ACG2071 CH16 Test Bank

Chapter 16 - Process Costing and Analysis
Chapter 16
Process Costing and Analysis
True / False Questions
1. The managers of process manufacturing systems focus on the series of processes needed to
complete the production of products.
True False
2. In a process manufacturing system, products pass through a series of sequential processes.

True False
3. Process manufacturing usually reflects a manufacturer that produces large quantities of

identical products.
True False
4. A production department is an organizational unit of a factory that has the responsibility for
at least partially manufacturing or producing a product or service.
True False
5. To determine unit cost under a process cost accounting system, equivalent units produced
must be calculated if the company has goods in process inventories.
True False
6. Equivalent units of production refer to the number of units that would be completed if all
effort during a period had been applied only to those units that were started and completed in
a period.
True False
16-1
7. In a process cost accounting system, a department's production should be measured in

terms of equivalent units when its beginning or ending inventory includes goods in process.
True False
8. Equivalent units of production are always the same as the total number of physical units
finished during the period.
True False
9. Equivalent units of production need to be determined only if a processing department adds

materials and labor to its products at different rates.
True False
10. "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.
True False
11. The last step in the four-step accounting procedure for process costing is the calculation of
equivalent units of production.
True False
12. The process cost summary is an important managerial accounting report produced by a
process cost accounting system.
True False
13. A process cost summary is an accounting 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.
True False
16-2
14. A process cost summary includes the amounts of equivalent finished units of production
for the period.
True False
15. 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.
True False
16. A process cost summary shows the cost of a particular job manufactured in the reporting
period.
True False
17. 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.
True False
18. The FIFO method of process costing assigns costs to units assuming a first-in, first-out
flow of product.
True False
19. The FIFO method of process costing has slightly different objectives from the weighted
average method of process costing.
True False
20. The FIFO method of process costing computes equivalent units of production in a slightly
different manner than the computation used in the weighted average method of process
costing.
True False
16-3
21. The Weighted Average method of process costing computes the cost per equivalent unit
based solely on the current period's EUPs and costs.
True False
22. Process cost accounting systems are commonly used by companies that produce a large
volume of standardized units on a continuous basis.
True False
23. 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.
True False
24. Process and job order manufacturing operations both combine materials, labor, and
overhead items in the process of producing products.
True False
25. Accountants use the term "process cost accounting system" because these systems use a
number of trained individuals and computers to process the collected cost information.
True False
26. Process costing is applied to operations with repetitive production and heterogeneous
products.
True False
27. In process cost accounting, all labor that is applied exclusively in a single production
department is considered to be direct labor.
True False
16-4
28. Process cost accounting systems consider overhead costs to include those costs that cannot
be readily identified with any specific process.
True False
29. A company that uses a process cost accounting system maintains separate Goods in
Process Inventory accounts for each of its manufacturing departments.
True False
30. Companies that use a series of manufacturing processes to produce standardized products
should use a process cost accounting system.
True False
31. When defining direct costs and indirect costs in process costing, it is the process that is the
cost object.
True False
32. Process cost accounting systems are used only by companies that manufacture physical
products; meaning that companies and other organizations that provide services to their
customers do not use process cost accounting.
True False
33. Process cost accounting systems are commonly used by companies that manufacture
standardized products by passing them through a series of manufacturing steps.
True False
34. A unique feature of process costing systems is the use of a single Goods in Process
Inventory control account.
True False
16-5
35. The use of process costing is of little benefit to a service type of operation.
True False
36. In process cost accounting, the classification of materials as direct or indirect depends on
whether they are clearly linked with a specific process.
True False
37. In process cost accounting, materials are always classified as indirect if they are not
physically incorporated into the final product.
True False
38. Direct costs in process cost accounting include only those costs that can be readily
identified with particular product units.
True False
39. Process cost accounting systems consider direct costs to include those costs that can be
readily identified with a particular process.
True False
40. Hybrid systems contain aspects of both process and job order operations.
True False
41. Hybrid costing systems can only be applied to auto manufacturing.

True False
42. When a process cost accounting system records the purchase of raw materials, the Raw
Materials Inventory account is credited.
True False
16-6
Materials Inventory account is debited.
True False
44. When a process cost accounting system assigns the cost of materials to a production
department, the journal entry debits the Raw Materials Inventory account and credits the
Goods in Process Inventory account for that department.
True False
45. If Department A uses $10,000 of direct materials and Department B uses $15,000 of direct
materials, the following journal entry would be recorded by the process cost accounting
system:
True False
46. If Department J uses $40,000 of direct materials and Department K uses $70,000 of direct
system:
True False
47. If Department Q uses $60,000 of direct materials and Department T uses $15,000 of direct
system:
True False
16-7
48. A materials consumption report is a source document that summarizes the materials used
during a reporting period.
True False
49. The following journal entry would be made to record the use of direct materials in the
reporting period covered by the information:
True False
50. After all process cost accounting journal entries are recorded and posted for a reporting
period, the Factory Payroll account should have a zero balance.
True False
51. If the factory labor cost for a month was $123,000 (paid in cash), the following journal
entry would be recorded by the process cost accounting system:
True False
52. If Department N incurred direct labor cost of $22,000 and Department O incurred direct
labor cost of $43,000, the following journal entry would be recorded by the process cost
accounting system:
True False
16-8
53. If Department T uses $89,000 of direct labor and Department V uses $11,000 of direct
labor, the following journal entry would be recorded by the process cost accounting system:
True False
54. If Department G uses $53,000 of direct labor and Department H uses $21,000 of direct
True False
55. In process cost accounting, direct labor includes only the labor that is applied directly to
the products.
True False
56. In some circumstances, a process cost accounting system can classify wages paid to
maintenance workers as direct labor costs instead of factory overhead.
True False
57. In a process costing system, factory labor costs incurred in a reporting period are
presented on the income statement as Factory Labor Expense.
True False
16-9
58. The following journal entry would be made to record the use of direct labor in the
True False
59. 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.
True False
60. If the indirect materials cost for a reporting period was $37,500, the following journal
True False
61. A process cost accounting system records all factory overhead costs directly in the Goods
in Process Inventory accounts.
True False
62. In process costing there is never a balance remaining in Factory Overhead that needs to be
closed at period end.
True False
63. In process costing, indirect materials are charged directly to Goods in Process Inventory.
True False
16-10
64. If the predetermined overhead allocation rate is 350% of direct labor cost and the Painting
Department's direct labor cost for the reporting period is $20,000, the following entry would
record the allocation of overhead to the products processed in this department:
True False
65. If the predetermined overhead allocation rate is 85% of direct labor cost, and the Polishing
be made to record the allocation of overhead to the products processed in this department:
True False
66. If the predetermined overhead allocation rate is 225% of direct labor cost, and the Mixing
True False
16-11
Refer to the following table of cost information:
67. The company uses the same predetermined overhead allocation rate (based on direct
labor) for the Pickling and Canning Departments.
True False
68. If the allocated overhead equaled the actual overhead, then total manufacturing costs
incurred in both departments during the reporting period were $35,300.
True False
69. If a department that applies process costing starts the reporting period with 100,000
physical units that were 20% complete with respect to direct labor, it must add 80,000
equivalent units of labor to complete them.
True False
70. The number of equivalent units of production assigned to ending goods in process
inventory should usually be equal to or less than the number of physical units in ending goods
in process inventory.
True False
16-12
71. In the same time period, it is possible that 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 labor.
True False
72. 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
labor also must be 100.
True False
73. Once equivalent units are calculated for materials, this number will also be used for direct
labor and factory overhead.
True False
physical units that were 25% complete with respect to direct materials and 40% complete with
respect to direct labor, it must add 12,500 equivalent units of direct materials and 20,000
equivalent units of direct labor to complete them.
True False
75. 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.
True False
76. Since the process cost summary describes the activities of a production department for a
specified reporting period, it does not present information about any costs incurred in prior
periods.
True False
16-13
77. All costs of the processes in a process costing system ultimately pass through the Cost of
Goods Sold account.
True False
78. The Packing Department transferred out completed units with a cost of $74,000. This
transfer should be recorded with the following entry:
True False
True False
16-14
80. If the predetermined overhead allocation rates were based on direct labor costs, the rates
for the Pushing and Shoving Departments were 50% and 150%, respectively.
True False
81. The following journal entry would be made to record the transfer of completed goods
from Shoving to the finished goods inventory for this period:
True False
Multiple Choice Questions
82. Which of the following five types of products is least likely to be produced in a process
manufacturing system?
A. Compact disks.
B. Slacks for casual wear.
C. Baseball hats.
D. Calculators.
E. Oil paintings.
83. Which of the following characteristics does not usually 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 different processes.
D. The output of all processes except the final process is an input to the next process.
E. In a multi-step process, there will be multiple Goods in Process accounts.
16-15
84. 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. Process cost summary.
85. Equivalent units of production are equal to:

A. The number of units that could have been completed if all effort had been applied to units
that were started and completed that period.
B. The number of finished units actually produced that period.
C. The number of units introduced into the process that period.
D. The number of units still in process that period.
E. Physical units that were completed this period from all effort being applied to them.
86. Which of the following is not one of the four steps in accounting for production activity in
a period?
A. Determine over or underapplied overhead.
B. Analyze the physical flow of units.
C. Analyze equivalent units.
D. Determine cost per equivalent unit.
E. Prepare a cost reconciliation.
87. Which of the following is true when computing cost per equivalent unit in a FIFO process
costing system?
A. Prior period costs are combined with costs incurred in the current period and then divided
by the equivalent units of production.
B. Costs incurred in the current period are divided by the equivalent units of production.
C. Total cost to account for is divided by the equivalent units of production.
D. Equivalent units of production are divided by costs incurred in the current period.
E. Equivalent units of production are divided by cost to account for.
16-16
88. A department had 12,500 units which were 20% complete in beginning Goods in Process
Inventory. During the current period 60,000 units were transferred in. Ending Goods in
Process Inventory was 15,000 units which were 70% complete. Assume this company uses the
Weighted Average method of process costing and direct material is added uniformly
throughout the process. What are the equivalent units produced with respect to direct
material?
A. 65,500.
B. 57,500.
C. 37,000.
D. 47,500.
E. 68,000.
FIFO method of process costing and direct material is added uniformly throughout the
process. What are the equivalent units produced with respect to direct material?
A. 65,500.
B. 57,500.
C. 37,000.
D. 47,500.
E. 68,000.
90. 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. General 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.
16-17
91. Which of the following characteristics applies to process cost accounting and not to job
order cost accounting?
A. Use of a predetermined overhead rate.
B. Identifiable lots of production.
C. Equivalent units of production.
D. Labor time ticket for each employee.
E. Use of a single Goods in Process account.
92. A company that applies process costing is most 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.
93. 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.
94. A hybrid costing system would be most appropriate when:

