Name: Depante, Leira R.

Cost Accounting 2/ Saturday 4:00 pm- 7:00 pm

Section: BSA-402 Professor: Mr. John Paul

FINAL EXAM
COST ACCOUNTING 2

1. In determining the cost of goods transferred in from a previous department under the average
cost method:
A. a simple average of unit costs is used
B. beginning inventory costs are separated from costs transferred in during the period
C. a first-in, first-out approach is used
D. equivalent production in ending inventory is separated from other transferred-in costs
E. a weighted average of unit costs is used

2. An equivalent unit of material or conversion cost is equal to:

A. the prime cost
B. the amount of material or conversion cost necessary to complete one unit of production
C. a unit of work in process inventory
D. the amount of material or conversion cost necessary to start a unit of production into work in process
E. 50% of the material or conversion cost of a unit of finished goods inventory, assuming a linear
production pattern

3. The first-in, first-out method of process costing will produce the same cost of goods manufactured amount
as the average cost method when:
A. there is no beginning inventory
B. there is no ending inventory
C. beginning and ending inventories are each 50% complete
D. beginning inventories are 100% complete as to materials
E. goods produced are homogeneous

4. When added materials in subsequent departments result in an increase of the units produced, the unit
transferred-in costs will:
A. be reclassified as new materials
B. be increased to provide for the additional units
C. be accounted for under the fifo costing method
D. be decreased as they are spread over more units
E. remain unchanged

5. In a process costing system, how is the unit cost affected in a production cost report when materials are
added in a department subsequent to the first department and the added materials result in additional
units?
A. The first department's unit cost is increased, but it does not necessitate an adjustment of the
transferred-in unit cost.
B. The first department's unit cost is decreased, but it does not necessitate an adjustment of the
transferred-in unit cost.
C. The first department's unit cost is not affected.
D. The first department's unit cost is increased, which necessitates an adjustment of the transferred-in
unit cost.
E. The first department's unit cost is decreased, which necessitates an adjustment of the transferred-in
unit cost.
6. An item that does not appear on a cost of production report is:
A. work in process—beginning inventory
B. cumulative costs through the end of departmental production
C. finished goods—ending inventory
D. materials used in the department
E. unit costs added by the department

7. Assuming that there was no beginning work in process inventory and the ending work in process inventory
is 50% complete as to conversion costs, the number of equivalent units as to conversion costs would be:
A. less than the units completed
B. more than the units completed
C. the same as the units placed in process
D. the same as the units completed
E. less than the units placed in process

8. An error was made in the computation of the percentage of completion of the current year's ending work
in process inventory. The error resulted in assigning a lower percentage of completion to each component
of the inventory than actually was the case. What is the 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
E. none of the above

9. A characteristic of a process costing system is that:

A. costs are accumulated by order
B. it is used by a company manufacturing custom machinery
C. standard costs are not applicable
D. it requires a lot more detailed accounting than does a job order system
E. work in process inventory is restated in terms of completed units

10. In accounting for beginning inventory costs, the method that allows the addition of beginning inventory
costs with costs incurred during the period is referred to as:
A. first-in, first-out
B. addition
C. last-in, first-out
D. average
E. first-in, last-out

11. The average and fifo process costing methods differ in that the average method:
A. can be used under any cost flow assumption
B. is much more difficult to apply than the fifo method
C. requires that ending work in process inventory be stated in terms of equivalent units of production
D. considers the ending work in process inventory only partially complete
E. does not consider the degree of completion of beginning work in process inventory when computing
equivalent units of production
12. Transferred-in costs as used in a process cost accounting system are:
A. supervisory salaries that are transferred from an overhead cost center to a production cost center
B. ending work in process inventory of a previous process that will be used in a succeeding process
C. labor that is transferred from another department within the same plant instead of hiring temporary
workers from the outside
D. costs of the product of a previous internal process that is subsequently used in a succeeding internal
process
E. none of the above

13. If a company reports two different unit costs for goods transferred to the next department, it is
reasonable to assume that:
A. the department accounts for lost units at the end of the process
B. a fifo costing method is used
C. lost unit costs are computed separately
D. an average costing method is used
E. errors must have occurred in recording costs

14. In order to compute equivalent units of production using the fifo method of process costing, work for the
period must be broken down to units:
A. started and completed during the period
B. completed during the period and units in ending inventory
C. completed from beginning inventory, started and completed during the month, and units in ending
inventory
D. started during the period and units transferred out during the period
E. processed during the period and units completed during the period

15. The fifo method of process costing differs from the average cost method of process costing in that fifo:
A. allocates costs based on whole units, but the average cost method uses equivalent units
B. considers the stage of completion of beginning work in process in computing equivalent units of
production, but the average cost method does not
C. does not consider the stage of completion of beginning work in process in computing equivalent units
of production, but the average cost method does
D. is applicable only to those companies using the fifo inventory pricing method, but the average cost
method may be used with any inventory pricing method
E. none of the above

16. The product flow format where certain portions of the work are done simultaneously and then brought
together for completion is called:
A. applied
B. parallel
C. standard
D. selective
E. sequential

