Saint Vincent College of Cabuyao

Brgy. Mamatid, City of Cabuyao, Laguna

Cost Accounting

Quiz – Process Costing

Name: Score:
Course & Section: Date:

Instructions: Before you take the exam, think about what your ultimate goal is. Please be patient in
pursuing your dreams.

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2. Career Development

64
 Chapter 18(3)/Process Cost Systems  65

Conquering the CPA Exam and obtaining the CPA license allows individuals to stand out to potential
employers, who are often impressed with accountants who earn this highly coveted title. Earning a CPA
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*DREAM BIG AND WORK HARD.

66  Chapter 18(3)/Process Cost Systems
 Chapter 18(3)/Process Cost Systems  67

TRUE/FALSE

1. Process cost systems use job order cost cards to accumulate cost data.

2. Both process and job order cost systems maintain perpetual inventory accounts with subsidiary
ledgers.

3. If the principal products of a manufacturing process are identical, a process cost system is more
appropriate than a job order cost system.

4. If the products of a manufacturing process are produced to customer specifications, a process cost
system is more appropriate than a job order cost system.

5. Process manufacturers typically use large machines to process a continuous flow of raw materials
into a finished state.

6. Industries that typically use process cost systems include chemicals, oil, metals, food, paper, and
pharmaceuticals.

7. In a process cost system, product costs are accumulated by processing department rather than by job.

8. Conversion costs include materials, direct labor, and factory overhead.

9. The direct materials costs and direct labor costs incurred by a production department are referred to
as conversion costs.

10. The direct labor costs and factory overhead costs incurred by a production department are referred to
as conversion costs.
68  Chapter 18(3)/Process Cost Systems

11. The first step in determining the cost of goods completed and ending inventory valuation using
process costing is to calculate equivalent units of production.

12. Conversion costs are usually incurred evenly throughout a process.

13. Equivalent units of production are the number of units that could have been manufactured from start
to finish during an accounting period.

14. Both job order and process cost accounting use equivalent units of production to determine costs.

15. If 30,000 units of materials enter production during the first year of operations, 25,000 of the units
are finished, and 5,000 are 30% completed, the number of equivalent units of production would be
28,500.

16. If 16,000 units of materials enter production during the first year of operations, 12,000 of the units
are finished, and 4,000 are 75% completed, the number of equivalent units of production would be
15,000.

17. If the costs for direct materials, direct labor, and factory overhead were $275,300, $42,600, and
$41,000, respectively, for 14,000 equivalent units of production, the total conversion cost was
$358,900.

18. If the costs for direct materials, direct labor, and factory overhead were $60,000, $35,000, and
$25,000, respectively, for 20,000 equivalent units of production, the conversion cost per equivalent
unit was $6.

19. If the costs for direct materials, direct labor, and factory overhead were $522,200, $82,700, and
$45,300, respectively, for 16,000 equivalent units of production, the conversion cost per equivalent
unit was $8.00.

20. If 10,000 units which were 40% completed are in process at November 1, 80,000 units were
completed during November, and 12,000 were 20% completed at November 30, the number of
equivalent units of production for November was 78,400. (Assume no loss of units in production and
that inventories are costed by the first-in, first-out method.)

21. If 10,000 units which were 40% completed are in process at November 1, 80,000 units were
completed during November, and 12,000 were 20% completed at November 30, the number of
equivalent units of production for November was 75,600. (Assume no loss of units in production and
that inventories are costed by the first-in, first-out method.)

22. In applying the first-in, first-out method of costing inventories, if 8,000 units which are 30%
completed are in process at June 1, 28,000 units are completed during June, and 4,000 units were
75% completed at June 30, the number of equivalent units of production for June was 33,400.
 Chapter 18(3)/Process Cost Systems  69

23. In applying the first-in, first-out method of costing inventories, if 8,000 units which are 30%
completed are in process at June 1, 28,000 units are completed during June, and 4,000 units were
75% completed at June 30, the number of equivalent units of production for June was 28,600.

24. The cost of production report reports the cost of the goods sold.

25. The cost of production report reports the cost charged to production and the costs allocated to
finished goods and work in process.

26. The cost of production report summarizes (1) the units for which the department is accountable and
the units to be assigned costs and (2) the costs charged to the department and the allocation of those
costs.

27. The amount journalized showing the cost added to finished goods is taken from the cost of
production report.

28. One of the differences in accounting for a process costing system compared to a job order system is
that the amounts used to transfer goods from one department to the next comes from the cost of
production report instead of job cost cards.

29. One of the primary uses of a cost of production report is to assist management in controlling
production costs.

30. Yield measures the ratio of the materials output quantity to the materials input quantity.

31. Companies recognizing the need to simultaneously produce products with high quality, low cost, and
instant availability have adopted a just-in-time processing philosophy.

32. In a just-in-time system, processing functions are combined into work centers, sometimes called
departments.

33. The FIFO method of process costing is simpler that the Average cost method.

34. Companies that use the average costing method for process costing have unit costs that include costs
from more that one accounting period.
70  Chapter 18(3)/Process Cost Systems

35. If a company uses average costing instead of FIFO they will still get the same unit costs.

36. The closer a company moves towards Just in Time production, the differences in unit costs between
average costing and FIFO will be reduced.

