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MULTIPLE CHOICE
1. The following information is available for the month of April from the First department
of the Armque Corporation:
Units
Work in process, April 1 (50% complete) 90,000
Started in April 250,000
Transferred to Second Department in April 280,000
Work in process, April 30 (40% complete) 60,000
Materials are added in the beginning of the process in the First department. Using the
average cost method, what are the equivalent units of production for the month of April?
Materials Conversion
a. 310,000 250,000
b. 250,000 295,000
c. 340,000 316,000
d. 340,000 304,000
Equivalent production:
Materials:
Finished and transferred during month 280,000
Equivalent units of work in process, end of month (60,000 units, 40%
completed, all materials) 60,000
Total 340,000
Labor and factory overhead:
Finished and transferred during April 280,000
Work in process, end of April (70,000 units, 40% completed) 24,000
Total 304,000
2. The following information is available for the month of August from the First
department of the Twigg Corporation:
Units
Work in process, August 1 (60% complete) 50,000
Started in August 190,000
Work in process, August 30 (40% complete) 80,000
Materials are added in the beginning of the process in the First department. Using the
average cost method, what are the equivalent units of production for the month of
August?
Materials Conversion
a. 192,000 240,000
b. 190,000 192,000
c. 240,000 208,000
d. 240,000 192,000
Units Materials
Costs
All materials are added at the beginning of the process. Using the average cost method,
the cost (rounded to two places) per equivalent unit for materials for June is:
a. $0.74.
b. $0.90.
c. $0.77.
d. $0.78.
4. Plemmon Company adds materials at the beginning of the process in the forming
department, which is the first of two stages of its production cycle. Information
concerning the materials used in the forming department in April follows:
Units Materials
Costs
Work in process at April 1 15,000 $ 8,000
Units started during April 60,000 $38,500
Units completed and transferred to next department
during April
65,000
Using the average cost method, what is the materials cost of the work in process at April
30 (rounded to nearest dollar)?
a. $7,154
b. $6,200
c. $7,750
d. $6,417
Units
Beginning work in process 15,000
Started 60,000
Total 75,000
Less completed 65,000
Ending work in process (complete as to material) 10,000
Unit cost (See calculation below) $ .62
Materials cost in ending work in process $ 6,200
5. The following information is available for the month of April from the First department
of the Armque Corporation:
Units
Work in process, April 1 (50% complete) 90,000
Started in April 250,000
Transferred to Second Department in April 280,000
Work in process, April 30 (40% complete) 60,000
Materials are added at the end of the process in the First department. Using the
average cost method, what are the equivalent units of production for the month of April?
Materials Conversion
a. 304,000 250,000
b. 280,000 295,000
c. 340,000 316,000
d. 280,000 304,000
Equivalent production:
Materials:
Finished and transferred during month 280,000
Equivalent units of work in process, end of month (60,000 units, 40%
completed, no materials) 0
Total 280,000
Labor and factory overhead:
Finished and transferred during April 280,000
Work in process, end of April (70,000 units, 40% completed) 24,000
Total 304,000
6. The following information is available for the month of August from the First
department of the Twigg Corporation:
Units
Work in process, August 1 (60% complete) 50,000
Started in August 190,000
Work in process, August 30 (40% complete) 80,000
Materials are added at the end of the process in the First department. Using the
average cost method, what are the equivalent units of production for the month of
August?
Materials Conversion
a. 192,000 160,000
b. 160,000 192,000
c. 160,000 208,000
d. 240,000 192,000
7. During June, Birch Bay Company's Department B equivalent unit product costs
computed under the average cost method were as follows:
Materials $2
Conversion $3
Transferred-in $5
Materials are introduced at the end of the process in Department B. There were 4,000
units (60 % complete as to conversion costs) in work in process at June 30. The total
costs assigned to the June 30 work in process inventory should be:
a. $20,000.
b. $24,800.
c. $27,200.
d. $35,200.
