Cost Accounting Q A

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Chapter: Chapter 24: Process Costing

True/False

1. Process cost accounting systems are generally used by companies that produce a large volume of standardized units on a continuous basis.
Ans: True
Difficulty: Easy
LO: 1

2. The managers of process manufacturing systems focus on the series of processes needed to complete the production of the products.
Ans: True
Difficulty: Easy
LO: 1

3. In a process manufacturing system, only one process is in progress at any particular point in time.
Ans: False
Difficulty: Easy
LO: 1

4. Process manufacturing usually occurs when the manufacturer produces large quantities of identical products.
Ans: True
Difficulty: Easy
LO: 1

http://webcache.googleusercontent.com/search?q=cache:6wvSeskB6V4J:210.31.100.100/kjxyl/教学 / 与模卷/英文 /Ch24%20Process%20Costing.rtf+"a+manufacturing+company+may+choose+to+use+either+a+job"&cd=5&hl=en&ct=clnk&gl=us&source=www.google.com[4/23/2011 5:02:24 PM]

5. Accountants use the term "process cost accounting system" because these systems use a number of trained individuals and computers to process the collected information.
Ans: False
Difficulty: Easy
LO: 1

6. Process costing involves repetitive production and heterogeneous products among its features.
Ans: False
Difficulty: Easy
LO: 1

7. Managers of process manufacturing systems are not evaluated on the basis of the costs incurred in their departments.
Ans: False
Difficulty: Moderate
LO: 1

8. Process cost accounting systems are used only by companies that manufacture physical products. Thus, companies and other organizations that provide services to their customers do not use process cost accounting.
Ans: False
LO: 1

9. Process cost accounting systems are used by companies that manufacture standardized products by passing them through a series of manufacturing steps.
Ans: True
LO: 1

10. A unique feature of process costing systems is the use of a single Goods in Process control account.
Ans: False
LO: 1

11. Unfortunately, the use of process costing is of little benefit to a service type of operation.
Ans: False
LO: 1

12. The ultimate objective of both job order costing and process costing is the same—to determine the cost per unit of output.

Ans: True
LO: 1

13. Companies that use a series of manufacturing processes to produce standardized products should use a process cost accounting system.
Ans: True
Difficulty: Easy
LO: 1

14. A production department is an organizational unit of a factory that has the responsibility for partially manufacturing or producing a product or service.
Ans: True
Difficulty: Easy
LO: 1

15. The cost object in process costing is the process itself.
Ans: True
Difficulty: Easy
LO: 1

16. In defining direct costs and indirect costs, it is the process that is the cost object in process costing.
Ans: True
Difficulty: Easy
LO: 1

17. The cost object in process costing is the same as in job order costing.
Ans: False
LO: 1

18. A manufacturing company may choose to use either a job order cost accounting system or a process cost accounting system, without considering the process it uses to produce its products.
Ans: False
Difficulty: Easy
LO: 2

19. Process and job order manufacturing operations are similar because they both combine materials, labour, and manufacturing overhead items in the process of producing products.
Ans: True

Difficulty: Easy
LO: 2

20. Some firms that primarily use job order costing may use process costing for a portion of their operations.
Ans: True
Difficulty: Easy
LO: 2

21. Job order and process manufacturing systems are similar in that they can only be used to apply direct materials, direct labour, and overhead to identifiable product units.
Ans: False
LO: 2

22. Using JIT in process costing can reduce costs.
Ans: True
LO: 2

23. The accounting systems used in process costing are simpler than those used in job order costing.
Ans: False
LO: 2

24. When a process cost accounting system records the purchase of raw materials, the Raw Materials Inventory account is credited instead of the Raw Materials Purchases account.
Ans: False
LO: 3

25. When a process cost accounting system records the purchase of raw materials, the Raw Materials Inventory account is debited instead of the Raw Materials Purchases account.
Ans: True
LO: 3

26. When a process cost accounting system assigns the cost of materials to the output produced by a department, the journal entry debits the Raw Materials Inventory account and credits the Goods in Process Inventory account for that department.
Ans: False

LO: 3

27. If Department A uses $10,000 of direct materials and Department B uses $15,000 of direct materials, this journal entry would be recorded by the process cost accounting system:
Goods in Process Inventory, Department B 10,000

Goods in Process Inventory, Department A 15,000
Raw Materials Inventory 25,000

Ans: False
LO: 3

28. If Department J uses $40,000 of direct materials and Department K uses $70,000 of direct materials, this journal entry would be recorded by the process cost accounting system:

Goods in Process Inventory, Department J 40,000
Goods in Process Inventory, Department K 30,000

Ans: False
LO: 3

29. If Department Q uses $60,000 of direct materials and Department T uses $15,000 of direct materials, this journal entry would be recorded by the process cost accounting system:
Finished Goods Inventory, Department Q 60,000

Finished Goods Inventory, Department T 15,000

Ans: False
LO: 3

30. If Department C uses $19,000 of direct materials and Department D uses $45,000 of direct materials, this journal entry would be recorded by the process cost accounting system:
Goods in Process Inventory, Department C 19,000

Goods in Process Inventory, Department D 45,000

Ans: True
LO: 3


31. In process cost accounting, the classification of materials as direct or indirect depends on whether they are consumed totally within a single department.
Ans: True
LO: 3

32. In process cost accounting, materials are always classified as indirect if they are not physically incorporated into the final product.
Ans: False
LO: 3

33. Direct costs in process cost accounting include those costs that can be readily identified with particular product units.
Ans: False
LO: 3

34. Process cost accounting systems consider direct costs to include those costs that can be readily identified with a particular process.
Ans: True
LO: 3

35. All process cost accounting systems use materials requisitions to release raw materials from the storeroom to the factory.
Ans: False
LO: 3

36. A materials consumption report is a source document that summarizes the materials used during a reporting period.
Ans: True
LO: 3

37. A materials consumption report is prepared to identify those managers who inappropriately exceeded the planned level of materials consumption.
Ans: False
LO: 3

38. Refer to the following table of cost information:

This journal entry would be made to record the use of direct materials in the reporting period covered by the information:
Goods in Process Inventory, Pickling Dept 16,000

Goods in Process Inventory, Canning Dept. 3,000

Ans: True
LO: 3

39. In process cost accounting, all labour that is applied exclusively in a single production department is considered to be direct labour.
Ans: True
Difficulty: Easy
LO: 4

