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New Era University

College of Accountancy

COST ACCOUNTING
Process Costing

Part I – Theory

1. Which cost accumulation procedure is most applicable in continuous mass-production


manufacturing environments?
a. standard
b. actual
c. process
d. job order

2. Process costing is used in companies that


a. engage in road and bridge construction.
b. produce sailboats made to customer specifications.
c. produce bricks for sale to the public.
d. construct houses according to customer plans.

3. A producer of ________ would not use a process costing system.


a. gasoline
b. potato chips
c. blank videotapes
d. stained glass windows

4. 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

5. 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

6. Equivalent units of production are equal to the


a. units completed by a production department in the period.
b. number of units worked on during the period by a production department.
c. number of whole units that could have been completed if all work of the period
had been used to produce whole units.
d. identifiable units existing at the end of the period in a production department.

7. In a process costing system using the weighted average method, cost per equivalent unit for a
given cost component is found by dividing which of the following by EUP?
a. only current period cost
b. current period cost plus the cost of beginning inventory
c. current period cost less the cost of beginning inventory
d. current period cost plus the cost of ending inventory

8. The weighted average method is thought by some accountants to be inferior to the FIFO
method because it
a. is more difficult to apply.
b. only considers the last units worked on.
c. ignores work performed in subsequent periods.
d. commingles costs of two periods.
9. A characteristic of a process costing system is that:
a. costs are accumulated by order
b. standard costs are not applicable
c. it requires a lot more detailed accounting than does a job order system
d. work in process inventory is restated in terms of completed units

10. 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. the same as the units placed in process
c. the same as the units completed
d. less than the units placed in process

11. 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

12. 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. does not consider the degree of completion of beginning work in process inventory when
computing equivalent units of production

13. Beginning work in process was 60% complete as to conversion costs, and ending work in
process was 45% complete as to conversion costs. The dollar amount of the conversion cost
included in ending work in process (using the average cost method) is determined by
multiplying the average unit conversion costs by what percentage of the total units in ending
work in process?
a. 60%
b. 55%
c. 45%
d. 52%

14. 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

15. 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

16. 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
17. The first step in determining the cost per EUP per cost component under the weighted
average method is to
a. add the beginning Work in Process Inventory cost to the current period's
production cost.
b. divide the current period's production cost by the equivalent units.
c. subtract the beginning Work in Process Inventory cost from the current period's
production cost.
d. divide the current period's production cost into the EUP.

18. In a FIFO process costing system, which of the following are assumed to be completed first
in the current period?
a. units started this period
b. units started last period
c. units transferred out
d. units still in process

19. Transferred-in cost represents the cost from


a. the last department only.
b. the last production cycle.
c. all prior departments.
d. the current period only.

20. Which of the following is(are) the same between the weighted average and FIFO methods of
calculating EUPs?

Units to EUP Total cost to


account for calculations account for

a. no yes no
b. yes yesyes
c. yes no no
d. yes no yes

21. The cost of abnormal continuous losses is


considered a product cost.
b. absorbed by all units in ending inventory and transferred out on an equivalent unit
basis.
c. written off as a loss on an equivalent unit basis.
d. absorbed by all units past the inspection point.

22. Which of the following is subtracted from weighted average EUP to derive FIFO EUP?
a. beginning WIP EUP completed in current period
b. beginning WIP EUP produced in prior period
c. ending WIP EUP not completed
d. ending WIP EUP completed

23. A continuous loss


a. occurs unevenly throughout a process.
b. never occurs during the production process.
c. always occurs at the same place in a production process.
d. occurs evenly throughout the production process.

24. Which of the following would be considered a discrete loss in a production process?
a. adding the correct ingredients to make a bottle of ketchup
b. putting the appropriate components together for a stereo
c. adding the wrong components when assembling a stereo
d. putting the appropriate pieces for a bike in the box

25. The method of neglect handles spoilage that is


a. discrete and abnormal.
b. discrete and normal.
c. continuous and abnormal.
d. continuous and normal.

