Deck 5: Process Costing and Cost Allocation

Question 1

In a manufacturing process-costing setting,each unit receives the same or similar amounts of direct material costs,direct manufacturing labor costs,and indirect manufacturing costs.

Answer 1

True

Question 2

Clothes Manufacturing,Inc.manufactures clothes and distributes them to various buyers.This organization is unique because the managers reported identical costs per unit in the production and manufacturing operations.The managers also reported they use different quality of materials,and in different batches.What type of costing does the managerial accountant use at Clothes Manufacturing,Inc.?

Answer 2

The managerial accountant at Clothes Manufacturing Inc.utilizes both process costing and job costing processes,or a hybrid costing system.The hybrid costing system combines elements of both job and process costing.For example,process-costing system is used to cost the cost-per unit of the cutting and sewing operations.The managerial accountants use the job-costing system to cost the different materials used to make the clothing.

Question 3

John's Assembly Service provided the following data for the assembly department for January 2013:

Required:
Compute the direct material cost per unit;the conversion cost per unit;and,the total department cost per unit.

A)$60;$40;$100.
B)$40;$60;$80.
C)$20;$30;$80.
D)$80;$10;$90.
E)$70;$30;$100.

Answer 3

A
Explanation: A)Direct material cost-per unit: ($36,000 / 600 units)= $60
Conversion cost per unit ($24,000 / 600 units)= $40.00
Department cost per unit ($60 + $40)= $100

Question 4

Which of the following is the formula to compute the assembly cost per unit?

A)Direct material cost-per unit + conversion cost per unit.
B)Direct material cost per unit - conversion cost per unit.
C)Direct material cost per unit × conversion cost per unit.
D)Direct material cost per unit / conversion cost per unit.
E)Direct material cost per unit + assembly department cost per unit.

Question 5

The main difference between process costing and job costing is the extent of averaging used to compute the costs of products and services.

Question 6

Managerial accountants record direct material costs and conversion costs in an assembly department as the costs are incurred.

Question 7

In process costing with no beginning or ending work-in-process inventory,physical units,whether complete or incomplete,refer to the number of:

A)zero units.
B)input units.
C)output units.
D)process units.
E)production units.

Question 8

________ -costing systems separate costs into cost categories according to when costs are introduced into the process.

A)Job
B)Single
C)Direct
D)Indirect
E)Process

Question 9

Process-costing systems separate costs into cost categories according to when costs are introduced into the process.

Question 10

Karen is a managerial accountant at a manufacturing company.She uses manufacturing process costing to assign costs to products and services.Write a short summary and explain how the manufacturing process is different compared to a job-costing system.

Question 11

Costs are averaged in service organizations that implement process-costing system with no beginning or ending work-in-process inventory.

Question 12

________ costs are all manufacturing costs other than direct material costs,including manufacturing labor,energy,and plant depreciation.

A)Joint
B)Hybrid
C)Equivalent
D)Conversion
E)Weighted average

Question 13

There are distinct,identifiable units of a product or service in the:

A)job-costing system.
B)product-costing system.
C)process-costing system.
D)inventory-costing system.
E)weighted-average costing system.

Question 14

A company that implements process costing with zero beginning and zero ending work-in-process inventory has:

A)no units are started and fully completed within the accounting period.
B)all units are started and fully completed within the accounting period.
C)all units are started and partially completed after the accounting period.
D)some units are started and fully completed after the accounting period.
E)all units are started and fully completed before the accounting period.

Question 15

What is the process-costing system for the SG-40 in the assembly department? List the components in each.

Question 16

Masses of identical or similar units of a product or service are in:

A)job-costing systems.
B)product-costing systems.
C)process-costing systems.
D)inventory-costing systems.
E)weighted-average costing systems.

Question 17

Terry's Service Corporation reported the following data:

Required:
Compute the direct material cost per unit;the conversion cost per unit;and,the total department cost per unit.

A)$133.33;$66.66;$199.99
B)$135.00;$68.00;$208.00
C)$137.50;$70.00;$207.50
D)$140.00;$75.00;$215.00
E)$142.00;$78.00;$220.00

Question 18

List and compare the two distinct systems that managerial accountants use to compute product costs.Include an example of a product that is typical in each system.

