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Introduction to Management Accounting, 16e, Global Edition (Horngren)

Chapter 14 Job-Order Costing and Process-Costing Systems

14.1 Questions

1) Product costing is an averaging process. This statement pertains to ________.


A) job order costing only
B) process costing only
C) activity-based costing only
D) all of the above
Answer: D
Diff: 1
LO: 14-1
AACSB: Reflective thinking skills
Learning Outcome: Describe a job order cost system and calculate the predetermined overhead rate and
allocate indirect costs

2) Nicholson Company uses job order costing. Supporting documents for the Work-In-Process Inventory
account do NOT include ________.
A) labor time tickets
B) time cards
C) materials requisition forms
D) schedule of actual factory overhead costs
Answer: D
Diff: 1
LO: 14-1
AACSB: Reflective thinking skills
Learning Outcome: Describe a job order cost system and calculate the predetermined overhead rate and
allocate indirect costs

3) Three types of costs are accumulated on job-cost records that include direct materials, ________ and
________.
A) direct labor; actual factory overhead
B) direct labor; applied factory overhead
C) variable factory overhead; fixed factory overhead
D) direct labor; budgeted factory overhead
Answer: B
Diff: 1
LO: 14-1
AACSB: Reflective thinking skills
Learning Outcome: Describe a job order cost system and calculate the predetermined overhead rate and
allocate indirect costs

1
Copyright © 2014 Pearson Education
4) The ________ system is better suited for a single physical unit or a few similar units.
A) process-costing
B) job-order costing
C) activity-based costing
D) activity-based management
Answer: B
Diff: 1
LO: 14-1
AACSB: Reflective thinking skills
Learning Outcome: Describe a job order cost system and calculate the predetermined overhead rate and
allocate indirect costs

5) In job-order costing, all the costs for a particular product or batch of products are recorded on the
________.
A) materials requisition form
B) labor time ticket
C) time card
D) job-cost record
Answer: D
Diff: 1
LO: 14-1
AACSB: Reflective thinking skills
Learning Outcome: Describe a job order cost system and calculate the predetermined overhead rate and
allocate indirect costs

6) Hybrid-costing systems use a combination of ________.


A) job-order costing and process costing ideas
B) activity-based costing and absorption costing
C) job-order costing and activity-based costing
D) job-order costing and costing for service organizations
Answer: A
Diff: 1
LO: 14-1
AACSB: Reflective thinking skills
Learning Outcome: Describe a job order cost system and calculate the predetermined overhead rate and
allocate indirect costs

7) Source documents used in job-order costing include ________.


A) labor time tickets
B) material requisitions
C) time cards
D) all of the above
Answer: D
Diff: 1
LO: 14-1
AACSB: Reflective thinking skills
Learning Outcome: Describe a job order cost system and calculate the predetermined overhead rate and
allocate indirect costs

2
Copyright © 2014 Pearson Education
8) The ________ account is supported by a file of job-cost records for partially completed jobs.
A) Direct Materials Inventory
B) Finished Goods Inventory
C) Cost of Goods Sold
D) Work-In-Process Inventory
Answer: D
Diff: 1
LO: 14-1
AACSB: Reflective thinking skills
Learning Outcome: Describe a job order cost system and calculate the predetermined overhead rate and
allocate indirect costs

9) The ________ account is supported by a file of job-cost records for completed jobs.
A) Direct Materials Inventory
B) Work-in-process Inventory
C) Finished Goods Inventory
D) Factory Overhead Control
Answer: C
Diff: 1
LO: 14-1
AACSB: Reflective thinking skills
Learning Outcome: Describe a job order cost system and calculate the predetermined overhead rate and
allocate indirect costs

10) The centerpiece of a job-order costing system is the balanced scorecard.


Answer: FALSE
Diff: 1
LO: 14-1
AACSB: Reflective thinking skills
Learning Outcome: Describe a job order cost system and calculate the predetermined overhead rate and
allocate indirect costs

11) Process costing averages costs over large numbers of nearly identical products.
Answer: TRUE
Diff: 1
LO: 14-1
AACSB: Reflective thinking skills
Learning Outcome: Describe a job order cost system and calculate the predetermined overhead rate and
allocate indirect costs

12) Two extremes of product-costing are job-order costing and normal-order costing.
Answer: FALSE
Diff: 1
LO: 14-1
AACSB: Reflective thinking skills
Learning Outcome: Describe a job order cost system and calculate the predetermined overhead rate and
allocate indirect costs

3
Copyright © 2014 Pearson Education
13) Companies that use job-order costing normally have uniform production steps.
Answer: FALSE
Diff: 1
LO: 14-1
AACSB: Reflective thinking skills
Learning Outcome: Describe a job order cost system and calculate the predetermined overhead rate and
allocate indirect costs

14) Job-order costing only applies to specific jobs with a single physical unit.
Answer: FALSE
Diff: 1
LO: 14-1
AACSB: Reflective thinking skills
Learning Outcome: Describe a job order cost system and calculate the predetermined overhead rate and
allocate indirect costs

15) Source documents used in job-order costing include material requisition forms and time cards.
Answer: TRUE
Diff: 1
LO: 14-1
AACSB: Reflective thinking skills
Learning Outcome: Describe a job order cost system and calculate the predetermined overhead rate and
allocate indirect costs

16) Some companies use hybrid costing, which blends the ideas from both job costing and process
costing.
Answer: TRUE
Diff: 1
LO: 14-1
AACSB: Reflective thinking skills
Learning Outcome: Describe a job order cost system and calculate the predetermined overhead rate and
allocate indirect costs

17) In job-order costing, time cards record the materials used in particular jobs.
Answer: FALSE
Diff: 1
LO: 14-1
AACSB: Reflective thinking skills
Learning Outcome: Describe a job order cost system and calculate the predetermined overhead rate and
allocate indirect costs

18) Each job has its own job-cost record in a job-costing system.
Answer: TRUE
Diff: 1
LO: 14-1
AACSB: Reflective thinking skills
Learning Outcome: Describe a job order cost system and calculate the predetermined overhead rate and
allocate indirect costs

4
Copyright © 2014 Pearson Education
19) In job-order costing, actual factory overhead rates are used to apply factory overhead costs to jobs.
Answer: FALSE
Diff: 1
LO: 14-1
AACSB: Reflective thinking skills
Learning Outcome: Describe a job order cost system and calculate the predetermined overhead rate and
allocate indirect costs

20) Carlson Company has two departments. Factory overhead costs are applied based on direct labor cost
in Department A and machine hours in Department B. The following information is available:

Budgeted Costs Dept. A Dept. B


Direct labor cost $150,000 $165,000
Machine hours 51,000 20,000
Factory overhead cost $225,000 $180,000

Actual data for Job #10 are as follows:


Actual Costs Dept. A Dept. B
Direct materials requisitioned $10,000 $16,000
Direct labor cost $11,000 $14,000
Machine hours 5,000 3,000

Required:
A) Compute the budgeted factory overhead rate for Department A.
B) Compute the budgeted factory overhead rate for Department B.
C) What is the total overhead cost for Job #10?
D) If Job #10 consists of 50 units of product, what is the unit cost of this job?
Answer:
A) $225,000/$150,000 = 150% of direct labor cost
B) $180,000/20,000 = $9.00 per machine hour
C) ($11,000 × 150%) + ($9.00 × 3,000) = $43,500
D) $10,000 + $16,000 + $11,000 + $14,000 + $43,500 = $94,500
$94,500/50 = $1,890 per unit
Diff: 2
LO: 14-1
AACSB: Analytic skills
Learning Outcome: Describe a job order cost system and calculate the predetermined overhead rate and
allocate indirect costs

5
Copyright © 2014 Pearson Education
14.2 Questions

1) In a job-order system, the actual factory overhead costs incurred are $150,000. Applied factory
overhead costs are $160,000. What entry is needed to dispose of the overhead variance? Use the
immediate write-off method.
A) Debit Factory Department Overhead Control, Credit Factory Department Overhead Applied
B) Debit Factory Department Overhead Applied, Credit Cost of Goods Sold
C) Debit Factory Department Overhead Applied, Credit Finished Goods Inventory
D) Debit Factory Department Overhead Control, Credit Cost of Goods Sold
Answer: D
Diff: 2
LO: 14-2
AACSB: Reflective thinking skills
Learning Outcome: Describe a job order cost system and calculate the predetermined overhead rate and
allocate indirect costs

2) In a job-order system, which of the following statements is TRUE?


A) The Work-in-Process Inventory account is increased by the actual factory overhead costs incurred for a
job.
B) The Work-in-Process Inventory account is increased by the applied factory overhead costs for a job.
C) The Work-In-Process Inventory account is decreased by the budgeted amount of factory overhead
costs for a job.
D) The Work-In-Process Inventory account is increased by the budgeted amount of factory overhead
costs for a job.
Answer: B
Diff: 1
LO: 14-2
AACSB: Reflective thinking skills
Learning Outcome: Describe a job order cost system and calculate the predetermined overhead rate and
allocate indirect costs

3) In a job-order system, accountants apply factory overhead costs to Work-In-Process Inventory by using
the ________. The company does not use activity-based costing.
A) actual overhead costs
B) budgeted indirect costs for value chain functions
C) budgeted overhead rate
D) actual overhead rate
Answer: C
Diff: 2
LO: 14-2
AACSB: Reflective thinking skills
Learning Outcome: Describe a job order cost system and calculate the predetermined overhead rate and
allocate indirect costs

6
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4) Conoco Company has an actual factory overhead cost of Depreciation Expense—Equipment of $5,000.
Job-order costing is used. The journal entry to record this actual cost would include ________.
A) Debit to Factory Department Overhead Control $5,000 and Credit to Accumulated Depreciation—
Equipment $5,000
B) Debit to Depreciation Expense—Equipment $5,000 and Credit to Accumulated Depreciation—
Equipment $5,000
C) Debit Work-In-Process Inventory $5,000 and Credit to Factory Department Overhead Control $5,000
D) Debit to Work-In-Process Inventory $5,000 and Credit to Factory Department Overhead Applied
$5,000
Answer: A
Diff: 2
LO: 14-2
AACSB: Analytic skills
Learning Outcome: Describe a job order cost system and calculate the predetermined overhead rate and
allocate indirect costs

5) Direct materials of $10,000 are requisitioned by the production supervisor for the production area. Job-
order costing is used. The journal entry to record this transaction is:
A) Direct Materials Inventory $10,000
Accounts payable $10,000
B) Direct Materials Inventory $10,000
Work-In-Process Inventory $10,000
C) Work-In-Process Inventory $10,000
Direct Materials Inventory $10,000
D) Finished Goods Inventory $10,000
Direct Materials Inventory $10,000
Answer: C
Diff: 2
LO: 14-2
AACSB: Analytic skills
Learning Outcome: Describe a job order cost system and calculate the predetermined overhead rate and
allocate indirect costs

6) In job-order costing, a Debit to Work-In-Process Inventory is used to record ________.


