor, 100%; overhead cost, 100%.
C. Materials, 100%; labor 40%; overhead cost, 40%.
D. Materials, 40%; labor, 40%; overhead cost, 60%.
E. Materials, 40%; labor, 40%; overhead cost, 100%.

29. Agora Company uses a process-cost system for its single product. Material A is added at
the beginning of the process; in contrast, material B is added when the units are 75%
complete. The firm's ending work-in-process inventory consists of 6,000 units that are 80%
complete. Which of the following correctly expresses the equivalent units of production with
respect to materials A and B in the ending work-in-process inventory? 
A. A, 4,800; B, 0.
B. A, 4,800; B, 4,800.
C. A, 6,000; B, 0.
D. A, 6,000; B, 4,800.
E. A, 6,000; B, 6,000.

 
30. Aglow Company uses a process-cost system for its single product. Material A is added at
the beginning of the process; in contrast, material B is added when the units are 50%
complete. The firm's ending work-in-process inventory consists of 4,000 units that are 75%
complete. Which of the following correctly expresses the equivalent units of production with
respect to materials A and B in the ending work-in-process inventory? 
A. A, 3,000; B, 0.
B. A, 3,000; B, 3,000.
C. A, 4,000; B, 0.
D. A, 4,000; B, 4,000.
E. A, 4,000; B, 3,000.

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31. Willingham uses a process-costing system for its single product, which is manufactured
from Material X and Material Y. X and Y are introduced to the product as follows:
Material X: Added at the beginning of manufacturing
Material Y: Added at the 75% stage of completion
The company started and completed 40,000 units during the period, and had an ending work-
in-process inventory amounting to 8,000 units, 20% complete. Which of the following choices
correctly expresses the total equivalent units of production for Material X and Material Y?

    
A. Choice A
B. Choice B
C. Choice C
D. Choice D
E. Choice E
 

 Haskins Textile Co. manufactures a variety of fabrics. All materials are introduced at the
beginning of production; conversion cost is incurred evenly through manufacturing. The
Weaving Department had 2,000 units of work in process on April 1 that were 30% complete
as to conversion costs. During April, 9,000 units were completed and on April 30, 4,000 units
remained in production, 40% complete with respect to conversion costs.

 32. Theequivalent units of direct materials for April total: 

A. 9,000.
B. 13,000.
C. 13,600.
D. 14,400.
E. 15,000.

33. The equivalent units of conversion for April total: 

A. 9,000.
B. 10,600.
C. 11,200.
D. 12,000.
E. 12,600.

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  34. Fiero
Corporation adds all materials at the beginning of production and incurs conversion
cost evenly throughout manufacturing. The company completed 70,000 units during the year
and had 12,000 units in process at year end, 20% complete with respect to conversion cost.
Equivalent units for the year total: 
A. materials, 70,000; conversion, 70,000.
B. materials, 70,000; conversion, 2,400.
C. materials, 72,400; conversion, 72,400.
D. materials, 82,000; conversion, 72,400.
E. materials, 82,000; conversion, 82,000.35.

 Gregory, which uses a process-costing system, adds all material at the beginning of
production and incurs conversion cost evenly throughout manufacturing. The information that
follows relates to the period just ended:
Units started and completed: 75,000
Units in ending work-in-process inventory: 15,000, 60% complete
Which of the following choices correctly expresses the total equivalent units of production
with respect to material and conversion cost?

    
A. Choice A
B. Choice B
C. Choice C
D. Choice D
E. Choice E
  36. Gajewski began operations on January 1 of the current year. The company uses a process-
costing system, and conversion cost is incurred evenly throughout manufacturing. By January
31, the firm had completed 56,000 units. Which of the following statements could be true
about the ending work-in-process inventory if equivalent units for conversion cost totaled
59,000 units? 
A. There is no ending work-in-process inventory.
B. The ending work-in-process inventory totaled 3,000 physical units.
C. The ending work-in-process inventory of 10,000 physical units was 30% complete.
D. The ending work-in-process inventory of 20,000 physical units was 85% complete.
E. More than one of the above could be true. 

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37. Majesco, which uses a process-costing system, adds material at the beginning of
production and incurs conversion cost evenly throughout manufacturing. The following
selected information was taken from the company's accounting records:
Total equivalent units of materials: 5,000
Total equivalent units of conversion: 4,400
Units started and completed during the period: 3,500
On the basis of this information, the ending work-in-process inventory's stage of completion
is: 
A. 40%.
B. 60%.
C. 70%.
D. 80%.
E. some other percentage not listed above.

38. Muhares, which uses a process-costing system, adds material at the beginning of

production and incurs conversion cost evenly throughout manufacturing. The following
selected information was taken from the company's accounting records:
Total equivalent units of materials: 8,000
Total equivalent units of conversion: 7,400
Units started and completed during the period: 6,500
On the basis of this information, the ending work-in-process inventory's stage of completion
is: 
A. 80%.
B. 70%.
C. 60%.
D. 40%.
E. some other percentage not listed above.