Transferred-in costs:
4,000 units @ $5 $20,000
Conversion costs:
4,000 units (60% complete) @ $3 7,200
$27,200
Because materials are introduced at the end of the process, no materials cost would be
included in the ending work in process.
8. Van Pelt Company uses the average cost method of process costing. The
production report for the Mixing department follows:
350
500 x 25% - Material
500 x 20% - Conversion costs 125
100
5,450 5,250
9. Normal losses that occur in the manufacturing process are properly classified as:
a. Extraordinary items.
b. Product costs.
c. Period costs.
d. Deferred charges.
Normal losses are properly classified as product costs and considered as part of the
total cost of production.
Units
Work in process at March 1 15,000
Started during March 38,000
Completed and transferred to next department during March 37,000
Normal spoilage incurred 2,000
Work in process at March 31 14,000
Using the average cost method, the equivalent units for the materials unit cost
calculation are:
a. 38,000.
b. 51,000.
c. 55,000.
d. 37,000.
11. Materials are added at the start of the process in McKay Company's blending
department, the first stage of the production cycle. The following information is available
for the month of July:
Units
Work in process, July 1 (60% complete as to conversion costs) 50,000
Started in July 200,000
Transferred to the next department 195,000
Lost in production 15,000
Work in process, July 31 (50% complete as to conversion costs) 40,000
Under McKay's cost accounting system, the costs incurred on the lost units are
absorbed by the remaining good units. Using the average cost method, what are the
equivalent units for the materials unit cost calculation?
a. 210,000
b. 195,000
c. 250,000
d. 235,000
Units completed and transferred 195,000
Ending work in process with all materials 40,000
235,000
12. In a process cost system, the cost attributable to abnormal losses that occur due to
unexpected circumstances such as machine operator error should be assigned to:
a. Ending work in process inventory.
b. Cost of goods manufactured and ending work in process inventory in the ratio of units
worked on during the period to units remaining in work in process inventory.
c. A separate loss account in order to highlight production inefficiencies
d. Cost of good manufactured (transferred out)
Abnormal loss should be classified as a period cost (charged to expense of the current
period and reflected separately on the income statement).
14. What losses should not affect the recorded cost of inventories?
a. Normal losses
b. Abnormal losses
c. Seasonal losses
d. Standard losses
Abnormal losses should not affect the recorded cost of inventories because they are
charged off as a period cost rather than being included in the cost of manufactured
goods.
15. In a process cost system, how is the unit cost affected in a production cost report
when materials are added in a department subsequent to the first department and the
added materials result in additional units?
a. It causes an increase in the preceding department's unit cost that necessitates an
adjustment of the transferred-in unit cost.
b. It causes a decrease in the preceding department's unit cost that necessitates an
adjustment of the transferred-in unit cost.
c. It causes an increase in the preceding department's unit cost but does not necessitate
an adjustment of the transferred-in unit cost.
d. It causes a decrease in the preceding department's unit cost but does not necessitate
an adjustment of the transferred-in unit cost.
16. Boyce Company manufactures chemicals. Chemical agent ABX is refined in the
Refining department and, after it is transferred to the Mixing department, a reactive
agent is added to it. In May, 25,000 gallons of ABX having a cost of $100,000 were
transferred from the refining to the Mixing department where 15,000 gallons of the
reactive agent were added. When calculating the inventory costs in the Mixing
department, what will the cost per unit relating to gallons transferred in from the Refining
department be?
a. $4.00
b. $2.50
c. $3.75
d. $6.67
Gallons transferred in from the Refining Department 25,000
Additional gallons of reactive agent added in Mixing 15,000
Total gallons 40,000
17. In order to compute equivalent units of production using the FIFO method of
process costing, work for the period must be broken down to units:
a. Completed from beginning inventory, started and completed during the month, and
units in ending inventory.
b. Completed during the period and units in ending inventory.
c. Started during the period and units transferred out during the period.
d. Processed during the period and units completed during the period.
