Process Costing System

Practice Questions
Use the following information to answer the next 5 questions)
Father Time Clock Shop uses weighted-average process costing. It utilizes two cost categories: direct
materials and conversion costs. Each product must pass through the Assembly Department and the
Testing Department. The following data are related to the Assembly Department for the month of June:

Physical units DM costs CC Costs

Work in process, beginning inventory (50% complete) 250 units $180,000 $270,000
Units started during June 800 units $1,000,000 $1,000,000
Work in process, ending inventory (75% complete) 150 units

1. What are the equivalent units for direct materials and conversion costs, respectively?
A) 1,200.5 units; 1,160.64 units
B) 1,050 units; 1,012.5 units
C) 1,050 units; 887.5 units
D) 962 units; 990 units
E) 990 units and 962 units

Explanation: C) Direct materials Conversion costs

Completed and transferred out: 900 900.0
Work in process, ending: 150 112.5
Total equivalent units: 1,050 1,012.5

2. What is the total amount debited to the work-in-process account during the month of June?
A) $450,000
B) $2,000,000
C) $2,270,000
D) $2,450,000
E) $3,250,000

Explanation: B) $1,000,000 + $1,000,000 = $2,000,000

3. What is the direct materials cost per equivalent unit during June?
A) $982.92
B) $1,226.61
C) $952.38
D) $1,123.81
E) $1,000.00

Explanation: D) $180,000 + $1,000,000 = $1,180,000

$1,180,000/1,050 units = $1,123.81

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4. What is the conversion cost per equivalent unit in June at Father Time Clock Shop?
A) $1,254.32
B) $1,430.99
C) $987.65
D) $1,282.83
E) $1,320.17

Explanation: A) $270,000 + $1,000,000 = $1,270,000

$1,270,000/1,012.5 = $1,254.32

5. What amount of conversion costs are assigned to ending work-in-process for June?
A) $160,986.38
B) $137,993.63
C) $141,111.00
D) $188,148.00
E) $111,110.63

Explanation: C) (150 units × 75%) × $1,254.32 = $141,111

Use the following information to answer the next 2 questions)

Carnival Furniture had 60,000 foam cushions in process at May 1 (70% converted) and 40,000 cushions in
process at May 31 (50% converted). During the month, 140,000 cushions were transferred to finished
goods.

6. What is the equivalent units for materials costs for May using the weighted average method?
A) 180,000 cushions
B) 160,000 cushions
C) 140,000 cushions
D) 118,000 cushions
E) 123,000 cushions

Explanation: A) 120,000 cushions + 60,000 cushions = 180,000 cushions; or

140,000 cushions (C&T) + 40,000 cushions (EB) = 180,000 cushions

7. What is the equivalent units for conversion costs for May using the weighted average method?
A) 180,000 cushions
B) 160,000 cushions
C) 140,000 cushions
D) 118,000 cushions
E) 123,000 cushions

Explanation: B) (40,000 cushions × 50%) = 20,000 cushions (EB-CC)

20,000 cushions + 140,000 cushions (C&T-CC) = 160,000 cushions

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8. All production costs have been steadily rising in the Donner Company for several periods.
The company maintains large work in process inventories. Which of the following is correct
about the company's cost of goods completed and transferred out (C&T) and cost of ending
WIP computed using the FIFO method as compared with Weighted Average (WA) method:
a. Cost of C&T would be higher under FIFO than that computed under the WA method.
b. Cost of ending WIP would be higher under FIFO than that computed under the WA method
c. Cost of C&T would be lower under FIFO than that computed under the WA method
d. Cost of ending WIP would be lower under FIFO than that computed under the WA method
e. Both b and c of the above are correct

E) “B&C” would be correct because if the costs are rising in the period it would get averaged
out over the units using the weighted average method. This would mean that the rising costs
would be offset by the previous lower costs. Conversely, under the FIFO method, those costs
are identified when they are incurred and are not offset by previous units. Therefore, the
previous units that were completed and transferred would have a lower cost than the newer
units that were not finished and left in WIP. Therefore the FIFO method would have a higher
ending WIP and lower C&T than under weighted average.

9. The materials are entered into production at the end of the process in the cracking
department. Assume there have been NO changes in input costs for material, labour or
overhead items over the past 2 years. Which of the following statements is TRUE?
a. Equivalents units for DM and CC under FIFO and weighted-average are the same
b. Cost of goods transferred out under FIFO and weighted-average are the same
c. Cost of ending balance of WIP under FIFO and weighted-average are the same
d. All of the above statements are true
e. Only B and C above are true

E) “B&C” are correct. This is because the costs have not changed for two years. Since they
would be likely turning over their inventory more than every two years, all the costs would be
the same regardless of the costing method. There is no BB or EB in the process.