MULTIPLE CHOICE

1. For which of the following businesses would a process cost system be appropriate?
a. Auto repair service
b. Paint manufacturer
c. Specialty printer
d. Custom furniture manufacturer

2. Which of the following is NOT a way in which process and job order cost systems are similar?
a. Both accumulate product costs--direct materials, direct labor, and factory overhead
b. Both allocate product cost to units produced
c. Both maintain perpetual inventories
d. Both use job order cost cards

3. The cost system best suited to industries that manufacture a large number of identical units of
commodities on a continuous basis is:
a. process
b. departmental
c. first-in, first-out
d. job order
 Chapter 18(3)/Process Cost Systems  71

4. In a process cost system, the amount of work in process inventory is valued by:
a. finding the sum of all open job costs
b. allocating departmental costs between completed and partially completed units
c. multiplying units in ending inventory by the direct materials cost per unit
d. all of the above

5. In process cost accounting, the costs of direct materials and direct labor are charged directly to:
a. service departments
b. processing departments
c. customer accounts receivable
d. job orders

6. The two categories of cost comprising conversion costs are:

a. direct labor and indirect labor
b. direct labor and factory overhead
c. factory overhead and direct materials
d. direct labor and direct materials

7. In a process cost system, the cost of completed production in Department A is transferred to

Department B by which of the following entries?
a. Debit Work in Process--Dept. B; credit Work in Process--Dept. A.
b. Debit Work in Process--Dept. B; credit Finished Goods--Dept. A.
c. Debit Work in Process--Dept. B; credit Cost of Goods Sold--Dept. A.
d. Debit Finished Goods; credit Work in Process--Dept. B.
72  Chapter 18(3)/Process Cost Systems

8. The three categories of manufacturing costs comprising the cost of work in process are direct labor,
direct materials, and:
a. indirect expenses
b. direct expenses
c. sales salaries expense
d. factory overhead

9. For which of the following businesses would a process cost system be appropriate?
a. An oil refinery
b. Yacht builder
c. Specialty furniture company
d. Custom electronics manufacturer

10. Which of the following is not characteristic of a process cost system.

a. The system may use several work in process inventory accounts.
b. Manufacturing costs are groups by department rather than by jobs.
c. The system accumulates costs per job.
d. The system emphasizes time periods rather than the time it takes to complete a job.

11. Which of the following entities would probably use a process costing system?
a. A custom boat builder
b. A custom furniture manufacturer
c. A one of a kind jewelry creator
d. An oil refinery.

12. Which of the following is not a characteristic of a process cost system?

a. Manufacturing costs are grouped by departments.
b. The system may use several Work-in-Process accounts.
c. The system measures costs for each completed job.
d. The system allocates costs between completed and partially completed units within a department.

13. If a company uses a process costing system to account for the costs in its four production
departments, how many Work-in-Process will it use?
a. 3
b. 4
c. 1
d. 2

14. The four steps necessary to determine the cost of goods completed and the ending inventory
valuation in a process cost system are:

1. allocate costs to transferred and partially completed units

2. determine the units to be assigned costs
3. determine the cost per equivalent unit
4. calculate equivalent units of production
 Chapter 18(3)/Process Cost Systems  73

The correct ordering of the steps is:

a. 2, 4, 3, 1
b. 4, 2, 3, 1
c. 2, 3, 4, 1
74  Chapter 18(3)/Process Cost Systems

d. 2, 3, 1, 4

15. Which of the following costs incurred by a paper manufacturer would be included in the group of
costs referred to as conversion costs?
a. Advertising costs
b. Raw lumber (direct materials)
c. Machine operator's wages (direct labor)
d. Sales salaries

16. Which of the following costs incurred by a paper manufacturer would NOT be included in the group
of costs referred to as conversion costs?
a. Factory supervisor's salary
b. Machine operator's wages (direct labor)
c. Raw lumber (direct materials)
d. Factory maintenance personnel supplies

17. In the manufacture of 10,000 units of a product, direct materials cost incurred was $143,700, direct
labor cost incurred was $85,000, and applied factory overhead was $43,500. What is the total
conversion cost?
a. $187,200
b. $128,500
c. $272,200
d. $43,500

18. If Department H had 500 units, 60% completed, in process at the beginning of the period, 6,000 units
were completed during the period, and 600 units were 30% completed at the end of the period, what
was the number of equivalent units of production for the period if the first-in, first-out method is
used to cost inventories?
a. 7,100
b. 5,980
c. 6,380
d. 5,880

19. If Department K had 2,000 units, 45% completed, in process at the beginning of the period, 12,000
units were completed during the period, and 1,200 units were 40% completed at the end of the
period, what was the number of equivalent units of production for the period if the first-in, first-out
method is used to cost inventories?
a. 11,580
b. 11,280
c. 13,680
d. 10,000

Department G had 3,600 units, one-third completed at the beginning of the period, 12,000 units were
completed during the period, 2,000 units were one-fifth completed at the end of the period, and the
following manufacturing costs were debited to the departmental work in process account during the
period:

Work in process, beginning of period $30,000

Costs added during period:
Direct materials (10,400 at $8) 83,200
Direct labor 62,000
 Chapter 18(3)/Process Cost Systems  75

Factory overhead 24,800

20. Assuming that all direct materials are placed in process at the beginning of production and that the
first-in, first-out method of inventory costing is used, what is the total cost of the departmental work
in process inventory at the end of the period?
a. $19,100
b. $26,000
c. $23,200
d. $12,000

21. Assuming that all direct materials are placed in process at the beginning of production and that the
first-in, first-out method of inventory costing is used, what is the total cost of 3,600 units of
beginning inventory which were completed during the period?
76  Chapter 18(3)/Process Cost Systems

a. $61,200
b. $48,600
c. $38,400
d. $45,600

22. Assuming that all direct materials are placed in process at the beginning of production and that the
first-in, first-out method of inventory costing is used, what is the total cost of the units "started and
completed" during the period?
a. $156,400
b. $154,800
c. $132,300
d. $156,000