A. A manufacturer is able to standardize processes while at the same time attempting to cater
to individual customer needs.
B. Large quantities of identical products are being produced.
C. The volume of production is low and costs are high.
D. There is no standardization of units of production.
E. The volume of production is low and standardized products are produced.
16-18
95. 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.
96. The purchase of raw materials on account in a process costing system is recorded with a:
A. Debit to Purchases and credit to Cash.
B. Debit to Purchases and a credit to Accounts Payable.
C. Debit to Raw Materials Inventory and a credit to Accounts Payable.
D. Debit to Accounts Payable and a credit to Raw Materials Inventory.
E. Debit to Goods in Process Inventory and a credit to Accounts Payable.
16-19
97. Which of the following journal entries correctly records the current month's activity where
$60,000 of direct material and $17,000 of indirect materials were used in the production
process?
A. A Above.
B. B Above.
C. C Above.
D. D Above.
E. E Above.
16-20
$125,000 of raw material was purchased for cash, and $75,000 of direct material and $30,000
of indirect materials were used in the production process?
A. A Above.
B. B Above.
C. C Above.
D. D Above.
E. E Above.
16-21
$250,000 of raw material was purchased for cash, and $150,000 of direct material and
$60,000 of indirect materials were used in the production process?
A. A Above.
B. B Above.
C. C Above.
D. D Above.
E. E Above.
16-22
100. Direct labor and indirect labor 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.
101. In a process costing operation, the direct labor of a production department includes:
A. All labor used exclusively by that department, even if the labor is not applied to the
product itself.
B. All labor used exclusively by that department, but only if the labor is applied to the product
itself.
C. All labor for that department, including labor for services that help more than one
production department, such as clerical, repair, and computer technicians.
D. Only labor that helps more than one production department, such as clerical, repair, and
computer technicians.
E. Only that labor that is recorded in the Factory Payroll account.
16-23
102. Which of the following journal entries correctly records the current month's activity
where the company had $42,060 in total factory labor costs which were paid in cash with
$32,400 of this total for direct labor?
A. A Above.
B. B Above.
C. C Above.
D. D Above.
E. E Above.
16-24
A. A Above.
B. B Above.
C. C Above.
D. D Above.
E. E Above.
16-25
104. After posting all actual factory overhead and applying factory overhead to production
departments in a process costing system:
A. There will never be underapplied overhead.
B. There will never be overapplied overhead.
C. There will always be underapplied overhead.
D. There will always be overapplied overhead.
E. There may be over or underapplied overhead.
105. Hou Company applies factory overhead to its production departments on the basis of
90% of direct labor costs. In the Assembly Department, Hou had $125,000 of direct labor
cost, and in the Finishing Department, Hou had $35,000 of direct labor cost. The entry to
apply overhead to these production departments is:
A. A Above.
B. B Above.
C. C Above.
D. D Above.
E. E Above.
16-26
106. Assume that the Hood River Juice Company applies factory overhead to its production
departments on the basis of 65% of direct labor costs. Direct labor in the Squeezing
Department was $80,000 and direct labor in the Filtering Department was $12,000. The entry
to apply overhead to these production departments is:
A. A Above.
B. B Above.
C. C Above.
D. D Above.
E. E Above.
107. To compute an equivalent unit of production, one must be able to reasonably estimate:
A. The percentage of completion.
B. Units completed.
C. Units started and completed.
D. Direct labor cost.
E. Materials cost.
16-27
108. A company's beginning work in process inventory consisted of 20,000 units that were 1/5
complete with respect to direct labor. These beginning units were completed and another
90,000 units were started during the current period. Of those started, 60,000 were finished and
the remaining 30,000 were 1/3 complete at the end of the period. Using FIFO, the equivalent
units of production were:
A. 60,000
B. 74,000
C. 76,000
D. 86,000
E. 90,000
the remaining 30,000 were 1/3 complete at the end of the period. Using the Weighted Average
method, the equivalent units of production were:
A. 60,000
B. 74,000
C. 76,000
D. 86,000
E. 90,000
110. The following data are available for a company's manufacturing activities:
Assume the company uses FIFO inventory. If materials are added when the production
process begins and direct labor is applied uniformly throughout the process, what are the
equivalent units for direct materials and for direct labor, 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
16-28
Assume the company uses the Weighted Average inventory method. If materials are added
when the production process begins and direct labor is applied uniformly throughout the
process, what are the equivalent units for direct materials and for direct labor, respectively?
A. 21,000; 23,000
B. 26,000; 19,250
C. 21,000; 19,250
D. 26,000; 23,000
E. 19,250; 19,250
112. At the beginning of the recent period, there were 900 units of product in a department,
one-third completed. These units were finished and an additional 5,000 units were started and
completed during the period. 800 units were still in process at the end of the period, one-
fourth completed. Using the FIFO valuation method, the equivalent units produced by the
department were:
A. 6,700 units.
B. 5,900 units.
C. 5,800 units.
D. 6,100 units.
E. 8,500 units.
fourth completed. Using the Weighted Average valuation method, the equivalent units
produced by the department were:
A. 6,700 units.
B. 5,900 units.
C. 5,800 units.
D. 6,100 units.
E. 8,500 units.
16-29
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 with respect to direct labor at the beginning of the
period and 30,000 were started and completed during the period. Also, during the period,
10,000 units were started but brought only to a stage of being 3/5 completed. Using the FIFO
inventory valuation method, the number of equivalent 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.
10,000 units were started but brought only to a stage of being 3/5 completed. Using the
Weighted Average inventory valuation method, the number of equivalent units of labor added
by the end of the period was:
A. 46,000 units.
B. 50,000 units.
C. 52,000 units.
D. 54,000 units.
E. 56,000 units.
116. A company uses a process cost accounting system. Its Sewing Department's beginning
inventory consisted of 50,000 units (1/4 complete with respect to direct labor and overhead).
The Sewing Department started and finished 120,000 units this period. Its ending inventory
consists of 40,000 units (1/4 complete with respect to direct labor and overhead). All direct
materials are added at the beginning of the process. Under FIFO what are the equivalent units
of production for the Sewing Department for direct materials and for direct labor and
overhead, respectively?
A. 210,000; 120,000
B. 210,000; 180,000
C. 167,500; 167,500
D. 160,000; 162,500
E. 160,000; 167,500
16-30
materials are added at the beginning of the process. Under the Weighted Average inventory
valuation method, what are the equivalent units of production for the Sewing Department for
direct materials and for direct labor and overhead, respectively?
A. 210,000; 120,000
B. 210,000; 180,000
C. 167,500; 167,500
D. 160,000; 162,500
E. 160,000; 167,500
Medina Corp. had the following information available for the year:
118. FIFO equivalent units of production for the year are:

A. 3,320 units.
B. 3,200 units.
C. 3,240 units.
D. 3,520 units.
E. 3,420 units.
119. 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. 3,500 units.
16-31
120. If the weighted average inventory method were used, the equivalent units for the year
would be:
A. 3,320
B. 3,200
C. 3,240
D. 3,520
E. 3,230
121. A department had 600 units which were 40% complete in beginning Goods in Process
Inventory. During the current period, 7,000 units were transferred out. Ending Goods in
Process Inventory was 800 units which were 40% complete. Using the FIFO method, what are
the equivalent units produced if all direct material and direct labor are added uniformly
throughout the process?
A. 7,080
B. 6,960
C. 7,320
D. 7,680
E. 7,800
Process Inventory was 800 units which were 40% complete. Using the Weighted Average
method, what are the equivalent units produced if all direct material and direct labor are added
uniformly throughout the process?
A. 7,080
B. 6,960
C. 7,320
D. 7,680
E. 7,800
16-32
Inventory. During the current period, 77 units were transferred out. Ending Goods in Process
Inventory was 30 units which were 20% complete. Using the FIFO method, what are the
equivalent units produced if all direct material and direct labor are added uniformly
A. 83
B. 70
C. 100
D. 77
E. 107
Inventory was 30 units which were 20% complete. Using the Weighted Average method, what
are the equivalent units produced if all direct material and direct labor are added uniformly
A. 83
B. 70
C. 100
D. 77
E. 107
125. The Machining Department started the current month with beginning goods in process
inventory of $10,000. During the month, it was assigned the following costs: direct materials,
$76,000; direct labor, $24,000; and factory overhead, 50% of direct labor 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 is:
A. $13,000
B. $1,000
C. $49,000
D. $110,000
E. $3,000
16-33
126. The Filtering Department started the current month with beginning goods in process
$77,000; direct labor, $44,000; and factory overhead, 20% of direct material cost. Also,
inventory with a cost of $66,000 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 Filtering
Department is:
A. $66,000
B. $110,000
C. $132,000
D. $125,400
E. $191,400
127. During the current 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. Also during the period, 10,000 units
were started but brought only to a stage of being 3/5 completed. If the FIFO method is used
and $13,000 of overhead was charged to Department A during the period, how much overhead
should be allocated to the ending goods in process inventory?
A. $1,615.
B. $3,250.
C. $2,600.
D. $2,500.
E. $1,500.
were started but brought only to a stage of being 3/5 completed. If the Weighted Average
method is used and $14,000 of overhead was charged to Department A during the period, how
much overhead should be allocated to the ending goods in process inventory?
A. $1,615
B. $3,250
C. $2,600
D. $2,500
E. $1,500.
16-34
129. A company uses a process cost accounting system and the FIFO inventory valuation
method. Its Assembly Department's beginning inventory consisted of 50,000 units, 3/4
complete with respect to direct labor and overhead. The department started and finished
127,500 units this period. The ending inventory consists of 40,000 units that are 1/4 complete
with respect to direct labor and overhead. All direct materials are added at the beginning of
the process. Goods in Process included direct labor costs of $24,000 and overhead costs of
$32,000 for the period. The direct labor cost per equivalent unit is:
A. $0.126
B. $0.160
C. $0.178
D. $0.213
E. $0.373
130. A company uses a process cost accounting system and the Weighted Average inventory
valuation method. Its Assembly Department's beginning inventory consisted of 50,000 units,
3/4 complete with respect to direct labor and overhead. The department started and finished
$40,000 for the period. The Overhead cost per equivalent unit is:
A. $0.126
B. $0.160
C. $0.178
D. $0.213
E. $0.373
16-35
131. 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
labor and overhead are applied uniformly. If the units in 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. $37,260
16-36
132. Que Corporation uses a process cost accounting system. The company manufactured
certain goods at a cost of $800 and sold them on credit to Are Corporation for $1,075. The
complete journal entry to be made by Que at the time of this sale is:
A. A Above.
B. B Above.
C. C Above.
D. D Above.
E. E Above.
Matching Questions
16-37
133. Match the following terms 1 to 7 with the definitions a through g.
Equivalent
1. Costing system to determine the cost of producing units of
each job or job lot production ____
2. System of assigning direct materials, direct labor, and
overhead to specific processes; total costs associated
with each process are then divided by the number of
units passing through that process to determine cost per Job order cost
equivalent unit accounting system ____
Hybrid
3. A manufacturing system that contains features of both manufacturing
process and job order systems system ____
4. Report of costs charged to a department, its Process
equivalent units of production achieved, even the costs manufacturing
assigned to its output system ____
5. Document that summarizes the materials a
department uses during a reporting period; replaces Process cost
materials requisition accounting system ____
Materials
consumption
6. Process of products in a continuous flow of steps report ____
7. Number of units that would be completed if all effort
during a period had been applied to units that were Process cost
started and finished summary ____
Short Answer Questions
134. Job order manufacturing and process manufacturing are two major costing systems used
in manufacturing. Briefly contrast the characteristics of these two systems.
16-38
135. What is meant by equivalent units of production, and why are they important when a
process cost accounting system is used?
136. (a) Why is the Process Cost Summary important to Management?