In computing equivalent production under the FIFO method, work for the period must be
broken down to units completed from beginning inventory, units started and completed
during the month, and units in ending inventory.
18. Material is added at the beginning of a process in a process costing system. The
beginning work in process inventory for this process this period was 30 percent complete
as to conversion costs. Using the first-in, first-out method of costing, the total equivalent
units for material for this process during this period are equal to the:
a. Units started this period in this process.
b. Beginning inventory this period for this process.
c. Units started this period in this process plus the beginning inventory.
d. Units started this period in this process plus 70 percent of the beginning inventory.
With the FIFO method of costing, equivalent units for materials would be the units
started in process this period because the beginning work in process would have been
complete as to materials. The proof follows:
19. Under which of the following conditions will the first-in, first-out method of process
costing produce the same cost of goods manufactured amount as the average cost
method?
a. When goods produced are homogeneous in nature
b. When there is no beginning inventory
c. When there is no ending inventory
d. When beginning and ending inventories are each 50 percent complete
When there is no beginning inventory, the FIFO method and the average cost method
will both produce the same cost of goods manufactured amount because equivalent
production and unit costs will be the same.
20. The average cost method of process costing differs from the FIFO method of
process costing in that the average cost method:
a. Requires that ending work in process inventory be stated in terms of equivalent units
of production.
b. Can be used under any cost-flow assumption.
c. Does not consider the degree of completion of beginning work in process inventory
when computing equivalent units of production.
d. Considers the ending work in process inventory only partially complete.
The average cost method of process costing does not consider the degree of completion
of beginning work in process inventory when computing equivalent units of production,
while the FIFO method does.
21. Regina Manufacturing uses the FIFO method of process costing. The production
report for the Curing Department, where the materials are added at the beginning of the
period, for September was as follows:
The number of units started and completed during the period was:
a. 12,000
b. 9,000
c. 15,000
d. 6,000
22. Regina Manufacturing uses the FIFO method of process costing. The production
report for the Curing Department, where the materials are added at the beginning of the
period, for September was as follows:
The number of equivalent units for conversion costs during the period was:
a. 13,500
b. 16,500
c. 12,300
d. 14,700
23. The following information is available for the month of April from the First
department of the Armque Corporation:
Units
Work in process, April 1 (50% complete) 90,000
Started in April 250,000
Transferred to Second Department in April 280,000
Work in process, April 30 (40% complete) 60,000
Materials are added in the beginning of the process in the First department. Using the
first-in, first-out method, what are the equivalent units of production for the month of
April?
Materials Conversion
a. 250,000 259,000
b. 340,000 259,000
c. 280,000 271,000
d. 250,000 271,000
Equivalent production:
Materials:
To complete beginning units in process (materials were 100% complete) 0
Units started and finished during the month (250,000 started - 60,000 in ending WIP)
190,000
Equivalent units of work in process, end of month (60,000 units, 40%
completed, all materials) 60,000
Total 250,000
Labor and factory overhead:
To complete beginning units in process (conversion costs were 50% complete)
45,000
Units started and finished during the month (250,000 started - 60,000 in ending WIP)
190,000
Work in process, end of April (70,000 units, 40% completed) 24,000
Total 259,000
24. Information concerning Department A of Ali Company for the month of June is as
follows:
Units Materials
Costs
All materials are added at the beginning of the process. Using the first-in, first-out
method, the cost (rounded to two places) per equivalent unit for materials for June is:
a. $0.63.
b. $0.90.
c. $0.77.
d. $0.78.