A) a sale of merchandise
B) a purchase of direct materials
C) the cost of goods completed
D) a requisition of direct materials for production area
Answer: D
Diff: 2
LO: 14-2
AACSB: Analytic skills
Learning Outcome: Describe a job order cost system and calculate the predetermined overhead rate and
allocate indirect costs

7
Copyright © 2014 Pearson Education
7) In job-order costing, a Debit to Direct Materials Inventory is used to record ________.
A) a requisition of direct materials for production
B) cost of goods completed
C) a sale of goods
D) a purchase of direct materials
Answer: D
Diff: 2
LO: 14-2
AACSB: Analytic skills
Learning Outcome: Describe a job order cost system and calculate the predetermined overhead rate and
allocate indirect costs

8) Job-order costing is used. When direct materials are requisitioned for production, which of the
following accounts is credited?
A) Work-In-Process Inventory
B) Accounts Payable
C) Finished Goods Inventory
D) Direct Materials Inventory
Answer: D
Diff: 2
LO: 14-2
AACSB: Analytic skills
Learning Outcome: Describe a job order cost system and calculate the predetermined overhead rate and
allocate indirect costs

9) Job-order costing is used. Which of the following accounts is debited when direct labor costs are
incurred?
A) Work-In-Process Inventory
B) Finished Goods Inventory
C) Cost of Goods Sold
D) Accrued Payroll
Answer: A
Diff: 2
LO: 14-2
AACSB: Analytic skills
Learning Outcome: Describe a job order cost system and calculate the predetermined overhead rate and
allocate indirect costs

8
Copyright © 2014 Pearson Education
10) Melody Scott Company uses a job-order costing system and has the following data available:

Beginning Direct Materials Inventory $26,000


Beginning Work-In-Process Inventory $64,000
Beginning Finished Goods Inventory $58,000
Direct materials purchased on account $148,000
Direct materials requisitioned $82,000
Direct labor cost incurred $130,000
Factory overhead incurred $146,000
Cost of goods completed $292,000
Cost of Goods Sold $256,000
Overhead application rate (based on direct labor cost) 130%

The journal entry to record the actual factory overhead costs incurred would include a ________.
A) Debit to Factory Department Overhead Control for $146,000
B) Credit to Factory Department Overhead Control for $169,000
C) Debit to Work-In-Process Inventory for $146,000
D) Credit to Work-In-Process Inventory for $169,000
Answer: A
Diff: 2
LO: 14-2
AACSB: Analytic skills
Learning Outcome: Describe a job order cost system and calculate the predetermined overhead rate and
allocate indirect costs

9
Copyright © 2014 Pearson Education
11) Bernard Bassuluchi Company uses a job-order costing system and has the following data available:

Beginning Direct Materials Inventory $26,000


Beginning Work-In-Process Inventory $64,000
Beginning Finished Goods Inventory $58,000
Direct materials purchased on account $148,000
Direct materials requisitioned $82,000
Direct labor cost incurred $130,000
Factory overhead incurred $146,000
Cost of goods completed $292,000
Cost of Goods Sold $256,000
Overhead application rate (based on direct labor cost) 125%

The journal entry to record the purchase of direct materials would include a ________.
A) Debit to Work-In-Process Inventory for $82,000
B) Debit to Direct Materials Inventory for $148,000
C) Credit to Direct Materials Inventory for $148,000
D) Credit to Work-In-Process Inventory for $148,000
Answer: B
Diff: 2
LO: 14-2
AACSB: Analytic skills
Learning Outcome: Describe a job order cost system and calculate the predetermined overhead rate and
allocate indirect costs

10
Copyright © 2014 Pearson Education
12) Brankovich Company uses a job-order costing system and has the following data available:

Beginning Direct Materials Inventory $26,000


Beginning Work-In-Process Inventory $64,000
Beginning Finished Goods Inventory $58,000
Direct materials purchased on account $148,000
Direct materials requisitioned $90,000
Direct labor cost incurred $130,000
Factory overhead incurred $146,000
Cost of goods completed $292,000
Cost of Goods Sold $256,000
Overhead application rate (based on direct labor cost) 125%

What is the cost of the ending inventory of Direct Materials?


A) $84,000
B) $90,000
C) $108,000
D) $174,000
Answer: A
Diff: 2
LO: 14-2
AACSB: Analytic skills
Learning Outcome: Describe a job order cost system and calculate the predetermined overhead rate and
allocate indirect costs

11
Copyright © 2014 Pearson Education
13) Williams Company uses a job-order costing system and has the following data available:

Beginning Direct Materials Inventory $26,000


Beginning Work-In-Process Inventory $64,000
Beginning Finished Goods Inventory $58,000
Direct materials purchased on account $148,000
Direct materials requisitioned $82,000
Direct labor cost incurred $130,000
Factory overhead incurred $146,000
Cost of goods completed $292,000
Cost of Goods Sold $256,000
Overhead application rate (based on direct labor cost) 125%

The journal entry to record the cost of goods completed would include a ________.
A) Credit to Finished Goods Inventory for $292,000
B) Credit to Cost of Goods Sold for $256,000
C) Debit to Work-In-Process Inventory for $256,000
D) Credit to Work-In-Process Inventory for $292,000
Answer: D
Diff: 2
LO: 14-2
AACSB: Analytic skills
Learning Outcome: Describe a job order cost system and calculate the predetermined overhead rate and
allocate indirect costs

12
Copyright © 2014 Pearson Education
14) Gerald Eiche Company uses a job-order costing system and has the following data available:

Beginning Direct Materials Inventory $26,000


Beginning Work-In-Process Inventory $64,000
Beginning Finished Goods Inventory $58,000
Direct materials purchased on account $148,000
Direct materials requisitioned $82,000
Direct labor cost incurred $130,000
Factory overhead incurred $146,000
Cost of goods completed $292,000
Cost of Goods Sold $260,000
Overhead application rate (based on direct labor cost) 125%

The journal entry to record the cost of goods sold would include a ________.
A) Debit to Finished Goods Inventory for $292,000
B) Credit to Finished Goods Inventory for $260,000
C) Credit to Work-In-Process Inventory for $260,000
D) Credit to Cost of Goods Sold for $292,000
Answer: B
Diff: 2
LO: 14-2
AACSB: Analytic skills
Learning Outcome: Describe a job order cost system and calculate the predetermined overhead rate and
allocate indirect costs

15) In job-order costing, a debit to Finished Goods Inventory is used to record the ________.
A) requisition of direct materials
B) cost of goods completed
C) sale of merchandise
D) purchase of direct materials
Answer: B
Diff: 2
LO: 14-2
AACSB: Analytic skills
Learning Outcome: Describe a job order cost system and calculate the predetermined overhead rate and
allocate indirect costs

16) In job-order costing, a debit to Work-In-Process Inventory is used to record ________.


A) a requisition of direct materials for a job
B) the cost of labor used by a job
C) factory overhead applied to a job
D) all of the above
Answer: D
Diff: 2
LO: 14-2
AACSB: Analytic skills
Learning Outcome: Describe a job order cost system and calculate the predetermined overhead rate and
allocate indirect costs

13
Copyright © 2014 Pearson Education
17) In job-order costing, the journal entry to record the application of factory overhead costs to jobs
includes a Debit to ________.
A) Factory Department Overhead Control
B) Factory Department Overhead Applied
C) Finished Goods Inventory
D) Work-In-Process Inventory
Answer: D
Diff: 2
LO: 14-2
AACSB: Analytic skills
Learning Outcome: Describe a job order cost system and calculate the predetermined overhead rate and
allocate indirect costs

18) In job-order costing, the journal entry to record the transfer of completed goods from the production
area would include a Credit to ________.
A) Cost of Goods Sold
B) Finished Goods Inventory
C) Factory Department Overhead Control
D) Work-In-Process Inventory
Answer: D
Diff: 2
LO: 14-2
AACSB: Analytic skills
Learning Outcome: Describe a job order cost system and calculate the predetermined overhead rate and
allocate indirect costs

19) A home builder just completed the construction of a new home. The home builder uses job-order
costing. Costs of $200,000 were incurred to construct the home. The home is ready for sale and is listed
with a real estate broker. Which of the following journal entries is necessary when the home is
completed?
A) Work-In-Process Inventory $200,000
Direct Materials Inventory $200,000
B) Finished Goods Inventory $200,000
Direct Materials Inventory $200,000
C) Finished Goods Inventory $200,000
Work-In-Process Inventory $200,000
D) Cost of Goods Sold $200,000
Finished Goods Inventory $200,000
Answer: C
Diff: 2
LO: 14-2
AACSB: Analytic skills
Learning Outcome: Describe a job order cost system and calculate the predetermined overhead rate and
allocate indirect costs

14
Copyright © 2014 Pearson Education
20) What journal entry is necessary to apply factory overhead to jobs in job-order costing?
A) Work-In-Process Inventory XXX
Factory Department Overhead Applied XXX
B) Finished Goods Inventory XXX
Factory Department Overhead Applied XXX
C) Factory Department Overhead Control XXX
Various accounts XXX
D) Work-In-Process Inventory XXX
Factory Department Overhead Control XXX
Answer: D
Diff: 2
LO: 14-2
AACSB: Analytic skills
Learning Outcome: Describe a job order cost system and calculate the predetermined overhead rate and
allocate indirect costs

21) A company uses job-order costing. At the end of the year, applied factory overhead costs were $10,000
and actual factory overhead costs were $12,000. The company uses the immediate write-off method to
dispose of variances. Which of the following journal entries is necessary under the immediate write-off
method?
A) Factory Department Overhead Control $2,000
Cost of Goods Sold $2,000
B) Factory Department Overhead Control $2,000
Finished Goods Inventory $2,000
C) Cost of Goods Sold $2,000
Factory Department Overhead Applied $2,000
D) Cost of Goods Sold $2,000
Factory Department Overhead Control $2,000
Answer: D
Diff: 2
LO: 14-2
AACSB: Analytic skills
Learning Outcome: Describe a job order cost system and calculate the predetermined overhead rate and
allocate indirect costs

22) In job-order costing, the journal entry to record the requisition of direct materials for production
would include a Debit to Direct Materials Inventory.
Answer: FALSE
Diff: 2
LO: 14-2
AACSB: Analytic skills
Learning Outcome: Describe a job order cost system and calculate the predetermined overhead rate and
allocate indirect costs

15
Copyright © 2014 Pearson Education
23) In job-order costing, the journal entry to record actual factory overhead costs incurred would include
a Credit to Factory Department Overhead Control.
Answer: FALSE
Diff: 2
LO: 14-2
AACSB: Analytic skills
Learning Outcome: Describe a job order cost system and calculate the predetermined overhead rate and
allocate indirect costs

24) In job-order costing, the journal entry to record the completion of units in process would include a
Debit to Finished Goods Inventory.
Answer: TRUE
Diff: 2
LO: 14-2
AACSB: Analytic skills
Learning Outcome: Describe a job order cost system and calculate the predetermined overhead rate and
allocate indirect costs

25) In job-order costing, the journal entry to record applied overhead costs would include a Debit to
Work-in-Process Inventory.
Answer: TRUE
Diff: 2
LO: 14-2
AACSB: Analytic skills
Learning Outcome: Describe a job order cost system and calculate the predetermined overhead rate and
allocate indirect costs

26) In job-order costing, the journal entry to record the completion of goods would include a Debit to
Cost of Goods Sold.
Answer: FALSE
Diff: 2
LO: 14-2
AACSB: Analytic skills
Learning Outcome: Describe a job order cost system and calculate the predetermined overhead rate and
allocate indirect costs

16
Copyright © 2014 Pearson Education
27) Carpenter Company uses job-order costing. The following is a summary of factory operations:

Direct materials purchased on account $125,000


Direct materials requisitioned $110,000
Direct labor costs incurred $256,000
Factory overhead costs incurred (Depreciation Expense only) $150,000
Cost of goods completed $515,000
Cost of goods sold $378,000
Sales on account $430,000
Factory overhead applied ?