(b) How does the Process Cost Summary accomplish its purposes?
137. Compare and contrast the FIFO and weighted average methods of process costing.
138. Briefly explain the conditions under which job order cost accounting systems and
process cost accounting systems are commonly applied.
16-39
139. What is a hybrid costing system? When is a hybrid costing system appropriate for a
manufacturer?
140. What are the four steps in accounting for production activity in a period?
141. Describe the flow of materials in a process cost accounting system, including accounts
used.
142. Describe the flow of labor in a process cost accounting system, including accounts used.
16-40
143. Describe the flow of overhead costs in a process cost accounting system, including
accounts used.
Essay Questions
144. Prepare the required general journal entries to record the following transactions for the
Bell Company.
(a.) Purchased $40,000 of raw materials on account.
(b.) Used $12,000 of direct materials in the Mixing Department, and $17,000 of direct
materials in the Assembly Department.
(c.) Used $5,000 of indirect materials.
145. Prepare the required general journal entry to record the following transactions for the
Flaherty Company.
(a.) Incurred $95,000 of factory labor cost which is paid in cash.
(b.) Used $42,000 of direct labor in the grinding department, and $36,000 of direct labor in
the sifting department.
(c.) Used $17,000 of indirect labor.
16-41
146. Iolaus Company provides the following data for the current year:
Required:
(a) Calculate the predetermined overhead allocation rate based on direct labor.
(b) Determine the amount of overhead applied to production.
(c) Prepare the journal entry to apply factory overhead to goods in process.
147. A company's January 1 goods in process inventory contained 30,000 units that were 1/4
complete with respect to direct labor. The beginning inventory was completed this year and
another 120,000 units were started. Of those started, 80,000 were finished and the remaining
40,000 were left 1/5 complete. Using FIFO, calculate the equivalent units of production for
the year.
16-42
40,000 were left 1/5 complete. Using Weighted Average, calculate the equivalent units of
production for the year.
149. The following data are available for Osman Corp. for the current year:
Using FIFO, calculate the equivalent units of production for the year.
Using Weighted Average, calculate the equivalent units of production for the year.
16-43
151. A company uses a process cost accounting system. The following information is
available regarding direct labor for the current year:
(a) Calculate the equivalent units of production for direct labor for the year using FIFO.
(b) Calculate the average cost per equivalent unit for direct labor (round to the nearest cent).
(a) Calculate the equivalent units of production for direct labor for the year using Weighted
Average.
16-44
Refer to the following information about the Painting Department in the Richardson Factory
for the month of June:
153. If FIFO has been used, how many equivalent units of materials were added to all units
processed during June? How many equivalent units of labor and overhead were added to all
units processed during June?
154. If FIFO is used, what was the materials cost per equivalent unit produced during June?
What was the labor and overhead cost per equivalent unit produced during June?
16-45
155. If FIFO is used, what is the total cost of all units that were completed and transferred to
finished goods during June? What is the total cost of the ending goods in process inventory?
156. Assume that the Painting Department of the Richardson Factory uses the weighted
average method. What is the cost of all units that were completed and transferred to finished
goods in June? What is the total cost of ending goods in process?
16-46
157. Bimrose Manufacturing uses process cost accounting and FIFO 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 labor and overhead are incurred evenly throughout all departments' processes. The
following information is available for September:
(a) 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.
(b) Determine the equivalent units of production for direct materials, direct labor, and
overhead for each department.
16-47
Refer to the following incomplete table of cost information:
158. What was the cost of goods transferred out of the Grating Department and into the
Bagging Department?
159. What was the cost of the goods transferred out of the Bagging Department and into the
finished goods inventory?
16-48
160. What was the cost of the beginning inventory of finished goods?
161. What was the cost of the direct materials used in the Grating Department?
162. What was the cost of the direct labor used in the Bagging Department?
16-49
Refer to the following information about the Dipping Department of the Indiana Factory for
the month of August:
The cost per equivalent unit of materials is $10.00, and the cost per equivalent unit of labor
and overhead is $22.00.
163. What total cost should be assigned to the units that were in the beginning goods in
process inventory and completed during August?
164. What total cost should be assigned to the units that were started and completed during
August?
16-50
165. What total cost should be assigned to all units that were completed during August?
166. What total cost should be assigned to the units that were in process at the end of August?
167. Nano Company uses a process cost system and the Weighted Average inventory
valuation method. The Nano Assembly Department's beginning inventory consisted of 40,000
units that were 3/5 complete with respect to direct labor and overhead. The department started
and finished 149,000 units with respect to direct labor and overhead. The ending inventory
consists of 60,000 units that are 3/4 complete with respect to direct labor and overhead. All
direct materials are added at the beginning of the process. The department Goods in Process
account included direct labor costs of $292,500 and overhead costs of $140,400.
(a) What is the direct labor cost per equivalent unit?
(b) What is the overhead cost per equivalent unit?
16-51
168. Tanner, Inc. uses a process cost accounting system with Weighted Average valuation
method. The following operating and cost data occurred during October:
Materials are added at the beginning of the process. Direct labor and overhead are incurred
evenly throughout the process. Prepare the October process cost summary.
16-52
169. Assuming the FIFO inventory valuation method, use the following information to
determine the cost of the goods completed during the current reporting period:
16-53
170. Based on the table of cost information below, prepare the general journal entry required
to record the:
(a.) Transfer of goods from the molding department to the finished goods inventory.
(b.) Cost of goods sold for November.
The following table of cost information is available for the Messier Company for the month of
November:
Fill in the Blank Questions
171. Process manufacturing, also called process operations or process production, is the
___________ production of products in a _____________________ flow of steps.
________________________________________
172. An equivalent unit of production is an estimate of efforts that is used to calculate the
______________ of each production component.
________________________________________
16-54
173. Partially completed production is measured for an account at two points in time for each
accounting period. These measurement points and the account are ________________ and
____________.
________________________________________
174. The first step in accounting for production activity in a period, ________________, is a
reconciliation of the physical units started in a period with the physical units completed in that
period.
________________________________________
175. The second step in accounting for production activity in a period is to compute
______________________.
________________________________________
176. The third step in accounting for production activity in a period is to compute the
______________________.
________________________________________
177. The fourth step in accounting for production activity in a period is to prepare a cost
reconciliation, which reconciles _____________________ with the
_____________________.
________________________________________
178. A process cost summary involves computations and analysis at four sequential steps.
These are (1) _________ (2) _____________, (3) _______________, and (4)
______________.
________________________________________
16-55
179. The _____________ method of process costing assigns costs to units assuming a first-in,
first-out flow of product.
________________________________________
180. The FIFO method of process costing accounts for cost flow in a ______________
manner.
________________________________________
181. ________ distinct groups of units must be considered in determining the equivalent units
of production under the FIFO method of process costing.
________________________________________
182. The three distinct groups of units which must be considered in determining the
equivalent units of production under the FIFO method of process costing are: (a)
_______________, (b) _______________, and (c) _____________________.
________________________________________
183. Materials and labor 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 ________________.
________________________________________
184. A ____________________ contains features of both process and job order operations.
________________________________________
185. In a process costing accounting system, direct materials used are debited to the
_________________ account, and indirect materials used are debited to the
______________________ account.
________________________________________
16-56
186. In a process costing accounting system, factory wages are debited to _______________,
and when direct labor is used, that account is credited and ____________________ is debited.
When indirect labor is used, the ________________________ account is debited and
______________________ is credited.
________________________________________
187. In process costing, factory overhead incurred does not usually equal that applied, which
yields either ____________________ or ___________________ overhead.
________________________________________
188. On a process cost summary, the total costs to account for (the processing costs for the
period plus the goods in process at the beginning of the period) should equal
___________________ (____________________ plus _____________________).
________________________________________
189. In a process cost accounting systems, when units are transferred from the Softening
Department to the Hardening Department, ____________________ is debited and
__________________________ is credited.
________________________________________
190. In a manufacturing operation with two process departments (1 and 2), the flow of costs
would proceed from Goods in Process, Dept #1 to ________________ to _______________
to ______________.
________________________________________
16-57
Chapter 16 Process Costing and Analysis Answer Key
True / False Questions
1. The managers of process manufacturing systems focus on the series of processes needed to
complete the production of products.
TRUE
AACSB: Analytic
AICPA BB: Industry
AICPA FN: Decision Making
Bloom's: Remember
Difficulty: Easy
Learning Objective: C1 Explain process operations and the way they differ from job order operations.
2. In a process manufacturing system, products pass through a series of sequential processes.

TRUE
AACSB: Analytic
AICPA BB: Industry
Bloom's: Remember
Difficulty: Easy
3. Process manufacturing usually reflects a manufacturer that produces large quantities of

identical products.
TRUE
AACSB: Analytic
AICPA BB: Industry
Bloom's: Remember
Difficulty: Easy
16-58
4. A production department is an organizational unit of a factory that has the responsibility for
at least partially manufacturing or producing a product or service.
TRUE
AACSB: Analytic
AICPA BB: Industry
Bloom's: Remember
Difficulty: Easy
5. To determine unit cost under a process cost accounting system, equivalent units produced
must be calculated if the company has goods in process inventories.
TRUE
AACSB: Analytic
AICPA BB: Industry
AICPA FN: Measurement
Bloom's: Remember
Difficulty: Easy
Learning Objective: C2 Define and compute equivalent units and explain their use in process cost accounting.
6. Equivalent units of production refer to the number of units that would be completed if all
effort during a period had been applied only to those units that were started and completed in
a period.
TRUE
AACSB: Analytic
AICPA BB: Industry
Bloom's: Remember
Difficulty: Easy
16-59
7. In a process cost accounting system, a department's production should be measured in

terms of equivalent units when its beginning or ending inventory includes goods in process.
TRUE
AACSB: Analytic
AICPA BB: Industry
Bloom's: Understand
Difficulty: Medium
8. Equivalent units of production are always the same as the total number of physical units
finished during the period.
FALSE
AACSB: Analytic
AICPA BB: Industry
Bloom's: Understand
Difficulty: Medium
9. Equivalent units of production need to be determined only if a processing department adds