25. Plemmon Company adds materials at the beginning of the process in the forming
department, which is the first of two stages of its production cycle. Information
concerning the materials used in the forming department in April follows:
Units Materials
Costs
Work in process at April 1 15,000 $ 8,000
Units started during April 60,000 $38,500
Units completed and transferred to next department
during April
65,000
Using the FIFO method, what is the materials cost of the work in process at April 30
(rounded to nearest dollar)?
a. $7,154
b. $6,200
c. $7,750
d. $6,417
Units
Beginning work in process 15,000
Started 60,000
Total 75,000
Less completed 65,000
Ending work in process (complete as to material) 10,000
Unit cost (See calculation below) $ .6417
Materials cost in ending work in process $ 6,417
26. The following information is available for the month of April from the First
department of the Armque Corporation:
Units
Work in process, April 1 (50% complete) 90,000
Started in April 250,000
Transferred to Second Department in April 280,000
Work in process, April 30 (40% complete) 60,000
Materials are added at the end of the process in the First department. Using the first-in,
first-out method, what are the equivalent units of production for the month of April?
Materials Conversion
a. 250,000 259,000
b. 280,000 259,000
c. 340,000 271,000
d. 280,000 271,000
Equivalent production:
Materials:
To complete beginning units in process (materials were 0% complete) 90,000
Units started and finished during the month (250,000 started - 60,000 in ending WIP)
190,000
Equivalent units of work in process, end of month (60,000 units, 40%
completed, no materials) 0
Total 280,000
Labor and factory overhead:
To complete beginning units in process (conversion costs were 50% complete)
45,000
Units started and finished during the month (250,000 started - 60,000 in ending WIP)
190,000
Work in process, end of April (70,000 units, 40% completed) 24,000
Total 259,000
27. During June, Birch Bay Company's Department B equivalent unit product costs
computed under the FIFO method were as follows:
Materials $2
Conversion $3
Transferred-in $5
Materials are introduced at the end of the process in Department B. There were 4,000
units (60 % complete as to conversion costs) in work in process at June 30. The total
costs assigned to the June 30 work in process inventory should be:
a. $20,000.
b. $24,800.
c. $27,200.
d. $35,200.
Transferred-in costs:
4,000 units @ $5 $20,000
Conversion costs:
4,000 units (60% complete) @ $3 7,200
$27,200
Because materials are introduced at the end of the process, no materials cost would be
included in the ending work in process.
28. When two products are produced during a common process, what is the factor that
determines whether the products are joint products or one principal product and a by-
product?
a. Potential marketability for each product
b. Amount of work expended in the production of each product
c. Management policy
d. Relative total sales value
The relative total sales value is the determining factor in deciding whether a product is a
joint product or a by-product. Products with relatively little value are by-products.
An allocation method is usually selected that will assign a portion of a given total cost to
each of the products that are sharing a physical part of the total item. A quantitative
method is chosen that will least affect the gross profit percentage differences among
these products.
30. Each of the following is a method by which to allocate joint costs except:
a. Chemical or engineering analysis.
b. Relative sales value.
c. Relative weight, volume, or linear measure.
d. Relative marketing costs.
Joint costs would not be allocated according to relative marketing costs because
marketing costs are not necessarily incurred directly in proportion to production costs.
Joint costs are commonly allocated based upon relative sales value. Profitability,
conversion costs, and prime costs do not necessarily have a direct relationship to
production costs.
PTS: 1 DIF: Easy REF: P. OBJ: 5
NAT: IMA 2B - Cost Management TOP: AACSB - Analytic
32. Budde Chemicals produces two industrial chemical compounds, X15 and Z24, from
the same process, which last year, cost $300,000. Budde produced 15,000 gallons of
X15, which sells for $40 per gallon and 45,000 gallons of Z24, which sells for $20 per
gallon. Using the relative sales method, how much of the joint cost should be allocated
to X15?
a. $100,000
b. $200,000
c. $60,000
d. $75,000
Product
Gallons
Selling price
Ultimate sales value Percent sales value Assignment of joint
costs
X15 15,000 $40 $ 400,000 33.3% $100,000
Z24 45,000 $20 800,000 66.7% 200,000
$1,200,000 $300,000
33. If a company produces two products, A and B, from a joint process, and B requires
additional processing after the split-off in order to be salable, how is the joint cost
allocated to B determined?
a. The costs of the additional processing are ignored in allocating joint costs.
b. The costs of the additional processing are subtracted from the joint costs allocated to
B.
c. The relative sales value used to allocate the joint cost are determined after the costs
of further processing are subtracted from the ultimate sales value of B.
d. None of these are correct.