23. Department R had 5,000 units in work in process that were 75% completed as to labor and overhead
at the beginning of the period, 30,000 units of direct materials were added during the period, 32,000
units were completed during the period, and 3,000 units were 40% completed as to labor and
overhead at the end of the period. All materials are added at the beginning of the process. The first-
in, first-out method is used to cost inventories. The number of equivalent units of production for
conversion costs for the period was:
a. 32,450
b. 29,450
c. 31,950
d. 26,000

Department S had no work in process at the beginning of the period. 12,000 units of direct materials were
added during the period at a cost of $84,000, 9,000 units were completed during the period, and 3,000
units were 30% completed as to labor and overhead at the end of the period. All materials are added at the
beginning of the process. Direct labor was $49,500 and factory overhead was $9,900.

24. The total conversion costs for the period were:

a. $59,400
b. $49,500
c. $143,400
d. $9,900

25. The total cost of units completed during the period were:
a. $117,000
b. $143,400
c. $121,000
d. $127,450

26. The following production data were taken from the records of the Finishing Department for June:

Inventory in process, 6-1,

  1/3 completed 1,500 units
Transferred to finished goods
  during June 5,000 units
Equivalent units of production
  during June 5,200 units
 Chapter 18(3)/Process Cost Systems  77

Determine the number of equivalent units of production in the June 30 Finishing Department
inventory, assuming that the first-in, first-out method is used to cost inventories.
a. 700 units
b. 200 units
c. 1,000 units
d. 300 units

27. The debits to Work in Process--Assembly Department for April, together with data concerning
production, are as follows:

April 1, work in process:

Materials cost, 3,000 units $  7,500
Conversion costs, 3,000 units,
2/3 completed 6,000
Materials added during April, 10,000 units 26,000
Conversion costs during April 31,000
Goods finished during April, 11,500 units ---
April 30 work in process, 1,500 units,
1/2 completed ---
78  Chapter 18(3)/Process Cost Systems

All direct materials are placed in process at the beginning of the process and the first-in, first-out
method is used to cost inventories. The materials cost per equivalent unit for April is:
a. $2.60
b. $2.26
c. $2.50
d. $5.50

28. Department E had 4,000 units in Work in Process that were 40% completed at the beginning of the
period at a cost of $12,500. 14,000 units of direct materials were added during the period at a cost of
$28,700. 15,000 units were completed during the period, and 3,000 units were 75% completed at the
end of the period. All materials are added at the beginning of the process. Direct labor was $32,450
and factory overhead was $18,710. The number of equivalent units of production for the period for
conversion if the first-in, first-out method is used to cost inventories was:
a. 15,650
b. 14,850
c. 14,150
d. 14,650

29. Department A had 1,000 units in Work in Process that were 70% completed at the beginning of the
period at a cost of $7,000. 4,000 units of direct materials were added during the period at a cost of
$8,200. 4,500 units were completed during the period, and 500 units were 60% completed at the end
of the period. All materials are added at the beginning of the process. Direct labor was $28,700 and
factory overhead was $4,510. The cost of the 500 units in process at the end of the period if the first-
in, first-out method is used to cost inventories was:
a. $1,025
b. $5,000
c. $5,075
d. $3,455

30. In the manufacture of 10,000 units of a product, direct materials cost incurred was $145,800, direct
labor cost incurred was $82,000, and applied factory overhead was $45,500. What is the total
conversion cost?
a. $127,500
b. $145,800
c. $272,200
 Chapter 18(3)/Process Cost Systems  79

d. $273,300

31. If Department H had 600 units, 60% completed, in process at the beginning of the period, 8,000 units
were completed during the period, and 500 units were 30% completed at the end of the period, what
was the number of equivalent units of production for the period if the first-in, first-out method is
used to cost inventories?
a. 7,790
b. 8,390
c. 8,600
d. 8,000

32. If Department K had 2,500 units, 45% completed, in process at the beginning of the period, 15,000
units were completed during the period, and 1,200 units were 40% completed at the end of the
period, what was the number of equivalent units of production for the period if the first-in, first-out
method is used to cost inventories?
a. 16,855
b. 16,605
c. 13,460
d. 14,355

Department A had 4,000 units in work in process that were 75% completed as to labor and overhead at
the beginning of the period, 30,000 units of direct materials were added during the period, 32,000 units
were completed during the period, and 2,000 units were 40% completed as to labor and overhead at the
end of the period. All materials are added at the beginning of the process. The first-in, first-out method is
used to cost inventories.

33. The number of equivalent units of production for conversion costs for the period was:
a. 31,800
b. 29,800
c. 33,800
d. 32,000

34. The number of equivalent units of production for material costs for the period was:
a. 31,800
b. 29,800
c. 30,000
d. 32,000

The following production data were taken from the records of the Finishing Department for June:

 Inventory in process, 6-1 ( 30% completed) 4,000 units

Completed units during June 58,000 units
Ending inventory (60% complete) 3,000 units
80  Chapter 18(3)/Process Cost Systems

35. Determine the number of conversion equivalent units of production in the June 30 Finishing
Department inventory, assuming that the first-in, first-out method is used to cost inventories.
a. 58,600 units
b. 57,000 units
c. 62,600 units
d. 57,000 units

36. Determine the number of material equivalent units of production in the June 30 Finishing
Department inventory, assuming that the first-in, first-out method is used to cost inventories and
materials were added at the beginning of the process.
a. 61,000 units
b. 57,000 units
c. 59,800 units
d. 59,200 units