40. After all process cost accounting journal entries are recorded and posted for a reporting period, the Factory Payroll account should have a zero balance.
Ans: True
Difficulty: Easy
LO: 4

41. If the factory labour cost for a month was $123,000, this journal entry would be recorded by the process cost accounting system:
Factory Payroll 123,000

Cash 123,000

Ans: True
LO: 4

42. If Department N incurred direct labour cost of $22,000 and Department O incurred direct labour cost of $43,000, this journal entry would be recorded by the process cost accounting system:

Goods in Process Inventory, Department N 22,000
Goods in Process Inventory, Department O 43,000

Ans: False
LO: 4

43. If Department T uses $89,000 of direct labour and Department V uses $11,000 of direct labour, this journal entry would be recorded by the process cost accounting system:

Goods in Process Inventory, Department V 89,000
Goods in Process Inventory, Department T 11,000
Factory Overhead 100,000

Ans: False
LO: 4

44. If Department G uses $53,000 of direct labour and Department H uses $21,000 of direct labour, this journal entry would be recorded by the process cost accounting system:
Goods in Process Inventory, Department G 53,000

Goods in Process Inventory, Department H 21,000

Ans: True
LO: 4

45. In process cost accounting, direct labour always includes only the labour that is applied directly to the products.
Ans: False
LO: 4

46. In some circumstances, a process cost accounting system may classify wages paid to maintenance workers as direct labour costs instead of factory overhead.
Ans: True
LO: 4

47. Some factory labour costs incurred in a reporting period are presented on the income statement as Factory Labour Expense.
Ans: False
LO: 4


This journal entry would be made to record the use of direct labour in the reporting period covered by the information:

Goods in Process Inventory, Pickling Dept. 4,000


Ans: False
LO: 4


This journal entry would be made to record the use of direct labour in the reporting period covered by the information:
Goods in Process Inventory, Pushing Dept. 120,000

Goods in Process Inventory, Shoving Dept. 70,000

Ans: True
LO: 4

50. Process cost accounting systems consider overhead costs to include those costs that cannot be readily identified with any specific process.
Ans: True
Difficulty: Easy
LO: 5

51. Factory overhead costs can be allocated by a process cost accounting system to the output of production departments by using a predetermined overhead allocation rate.
Ans: True
Difficulty: Easy
LO: 5

52. If the indirect materials cost for a reporting period was $37,500, the following journal entry would be recorded by the process cost accounting system:


Ans: True
Difficulty: Easy
LO: 5

53. A process cost accounting system records all factory overhead costs directly in the Goods in Process Inventory accounts.
Ans: False
Difficulty: Easy
LO: 5


54. In process costing there is rarely a balance in Factory Overhead that needs to be closed at period-end.
Ans: False
Difficulty: Easy
LO: 5

55. In process costing, indirect materials are charged directly to Goods in Process.
Ans: False
Difficulty: Easy
LO: 5

56. If the predetermined overhead allocation rate is 350% of direct labour cost and the Painting Department's direct labour cost for the reporting period is $20,000, this entry would record the allocation of overhead to the products processed in this
department:
Goods in Process Inventory, Painting Dept 70,000


Ans: True
LO: 5

57. If the predetermined overhead allocation rate is 85% of direct labour cost, and the Polishing Department's direct labour cost for the reporting period is $20,000, this entry would be made to record the allocation of overhead to the products processed in this
department:

Goods in Process Inventory,
Painting Dept. 17,000

Ans: False
LO: 5

58. If the predetermined overhead allocation rate is 225% of direct labour cost, and the Mixing Department's direct labour cost for the reporting period is $10,000, this entry would be made to record the allocation of overhead to the products processed in this
department:
Goods in Process Inventory, Mixing Dept. 225,000


Ans: False
Difficulty: Hard
LO: 5



The company uses the same predetermined overhead allocation rate for the Pickling and Canning Departments.
Ans: False
Difficulty: Easy
LO: 5


If the allocated overhead equalled the actual overhead, the total manufacturing costs incurred during the reporting period were $35,300.
Ans: True
LO: 5


If the predetermined overhead allocation rates were based on direct labour costs, the rates for the Pushing and Shoving Departments were 50% and 150%, respectively.
Ans: True
LO: 5

62. In order to determine unit cost under a process cost accounting system, equivalent finished units produced must be calculated.
Ans: True
Difficulty: Easy
LO: 6

63. In the same time period, a production department can produce 1,000 equivalent finished units with respect to direct materials and 1,200 equivalent finished units with respect to direct labour.
Ans: True
LO: 6

64. If a production department has 100 equivalent units of production with respect to direct materials in a given reporting period, the equivalent units of production with respect to direct labour also must be 100.
Ans: False
LO: 6


65. In a process cost accounting system, a department's production should be measured in terms of equivalent units.
Ans: True
LO: 6

66. If a department did all the work on 30 units, one-half the work on 50 units, and one-fourth of the work on 100 units, you would find the unit cost by dividing the incurred costs by 180 equivalent units.
Ans: False
LO: 6

67. Equivalent units of production are always the same as the total number of physical units finished during the period.
Ans: False
LO: 6

68. Equivalent units of production need to be determined only if a processing department adds materials and labour to its products at different rates.
Ans: False
LO: 6

69. "Equivalent units of production" is an engineering term used to describe the process by which one company attempts to manufacture units of a product that are equivalent to the product manufactured by a competitor.
Ans: False
LO: 6

70. Once equivalent units are calculated for materials, this number may also be used for direct labour and factory overhead.
Ans: False
LO: 6

71. Material EUP started and completed is never the same as Direct Labour EUP started and completed.
Ans: False
LO: 6

72. If a processing department starts the reporting period with 100,000 physical units that were 20% complete with respect to direct labour, it must add 80,000 equivalent units of labour to complete them.

Ans: True
Difficulty: Easy
LO: 6

73. The number of EUPs assigned to ending inventory should usually be equal to or less than the number of physical units in ending inventory.
Ans: True
Difficulty: Easy
LO: 6

74. If a processing department starts the reporting period with 50,000 physical units that were 25% complete with respect to direct materials and 40% complete with respect to direct labour, it must add 12,500 equivalent units of direct materials and 20,000
equivalent units of direct labour to complete them.
Ans: False
Difficulty: Easy
LO: 6

75. Accounting for the activities of a process costing operation involves five distinct stages of calculation.
Ans: False
LO: 7

76. The last step in the four-step accounting procedure for process costing is the calculation of EUPs.
Ans: False
LO: 7

77. The process cost summary is a primary managerial accounting report produced by a process cost accounting system.
Ans: True
Difficulty: Easy
LO: 8

78. One section of the process cost summary describes the equivalent units of production for the department during the reporting period and presents the calculations of the costs per equivalent unit.
Ans: True
Difficulty: Easy
LO: 8

79. A process cost summary is a financial report that describes the costs charged to a department, the equivalent units of production by the department, and how the costs were assigned to the output.