26. The cost of normal discrete losses is


a. absorbed by all units past the inspection point on an equivalent unit basis.
b. absorbed by all units in ending inventory.
c. considered a period cost.
d. written off as a loss on an equivalent unit basis.

27. The cost of abnormal continuous losses is


a. considered a product cost.
b. absorbed by all units in ending inventory and transferred out on an equivalent unit
basis.
c. written off as a loss on an equivalent unit basis.
d. absorbed by all units past the inspection point.

28. Normal spoilage units resulting from a continuous process


a. are extended to the EUP schedule.
b. result in a higher unit cost for the good units produced.
c. result in a loss being incurred.
d. cause estimated overhead to increase.

29. Taylor Co. has a production process in which the inspection point is at 65 percent of
conversion. The beginning inventory for July was 35 percent complete and ending inventory
was 80 percent complete. Normal spoilage costs would be assigned to which of the following
groups of units, using FIFO costing?

Beginning Ending Units Started


Inventory Inventory & Completed

a. no yes yes
b. yes yesyes
c. no no yes
d. yes no no

30. If normal spoilage is detected at an inspection point within the process (rather than at the
end), the cost of that spoilage should be
a. included with the cost of the units sold during the period.
b. included with the cost of the units completed in that department during the period.
c. allocated to ending work in process units and units transferred out based on their
relative values.
d. allocated to the good units that have passed the inspection point.
Part II - Problems

1. Ditto 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 A were P80,000, P100,000, and P120,000, respectively.
Work in process at the beginning of the period for Department 1 was P60,000, and work in
process at the end of the period totaled P48,000. The records indicate that direct materials,
direct labor, and applied factory overhead for Department B were P40,000, P48,000, and
P56,000, respectively. In addition, work in process at the beginning of the period for
Department 2 totaled P60,000, and work in process at the end of the period totaled P48,000.
The journal entry to record the flow of costs into Department 3 is:
a. Work in Process--Department C 564,000
Work in Process--Department B 564,000
b. Work in Process--Department C 156,000
Work in Process--Department B 156,000
c. Work in Process--Department C 468,000
Work in Process--Department B 468,000
d. Work in Process--Department C 424,000
Work in Process--Department B 424,000

2. Bulbasaur Company uses the weighted-average method in its process costing system. The
following information was available about one of the company’s processing departments:
 There were 108,000 equivalent units of production with respect to conversion costs
during the current month.
 There were 15,000 units in the department's beginning work in process inventory, which
were two-thirds complete with respect to conversion costs.
 During the current month, 105,000 units were started and 100,000 were completed and
transferred out of the department.
The ending work in process inventory in the department:
a. was 40% complete with respect to conversion costs.
b. was 65% complete with respect to conversion costs.
c. consisted of 5,000 units.
d. consisted of 8,000 units.

3. Charmander Company uses the weighted-average method in its process costing system. The
following information was available for one of its processing departments:
 The beginning work in process inventory consisted of 16,000 units, which were 75%
complete with respect to conversion costs.
 The department converted the equivalent of 59,000 units of production during the current
month.
 A total of 50,000 units were completed and transferred out during the current month.
 The ending work in process inventory consisted of 12,000 units, which were 50%
complete with respect to conversion costs.
The number of units started during the month in that department was:
a. 54,000 units. c. 46,000 units.
b. 29,000 units. d. 42,000 units.

4. Squirtle Company uses the weighted-average method in its process costing system. The
company sold 250,000 units during the current month. The following data were taken from
its books:
Beginning inventories:
Work in process – Packing Department None
Finished goods 75,000 units
Ending inventories:
Work in process – Packing Department 16,000 units
Finished goods 60,000 units
The ending work in process inventory was 75% complete as to conversion costs. What were
the equivalent units of production for conversion costs for the current month?
a. 235,000 c. 251,000
b. 153,000 d. 247,000
5. Pidgeot Company has a weighted-average EUP of 49,750 units. Beginning inventory of
4,500 units was 60% complete; the ending inventory of 4,800 units was 60% complete. The
units completed during the period is:
a. 49,750 c. 47,050
b. 44,950 d. 46,870

