Quiz 3

1: Lakeland Chemical manufactures a product called Zing. Direct materials are added at the
beginning of the process, and conversion activity occurs uniformly throughout production. The
beginning work-in-process inventory is 60% complete with respect to conversion; the ending
work-in-process inventory is 20% complete. The following data pertain to May:
 

    Units  
Work in process, May 1  15,000  
Units started during May  60,000  
Units completed and transferred out  68,000  
Work in process, May 31   7,000  

Direct Conversion
    
Total
Materials Costs
Costs:                       
Work in process, May 1  $ 41,250       $ 16,500       $ 24,750  
Costs incurred during
  234,630         72,000         162,630  
May
Totals  $275,880       $ 88,500       $ 187,380  

Using the weighted-average method of process costing, the equivalent units of direct materials
total:
Ans: The equivalent units of direct materials using the weighted-average method of process costing is
equal to Equivalent units = Units completed plus Ending work in process x the percentage of completion
= 68,000 + (7,000 × 100%) = 75,000.
B: Using the weighted-average method of process costing, the cost per unit of conversion activity is:
Ans: The equivalent units of conversion are equal to Units completed and transferred out (100%
conversion) + Ending WIP (20% conversion) = 68,000 + (7,000 × 20%) = 69,400 units.

Total conversion costs ÷ Equivalent units for total conversion costs = $187,380 ÷ 69,400 = $2.70
conversion costs per unit.
C: Using the weighted-average method of process costing, the cost of goods completed and transferred
during May is:
Ans: The equivalent units of direct materials using the weighted-average method of process costing is
equal to Equivalent units = Units completed plus Ending work in process x the percentage of completion
= 68,000 + (7,000 × 100%) = 75,000.
Direct material costs for material in beginning inventory and started units ÷ Equivalent units of material
in beginning inventory and started units = $88,500 ÷ 75,000 = $1.18 direct material costs per unit.

The equivalent units of conversion are equal to Units completed and transferred out (100% conversion) +
Ending WIP (20% conversion) = 68,000 + (7,000 × 20%) = 69,400 units.

Total conversion costs ÷ Equivalent units for total conversion costs = $187,380 ÷ 69,400 = $2.70
conversion costs per unit.

Cost of good completed and transferred out = Units completed and transferred out × (sum of per unit
costs for direct material and conversion) = 68,000 × ($1.18 + 2.70) = $263,840.
D: Using the weighted-average method of process costing, the equivalent units of conversion activity
total:
Ans: The equivalent units of conversion are equal to Units completed and transferred out (100%
conversion) + Ending WIP (20% conversion) = 68,000 + (7,000 × 20%) = 69,400 units.

2: Which of the following are needed under weighted-average process costing to calculate the
cost of goods completed during the period?
 

  Unit Cost Equivalent Units

A. Yes Yes
B. Yes No
C. No Yes
D. No No
Yes but only in
E. Yes specialized cases

Ans: B . In order to calculate the cost of goods completed during the period under weighted-average
process costing, unit cost is needed but the number of equivalent units is not needed.
B: Which of the above are needed to calculate the total cost of the ending work-in-process inventory
under the weighted-average process-costing method?
Ans: A
3: Which of the following data are needed to calculate total equivalent units under the weighted-average
method?
Ans: In order to calculate total equivalent units under the weighted average method, units completed
during the period and work-to-date on ending work in process is needed.
4: Covington Corporation uses a process-cost accounting system. The company adds direct materials at
the start of its production process; conversion cost, on the other hand, is incurred evenly throughout
manufacturing. The firm has no beginning work-in-process inventory; its ending work in process is 40%
complete. Which of the following sets of percentages would be used to calculate the correct number of
equivalent units in the ending work-in-process inventory?
Ans: 100% material is the correct percentage since material is added at the start of the process; 40%
conversion cost is the correct percentage since it is added evenly during the process and ending work in
process is 40% complete with respect to conversion costs.

5: Gambino Construction adds materials at the beginning of production and incurs conversion
cost uniformly throughout manufacturing. Consider the data that follow.
 

    Units  
Beginning work in process  20,000  
Started in August  60,000  
Production completed  55,000  
Ending work in process, 40% complete  25,000  

 
Conversion cost in the beginning work-in-process inventory totaled $120,000, and August
conversion cost totaled $270,000. Assuming use of the weighted-average method, which of the
following choices correctly depicts the number of equivalent units for conversion cost and the
conversion cost per equivalent unit?
 