materials and labor to its products at different rates.
FALSE
AACSB: Analytic
AICPA BB: Industry
Bloom's: Understand
Difficulty: Medium
16-60
10. "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.
FALSE
AACSB: Analytic
AICPA BB: Industry
Bloom's: Understand
Difficulty: Medium
11. The last step in the four-step accounting procedure for process costing is the calculation of
equivalent units of production.
FALSE
AACSB: Analytic
AICPA BB: Industry
Bloom's: Understand
Difficulty: Medium
Learning Objective: C3 Define and prepare a process cost summary and describe its purposes.
12. The process cost summary is an important managerial accounting report produced by a
process cost accounting system.
TRUE
AACSB: Analytic
AICPA BB: Industry
AICPA FN: Reporting
Bloom's: Remember
Difficulty: Easy
16-61
13. A process cost summary is an accounting 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.
TRUE
AACSB: Analytic
AICPA BB: Industry
AICPA FN: Reporting
Bloom's: Remember
Difficulty: Easy
14. A process cost summary includes the amounts of equivalent finished units of production
for the period.
TRUE
AACSB: Analytic
AICPA BB: Industry
AICPA FN: Reporting
Bloom's: Understand
Difficulty: Medium
15. 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.
TRUE
AACSB: Analytic
AICPA BB: Industry
AICPA FN: Reporting
Bloom's: Understand
Difficulty: Medium
16-62
16. A process cost summary shows the cost of a particular job manufactured in the reporting
period.
FALSE
AACSB: Analytic
AICPA BB: Industry
AICPA FN: Reporting
Bloom's: Understand
Difficulty: Medium
17. 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.
FALSE
AACSB: Analytic
AICPA BB: Industry
AICPA FN: Reporting
Bloom's: Understand
Difficulty: Medium
18. The FIFO method of process costing assigns costs to units assuming a first-in, first-out
flow of product.
TRUE
AACSB: Analytic
AICPA BB: Industry
Bloom's: Remember
Difficulty: Easy
Learning Objective: C4 Appendix 16A-Explain and illustrate the accounting for production activity using FIFO.
16-63
19. The FIFO method of process costing has slightly different objectives from the weighted
average method of process costing.
FALSE
AACSB: Analytic
AICPA BB: Industry
Bloom's: Understand
Difficulty: Medium
20. The FIFO method of process costing computes equivalent units of production in a slightly
different manner than the computation used in the weighted average method of process
costing.
TRUE
AACSB: Analytic
AICPA BB: Industry
Bloom's: Understand
Difficulty: Medium
21. The Weighted Average method of process costing computes the cost per equivalent unit
based solely on the current period's EUPs and costs.
FALSE
AACSB: Analytic
AICPA BB: Industry
Bloom's: Apply
Difficulty: Hard
16-64
22. Process cost accounting systems are commonly used by companies that produce a large
volume of standardized units on a continuous basis.
TRUE
AACSB: Analytic
AICPA BB: Industry
AICPA FN: Reporting
Bloom's: Remember
Difficulty: Easy
Learning Objective: A1 Compare process cost accounting and job order cost accounting.
23. 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.
FALSE
AACSB: Analytic
AICPA BB: Industry
Bloom's: Remember
Difficulty: Easy
24. Process and job order manufacturing operations both combine materials, labor, and
overhead items in the process of producing products.
TRUE
AACSB: Analytic
AICPA BB: Industry
AICPA FN: Reporting
Bloom's: Remember
Difficulty: Easy
16-65
25. Accountants use the term "process cost accounting system" because these systems use a
number of trained individuals and computers to process the collected cost information.
FALSE
AACSB: Analytic
AICPA BB: Industry
AICPA FN: Reporting
Bloom's: Remember
Difficulty: Easy
26. Process costing is applied to operations with repetitive production and heterogeneous
products.
FALSE
AACSB: Analytic
AICPA BB: Industry
AICPA FN: Reporting
Bloom's: Remember
Difficulty: Easy
27. In process cost accounting, all labor that is applied exclusively in a single production
department is considered to be direct labor.
TRUE
AACSB: Analytic
AICPA BB: Industry
AICPA FN: Reporting
Bloom's: Remember
Difficulty: Easy
28. Process cost accounting systems consider overhead costs to include those costs that cannot
be readily identified with any specific process.
TRUE
AACSB: Analytic
AICPA BB: Industry
AICPA FN: Reporting
Bloom's: Remember
Difficulty: Easy
16-66
29. A company that uses a process cost accounting system maintains separate Goods in
Process Inventory accounts for each of its manufacturing departments.
TRUE
AACSB: Analytic
AICPA BB: Industry
AICPA FN: Reporting
Bloom's: Remember
Difficulty: Easy
30. Companies that use a series of manufacturing processes to produce standardized products
should use a process cost accounting system.
TRUE
AACSB: Analytic
AICPA BB: Industry
AICPA FN: Reporting
Bloom's: Remember
Difficulty: Easy
31. When defining direct costs and indirect costs in process costing, it is the process that is the
cost object.
TRUE
AACSB: Analytic
AICPA BB: Industry
AICPA FN: Reporting
Bloom's: Remember
Difficulty: Easy
16-67
32. Process cost accounting systems are used only by companies that manufacture physical
products; meaning that companies and other organizations that provide services to their
customers do not use process cost accounting.
FALSE
AACSB: Analytic
AICPA BB: Industry
AICPA FN: Reporting
Bloom's: Understand
Difficulty: Medium
33. Process cost accounting systems are commonly used by companies that manufacture
standardized products by passing them through a series of manufacturing steps.
TRUE
AACSB: Analytic
AICPA BB: Industry
AICPA FN: Reporting
Bloom's: Understand
Difficulty: Medium
34. A unique feature of process costing systems is the use of a single Goods in Process
Inventory control account.
FALSE
AACSB: Analytic
AICPA BB: Industry
AICPA FN: Reporting
Bloom's: Understand
Difficulty: Medium
35. The use of process costing is of little benefit to a service type of operation.
FALSE
AACSB: Analytic
AICPA BB: Industry
AICPA FN: Reporting
Bloom's: Understand
Difficulty: Medium
16-68
36. In process cost accounting, the classification of materials as direct or indirect depends on
whether they are clearly linked with a specific process.
TRUE
AACSB: Analytic
AICPA BB: Industry
AICPA FN: Reporting
Bloom's: Understand
Difficulty: Medium
37. In process cost accounting, materials are always classified as indirect if they are not
physically incorporated into the final product.
FALSE
AACSB: Analytic
AICPA BB: Industry
AICPA FN: Reporting
Bloom's: Understand
Difficulty: Medium
38. Direct costs in process cost accounting include only those costs that can be readily
identified with particular product units.
FALSE
AACSB: Analytic
AICPA BB: Industry
AICPA FN: Reporting
Bloom's: Understand
Difficulty: Medium
39. Process cost accounting systems consider direct costs to include those costs that can be
readily identified with a particular process.
TRUE
AACSB: Analytic
AICPA BB: Industry
AICPA FN: Reporting
Bloom's: Understand
Difficulty: Medium
16-69
40. Hybrid systems contain aspects of both process and job order operations.
TRUE
AACSB: Analytic
AICPA BB: Industry
AICPA FN: Reporting
Bloom's: Remember
Difficulty: Easy
Learning Objective: A2 Explain and illustrate a hybrid costing system.
41. Hybrid costing systems can only be applied to auto manufacturing.

FALSE
AACSB: Analytic
AICPA BB: Industry
AICPA FN: Reporting
Bloom's: Remember
Difficulty: Easy
Materials Inventory account is credited.
FALSE
AACSB: Analytic
AICPA BB: Industry
AICPA FN: Reporting
Bloom's: Understand
Difficulty: Medium
Learning Objective: P1 Record the flow of direct materials costs in process cost accounting.
Materials Inventory account is debited.
TRUE
AACSB: Analytic
AICPA BB: Industry
AICPA FN: Reporting
Bloom's: Understand
Difficulty: Medium
16-70
44. When a process cost accounting system assigns the cost of materials to a production
department, the journal entry debits the Raw Materials Inventory account and credits the
Goods in Process Inventory account for that department.
FALSE
AACSB: Analytic
AICPA BB: Industry
AICPA FN: Reporting
Bloom's: Understand
Difficulty: Medium
45. If Department A uses $10,000 of direct materials and Department B uses $15,000 of direct
system:
TRUE
AACSB: Analytic
AICPA BB: Industry
AICPA FN: Reporting
Bloom's: Understand
Difficulty: Medium
46. If Department J uses $40,000 of direct materials and Department K uses $70,000 of direct
system:
FALSE
AACSB: Analytic
AICPA BB: Industry
AICPA FN: Reporting
Bloom's: Understand
Difficulty: Medium
16-71
47. If Department Q uses $60,000 of direct materials and Department T uses $15,000 of direct
system:
FALSE
AACSB: Analytic
AICPA BB: Industry
AICPA FN: Reporting
Bloom's: Understand
Difficulty: Medium
48. A materials consumption report is a source document that summarizes the materials used
during a reporting period.
TRUE
AACSB: Analytic
AICPA BB: Industry
AICPA FN: Reporting
Bloom's: Understand
Difficulty: Medium
49. The following journal entry would be made to record the use of direct materials in the
TRUE
AACSB: Analytic
AICPA BB: Industry
AICPA FN: Reporting
Bloom's: Understand
Difficulty: Medium
16-72
50. After all process cost accounting journal entries are recorded and posted for a reporting
period, the Factory Payroll account should have a zero balance.
TRUE
AACSB: Analytic
AICPA BB: Industry
AICPA FN: Reporting
Bloom's: Understand
Difficulty: Medium
Learning Objective: P2 Record the flow of direct labor costs in process cost accounting.
51. If the factory labor cost for a month was $123,000 (paid in cash), the following journal
TRUE
AACSB: Analytic
AICPA BB: Industry
AICPA FN: Reporting
Bloom's: Understand
Difficulty: Medium
52. If Department N incurred direct labor cost of $22,000 and Department O incurred direct
labor cost of $43,000, the following journal entry would be recorded by the process cost
accounting system:
FALSE
AACSB: Analytic
AICPA BB: Industry
AICPA FN: Reporting
Bloom's: Understand
Difficulty: Medium
16-73
53. If Department T uses $89,000 of direct labor and Department V uses $11,000 of direct
FALSE
AACSB: Analytic
AICPA BB: Industry
AICPA FN: Reporting
Bloom's: Understand
Difficulty: Medium
54. If Department G uses $53,000 of direct labor and Department H uses $21,000 of direct
TRUE
AACSB: Analytic
AICPA BB: Industry
AICPA FN: Reporting
Bloom's: Understand
Difficulty: Medium
55. In process cost accounting, direct labor includes only the labor that is applied directly to
the products.
FALSE
AACSB: Analytic
AICPA BB: Industry
AICPA FN: Reporting
Bloom's: Understand
Difficulty: Medium
16-74
56. In some circumstances, a process cost accounting system can classify wages paid to
maintenance workers as direct labor costs instead of factory overhead.
TRUE
AACSB: Analytic
AICPA BB: Industry
AICPA FN: Reporting
Bloom's: Understand
Difficulty: Medium
57. In a process costing system, factory labor costs incurred in a reporting period are
presented on the income statement as Factory Labor Expense.
FALSE
AACSB: Analytic
AICPA BB: Industry
AICPA FN: Reporting
Bloom's: Understand
Difficulty: Medium
FALSE
AACSB: Analytic
AICPA BB: Industry
AICPA FN: Reporting
Bloom's: Understand
Difficulty: Medium
16-75
59. 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.
TRUE
AACSB: Analytic
AICPA BB: Industry
Bloom's: Remember
Difficulty: Easy
Learning Objective: P3 Record the flow of factory overhead costs in process cost accounting.
60. If the indirect materials cost for a reporting period was $37,500, the following journal
TRUE
AACSB: Analytic
AICPA BB: Industry
Bloom's: Remember
Difficulty: Easy
61. A process cost accounting system records all factory overhead costs directly in the Goods
in Process Inventory accounts.
FALSE
AACSB: Analytic
AICPA BB: Industry
Bloom's: Remember
Difficulty: Easy
16-76
62. In process costing there is never a balance remaining in Factory Overhead that needs to be
closed at period end.
FALSE
AACSB: Analytic
AICPA BB: Industry
AICPA FN: Reporting
Bloom's: Remember
Difficulty: Easy
63. In process costing, indirect materials are charged directly to Goods in Process Inventory.
FALSE
AACSB: Analytic
AICPA BB: Industry
Bloom's: Remember
Difficulty: Easy
64. If the predetermined overhead allocation rate is 350% of direct labor cost and the Painting
record the allocation of overhead to the products processed in this department:
TRUE
AACSB: Analytic
AICPA BB: Industry
AICPA FN: Reporting
Bloom's: Understand
Difficulty: Medium
16-77
65. If the predetermined overhead allocation rate is 85% of direct labor cost, and the Polishing
FALSE
AACSB: Analytic
AICPA BB: Industry
AICPA FN: Reporting
Bloom's: Understand
Difficulty: Medium
66. If the predetermined overhead allocation rate is 225% of direct labor cost, and the Mixing
FALSE
AACSB: Analytic
AICPA BB: Industry
AICPA FN: Reporting
Bloom's: Apply
Difficulty: Hard
16-78
67. The company uses the same predetermined overhead allocation rate (based on direct
labor) for the Pickling and Canning Departments.
FALSE
Pickling Dept. OH rate = $6,000/$4,000 = 150%

