Question 1

The unit cost of a case incurred by the Packing Department in May was:

Accepted Answer

A)  $73.50. 
B)  $57.50. 
C)  $28.75 
D)  Some other amount. 
A)  $73.50. 
B)  $57.50. 
C)  $28.75 
D)  Some other amount. C

Question 2

The journal entry to record the transfer of soup out of the Mixing and Cooking Department during March would include:

Accepted Answer

A)  A debit to Work in Process Inventory, Mixing and Cooking Department of $63,000. 
B)  A credit to Work in Process Inventory, Canning Department of $72,000. 
C)  A debit to Finished Goods Inventory of $72,000. 
D)  A credit to Work in Process Inventory, Mixing and Cooking Department of $63,000. 
A)  A debit to Work in Process Inventory, Mixing and Cooking Department of $63,000. 
B)  A credit to Work in Process Inventory, Canning Department of $72,000. 
C)  A debit to Finished Goods Inventory of $72,000. 
D)  A credit to Work in Process Inventory, Mixing and Cooking Department of $63,000. D

Question 3

In most process costing systems, per-unit costs are determined by:

Accepted Answer

A)  Dividing the number of units completed during the period by the total manufacturing costs incurred during the period. 
B)  Dividing the total manufacturing costs incurred during the period by the number of units worked on during the period. 
C)  Dividing the total manufacturing costs incurred during the period by the equivalent number of units completed during the period. 
D)  Unit costs cannot be determined in a process costing system. 
A)  Dividing the number of units completed during the period by the total manufacturing costs incurred during the period. 
B)  Dividing the total manufacturing costs incurred during the period by the number of units worked on during the period. 
C)  Dividing the total manufacturing costs incurred during the period by the equivalent number of units completed during the period. 
D)  Unit costs cannot be determined in a process costing system. C

Question 4

All of the following are characteristics of the products of process costing except:

Accepted Answer

A)  High volume. 
B)  Different amounts of direct materials. 
C)  Identical amounts of direct materials. 
D)  Repetitive operations. 
A)  High volume. 
B)  Different amounts of direct materials. 
C)  Identical amounts of direct materials. 
D)  Repetitive operations.

Question 5

In a process costing system, costs flow from one Work in Process Inventory account to the next in the same sequence as:

Accepted Answer

A)  Units flow through production. 
B)  In a LIFO periodic inventory system. 
C)  Shipped to customers. 
D)  In a job order cost system. 
A)  Units flow through production. 
B)  In a LIFO periodic inventory system. 
C)  Shipped to customers. 
D)  In a job order cost system.

Question 6

The beginning inventory of Department No. 3 was zero. During May, 2,500 units were processed in the department at a cost of $5 per unit. All 2,500 of these units were transferred to Department No. 4 in May at a total cost of $17,500. The unit cost of goods transferred to Department No. 4 in May was:

Accepted Answer

A)  $5.00. 
B)  $6.00. 
C)  $7.00. 
D)  $1.00. 
A)  $5.00. 
B)  $6.00. 
C)  $7.00. 
D)  $1.00.

Question 7

In the production process described, what is the Work in Process Inventory: Packaging Department debited for?

Accepted Answer

A)  Costs transferred from the Work in Process Inventory: Mixing Department only. 
B)  The cost of materials, direct labor, and overhead applicable to the packaging operation only. 
C)  Costs transferred from the Work in Process Inventory: Mixing Department, as well as materials, direct labor, and overhead applicable to the packaging operation. 
D)  Costs transferred to the Finished Goods Inventory. 
A)  Costs transferred from the Work in Process Inventory: Mixing Department only. 
B)  The cost of materials, direct labor, and overhead applicable to the packaging operation only. 
C)  Costs transferred from the Work in Process Inventory: Mixing Department, as well as materials, direct labor, and overhead applicable to the packaging operation. 
D)  Costs transferred to the Finished Goods Inventory.

Question 8

Process costing provides information on a total and per-unit bases as well as the per-unit cost of performing each step in the production process.

Accepted Answer

A) True 
 B)False

Question 9

The best cost system to use for a company producing a continuous stream of similar items would be a:

Accepted Answer

A)  Job order system. 
B)  Process costing system. 
C)  Production costing system. 
D)  No cost system is required when jobs are similar. 
A)  Job order system. 
B)  Process costing system. 
C)  Production costing system. 
D)  No cost system is required when jobs are similar.

Question 10

What are the equivalent units for materials?

Accepted Answer

A)  92,000. 
B)  60,000. 
C)  160,000. 
D)  110,000. 
A)  92,000. 
B)  60,000. 
C)  160,000. 
D)  110,000.

Question 11

A process costing system is suitable for a company with a large volume of standard products produced on a relatively continuous basis, for example, golf balls or petroleum.

Accepted Answer

A) True 
 B)False

Question 12

In a production cost report, the units in beginning Work in Process are always expressed as equivalent units.

Accepted Answer

A) True 
 B)False

Question 13

Direct materials and overhead may also be referred to as conversion costs.

Accepted Answer

A) True 
 B)False

Question 14

Job order and process costing systems
There are two distinct types of cost accounting systems: job order costing systems and process costing systems. How does management decide whether to use a job order costing system or a process costing system in any given manufacturing situation? Explain briefly.