Conversion Cost
Equivalent Units:
    Per Equivalent
Conversion Costs
Unit
A.   55,000    $ 4.91  
B.   65,000    $ 4.88  
C.   65,000    $ 6.00  
D.   80,000    $ 4.88  
E.   80,000    $ 6.00  
Ans: 65,000 [55,000 + (25,000 × 0.4)] equivalent units for conversion and total conversion cost of
$390,000 ($120,000 + $270,000) to yield: $390,000/65,000 units = $6.00 conversion cost per equivalent
unit.
6: Which of the following is true concerning cost drivers for the predetermined overhead rate in a
process-costing system?
Ans: It is true that if direct labor cost is the cost driver, direct labor and manufacturing overhead may be
combined into the single element of conversion cost.
7: Equivalent-unit calculations are necessary to allocate manufacturing costs between:
Ans: Equivalent unit calculations are necessary to allocate manufacturing costs between units completed
and ending work in process.
8: Agee Company uses a process-costing system for its single product. Material A is added at the
beginning of the process; in contrast, material B is added when the units are 50% complete. The firm's
ending work-in-process inventory consists of 4,000 units that are 75% complete. Which of the following
correctly expresses the equivalent units of production with respect to materials A and B in the ending
work-in-process inventory?
Ans: Equivalent units are 4,000 for each Material A and B, since A is added at the beginning and the 50%
mark for B’s addition has already passed when the product is 75% complete.
9: Ashley Corporation uses a process-cost accounting system. The company adds direct materials and
direct labor at the start of its production process; overhead cost is incurred evenly throughout
manufacturing. The firm has no beginning work-in-process inventory; its ending work in process is 40%
complete. Which of the following sets of percentages would be used to calculate the correct number of
equivalent units in the ending work-in-process inventory?
Ans: Since both materials and labor are added at the beginning of the process, they are both 100%;
overhead on the other hand is added evenly throughout the process but is only 40%, since that is the stage
of ending work in process completion for overhead costs.

10: Peach Company uses a weighted-average process-costing system. Company records disclosed that the
firm completed 40,000 units during the month and had 10,000 units in process at month-end, 20%
complete. Conversion costs associated with the beginning work-in-process inventory amounted to
$231,000, and amounts that relate to the current month totaled $966,000. If conversion is incurred
uniformly throughout manufacturing, Peach's equivalent-unit cost is:
Ans: Conversion Equivalent unit cost = (Beginning WIP conversion costs + Conversion costs for the
month) ÷ Completed equivalent units and in-process equivalent units for conversion = ($231,000 +
$966,000) ÷ [40,000 + (10,000 × 20%)] = $28.50.

11: Bratton Corporation had 6,500 units of work in process on April 1. During April, 19,100 units were
completed and as of April 30, 5,100 units remained in production. How many units were started during
April?
Ans: Units remaining in production (April 30) + Units completed − WIP Inventory (April 1) = Units
started; 5,100 + 19,100 − 6,500 = 17,700 units were started.

12: When computing the conversion cost per equivalent unit under the weighted-average method of
process costing, all of the following information would be needed except:
Ans: Computing conversion cost per equivalent unit under the weighted-average method of process
costing does not require the conversion work performed during the current period on the beginning work-
in-process.
13: Forte Co., had 3,000 units of work in process on April 1 that were 60% complete. During April,
11,000 units were started and as of April 30, 4,000 units that were 40% complete remained in production.
How many units were completed during April?
Ans: Beginning WIP (Apr.1) + Units started in April − Units remaining in production = Units completed
in April; 3,000 + 11,000 − 4,000 = 10,000 units completed.
14: When determining the cost of a manufactured good under an operation-costing system, a company
would:
Ans: trace direct-material cost to each product produced and use a predetermined application rate for
conversion cost.

15: Claremore Industries uses a weighted-average process-costing system. All materials are added at the
beginning of the process; conversion costs are incurred evenly throughout production. The company
finished 40,000 units during the period and had 15,000 units in progress at year-end, the latter at the 40%
stage of completion. Total material costs amounted to $220,000; conversion costs were $414,000.

The cost of goods completed is:

Ans: Materials per unit are $4 [or $220,000 ÷ (40,000 + 15,000)]. Conversion costs per unit are $9 =
{$414,000 ÷ [40,000 + (40% × 15,000)]}. Cost of goods completed = ($4 × 40,000) + ($9 × 40,000) =
$520,000.
B: The cost of the ending work in process is: Materials per unit are $4 [or $220,000 ÷ (40,000 + 15,000)].
Conversion costs per unit are $9 = {$414,000 ÷ [(40,000 + (40% × 15,000)]}. Ending WIP cost = (15,000
× $4) + $9 (15,000 × 40%) = $114,000
16: Xin Co., had 3,000 units of work in process on April 1 that were 60% complete. During April, 10,000
units were completed and as of April 30, 4,000 units that were 40% complete remained in production.
How many units were started during April?
Ans: Units completed by April 30 + Units remaining in production − Beginning WIP on April 1 = Units
started in April; 10,000 + (4,000 − 3,000) = 11,000 units started.
17: Universal Manufacturing uses a weighted-average process-costing system. All materials are
introduced at the start of manufacturing, and conversion costs are incurred evenly throughout the process.
The company's beginning and ending work-in-process inventories totaled 10,000 units and 15,000 units,
respectively, with the latter units being 2/3 complete at the end of the period. Universal started 30,000
units into production and completed 25,000 units. Manufacturing costs follow.