Canning Dept. OH rate = $4,200/$2,100 = 200%
AACSB: Analytic
AICPA BB: Industry
AICPA FN: Reporting
Bloom's: Remember
Difficulty: Easy
16-79
68. If the allocated overhead equaled the actual overhead, then total manufacturing costs
incurred in both departments during the reporting period were $35,300.
TRUE
Total costs added = $16,000 + $4,000 + $6,000 + $3,000 + $2,100 + $4,200 = $35,300
AACSB: Analytic
AICPA BB: Industry
AICPA FN: Reporting
Bloom's: Apply
Difficulty: Hard
physical units that were 20% complete with respect to direct labor, it must add 80,000
equivalent units of labor to complete them.
TRUE
AACSB: Analytic
AICPA BB: Industry
Bloom's: Remember
Difficulty: Easy
70. The number of equivalent units of production assigned to ending goods in process
inventory should usually be equal to or less than the number of physical units in ending goods
in process inventory.
TRUE
AACSB: Analytic
AICPA BB: Industry
Bloom's: Remember
Difficulty: Easy
16-80
71. In the same time period, it is possible that 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 labor.
TRUE
AACSB: Analytic
AICPA BB: Industry
Bloom's: Understand
Difficulty: Medium
72. 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
labor also must be 100.
FALSE
AACSB: Analytic
AICPA BB: Industry
Bloom's: Understand
Difficulty: Medium
73. Once equivalent units are calculated for materials, this number will also be used for direct
labor and factory overhead.
FALSE
AACSB: Analytic
AICPA BB: Industry
Bloom's: Understand
Difficulty: Medium
16-81
physical units that were 25% complete with respect to direct materials and 40% complete with
respect to direct labor, it must add 12,500 equivalent units of direct materials and 20,000
equivalent units of direct labor to complete them.
FALSE
AACSB: Analytic
AICPA BB: Industry
Bloom's: Understand
Difficulty: Medium
75. 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.
TRUE
AACSB: Analytic
AICPA BB: Industry
AICPA FN: Reporting
Bloom's: Remember
Difficulty: Easy
Static/Algo: Static
76. Since the process cost summary describes the activities of a production department for a
specified reporting period, it does not present information about any costs incurred in prior
periods.
FALSE
AACSB: Analytic
AICPA BB: Industry
AICPA FN: Reporting
Bloom's: Apply
Difficulty: Hard
16-82
77. All costs of the processes in a process costing system ultimately pass through the Cost of
Goods Sold account.
TRUE
AACSB: Analytic
AICPA BB: Industry
AICPA FN: Reporting
Bloom's: Remember
Difficulty: Easy
Learning Objective: P4 Record the transfer of completed goods to Finished Goods Inventory and Cost of Goods Sold.
78. The Packing Department transferred out completed units with a cost of $74,000. This
transfer should be recorded with the following entry:
TRUE
AACSB: Analytic
AICPA BB: Industry
AICPA FN: Reporting
Bloom's: Understand
Difficulty: Medium
16-83
TRUE
AACSB: Analytic
AICPA BB: Industry
AICPA FN: Reporting
Bloom's: Understand
Difficulty: Medium
80. If the predetermined overhead allocation rates were based on direct labor costs, the rates
for the Pushing and Shoving Departments were 50% and 150%, respectively.
TRUE
Pushing OH rate = $60,000/$120,000 = 50%

Shoving OH rate = $105,000/$70,000 = 150%
AACSB: Analytic
AICPA BB: Industry
AICPA FN: Reporting
Bloom's: Understand
Difficulty: Medium
81. The following journal entry would be made to record the transfer of completed goods
from Shoving to the finished goods inventory for this period:
FALSE
AACSB: Analytic
AICPA BB: Industry
AICPA FN: Reporting
Bloom's: Understand
Difficulty: Medium
16-84
Multiple Choice Questions
82. Which of the following five types of products is least likely to be produced in a process
manufacturing system?
A. Compact disks.
B. Slacks for casual wear.
C. Baseball hats.
D. Calculators.
E. Oil paintings.
AACSB: Analytic
AICPA BB: Industry
AICPA FN: Reporting
Bloom's: Understand
Difficulty: Medium
83. Which of the following characteristics does not usually 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 different processes.
D. The output of all processes except the final process is an input to the next process.
E. In a multi-step process, there will be multiple Goods in Process accounts.
AACSB: Analytic
AICPA BB: Industry
AICPA FN: Reporting
Bloom's: Understand
Difficulty: Medium
16-85
84. 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. Process cost summary.
AACSB: Analytic
AICPA BB: Industry
Bloom's: Remember
Difficulty: Easy
85. Equivalent units of production are equal to:

A. The number of units that could have been completed if all effort had been applied to units
that were started and completed that period.
B. The number of finished units actually produced that period.
C. The number of units introduced into the process that period.
D. The number of units still in process that period.
E. Physical units that were completed this period from all effort being applied to them.
AACSB: Analytic
AICPA BB: Industry
Bloom's: Remember
Difficulty: Easy
16-86
86. Which of the following is not one of the four steps in accounting for production activity in
a period?
A. Determine over or underapplied overhead.
B. Analyze the physical flow of units.
C. Analyze equivalent units.
D. Determine cost per equivalent unit.
E. Prepare a cost reconciliation.
AACSB: Analytic
AICPA BB: Industry
AICPA FN: Reporting
Bloom's: Remember
Difficulty: Easy
87. Which of the following is true when computing cost per equivalent unit in a FIFO process
costing system?
A. Prior period costs are combined with costs incurred in the current period and then divided
by the equivalent units of production.
B. Costs incurred in the current period are divided by the equivalent units of production.
C. Total cost to account for is divided by the equivalent units of production.
D. Equivalent units of production are divided by costs incurred in the current period.
E. Equivalent units of production are divided by cost to account for.
AACSB: Analytic
AICPA BB: Industry
AICPA FN: Reporting
Bloom's: Understand
Difficulty: Medium
16-87
Weighted Average method of process costing and direct material is added uniformly
throughout the process. What are the equivalent units produced with respect to direct
material?
A. 65,500.
B. 57,500.
C. 37,000.
D. 47,500.
E. 68,000.
Equivalent Units Produced = Units completed + Ending Goods in Process Inventory Units
Completed = 12,500 + 60,000 -15,000 = 57,500
AACSB: Analytic
AICPA BB: Industry
AICPA FN: Reporting
Bloom's: Apply
Difficulty: Hard
FIFO method of process costing and direct material is added uniformly throughout the
process. What are the equivalent units produced with respect to direct material?
A. 65,500.
B. 57,500.
C. 37,000.
D. 47,500.
E. 68,000.
Units completed = Units completed - Beginning Goods in Process = 57,500 - 12,500 = 45,000
Equivalent Units Produced = (12,500)(.8) + 45,000 + (15,000)(.7) = 65,500
AACSB: Analytic
AICPA BB: Industry
AICPA FN: Reporting
Bloom's: Apply
Difficulty: Hard
16-88
90. 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. General 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.
AACSB: Analytic
AICPA BB: Industry
AICPA FN: Reporting
Bloom's: Remember
Difficulty: Easy
91. Which of the following characteristics applies to process cost accounting and not to job
order cost accounting?
A. Use of a predetermined overhead rate.
B. Identifiable lots of production.
C. Equivalent units of production.
D. Labor time ticket for each employee.
E. Use of a single Goods in Process account.
AACSB: Analytic
AICPA BB: Industry
AICPA FN: Reporting
Bloom's: Understand
Difficulty: Medium
92. A company that applies process costing is most 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.
AACSB: Analytic
AICPA BB: Industry
AICPA FN: Reporting
Bloom's: Understand
Difficulty: Medium
16-89
93. 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.
AACSB: Analytic
AICPA BB: Industry
AICPA FN: Reporting
Bloom's: Understand
Difficulty: Medium
94. A hybrid costing system would be most appropriate when:

A. A manufacturer is able to standardize processes while at the same time attempting to cater
to individual customer needs.
B. Large quantities of identical products are being produced.
C. The volume of production is low and costs are high.
D. There is no standardization of units of production.
E. The volume of production is low and standardized products are produced.
AACSB: Analytic
AICPA BB: Industry
AICPA FN: Reporting
Bloom's: Remember
Difficulty: Easy
95. 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.
AACSB: Analytic
AICPA BB: Industry
AICPA FN: Reporting
Bloom's: Remember
Difficulty: Easy
16-90
96. The purchase of raw materials on account in a process costing system is recorded with a:
A. Debit to Purchases and credit to Cash.
B. Debit to Purchases and a credit to Accounts Payable.
C. Debit to Raw Materials Inventory and a credit to Accounts Payable.
D. Debit to Accounts Payable and a credit to Raw Materials Inventory.
E. Debit to Goods in Process Inventory and a credit to Accounts Payable.
AACSB: Analytic
AICPA BB: Industry
AICPA FN: Reporting
Bloom's: Remember
Difficulty: Easy
16-91
$60,000 of direct material and $17,000 of indirect materials were used in the production
process?
A. A Above.
B. B Above.
C. C Above.
D. D Above.
E. E Above.
AACSB: Analytic
AICPA BB: Industry
AICPA FN: Reporting
Bloom's: Understand
Difficulty: Medium
16-92
$125,000 of raw material was purchased for cash, and $75,000 of direct material and $30,000
of indirect materials were used in the production process?
A. A Above.
B. B Above.
C. C Above.
D. D Above.
E. E Above.
16-93
AACSB: Analytic
AICPA BB: Industry
AICPA FN: Reporting
Bloom's: Apply
Difficulty: Hard
16-94
$250,000 of raw material was purchased for cash, and $150,000 of direct material and
$60,000 of indirect materials were used in the production process?
A. A Above.
B. B Above.
C. C Above.
D. D Above.
E. E Above.
16-95
AACSB: Analytic
AICPA BB: Industry
AICPA FN: Reporting
Bloom's: Apply
Difficulty: Hard
100. Direct labor and indirect labor 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.
AACSB: Analytic
AICPA BB: Industry
AICPA FN: Reporting
Bloom's: Understand
Difficulty: Medium
101. In a process costing operation, the direct labor of a production department includes:
A. All labor used exclusively by that department, even if the labor is not applied to the
product itself.
B. All labor used exclusively by that department, but only if the labor is applied to the product
itself.
C. All labor for that department, including labor for services that help more than one
production department, such as clerical, repair, and computer technicians.
D. Only labor that helps more than one production department, such as clerical, repair, and
computer technicians.
E. Only that labor that is recorded in the Factory Payroll account.
AACSB: Analytic
AICPA BB: Industry
AICPA FN: Reporting
Bloom's: Understand
Difficulty: Medium
16-96
A. A Above.
B. B Above.
C. C Above.
D. D Above.
E. E Above.
16-97
AACSB: Analytic
AICPA BB: Industry
AICPA FN: Reporting
Bloom's: Apply
Difficulty: Hard
16-98
A. A Above.
B. B Above.
C. C Above.
D. D Above.
E. E Above.
16-99
AACSB: Analytic
AICPA BB: Industry
AICPA FN: Reporting
Bloom's: Apply
Difficulty: Hard
104. After posting all actual factory overhead and applying factory overhead to production
departments in a process costing system:
A. There will never be underapplied overhead.
B. There will never be overapplied overhead.
C. There will always be underapplied overhead.
D. There will always be overapplied overhead.
E. There may be over or underapplied overhead.
AACSB: Analytic
AICPA BB: Industry
AICPA FN: Reporting
Bloom's: Understand
Difficulty: Medium
16-100
105. Hou Company applies factory overhead to its production departments on the basis of
90% of direct labor costs. In the Assembly Department, Hou had $125,000 of direct labor
cost, and in the Finishing Department, Hou had $35,000 of direct labor cost. The entry to
apply overhead to these production departments is:
A. A Above.
B. B Above.
C. C Above.
D. D Above.
E. E Above.
AACSB: Analytic
AICPA BB: Industry
AICPA FN: Reporting
Bloom's: Understand
Difficulty: Medium
16-101
106. Assume that the Hood River Juice Company applies factory overhead to its production
departments on the basis of 65% of direct labor costs. Direct labor in the Squeezing
Department was $80,000 and direct labor in the Filtering Department was $12,000. The entry
to apply overhead to these production departments is:
A. A Above.
B. B Above.
C. C Above.
D. D Above.
E. E Above.
AACSB: Analytic
AICPA BB: Industry
AICPA FN: Reporting
Bloom's: Understand
Difficulty: Medium
16-102
107. To compute an equivalent unit of production, one must be able to reasonably estimate:
A. The percentage of completion.
B. Units completed.
C. Units started and completed.
D. Direct labor cost.
E. Materials cost.
AACSB: Analytic
AICPA BB: Industry
Bloom's: Understand
Difficulty: Medium
the remaining 30,000 were 1/3 complete at the end of the period. Using FIFO, the equivalent
units of production were:
A. 60,000
B. 74,000
C. 76,000
D. 86,000
E. 90,000
(20,000)(4/5) + 60,000 + (30,000)(1/3) = 86,000
AACSB: Analytic
AICPA BB: Industry
Bloom's: Understand
Difficulty: Medium
16-103
the remaining 30,000 were 1/3 complete at the end of the period. Using the Weighted Average
method, the equivalent units of production were:
A. 60,000
B. 74,000
C. 76,000
D. 86,000
E. 90,000
80,000 + (30,000)(1/3) = 90,000
AACSB: Analytic
AICPA BB: Industry
Bloom's: Understand
Difficulty: Medium
16-104
Assume the company uses FIFO inventory. If materials are added when the production
process begins and direct labor is applied uniformly throughout the process, what are the
equivalent units for direct materials and for direct labor, 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
DM: 15,000 + 6,000 = 21,000