37. The debits to Work in Process--Assembly Department for April, together with data concerning
production, are as follows:

April 1, work in process:

Materials cost, 3,000 units $  7,200
Conversion costs, 3,000 units,
60% completed 6,000
Materials added during April, 10,000 units 25,000
Conversion costs during April 35,750
Goods finished during April, 12,000 units ---
April 30 work in process, 1,000 units,
40% completed ---
 Chapter 18(3)/Process Cost Systems  81

All direct materials are placed in process at the beginning of the process and the first-in, first-out
method is used to cost inventories. The materials cost per equivalent unit for April is:
a. $2.48
b. $2.08
c. $2.50
d. $5.25

38. The debits to Work in Process--Assembly Department for April, together with data concerning
production, are as follows:

April 1, work in process:

Materials cost, 3,000 units $  7,200
Conversion costs, 3,000 units,
40% completed 6,000
Materials added during April, 10,000 units 25,000
Conversion costs during April 30,800
Goods finished during April, 12,000 units ---
April 30 work in process, 1,000 units,
40% completed ---

All direct materials are placed in process at the beginning of the process and the first-in, first-out
method is used to cost inventories. The conversion cost per equivalent unit for April is:
a. $2.48
b. $2.75
c. $2.50
d. $5.25

Department B had 3,000 units in Work in Process that were 40% completed at the beginning of the period
at a cost of $12,500. 14,000 units of direct materials were added during the period at a cost of $28,700.
15,000 units were completed during the period, and 2,000 units were 75% completed at the end of the
period. All materials are added at the beginning of the process. Direct labor was $32,450 and factory
overhead was $18,710.

39. The number of equivalent units of production for the period for conversion if the first-in, first-out
method is used to cost inventories was:
a. 15,650
b. 14,850
c. 18,500
d. 15,300
ANS: D DIF: Moderate OBJ: 18(3)-02
NAT: AACSB Analytic | IMA-Cost Management
82  Chapter 18(3)/Process Cost Systems

40. The number of equivalent units of production for the period for materials if the first-in, first-out
method is used to cost inventories was:
a. 15,000
b. 17,800
c. 16,000
d. 14,000

The following unit data were assembled for the assembly process of the Fine Co. for the month of June.
Direct materials are added at the beginning of the process. Conversion costs are added uniformly over the
production process. The company uses the FIFO process.

Units
Beginning work in process 5,000
(60% complete)
Units started in September 51,000
Ending work in process 4,000
(30% complete)
 Chapter 18(3)/Process Cost Systems  83

41. The number of equivalent units produced with respect to conversion costs is:
a. 54,200
b. 55,200
c. 54,200
d. 50,200

42. The number of equivalent units produced with respect to direct materials costs is:
a. 51,000
b. 50,000
c. 47,000
d. 56,000

Frank Inc., has the following information available:

Costs from Costs from

Beginning Inventory Current Period

Direct materials $2,500 $22,252

Conversion Costs 6,200 150,536
84  Chapter 18(3)/Process Cost Systems

43. At the beginning of the period, there were 500 units in process that were 60 percent complete as to
conversion costs and 100 percent complete as to direct materials costs. During the period 4,500 units
were started and completed. Ending inventory contained 340 units that were 30 percent complete as
to conversion costs and 100 percent complete as to materials costs. (Assume that the company uses
the FIFO process cost method.)

The equivalent units of production for direct materials and conversion costs, respectively, were
a. 5,340 for direct materials and 4,902 for conversion costs.
b. 4,840 for direct materials and 4,802 for conversion costs.
c. 4,602 for direct materials and 4,802 for conversion costs.
d. 4,902 for direct materials and 4,802 for conversion costs.

44. At the beginning of the period, there were 500 units in process that were 40 percent complete as to
conversion costs and 100 percent complete as to direct materials costs. During the period 4,500 units
were started and completed. Ending inventory contained 340 units that were 30 percent complete as
to conversion costs and 100 percent complete as to materials costs. (Assume that the company uses
the FIFO process cost method.)

The cost of completing a unit during the current period was

a. $36.19
b. $34.88
c. $35.95
d. $35.89

45. At the beginning of the period, there were 500 units in process that were 40 percent complete as to
conversion costs and 100 percent complete as to direct materials costs. During the period 4,500 units
were started and completed. Ending inventory contained 340 units that were 80 percent complete as
to conversion costs and 100 percent complete as to materials costs. (Assume that the company uses
the FIFO process cost method.)

The total costs that will be transferred into Finished Goods for units started and completed were
a. $161,775
b. $156,960
c. $162,855
d. $161,505
 Chapter 18(3)/Process Cost Systems  85

46. Equivalent production units, usually are determined for

a. direct materials and conversion costs.
b. direct materials only.
c. conversion costs only.
d. direct materials and direct labor costs only.

47. The number of units that could have been completed within a given accounting period is the
definition of
a. units started and completed.
b. equivalent units.
c. conversion costs.
d. ending work in process.

48. Which of the following is not included in conversion costs?

a. Direct labor.
b. Factory overhead.
c. Indirect labor.
d. Direct materials.

49. A form prepared periodically for each processing department summarizing (1) the units for which
the department is accountable and the units to be assigned costs and (2) the costs charged to the
department and the allocation of these costs is termed a:
a. factory overhead production report
b. manufacturing cost report
c. process cost report
d. cost of production report

Department W had 2,400 units, one-third completed at the beginning of the period, 12,000 units were
transferred to Department X from Department W during the period, and 1,800 units were one-half
completed at the end of the period.