6. The Psyduck Company’s accounting records reflected the following data for April 2013. The
company accounts its production using FIFO.
Work in process, March 31, 2013, 60% completed
as to materials and conversion costs ?
Work in process, April 30, 2013, 30% completed
as to materials and conversion costs 24,000
Equivalent units of production for April 64,000
Units started and completed in April 50,000
How many units were in the beginning work-in-process?
a. 17,000 c. 6,800
b. 11,333 d. 10,000

7. Slowbro manufactures concrete garden border sections. June 2013 production and cost
information are as follows:
Direct material Direct labor Overhead
WA EUP 40,000 38,000 37,500
FIFO EUP 30,000 32,000 33,400
Beginning inventory costs P 3,950 P1,580 P 3,630
Current period costs P13,500 P8,680 P21,120
All materials are added at the beginning of processing. How many units were in beginning
inventory and at what percentage of completion was the direct labor component?
No. of units % of completion No. of units % of completion
a. 6,000 100% c. 10,000 100%
b. 6,000 40% d. 10,000 60%

8. The Raichu Company manufacturers a standard recliner. During February, the firm's
Assembly Department started production of 75,000 chairs. During the month, the firm
completed 87,000 chairs and transferred them to the Finishing Department. The firm ended
the month with 15,000 chairs in ending inventory. All direct materials costs are added at the
beginning of the production cycle. FIFO process costing is used by Raichu.What were the
equivalent units for conversion costs for February if beginning inventory was 70% complete
as to conversion costs and ending inventory was 25% complete as to conversion costs?
a. 71,850 units c. 90,750 units
b. 64,650 units d. 82,650 units

Refer to the following information to answer the next two questions:


Beginning inventory (30% complete as to
Material B and 60% complete for conversion) 980 units
Started this cycle 2,600 units
Ending inventory (50% complete as to Material B
and 80% complete for conversion) 650 units
Material A Material B Conversion
Beginning inventory costs P14,270 P5,950 P5,640
Current period costs P40,000 P70,000 P98,100
Material A is added at the start of production, while Material B is added uniformly
throughout the process.

9. Using the weighted average method, compute EUP units for Materials A and B.
a. 3,580 and 3,580, respectively
b. 3,255 and 2,930, respectively
c. 3,580 and 3,255, respectively
d. 3,255 and 3,255, respectively

10. Using the weighted average method, compute the average cost per EUP for conversion.
a. P30.07 c. P35.41
b. P28.43 d. P28.98
11. Department R had 4,000 units in Work in Process that were 40% completed at the beginning
of the period at a cost of P12,500. Of the P12,500, P8,000 was for material and P4,500 was
for conversion costs. 14,000 units of direct materials were added during the period at a cost
of P28,700. 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 P32,450 and factory overhead was P18,710.If the average cost method is
used, the material cost per unit would be:
a. P2.00 c. P2.04
b. P1.59 d. P1.91

12. Jigglypuff Manufacturing has three producing departments in its factory. The ending
inventory in the Milling Department consisted of 7,500 units. These units were 80%
complete with respect to labor and factory overhead. Materials are applied at the end of the
milling process. Unit costs for the complete process in the Milling Department are: materials,
P50; labor, P20; and factory overhead, P30. What is the total cost of the ending inventory?
a. P600,000 c. P750,000
b. P300,000 d. P375,000

13. Jynx Department had no work in process at the beginning of the period, 21,600 units were
completed during the period, 2,400 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:
Direct materials (24,000 at P4) P 96,000
Direct labor 122,760
Factory overhead 44,640
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. P26,340 c. P15,000
b. P8,280 d. P27,600

Refer to the following information to answer the next three questions:


In July 2013, Lapras Co. computed its equivalent unit costs under FIFO process costing as
follows:
Direct material P30.00 Direct labor 12.00
Packaging 4.00 Manufacturing overhead 8.00
Direct material and packaging are added at the start and end of processing, respectively.
Beginning inventory cost was P1,026,810 and consisted of:
 P789,040 direct material cost for 54,000 EUP;
 P91,862 direct labor cost for 16,200 EUP; and
 P145,908 manufacturing overhead cost for 18,900 EUP.
Lapras Co. transferred a total of 380,000 units to finished goods during July and had 12,000
units in ending WIP inventory. The ending inventory units were 30 percent complete as to
direct labor and 55 percent complete as to overhead.