DL: (5,000 x .25) + 15,000 + (6,000 x .5) = 19,250
AACSB: Analytic
AICPA BB: Industry
Bloom's: Understand
Difficulty: Medium
16-105
Assume the company uses the Weighted Average inventory method. If materials are added
when the production process begins and direct labor is applied uniformly throughout the
process, what are the equivalent units for direct materials and for direct labor, respectively?
A. 21,000; 23,000
B. 26,000; 19,250
C. 21,000; 19,250
D. 26,000; 23,000
E. 19,250; 19,250
DM: 20,000 + 6,000 = 26,000

DL: 20000 + (6,000 x .5) = 23,000
AACSB: Analytic
AICPA BB: Industry
Bloom's: Understand
Difficulty: Medium
16-106
fourth completed. Using the FIFO valuation method, the equivalent units produced by the
department were:
A. 6,700 units.
B. 5,900 units.
C. 5,800 units.
D. 6,100 units.
E. 8,500 units.
(900 x 2/3) + 5,000 + (800 x ) = 5,800
AACSB: Analytic
AICPA BB: Industry
Bloom's: Apply
Difficulty: Hard
fourth completed. Using the Weighted Average valuation method, the equivalent units
produced by the department were:
A. 6,700 units.
B. 5,900 units.
C. 5,800 units.
D. 6,100 units.
E. 8,500 units.
5,900 + (800 x ) = 6,100
AACSB: Analytic
AICPA BB: Industry
Bloom's: Apply
Difficulty: Hard
16-107
10,000 units were started but brought only to a stage of being 3/5 completed. Using the FIFO
inventory valuation method, the number of equivalent 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.
(20,000 x 4/5) + 30,000 + (10,000 x 3/5) = 52,000
AACSB: Analytic
AICPA BB: Industry
Bloom's: Apply
Difficulty: Hard
10,000 units were started but brought only to a stage of being 3/5 completed. Using the
Weighted Average inventory valuation method, the number of equivalent units of labor added
by the end of the period was:
A. 46,000 units.
B. 50,000 units.
C. 52,000 units.
D. 54,000 units.
E. 56,000 units.
50,000 + (10,000 x 3/5) = 56,000
AACSB: Analytic
AICPA BB: Industry
Bloom's: Apply
Difficulty: Hard
16-108
materials are added at the beginning of the process. Under FIFO what are the equivalent units
of production for the Sewing Department for direct materials and for direct labor and
overhead, respectively?
A. 210,000; 120,000
B. 210,000; 180,000
C. 167,500; 167,500
D. 160,000; 162,500
E. 160,000; 167,500
Direct materials: 120,000 + 40,000 = 160,000

Direct labor and overhead: (50,000)(.75) +120,000 + (40,000 x .25) = 167,500
AACSB: Analytic
AICPA BB: Industry
Bloom's: Apply
Difficulty: Hard
16-109
materials are added at the beginning of the process. Under the Weighted Average inventory
valuation method, what are the equivalent units of production for the Sewing Department for
direct materials and for direct labor and overhead, respectively?
A. 210,000; 120,000
B. 210,000; 180,000
C. 167,500; 167,500
D. 160,000; 162,500
E. 160,000; 167,500
Direct materials: 170,000 + 40,000 = 210,000

Direct labor and overhead: 170,000 + (40,000 x .25) = 180,000
AACSB: Analytic
AICPA BB: Industry
Bloom's: Apply
Difficulty: Hard
Medina Corp. had the following information available for the year:
16-110
118. FIFO equivalent units of production for the year are:

A. 3,320 units.
B. 3,200 units.
C. 3,240 units.
D. 3,520 units.
E. 3,420 units.
(200 x .6) + 2,800 + (400 x .8) = 3,240
AACSB: Analytic
AICPA BB: Industry
Bloom's: Apply
Difficulty: Hard
119. 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. 3,500 units.
200 beginning + 3,200 started - 400 ending = 3,000 transferred out
AACSB: Analytic
AICPA BB: Industry
Bloom's: Understand
Difficulty: Medium
16-111
120. If the weighted average inventory method were used, the equivalent units for the year
would be:
A. 3,320
B. 3,200
C. 3,240
D. 3,520
E. 3,230
3,000 + (400 x .8) = 3,320
AACSB: Analytic
AICPA BB: Industry
Bloom's: Understand
Difficulty: Medium
Process Inventory was 800 units which were 40% complete. Using the FIFO method, what are
the equivalent units produced if all direct material and direct labor are added uniformly
A. 7,080
B. 6,960
C. 7,320
D. 7,680
E. 7,800
(600 x .6) + 6,400 + (800 x .4) = 7,080
AACSB: Analytic
AICPA BB: Industry
Bloom's: Apply
Difficulty: Hard
16-112
Process Inventory was 800 units which were 40% complete. Using the Weighted Average
method, what are the equivalent units produced if all direct material and direct labor are added
uniformly throughout the process?
A. 7,080
B. 6,960
C. 7,320
D. 7,680
E. 7,800
7,000 + (800 x .4) = 7,320
AACSB: Analytic
AICPA BB: Industry
Bloom's: Apply
Difficulty: Hard
Inventory was 30 units which were 20% complete. Using the FIFO method, what are the
equivalent units produced if all direct material and direct labor are added uniformly
A. 83
B. 70
C. 100
D. 77
E. 107
(65 x .8) + 12 + (30 x .2) = 70
AACSB: Analytic
AICPA BB: Industry
Bloom's: Apply
Difficulty: Hard
16-113
Inventory was 30 units which were 20% complete. Using the Weighted Average method, what
are the equivalent units produced if all direct material and direct labor are added uniformly
A. 83
B. 70
C. 100
D. 77
E. 107
77 + (30 x .2) = 83
AACSB: Analytic
AICPA BB: Industry
Bloom's: Apply
Difficulty: Hard
125. The Machining Department started the current month with beginning goods in process
$76,000; direct labor, $24,000; and factory overhead, 50% of direct labor 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 is:
A. $13,000
B. $1,000
C. $49,000
D. $110,000
E. $3,000
$10,000 + $76,000 + $24,000 + $12,000 - $109,000 = $13,000
AACSB: Analytic
AICPA BB: Industry
Bloom's: Understand
Difficulty: Medium
16-114
126. The Filtering Department started the current month with beginning goods in process
$77,000; direct labor, $44,000; and factory overhead, 20% of direct material cost. Also,
inventory with a cost of $66,000 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 Filtering
Department is:
A. $66,000
B. $110,000
C. $132,000
D. $125,400
E. $191,400
$55,000 + $77,000 + $44,000 + $15,400 - $66,000 = $125,400
AACSB: Analytic
AICPA BB: Industry
Bloom's: Understand
Difficulty: Medium
were started but brought only to a stage of being 3/5 completed. If the FIFO method is used
and $13,000 of overhead was charged to Department A during the period, how much overhead
should be allocated to the ending goods in process inventory?
A. $1,615.
B. $3,250.
C. $2,600.
D. $2,500.
E. $1,500.
EU = (20,000 x .8) + 30,000 + (10,000 x .6) = 52,000

EU in ending inventory = (10,000 x .6) = 6,000
Overhead allocated to ending inventory: (6,000/52,000) x $13,000 = $1,500
AACSB: Analytic
AICPA BB: Industry
Bloom's: Apply
Difficulty: Hard
16-115
were started but brought only to a stage of being 3/5 completed. If the Weighted Average
method is used and $14,000 of overhead was charged to Department A during the period, how
much overhead should be allocated to the ending goods in process inventory?
A. $1,615
B. $3,250
C. $2,600
D. $2,500
E. $1,500.
EU = 50,000 + (10,000 x .6) = 56,000

EU in ending inventory = (10,000 x .6) = 6,000
Overhead allocated to ending inventory: (6,000/56,000) x $14,000 = $1,500
AACSB: Analytic
AICPA BB: Industry
Bloom's: Apply
Difficulty: Hard
16-116
129. A company uses a process cost accounting system and the FIFO inventory valuation
method. Its Assembly Department's beginning inventory consisted of 50,000 units, 3/4
complete with respect to direct labor and overhead. The department started and finished
$32,000 for the period. The direct labor cost per equivalent unit is:
A. $0.126
B. $0.160
C. $0.178
D. $0.213
E. $0.373
$24,000/((50,000)(.25) + 127,500 + (40,000)(.25)) = .160
AACSB: Analytic
AICPA BB: Industry
Bloom's: Apply
Difficulty: Hard
130. A company uses a process cost accounting system and the Weighted Average inventory
valuation method. Its Assembly Department's beginning inventory consisted of 50,000 units,
3/4 complete with respect to direct labor and overhead. The department started and finished
$40,000 for the period. The Overhead cost per equivalent unit is:
A. $0.126
B. $0.160
C. $0.178
D. $0.213
E. $0.373
$40,000/(177,500 + (40,000)(.25)) = .213
AACSB: Analytic
AICPA BB: Industry
Bloom's: Apply
Difficulty: Hard
16-117
131. 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
labor and overhead are applied uniformly. If the units in 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. $37,260
Total costs = $5,400 + $21,600 + 16,200 + $10,800 = $54,000

Total transferred out = $54,000 - $4,590 = $49,410
BGIP transferred out = $49,410 - $41,850 = $7,560
Cost to complete BGIP = $7,560 - $5,400 = $2,160
AACSB: Analytic
AICPA BB: Industry
Bloom's: Apply
Difficulty: Hard
16-118
132. Que Corporation uses a process cost accounting system. The company manufactured
certain goods at a cost of $800 and sold them on credit to Are Corporation for $1,075. The
complete journal entry to be made by Que at the time of this sale is:
A. A Above.
B. B Above.
C. C Above.
D. D Above.
E. E Above.
AACSB: Analytic
AICPA BB: Industry
AICPA FN: Reporting
Bloom's: Understand
Difficulty: Medium
Matching Questions
16-119
133. Match the following terms 1 to 7 with the definitions a through g.
1. Costing system to determine the cost of producing each Equivalent units

job or job lot of production 7
2. System of assigning direct materials, direct labor, and
overhead to specific processes; total costs associated with
each process are then divided by the number of units
passing through that process to determine cost per Job order cost
equivalent unit accounting system 1
Hybrid
3. A manufacturing system that contains features of both manufacturing
process and job order systems system 3
4. Report of costs charged to a department, its equivalent Process
units of production achieved, even the costs assigned to its manufacturing
output system 6
5. Document that summarizes the materials a department
uses during a reporting period; replaces materials Process cost
requisition accounting system 2
Materials
consumption
6. Process of products in a continuous flow of steps report 5
7. Number of units that would be completed if all effort
during a period had been applied to units that were started Process cost
and finished summary 4
AACSB: Analytic
AICPA BB: Industry
AICPA FN: Reporting
Bloom's: Understand
Difficulty: Medium
Short Answer Questions
16-120
134. Job order manufacturing and process manufacturing are two major costing systems used
in manufacturing. Briefly contrast the characteristics of these two systems.
AACSB: Communications
AICPA BB: Industry
AICPA FN: Reporting
Bloom's: Understand
Difficulty: Medium
135. What is meant by equivalent units of production, and why are they important when a
process cost accounting system is used?
Equivalent units of production measure production with respect to direct materials, direct
labor and overhead, expressed as the number of units that could have been manufactured
during a period if all effort during a period had been applied only to those units started and
completed during the period. Determining equivalent units of production is important for the
calculation of the cost per unit and, thus, for calculating the costs of inventories and the cost
of goods sold.
AICPA BB: Industry
Bloom's: Understand
Difficulty: Medium
16-121
136. (a) Why is the Process Cost Summary important to Management?