50. What are the total number of units to be assigned cost on the cost of production report for
Department W
a. 12,000 units
b. 13,600 units
c. 12,700 units
d. 13,800 units

51. What is the equivalent units of production used to compute unit conversion cost on the cost of
production report for Department W (Assuming the company uses FIFO)?
a. 12,100 units
b. 12,000 units
c. 15,000 units
d. 11,400 units

Department J had no work in process at the beginning of the period, 18,000 units were completed during
the period, 2,000 units were 30% completed at the end of the period, and the following manufacturing
costs were debited to the departmental work in process account during the period (Assuming the company
uses FIFO):

Direct materials (20,000 at $4) $  80,000

86  Chapter 18(3)/Process Cost Systems
 Chapter 18(3)/Process Cost Systems  87

52. Assuming that all direct materials are placed in process at the beginning of production, what is the
total cost of the departmental work in process inventory at the end of the period?
a. $4,500
b. $23,000
c. $6,900
d. $12,500
53. Assuming that all direct materials are placed in process at the beginning of production, what is the
total cost of the 18,000 units completed during the period?
a. $139,500
b. $219,500
c. $80,000
d. $207,000

Lombardi Company manufactures a single product by a continuous process, involving three production
departments. The records indicate that direct materials, direct labor, and applied factory overhead for
Department 1 were $100,000, $125,000, and $150,000, respectively. The records further indicate that
direct materials, direct labor, and applied factory overhead for Department 2 were $50,000, $60,000, and
$70,000, respectively. In addition, work in process at the beginning of the period for Department 1 totaled
$75,000, and work in process at the end of the period totaled $60,000.

54. The journal entry to record the flow of costs into Department 1 during the period for direct materials
is:
a. Work in Process--Department 1               100,000
  Materials                                                                           100,000
b. Work in Process--Department 1                 50,000
  Materials                                                                             50,000
c. Materials                                                  100,000
  Work in Process--Department 1                                        100,000
d. Materials                                                    50,000
  Work in Process--Department 1                                          50,000

55. The journal entry to record the flow of costs into Department 2 during the period for direct materials
is:
88  Chapter 18(3)/Process Cost Systems

a. Work in Process--Department 2               100,000

  Materials                                                                           100,000
b. Work in Process--Department 2                 50,000
  Materials                                                                             50,000
c. Work in Process--Department 2               150,000
  Materials                                                                           150,000
d. Materials                                                     50,000
  Work in Process--Department 2                                         50,000

56. The journal entry to record the flow of costs into Department 1 during the period for direct labor is:
a. Work in Process--Department 1               60,000
  Wages Payable                                                                   60,000
b. Wages Payable                                       125,000
  Work in Process--Department 1                                       125,000
c. Work in Process--Department 1              125,000
  Wages Payable                                                                 125,000
d. Wages Payable                                          60,000
  Work in Process--Department 1                                         60,000

57. The journal entry to record the flow of costs into Department 2 during the period for direct labor is:
a. Work in Process--Department 2                 60,000
  Wages Payable                                                                  60,000
b. Wages Payable                                            60,000
  Work in Process--Department 2                                        60,000
 Chapter 18(3)/Process Cost Systems  89

c. Work in Process--Department 2               125,000

  Wages Payable                                                                125,000
d. Work in Process--Department 2               185,000
  Wages Payable                                                                185,000

58. The journal entry to record the flow of costs into Department 1 during the period for applied
overhead is:
a. Factory Overhead--Department 1               150,000
  Work in Process--Department 1                                           150,000
b. Work in Process--Department 1                 125,000
  Factory Overhead--Department 1                                        125,000
c. Work in Process--Department 1                   70,000
  Factory Overhead--Department 1                                          70,000
d. Work in Process--Department 1                 150,000
  Factory Overhead--Department 1                                        150,000

59. The journal entry to record the flow of costs into Department 2 during the period for applied
overhead is:
a. Factory Overhead--Department 2                 70,000
  Work in Process--Department 2                                          70,000
b. Work in Process--Department 2               220,000
Factory Overhead--Department 2                                      220,000
c. Work in Process--Department 2                 70,000
Factory Overhead--Department 2                                        70,000
d. Work in Process--Department 2               150,000
Factory Overhead--Department 2                                      150,000
90  Chapter 18(3)/Process Cost Systems

60. The journal entry to record the flow of costs from Department 1 into Department 2 during the period
is:
a. Work in Process--Department 2               390,000
Work in Process--Department 1                                         390,000
b. Work in Process--Department 2               330,000
Work in Process--Department 1                                         330,000
c. Work in Process--Department 2               255,000
Work in Process--Department 1                                         255,000
d. Work in Process--Department 2               375,000
Work in Process--Department 1                                         375,000

61. Lombardi Company manufactures a single product by a continuous process, involving three
production departments. The records indicate that direct materials, direct labor, and applied factory
overhead for Department 1 were $100,000, $125,000, and $150,000, respectively. Work in process at
the beginning of the period for Department 1 was $75,000, and work in process at the end of the
period totaled $60,000. The records indicate that direct materials, direct labor, and applied factory
overhead for Department 2 were $50,000, $60,000, and $70,000, respectively. In addition, work in
process at the beginning of the period for Department 2 totaled $75,000, and work in process at the
end of the period totaled $60,000. The journal entry to record the flow of costs into Department 3
during the period is:
a. Work in Process--Department 3               585,000
Work in Process--Department 2                                         585,000
b. Work in Process--Department 3               570,000
Work in Process--Department 2                                         570,000
c. Work in Process--Department 3               555,000
Work in Process--Department 2                                         555,000
d. Work in Process--Department 3               165,000
Work in Process--Department 2                                         165,000