Factory overhead costs are applied at 50% of direct labor costs.

Required:
A) Prepare the required journal entries for the above transactions.
B) Prepare the journal entry to dispose of the overhead variance using the immediate write-off method.
C) Is the factory overhead overapplied or underapplied?
D) What is the actual, correct amount of Cost of Goods Sold?

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Answer:
A)
Direct Materials Inventory 125,000
Accounts payable 125,000

Work-in-Process Inventory 110,000


Direct Materials Inventory 110,000

Work-in-Process Inventory 256,000


Accrued payroll 256,000

Factory Department Overhead Control 150,000


Accumulated Depreciation 150,000

Work-in-Process Inventory 128,000


Factory Department Overhead Control 128,000

Finished Goods Inventory 515,000


Work-in-Process Inventory 515,000

Cost of Goods Sold 378,000


Finished Goods Inventory 378,000

Accounts Receivable 430,000


Sales 430,000

B)
Cost of Goods Sold 22,000
Factory Department Overhead Control 22,000

C) Underapplied
D) $378,000 + $22,000 = $400,000
Diff: 2
LO: 14-2
AACSB: Analytic skills
Learning Outcome: Describe a job order cost system and calculate the predetermined overhead rate and
allocate indirect costs

18
Copyright © 2014 Pearson Education
28) Michael Company uses job-order costing. The company has gathered the following data:

Direct materials purchased for cash $60,000


Direct materials requisitioned $50,000
Direct labor costs incurred $90,000
Factory overhead costs incurred $60,000
Cost of goods completed $180,000
Cost of goods sold $170,000
Sales for cash $300,000
Factory overhead applied ?
Factory overhead costs are applied at 90% of direct labor costs.

Required:
A) Prepare the required journal entries for the above transactions.
B) Prepare the journal entry to dispose of the overhead variance using the immediate write-off method.

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Copyright © 2014 Pearson Education
Answer:
A)
Direct Materials Inventory 60,000
Cash 60,000

Work-in-Process Inventory 50,000


Direct Materials Inventory 50,000

Work-in-Process Inventory 90,000


Accrued payroll 90,000

Factory Department Overhead Control 60,000


Various accounts 60,000

Work-in-Process Inventory 81,000


Factory Department Overhead Control 81,000

Finished Goods Inventory 180,000


Work-in-Process Inventory 180,000

Cost of Goods Sold 170,000


Finished Goods Inventory 170,000

Cash 300,000
Sales 300,000

B)
Factory Department Overhead Control 21,000
Cost of Goods Sold 21,000
Diff: 2
LO: 14-2
AACSB: Analytic skills
Learning Outcome: Describe a job order cost system and calculate the predetermined overhead rate and
allocate indirect costs

14.3 Questions

1) One of the primary purposes of an activity-based costing system is to ________.


A) focus on quality improvements in the production process
B) focus on cost reduction in the production process
C) eliminate all overhead costs for manufactured products
D) increase the accuracy of product costs so managers can make better decisions
Answer: D
Diff: 1
LO: 14-3
AACSB: Reflective thinking skills
Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts

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2) In activity-based costing systems, the budgeted overhead rate for products is developed after
considering indirect costs for ________.
A) production only
B) production and distribution only
C) all value chain functions
D) production and customer service only
Answer: C
Diff: 2
LO: 14-3
AACSB: Reflective thinking skills
Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts

3) Regardless of the nature of a company's production system, there will always be resources that are
shared among different products.
Answer: TRUE
Diff: 2
LO: 14-3
AACSB: Reflective thinking skills
Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts

4) Examples of activity centers with indirect costs include receiving, testing and packaging.
Answer: TRUE
Diff: 2
LO: 14-3
AACSB: Analytic skills
Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts

14.4 Questions

1) An accounting firm is setting the audit fee for a proposed engagement. The budgeted direct
professional labor hours are 100 hours at a rate of $100 per hour. Indirect costs are budgeted at 200% of
the direct professional labor cost. Travel costs are budgeted at $20,000. If the markup is 100% of total
budgeted costs, what is the audit fee?
A) $30,000
B) $50,000
C) $100,000
D) $640,000
Answer: C
Diff: 3
LO: 14-4
AACSB: Analytic skills
Learning Outcome: Describe a job order cost system and calculate the predetermined overhead rate and
allocate indirect costs

21
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2) In nonprofit organizations, a program is defined as a(n) ________.
A) identifiable group of activities that produces outputs in the form of consumable products
B) identifiable group of activities that produces outputs in the form of services
C) class of products
D) none of the above
Answer: B
Diff: 1
LO: 14-4
AACSB: Reflective thinking skills
Learning Outcome: Describe a job order cost system and calculate the predetermined overhead rate and
allocate indirect costs

3) In nonprofit organizations, the challenge is to apply the costs from various departments to different
________.
A) service organizations
B) nonprofit revenue accounts
C) nonprofit expense accounts
D) programs
Answer: D
Diff: 1
LO: 14-4
AACSB: Reflective thinking skills
Learning Outcome: Describe a job order cost system and calculate the predetermined overhead rate and
allocate indirect costs

4) When public accounting firms apply indirect costs to audit engagements, they use ________ or
________ as the cost driver.
A) direct labor cost; equipment usage
B) direct labor cost; direct labor hours
C) hours of equipment use; hours of computer use
D) traveling costs; hours of clerical assistance
Answer: B
Diff: 1
LO: 14-4
AACSB: Reflective thinking skills
Learning Outcome: Describe a job order cost system and calculate the predetermined overhead rate and
allocate indirect costs

22
Copyright © 2014 Pearson Education
5) Choosing direct labor cost rather than direct labor hours as a cost driver for overhead costs implies that
________.
A) direct labor cost data is more accurate
B) direct labor cost data is easier to obtain
C) higher paid employees use proportionately less overhead support than lower paid employees
D) higher paid employees use proportionately more overhead support than lower paid employees
Answer: D
Diff: 2
LO: 14-4
AACSB: Analytic skills
Learning Outcome: Describe a job order cost system and calculate the predetermined overhead rate and
allocate indirect costs

6) St. Matthew's Hospital uses a job-order costing system for all patients who have surgery. The following
information is available:

Budgeted indirect costs—pre-operating room $84,000


Budgeted indirect costs—operating room $66,000
Budgeted indirect costs—surgery recovery floor $600,000
Budgeted nursing hours—pre-operating room 4,000
Budgeted nursing hours—operating room 1,000
Budgeted nursing hours—surgery recovery floor 7,500

The cost driver for all indirect costs is nursing hours. The hospital uses a budgeted rate for indirect costs.
The budgeted rate for indirect costs for the pre-operating room is ________.
A) $21.00
B) $43.25
C) $66.00
D) $80.00
Answer: A
Diff: 2
LO: 14-4
AACSB: Analytic skills
Learning Outcome: Describe a job order cost system and calculate the predetermined overhead rate and
allocate indirect costs

23
Copyright © 2014 Pearson Education
7) St. Vincent's Hospital uses a job-order costing system for all patients who have surgery. The following
information is available:

Budgeted indirect costs—pre-operating room $84,000


Budgeted indirect costs—operating room $66,000
Budgeted indirect costs—surgery recovery floor $600,000
Budgeted nursing hours—pre-operating room 4,000
Budgeted nursing hours—operating room 1,000
Budgeted nursing hours—surgery recovery floor 7,500

The cost driver for all indirect costs is nursing hours. The hospital uses a budgeted rate for indirect costs.
The budgeted rate for indirect costs for the operating room is ________.
A) $21.00
B) $66.00
C) $69.75
D) $80.00
Answer: B
Diff: 2
LO: 14-4
AACSB: Analytic skills
Learning Outcome: Describe a job order cost system and calculate the predetermined overhead rate and
allocate indirect costs

8) Benville Hospital uses a job-order costing system for all patients who have surgery. The following
information is available:

Budgeted indirect costs—pre-operating room $84,000


Budgeted indirect costs—operating room $66,000
Budgeted indirect costs—surgery recovery floor $600,000
Budgeted nursing hours—pre-operating room 4,000
Budgeted nursing hours—operating room 1,000
Budgeted nursing hours—surgery recovery floor 7,500

The cost driver for all indirect costs is nursing hours. The hospital uses a budgeted rate for indirect costs.
The budgeted rate for indirect costs for the surgery recovery floor is ________.
A) $42.00
B) $45.75
C) $75.00
D) $80.00
Answer: D
Diff: 2
LO: 14-4
AACSB: Analytic skills
Learning Outcome: Describe a job order cost system and calculate the predetermined overhead rate and
allocate indirect costs

24
Copyright © 2014 Pearson Education
9) Elmbrook Hospital uses a job-order costing system for all patients who have surgery. The following
information is available:

Budgeted indirect costs—pre-operating room $84,000


Budgeted indirect costs—operating room $66,000
Budgeted indirect costs—surgery recovery floor $600,000
Budgeted nursing hours—pre-operating room 4,000
Budgeted nursing hours—operating room 1,000
Budgeted nursing hours—surgery recovery floor 7,500

The cost driver for all indirect costs is nursing hours. The hospital uses a budgeted rate for indirect costs.
A patient spent 8 hours in the pre-operating room, 4 hours in the operating room and 96 hours on the
surgery recovery floor. What amount of indirect costs will be applied to this patient?
A) $336.00
B) $600.00
C) $7,680
D) $8,112
Answer: D
Diff: 2
LO: 14-4
AACSB: Analytic skills
Learning Outcome: Describe a job order cost system and calculate the predetermined overhead rate and
allocate indirect costs

10) Job-order costing can be used only in manufacturing environments.


Answer: FALSE
Diff: 1
LO: 14-4
AACSB: Reflective thinking skills
Learning Outcome: Describe a job order cost system and calculate the predetermined overhead rate and
allocate indirect costs

11) Managers need to know program costs to make ongoing decisions such as which programs to
emphasize or deemphasize and the pricing of programs.
Answer: TRUE
Diff: 1
LO: 14-4
AACSB: Reflective thinking skills
Learning Outcome: Describe a job order cost system and calculate the predetermined overhead rate and
allocate indirect costs

25
Copyright © 2014 Pearson Education
14.5 Questions

1) In process costing, how many Work-In-Process Inventory accounts are used?