Question 19

In a ________-costing system,individual jobs use different quantities of production resources.

A)job
B)single
C)direct
D)process
E)indirect

Question 20

Costs added evenly during production are:

A)job costs.
B)unit costs.
C)single costs.
D)process costs.
E)conversion costs.

Question 21

Surplus,Inc.is a manufacturer of seat cushions.The company only runs and operates two departments,the assembly department and the completion department.In January 2013,the company incurred $500,000 of direct materials and $450,000 of conversion costs,for a total manufacturing cost of $950,000.The accounting manager reported that there was no beginning inventory on January 1,2013 and during January 2013,400 units were fully completed at the end of the month.Compute the direct material cost per unit,the conversion cost per unit,and the assembly department cost per unit.

Question 22

The Flannigan Factory was recently formed to product a specialized part that forms and essential part to go on a refrigerator.The direct materials are added at the start of the production process while conversion costs are added uniformly throughout the production process.December is Flannigan's first month of operations;and,therefore,there was no beginning inventory.Direct materials cost for the month totaled $1,200,000,while conversion costs equaled $1,600,000.The accounting records indicate that 500,000 parts were started in December and 400,000 parts were completed.
Ending inventory was 30% complete as to conversion costs.
Required:
a.What is the total manufacturing cost per part for December?
b.Allocate the total costs between the completed parts and the parts in ending inventory.

Question 23

T-account entries in process-costing systems are similar to T-account entries in job-costing systems for direct materials and conversion costs.

Question 24

The managerial accountant at Cheryl's Chocolate Factory changed the job-costing system to a process-costing system.Write a short essay and explain how the managerial accountant will make T-account entries.How are the T-account entries different in the process-costing system compared to the job-costing system?

Question 25

Managerial accountants calculate product costs on a:

A)preparation worksheet.
B)managerial cost worksheet.
C)production cost worksheet.
D)cost calculation worksheet.
E)predetermined cost worksheet.

Question 26

The accountant at Magnificent Magic Company reported $180,000 total direct-material cost and 60,000 total direct-material equivalent units.Compute the direct-material cost per equivalent unit.

A)$1.00 per equivalent unit
B)$2.00 per equivalent unit
C)$3.00 per equivalent unit
D)$4.00 per equivalent unit
E)$5.00 per equivalent unit

Question 27

Paul's Service,Inc.is a service organization that produces a homogenous product,but has no incomplete units when each accounting period ends.In this organization,the process-costing system has no beginning or ending work-in-process inventory.Write a short essay and discuss some of the characteristics of the process-costing system that the manger considers at this organization.How does the manager compute the average unit costs when no inventories are present?

Question 28

T-account entries posted in process-costing systems:

A)are different compared to the T-account entries made in job-costing systems for direct materials and conversion costs.
B)in job-costing have one work-in-process account for each process.
C)are similar to the T-account entries made in job-costing systems for direct materials and conversion costs.
D)are never used to record purchase of direct materials used in production.
E)are never used by managerial accountants in process-costing systems.

Question 29

Managerial accountants estimate the degree of completion easier for direct material costs compared to conversion costs because the quantity of direct materials needed for a complete unit and quantity of direct materials in partially completed units are measured more accurately.

Question 30

Managerial accountants treat partially-assembled units the same as a fully-assembled units.

Question 31

What is the first step of process costing?

A)Summarize the flow of physical units of output.
B)Compute output in terms of equivalent units.
C)Summarize total costs to account for.
D)Compute cost per equivalent unit.
E)Assign total costs to units completed and to units in ending work in process.

Question 32

Overestimating the degree of completion increases the costs assigned to goods transferred out and eventually to cost of goods sold,and it increases operating income.

Question 33

Managers use equivalent units to compare work done in categories and to measure work completed when they work with fully-assembled units and partially-assembled units.

Question 34

Which of the following is not correct about equivalent units?

A)A total measure of completed work.
B)Compares work completed in each category.
C)Combines quantity of each input in units completed units of output.
D)Combines quantity of each input in incomplete units of output.
E)Fails to convert the quantity of input into the amount of completed output units.

Question 35

It is easier for managerial accountants to estimate the degree of completion for direct-material costs than for conversion costs because quantities of direct materials in completed and partially-completed units are more accurately measured.