The relative sales value used to determine joint costs is determined by subtracting the
costs of further processing from the ultimate sales value of B.
PTS: 1 DIF: Moderate REF: P. OBJ: 5
NAT: IMA 2B - Cost Management TOP: AACSB - Analytic
34. Budde Chemicals produces two industrial chemical compounds, X15 and Z24, from
the same process, which last year, cost $300,000. Budde produced 15,000 gallons of
X15, which sells for $40 per gallon and 45,000 gallons of Z24, which sells for $20 per
gallon. After the split-off point, X15 required additional processing costing $200,000 to
make it salable. Using the adjusted sales method, how much of the joint cost should be
allocated to X15?
a. $100,000
b. $240,000
c. $60,000
d. $75,000
Product
Gallons
Selling price
Ultimate sales
value
Costs after split-off
Sales value at
split-off Percent sales value Assignment of joint
costs
X15
10,000
$40
$400,000
$200,000
$ 200,000
20%
$ 60,000
Z24
40,000
$20
800,000
0
800,000
80%
240,000
$1,200,000 $200,000 $1,000,000 $300,000
35. Budde Chemicals produces two industrial chemical compounds, X15 and Z24, from
the same process, which last year, cost $300,000. Budde produced 15,000 gallons of
X15, which sells for $40 per gallon and 45,000 gallons of Z24, which sells for $20 per
gallon. Using the physical units method, how much of the joint cost should be allocated
to X15?
a. $100,000
b. $225,000
c. $60,000
d. $75,000
Product
Selling price
Gallons
Percentage of total gallons Assignment of joint
costs
X15 $40 15,000 25% $ 75,000
Z24 $20 45,000 75% 225,000
60,000 $300,000
Of the choices above, it is most likely that sawdust would have very little sales value
compared to the lumber being processed.
38. Which of the following is not an acceptable method for accounting for by-products in
a joint manufacturing process?
a. Costs before the split-off point are allocated to by-products.
b. The estimated sales value of the by-product reduces the cost of the main product.
c. The joint costs allocated to by-products are included in an account called “By-products
Inventory.”
d. In some instances, the revenue from selling by-products may be treated as “other
income” on the income statement.
Joint costs are not allocated to by-products. When accounting for by-products, the
estimated sales value of the by-product reduces the cost of the main product, and is
recorded to an account called “By-products Inventory.” Alternatively, if the sales value is
not easily estimated, the sales may be recorded as “Other Income.”
39. Thomas Lumber Company produces furniture grade lumber and building grade
lumber from a joint process. Sawdust, a by-product of the manufacturing process is sold
to a local toy manufacturer to stuff leather toys for $10 per ton. In February, the
company produced 3,000 tons of sawdust. What is the entry to reduce the cost of the
main products by the estimated sales value of the by-product?
a. By-product inventory $30,000
Work in process $30,000
PROBLEM
1. Information for Tyson Company in May for Department One, the first stage of the
production cycle, is as follows:
Materials Conversion
Costs
Beginning work in process $ 7,500 $ 6,000
Costs added during May 28,500 16,050
Total costs $36,000 $22,050
Material costs are added at the beginning of the process. The ending work in process is
80 percent complete as to conversion costs. How would the total costs accounted for be
distributed using the average cost method?