Accepted Answer

Whether a manufacturing company should u

Question 15

The gross profit (sales minus cost of goods sold) on chemicals sold in May was:

Accepted Answer

A)  $64,000. 
B)  $70,000. 
C)  $111,000. 
D)  Some other amount. 
A)  $64,000. 
B)  $70,000. 
C)  $111,000. 
D)  Some other amount.

Question 16

Process costing system-determining unit costs
Houston Oil Company uses a process costing system with two departments: (a) a Refining Department and (b) a Packaging Department. During June, its first month of operations, the company manufactured and sold 650,000 gallons of motor oil, generating total revenue of $3,845,000. The company incurred the following manufacturing costs in June:
 
(a) How much was the unit cost per gallon of oil processed by the Refining Department in June?
(b) If each case of oil contains four gallons, how much was the unit cost per case incurred by the Packaging Department in June?
(c) How much was the unit cost per case transferred to finished goods in June?
(d) How much total gross profit (sales less cost of goods sold) was generated by the company in June?

Accepted Answer

(a) $3.00 per gallon

Question 17

Equivalent units
In the first month of operations, the manufacturing costs for Blue Sun Company were as follows:
 
During the month 10,000 units were completed, and 5,000 units were in process at the end of the month. The 5,000 units in process were 100% completed as to materials and 80% completed as to direct labor and overhead. Compute the following:
(a) Direct materials cost per equivalent unit: $________________ (b) Equivalent full units of production for direct labor and manufacturing overhead: ________________ (c) Direct labor cost per equivalent unit: $_________________ (d) Manufacturing overhead cost per equivalent unit: $_________________ (e) Total cost of 10,000 units completed: $_________________ (f) Total cost of 5,000 units in process at the end of the month: $_________________

Accepted Answer

(a) $4.44
(b) 14,000

Question 18

Assume that 9,500 cases of mustard were sold in May. The amount charged to cost of goods sold in May $__________.

Accepted Answer

The answer of Assume that 9,500 cases of mustard were...

Question 19

A process costing system differs from a job order costing system in that:

Accepted Answer

A)  There is no need for overhead application rates in process costing systems. 
B)  Process costing systems are used primarily in service industries, whereas job order costing systems are used in manufacturing operations. 
C)  Per-unit costs are not computed in process costing systems. 
D)  Process costing systems are used when production involves large volumes of standardized products, whereas job costing systems are used when each job or batch of products is uniquely different. 
A)  There is no need for overhead application rates in process costing systems. 
B)  Process costing systems are used primarily in service industries, whereas job order costing systems are used in manufacturing operations. 
C)  Per-unit costs are not computed in process costing systems. 
D)  Process costing systems are used when production involves large volumes of standardized products, whereas job costing systems are used when each job or batch of products is uniquely different.

Question 20

The transfer of 35,000 units to the Finishing Department in June required:

Accepted Answer

A)  A debit to Finished Goods Inventory of $770,000. 
B)  A credit to Work-in-Process Inventory, Mixing Department of $770,000. 
C)  A credit to Work-in-Process Inventory, Finishing Department of $140,000. 
D)  A debit to Work-in-Process Inventory, Finishing Department of $140,000. 
A)  A debit to Finished Goods Inventory of $770,000. 
B)  A credit to Work-in-Process Inventory, Mixing Department of $770,000. 
C)  A credit to Work-in-Process Inventory, Finishing Department of $140,000. 
D)  A debit to Work-in-Process Inventory, Finishing Department of $140,000.

Exam 18: Process Costing

The unit cost of a case incurred by the Packing Department in May was:

The journal entry to record the transfer of soup out of the Mixing and Cooking Department during March would include:

In most process costing systems, per-unit costs are determined by:

All of the following are characteristics of the products of process costing except:

In a process costing system, costs flow from one Work in Process Inventory account to the next in the same sequence as:

In the production process described, what is the Work in Process Inventory: Packaging Department debited for?

Process costing provides information on a total and per-unit bases as well as the per-unit cost of performing each step in the production process.

The best cost system to use for a company producing a continuous stream of similar items would be a:

What are the equivalent units for materials?

A process costing system is suitable for a company with a large volume of standard products produced on a relatively continuous basis, for example, golf balls or petroleum.

In a production cost report, the units in beginning Work in Process are always expressed as equivalent units.

Direct materials and overhead may also be referred to as conversion costs.

The gross profit (sales minus cost of goods sold) on chemicals sold in May was:

Assume that 9,500 cases of mustard were sold in May. The amount charged to cost of goods sold in May $__________.

A process costing system differs from a job order costing system in that:

The transfer of 35,000 units to the Finishing Department in June required:

Accounting: Information for Decision Making

Basic Financial Statements

The Accounting Cycle: Capturing Economic Events

The Accounting Cycle: Accruals and Deferrals

The Accounting Cycle: Reporting Financial Results

Merchandising Activities

Financial Assets

Inventories and the Cost of Goods Sold

Plant and Intangible Assets

Liabilities

Stockholders Equity: Paid-In Capital

Income and Changes in Retained Earnings

Statement of Cash Flows

Financial Statement Analysis

Global Business and Accounting

Management Accounting: a Business Partner

Job Order Cost Systems and Overhead Allocations

Costing and the Value Chain

Cost-Volume-Profit Analysis

Incremental Analysis

Responsibility Accounting and Transfer Pricing

Operational Budgeting

Standard Cost Systems

Rewarding Business Performance

Capital Budgeting

Forms of Business Organization

The Time Value of Money: Future Amounts and Present Values Answer Key

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