62. Lombardi Company manufactures a single product by a continuous process, involving three
production departments. The records indicate that direct materials, direct labor, and applied factory
overhead for Department 1 were $100,000, $125,000, and $150,000, respectively. The records
further indicate that direct materials, direct labor, and applied factory overhead for Department 2
were $50,000, $60,000, and $70,000, respectively. Department 2 has transferred-in costs of $390,000
for the current period. In addition, work in process at the beginning of the period for Department 2
totaled $75,000, and work in process at the end of the period totaled $90,000. The journal entry to
record the flow of costs into Department 3 during the period is:
a. Work in Process--Department 3               375,000
Work in Process--Department 2                                         375,000
 Chapter 18(3)/Process Cost Systems  91

b. Work in Process--Department 3               570,000

Work in Process--Department 2                                         570,000
c. Work in Process--Department 3               490,000
Work in Process--Department 2                                         490,000
d. Work in Process--Department 3               555,000
Work in Process--Department 2                                         555,000

63. Lombardi Company manufactures a single product by a continuous process, involving three
production departments. The records indicate that direct materials, direct labor, and applied factory
overhead for Department 2 were $100,000, $125,000, and $150,000, respectively. The records
further indicate that direct materials, direct labor, and applied factory overhead for Department 3
were $50,000, $60,000, and $70,000, respectively. In addition, work in process at the beginning of
the period for Department 3 totaled $75,000, and work in process at the end of the period totaled
$60,000. The journal entry to record the flow of costs into Department 3 during the period for direct
materials is:
a. Work in Process--Department 3               100,000
Materials                                                                           100,000
b. Work in Process--Department 3               125,000
Materials                                                                           125,000
c. Work in Process--Department 3                 50,000
Materials                                                                             50,000
d. Work in Process--Department 3                 70,000
Materials                                                                             70,000

Department G had 3,600 units, one-third completed at the beginning of the period, 12,000 units were
completed during the period, 2,000 units were one-fifth completed at the end of the period, and the
following manufacturing costs were debited to the departmental work in process account during the
period:

Work in process, beginning of period $30,000

Costs added during period:
Direct materials (10,400 at $8) 83,200
Direct labor 62,000
Factory overhead 24,800
92  Chapter 18(3)/Process Cost Systems

64. Assuming that all direct materials are placed in process at the beginning of production and that the
first-in, first-out method of inventory costing is used, what is the equivalent units for materials and
conversion costs, respectively.
a. 14,000 and 14,800
b. 10,400 and 11,200
c. 14,000 and 13,600
d. 10,400 and 10,000

65. Assuming that all direct materials are placed in process at the beginning of production and that the
first-in, first-out method of inventory costing is used, what is the material and conversion cost per
unit (to the nearest penny), respectively.
a. $5.94 and $5.86
b. $5.94 and $6.38
c. $8.00 and $8.68
d. $8.00 and $7.75

66. From the selections offered below, select the one journal entry that properly presents the application
of Factory Overhead to Work in Process if the driver is Drop-Forge Strokes and the rate is $1.75 per
stroke and the meter read 1,780 at the start of the day and 2,890 at the end of the day.
a. Jan 21 Work in Process 1.75
Factory Overhead 1.75
b. Jan 21 Work in Process 1,942.50
Depreciation Expense 1,942.50
c. Jan 21 Work in Process 1,942.50
Cash 1,942.50
d. Jan 21 Work in Process 1,942.50
Factory Overhead 1,942.50
 Chapter 18(3)/Process Cost Systems  93

67. The company maintains several standards for the allocation of indirect labor to factory overhead.
70% of Stockhandlers wages are allocated to Stamping and 30% to Finishing. Supervisors are
allocated at 60% to Stamping and 20% to Finishing while the balance is left as a period expense due
to activities outside production. Because of the ratio of production equipment to office equipment
40% of depreciation is allocated to Stamping, 30% is allocated to Finishing while the balance is left
as a period expense representing office equipment.

If the stockhandlers wages are $2,750, the supervisors wages are $4,550, and the depreciation for the
period is $15,000, the proper journal entry would be:
a. Oct 31 Factory Overhead - Stamping 10,655
Factory Overhead - Finishing 6,235
Wage Expense 6,390
Depreciation Expense 10,500
b. Oct 31 Factory Overhead - Stamping 10,655
Factory Overhead - Finishing 6,235
Cash 16,890
c. Oct 31 Factory Overhead 16,890
Cash 16,890
d. Oct 31 Accounts Payable 16,890
Wage Expense 6,390
Depreciation Expense 10,500

68. Which of the following is not a use of the cost of production report?
a. To help managers control operations.
b. To help managers isolate problems.
c. To project production.
d. To help managers to improve operations.

69. Which of the following measures would not help managers to control and improve operations?
a. Units produced per time period
94  Chapter 18(3)/Process Cost Systems

b. Cost trends of a product

c. Yield trends
d. Commissions paid per time period

70. Just-in-time processing is a business philosophy that focuses on reducing time and cost and
eliminating poor quality. This is accomplished in manufacturing and non-manufacturing processes
by:
a. moving a product from process to process as each function is completed
b. combining processing functions into work centers and cross-training workers to perform more
than one function
c. having production supervisors attempt to enter enough materials into manufacturing to keep all
manufacturing departments operating
d. having workers typically perform one function on a continuous basis

71. When a firm adopts a just-in-time operating environment,

a. new, more efficient machinery and equipment must be purchased and installed in the original
layout.
b. machinery and equipment are moved into small autonomous production lines called
manufacturing cells.
c. new machinery and equipment must be purchased from franchised JIT dealers.
d. employees are retrained on different equipment but the plant layout generally stays unchanged.