17. The first step in applying the average cost method is to:
A. add the beginning work in process costs to the current period's production costs
B. divide the current period's production costs by the equivalent units
C. subtract the beginning work in process costs from the current period's production costs
D. A and B
E. B and C
 18. The allocation of joint costs to individual products is useful primarily for purposes of:
A. determining whether to produce one of the joint products
B. inventory costing
C. determining the best market price
D. deciding whether to sell at the split-off point
E. evaluating whether an output is a main product or a by-product

19. In a joint production process, a by-product is also described as:

A. a simultaneously produced product of relatively low value
B. a form of main product with controllable production proportions
C. waste
D. products of low value recovered at the end of a production process
E. a product with no value contribution to help offset production costs

20. All of the following are methods of allocating joint production costs except the:
A. market value method
B. quantitative unit method
C. average unit cost method
D. average cost method
E. recognition of net revenue method

21. Alphabet Company manufactures Products A and B from a joint process that also yields a by-product, X.
Alphabet accounts for the revenues from its by-product sales as a deduction from the cost of goods sold of
its main products. Additional information is as follows:

A B X Total
Units produced .......................... 15,000 9,000 6,000 30,000
Joint costs .................................. $ 264,000
Market value at split-off............ $290,000 $150,000 $ 10,000 $450,000

Assuming that joint product costs are allocated using the market value at the split-off approach, the joint
cost allocated to Product B would be:
A. $136,540
B. $79,200
C. $88,000
D. $86,591
E. $99,000

SOLUTION:

$ 150, 000 x ($264, 000 – $10, 000)

$290, 000 + $150, 000

$150, 000 x $254, 000

$440,000

15 x $254, 000 = $86, 590. 90909 or $86, 591

44
 22. Relative sales value at split-off is used to allocate:
Cost Beyond
Split-Off Joint Costs
A. yes no
B. no yes
C. no no
D. sometimes never
E. yes yes

23. Idaho Corporation manufactures liquid chemicals A and B from a joint process. Joint costs are allocated on
the basis of relative market value at split-off. It costs $4,560 to process 500 gallons of Product A and 1,000
gallons of Product B to the split-off point. The market value at split-off is $10 per gallon for Product A and
$14 for Product B. Product B requires an additional process beyond split-off at a cost of $2 per gallon
before it can be sold. What is Idaho's cost to produce 1,000 gallons of Product B?
A. $5,040
B. $4,360
C. $4,860
D. $5,360
E. $3,360

SOLUTION:

$14, 000

$14, 000 + $5, 000 x $4, 560 = $3, 360

$3, 360 x ($2 * 1,000) = $5, 360

24. The characteristic that is most often used to distinguish a product as either a joint product or a by-product
is the:
A. amount of labor used in processing the product
B. amount of separable product costs that are incurred in processing
C. amount (i.e., weight, inches, etc.) of the product produced in the manufacturing process
D. relative sales value of the products produced in the process
E. none of the above

25. A company manufactures two joint products at a joint cost of $1,000. These products can be sold at
split-off, or when further processed at an additional cost, sold as higher quality items. The decision to sell
at split-off or further process should be based on the:
A. allocation of the $1,000 joint cost using the quantitative unit measure
B. assumption that the $1,000 joint cost is irrelevant
C. allocation of the $1,000 joint cost using the relative sales value approach
D. assumption that the $1,000 joint cost must be allocated using a physical-measure approach
E. allocation of the $1,000 joint cost using any equitable and rational allocation basis

26. A company uses the weighted average method to assign joint products. Weight factors used to assign joint
costs to its three joint products were: Product A, 4 points; Product B, 7 points; and Product C, 8 points.
Units produced were: Product A, 10,000; Product B, 5,000; and Product C, 3,125. The amount of the
joint costs of $100,000 that would be allocated to Product C are:
A. $42,105
B. $17,241
C. $25,000
D. $30,000
 E. none of the above

SOLUTION:

($3, 125 x 8) x $100, 000

(10, 000 x 4) + (5, 000 x 7) + (3, 125 x 8)

$25, 000 x $100, 000 = $25, 000

$40, 000 + $35, 000 + $25, 000

27. The Hovart Corporation manufactures two products out of a joint process-Compod and Ultrasene. The
joint (common) costs incurred are $250,000 for a standard production run that generates 120,000 gallons
of Compod and 80,000 gallons of Ultrasene. Compod sells for $2.00 per gallon, while Ultrasene sells for
$3.25 per gallon. If there are no additional processing costs incurred after the split-off point, the amount
of joint cost of each production run allocated to Compod by the quantitative unit method is:
A. $100,000
B. $120,000
C. $130,000
D. $150,000
E. some amount other than those given above

SOLUTION:

$120, 000

$120, 000 + ₱80, 000 x $250, 000 = $150, 000

28. ABC Company made the following journal entry.

Work in Process Inventory P200, 000
Direct Labor P188, 000
Direct Labor Rate Variance 12, 000
From this entry we can tell that ABC uses
A. job-order costing
B. process costing
C. standard costing
D. normal costing