Ans: True
Difficulty: Easy
LO: 8

80. A process cost summary includes the amounts of equivalent finished units of production for the period.
Ans: True
LO: 8

81. A process cost summary for a production department accounts for all costs assigned to that department during the period plus costs that were in the department's Goods in Process Inventory account at the beginning of the period.
Ans: True
LO: 8

82. A process cost summary shows the cost of a particular job manufactured in the reporting period.
Ans: False
LO: 8

83. The process cost summary presents calculations of the cost of units completed during the reporting period, but does not present any information about the ending goods in process inventory.
Ans: False
LO: 8

84. A process cost summary balances costs in opening inventory and transferred in to costs transferred out and ending inventory.
Ans: True
LO: 8

85. Because the process cost summary describes the activities of the production department for the specified reporting period, it does not present information about any costs incurred in prior periods.
Ans: False
Difficulty: Hard
LO: 8

86. A company that uses a process cost accounting system maintains separate Goods in Process Inventory accounts for each of its manufacturing departments.
Ans: True

Difficulty: Easy
LO: 9


This journal entry would be made to record the transfer of partially completed goods from the Pushing Department to the Shoving Department:
Goods in Process Inventory, Pushing Dept. 250,000

Goods in Process Inventory, Shoving Dept 250,000

Ans: False
LO: 9

88. During a recent month, the Shaking Department received input transferred from the Rolling Department with an assigned cost of $65,000. This transfer should be recorded with the following entry:
Goods in Process Inventory, Shaking Dept. 65,000

Goods in Process Inventory, Rolling Dept. 65,000

Ans: True
LO: 9

89. During a recent month, the Canning Department received input transferred from the Cooking Department with an assigned cost of $100,000. This transfer should be recorded with the following entry:
Goods in Process Inventory, Cooking Dept. 100,000


Ans: False
LO: 9

90. When goods are transferred from the Grinding department to the Mixing department for further processing, the Mixing department should debit its Goods in Process Inventory account and the Grinding department should credit its Goods in Process
Inventory account.
Ans: True
LO: 9

91. Ultimately all costs of the processes in a Process Costing system pass through the Cost of Goods Sold account.
Ans: True
Difficulty: Easy

LO: 10

92. During the preceding week, the Packing Department transferred out completed units with a cost of $74,000. This transfer should be recorded with the following entry:
Finished Goods Inventory 74,000

Goods in Process Inventory, Packing Dept. 74,000

Ans: True
LO: 10


This journal entry would be made to record the transfer of fully completed goods from Shoving to the finished goods inventory:
Finished Goods Inventory 525,000

Goods in Process Inventory, Shoving Dept 525,000

Ans: False
LO: 10

94. Supervisory staff associated with a particular department would be considered indirect labour in job costing but direct labour in process costing.
Ans: True
LO: 10

Multiple Choice

95. Which of the following is not a true statement about process cost accounting systems?
A) Process cost accounting systems attempt to determine unit costs.
B) Process cost accounting systems use predetermined overhead application rates.
C) Process cost accounting systems involve a number of departments, each of which produces a different product.
D) Process cost accounting systems accumulate costs in Goods in Process Inventory accounts.
E) Process cost systems use equivalent units of production.
Ans: C
LO: 1


96. Which of the following five kinds of products is unlikely to be produced in a process manufacturing system?
A) Compact disks.
B) Slacks for casual wear.
C) Baseball hats.
D) Calculators.
E) Oil paintings.
Ans: E
LO: 1

97. Which of the following characteristics does not apply to process manufacturing systems?
A) Each unit of product is separately identifiable.
B) Partially completed products are transferred between processes.
C) Different managers are responsible for the different steps in the whole process.
D) The output of all processes (except the final process) is a raw material to the next process.
E) All of these are characteristics of process manufacturing systems.
Ans: A
LO: 1

98. Process costing is frequently characterized by:
A) Low standardization and high production volume.
B) Custom orders and homogeneous products.
C) Repetitive production and heterogeneous products.
D) Repetitive production and low production volume.
E) Homogeneous product and high production volume.
Ans: E
LO: 1

99. A system of accounting in which the costs of each process are accumulated separately and then assigned to the units of product that passed through the process is a:
A) Product cost accounting system.
B) Process cost accounting system.
C) Job order cost accounting system.
D) Manufacturing cost accounting system.
E) Goods in process accounting system.
Ans: B
Difficulty: Easy

LO: 1

100. An organizational unit of a factory that has the responsibility for partially manufacturing or producing a product is called a:
A) Production department.
B) Service department.
C) Primary department.
D) Responsibility department.
E) Control department.
Ans: A
LO: 1

101. In Process Cost, the goal of the system is to:
A) Identify all incoming costs.
B) Identify all outgoing costs.
C) Identify all unit costs.
D) Identify and trace all incoming and outgoing costs.
E) Identify and trace all total costs.
Ans: D
LO: 1

102. Which of the following characteristics applies to process cost accounting but not to job order cost accounting?
A) Use of a predetermined overhead rate.
B) Identifiable lots of production.
C) Equivalent finished units.
D) Labour time ticket for each employee.
E) Use of a single Goods in Process account.
Ans: C
LO: 2

103. A document that shows the raw materials issued to a department during a period and that substitutes for a materials requisition is a:
A) Materials purchase order.
B) Receiving report.
C) Materials consumption report.
D) Job cost sheet.