72. Which of the following best describes the effect on direct labor when management adopts a just-in-
time environment?
a. Workers typically perform one function.
b. The environment becomes more labor intensive.
c. Each employee runs a single machine.
d. Workers are often cross-trained to perform more than one function.

73. According to the just-in-time philosophy,

a. finished goods should always be available in case a customer wants something.
b. employees should be expert at one function rather than be cross-trained for multiple functions.
c. movement of the product and material is reduced.
d. the product moves from process to process until completion.

74. Just-in-time operations attempt to significantly reduce

a. inspection time and processing time.
b. moving time and processing time.
c. inspection time and moving time.
d. only storage time.

The debits to Work in Process--Assembly Department for April, together with data concerning
production, are as follows:

April 1, work in process:

Materials cost, 3,000 units $  7,500
Conversion costs, 3,000 units,
2/3 completed 6,000
Materials added during April, 10,000 units 26,000
Conversion costs during April 31,000
Goods finished during April, 11,500 units ---
 Chapter 18(3)/Process Cost Systems  95

April 30 work in process, 1,500 units,

1/2 completed ---

All direct materials are placed in process at the beginning of the process and the average cost method is
used to cost inventories.

75. The materials cost per equivalent unit (to the nearest cent) for April is:
a. $2.60
b. $2.58
c. $3.02
d. $2.26

76. The conversion cost per equivalent unit (to the nearest cent) for April is:
a. $2.70
b. $2.53
c. $3.02
d. $5.60
96  Chapter 18(3)/Process Cost Systems

Department E had 4,000 units in Work in Process that were 40% completed at the beginning of the period
at a cost of $12,500. 14,000 units of direct materials were added during the period at a cost of $28,700.
15,000 units were completed during the period, and 3,000 units were 75% completed at the end of the
period. All materials are added at the beginning of the process. Direct labor was $32,450 and factory
overhead was $18,710.

77. The number of equivalent units of production for the period for conversion if the average cost
method is used to cost inventories was:
a. 15,650
b. 14,850
c. 18,000
d. 17,250

78. The number of equivalent units of production for the period for materials if the average cost method
is used to cost inventories was:
a. 15,650
b. 18,000
c. 17,250
d. 17,700

Department E had 4,000 units in Work in Process that were 40% completed at the beginning of the period
at a cost of $12,500. Of the $12,500, $8,000 was for material and $4,500 was for conversion costs. 14,000
units of direct materials were added during the period at a cost of $28,700. 15,000 units were completed
during the period, and 3,000 units were 75% completed at the end of the period. All materials are added at
the beginning of the process. Direct labor was $32,450 and factory overhead was $18,710.

79. If the average cost method is used the material cost per unit (to the nearest cent) would be:
a. $2.04
b. $1.59
c. $1.91
d. $2.00
 Chapter 18(3)/Process Cost Systems  97

80. Department E had 4,000 units in Work in Process that were 40% completed at the beginning of the
period at a cost of $12,500. Of the $12,500, $8,000 was for material and $4,500 was for conversion
costs. 14,000 units of direct materials were added during the period at a cost of $28,700. 15,000 units
were completed during the period, and 3,000 units were 75% completed at the end of the period. All
materials are added at the beginning of the process. Direct labor was $32,450 and factory overhead
was $18,710. If the average cost method is used the conversion cost per unit (to the nearest cent)
would be:
a. $3.71
b. $2.84
c. $2.97
d. $3.23

EXERCISE/OTHER

1. Which of the following industries would normally use job order costing systems and which would
normally use process costing systems?

Business consulting
Chemicals
Food
Movie
Soap and cosmetics
Web designer

2. The Desert Springs Water Company has two departments. Purifying and Bottling. The Bottling
Department received 62,000 liters from the Purifying Department. During the period, the Bottling
Department completed 60,000 liters, including 3,000 liters of work in process at the beginning of the
period. The ending work in process was 5,000 liters. How many liters were started and completed
during the period?

3. The Desert Springs Water Company has two departments. Purifying and Bottling. The Bottling
Department received 65,000 liters from the Purifying Department. During the period, the Bottling
Department completed 66,000 liters, including 4,000 liters of work in process at the beginning of the
period. The ending work in process was 3,000 liters. How many liters were started and completed
during the period?
4. The Desert Springs Water Company has two departments, Purifying and Bottling. The Bottling
Department had 3,000 liters in beginning work in process inventory (30% complete). During the
period 60,000 liters were completed. The ending work in process was 5,000 liters (70% completed).
What are the total equivalent units for direct materials if materials were added at the beginning of the
process?
5. The Desert Springs Water Company has two departments, Purifying and Bottling. The Bottling
Department had 4,000 liters in beginning work in process inventory (40% complete). During the
period 66,000 liters were completed. The ending work in process was 3,000 liters (60% completed).
What are the total equivalent units for direct materials if materials were added at the beginning of the
process?

6. The Bottling Department of Desert Springs Water Company had 5,000 liters in beginning work in
process inventory (30% complete). During the period, 58,000 liters were completed. The ending
work in process inventory was 3,000 liters (60% complete). What are the equivalent units for
conversion costs?
98  Chapter 18(3)/Process Cost Systems

7. The Bottling Department of Desert Springs Water Company had 4,000 liters in beginning work in
process inventory (40% complete). During the period, 66,000 liters were completed. The ending
work in process inventory was 3,000 liters (70% complete). What are the equivalent units for
conversion costs?