Use the information below to answer the next four questions

Landry Co. had the following information for the month of December 2007. Material is
added at the beginning of the process. The BB is 240 units (10% complete). The number of
units C&T is 960 units. The EB is 360 units (20% complete). The company uses FIFO
method. The WIP account at the end of the month is presented below:

Work in Process Inventory

BB $17,000 C& T $168,000

Direct materials $65,000

Conversion Costs $113,000

EB $27,000

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10. Total equivalent units for materials would be:
a. 1,110 equivalent units
b. 1,080 equivalent units
c. 1,032 equivalent units
d. 1,008 equivalent units
e. 1,320 equivalent units

Explanation: B) Started and completed = C&T – BWIP = 960 – 240 = 720 units started and
completed.
Equivalent units of DM in the EWIP = 360 * 100% = 360 equivalent DM units
DM equivalent units = 360 + 720 = 1080

11. Total equivalent units for conversion would be:

a. 1,110 equivalent units
b. 1,080 equivalent units
c. 1,032 equivalent units
d. 1,008 equivalent units
e. 1,320 equivalent units

Explanation: D) Started and completed = 720

Equivalent units in BWIP = 240*90% = 216
Equivalent units in EWIP = 360*20%= 72
CC equivalent units = 720+216+72 =1008

12. Cost per equivalent unit for materials would be:

a. $112.103
b. $ 49.242
c. $109.496
d. $ 82.757
e. $ 60.185

Explanation: e) Equivalent units for DM is 1080 (found in question 11)

Costs for DM is $65,000
Cost per equivalent unit of DM = $65,000/1080 = $60.185

13. Cost per equivalent unit for conversion would be:

a. $112.103
b. $ 49.242
c. $109.496
d. $ 82.757
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e. $ 60.185

Explanation: a) Equivalent units for CC = 1008 (found in question 12)

Conversion costs = $113,000
Cost per equivalent unit of CC = $113,000/1008= $112.103

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14. On March 1, Atlanta Company had 20,000 units of WIP in Department A, which were 100%
complete as to material costs and 30% complete as to conversion costs. During March,
150,000 units were started in Department A and 160,000 units were completed and
transferred to Department B. WIP on March 31 was 100% complete as to material costs and
50% complete as to conversion costs. By what amount would the equivalent units for
conversion costs for the month of March differ if the FIFO method were used instead of the
weighted-average method?
a. 10,000 decrease
b. 8,000 decrease
c. 6,000 decrease
d. 5,000 decrease
e. 4,000 decrease

Explanation: c)
Units in EWIP = BWIP + Started – Completed = 20K+150K-160K= 10K
Equivalent units under FIFO Method
S&C = Completed – BWIP = 160K-20K=140K
Equivalent units in BWIP = 20K*70% = 14K
Equivalent units in EWIP = 10K*50%=5K
Equivalent CC units under FIFO = 159K
Equivalent units under WA method
Completed units = 160K
Equivalent units in EWIP = 10K*50% = 5K
Equivalent CC units under WA = 165K
Difference between the methods = 165K-159K= 6K

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15. Lucas Company uses the weighted-average method in its process costing system. The
company adds materials at the beginning of the process in the Forming Department, which
is the first of two stages in its production process. Information concerning operations in the
Forming Department in October follows:
Materials
Units Cost
Work in process on October 1 6,000 $ 3,000
Units started during October 50,000 $25,560

Units completed and transferred to the next Department during October: 44,000
What was the materials cost of work in process at October 31?
a. $3,060
b. $5,520
c. $6,000
d. $6,120
e. None of the above

Explanation: d)
Ending WIP = BWIP + units started – units transferred = 6K+50K-44K=12K
Equivalent units of DM in EWIP = 12K*100%=12K
Total Equivalent units of DM = EWIP + Transferred =12K+44K=56K
Total DM costs = BWIP costs + Started DM costs = $3,000 + $25,560 = $28,560
Total cost per equivalent units = $28,560/56,000 units = $.51 per DM unit
DM costs in EWIP = DM equivalent units * cost per DM unit = 12K*$.51 = $6,120

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16. O'Leary Company manufactures Product Z in a two-stage production cycle in Departments
A and B. Materials are added at the beginning of the process in Department B. O'Leary
uses the weighted-average method. Conversion costs for Department B were 40%
complete as to the 5,000 units in the beginning work-in-process inventory and 50% complete
as to the 7,000 units in the ending work-in-process inventory. 10,000 units were completed
and transferred out of Department B during October. An analysis of the costs relating to
work-in-process inventories and production activity in Department B for October follows:
Transferred- Materials Conversion
in Costs Costs Costs
WIP, October 1: $10,000 $3,000 $1,000
Costs added in October 24,000 5,500 4,400

The total cost per equivalent unit transferred-out for October of Product Z, rounded to the
nearest penny, was:
a. $2.75
b. $2.80
c. $2.85
d. $2.90
e. $2.95