A) none
B) only one
C) one for each processing department
D) at least two for each processing department
Answer: C
Diff: 2
LO: 14-5
AACSB: Reflective thinking skills
Learning Outcome: Discuss process costing systems and calculate product cost using process costing

2) In a process costing system, which of the following entries is prepared to transfer a finished food
product from the cooking process to the packaging process?
A) Debit Work-In-Process Inventory—Cooking, Credit Work-In-Process Inventory—Packaging
B) Debit Finished Goods Inventory—Credit Work-In-Process Inventory—Packaging
C) Debit Work-In-Process Inventory—Packaging, Credit Work-In-Process Inventory—Cooking
D) Debit Work-In-Process Inventory—Packaging, Credit Finished Goods Inventory
Answer: C
Diff: 2
LO: 14-5
AACSB: Reflective thinking skills
Learning Outcome: Discuss process costing systems and calculate product cost using process costing

3) In a process costing system, which of the following entries is prepared to transfer direct materials from
storage to the cooking process?
A) Debit Direct Materials Inventory, Credit Work-In-Process Inventory—Cooking
B) Debit Direct Materials Inventory, Credit Accounts Payable
C) Debit Work-In-Process Inventory—Cooking, Credit Work-In-Process Inventory—Storage
D) Debit Work-In-Process Inventory—Cooking, Credit Direct Materials Inventory
Answer: D
Diff: 2
LO: 14-5
AACSB: Reflective thinking skills
Learning Outcome: Discuss process costing systems and calculate product cost using process costing

4) ________ is the system that applies costs to similar products that are mass-produced in continuous
fashion through a series of production processes.
A) Job-order costing
B) JIT costing
C) Activity-based costing
D) Process costing
Answer: D
Diff: 1
LO: 14-5
AACSB: Reflective thinking skills
Learning Outcome: Discuss process costing systems and calculate product cost using process costing

26
Copyright © 2014 Pearson Education
5) Which of the following outputs would NOT use a process costing system?
A) flour
B) glass
C) toothpaste
D) building
Answer: D
Diff: 1
LO: 14-5
AACSB: Reflective thinking skills
Learning Outcome: Discuss process costing systems and calculate product cost using process costing

6) Which of the following statements regarding process costing is TRUE?


A) Process-costing systems use a single Work-In-Process Inventory account.
B) Process costing is used for products that are easily separated and individually identifiable.
C) The unit cost for process costing is found by accumulating the costs for all the manufacturing
departments and dividing the total by the number of units produced.
D) The process-costing approach does not distinguish between individual units of product.
Answer: D
Diff: 2
LO: 14-5
AACSB: Reflective thinking skills
Learning Outcome: Discuss process costing systems and calculate product cost using process costing

7) Process costing can be used for ________ activities.


A) manufacturing
B) nonmanufacturing
C) manufacturing and nonmanufacturing
D) none of the above
Answer: C
Diff: 1
LO: 14-5
AACSB: Reflective thinking skills
Learning Outcome: Discuss process costing systems and calculate product cost using process costing

8) In process costing, each department computes the product cost of ________.


A) completed goods transferred out of the department only
B) completed goods waiting to be sold only
C) uncompleted goods in the department only
D) uncompleted goods in the department and completed goods transferred out of the department
Answer: D
Diff: 2
LO: 14-5
AACSB: Reflective thinking skills
Learning Outcome: Discuss process costing systems and calculate product cost using process costing

27
Copyright © 2014 Pearson Education
9) In process costing, units that are started but NOT completed by the end of the accounting period are
called ________.
A) Cost of Goods Sold
B) ending Direct Materials Inventory
C) ending Work-In-Process Inventory
D) ending Finished Goods Inventory
Answer: C
Diff: 2
LO: 14-5
AACSB: Reflective thinking skills
Learning Outcome: Discuss process costing systems and calculate product cost using process costing

10) Assume a company uses process costing and has several processing departments. When goods are
transferred from Department X to Department Y, the journal entry requires a Debit to ________ and a
Credit to ________.
A) Work-In-Process Inventory—Department X; Work-In-Process Inventory—Department Y
B) Finished Goods Inventory; Work-In-Process Inventory—Department Y
C) Cost of Goods Sold; Finished Goods Inventory
D) Work-In-Process Inventory—Department Y; Work-In-Process Inventory—Department X
Answer: D
Diff: 2
LO: 14-5
AACSB: Reflective thinking skills
Learning Outcome: Discuss process costing systems and calculate product cost using process costing

11) The chemical and glass industries normally use job costing.
Answer: FALSE
Diff: 1
LO: 14-5
AACSB: Analytic skills
Learning Outcome: Discuss process costing systems and calculate product cost using process costing

12) Process-costing systems apply costs to like products that are usually mass-produced in continuous
fashion through a series of production processes.
Answer: TRUE
Diff: 1
LO: 14-5
AACSB: Reflective thinking skills
Learning Outcome: Discuss process costing systems and calculate product cost using process costing

13) Assume a company uses process costing. When factory overhead is applied to the units in production,
Finished Goods Inventory is the Debit part of the journal entry.
Answer: FALSE
Diff: 1
LO: 14-5
AACSB: Reflective thinking skills
Learning Outcome: Discuss process costing systems and calculate product cost using process costing

28
Copyright © 2014 Pearson Education
14) Unlike job-order costing, process costing requires only one Work-In-Process Inventory account.
Answer: FALSE
Diff: 2
LO: 14-5
AACSB: Reflective thinking skills
Learning Outcome: Discuss process costing systems and calculate product cost using process costing

14.6 Questions

1) During the month of May, Masters Company transferred 140,000 gadgets to Finished Goods Inventory.
There was no beginning work-in-process inventory. The company had 40,000 gadgets in process at May
31 and the gadgets were 50 percent complete with respect to conversion costs. All direct materials are
added at the end of the production process. The equivalent units for materials for May are ________.
A) 90,000
B) 140,000
C) 160,000
D) 180,000
Answer: B
Diff: 2
LO: 14-6
AACSB: Analytic skills
Learning Outcome: Discuss process costing systems and calculate product cost using process costing

2) During the month of May, Sonny Company transferred 140,000 gadgets to Finished Goods Inventory.
There was no beginning work-in-process inventory. The company had 40,000 gadgets in process at May
31 and the gadgets were 75 percent complete with respect to conversion costs. All direct materials are
added at the end of the production process. The equivalent units for conversion costs for May are
________.
A) 140,000
B) 150,000
C) 170,000
D) 180,000
Answer: C
Diff: 2
LO: 14-6
AACSB: Analytic skills
Learning Outcome: Discuss process costing systems and calculate product cost using process costing

29
Copyright © 2014 Pearson Education
3) In process costing, a company has some unfinished units at the end of the accounting period. ________
units are the number of completed units that could have been produced from the inputs used to create
the unfinished units.
A) Physical
B) Convertible
C) Fully-complete
D) Equivalent
Answer: D
Diff: 1
LO: 14-6
AACSB: Reflective thinking skills
Learning Outcome: Discuss process costing systems and calculate product cost using process costing

4) Xerox Company produces plastic cups in a one-department process. The following data is available for
the past month:

Work-in-process inventory, beginning 0


Units started 60,000
Units completed and transferred 48,000
Work-in-process inventory, ending 12,000

The units in process at the end of the month are 100 percent complete with respect to materials and 50
percent complete with respect to conversion costs. What are the equivalent units for materials for the
month?
A) 12,000
B) 48,000
C) 54,000
D) 60,000
Answer: D
Diff: 2
LO: 14-6
AACSB: Analytic skills
Learning Outcome: Discuss process costing systems and calculate product cost using process costing

30
Copyright © 2014 Pearson Education
5) Durante Company produces plastic cups in a one-department process. The following data is available
for the past month:

Work-in-process inventory, beginning 0


Units started 60,000
Units completed and transferred 48,000
Work-in-process inventory, ending 12,000

The units in process at the end of the month are 100 percent complete with respect to materials and 50
percent complete with respect to conversion costs. What are the equivalent units for conversion costs for
the month?
A) 12,000
B) 30,000
C) 54,000
D) 60,000
Answer: C
Diff: 2
LO: 14-6
AACSB: Analytic skills
Learning Outcome: Discuss process costing systems and calculate product cost using process costing

6) Excalibur Company produces calendars in a one-department process. The following data is available
for the past month:

Work-in-process inventory, beginning 0


Units started 15,000
Units completed and transferred 12,000
Work-in-process inventory, ending 3,000

Direct materials added $30,000


Direct labor $20,700
Factory overhead costs $10,350

The units in process at the end of the month are 100 percent complete with respect to direct materials and
50 percent complete with respect to conversion costs. What are the equivalent units for materials for the
month?
A) 3,000
B) 12,000
C) 13,500
D) 15,000
Answer: D
Diff: 2
LO: 14-6
AACSB: Analytic skills
Learning Outcome: Discuss process costing systems and calculate product cost using process costing

31
Copyright © 2014 Pearson Education
7) Rozman Company produces calendars in a one-department process. The following data is available for
the past month:

Work-in-process inventory, beginning 0


Units started 15,000
Units completed and transferred 12,000
Work-in-process inventory, ending 3,000

Direct materials added $30,000


Direct labor $20,700
Factory overhead costs $10,350

The units in process at the end of the month are 100 percent complete with respect to direct materials and
50 percent complete with respect to conversion costs. What are the equivalent units for conversion costs
for the month?
A) 3,000
B) 12,000
C) 13,500
D) 15,000
Answer: C
Diff: 2
LO: 14-6
AACSB: Analytic skills
Learning Outcome: Discuss process costing systems and calculate product cost using process costing

8) Orlando Company manufactures phones in a two-department process that includes Assembly and
Finishing. Information about the Assembly Department follows:

Direct materials added $310,000


Direct labor 460,000
Factory overhead 230,000
Total costs to account for $1,000,000

There was no beginning inventory and 80,000 units were started in the Assembly Department. By the end
of the month, 67,200 units were completed and transferred to the Finishing Department and 12,800 units
were still in process. The partially complete units were 100 percent complete with regard to direct
materials but 75 percent complete with regard to conversion costs. The equivalent units for materials for
the month for the Assembly Department are ________.
A) 12,800
B) 67,200
C) 76,800
D) 80,000
Answer: D
Diff: 2
LO: 14-6
AACSB: Analytic skills
Learning Outcome: Discuss process costing systems and calculate product cost using process costing

32
Copyright © 2014 Pearson Education
9) Garcia Company manufactures phones in a two-department process that includes Assembly and
Finishing. Information about the Assembly Department follows:

Direct materials added $310,000


Direct labor 460,000
Factory overhead 230,000
Total costs to account for $1,000,000

There was no beginning inventory and 80,000 units were started in the Assembly Department. By the end
of the month, 67,200 units were completed and transferred to the Finishing Department and 12,800 units
were still in process. The partially complete units were 100 percent complete with regard to direct
materials but 80 percent complete with regard to conversion costs. The equivalent units for conversion
costs for the month for the Assembly Department are ________.
A) 12,800
B) 67,200
C) 77,440
D) 80,000
Answer: C
Diff: 2
LO: 14-6
AACSB: Analytic skills
Learning Outcome: Discuss process costing systems and calculate product cost using process costing

10) During the month of May, Gonzalez Clothing transferred 140,000 shirts to Finished Goods Inventory.
There was no beginning work-in-process inventory. The company had 30,000 shirts in process at May 31
and the shirts were 50 percent complete with respect to conversion costs. All direct materials are added at
the beginning of the production process. How many shirts were started during May?
A) 30,000
B) 110,000
C) 140,000
D) 170,000
Answer: D
Diff: 2
LO: 14-6
AACSB: Analytic skills
Learning Outcome: Discuss process costing systems and calculate product cost using process costing