Amount Percent of
Completion
Transferred in from the molding department $60,000 100%
Costs added by the assembling department:
Direct materials $ 0 0%
Direct labor 12,300 60%
Factory overhead applied 4,700 50%
$17,000
Work in process, June 1 $77,000
(1) 20,000 units were transferred in from the molding department at a cost of $300,000.
(4) 18,000 units were completed and transferred to the finishing department. At June
30, 6,000 units were still in process. The degree of completion of work in process at
June 30 follows:
Prepare in good form a cost of production report for the assembling department for the
month of June. Show supporting computations in good form. The report should include:
3. Logan, Inc., had 9,000 units of work in process in Department M on March 1 that
were 50 percent complete as to conversion costs. Materials are introduced at the
beginning of the process. During March, 18,000 units were started, 20,000 units were
completed, and there were 1,000 units of normal losses. Logan had 6,000 units of work
in process at March 31 that were 60 percent complete as to conversion costs. Under
Logan's cost accounting system, lost units reduce the number of units over which total
cost can be spread. Using the average cost method, what were the equivalent units for
March for conversion costs?
5. The Roberto Company had computed the flow of units for Department A for the
month of May as follows:
Work in process, May 1: 10,000
Started into production during May 39,000
Units to be accounted for 49,000
Beginning
work in process Added during the current month
Materials $20,800 $ 97,500
Labor 5,200 34,920
Factory overhead 4,800 32,980
Total $30,800 $165,400
Materials are added at the beginning of the process. There were 8,000 units of work in
process at May 31. The work in process at May 1 was 70 percent complete as to
conversion costs and the work in process at May 31 was 60 percent complete as to
conversion costs. What was the cost of the goods transferred out and in ending work in
process using the FIFO method?
6. The Roberto Company had computed the flow of units for Department A for the
month of May as follows:
Beginning
work in process Added during the current month
Materials $ -0- $235,750
Labor 12,660 166,320
Factory overhead 11,310 150,480
Total $23,970 $552,550
Materials are added at the end of the process. There were 8,000 units of work in
process at May 31. The work in process at May 1 was 30 percent complete as to
conversion costs and the work in process at May 31 was 20 percent complete as to
conversion costs. What was the cost of the goods transferred out and in ending work in
process using the FIFO method?
1) Compute the equivalent units for materials and conversion costs for the month of
October using the FIFO method.
2) Using the average cost method determine the equivalent units for materials and
conversion costs for the month of October.
1) Compute the equivalent units for materials and conversion costs for the month of
October using the FIFO method.
2) Using the average cost method determine the equivalent units for materials and
conversion costs for the month of October.
Product
A B C Total
Units produced 8,000 4,000 2,000 14,000
Joint costs $90,000 ? ? $150,000
Sales value at split off ? ? $30,000 $240,000
Assuming that joint costs are allocated using the relative sales value at split-off
approach, what was the sales value at split off for Product A?
10. Jim Davis Company processes hogs into three products, chops, bacon and
sausage. Production and selling price data follow:
Bacon was smoked, sliced and packaged after the split-off point. The cost incurred for
these processes was $100,000. Sausage was ground and formed into patties after the
split-off. This process cost $60,000.
If joint processing costs were $1,500,000, calculate the total cost of each product using
the adjusted sales value method.
11. Nate Company manufactures Products A and B from a joint process that also yields
a by-product, X. Nate Company accounts for the revenue from its by-product sales as a
deduction from the cost of its main products. Additional information is as follows:
Product
A B X Total
Units produced 15,000 9,000 6,000 30,000
Joint costs ? ? ? $180,000
Sales value at split off $420,000 $140,000 $20,000 $580,000
(1) Assuming that joint product costs are allocated using the relative sales value at split-
off approach, what was the joint cost allocated to Products A and B?
(2) Prepare the journal entry to transfer the finished products to separate inventory
accounts.
(3) Assuming the sales value of X is stable, prepare the journal entries to:
(a) place the by-product in stock
(b) record the sale of 3,000 units for $10,500 on account.