8. The cost of direct materials transferred into the Bottling Department of the Desert Springs Water
Company is $27,225. The conversion cost for the period in the Bottling Department is $7,596. The
total equivalent units for direct materials and conversion are 60,500 and 63,300 respectively.
Determine the direct materials and conversion cost per equivalent unit.

9. The cost of direct materials transferred into the Bottling Department of the Desert Springs Water
Company is $28,072. The conversion cost for the period in the Bottling Department is $10,275. The
total equivalent units for direct materials and conversion are 63,800 and 68,500 respectively.
Determine the direct materials and conversion cost per equivalent unit.

10. The cost per equivalent units of direct materials and conversion in the Bottling Department of Desert
Springs Water Company is $.45 and $.12, respectively. The equivalent units to be assigned costs are
as follows.

Direct Materials Conversion

Inventory in process, beginning of period 0 3,500
Started and completed during the period 57,000 57,000
Transferred out of Bottling (completed) 57,000 60,500
Inventory in process, end of period 3,500 1,800
Total units to be assigned costs 60,500 62,300

The beginning work in process inventory had a cost of $2,200. Determine the cost of completed and
transferred out production, and the ending work in process inventory.

11. The cost per equivalent units of direct material s and conversion in the Bottling Department of
Beverages on Tap Company is $.47 and $.15, respectively. The equivalent units to be
assigned costs are as follows.
Direct Materials Conversion
Inventory in process, beginning of period 0 3,000
Started and completed during the period 52,000 52,000
Transferred out of Bottling (completed) 52,000 55,000
Inventory in process, end of period 3,500 2,100
Total units to be assigned costs 55,500 57,100

The beginning work in process inventory had a cost of $3,500. Determine the cost of completed and
transferred out production, and the ending work in process inventory.

12. The cost of materials transferred into the Bottling Department of Desert Springs Water Company is
$28,400, with $22,000 from the Purifying Department, plus additional $6,400 from the materials
storeroom. The conversion cost for the period in the Bottling Department is $8,750 ($3,750 factory
applied and $5,000 direct labor.) The total costs transferred to finished goods for the period
was $31,980. The Bottling Department had a beginning inventory of $1,860.
(a) Journalize (1) the cost of transferred-in materials (2) conversion costs, and (3) the cost
of transferred out to finished goods.
 Chapter 18(3)/Process Cost Systems  99

(b) Determine the balance of Work in Process-Bottling at the end of the period.

PROBLEM

1. The inventory at June 1 and costs charged to Work in Process - Department 60 during June are as
follows:

3,800 units, 80% completed $ 60,400

Direct materials, 32,000 units 368,000
Direct labor 244,000
Factory overhead   188,000
Total cost to be accounted for $860,400

During June, 32,000 units were placed into production and 31,200 units were completed, including
those in inventory on June 1. On June 30, the inventory of work in process consisted of 4,600 units
which were 40% completed. Inventories are costed by the first-in, first-out method and all materials
are added at the beginning of the process.

Determine the following, presenting your computations:

(a) equivalent units of production for conversion cost

(b) conversion cost per equivalent unit
(c) total and unit cost of finished goods started in prior period and completed in the current
period
(d) total and unit cost of finished goods started and completed in the current period
(e) total cost of work in process inventory at June 30

2. The inventory at May 1 and the costs charged to Work in Process--Department B during May for
Star Company are as follows:

12,000 units, 2/5 completed $  62,400

From Department A, 55,000 units 115,500
Direct labor 364,915
Factory overhead 148,000

During May, all direct materials are transferred from Department A, the units in process at May 1
were completed, and of the 55,000 units entering the department, all were completed except 6,000
units which were 3/4 completed. Inventories are costed by the first-in, first-out method.

Prepare a cost of production report for May.

100  Chapter 18(3)/Process Cost Systems

3. Jones Co. manufactures a product called Zens in a three-process series. All materials are introduced
at the beginning of the first process. Jones uses the first-in, first-out method of inventory costing.
Unit and cost data for the first process (Department A) for the month of October 2007 follow:

Conversion Units Completion Cost

Work in process inventory:
October 1 12,000 60% $140,400
October 31   5,000 40% ?
Started in October 14,000
Direct materials cost   106,400
Conversion cost     70,310
Completed in October 21,000 ?

Prepare Jones' Department A cost of production report for October.

4. The inventory at April 1, 2007, and the costs charged to Work in Process--Department B during
April for Tanzer Company are as follows:

1,200 units, 40% completed $  47,800

From Department A, 26,000 units 845,000
Direct labor 312,000
Factory overhead 176,770

During April, all direct materials are transferred from Department A, the units in process at April 1
were completed, and of the 26,000 units entering the department, all were completed except 1,000
units which were 70% completed as to conversion costs. Inventories are costed by the first-in, first-
out method.

Prepare a cost of production report for April.

5. The inventory at April 1, 2007, and the costs charged to Work in Process--Department B during
April for Barley Company are as follows:

500 units, 60% completed $  3,460

From Department A, 10,000 units 36,300
Direct labor 7,960
Factory overhead 12,500

During April, all direct materials are transferred from Department A, the units in process at April 1
were completed, and of the 10,000 units entering the department, all were completed except 1,200
units which were 25% completed as to conversion costs. Inventories are costed by the first-in, first-
out method.

Prepare a cost of production report for April.