Explanation: d)
Transferred in units = C&T + EWIP = 17K
Total transferred in cots = BWIP + Costs added = 10K+24K
Cost per equivalent transferred in units = $34,000/17,000units = $2 per transferred unit
Equivalent DM units in EWIP = 7K*100%= 7K
Equivalent units of DM = C&T + Equivalent DM units in EWIP = 10K + 7K= 17K
Total DM costs = BWIP + cost added = $3,000 + $5,500 = $8,500
Cost per equivalent DM units = $8,500/17,000 units = $.50 per DM unit
Equivalent units of CC in EWIP = 7K*50% = 3.5K
Equivalent units of CC = C&T+ Equivalent CC units in EWIP = 10K + 3.5K = 13.5K
Total CC costs = BWIP + costs added = $1,000 + $4,400 = $5,400
Cost per equivalent unit of CC = $5,400/13,500 units = $.40 per CC units
Total cost per equivalent unit = $2+$.50+$.40 = $2.90

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17. A company uses the weighted average method of costing in a process costing system.
Material is added at the beginning of the process in Department A, and conversion costs are
incurred uniformly throughout the process. Beginning WIP on April 1 in Department A
consisted of 50,000 units estimated to be 30% complete. During April, 150,000 units were
started in Department A, and 160,000 units were completed and transferred to Department
B. Ending WIP on April 30 in Department A was estimated to be 20% complete. What were
the total equivalent units of production in department A for April for materials and
conversion costs, respectively?
a. 150,000 and 133,000
b. 150,000 and 153,000
c. 200,000 and 168,000
d. 200,000 and 153,000
e. None of the above

Explanation: c)
Units in the ending WIP = BWIP + Start – C&T = 50+150-160= 40K
Equivalent units of DM in EWIP = 40K*100% = 40K
Total Equivalent units of DM = EWIP DM units + C&T = 40K + 160K = 200K
Equivalent units of CC in EWIP = 40K*20% = 8K
Total Equivalent units of CC = EWIP CC units + C&T = 8K + 160K = 168K

18. Stay Company uses the weighted-average method in its process costing system. The
company's ending work in process inventory consists of 8,000 units, 60% complete with
respect to materials and 80% complete with respect to labor and overhead. If the total cost in
this inventory is $200,000 and if the cost for materials is $16 per equivalent unit for the
period, the cost of labor and overhead per equivalent unit of the production for the period
must be:
a. $19.25
b. $16.00
c. $25.67
d. $31.25
e. None of the above

Explanation: a)
Equivalent units of DM = 8,000*60% = 4,800 units
Total cost of DM = DM equivalent units * cost per DM equivalent unit= 4,800*$16=$76,800
Cost of labour and overhead = $200,000 - $76,800 = $123,200
Equivalent units of CC = 8000 * 80% = 6,400 units
Cost per equivalent unit of CC = $123,200/6,400 units = $19.25

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THE FOLLOWING INFORMATION APPLIES To the next 3 QUESTIONS
The Rest-a-Lot chair company manufacturers a standard recliner. During February, the firm's
Assembly Department started production of 75,000 chairs. During the month, the firm completed
80,000 chairs, and transferred them to the Finishing Department. The firm ended the month with
10,000 chairs in ending inventory. There were 15,000 chairs in beginning inventory. The FIFO
method is used. Beginning work in process was 30% complete as to conversion costs, while
ending work in process was 80% complete as to conversion costs.

Beginning inventory:
Direct materials $24,000
Conversion costs $35,000

Manufacturing costs added during the accounting period:

Direct materials $168,000
Conversion costs $278,000
31. What were the equivalent units for conversion costs during February?
a. 83,500
b. 85,000
c. 75,000
d. 79,500

Explanation: a)
(15,000 x 0.7) + 65,000 + 10,000 (0.8) = 83,500

32. What is the amount of direct materials cost assigned to ending work-in-process inventory at
the end of February?
a. $19,200
b. $22,400
c. $25,600
d. $22,500

Explanation: b)
$168,000/75,000 = $2.24 x 10,000 = $22,400

33. What is the cost of the goods transferred out during February?
a. $417,750
b. $456,015
c. $476,750
d. $505,000

Explanation: b)
The costs in beginning inventory $24,000 + $35,000 = $ 59,000
Direct materials = $2.24 x 65,000 = 145,600
Conversion costs =
[$278,000/(10,500 + 8,000 + 65,000)] x 65,000 = 216,450

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 also FG beginning inventory (15,000 x 0.7 x 3.33) = 34,965
Total $456,015

Answer Key
1 B 11 B 21 D 31 A
2 B 12 D 22 D 32 B
3 D 13 E 23 A 33 B
4 A 14 A 24 C 34 A
5 C 15 C 25 A 35 D
6 A 16 D 26 B 36 A
7 B 17 D 27 C 37 A
8 E 18 C 28 D 38 D
9 E 19 A 29 C 39 E
10 E 20 D 30 D 40 B

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