E) Production order.
Ans: C
LO: 3

104. Direct material costs are recorded:
A) Indirectly to Goods in Process account.
B) Indirectly to a Finished Goods account.
C) Directly to a Goods in Process account.
D) Directly to a Finished Goods account.
E) Directly to a Cost of Goods Sold account.
Ans: C
LO: 3

105. Direct labour and indirect labour are recorded respectively to:
A) Factory Overhead and Goods in Process.
B) Goods in Process and Finished Goods.
C) Finished Goods and Goods in Process.
D) Goods in Process and Factory Overhead.
E) Cost of Goods Sold and Finished Goods.
Ans: D
LO: 4

106. X Company uses a process cost accounting system. The Sewing Department's beginning inventory consisted of 50,000 units, complete with respect to direct labour and overhead. The department started and finished 127,500 units. The ending inventory
consists of 40,000 units that are complete with respect to direct labour and overhead. All direct materials are added at the beginning of the process. The department incurred direct labour costs of $24,000 and overhead costs of $32,000. The direct labour cost
per equivalent unit is:
A) $0.126.
B) $0.160.
C) $0.178.
D) $0.295.
E) $0.373.
Ans: B
Difficulty: Hard
LO: 4

107. The purpose of the process cost summary report is to:

A) Help managers control departments, factory managers evaluate department managers' performance, and provide cost information for financial statements.
B) Help managers control departments.
C) Help factory managers evaluate department managers' performance.
D) Provide cost information for financial statements.
E) Help managers control departments and provide cost information for financial statements.
Ans: A
LO: 5

108. A measure of the productivity of a process with respect to its use of direct materials, direct labour, or overhead, and an expression of the activity of a process as the number of units that would have been processed during a period if all effort had been
applied to units that were started and finished during the period, is called:
A) Manufacturing overhead.
B) Units in process.
C) A job cost sheet.
D) Equivalent units of production.
E) A job lot.
Ans: D
Difficulty: Easy
LO: 6

109. Equivalent units of production are equal to:
A) The number of units that could have been produced.
B) The number of finished units produced.
C) The number of units introduced into the process.
D) The number of units still in process.
E) The sum of the numbers of finished units produced and units still in process.
Ans: A
Difficulty: Easy
LO: 6

110. In order to compute an EUP, you must know:
A) An estimate of the percentage of completion.
B) An estimate of units completed.
C) An estimate of units started and completed.
D) An estimate of direct labour cost.
E) An estimate of materials cost.
Ans: A

LO: 6

111. With respect to direct labour costs, a company's beginning work in process inventory consisted of 20,000 units that were 1/5 complete. These units were completed and another 90,000 units were started during the period. Of those started, 60,000 were
finished and the remaining 30,000 were 1/3 complete at the end of the period. The equivalent units of production were:
A) 60,000.
B) 74,000.
C) 76,000.
D) 86,000.
E) 96,000.
Ans: D
LO: 6

112. Assume the following data:
Beginning goods in process inventory 5,000 units (3/4 completed)

Units started and completed 15,000
Ending goods in process inventory 6,000 units (1/2 completed)

If materials are added when the production process begins and direct labour is applied uniformly throughout the process, what are the equivalent units for direct materials and for direct labour, respectively?
A) 16,250; 19,250.
B) 16,250; 21,750.
C) 21,000; 19,250.
D) 19,250; 18,750.
E) 21,000; 22,250.
Ans: C
LO: 6

113. At the beginning of a recent period, there were 900 units of product in a department, one-third processed. These units were finished and an additional 5,000 units were started and finished during the period. 800 units were still in process at the end of
the period, one-fourth processed. The equivalent units produced by the department were:
A) 6,700 units.
B) 5,900 units.
C) 5,800 units.
D) 5,500 units.
E) Some other number of units.
Ans: C
Difficulty: Hard
LO: 6


114. During a period, Department A finished and transferred 50,000 units to Department B. Of the 50,000 units, 20,000 were 1/5 complete at the beginning of the period and 30,000 were started and completed during the period. During the period, 10,000
units were started but brought only to a stage of being 3/5 completed. The number of equivalent finished units produced by Department A during the period was:
A) 46,000 units.
B) 50,000 units.
C) 52,000 units.
D) 54,000 units.
E) 56,000 units.
Ans: C
Difficulty: Hard
LO: 6

115. X Company uses a process cost accounting system. The Sewing Department's beginning inventory consisted of 50,000 units complete with respect to direct labour and overhead. The Sewing Department started and finished 120,000 units. The ending
inventory consists of 40,000 units that are also complete with respect to direct labour and overhead. All direct materials are added at the beginning of the process. What are the equivalent units of production of the Sewing Department for direct materials and
for direct labour and overhead, respectively?
A) 160,000; 120,000.
B) 120,000; 157,500.
C) 167,500; 167,500.
D) 160,000; 162,500.
E) 160,000; 167,500.
Ans: E
Difficulty: Hard
LO: 6

116. Medina Corp. had the following information available for the year:
Beginning inventory of goods in process 40% complete, $1,100 200 units

Ending inventory of goods in process 80% complete 400 units
Total units started during the year 3,200 units
Total manufacturing costs incurred during the year $47,600

Equivalent units produced for the year are:
A) 3,800 units.
B) 3,200 units.
C) 3,240 units.
D) 3,520 units.
E) Cannot be determined from information given.
Ans: C
Difficulty: Hard
LO: 6

117. When considering spoilage in the computation of cost per EUP:
A) The unit cost is greater.

B) The unit cost is lesser.
C) The unit cost is the same but reported differently.
D) The unit cost and reporting method are the same.
E) Spoilage does not affect the cost per EUP.
Ans: B
Difficulty: Hard
LO: 6

Beginning inventory of goods in process 40% complete, 200 units

$1,100
Total units started during the year 3,200 units

The equivalent unit processing cost is equal to:
A) $47,600/Equivalent finished units for the year.
B) $48,700/Equivalent finished units for the year.
C) $46,500/Equivalent finished units for the year.
D) $14.875 per EUP.
E) None of these answers is correct.
Ans: A
LO: 6

119. A process cost summary is a managerial accounting report that describes the:
A) Costs charged to a department.
B) Equivalent units of production by the department.
C) How the costs were assigned to the output.
D) Physical transfers for a department.
E) All of these answers are correct.
Ans: D
LO: 8

120. The following is an account for a production department, showing its costs for one month:
Assume that materials are added at the beginning of the production process and that direct labour and overhead occur uniformly. If the units in the ending goods in process inventory cost $4,590 and the started and completed units cost $41,850, what was the
cost of completing the units in the beginning goods in process inventory?
A) $12,150.
B) $ 2,160.