29. CDE Company made the following journal entry.

Finished Goods Inventory P250, 000
Work in Process Inventory P250, 000
From this entry we can tell that CDE uses
A. job-order costing
B. process costing
C. standard costing
D. any of the above

30. Algoma completed 10,000 units, had beginning inventory of 2,500 units 40% complete and ending
inventory of 1,000 units 20% complete. EUP was
A. 9,200
B. 10,000
 C. 10,200
D. 11,000

31. Scooter Corp had no beginning inventories, finished 40,000 units, and sold 36,000 units. There were no
ending inventories of materials or work in process. Materials purchased and used were P225, 000; direct
labor and overhead were P170, 000. Cost of goods sold would be valued at
A. P39, 500
B. P355, 500
C. P395, 000
D. some other number

32. Read, Inc. instituted a new process in October. During October, 10,000 units were started in Department A.
Of the units started, 7,000 were transferred to Department B, and 3,000 remained in work in process at
October 31. The work in process at October 31 was 100% complete as to material costs and 50% complete
as to conversion costs. Materials costs of P27, 000 and conversion costs of P39, 950 were charged to
Department A in October. What were the total costs transferred to Department B?
A. P46, 900
B. P53, 600
C. P51, 800
D. P57, 120
E. none of the above

SOLUTION:
Materials unit cost = ₱27,000
(7,000 + 3,000) = ₱2.70

Conversion unit cost = ₱39,950

[7,000 + 50 %( 3,000)] = ₱4.70

Costs transferred = 7,000 x (₱2.70 + ₱4.70) = ₱51,800

33. Kennedy Company adds materials in the beginning of the process in the Forming Department, which is the
first of two stages of its production cycle. Information concerning the materials used in the Forming
Department in October is as follows:
Materials
Units Costs
Work in process, October 1 .......................................................... 6,000 P 3,000
Units started ................................................................................. 50,000 25,560
Units completed and transferred out .......................................... 44,000

Using the average cost method, what was the materials cost of work in process at October 31?
A. P3, 000
B. P6, 120
C. P3, 060
D. P5, 520
E. P6, 000

SOLUTION:

(₱3,000 + ₱25,560)
(44,000 + 12,000) =₱ 0.51
 ₱0.51 x 12,000 =₱ 6,120

34. During March, Quig Company's Department Y equivalent unit product costs, computed under the process
costing, were as follows:

Materials ........................................... P1
Conversion ........................................ 3
Transferred-in ................................... 5

Materials are introduced at the end of the process in Department Y. There were 4,000 units (40%
complete as to conversion costs) in work in process at March 31. The total costs assigned to the March 31
work in process inventory should be:
A. P36, 000
B. P28, 800
C. P27, 200
D. P24, 800
E. none of the above

SOLUTION:
₱5 (4,000) + ₱3 (4,000 x 0.4) = ₱24,800

35. Which company is most likely to use process costing?

A. A manufacturer of nuclear reactors.
B. A construction contractor.
C. A cannery.
D. A textbook publisher.

36. Fixed production costs are inventorIable only if a company

A. uses absorption costing.
B. uses standard costing.
C. produces a single product.
D. receives permission from the Internal Revenue Service.

Use the following to answer questions 37-38:

Hampton 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 100% complete as to materials and 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.

37. The equivalent units of direct materials for April total:

A. 9,000
B. 13,000
C. 13,600
D. 14,400
E. 15,000
SOLUTION:
Materials
Transferred out to Next Department ₱9, 000
Work in Process- Ending (4, 000 x 100%) 4, 000
Equivalent Units of Production ₱13, 000

38. The equivalent units of conversion for April total:

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

SOLUTION:
Conversion Cost
Transferred out to Next Department ₱9, 000
Work in Process- Ending (4, 000 x 40%) 1, 600
Equivalent Units of Production ₱10, 600

39. Columbia Corporation adds all materials at the beginning of production and incurs conversion cost
evenly throughout manufacturing. The company completed 50,000 units during the year and had 15,000
units in process at December 31, 30% complete with respect to conversion cost. Equivalent units for the
year total:
A. materials, 50,000; conversion, 50,000
B. materials, 50,000; conversion, 4,500
C. materials, 54,500; conversion, 54,500
D. materials, 65,000; conversion, 54,500
E. materials, 65,000; conversion, 65,000

SOLUTION:
Materials
Transferred out to Next Department ₱50, 000
Work in Process- Ending (15, 000 x 100%) 15, 000
Equivalent Units of Production ₱65, 000

Conversion Cost
Transferred out to Next Department ₱75, 000
Work in Process- Ending (15, 000 x 30%) 4, 500
Equivalent Units of Production ₱54, 500

40. 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?
Material Conversion
A. 75,000 75,000
B. 84,000 84,000
C. 90,000 81,000
D. 90,000 84,000
 E. 90,000 90,000

SOLUTION:
Materials
Transferred out to Next Department ₱75, 000
Work in Process- Ending (15, 000 x 100%) 15, 000
Equivalent Units of Production ₱90, 000

Conversion Cost
Transferred out to Next Department ₱75, 000
Work in Process- Ending (15, 000 x 60%) 9, 000
Equivalent Units of Production ₱84, 000