33
Copyright © 2014 Pearson Education
11) During the month of May, Sanchez Clothing transferred 140,000 shirts to Finished Goods Inventory.
There was no beginning work-in-process inventory. The company had 40,000 shirts in process at May 31
and the shirts were 50 percent complete with respect to conversion costs. All direct materials are added at
the beginning of the production process. The equivalent units for materials for May are ________.
A) 90,000
B) 140,000
C) 160,000
D) 180,000
Answer: D
Diff: 2
LO: 14-6
AACSB: Analytic skills
Learning Outcome: Discuss process costing systems and calculate product cost using process costing

12) During the month of May, Lucas Clothing transferred 140,000 shirts to Finished Goods Inventory.
There was no beginning work-in-process inventory. The company had 40,000 shirts in process at May 31
and the shirts were 75 percent complete with respect to conversion costs. All direct materials are added at
the beginning of the production process. The equivalent units for conversion costs for May are ________.
A) 140,000
B) 150,000
C) 170,000
D) 180,000
Answer: C
Diff: 2
LO: 14-6
AACSB: Analytic skills
Learning Outcome: Discuss process costing systems and calculate product cost using process costing

13) Equivalent units are computed to assign costs to partially completed units.
Answer: TRUE
Diff: 2
LO: 14-6
AACSB: Reflective thinking skills
Learning Outcome: Discuss process costing systems and calculate product cost using process costing

14) Equivalent units are determined by multiplying the number of physical units by the percentage of
noncompletion.
Answer: FALSE
Diff: 2
LO: 14-6
AACSB: Reflective thinking skills
Learning Outcome: Discuss process costing systems and calculate product cost using process costing

34
Copyright © 2014 Pearson Education
15) Measures in equivalent units are found only in manufacturing situations.
Answer: FALSE
Diff: 2
LO: 14-6
AACSB: Reflective thinking skills
Learning Outcome: Discuss process costing systems and calculate product cost using process costing

14.7 Questions

1) Freund Company produces calendars in a one-department process. The following data is available for
the past month:

Work-in-process inventory, beginning 0


Units started 15,000
Units completed and transferred 12,000
Units in ending inventory 3,000

Direct materials added $30,000


Direct labor $20,700
Factory overhead costs $10,350

The units in process at the end of the month are 100 percent complete with respect to materials and 60
percent complete with respect to conversion costs. What are the total costs to account for?
A) $20,700
B) $30,000
C) $50,700
D) $61,050
Answer: D
Diff: 2
LO: 14-7
AACSB: Analytic skills
Learning Outcome: Discuss process costing systems and calculate product cost using process costing

35
Copyright © 2014 Pearson Education
2) Brown Company manufactures tape dispensers. The Assembly Department reported the follow data
for the past month:

Units started and completed 70,000


Units started and not complete 10,000
Units in beginning inventory 0

Direct materials costs $560,000


Conversion costs $240,000

The partially complete units at the end of the month were 100 percent complete with respect to materials
and 60 percent complete with respect to conversion costs. The unit cost of direct materials is ________.
A) $1.67
B) $3.32
C) $6.86
D) $7.00
Answer: D
Diff: 2
LO: 14-7
AACSB: Analytic skills
Learning Outcome: Discuss process costing systems and calculate product cost using process costing

3) Williams Company manufactures tape dispensers. The Assembly Department reported the follow data
for the past month:

Units started and completed 70,000


Units started and not complete 10,000
Units in beginning inventory 0

Direct materials costs $480,000


Conversion costs $240,000

The partially complete units at the end of the month were 100 percent complete with respect to materials
and 40 percent complete with respect to conversion costs. The unit cost of conversion costs is ________.
A) $3.00
B) $3.24
C) $3.42
D) $24.00
Answer: B
Diff: 2
LO: 14-7
AACSB: Analytic skills
Learning Outcome: Discuss process costing systems and calculate product cost using process costing

36
Copyright © 2014 Pearson Education
4) Barber Company manufactures tape dispensers. The Assembly Department reported the follow data
for the past month:

Units started and completed 70,000


Units started and not complete 10,000
Units in beginning inventory 0

Direct materials costs $480,000


Conversion costs $240,000

The partially complete units at the end of the month were 100 percent complete with respect to materials
and 50 percent complete with respect to conversion costs. The cost of one completed unit in the Assembly
Department is ________.
A) $9.00
B) $9.20
C) $9.42
D) $10.29
Answer: B
Diff: 2
LO: 14-7
AACSB: Analytic skills
Learning Outcome: Discuss process costing systems and calculate product cost using process costing

5) Flajovich Company manufactures tape dispensers. The Assembly Department reported the follow data
for the past month:

Units started and completed 70,000


Units started and not complete 10,000
Units in beginning inventory 0

Direct materials costs $480,000


Conversion costs $240,000

The partially complete units at the end of the month were 100 percent complete with respect to materials
and 50 percent complete with respect to conversion costs. The total cost of units completed and
transferred is ________.
A) $630,000
B) $644,000
C) $690,000
D) $720,000
Answer: B
Diff: 2
LO: 14-7
AACSB: Analytic skills
Learning Outcome: Discuss process costing systems and calculate product cost using process costing

37
Copyright © 2014 Pearson Education
6) Ropal Company manufactures tape dispensers. The Assembly Department reported the follow data for
the past month:

Units started and completed 70,000


Units started and not complete 10,000
Units in beginning inventory 0

Direct materials costs $480,000


Conversion costs $240,000

The partially complete units at the end of the month were 100 percent complete with respect to materials
and 50 percent complete with respect to conversion costs. The total cost of ending work-in-process
inventory is ________.
A) $60,000
B) $76,000
C) $90,000
D) $91,600
Answer: B
Diff: 2
LO: 14-7
AACSB: Analytic skills
Learning Outcome: Discuss process costing systems and calculate product cost using process costing

7) Green Company manufactures phones in a two-department process that involves Assembly and
Finishing. The Assembly Department reported the follow data for the past month:

Direct materials added $336,000


Direct labor 460,000
Factory overhead 204,000
Total costs to account for $1,000,000

Units started 80,000


Units completed and transferred 67,200
Units not complete 12,800
Units in beginning inventory 0

The partially complete units at the end of the month were 100 percent complete with respect to materials
and 75 percent complete with respect to conversion costs. The journal entry to record the requisition of
direct materials for the Assembly Department includes a Debit to ________.
A) Direct Materials Inventory for $336,000
B) Work-in-Process Inventory, Finishing for $336,00
C) Work-in-Process Inventory, Assembly for $336,000
D) Finished Goods Inventory for $336,000
Answer: C
Diff: 2
LO: 14-7
AACSB: Analytic skills
Learning Outcome: Discuss process costing systems and calculate product cost using process costing

38
Copyright © 2014 Pearson Education
8) Sherry Company manufactures phones in a two-department process that involves Assembly and
Finishing. The Assembly Department reported the follow data for the past month:

Direct materials added $336,000


Direct labor 460,320
Factory overhead 204,000
Total costs to account for $1,000,320

Units started 80,000


Units completed and transferred 67,200
Units not complete 12,800
Units in beginning inventory 0

The partially complete units at the end of the month were 100 percent complete with respect to materials
and 75 percent complete with respect to conversion costs. The unit cost of conversion costs is ________.
A) $3.00
B) $6.00
C) $8.65
D) $9.00
Answer: C
Diff: 2
LO: 14-7
AACSB: Analytic skills
Learning Outcome: Discuss process costing systems and calculate product cost using process costing

39
Copyright © 2014 Pearson Education
9) Paula Inc. manufactures phones in a two-department process that involves Assembly and Finishing.
The Assembly Department reported the follow data for the past month:

Direct materials added $336,000


Direct labor 460,800
Factory overhead 230,400
Total costs to account for $1,027,200

Units started 80,000


Units completed and transferred 67,200
Units not complete 12,800
Units in beginning inventory 0

The partially complete units at the end of the month were 100 percent complete with respect to materials
and 75 percent complete with respect to conversion costs. The cost of a finished unit is ________.
A) $12.84
B) $13.20
C) $15.29
D) $17.20
Answer: B
Diff: 2
LO: 14-7
AACSB: Analytic skills
Learning Outcome: Discuss process costing systems and calculate product cost using process costing

40
Copyright © 2014 Pearson Education
10) Rachel Company manufactures phones in a two-department process that involves Assembly and
Finishing. The Assembly Department reported the follow data for the past month:

Direct materials added $336,000


Direct labor 460,800
Factory overhead 230,400
Total costs to account for $1,027,200

Units started 80,000


Units completed and transferred 67,200
Units not complete 12,800
Units in beginning inventory 0

The partially complete units at the end of the month were 100 percent complete with respect to materials
and 75 percent complete with respect to conversion costs. The journal entry to record the units completed
and transferred to the Finishing Department includes ________.
A) Debit to Work-in-Process Inventory, Finishing for $862,848
B) Credit to Work-in-Process Inventory, Finishing for $862,848
C) Debit to Work-in-Process Inventory, Assembly for $887,040
D) Credit to Work-in-Process Inventory, Assembly for $887,040
Answer: D
Diff: 2
LO: 14-7
AACSB: Analytic skills
Learning Outcome: Discuss process costing systems and calculate product cost using process costing

41
Copyright © 2014 Pearson Education
11) Roberts Company manufactures phones in a two-department process that involves Assembly and
Finishing. The Assembly Department reported the follow data for the past month:

Direct materials added $336,000


Direct labor 460,800
Factory overhead 230,400
Total costs to account for $1,027,200

Units started 80,000


Units completed and transferred 67,200
Units not complete 12,800
Units in beginning inventory 0

The partially complete units at the end of the month were 100 percent complete with respect to materials
and 75 percent complete with respect to conversion costs. The ending balance in Work-In-Process
Inventory--Assembly is ________.
A) $140,160
B) $168,960
C) $862,848
D) $887,040
Answer: A
Diff: 2
LO: 14-7
AACSB: Analytic skills
Learning Outcome: Discuss process costing systems and calculate product cost using process costing

42
Copyright © 2014 Pearson Education
12) Zimmerman Company manufactures plastic cups in one department. The following information is
available:

Work-In-Process Inventory, beginning 0


Units started 60,000
Units completed and transferred 48,000
Work-In-Process Inventory, end 12,000

Direct materials added $180,000


Direct labor $165,600
Factory overhead $82,800

The units in the ending Work-In-Process Inventory are 50 percent complete with respect to direct
materials and 60 percent complete with respect to conversion costs. The unit cost of direct materials is
________.
A) $1.00
B) $3.00
C) $3.33
D) $5.00
Answer: C
Diff: 2
LO: 14-7
AACSB: Analytic skills
Learning Outcome: Discuss process costing systems and calculate product cost using process costing

13) Keller Company manufactures plastic cups in one department. The following information is available:

Work-In-Process Inventory, beginning 0


Units started 60,000
Units completed and transferred 48,000
Work-In-Process Inventory, end 12,000

Direct materials added $240,000


Direct labor $164,780
Factory overhead $82,000

The units in the ending Work-In-Process Inventory are 50 percent complete with respect to direct
materials and 50 percent complete with respect to conversion costs. The unit cost of conversion costs is
________.
A) $0.88
B) $4.14
C) $4.57
D) $5.18
Answer: C
Diff: 2
LO: 14-7
AACSB: Analytic skills
Learning Outcome: Discuss process costing systems and calculate product cost using process costing

43
Copyright © 2014 Pearson Education
14) Linda Company manufactures gadgets in one department. The following information is available:

Work-In-Process Inventory, beginning 0


Units started 60,000
Units completed and transferred 48,000
Work-In-Process Inventory, end 12,000

Direct materials added $240,000


Direct labor $164,780
Factory overhead $82,000

The units in the ending Work-In-Process Inventory are 0 percent complete with respect to materials and
50 percent complete with respect to conversion costs. Direct materials are added at the end of the process.
The cost of one completed unit is ________.
A) $8.14
B) $8.57
C) $9.57
D) $10.18
Answer: C
Diff: 2
LO: 14-7
AACSB: Analytic skills
Learning Outcome: Discuss process costing systems and calculate product cost using process costing

15) Black Company manufactures gadgets in one department. The following information is available:

Work-In-Process Inventory, beginning 0


Units started 60,000
Units completed and transferred 48,000
Work-In-Process Inventory, end 12,000

Direct materials added $240,000


Direct labor $164,780
Factory overhead $82,000

The units in the ending Work-In-Process Inventory are 0 percent complete with respect to direct materials
and 50 percent complete with respect to conversion costs. Direct materials are added at the end of the
process. The total cost of units completed and transferred is ________.
A) $90,240
B) $411,360
C) $459,360
D) $488,400
Answer: C
Diff: 2
LO: 14-7
AACSB: Analytic skills
Learning Outcome: Discuss process costing systems and calculate product cost using process costing

44
Copyright © 2014 Pearson Education
16) Bombard Company manufactures plastic cups in one department. The following information is
available:

Work-In-Process Inventory, beginning 0


Units started 60,000
Units completed and transferred 48,000
Work-In-Process Inventory, end 12,000

Direct materials added $240,000


Direct labor $164,780
Factory overhead $82,000

The units in the ending Work-In-Process Inventory are 100 percent complete with respect to direct
materials and 50 percent complete with respect to conversion costs. The cost of the ending Work-In-
Process Inventory is ________.
A) $61,200
B) $72,200
C) $75,420
D) $102,000
Answer: C
Diff: 2
LO: 14-7
AACSB: Analytic skills
Learning Outcome: Discuss process costing systems and calculate product cost using process costing

45
Copyright © 2014 Pearson Education
17) Angelina Company manufactures plastic cups in one department. The following information is
available:

Work-In-Process Inventory, beginning 0


Units started 15,000
Units completed and transferred 12,000
Work-In-Process Inventory, end 3,000

Direct materials added $30,000


Direct labor $20,700
Factory overhead $10,350

The units in the ending Work-In-Process Inventory are 100 percent complete with respect to direct
materials and 60 percent complete with respect to conversion costs. The cost of one completed unit is
________.
A) $4.07
B) $4.25
C) $4.42
D) $5.08
Answer: B
Diff: 2
LO: 14-7
AACSB: Analytic skills
Learning Outcome: Discuss process costing systems and calculate product cost using process costing

18) In process costing, the journal entry to record direct labor costs incurred associated with units in a
department would include a ________.
A) Debit to Accrued Payroll
B) Credit to Factory Overhead
C) Debit to Work-in-Process Inventory—Department Name
D) Credit to Finished Goods Inventory
Answer: C
Diff: 2
LO: 14-7
AACSB: Analytic skills
Learning Outcome: Discuss process costing systems and calculate product cost using process costing

19) In process costing, the journal entry to record factory overhead applied to units in a department
would include a ________.
A) Debit to Factory Overhead
B) Debit to Work-in-Process Inventory—Department Name
C) Credit to Cost of Goods Sold
D) Credit to Finished Goods Inventory
Answer: B
Diff: 2
LO: 14-7
AACSB: Analytic skills
Learning Outcome: Discuss process costing systems and calculate product cost using process costing

46
Copyright © 2014 Pearson Education
20) In process costing, the journal entry to transfer completed units from Department A to Department B
would include a ________.
A) Credit to Direct Materials Inventory
B) Debit to Work-In-Process Inventory—Department A
C) Credit to Work-In-Process Inventory—Department B
D) Debit to Work-In-Process Inventory—Department B
Answer: D
Diff: 2
LO: 14-7
AACSB: Analytic skills
Learning Outcome: Discuss process costing systems and calculate product cost using process costing

21) The last step in calculating the production-cost report is to apply unit costs to units completed and to
units in the ending work-in-process inventory.
Answer: TRUE
Diff: 2
LO: 14-7
AACSB: Reflective thinking skills
Learning Outcome: Discuss process costing systems and calculate product cost using process costing

22) Bertinoli's Company makes gadgets. The company uses process costing. All direct materials are
introduced at the end of the process. Conversion costs are incurred evenly throughout the process. In
February, there was no beginning Work-in-Process Inventory, but 490,000 units were started. At the end
of February, there were 90,000 units still in process at the 70% level of completion. Total costs incurred
during February were $1,212,500 for materials and $3,664,000 for conversion costs.

Required:
A) Compute the number of units completed and transferred.
B) Compute the equivalent units for materials and conversion costs.
C) Compute the cost per equivalent unit for materials and conversion costs. Round to two decimal places.
D) Compute the cost of the units completed and transferred.
E) Compute the cost of ending work-in-process inventory.
Answer:
A) 400,000 units
B) Materials: 400,000 equivalent units
Conversion Costs: 463,000 equivalent units
C) Materials: $1,212,500/400,000 = $3.03 per unit
Conversion Costs: $3,664,000/463,000 = $7.91 per unit
D) $10.94 × 400,000 = $4,376,000
E) (63,000 × $7.91) = $498,330
Diff: 2
LO: 14-7
AACSB: Analytic skills
Learning Outcome: Discuss process costing systems and calculate product cost using process costing

47
Copyright © 2014 Pearson Education
23) Burtard Chemical makes a variety of chemicals. The company uses process costing. Materials are
added at the end of the process. Conversion costs are added evenly throughout the process. The company
has no beginning work-in-process inventory. The Mixing Department had the following data:

Units started and completed 8,000


Units started and 30% complete 2,500

Direct materials costs $126,000


Direct labor costs $31,250
Factory overhead costs $30,000

Required:
A) Compute the equivalent units for materials and conversion costs.
B) Compute the cost per unit for materials and conversion costs.
C) Compute the cost of the goods completed and transferred.
D) Compute the cost of the ending work-in-process inventory.
Answer:
A) Materials 8,000
Conversion costs 8,750
B) Materials $15.75 per unit
Conversion costs $7.00 per unit
C) ($15.75 + $7.00) × 8,000 = $182,000
D) $7.00 × 2,500 × 30% = $5,250
Diff: 2
LO: 14-7
AACSB: Analytic skills
Learning Outcome: Discuss process costing systems and calculate product cost using process costing

48
Copyright © 2014 Pearson Education
24) The manufacturing costs of the Assembly Department for the month of July are as follows:

Direct materials added $220,000


Direct labor costs added $190,000
Factory overhead costs applied $140,000

The company uses a process costing system. At July 31, the cost of the goods completed and transferred to
the Finishing Department was $563,000.

Required:
A) Prepare summary journal entries for the use of direct materials, direct labor and factory overhead.
B) Prepare a journal entry for the transfer of completed goods.
Answer: A)
Work-in-Process Inventory—Assembly 220,000
Direct Materials Inventory 220,000

Work-in-Process Inventory—Assembly 190,000


Accrued Payroll 190,000

Work-in-Process Inventory—Assembly 140,000


Factory Overhead 140,000

B)
Work-in-Process Inventory—Finishing 563,000
Work-in-Process Inventory—Assembly 563,000
Diff: 2
LO: 14-7
AACSB: Analytic skills
Learning Outcome: Discuss process costing systems and calculate product cost using process costing

14.8 Questions

1) The weighted-average method of process costing adds the cost of all work done in the current period to
________.
A) the ending work-in-process inventory
B) all costs estimated to be incurred in the next department
C) the cost of the work done in the preceding period to the current period's ending work-in-process
inventory
D) the cost of the work done in the preceding period to the current period's beginning work-in-process
inventory
Answer: D
Diff: 2
LO: 14-8
AACSB: Analytic skills
Learning Outcome: Discuss process costing systems and calculate product cost using process costing

49
Copyright © 2014 Pearson Education
2) Jorgensen Company manufactures generic notebooks. Material is introduced at the beginning of the
process in the Printing Department. Conversion costs are applied uniformly throughout the process. The
weighted-average method of process costing is used. Data for the Printing Department for the month of
June follow:

Work-In-Process Inventory, June 1:


Units 15,000
Direct materials (100% complete) $34,000
Conversion costs (30% complete) $14,000

Units started in June 65,000


Units completed in June 62,000
Work-In-Process Inventory, June 30 18,000

Direct materials added in June $285,000


Conversion costs added in June $210,000

With regard to the Work-In-Process Inventory on June 30, materials are 100 percent complete and
conversion costs are 60 percent complete. What are the equivalent units for materials for June?
A) 62,000
B) 77,000
C) 80,000
D) 83,000
Answer: C
Diff: 3
LO: 14-8
AACSB: Analytic skills
Learning Outcome: Discuss process costing systems and calculate product cost using process costing

50
Copyright © 2014 Pearson Education
3) Bradley Company manufactures generic notebooks. Material is introduced at the beginning of the
process in the Printing Department. Conversion costs are applied uniformly throughout the process. The
weighted-average method of process costing is used. Data for the Printing Department for the month of
June follow:

Work-In-Process Inventory, June 1:


Units 15,000
Direct materials (100% complete) $34,000
Conversion costs (30% complete) $14,000

Units started in June 65,000


Units completed in June 62,000
Work-In-Process Inventory, June 30 18,000

Direct materials added in June $285,000


Conversion costs added in June $210,000

With regard to the Work-In-Process Inventory on June 30, materials are 100 percent complete and
conversion costs are 50 percent complete. What are the equivalent units for conversion costs for June?
A) 62,000
B) 68,300
C) 71,000
D) 80,000
Answer: C
Diff: 3
LO: 14-8
AACSB: Analytic skills
Learning Outcome: Discuss process costing systems and calculate product cost using process costing

51
Copyright © 2014 Pearson Education
4) Jones Company manufactures greeting cards. Material is introduced at the beginning of the process in
the Printing Department. Conversion costs are applied uniformly throughout the process. The weighted-
average method of process costing is used. Data for the Printing Department for the month of September
follow:

Work-In-Process Inventory, September 1:


Units 22,500
Direct materials (100% complete) $51,000
Conversion costs (30% complete) $20,472

Units started in September 127,500


Units completed in September 123,000
Work-In-Process Inventory, September 30 27,000

Direct materials added in September $427,500


Conversion costs added in September $315,000

With regard to the Work-In-Process Inventory on September 30, materials are 100 percent complete and
conversion costs are 60 percent complete. The equivalent units for materials are ________.
A) 125,000
B) 145,500
C) 150,000
D) 154,500
Answer: C
Diff: 3
LO: 14-8
AACSB: Analytic skills
Learning Outcome: Discuss process costing systems and calculate product cost using process costing

52
Copyright © 2014 Pearson Education
5) Smith manufactures greeting cards. Material is introduced at the beginning of the process in the
Printing Department. Conversion costs are applied uniformly throughout the process. The weighted-
average method of process costing is used. Data for the Printing Department for the month of September
follow:

Work-In-Process Inventory, September 1:


Units 22,500
Direct materials (100% complete) $51,000
Conversion costs (30% complete) $20,472

Units started in September 127,500


Units completed in September 123,000
Work-In-Process Inventory, September 30 27,000

Direct materials added in September $427,500


Conversion costs added in September $315,000

With regard to the Work-In-Process Inventory on September 30, materials are 100 percent complete and
conversion costs are 50 percent complete. The equivalent units for conversion costs are ________.
A) 123,000
B) 132,450
C) 136,500
D) 150,000
Answer: C
Diff: 3
LO: 14-8
AACSB: Analytic skills
Learning Outcome: Discuss process costing systems and calculate product cost using process costing

53
Copyright © 2014 Pearson Education
6) Brankovich Company manufactures generic notebooks. Material is introduced at the beginning of the
process in the Printing Department. Conversion costs are applied uniformly throughout the process. The
weighted-average method of process costing is used. Data for the Printing Department for the month of
June follow:

Work-In-Process Inventory, June 1:


Units 15,000
Direct materials (100% complete) $35,000
Conversion costs (30% complete) $14,000

Units started in June 65,000


Units completed in June 62,000
Work-In-Process Inventory, June 30 18,000

Direct materials added in June $285,000


Conversion costs added in June $210,000

With regard to the Work-In-Process Inventory on June 30, materials are 100 percent complete and
conversion costs are 60 percent complete. The unit cost for materials is ________.
A) $3.54
B) $3.59
C) $4.00
D) $4.91
Answer: C
Diff: 3
LO: 14-8
AACSB: Analytic skills
Learning Outcome: Discuss process costing systems and calculate product cost using process costing

54
Copyright © 2014 Pearson Education
7) Simeranio Company manufactures generic notebooks. Material is introduced at the beginning of the
process in the Printing Department. Conversion costs are applied uniformly throughout the process. The
weighted-average method of process costing is used. Data for the Printing Department for the month of
June follow:

Work-In-Process Inventory, June 1:


Units 15,000
Direct materials (100% complete) $35,000
Conversion costs (30% complete) $14,000

Units started in June 65,000


Units completed in June 62,000
Work-In-Process Inventory, June 30 18,000

Direct materials added in June $285,000


Conversion costs added in June $210,000

With regard to the Work-In-Process Inventory on June 30, materials are 100 percent complete and
conversion costs are 50 percent complete. The unit cost for conversion costs is ________.
A) $2.62
B) $2.80
C) $2.88
D) $3.15
Answer: D
Diff: 3
LO: 14-8
AACSB: Analytic skills
Learning Outcome: Discuss process costing systems and calculate product cost using process costing

55
Copyright © 2014 Pearson Education
8) Gomez Company manufactures generic notebooks. Material is introduced at the beginning of the
process in the Printing Department. Conversion costs are applied uniformly throughout the process. The
weighted-average method of process costing is used. Data for the Printing Department for the month of
June follow:

Work-In-Process Inventory, June 1:


Units 15,000
Direct materials (100% complete) $35,000
Conversion costs (30% complete) $8,400

Units started in June 65,000


Units completed in June 62,000
Work-In-Process Inventory, June 30 18,000

Direct materials added in June $285,000


Conversion costs added in June $210,000

With regard to the Work-In-Process Inventory on June 30, materials are 100 percent complete and
conversion costs are 60 percent complete. The total cost of goods transferred out of the Printing
Department is ________.
A) $420,825
B) $434,000
C) $495,000
D) $543,000
Answer: B
Diff: 3
LO: 14-8
AACSB: Analytic skills
Learning Outcome: Discuss process costing systems and calculate product cost using process costing

56
Copyright © 2014 Pearson Education
9) El Rey Company manufactures generic notebooks. Material is introduced at the beginning of the
process in the Printing Department. Conversion costs are applied uniformly throughout the process. The
weighted-average method of process costing is used. Data for the Printing Department for the month of
June follow:

Work-In-Process Inventory, June 1:


Units 15,000
Direct materials (100% complete) $35,000
Conversion costs (30% complete) $8,400

Units started in June 65,000


Units completed in June 62,000
Work-In-Process Inventory, June 30 18,000

Direct materials added in June $285,000


Conversion costs added in June $210,000

With regard to the Work-In-Process Inventory on June 30, materials are 100 percent complete and
conversion costs are 60 percent complete. The total cost of the ending Work-In-Process Inventory is
________.
A) $104,400
B) $111,996
C) $122,175
D) $127,260
Answer: A
Diff: 3
LO: 14-8
AACSB: Analytic skills
Learning Outcome: Discuss process costing systems and calculate product cost using process costing

57
Copyright © 2014 Pearson Education
10) Saludo Company manufactures greeting cards. Special glittery material is added at the end of the
process in the Printing Department. Conversion costs are applied uniformly throughout the process. The
weighted-average method of process costing is used. Data for the Printing Department for the month of
September follow:

Work-In-Process Inventory, September 1:


Units 22,500
Direct materials (0% complete) $0
Conversion costs (30% complete) $20,472

Units started in September 127,500


Units completed in September 123,000
Work-In-Process Inventory, September 30 27,000

Direct materials added in September $425,000


Conversion costs added in September $315,000

With regard to the Work-In-Process Inventory on September 30, materials are 0 percent complete and
conversion costs are 60 percent complete. The unit cost for materials is ________.
A) $2.85
B) $3.20
C) $3.46
D) $3.89
Answer: C
Diff: 3
LO: 14-8
AACSB: Analytic skills
Learning Outcome: Discuss process costing systems and calculate product cost using process costing

58
Copyright © 2014 Pearson Education
11) Walter Company manufactures greeting cards. Special glittery material is added at the end of the
process in the Printing Department. Conversion costs are applied uniformly throughout the process. The
weighted-average method of process costing is used. Data for the Printing Department for the month of
September follow:

Work-In-Process Inventory, September 1:


Units 22,500
Direct materials (0% complete) $0
Conversion costs (30% complete) $20,472

Units started in September 127,500


Units completed in September 123,000
Work-In-Process Inventory, September 30 27,000

Direct materials added in September $427,500


Conversion costs added in September $315,000

With regard to the Work-In-Process Inventory on September 30, materials are 0 percent complete and
conversion costs are 60 percent complete. The unit cost for conversion costs is ________.
A) $2.24
B) $2.26
C) $2.41
D) $2.73
Answer: C
Diff: 3
LO: 14-8
AACSB: Analytic skills
Learning Outcome: Discuss process costing systems and calculate product cost using process costing

59
Copyright © 2014 Pearson Education
12) Fish Company manufactures greeting cards. Special glittery material is added at the end of the
process in the Printing Department. Conversion costs are applied uniformly throughout the process. The
weighted-average method of process costing is used. Data for the Printing Department for the month of
September follow:

Work-In-Process Inventory, September 1:


Units 22,500
Direct materials (0% complete) $0
Conversion costs (30% complete) $20,472

Units started in September 127,500


Units completed in September 123,000
Work-In-Process Inventory, September 30 27,000

Direct materials added in September $492,000


Conversion costs added in September $315,000

With regard to the Work-In-Process Inventory on September 30, materials are 0 percent complete and
conversion costs are 60 percent complete. The total cost of goods transferred out of the Printing
Department is ________.
A) $688,800
B) $714,000
C) $788,430
D) $813,972
Answer: C
Diff: 3
LO: 14-8
AACSB: Analytic skills
Learning Outcome: Discuss process costing systems and calculate product cost using process costing

60
Copyright © 2014 Pearson Education
13) Salmon Company manufactures greeting cards. Special glittery material is added at the end of the
process in the Printing Department. Conversion costs are applied uniformly throughout the process. The
weighted-average method of process costing is used. Data for the Printing Department for the month of
September follow:

Work-In-Process Inventory, September 1:


Units 22,500
Direct materials (0% complete) $0
Conversion costs (30% complete) $20,472

Units started in September 127,500


Units completed in September 123,000
Work-In-Process Inventory, September 30 27,000

Direct materials added in September $427,500


Conversion costs added in September $315,000

With regard to the Work-In-Process Inventory on September 30, materials are 0 percent complete and
conversion costs are 60 percent complete. The total cost of the ending Work-In-Process Inventory is
________.
A) $39,042
B) $90,720
C) $128,520
D) $151,200
Answer: A
Diff: 3
LO: 14-8
AACSB: Analytic skills
Learning Outcome: Discuss process costing systems and calculate product cost using process costing

14) When there is beginning work-in-process inventory and process costing, the weighted-average
method of inventory costing must be used.
Answer: FALSE
Diff: 2
LO: 14-8
AACSB: Reflective thinking skills
Learning Outcome: Discuss process costing systems and calculate product cost using process costing

15) The most popular inventory system that companies use for process costing with beginning
inventories is the weighted-average method.
Answer: TRUE
Diff: 2
LO: 14-8
AACSB: Reflective thinking skills
Learning Outcome: Discuss process costing systems and calculate product cost using process costing

61
Copyright © 2014 Pearson Education
16) Under weighted-average process costing, the unit costs used for applying costs to products are based
on the total costs incurred to date, regardless of whether those costs were incurred during or before the
current period.
Answer: TRUE
Diff: 2
LO: 14-8
AACSB: Reflective thinking skills
Learning Outcome: Discuss process costing systems and calculate product cost using process costing

17) Diulio Company produces a product in a process-costing system involving several departments. The
company uses the weighted-average method of process costing. The first department's data for the month
of April follow:

Units in beginning work-in-process inventory 15,000


Units started during April 140,000
Units completed during April 120,000
Units in ending work-in-process inventory 35,000

Direct materials added in current month $168,000


Conversion costs added in current month $186,000
Direct materials-beginning work-in-process inventory $25,750
Conversion costs-beginning work-in-process inventory $3,225

Stage of Completion:
Materials Conversion Costs
Beginning work-in-process inventory 50% 40%
Ending work-in-process inventory 50% 30%

Required:
A) Compute equivalent units for materials and conversion costs.
B) Compute the cost per unit for materials and conversion costs. Round to two decimal places.
C) Compute the cost of the units transferred.
D) Compute the cost of the ending work-in-process inventory.
Answer:
A) Materials: 137,500 equivalent units
Conversion Costs: 130,500 equivalent units
B) Materials: $1.41 per unit
Conversion Costs: $1.45 per unit
C) $343,200 = 120,000 × $2.86
D) $39,900 = (35,000 x 50% × $1.41) + (35,000 × 30% × $1.45)
Diff: 3
LO: 14-8
AACSB: Analytic skills
Learning Outcome: Discuss process costing systems and calculate product cost using process costing

62
Copyright © 2014 Pearson Education
18) Brother Company prints calendars. All direct materials are added at the inception of the printing
process. There were 20,000 units in beginning inventory with a direct material cost of $1,000 and
conversion costs of $3,760.

During the month of April, 160,000 calendars were started and 144,000 calendars were completed. Direct
materials cost $26,000 for the month of April. Conversion costs for the month of April were $20,000.

Ending work-in-process units are 100% complete with regard to direct materials and 40% complete with
regard to conversion costs. The weighted-average method of process costing is used by Binding
Company.