C) $ 7,560.
D) $54,000.
E) Unable to determine from data given.
Ans: B
Difficulty: Hard
LO: 8

121. The Machining Department started last month with a beginning goods in process inventory of $10,000. During the month, it was assigned the following costs: direct materials—$76,000; direct labour—$24,000; and factory overhead—50% of direct
labour cost. Also, inventory with a cost of $109,000 was transferred out of the department to the next phase in the process. The ending balance of the Goods in Process Inventory account for the Machining Department should be:
A) $ 13,000.
B) $ 56,000.
C) $ 59,000.
D) $110,000.
E) $165,000.
Ans: A
LO: 9

122. During a period, Department A finished and transferred 50,000 units to Department B. Of the 50,000 units, 20,000 were 1/5 complete at the beginning of the period and 30,000 were started and completed during the period. During the period, 10,000
units were started but brought only to a stage of being 3/5 completed. If $13,000 of overhead was charged to Department A during the period, how much overhead should be allocated to the ending work in process inventory?
A) $4,333.
B) $3,250.
C) $2,600.
D) $2,500.
E) $1,500.
Ans: E
Difficulty: Hard
LO: 9

123. A common recording procedure in process cost accounting is the transfer of costs from:
A) One Goods in Process account to another Goods in Process account.
B) Materials to Finished Goods.
C) Goods in Process to Cost of Goods Sold.
D) Goods in Process to Overhead.
E) Finished Goods to Goods in Process.
Ans: A
LO: 9


Beginning inventory of goods in process 40% complete, 200 units

$1,100
Total units started during the year 3,200
units

The number of units transferred to finished goods during the year is:
A) 3,200 units.
B) 3,000 units.
C) 3,400 units.
D) 3,160 units.
E) Cannot be determined from information given.
Ans: B
LO: 10

125. Que Corporation uses a process cost accounting system. The company manufactured goods at a cost of $800 and sold them on credit to Are Corporation for $1,075. The correct journal entry to be made by Que at the time of the sale is:
A)
Accounts Receivable—Are Corporation 1,075

Cost of Goods Sold 800
Sales 1,075
Finished Goods Inventory 800

B)

Sales 275

C)
Cost of Goods Sold 1,075

Sales 1,075

D)

Sales 1,075
Cost of Goods Sold 800

E) None of these answers is correct.
Ans: A
LO: 10


Short Answer

126. Match the following definition with the appropriate terms:
(a) Estimate of efforts attained.
(b) Unique product design.
(c) Traceable costs.
(d) Total cost expensed.
(e) Allocated costs.
(f) Cost from a goods in process to another.
(g) Mass production in a sequence.
(h) Work completed entirely in one period.
__________ (1) Cost transfer
__________ (2) Process cost
__________ (3) Percent of completion
__________ (4) Indirect costs
__________ (5) Units started and completed
__________ (6) Job order cost
__________ (7) Direct costs
__________ (8) Cost of goods sold
Ans: (1) f (2) g (3) a (4) e (5) h (6) b (7) c (8) d
Difficulty: Hard
LO: 1

127. Match the following definition with the appropriate terms:
(a) The number of units if all efforts are counted.
(b) Imperfectly produced units.
(c) An average unit cost.
(d) A period report of a department's costs.
(e) Units transferred to the next department.
(f) The most common method of calculating unit costs.
(g) Assigning costs to Finished Goods and Goods in Process.
(h) An alternative method for calculating unit cost.
__________ (1) Weighted Average
__________ (2) Cost Reconciliation
__________ (3) Physical Flow
__________ (4) FIFO
__________ (5) Spoiled Units

__________ (6) Equivalent Units
__________ (7) Process Cost Summary
__________ (8) Cost per EUP
Ans: (1) h (2) g (3) e (4) f (5) b (6) a (7) d (8) c
LO: 1, 5, 6

128. A company's January 1 work in process inventory contained 30,000 units that were complete with respect to direct labour. Production for the year included completing these units and another 120,000 units were started. Of those started, 80,000 were
finished and the remaining 40,000 were left 1/5 complete. Calculate the equivalent units of production for the year.
Ans: (3/4 30,000) + 80,000 + (1/5 40,000) = 110,500
LO: 6

129. Briefly explain the conditions under which job order cost accounting systems and process cost accounting systems are used.
Ans: Job order cost accounting systems are used when each product or job has a unique design so that the manufacturing process focuses on the production of that specific job.
Process cost accounting systems are used when manufacturing operations produce a large volume of standardized units that generally pass from one manufacturing process to another.
LO: 1

130. Experts in production management have claimed that multiple products demand the use of multiple production methods. From your reading of Chapter 23, comment on how this might be accomplished.
Ans: Cite examples of how a mass product manufacturer can tailor specific lines.
Difficulty: Hard
LO: 1

131. Briefly describe how JIT may be used in a modern manufacturing environment.
Ans: In a system using JIT, the manufacturer may be able to eliminate inventories at several steps in the process. This would allow for cost savings and possibly even direct transfers to customers.
Difficulty: Hard
LO: 1

132. Job order costing and process costing are the two major alternatives used in manufacturing. Briefly contrast the characteristics of these two systems.
Ans:
Job Order Cost Process Cost

Custom orders Repetitive production
Heterogeneous product Homogeneous product
Low volume High volume
High flexibility (prod.) Low flexibility (prod.)
Low to medium standard High standardization


LO: 2

133. Refer to the following incomplete table of cost information:

What was the cost of the direct materials used in the Grating Department?
Ans: The calculation can be made after setting the costs transferred out of the Grating Department equal to the costs transferred into the Bagging Department. With this substitution, the column of the table appears as follows:

Thus, the missing amount is found to be $20,000.
LO: 3


What was the cost of the direct labour used in the Bagging Department?
Ans: The calculation can be made after setting the cost transferred out of the Bagging Department equal to the costs transferred into Finished Goods.
Goods in Process—Bagging

Beginning inventory $ 13,000
Costs incurred:
Direct materials 12,000
Direct labour ?
Overhead applied 22,500
Costs transferred out (150,000)
Costs transferred in 98,000
Ending inventory $ 10,500

LO: 4

135. Iolaus Company provides the following data for 2003:
Factory Overhead Incurred $11,400

Factory Overhead Applied ?
Estimated Direct Labour Cost $12,000
Direct Labour Cost Incurred $11,800
Estimated Factory Overhead $8,000

Required:
Based on the data above:
Calculate the Overhead application rate.
Determine the amount of overhead applied to production.
Prepare a journal entry to apply Factory Overhead.
Ans:
$8,000/$12,000 = 66.7% of Direct Labour Cost