 
  39. Corruption,Inc. overstated the percentage of work completed with respect to conversion
cost on the ending work-in-process inventory. What is the effect of this overstatement on
conversion-cost equivalent units and physical units manufactured, respectively? 
A. Overstated, overstated.
B. Overstated, understated.
C. Overstated, none.
D. None, overstated.
E. None, none.

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40. Michaella, Inc. uses a process-costing system. A newly-hired accountant identified the

following procedures that must be performed by the close of business on Friday:
1—Calculation of equivalent units
2—Analysis of physical flows of units
3—Assignment of costs to completed units and units still in process
4—Calculation of unit costs
Which of the following choices correctly expresses the proper order of the preceding tasks? 
A. 1, 2, 3, 4.
B. 1, 2, 4, 3.
C. 1, 4, 3, 2.
D. 2, 1, 4, 3.
E. 2, 1, 3, 4.
 

41. When calculating unit costs under the weighted-average process-costing method, the unit
cost is based on: 
A. only the current period's manufacturing costs.
B. only costs in the period's beginning work-in-process inventory.
C. a summation of the costs in the beginning work-in-process inventory plus costs incurred in
the current period.
D. only costs incurred in previous accounting periods.
E. a summation of the costs in the beginning work-in-process inventory plus costs to be
incurred in the upcoming period.

 
  42. When computing the conversion cost per equivalent unit under the weighted-average
method of process costing, all of the following information would be needed except: 
A. the number of units completed during the current accounting period.
B. the conversion work performed during the current period on the ending work-in-process
inventory.
C. the conversion work performed during the current period on the beginning work-in-process
inventory.
D. the conversion cost in the beginning work-in-process inventory.
E. the conversion cost incurred during the current accounting period.
 

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43. Tesla Corporation, which adds materials at the beginning of production, uses a weighted-
average process-costing system. Consider the data that follow.

   

The company's cost per equivalent unit for materials is: 

A. $1.24.
B. $1.66.
C. $1.67.
D. $2.05.
E. some other amount.

44. Peach Company uses a weighted-average process-costing system. Company records

disclosed that the firm completed 40,000 units during the month and had 10,000 units in
process at month-end, 20% complete. Conversion costs associated with the beginning work-
in-process inventory amounted to $231,000, and amounts that relate to the current month
totaled $966,000. If conversion is incurred uniformly throughout manufacturing, Peach's
equivalent-unit cost is: 
A. $23.00.
B. $23.94.
C. $24.15.
D. $28.50.
E. some other amount.

 Universal Manufacturing uses a weighted-average process-costing system. All materials are

introduced at the start of manufacturing, and conversion costs are incurred evenly throughout
the process. The company's beginning and ending work-in-process inventories totaled 10,000
units and 15,000 units, respectively, with the latter units being 2/3 complete at the end of the
period. Universal started 30,000 units into production and completed 25,000 units.
Manufacturing costs follow.
Beginning work in process: Materials, $60,000; conversion cost, $150,000
Current costs: Materials, $180,000; conversion cost, $480,000

 45. Universal's
equivalent-unit cost for materials is: 
A. $4.50.
B. $6.00.
C. $8.00.
D. $9.60.
E. some other amount.

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46. Universal's equivalent-unit cost for conversion cost is: 
A. $13.71.
B. $18.00.
C. $21.00.
D. $25.20.
E. some other amount.

47. Gilberto adds materials at the beginning of production and incurs conversion cost
uniformly throughout manufacturing. Consider the data that follow.

   

Conversion cost in the beginning work-in-process inventory totaled $120,000, and August
conversion cost totaled $270,000. Assuming use of the weighted-average method, which of
the following choices correctly depicts the number of equivalent units for materials and the
conversion cost per equivalent unit?

    
A. Choice A
B. Choice B
C. Choice C
D. Choice D
E. Choice E

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48. Which of the following are needed to calculate the total cost of the ending work-in-
process inventory under the weighted-average process-costing method?

    
A. Choice A
B. Choice B
C. Choice C
D. Choice D
E. Choice E

 
 

49. Which of the following are needed under weighted-average process costing to calculate
the cost of goods completed during the period?

    
A. Choice A
B. Choice B
C. Choice C
D. Choice D
E. Choice E

 
  50. Equivalent-unitcalculations are necessary to allocate manufacturing costs between: 
A. units completed and ending work in process.
B. beginning work in process and units completed.
C. units sold and ending work in process.
D. cost of goods manufactured and beginning work in process.
E. cost of goods manufactured and cost of goods sold.
 

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 Southern Lake Chemical manufactures a product called Zubek. Direct materials are added at
the beginning of the process, and conversion activity occurs uniformly throughout production.
The beginning work-in-process inventory is 60% complete with respect to conversion; the
ending work-in-process inventory is 20% complete. The following data pertain to May:

   

51. Using the weighted-average method of process costing, the equivalent units of direct
materials total: 
A. 68,000.
B. 69,400.
C. 74,000.
D. 75,000.
E. some other amount.

  52. Using the weighted-average method of process costing, the equivalent units of conversion
activity total: 
A. 60,400.
B. 68,000.
C. 69,400.
D. 74,000.
E. some other amount.
 

