Question 1

Process costing is used to account for costs in:

Accepted Answer

A)  Custom manufacturing 
B)  Services such as health care 
C)  Mass production 
D)  None of the above

Question 2

Beginning work in process consists of 7,000 units, 55% complete. 50,000 units were started and ending work in process is 5,000 units, 25% complete. Normal spoilage is equal to 10% of the units inspected. The inspection point occurs at the 20% point and 7,000 units were rejected. Direct materials are added at the 50% point, direct labour at 30% and overhead is applied uniformly. The costs per equivalent unit are: direct material $1.00; direct labour $1.50; overhead $2.00.
The cost of the ending work in process is:

Accepted Answer

A)  $2,500 
B)  $2,850 
C)  $2,700 
D)  $4,000

Question 3

Equivalent units reflect:

Accepted Answer

A)  All of the units produced in a period 
B)  The amount of work that could have been completed if all effort had gone to complete whole units instead of partially completed units 
C)  Only the units that are partially complete at the end of the period 
D)  Only the units that are partially complete at the beginning of the period

Question 4

Zuniga, Inc. uses a process costing system. During May, 1,200 units were transferred into Department 2 at a cost of $38,040. Direct materials are added at the beginning of the process. Additionally:
On May 1: Beginning inventories = 250 units, 40% complete
Direct materials costs = $1,250
Conversion costs = $1,356
Transferred-in costs = $2,560
During May: Direct materials costs incurred = $6,000
Conversion costs incurred = $17,013
On May 31: Ending Inventories = 350 units, 20% complete
Using the FIFO method, the cost of the ending work in process was:

Accepted Answer

A)  $2,863 
B)  $7,113 
C)  $12,649 
D)  $13,958

Question 5

All spoilage in a process costing system is considered abnormal spoilage.

Accepted Answer

A) True 
 B)False

Question 6

The accountant for Whirly Manufacturing Inc. gathered the following information for the month of November: $$\begin{array} { l c } 
\text { Beginning WIP } & 16,000 \text { units } \
\text { Started production } & 100,000 \
\text { Completed production } & 92,000 \
\text { Ending WIP } & 24,000
\end{array}$$ The beginning inventory was 60% complete for materials and 20% complete for conversion costs. The ending inventory was 90% complete for materials and 40% complete for conversion costs.
Costs pertaining to the month of November are as follows:
Beginning inventory costs are: $$\begin{array} { l r } 
\text { Materials } & \$ 54,560 \
\text { Direct labour } & 20,320 \
\text { Factory overhead } & 15,240 \
\text { Costs incurred during November include: } \
\text { Materials } & \$ 468,000 \
\text { Direct labour } & 182,880 \
\text { Factory overhead } & 391,160
\end{array}$$
Using the FIFO method, the equivalent unit cost of materials for November is:

Accepted Answer

A)  $4.12 
B)  $4.50 
C)  $4.60 
D)  $4.80

Question 7

Miramar, Inc. uses a weighted-average process costing system which recognizes normal spoilage as 5% of good output. During the current period, 14,000 units were started and 10,000 units completed. Materials are added at the beginning of the process, conversion costs occur uniformly, and the inspection point is at the 70% point. Beginning work in process was 6,000 units, 40% complete, and ending work in process 9,000 units, 80% complete. The cost per equivalent unit for material was $1.00 and for conversion costs $3.00.
The total costs in work in process during the period were:

Accepted Answer

A)  $31,995 
B)  $70,600 
C)  $73,700 
D)  Cannot be determined

Question 8

Kelly, Inc. uses a weighted-average process costing system that calculates normal rework as 2% of the units passing inspection. The inspection point is at the 75% point and units failing inspection are returned to the 40% point. During the current period, 52,000 units were started; 62,000 units inspected; and 52,000 units completed. Direct material is added at the 50% point and conversion costs occur uniformly. Beginning work in process was 10,000 units, 55% complete and ending work in process was 8,000 units, 85% complete. Costs per equivalent unit for material were $1.00 and $3.00 for conversion costs.
The cost of the ending work in process was:

Accepted Answer

A)  $28,400 
B)  $30,532 
C)  $32,328 
D)  $28,728

Question 9

Assume that ending work in process is 8,000 units, 20% complete, and that 20,000 units were completed and transferred out. The beginning work in process was 75% complete. Materials are added when the process is 50% complete, and the cost of materials added during the month was $61,500. Using the weighted average method, materials are allocated at $4.00 per equivalent unit. The cost of material included in the beginning work in process from last month was:

Accepted Answer

A)  $18,500 
B)  $20,000 
C)  $34,500 
D)  None of the above

Question 10

Hendrix, Inc. employs a process costing system. Direct materials are added at the beginning of the process. Here is information about July's activities:
On July 1: Beginning inventories = 750 units, 60% complete
Direct materials cost = $5,925
Conversion costs = $4,095
During July: 15,000 units started
Direct materials added = $150,000
Conversion costs added = $83,520
On July 31: Ending inventories = 1,500 units, 40% complete
Using the FIFO method, the cost of goods completed and transferred out during July was:

Accepted Answer

A)  $225,150 
B)  $225,060 
C)  $213,300 
D)  $213,000

Question 11

In a process costing system, transferred-in costs:

Accepted Answer

A)  Are computed for all production but not reported in the cost of process costing report 
B)  Usually do not include any indirect costs 
C)  Are the costs recorded in preceding departments 
D)  Are the costs of the completed units

Question 12

Tong, Inc. is a manufacturing company that uses a process costing system. All direct material is added at the start of the process, and spoilage is discovered at the end. During the first period of operations 15,000 units of material were placed into production at a cost of $20 each (ignore conversion costs for this process). Ending work in process was 2,000 units, good units completed totalled 11,000 units, and normal spoilage is 15% of the units surviving inspection. Inspection takes place after the units are completed.
The unit cost assigned to the ending work in process inventory is:

Accepted Answer

A)  $-0- 
B)  $22.61 
C)  $20.00 
D)  $24.00

Question 13

Normal spoilage can be defined as:

Accepted Answer

A)  Controllable spoilage 
B)  Spoilage that results from inefficient operations 
C)  A percentage of the units surviving inspection 
D)  A loss in the period in which it occurred

Question 14

Spoilage costs from an unusual natural disaster would be allocated to good units produced in a process costing system.

Accepted Answer

A) True 
 B)False

Question 15

The accountant for Whirly Manufacturing Inc. gathered the following information for the month of November: $$\begin{array} { l c } 
\text { Beginning WIP } & 16,000 \text { units } \
\text { Started production } & 100,000 \
\text { Completed production } & 92,000 \
\text { Ending WIP } & 24,000
\end{array}$$ The beginning inventory was 60% complete for materials and 20% complete for conversion costs. The ending inventory was 90% complete for materials and 40% complete for conversion costs.
Costs pertaining to the month of November are as follows:
Beginning inventory costs are: $$\begin{array} { l r } 
\text { Materials } & \$ 54,560 \
\text { Direct labour } & 20,320 \
\text { Factory overhead } & 15,240 \
\text { Costs incurred during November include: } \
\text { Materials } & \$ 468,000 \
\text { Direct labour } & 182,880 \
\text { Factory overhead } & 391,160
\end{array}$$
Using the FIFO method, the equivalent units of production for conversion costs are:

Accepted Answer

A)  85,600 units 
B)  95,200 units 
C)  98,400 units 
D)  101,600 units

Question 16

The cost of transferred-in units is accounted for by:

Accepted Answer

A)  Ignoring it 
B)  Adding it to beginning WIP and work performed this period as an additional cost with a separate category 
C)  Adding it to direct materials and allocating it with the direct materials 
D)  Adding it to conversion costs and allocating it with conversion costs

Question 17

In a process costing system with multiple production departments, costs from the first department's ending work in process are transferred to the second department's finished goods before going into the second department's work in process.

Accepted Answer

A) True 
 B)False

Question 18

Assume there were 6,000 units in beginning work in process, 60% complete. 20,000 units were completed during the month. Ending work in process is 40% complete, which is equivalent to 3,200 units for conversion costs. Materials are added at the beginning of the process. The standard cost method is used.
The number of units started this month is:

Accepted Answer

A)  20,000 units 
B)  22,000 units 
C)  28,000 units 
D)  15,280 units

Question 19

Kelly, Inc. uses a weighted-average process costing system that calculates normal rework as 2% of the units passing inspection. The inspection point is at the 75% point and units failing inspection are returned to the 40% point. During the current period, 52,000 units were started; 62,000 units inspected; and 52,000 units completed. Direct material is added at the 50% point and conversion costs occur uniformly. Beginning work in process was 10,000 units, 55% complete and ending work in process was 8,000 units, 85% complete. Costs per equivalent unit for material were $1.00 and $3.00 for conversion costs.
The number of units reworked was:

Accepted Answer

A)  3,000 
B)  2,000 
C)  8,000 
D)  10,000

Question 20

The accountant for Whirly Manufacturing Inc. gathered the following information for the month of November: $$\begin{array} { l c } 
\text { Beginning WIP } & 16,000 \text { units } \
\text { Started production } & 100,000 \
\text { Completed production } & 92,000 \
\text { Ending WIP } & 24,000
\end{array}$$ The beginning inventory was 60% complete for materials and 20% complete for conversion costs. The ending inventory was 90% complete for materials and 40% complete for conversion costs.
Costs pertaining to the month of November are as follows:
Beginning inventory costs are: $$\begin{array} { l r } 
\text { Materials } & \$ 54,560 \
\text { Direct labour } & 20,320 \
\text { Factory overhead } & 15,240 \
\text { Costs incurred during November include: } \
\text { Materials } & \$ 468,000 \
\text { Direct labour } & 182,880 \
\text { Factory overhead } & 391,160
\end{array}$$
Using the first-in, first-out (FIFO) method, the equivalent units of production for materials are:

Accepted Answer

A)  97,600 units 
B)  104,000 units 
C)  107,200 units 
D)  113,600 units

Exam 6: Process Costing

Process costing is used to account for costs in:

Equivalent units reflect:

All spoilage in a process costing system is considered abnormal spoilage.

In a process costing system, transferred-in costs:

Normal spoilage can be defined as:

Spoilage costs from an unusual natural disaster would be allocated to good units produced in a process costing system.

The cost of transferred-in units is accounted for by:

In a process costing system with multiple production departments, costs from the first department's ending work in process are transferred to the second department's finished goods before going into the second department's work in process.