14. What was the total cost of the completed beginning inventory units?
a. P2,992,410 c. P3,942,810
b. P1,977,210 d. P2,916,000

15. What was the cost of the units started and completed in July?
a. P20,520,000 c. P18,554,400
b. P19,581,210 d. P17,604,000

16. What was the cost of July’s ending inventory?


a. P648,000 c. P504,000
b. P456,000 d. P600,000
17. Starmie Company employs a process cost system using the first-in, first-out (FIFO) method.
The product passes through both Department 1 and Department 2 in order to be completed.
Units enter Department 2 upon completion in Department 1. Additional direct materials are
added in Department 2 when the units have reached the 25% stage of completion with
respect to conversion costs. Conversion costs are added proportionally in Department 2. The
production activity in Department 2 for the current month was as follows:
Beginning work-in-process inventory:
40%complete with respect to conversion costs 15,000
Units transferred in from Department1 80,000
Units completed and transferred to finished goods 85,000
Ending work-in-process inventory:
20%complete with respect to conversion costs 10,000
How many equivalent units for direct materials were added in Department 2 for the current
month?
a. 85,000 units c. 90,000 units
b. 80,000 units d. 70,000 units

18. Dragonite, 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 P44,200 were charged to Department A in October. What
were the total costs transferred to Department B?
a. P71,200 c. P55,300
b. P49,840 d. P79,000

19. Machamp Corporation uses the weighted-average method in its process costing system. This
month, the beginning inventory in the first processing department consisted of 400 units. The
costs and percentage completion of these units in beginning inventory were:
Cost Percent Complete
Materials costs P5,500 50%
Conversion costs P1,700 20%
A total of 6,800 units were started and 6,200 units were transferred to the second processing
department during the month. The following costs were incurred in the first processing
department during the month:
Materials costs P158,700
Conversion costs P120,400
The ending inventory was 85% complete with respect to materials and 75% complete with
respect to conversion costs. What is the cost per equivalent unit for materials for the month?
a. P23.29 c. P22.51
b. P22.81 d. P24.47

Refer to the following information to answer the next two questions:


Snorlax Inc. produces calendars in a two-process, two-department operation. In the Printing
Department, calendars are printed out and cut. In the Assembly Department, the material
received from Printing is assembled into individual calendars and bound. Each department
maintains its own Work in Process Inventory. In Assembly, conversion costs are incurred
evenly throughout the process; direct material is added at the end of the process. For
September 2013, the following production and cost information is available for the Assembly
Department:
Beginning WIP Inventory: 5,000 calendars (30% complete as to conversion);
transferred-in cost, P9,250; conversion cost, P3,598
Transferred in during September: 80,000 calendars
Current period costs: transferred in, P80,000; direct material, P10,270; conversion,
P14,000
Ending WIP Inventory: 6,000 calendars (80% complete as to conversion)

20. Using weighted-average process costing, what was the cost of calendars completed in
September?
a. P97,821 c. P109,085
b. P102,709 d. P109,810
21. Using the FIFO method of process costing, what was the cost of ending WIP Inventory?
a. P6,816.52 c. P7,720.12
b. P7,800.66 d. P8,756.71

22. Gengar Corporation uses the FIFO method in its process costing system. Operating data for
the Curing Department for the month of March appear below:
Units Percent Complete
Beginning work in process inventory 2,500 80%
Transferred in from the prior department 44,000
Completed and transferred to the next department 38,500
Ending work in process inventory 8,000 15%
According to the company's records, the conversion cost in beginning work in process
inventory was P7,350 at the beginning of March. The cost per equivalent unit for conversion
costs for March was P4.10. How much conversion cost would be assigned to the units
completed and transferred out of the department during March?
a. P165,200 c. P149,650
b. P157,000 d. P157,850