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53. Using the weighted-average method of process costing, the cost per unit of direct
materials is: 
A. $1.17.
B. $1.18.
C. $1.20.
D. $1.28.
E. some other amount.

 
 

54. Using the weighted-average method of process costing, the cost per unit of conversion
activity is: 
A. $2.50.
B. $2.53.
C. $2.70.
D. $2.76.
E. some other amount.

55. Using the weighted-average method of process costing, the cost of goods completed and
transferred during May is: 
A. $249,560.
B. $250,240.
C. $258,400.
D. $263,840.
E. some other amount.

  56. Usingthe weighted-average method of process costing, the total costs remaining in work
in process on May 31 are: 
A. $0.
B. $12,040.
C. $17,480.
D. $25,640.
E. some other amount.

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57. Forest Company, which uses a weighted-average process-costing system, had 7,000 units
in production at the end of the current period that were 60% complete. Material A is
introduced at the beginning of the process; material B is introduced at the end of the process;
and conversion cost is introduced evenly throughout manufacturing. Equivalent-unit
production costs follow.
Material A: $12.50
Material B: $2.00
Conversion cost: $6.60
The cost of the company's ending work-in-process inventory is: 
A. $88,620.
B. $115,220.
C. $123,620.
D. $147,700.
E. some other amount.

 Chen Corporation, a new company, adds material at the beginning of its production process;
conversion cost, in contrast, is incurred evenly throughout manufacturing. During May, the
firm completed 15,000 units and had ending work in process of 2,000 units, 60% complete.
Equivalent-unit costs were: materials, $15; conversion, $22.

58. The cost of Chen's completed production is: 

A. $225,000.
B. $330,000.
C. $333,000.
D. $555,000.
E. some other amount.

  59. The
cost of the company's ending work-in-process inventory is: 
A. $26,640.
B. $44,400.
C. $56,400.
D. $74,000.
E. some other amount.
 

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 Cosby uses a weighted-average process-costing system. All materials are added at the
beginning of the process; conversion costs are incurred evenly throughout production. The
company finished 40,000 units during the period and had 15,000 units in progress at year-end,
the latter at the 40% stage of completion. Total material costs amounted to $220,000;
conversion costs were $414,000.

 
60. The cost of goods completed is: 
A. $312,000.
B. $414,000.
C. $520,000.
D. $634,000.
 

61. The cost of the ending work in process is: 

A. $54,000.
B. $78,000.
C. $114,000.
D. $195,000.
E. some other amount.

62. Which of the following is a key document in a typical process-costing system? 

A. Departmental production report.
B. Master schedule.
C. Production budget.
D. Sequential product report.
E. Materials requirement report.

 
  63. Which of the following is true concerning cost drivers for the predetermined overhead
rate in a process-costing system? 
A. Predetermined overhead rates are not used in a process-costing system.
B. If direct material cost is the cost driver, direct labor and direct materials may be combined
into the single element of prime cost.
C. If direct labor hours is the cost driver, direct labor and manufacturing overhead may be
combined into the single element of conversion cost.
D. If direct labor cost is the cost driver, direct labor and manufacturing overhead may be
combined into the single element of conversion cost.
E. Cost drivers are irrelevant in process-costing systems.
 

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64. Operation costing might be used to determine the cost of all of the following products
except: 
A. sweaters.
B. automobiles.
C. living-room sofas.
D. dishwashing detergent.
E. high-definition (HD) and surround-sound cables.

65. Which of the following statements about operation costing is (are) true?

I. Conversion costs are accumulated by department.
II. Direct material costs are accumulated by batch.
III. Operation costing is a hybrid product-costing system. 
A. I only.
B. I and II.
C. I and III.
D. II and III.
E. I, II, and III.

66. Operation costing: 
A. tends to parallel job-order costing with respect to the treatment of conversion cost.
B. tends to parallel process costing with respect to the treatment of conversion cost.
C. tends to parallel process costing with respect to the treatment of direct materials.
D. would likely be used by a manufacturing plant that produces one model of a single
product.
E. is commonly known as a joint-costing system.

67. Which of the following best describes the procedures used in operation costing to assign
direct-material and conversion costs to production?

 
A. Choice A
B. Choice B
C. Choice C
D. Choice D
E. Choice E

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Chapter 04 - Process Costing and Hybrid Product-Costing Systems
 

68. When determining the cost of a manufactured good under an operation-costing system, a

company would: 
A. trace direct-material cost and actual conversion cost to each product produced.
B. trace direct-material cost to each product produced and use a predetermined application
rate for conversion cost.
C. trace actual conversion cost to each product produced and use a predetermined application
rate for direct material.
D. use a predetermined application rate for both direct-material cost and conversion cost.
E. often switch to a job-costing system to simplify recordkeeping procedures.

69. All of the following statements about an operation-costing system are true except: 
A. direct material and conversion costs are traced to each batch of product produced.
B. direct-material cost is traced to each batch produced.
C. conversion costs are applied to products on a departmental basis using a predetermined
application rate.
D. batches of product pass sequentially through the same processes.
E. conversion activities are similar across product lines but direct materials differ
significantly.

 
 

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