Required:
A) Compute the equivalent units for materials and conversion costs.
B) Compute the unit costs for materials and conversion costs.
C) Compute the cost of units transferred.
D) Compute the cost of ending work-in-process inventory.
Answer:
A) Materials: 180,000 equivalent units
Conversion Costs: 158,400 equivalent units
B) Materials: $0.15 per unit
Conversion Costs: $0.15 per unit
C) $43,200
D) $7,560
Diff: 3
LO: 14-8
AACSB: Analytic skills
Learning Outcome: Discuss process costing systems and calculate product cost using process costing

14.9 Questions

1) When using process costing with transferred-in costs, the production report for Department B has
________ columns for ________ different types of costs. Assume Department B adds materials and
conversion costs to units received from Department A.
A) two; two
B) three; three
C) four; four
D) indeterminate; indeterminate
Answer: B
Diff: 3
LO: 14-9
AACSB: Reflective thinking skills
Learning Outcome: Discuss process costing systems and calculate product cost using process costing

63
Copyright © 2014 Pearson Education
2) Department B is the second department in a series of production processes. Department B receives
units from Department A. Department B adds materials, labor and overhead to the units received. The
company uses process costing. What costs are assigned to each completed unit in Department B?
A) material cost per equivalent unit, conversion cost per equivalent unit
B) transferred-in cost per equivalent unit, conversion cost per equivalent unit
C) transferred-in cost per equivalent unit, material cost per equivalent unit
D) transferred-in cost per equivalent unit, material cost per equivalent unit, conversion cost per
equivalent unit
Answer: D
Diff: 3
LO: 14-9
AACSB: Analytic skills
Learning Outcome: Discuss process costing systems and calculate product cost using process costing

3) In process costing, which of the following cost(s) is(are) usually included in transferred-in costs?
A) direct materials cost only
B) conversion costs only
C) direct materials cost and conversion costs
D) none of the above
Answer: C
Diff: 3
LO: 14-9
AACSB: Reflective thinking skills
Learning Outcome: Discuss process costing systems and calculate product cost using process costing

4) What are transferred-in costs?


A) costs that can be ignored in calculating the cost of ending Work-in-Process Inventory
B) costs that can be ignored in calculating the cost of beginning Work-in-Process Inventory
C) costs that can be ignored in calculating the cost of units transferred to the next department
D) costs incurred in a previous department for units that have been received by a subsequent department
Answer: D
Diff: 3
LO: 14-9
AACSB: Reflective thinking skills
Learning Outcome: Discuss process costing systems and calculate product cost using process costing

64
Copyright © 2014 Pearson Education
5) Beckronski Company has the following information available for the month of March:

Units Transferred- Direct Conversion


in Costs Materials Costs
Work-in-process inventory, March 1 240 $33,600 0 $18,000
*Percent complete 100% 0% 62.5%

Transferred-in during March 400


Completed in March 440
Work-in-process inventory, March 31 200
*Percent complete 100% 0% 80%

Costs added in March $52,000 $13,200 $48,600

The company uses the weighted-average cost method of process costing. What are the equivalent units
for March for direct materials?
A) 400
B) 440
C) 600
D) 640
Answer: B
Diff: 3
LO: 14-9
AACSB: Analytic skills
Learning Outcome: Discuss process costing systems and calculate product cost using process costing

65
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6) Latinovich Company has the following information available for the month of March:

Units Transferred- Direct Conversion


in Costs Materials Costs
Work-in-process inventory, March 1 240 $33,600 0 $18,000
*Percent complete 100% 0% 62.5%

Transferred-in during March 400


Completed in March 440
Work-in-process inventory, March 31 200
*Percent complete 100% 0% 80%

Costs added in March $52,000 $13,200 $48,600

The company uses the weighted-average method of process costing. What are the equivalent units for
March for conversion costs?
A) 400
B) 440
C) 600
D) 640
Answer: C
Diff: 3
LO: 14-9
AACSB: Analytic skills
Learning Outcome: Discuss process costing systems and calculate product cost using process costing

66
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7) Schaefer Company has the following information available for the month of March:

Units Transferred- Direct Conversion


in Costs Materials Costs
Work-in-process inventory, March 1 240 $33,600 0 $18,000
*Percent complete 100% 0% 62.5%

Transferred-in during March 400


Completed in March 440
Work-in-process inventory, March 31 200
*Percent complete 100% 0% 80%

Costs added in March $52,000 $13,200 $48,600

The company uses the weighted-average method for process costing. What are the equivalent units for
March for transferred-in costs?
A) 400
B) 440
C) 600
D) 640
Answer: D
Diff: 3
LO: 14-9
AACSB: Analytic skills
Learning Outcome: Discuss process costing systems and calculate product cost using process costing

67
Copyright © 2014 Pearson Education
8) Litfin Company has the following information available for the month of March:

Units Transferred- Direct Conversion


in Costs Materials Costs
Work-in-process inventory, March 1 240 $33,600 0 $18,000
*Percent complete 100% 0% 62.5%

Transferred-in during March 400


Completed in March 440
Work-in-process inventory, March 31 200
*Percent complete 100% 0% 80%

Costs added in March $52,000 $13,200 $48,600

The company uses the weighted average cost method. What is the cost per equivalent unit for March for
direct materials?
A) $20.63
B) $22.00
C) $30.00
D) $33.00
Answer: C
Diff: 3
LO: 14-9
AACSB: Reflective thinking skills
Learning Outcome: Discuss process costing systems and calculate product cost using process costing

68
Copyright © 2014 Pearson Education
9) Zeman Company has the following information available for the month of March:

Units Transferred- Direct Conversion


in Costs Materials Costs
Work-in-process inventory, March 1 240 $33,600 0 $18,000
*Percent complete 100% 0% 62.5%

Transferred-in during March 400


Completed in March 440
Work-in-process inventory, March 31 200
*Percent complete 100% 0% 80%

Costs added in March $52,000 $13,200 $48,600

The company uses the weighted average cost method. What is the cost per equivalent unit for March for
conversion costs?
A) $22.00
B) $40.91
C) $104.06
D) $111.00
Answer: D
Diff: 3
LO: 14-9
AACSB: Analytic skills
Learning Outcome: Discuss process costing systems and calculate product cost using process costing

10) In process costing, goods are moved from the Assembly Department to the Packaging Department.
Costs incurred in the Assembly Department for the goods received by the Packaging Department are
called ________ by the Packaging Department.
A) equivalent units
B) finished goods
C) transferred-in costs
D) factory overhead applied
Answer: C
Diff: 2
LO: 14-9
AACSB: Analytic skills
Learning Outcome: Discuss process costing systems and calculate product cost using process costing

11) In process costing, the transferred-in costs include only direct materials costs.
Answer: FALSE
Diff: 2
LO: 14-9
AACSB: Reflective thinking skills
Learning Outcome: Discuss process costing systems and calculate product cost using process costing

69
Copyright © 2014 Pearson Education
14.10 Questions

1) West Allis Bike Shop uses a backflush-costing system to account for bicycles. Bicycles are scheduled for
production only after orders are received and products are shipped to customers immediately upon
completion. No Finished Goods Inventory is maintained and product costs are applied directly to Cost of
Goods Sold. The standard cost for materials is $150 per bicycle. The standard cost for conversion costs is
$75 per bicycle.

During the current month, West Allis Bike Shop purchased $6,000 of direct materials and incurred $3,000
in conversion costs to produce 40 bicycles. The journal entry to record the purchase of materials includes
a Debit to ________.
A) Materials Inventory
B) Work-in-Process Inventory
C) Finished Goods Inventory
D) Cost of Goods Sold
Answer: A
Diff: 1
LO: 14-10
AACSB: Analytic skills
Learning Outcome: None

2) Wheel and Sprocket Company uses a backflush-costing system to account for bicycles. Bicycles are
scheduled for production only after orders are received and products are shipped to customers
immediately upon completion. No Finished Goods Inventory is maintained and product costs are applied
directly to Cost of Goods Sold. The standard cost for materials is $150 per bicycle. The standard cost for
conversion costs is $75 per bicycle.

During the current month, Wheel and Sprocket Company purchased $6,000 of direct materials and
incurred $3,000 in conversion costs to produce 40 bicycles. The journal entry for the incurrence of
conversion costs includes a Debit to ________.
A) Finished Goods Inventory for $3,000
B) Work-In-Process Inventory for $3,000
C) Conversion Costs for $3,000
D) Cost of Goods Sold for $3,000
Answer: C
Diff: 2
LO: 14-10
AACSB: Analytic skills
Learning Outcome: None

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3) Healthy Connection Company uses a backflush-costing system to account for bicycles. Bicycles are
scheduled for production only after orders are received and products are shipped to customers
immediately upon completion. No Finished Goods Inventory is maintained and product costs are applied
directly to Cost of Goods Sold. The standard cost for materials is $150 per bicycle. The standard cost for
conversion costs is $75 per bicycle.

During the current month, Healthy Connection Company purchased $6,000 of direct materials and
incurred $3,000 in conversion costs to produce 40 bicycles. When production is complete, the journal
entry has a Debit to ________.
A) Finished Goods Inventory for $9,000
B) Conversion Costs for $9,000
C) Cost of Goods Sold for $9,000
D) No entry is needed
Answer: C
Diff: 2
LO: 14-10
AACSB: Analytic skills
Learning Outcome: None

4) In backflush costing, any remaining balance in the Conversion Costs account at the end of the
accounting period is charged to ________.
A) Cost of Goods Sold
B) Work-in-Process Inventory
C) Finished Goods Inventory
D) Direct Materials Inventory
Answer: A
Diff: 2
LO: 14-10
AACSB: Analytic skills
Learning Outcome: None

5) Backflush costing provides reasonably accurate product costs if materials inventories are ________.
A) high and production cycle times are short
B) high and production cycle times are long
C) low and production cycle times are short
D) low and production cycle times are long
Answer: C
Diff: 2
LO: 14-10
AACSB: Reflective thinking skills
Learning Outcome: None

6) Backflush costing has only two categories of costs that include materials and conversion costs.
Answer: TRUE
Diff: 2
LO: 14-10
AACSB: Reflective thinking skills
Learning Outcome: None

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7) Backflush costing has no Work-In-Process Inventory account.
Answer: TRUE
Diff: 2
LO: 14-10
AACSB: Reflective thinking skills
Learning Outcome: None

8) Some backflush costing systems eliminate the Finished Goods Inventory account.
Answer: TRUE
Diff: 2
LO: 14-10
AACSB: Reflective thinking skills
Learning Outcome: None

9) Kulvekowski Company manufactures aircraft parts. A backflush costing system is used and standard
costs for the part follow:

Direct materials $1.50


Conversion costs $2.00

The parts are scheduled for production only after orders are received. They are shipped immediately
upon completion. Product costs are charged directly to Cost of Goods Sold. In July, 6,000 parts were
produced and immediately shipped to the customer. Materials were purchased for cash at a cost of
$10,000 and actual conversion costs were $12,000.

Required:
Prepare the necessary journal entries.
Answer: Materials Inventory 10,000
Cash 10,000

Conversion Costs 12,000


Various Accounts 12,000

Cost of Goods Sold 21,000


Materials Inventory ($1.50 × 6,000) 9,000
Conversion Costs ($2 × 6,000) 12,000
Diff: 2
LO: 14-10
AACSB: Analytic skills
Learning Outcome: None

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Copyright © 2014 Pearson Education

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