$11,800 .667 = $7,871 Overhead applied

Goods in Process 7,871

LO: 5

136. What is meant by equivalent units of production, and why are they important when a process cost accounting system is used?
Ans: Equivalent units of production measure production with respect to direct materials, direct labour and overhead, expressed as the number of units that could have been manufactured from start to finish during a period given the amount of direct materials,
direct labour, and overhead used during the period. Determining equivalent finished units produced is important for the calculation of the cost per unit and thus for calculating the costs of inventories and the cost of goods sold.
LO: 6

137. Osman Corp. is a manufacturing firm. The following data is available for the year:
Beginning inventory of goods in process,
12,000 units, 60% completed
Ending inventory of goods in process,
18,000 units, 30% completed
Units completed and transferred to finished goods
during the year, 144,000 units
Calculate the equivalent units of production for the year.
Ans:
% of Work Equivalent
Units Performed Units
Beginning inventory of goods in process 12,000 40% 4,800
Units completed during 1998 (144,000 – 132,000 100% 132,000
12,000)
Ending inventory of goods in process 30% 5,400
18,000
Total 162,000 142,200

LO: 6

138. Refer to the following information about the Painting Department in the Richardson Factory for the month of June:
Beginning goods in process inventory:

Physical units 5,000
% complete for materials 70%
% complete for labour and overhead 25%
Materials cost from May $7,350
Labour and overhead cost from May $3,125
Product started and completed:
Ending goods in process inventory:

Manufacturing costs for June:
Materials $96,975
Labour and overhead $79,470

How many equivalent units of materials were added to the beginning inventory in finishing those units during June? How many equivalent units of labour and overhead were added to the beginning inventory in finishing those units during June?
Ans: Equivalent units of materials
added to the beginning inventory = (100% - 70%) 5,000 physical units

= 1,500 equivalent units of materials

Equivalent units of labour and overhead
added to the beginning = (100% - 25%) 5,000 physical units

inventory
= 3,750 equivalent units of labour and overhead

Difficulty: Easy
LO: 6


Materials $96,975

How many equivalent units of materials were added to the ending inventory in getting those units to their state of partial completion? How many equivalent units of labour and overhead were added to the ending inventory in getting those units to their state
of partial completion?
Ans: Equivalent units of materials
added to the ending inventory = 40% 4,000 physical units

= 1,600 equivalent units of materials

Equivalent units of labour and overhead
added to the ending inventory = 10% 4,000 physical units

= 400 equivalent units of labour and overhead

LO: 6


Materials $96,975

How many equivalent units of materials were added to all units processed during June? How many equivalent units of labour and overhead were added to all units processed during June?
Ans: Equivalent units of materials:
Physical Percent Equivalent

Units Added Units
Beginning goods in process 5,000 30% 1,500
Goods started and completed 40,000 100% 40,000
Ending goods in process 4,000 40% 1,600
Total units 49,000 43,100

Equivalent units of labour and overhead:

Units Added Units
Ending goods in process 4,000 10% 400

LO: 6



Materials $96,975

What was the materials cost per equivalent unit produced during June? What was the labour and overhead cost per equivalent unit produced during June?

Units Added Units

Materials cost per equiv. unit = $96,975/43,100 equiv. units
= $2.25 per equivalent unit


Units Added Units

Labour and overhead cost per equiv. unit = $79,470/44,150 equiv. units

LO: 6


Materials $96,975

What is the total cost of all units that were completed during June? What is the total cost of the ending goods in process inventory?

Units Added Units

Materials cost per equiv. unit = $96,975/43,100 equiv. units


Units Added Units

Labour and overhead cost per equiv. unit = $79,470/44,150 equiv. units

Equivalent Cost Total
Units per Unit Cost
COST OF FINISHED GOODS:
Beginning goods in process:
Beginning materials cost $ 7,350

Materials costs added 1,500 $2.25 3,375
Beginning labour and overhead cost 3,125
Labour and overhead cost added 3,750 $1.80 6,750
Total $ 20,600
Started and completed goods:
Materials costs added 40,000 $2.25 $ 90,000

Total $162,000
Total cost of finished goods $182,600

COST OF ENDING GOODS IN PROCESS:
Materials costs added 1,600 $2.25 $ 3,600

Labour and overhead cost added 400 $1.80 720
Total $ 4,320

Difficulty: Hard
LO: 6

143. A company uses a process cost accounting system. The following information is available for the year:
Goods in process, January 1, 5,500 units, 80% complete.
Goods in process, December 31, 8,800 units, 40% complete.

Units completed and transferred to finished goods during the year, 46,900.
Manufacturing costs during the year, $266,300.
(a) Calculate equivalent finished units produced during the year.
(b) Calculate the average cost per equivalent unit (round to the nearest cent).
Ans:
Equivalent
Finished
Physical % of Units
Work
Units Completed Produced
(a)
Beginning inventory of goods in process 5,500 20% 1,100
Units completed during the year (46,900- 41,400 100% 41,400
5,500)
Ending inventory of goods in process 8,800 40% 3,520
Total 55,700 46,020

(b) Average cost per equivalent finished unit = $266,300/46,020 = $5.79
LO: 6, 8

144. Bimrose Manufacturing uses process cost accounting for its three-department operation. Direct materials are added at the beginning of the Department 1 process, at the halfway point of the Department 2 process, and at the beginning of the Department 3
process. Direct labour and overhead are incurred evenly throughout all departments' processes. The following data are known for September:
Department
1 2 3
Beginning in process inventories:
Units 2,500 5,500 1,500

Percent complete 60% 40% 80%
Ending in process inventories:
Units 3,500 4,200 6,500

Percent complete 30% 60% 70%
Units completed 14,500 15,800 10,800

Determine the number of units started and completed in Department 1, and the number of units transferred into and completed in Departments 2 and 3. Also, determine the equivalent units of production for direct materials, direct labour and overhead for each
department.
Ans:
Dept. 1 Dept. 2 Dept. 3

Units completed 14,500 15,800 10,800
Less: beginning in process units (2,500) (5,500) (1,500)
Units started and completed 12,000
Units transferred in and completed 10,300 9,300

Equivalent units for materials:
Department 1
Materials are added at beginning.

Units Added Units

Beginning goods in process 2,500 0% -0-

Department 2
Materials are added halfway.

Units Added Units

Department 3
Materials are added at beginning.