(b) How does the Process Cost Summary accomplish its purposes?
(a) The Process Cost Summary depicts a four-step process detailing physical flows and cost
flows. It allows management to verify inputs and outputs as part of a cost control and
monitoring system. It also lets management logically perform unit costing - a necessary
activity to allow for appropriate product pricing.
(b) By detailing physical flow, a process cost summary measures accountability and
responsibility. By detailing cost flow, it allows management to determine and derive
appropriate cost allocations in a logical format.
AICPA BB: Industry
AICPA FN: Reporting
Bloom's: Understand
Difficulty: Medium
137. Compare and contrast the FIFO and weighted average methods of process costing.
The FIFO method of process costing assigns costs to units assuming a first-in, first-out flow
of product. The weighted average method does not separately track units in beginning work in
process from those units started in the current period. The objectives, concepts and journal
entries (not amounts) are the same for both methods. Computation of equivalent units of
production and cost assignment are slightly different.
AICPA BB: Industry
AICPA FN: Reporting
Bloom's: Apply
Difficulty: Hard
16-122
138. Briefly explain the conditions under which job order cost accounting systems and
process cost accounting systems are commonly applied.
Job order cost accounting systems are commonly 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 commonly used when manufacturing operations produce
a large volume of standardized units that generally pass from one manufacturing process to
another.
AICPA BB: Industry
AICPA FN: Reporting
Bloom's: Understand
Difficulty: Medium
139. What is a hybrid costing system? When is a hybrid costing system appropriate for a
manufacturer?
A hybrid manufacturing system contains the features of both process and job order operations.
In a hybrid costing system, some parts of the manufacturing process are accounted for using a
process costing system, and other parts are accounted for using a job order costing system.
Hybrid costing systems are appropriate when a manufacturer can standardize processes and
yet cater to individual customer needs.
AICPA BB: Industry
AICPA FN: Reporting
Bloom's: Understand
Difficulty: Medium
140. What are the four steps in accounting for production activity in a period?
Accounting for a department's activity for a period includes the four steps of analyzing (1)
physical flow, (2) equivalent units, (3) cost per equivalent unit, (4) cost reconciliation.
AICPA BB: Industry
AICPA FN: Reporting
Bloom's: Understand
Difficulty: Medium
16-123
141. Describe the flow of materials in a process cost accounting system, including accounts
used.
When raw materials are purchased they are debited to a Raw Materials Inventory account.
When direct materials are needed in a production department, a materials requisition or
materials consumption report is used to move the materials from the storeroom to the
production department. Direct materials used are recorded with a debit to the Goods in
Process Inventory for that department and a credit to Raw Materials Inventory. Indirect
materials used in a department are recorded with a debit to Factory Overhead and a credit to
Raw Materials Inventory. The Factory Overhead is subsequently allocated to the Goods in
Process account for each production department.
AICPA BB: Industry
AICPA FN: Reporting
Bloom's: Understand
Difficulty: Medium
142. Describe the flow of labor in a process cost accounting system, including accounts used.
Each pay period, as workers earn their wages, Factory Payroll is debited and Cash is credited
to record the amount paid to workers. As direct labor is used in each production department,
Goods in Process of that department are debited and Factory Payroll is credited to assign the
labor to the department. Indirect labor is recorded to the factory overhead with a debit to
Factory Overhead and a credit to Factory Payroll. The Factory Overhead is subsequently
allocated to the Goods in Process account for each production department.
AICPA BB: Industry
AICPA FN: Reporting
Bloom's: Understand
Difficulty: Medium
16-124
143. Describe the flow of overhead costs in a process cost accounting system, including
accounts used.
As actual overhead costs are incurred for indirect labor, indirect materials, insurance, utilities,
and so on, the Factory Overhead account is debited, and the appropriate accounts are credited
(for instance, Factory Payroll, Raw Materials Inventory, various payables, and cash). When
overhead is applied to production based on the overhead allocation rate, Goods in Process is
debited and Factory Overhead is credited. Any under or overapplied overhead is closed to
either the Cost of Goods Sold account, or allocated among the Cost of Goods Sold, Goods in
Process Inventory, and Finished Goods.
AICPA BB: Industry
AICPA FN: Reporting
Bloom's: Understand
Difficulty: Medium
Essay Questions
16-125
144. Prepare the required general journal entries to record the following transactions for the
Bell Company.
(a.) Purchased $40,000 of raw materials on account.
(b.) Used $12,000 of direct materials in the Mixing Department, and $17,000 of direct
materials in the Assembly Department.
(c.) Used $5,000 of indirect materials.
AACSB: Analytic
AICPA BB: Industry
AICPA FN: Reporting
Bloom's: Understand
Difficulty: Medium
16-126
145. Prepare the required general journal entry to record the following transactions for the
Flaherty Company.
(a.) Incurred $95,000 of factory labor cost which is paid in cash.
(b.) Used $42,000 of direct labor in the grinding department, and $36,000 of direct labor in
the sifting department.
(c.) Used $17,000 of indirect labor.
AACSB: Analytic
AICPA BB: Industry
AICPA FN: Reporting
Bloom's: Understand
Difficulty: Medium
16-127
146. Iolaus Company provides the following data for the current year:
Required:
(a) Calculate the predetermined overhead allocation rate based on direct labor.
(b) Determine the amount of overhead applied to production.
(c) Prepare the journal entry to apply factory overhead to goods in process.
AACSB: Analytic
AICPA BB: Industry
AICPA FN: Reporting
Bloom's: Understand
Difficulty: Medium
16-128
40,000 were left 1/5 complete. Using FIFO, calculate the equivalent units of production for
the year.
AACSB: Analytic
AICPA BB: Industry
Bloom's: Understand
Difficulty: Medium
40,000 were left 1/5 complete. Using Weighted Average, calculate the equivalent units of
production for the year.
AACSB: Analytic
AICPA BB: Industry
Bloom's: Understand
Difficulty: Medium
16-129
Using FIFO, calculate the equivalent units of production for the year.
AACSB: Analytic
AICPA BB: Industry
Bloom's: Understand
Difficulty: Medium
16-130
Using Weighted Average, calculate the equivalent units of production for the year.
AACSB: Analytic
AICPA BB: Industry
Bloom's: Understand
Difficulty: Medium
16-131
(a) Calculate the equivalent units of production for direct labor for the year using FIFO.
AACSB: Analytic
AICPA BB: Industry
Bloom's: Understand
Difficulty: Medium
16-132
(a) Calculate the equivalent units of production for direct labor for the year using Weighted
Average.
AACSB: Analytic
AICPA BB: Industry
Bloom's: Understand
Difficulty: Medium
16-133
Refer to the following information about the Painting Department in the Richardson Factory
for the month of June:
16-134
153. If FIFO has been used, how many equivalent units of materials were added to all units
processed during June? How many equivalent units of labor and overhead were added to all
units processed during June?
AACSB: Analytic
AICPA BB: Industry
Bloom's: Understand
Difficulty: Medium
16-135
154. If FIFO is used, what was the materials cost per equivalent unit produced during June?
What was the labor and overhead cost per equivalent unit produced during June?
AACSB: Analytic
AICPA BB: Industry
Bloom's: Understand
Difficulty: Medium
16-136
155. If FIFO is used, what is the total cost of all units that were completed and transferred to
finished goods during June? What is the total cost of the ending goods in process inventory?
16-137
AACSB: Analytic
AICPA BB: Industry
Bloom's: Apply
Difficulty: Hard
16-138
156. Assume that the Painting Department of the Richardson Factory uses the weighted
average method. What is the cost of all units that were completed and transferred to finished
goods in June? What is the total cost of ending goods in process?
16-139
16-140
AACSB: Analytic
AICPA BB: Industry
Bloom's: Apply
Difficulty: Hard
16-141
157. Bimrose Manufacturing uses process cost accounting and FIFO 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 labor and overhead are incurred evenly throughout all departments' processes. The
following information is available for September:
(a) 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.
(b) Determine the equivalent units of production for direct materials, direct labor, and
overhead for each department.
16-142
(b) Equivalent units for labor and overhead:

Labor and overhead are applied evenly throughout the process.
16-143
AACSB: Analytic
AICPA BB: Industry
Bloom's: Apply
Difficulty: Hard
16-144
Refer to the following incomplete table of cost information:
158. What was the cost of goods transferred out of the Grating Department and into the
Bagging Department?
The cost of goods transferred out of the Grating Department equals the $98,000 cost
transferred into the Bagging Department.
AACSB: Analytic
AICPA BB: Industry
Bloom's: Remember
Difficulty: Easy
16-145
159. What was the cost of the goods transferred out of the Bagging Department and into the
finished goods inventory?
The cost of goods transferred out of the Bagging Department equals the $150,000 cost
transferred into the Finished Goods inventory.
AACSB: Analytic
AICPA BB: Industry
Bloom's: Remember
Difficulty: Easy
160. What was the cost of the beginning inventory of finished goods?
The cost of the beginning inventory of finished goods is found by solving for the unknown
factor in the third column of the table:
The missing amount is $22,000.
AACSB: Analytic
AICPA BB: Industry
Bloom's: Remember
Difficulty: Easy
16-146
161. What was the cost of the direct materials used in the Grating Department?
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:
The missing amount is $20,000.
AACSB: Analytic
AICPA BB: Industry
Bloom's: Understand
Difficulty: Medium
16-147
162. What was the cost of the direct labor used in the Bagging Department?
The calculation can be made after setting the cost transferred out of the Bagging Department
equal to the costs transferred into Finished Goods.
Thus, the missing amount is $15,000.
AACSB: Analytic
AICPA BB: Industry
Bloom's: Understand
Difficulty: Medium
Refer to the following information about the Dipping Department of the Indiana Factory for
the month of August:
The cost per equivalent unit of materials is $10.00, and the cost per equivalent unit of labor
and overhead is $22.00.
16-148
163. What total cost should be assigned to the units that were in the beginning goods in
process inventory and completed during August?
AACSB: Analytic
AICPA BB: Industry
Bloom's: Understand
Difficulty: Medium
164. What total cost should be assigned to the units that were started and completed during
August?
AACSB: Analytic
AICPA BB: Industry
Bloom's: Understand
Difficulty: Medium
16-149
165. What total cost should be assigned to all units that were completed during August?
AACSB: Analytic
AICPA BB: Industry
Bloom's: Understand
Difficulty: Medium
166. What total cost should be assigned to the units that were in process at the end of August?
AACSB: Analytic
AICPA BB: Industry
Bloom's: Understand
Difficulty: Medium
16-150
167. Nano Company uses a process cost system and the Weighted Average inventory
valuation method. The Nano Assembly Department's beginning inventory consisted of 40,000
units that were 3/5 complete with respect to direct labor and overhead. The department started
and finished 149,000 units with respect to direct labor and overhead. The ending inventory
consists of 60,000 units that are 3/4 complete with respect to direct labor and overhead. All
direct materials are added at the beginning of the process. The department Goods in Process
account included direct labor costs of $292,500 and overhead costs of $140,400.
(a) What is the direct labor cost per equivalent unit?
(b) What is the overhead cost per equivalent unit?
AACSB: Analytic
AICPA BB: Industry
Bloom's: Understand
Difficulty: Medium
16-151
168. Tanner, Inc. uses a process cost accounting system with Weighted Average valuation
method. The following operating and cost data occurred during October:
Materials are added at the beginning of the process. Direct labor and overhead are incurred
evenly throughout the process. Prepare the October process cost summary.
16-152
Equivalent unit processing cost:
16-153
AACSB: Analytic
AICPA BB: Industry
Bloom's: Apply
Difficulty: Medium
16-154
169. Assuming the FIFO inventory valuation method, use the following information to
determine the cost of the goods completed during the current reporting period:
AACSB: Analytic
AICPA BB: Industry
Bloom's: Understand
Difficulty: Medium
16-155
170. Based on the table of cost information below, prepare the general journal entry required
to record the:
(a.) Transfer of goods from the molding department to the finished goods inventory.
(b.) Cost of goods sold for November.
The following table of cost information is available for the Messier Company for the month of
November:
AACSB: Analytic
AICPA BB: Industry
AICPA FN: Reporting
Bloom's: Remember
Difficulty: Easy
Fill in the Blank Questions
16-156
171. Process manufacturing, also called process operations or process production, is the
___________ production of products in a _____________________ flow of steps.
Mass; continuous
AACSB: Analytic
AICPA BB: Industry
AICPA FN: Reporting
Bloom's: Remember
Difficulty: Easy
172. An equivalent unit of production is an estimate of efforts that is used to calculate the
______________ of each production component.
Unit Cost
AACSB: Analytic
AICPA BB: Industry
Bloom's: Remember
Difficulty: Easy
173. Partially completed production is measured for an account at two points in time for each
accounting period. These measurement points and the account are ________________ and
____________.
Beginning Goods in Process Inventory; Ending Goods in Process Inventory
AACSB: Analytic
AICPA BB: Industry
Bloom's: Understand
Difficulty: Medium
16-157
174. The first step in accounting for production activity in a period, ________________, is a
reconciliation of the physical units started in a period with the physical units completed in that
period.
Physical flow
AACSB: Analytic
AICPA BB: Industry
Bloom's: Understand
Difficulty: Medium
175. The second step in accounting for production activity in a period is to compute
______________________.
Equivalent units
AACSB: Analytic
AICPA BB: Industry
Bloom's: Understand
Difficulty: Medium
176. The third step in accounting for production activity in a period is to compute the
______________________.
Cost per equivalent unit
AACSB: Analytic
AICPA BB: Industry
Bloom's: Understand
Difficulty: Medium
16-158
177. The fourth step in accounting for production activity in a period is to prepare a cost
reconciliation, which reconciles _____________________ with the
_____________________.
Costs to account for; costs accounted for
AACSB: Analytic
AICPA BB: Industry
AICPA FN: Reporting
Bloom's: Understand
Difficulty: Medium
178. A process cost summary involves computations and analysis at four sequential steps.
These are (1) _________ (2) _____________, (3) _______________, and (4)
______________.
Physical Flow; Equivalent Units; Cost per equivalent unit of production; Cost
Reconciliation
AACSB: Analytic
AICPA BB: Industry
AICPA FN: Reporting
Bloom's: Understand
Difficulty: Medium
179. The _____________ method of process costing assigns costs to units assuming a first-in,
first-out flow of product.
FIFO
AACSB: Analytic
AICPA BB: Industry
AICPA FN: Reporting
Bloom's: Remember
Difficulty: Easy
16-159
180. The FIFO method of process costing accounts for cost flow in a ______________
manner.
Sequential
AACSB: Analytic
AICPA BB: Industry
AICPA FN: Reporting
Bloom's: Understand
Difficulty: Medium
181. ________ distinct groups of units must be considered in determining the equivalent units
of production under the FIFO method of process costing.
Three
AACSB: Analytic
AICPA BB: Industry
Bloom's: Understand
Difficulty: Medium
182. The three distinct groups of units which must be considered in determining the
equivalent units of production under the FIFO method of process costing are: (a)
_______________, (b) _______________, and (c) _____________________.
(a) Beginning GIP inventory completed this period, (b) Units started and completed this
period, (c) units in ending GIP
AACSB: Analytic
AICPA BB: Industry
Bloom's: Apply
Difficulty: Hard
16-160
183. Materials and labor 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 ________________.
Direct costs; Indirect costs
AACSB: Analytic
AICPA BB: Industry
Bloom's: Remember
Difficulty: Easy
184. A ____________________ contains features of both process and job order operations.
Hybrid system
AACSB: Analytic
AICPA BB: Industry
AICPA FN: Reporting
Bloom's: Understand
Difficulty: Medium
185. In a process costing accounting system, direct materials used are debited to the
_________________ account, and indirect materials used are debited to the
______________________ account.
Goods in process; factory overhead
AACSB: Analytic
AICPA BB: Industry
AICPA FN: Reporting
Bloom's: Understand
Difficulty: Medium
16-161
186. In a process costing accounting system, factory wages are debited to _______________,
and when direct labor is used, that account is credited and ____________________ is debited.
When indirect labor is used, the ________________________ account is debited and
______________________ is credited.
Factory payroll; Goods in process; Factory overhead; Factory payroll
AACSB: Analytic
AICPA BB: Industry
AICPA FN: Reporting
Bloom's: Understand
Difficulty: Medium
187. In process costing, factory overhead incurred does not usually equal that applied, which
yields either ____________________ or ___________________ overhead.
Overapplied or Underapplied.
AACSB: Analytic
AICPA BB: Industry
AICPA FN: Reporting
Bloom's: Understand
Difficulty: Medium
188. On a process cost summary, the total costs to account for (the processing costs for the
period plus the goods in process at the beginning of the period) should equal
___________________ (____________________ plus _____________________).
Total costs accounted for; total costs transferred; ending goods in process
AACSB: Analytic
AICPA BB: Industry
AICPA FN: Reporting
Bloom's: Remember
Difficulty: Easy
16-162
189. In a process cost accounting systems, when units are transferred from the Softening
Department to the Hardening Department, ____________________ is debited and
__________________________ is credited.
Goods in Process - Hardening; Goods in Process - Softening
AACSB: Analytic
AICPA BB: Industry
AICPA FN: Reporting
Bloom's: Understand
Difficulty: Medium
190. In a manufacturing operation with two process departments (1 and 2), the flow of costs
would proceed from Goods in Process, Dept #1 to ________________ to _______________
to ______________.
Goods in Process, Dept #2; Finished Goods; Cost of Goods Sold
AACSB: Analytic
AICPA BB: Industry
AICPA FN: Reporting
Bloom's: Understand
Difficulty: Medium
16-163

ACG2071 CH16 Test Bank

Hochgeladen von

Dokumentinformationen

Originalbeschreibung:

Originaltitel

Copyright

Verfügbare Formate

Dieses Dokument teilen

Dokument teilen oder einbetten

Freigabeoptionen

Stufen Sie dieses Dokument als nützlich ein?

Sind diese Inhalte unangemessen?

Copyright:

Verfügbare Formate

ACG2071 CH16 Test Bank

Hochgeladen von

Copyright:

Verfügbare Formate

Chapter 16 - Process Costing and Analysis

True / False Questions

2. In a process manufacturing system, products pass through a series of sequential processes.

3. Process manufacturing usually reflects a manufacturer that produces large quantities of

7. In a process cost accounting system, a department's production should be measured in

9. Equivalent units of production need to be determined only if a processing department adds

41. Hybrid costing systems can only be applied to auto manufacturing.

Refer to the following table of cost information:

Refer to the following table of cost information:

Multiple Choice Questions

85. Equivalent units of production are equal to:

94. A hybrid costing system would be most appropriate when:

95. Direct material costs are recorded:

118. FIFO equivalent units of production for the year are:

133. Match the following terms 1 to 7 with the definitions a through g.

Short Answer Questions

136. (a) Why is the Process Cost Summary important to Management?

Refer to the following incomplete table of cost information:

Fill in the Blank Questions

Chapter 16 Process Costing and Analysis Answer Key

True / False Questions

2. In a process manufacturing system, products pass through a series of sequential processes.

3. Process manufacturing usually reflects a manufacturer that produces large quantities of

7. In a process cost accounting system, a department's production should be measured in

9. Equivalent units of production need to be determined only if a processing department adds

41. Hybrid costing systems can only be applied to auto manufacturing.

Refer to the following table of cost information:

Pickling Dept. OH rate = $6,000/$4,000 = 150%

Refer to the following table of cost information:

Pushing OH rate = $60,000/$120,000 = 50%

Multiple Choice Questions

85. Equivalent units of production are equal to:

94. A hybrid costing system would be most appropriate when:

95. Direct material costs are recorded:

(20,000)(4/5) + 60,000 + (30,000)(1/3) = 86,000

80,000 + (30,000)(1/3) = 90,000

DM: 15,000 + 6,000 = 21,000

DM: 20,000 + 6,000 = 26,000

(900 x 2/3) + 5,000 + (800 x ) = 5,800

5,900 + (800 x ) = 6,100

(20,000 x 4/5) + 30,000 + (10,000 x 3/5) = 52,000

50,000 + (10,000 x 3/5) = 56,000

Direct materials: 120,000 + 40,000 = 160,000

Direct materials: 170,000 + 40,000 = 210,000

118. FIFO equivalent units of production for the year are:

(200 x .6) + 2,800 + (400 x .8) = 3,240

200 beginning + 3,200 started - 400 ending = 3,000 transferred out

3,000 + (400 x .8) = 3,320

(600 x .6) + 6,400 + (800 x .4) = 7,080

7,000 + (800 x .4) = 7,320

(65 x .8) + 12 + (30 x .2) = 70

$10,000 + $76,000 + $24,000 + $12,000 - $109,000 = $13,000

$55,000 + $77,000 + $44,000 + $15,400 - $66,000 = $125,400

EU = (20,000 x .8) + 30,000 + (10,000 x .6) = 52,000

EU = 50,000 + (10,000 x .6) = 56,000

$24,000/((50,000)(.25) + 127,500 + (40,000)(.25)) = .160

$40,000/(177,500 + (40,000)(.25)) = .213

Total costs = $5,400 + $21,600 + 16,200 + $10,800 = $54,000

133. Match the following terms 1 to 7 with the definitions a through g.

1. Costing system to determine the cost of producing each Equivalent units

Short Answer Questions

136. (a) Why is the Process Cost Summary important to Management?