Refer to the following information to answer the next two questions:


Alakazam Corporation uses the FIFO method in its process costing system. Data concerning
the first processing department for the most recent month are listed below:
Beginning work in process inventory:
Units in beginning work in process inventory 500
Materials costs P4,800
Conversion costs P3,100
Percentage complete with respect to materials 80%
Percentage complete with respect to conversion 45%
Units started into production during the month 6,000
Units transferred to the next department during the month 5,100
Materials costs added during the month P69,500
Conversion costs added during the month P82,300
Ending work in process inventory:
Units in ending work in process inventory 1,400
Percentage complete with respect to materials 50%
Percentage complete with respect to conversion 45%

23. What are the equivalent units for materials for the month in the first processing department?
a. 5,400 units c. 5,700 units
b. 6,000 units d. 5,800 units

24. The cost per equivalent unit for conversion costs for the first department for the month is
closest to:
a. P14.36 c. P14.95
b. P15.55 d. P15.51

25. For the month of May, the Production Control Department of Togepi, Inc. reported the
following production data for Finishing Department (second department):
Transferred-in from Assembly Department 75,000
Transferred-out to Packaging Department 59,250
In-process end of May (with 1/3 labor and factory overhead) 15,750
All materials were put into process in Assembly Department. The Cost Accounting
Department collected these figures for Finishing Department:
Unit cost for unit transferred-in from Assembly Dept. P2.70
Labor cost in Finishing Dept. P41,280
Applied factory overhead as % of labor cost 112.5%
How much was the cost of finished goods transferred out to the Packaging Department?
a. P240,555 c. P260,580
b. P80,580 d. P159,975

26. Gyarados Company uses the FIFO method in its process costing system. The beginning work
in process inventory in a particular department consisted of 10,000 units, 100% complete
with respect to materials and 60% with respect to conversion costs. The total cost in the
beginning work in process inventory was P48,200. During the month, 28,000 units were
transferred out of the department. The costs per equivalent unit were computed to be P3.10
for materials and P4.50 for conversion costs. The total cost of the units completed and
transferred out of the department was:
a. P154,800 c. P203,000
b. P212,800 d. P261,000

Refer to the following information to answer the next three questions:


The following information is available for Eevee Company for April:
Started this month 84,000 units
Beginning WIP (40% complete) 7,500 units
Normal spoilage (discrete) 1,100 units
Abnormal spoilage 900 units
Ending WIP (70% complete) 16,200 units
Transferred out 73,300 units
Beginning WIP costs:
Material P10,400
Conversion 13,800
Current costs:
Material P125,000
Conversion 360,000
All materials are added at the start of production and the inspection point is at the end of the
process.

27. What is the cost assigned to ending inventory using FIFO?


a. P93,834.55 c. P76,793.06
b. P74,700.02 d. P72,916.33

28. What is the cost assigned to normal spoilage and how is it classified using weighted average?
a. P6,373.60 assigned to units transferred out
b. P6,373.60 allocated between WIP and transferred out
c. P6,073.37 allocated between WIP and transferred out
d. P6,073.37 assigned to loss account

29. What is the total cost assigned to goods transferred out using weighted average?
a. P424,713.82 c. P436,302.19
b. P431,087.43 d. P410,780.62

30. A manufacturing firm has a normal spoilage rate of 3% of the units inspected; anything over
this rate is considered abnormal spoilage. Final inspection occurs at the end of the
manufacturing process. The firm employs the first-in, first-out (FIFO) method of inventory
flow. The processing for the current month was as follows:
Beginning work-in-process inventory 24,600 units
Units entered into production 470,400 units
Units completed and passinginspection 460,800 units
Units failing final inspection 22,600 units
Ending work-in-process inventory 11,600 units
The equivalent units assigned to normal and abnormal spoilage for the current month would
be
Normal Spoilage Abnormal Spoilage
a. 14,112 units 8,488 units
b. 14,502 units 8,098 units
c. 13,824 units 8,776 units
d. 678 units 21,922 units

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