Units Added Units
Beginning goods in process 1,500 0% -0-

Equivalent units for labour and overhead:
Labour and overhead are applied evenly throughout the process.
Department 1

Units Added Units

Department 2

Units Added Units

Department 3

Units Added Units
Beginning goods in process 1,500 20% 300


Difficulty: Hard
LO: 6, 8

145. Why is the Process Cost Summary important to management? How does the Process Cost Summary accomplish its purpose?
Ans: The Process Cost Summary depicts a four-step process detailing physical flows and cost flows allowing management to verify inputs and outputs as part of a control system. It also lets management logically perform unit costing (a necessary activity to
allow for appropriate product pricing).
By detailing physical flow, it measures accountability and responsibility. By detailing cost flow, it allows management to determine and derive appropriate cost allocations in a logical format.
LO: 8

146. Nano Company uses a process cost system. The Nano Assembly Department's beginning inventory consisted of 40,000 units that were 3/5 complete with respect to direct labour and overhead. The department started and finished 149,000 units with
respect to direct labour and overhead. The ending inventory consists of 60,000 units that are 3/4 complete with respect to direct labour and overhead. All direct materials are added at the beginning of the process. The department incurred direct labour costs
of $262,500 and overhead costs of $120,000. What is the direct labour cost per equivalent unit?
Ans:

Units Added Units
Total units 249,000 210,000

Direct labour cost per equiv. unit = $262,500/210,000 equiv. units

LO: 8

147. Heesacker, Inc., uses a process cost accounting system. The following operating and cost data occurred during October:
October 1, 30,000 units, 100% complete for materials ($60,000) and 50%
Inventory: complete for direct labour ($7,500) and overhead ($7,500).

October 31, 20,000 units, 100% complete for materials and 30% complete
Inventory: for direct labour and overhead.

Units completed during Oct.: 50,000

October production costs: Direct materials $110,000
Direct labour 28,700
Overhead 28,700

Materials are added at the beginning of the process. Direct labour and overhead are incurred evenly throughout the process.
Prepare the October process cost summary.

Ans:
HEESACKER, INC.
Process Cost Summary
For Month Ended October 31

COSTS CHARGED TO THE DEPARTMENT
Direct materials requisitioned $110,000

Direct labour charged 28,700
Overhead costs allocated 28,700
Total processing costs for the month $167,400
Goods in process at the beginning of the month 75,000
Total costs to be accounted for $242,400

EQUIVALENT UNITS OF PRODUCTION
Equivalent Units
Physical Labour &
Units Materials Overhead
Categories of Units in Process:
Beginning goods in process 30,000 -0- 15,000

Units started and completed 20,000 20,000 20,000
Ending goods in process 20,000 20,000 6,000
Total 70,000 40,000 41,000

Total materials cost for October $110,000
Material cost per equivalent unit ($110,000/40,000 $2.75
units)

Total labour cost for October $28,700
Labour cost per equivalent unit ($28,700/41,000) $0.70

Total overhead cost for October $28,700
Overhead cost per equivalent unit ($28,700/41,000) $0.70

ASSIGNMENT OF COSTS TO THE WORK OF THE DEPARTMENT

Units per Unit Cost
Goods in process, October 1 and completed during October:
Costs from prior month $75,000
Direct materials added -0- -0-
Direct labour added 15,000 $0.70 10,500
Overhead applied 15,000 $0.70 10,500
Total costs to process $ 96,000
Goods started and completed during October:
Direct materials added 20,000 $2.75 $ 55,000

Goods in process, October 30:
Direct materials added 20,000 $2.75 $ 55,000

Total costs accounted for $242,400

LO: 8

148. Use the following information to determine the cost of the finished goods completed during the reporting period:

Units per Unit Cost
Costs from prior month $102,000

Materials costs added 6,000 $25.00
Labour and overhead cost added 2,000 $60.00
Started and completed goods
Materials costs added 90,000 $25.00


Ans:

Units per Unit Cost
COST OF FINISHED GOODS
Costs from prior month $ 102,000

Materials costs added 6,000 $25.00 150,000
Total $ 372,000
Materials costs added 90,000 $25.00 $2,250,000

Labour and overhead cost added 90,000 $60.00 5,400,000
Total $7,650,000
Total cost of finished goods $8,022,000

LO: 8

149. Use the following information to determine the cost of the finished goods completed during the reporting period:

Units per Unit Cost
Costs from prior month $735

Materials costs added 60 $ 5.00

Labour and overhead cost added 20 $12.00
Materials costs added 1,000 $ 5.00


Ans:

Units per Unit Cost
Costs from prior month $ 735

Materials costs added 60 $ 5.00 300
Total $ 1,275
Materials costs added 1,000 $ 5.00 $ 5,000

Total $17,000

LO: 8

150. Refer to the following information about the Dipping Department of the Halifax Factory for the month of August:
Equivalent Total
Units Cost

Materials costs added 300
Labour and overhead cost added 375
Materials costs added 2,000

Labour and overhead cost added 2,000
Total cost of finished goods
COST OF ENDING GOODS IN PROCESS


The cost per equivalent unit of materials is $10, and the cost per equivalent unit of labour and overhead is $22.
What total cost should be assigned to the units that were in the beginning goods in process inventory and completed during August?
Ans:

Units per Unit Cost

Materials costs added 300 $10.00 3,000
Labour and overhead cost added 375 $22.00 8,250
Total $18,250

LO: 8

Equivalent Total
Units Cost




What total cost should be assigned to the units that were started and completed during August?
Ans:

Units per Unit Cost
Materials costs added 2,000 $10.00 $20,000

Total $64,000

LO: 8


Equivalent Total
Units Cost




What total cost should be assigned to all units that were completed during August?
Ans:

Units per Unit Cost

Total $18,250

Total $64,000

LO: 8

Equivalent Total
Units Cost





What total cost should be assigned to the units that were in process at the end of August?
Ans:

Units per Unit Cost

Materials costs added 320 $10.00 $ 3,200

Total $11,120

LO: 8

Equivalent Total
Units Cost




What is the total cost to be accounted for during August?
Ans:

Units per Unit Cost

Total $18,250

Total $64,000

Materials costs added 320 $10.00 $ 3,200

Total $11,120

Total costs accounted for $93,370

LO: 8

155. During the year, RB Corp. introduced 132,000 units into production. During the year, 144,000 units were completed and transferred to finished goods. At the end of the year, the company had 13,600 units still in process that were 80% complete. If
equivalent units produced were 136,960, how many units did the company have in goods in process at the beginning of the year, and what was their level of completion?
Ans:

Difficulty: Hard
LO: 8

156. Use the following information to determine the cost of the finished goods completed during the reporting period and the ending goods in process inventory:

Units per Unit Cost


Materials costs added 1,000 $ 5.00

Ending goods in process:


Ans:

Units per Unit Cost

Materials costs added 60 $ 5.00 300
Total $ 1,275
Materials costs added 1,000 $ 5.00 $ 5,000

Total $17,000

Ending goods in process:
Materials costs added 80 $ 5.00 $ 400

Total $ 760

Difficulty: Hard
LO: 8

157. Tomm Corporation provides the following information:
Beginning inventory $0
Materials added $14,000
Conversion costs added $21,000
EUPs—materials 700
EUPs—conversion costs 1,400
Required: Calculate the cost of 500 units produced.
Ans:
Materials costs $14,000/700 = $20 per unit

Conversion cost $21,000/1,400 = $15 per unit
Total unit costs $20 + $15 = $35 per unit
Total cost (500 units) 500 $35 = $17,500

Difficulty: Hard
LO: 8

158. Jay Company provides the following data:
Goods in process, Jan. 1 (80 units) $7,200

Current costs added (50 units) $4,500
Cost of goods sold (100 units) ?

Goods sold at sales price of $120.
Units completed (120 units)

Finished goods, Jan. 1 (0 units)

Required: Prepared the journal entries to record:
(a) Cost of production completed in January.
(b) Sales and cost of goods sold (assume FIFO).
Ans:
(a) Finished Goods 10,800

Goods in Process 10,800
(120 units @ $90)
(b) Cost of Goods Sold 9,000

Finished Goods 9,000
(100 @ $90)
Accounts Receivable (or Cash) 12,000

Sales 12,000
(100 @ $120)
Difficulty: Hard
LO: 8, 9

Goods in Goods in
Process— Process— Finished
Grating Bagging Goods
Beginning inventory $10,000 $13,000 $ ?
Costs incurred:
Direct materials ? 12,000
Direct labour 30,000 ?
Overhead applied 45,000 22,500
Costs transferred out (?) (? )
Costs transferred in 98,000 150,000
Cost of goods sold (147,000)
Ending inventory 7,000 10,500 25,000
What was the cost of goods transferred out of the Grating Department into the Bagging Department?
Ans: The cost of goods transferred out of the Grating Department equals the $98,000 cost transferred into the Bagging Department.
Difficulty: Easy
LO: 10

Goods in Goods in

Costs incurred:
What was the cost of the goods transferred out of the Bagging Department into the finished goods inventory?
Ans: The cost of goods transferred out of the Bagging Department equals the $150,000 cost transferred into the Finished Goods inventory.
Difficulty: Easy
LO: 10

Goods in Goods in
Costs incurred:

What was the cost of the beginning inventory of finished goods?
Ans: The cost of the beginning inventory of finished goods can be found by solving for the unknown factor in the third column of the table:
Finished
Goods
Beginning inventory $ ?
Costs transferred in 150,000
Ending inventory $ 25,000
Difficulty: Easy
LO: 10

Fill-In-The-Blank


162. Materials and labour costs that are clearly associated with a specific process are known as _______________. Those costs that are not clearly associated with a specific process are called ______________.
Ans: Direct costs, indirect costs
Difficulty: Easy
LO: 3

163. In process cost, factory overhead is usually either ________________ or _______________.
Ans: Overapplied or underapplied
LO: 5

164. The number of units that would be completed if all effort during a period had been applied to units that were started and finished is called ______________________.
Ans: Equivalent units of production
Difficulty: Easy
LO: 6

165. An EUP is an estimate of efforts used to calculate the ______________ of each production component.
Ans: Unit cost
Difficulty: Easy
LO: 6

166. A process cost summary involves four sequential steps. These are (1)_________ (2) ___________, (3) _______________, and (4) ______________.
Ans: Physical flow, equivalent units, cost per EUP, cost reconciliation
LO: 7

167. Partially completed production is measured in two locations each accounting period. These measurement points are ________________ and ____________.
Ans: Beginning Goods in Process, Ending Goods in Process.
LO: 8

168. In a manufacturing operation with two process departments, the flow of costs would proceed from Goods in Process, Dept. #1 to ________________ to _______________ to ______________.
Ans: Goods in Process, Dept. #2, Finished Goods, Cost of Goods Sold
LO: 9

169. Cost per equivalent unit may be calculated for both _______________ and ________________.

Ans: "Good units" and spoiled units (spoilage)
Difficulty: Hard
LO: 9


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Chapter: Chapter 24: Process Costing

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15. The cost object in process costing is the process itself.

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22. Using JIT in process costing can reduce costs.

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Goods in Process Inventory, Department B 10,000

Raw Materials Inventory 70,000

Finished Goods Inventory, Department Q 60,000

Goods in Process Inventory, Department C 19,000

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38. Refer to the following table of cost information:

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Goods in Process Inventory, Pickling Dept 16,000

Factory Payroll 123,000

Factory Payroll 65,000

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Goods in Process Inventory, Department G 53,000

48. Refer to the following table of cost information:

Factory Payroll 6,100

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49. Refer to the following table of cost information:

Goods in Process Inventory, Pushing Dept. 120,000

Factory Overhead 37,500

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Goods in Process Inventory, Painting Dept 70,000

Factory Overhead 17,000

Goods in Process Inventory, Mixing Dept. 225,000

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60. Refer to the following table of cost information:

61. Refer to the following table of cost information:

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87. Refer to the following table of cost information:

Goods in Process Inventory, Pushing Dept. 250,000

Goods in Process Inventory, Shaking Dept. 65,000

Goods in Process Inventory, Cooking Dept. 100,000

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Finished Goods Inventory 74,000

93. Refer to the following table of cost information:

Finished Goods Inventory 525,000

A) Process cost accounting systems attempt to determine unit costs.

E) Process cost systems use equivalent units of production.

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A) Compact disks.

B) Slacks for casual wear.

C) Baseball hats.

E) Oil paintings.

A) Each unit of product is separately identifiable.

B) Partially completed products are transferred between processes.

E) All of these are characteristics of process manufacturing systems.

98. Process costing is frequently characterized by:

A) Low standardization and high production volume.

B) Custom orders and homogeneous products.

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