Beginning work in process: Materials, $60,000; conversion cost, $150,000

Current costs: Materials, $180,000; conversion cost, $480,000

Universal's equivalent-unit cost for materials is:

Ans: Equivalent unit cost for materials is (Beginning WIP cost + Current costs) ÷ (Production Completed
+ Ending WIP units) = ($60,000 + $180,000) ÷ (25,000 + 15,000) = $6.00
18: Forrest Corporation, a new company, adds material at the beginning of its production process;
conversion cost, in contrast, is incurred evenly throughout manufacturing. During May, the firm
completed 15,000 units and had ending work in process of 2,000 units, 60% complete. Equivalent-unit
costs were: materials, $15; conversion, $22.
 
The cost of Forrest’s completed production is:
Ans: Completed production costs = Completed units × (Sum of equivalent unit cost for materials and
conversion) = 15,000 × ($15 + $22) = $555,000.
19: When calculating unit costs under the weighted-average process-costing method, the unit cost is based
on:
Ans: A summation of the costs in the beginning work-in-process inventory plus costs incurred in the
current period.

20: Barton Corporation, which adds materials at the beginning of production, uses a weighted-
average process-costing system. Consider the data that follow.
 

Number of Cost of
   
Units Materials
Beginning work in
  40,000     $ 80,600  
process
Started in June   60,000       124,400  
Production completed   75,000          
Ending work in process   25,000          

 
The company's cost per equivalent unit for materials is:2.05

Cost per equivalent unit of materials = (Beginning WIP cost of materials + Started cost of materials) ÷
(Production completed + Ending Work in Process) = ($80,600 + $124,400) ÷ (75,000 + 25,000) = $2.05.
21: Mohawk Machining, which uses a process-costing system, adds material at the beginning of
production and incurs conversion cost evenly throughout manufacturing. The following selected
information was taken from the company's accounting records:

Total equivalent units of materials: 8,000

Total equivalent units of conversion: 7,400
Units started and completed during the period: 6,500

On the basis of this information, the ending work-in-process inventory's stage of completion is:60%
Sol: Based on this information, the ending work-in-process is 60% complete: Materials started and
completed + Units in ending WIP = Total materials or 6,500 + x = 8,000; x = 1,500; Equivalent units of
conversion − Started and completed = Partial units with conversion costs in ending inventory or 7,400 −
6,500 = 900 units; the percentage of partial conversion work is: 900 ÷ 1,500 = 60% complete.

22: Norton 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 30% complete as to 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.

The equivalent units of conversion for April total:

The equivalent units of conversion for April total = April units completed + 40% of conversion costs that
are added evenly to units remaining in production = 9,000 + (4,000 × 40%) = 10,600 Equivalent units of
conversion.
23: Linder Corporation had 8,200 units of work in process on November 1. During November, 26,800
units were started and as of November 30, 7,900 units remained in production. How many units were
completed during November?
Ans: Beginning WIP inventory (Nov. 1) + units started in November − units remaining in production =
Units completed; 8,200 + 26,800 − 7,900 = 27,100.
24: Domkowski began operations on January 1 of the current year. The company uses a process-costing
system, and conversion cost is incurred evenly throughout manufacturing. By January 31, the firm had
completed 56,000 units. Which of the following statements is true about the ending work-in-process
inventory if equivalent units for conversion cost totaled 59,000 units?
Ans: The ending work-in-process inventory of 10,000 physical units was 30% complete
25: Which of the following statements is false?
The total cost of each unit in process costing is not found by dividing the total factory costs by the
number of units completed.
26: Frankenberger Company, which uses a weighted-average process-costing system, had 7,000 units in
production at the end of the current period that were 60% complete. Material A is introduced at the
beginning of the process; material B is introduced at the end of the process; and conversion cost is
introduced evenly throughout manufacturing. Equivalent-unit production costs follow.

Material A: $12.50
Material B: $2.00
Conversion cost: $6.60

The cost of the company's ending work-in-process inventory is:

Ans: Ending work in process inventory cost = (Units in production at end of period × Material A cost per
equivalent unit) + (Units in production at end of period × percentage complete × Conversion cost per
equivalent unit) = (7,000 × $12.50) + (7,000 × 60% × $6.60) = $115,220.