Question 36

The common metric that managerial accountants use to compare work completed in each category and to obtain the measure of work completed is:

A)physical unit.
B)equivalent unit.
C)fully-assembled unit.
D)matrix-assembled unit.
E)partially-assembled unit.

Question 37

The manager at Greenies Floral Shoppe estimated that the 50 units in ending inventory were 60% complete for conversion costs.All conversion costs represented in the 60% were used to make fully completed units.
Required:
Compute the number of units completed at the end of the month.

A)10 completed units of output.
B)20 completed units of output.
C)30 completed units of output.
D)40 completed units of output.
E)50 completed units of output.

Question 38

Crystal Clean Manufacturing reported the following information:

Required:
Compute the total cost of ending work-in-process inventory.

A)$15,000
B)$25,000
C)$28,000
D)$33,000
E)$38,000

Question 39

Service-sector organizations typically have homogeneous product or service.

Question 40

What is the second step of process costing?

A)Summarize the flow of physical units of output.
B)Compute output in terms of equivalent units.
C)Summarize total costs to account for.
D)Compute cost per equivalent unit.
E)Assign total costs to units completed and to units in ending work in progress.

Question 41

Ms.Davidson is the project manager at a local warehouse.She is responsible for the supervision and development of staff and she also prepares and maintains the reports.Recently,she became friends with a coworker,Betty,who is a staff manager that she oversees the business operations division.She discovered that Betty was reporting higher rates of completion on several projects and she overstated the estimations on operating income in her department to inflate profits and make the department look better.What should the project manager,Ms.Davidson,do about this issue?

Question 42

The process-costing method that assumes the earliest equivalent units in work in process are completed first is:

A)unit of output method.
B)physical unit method.
C)work in process method.
D)last in,first out (LIFO).
E)first in,first out (FIFO).

Question 43

The accountant at John's Cycle Manufacturing Company uses the weighted-average costing method.The accountant reported that there were 400 equivalent units of work completed to date,and reported the following cost:
Summary of Total Costs

Required:
Compute the conversion cost-per-unit using the weighted-average costing method.

A)50
B)52
C)54
D)60
E)62

Question 44

The manager at Marilyn's Sewing Service reported $75,000 total conversion cost and 41,500 total conversion cost in equivalent units.Compute the conversion cost per equivalent unit.

A)$1.50
B)$1.60
C)$1.70
D)$1.80
E)$1.90

Question 45

Managerial accountants compute the budgeted cost per unit (standard input cost)to develop a budgeted cost per output unit (standard cost of output).

Question 46

The hybrid-costing system that applies to batches of similar,but not identical products is the:

A)job-costing system.
B)process-costing system.
C)product-costing system.
D)operation-costing system.
E)manufacturing-costing system.

Question 47

In an economy that experiences rising prices,the weighted-average method will decrease taxes because of goods sold will be higher and operating income is lower.

Question 48

The weighted-average process-costing method:

A)calculates equivalent cost-per-unit of all work completed to date.
B)fails to calculate the cost-per equivalent unit of all work completed to date.
C)ignores the cost-per equivalent unit of all work completed to date.
D)ignores the costs from work started during the current period.
E)only takes into account those costs from work at the beginning of work in process.

Question 49

The accounting manager at Sarah's Pet Toy Manufacturing uses the weighted-average method costing system.The accountant reported 85,000 units in beginning work in process and 32,000 equivalent units of work done in the current period.Compute the equivalent units completed and transferred out in the current period.

A)100,000
B)107,000
C)110,000
D)117,000
E)123,000

Question 50

The managers at Anderson's Roofing Company use five steps in their process-costing system.List the five steps the managers use in their system and discuss the significance of each step to a managerial accountant.

Question 51

The Studio Furniture Company manufactures leather recliners.In February,the firm's Assembly Division started production of 50,000 leather recliners.During the month,the firm completed 55,000 chairs,and transferred them to the Finishing Department.The firm ended the month with 10,000 chairs in ending inventory.There were 15,000 chairs in beginning inventory.All direct materials costs are added at the beginning of the production cycle and conversion costs are added uniformly throughout the production process.The FIFO method of process costing is used by the accounting manager.The Operations Manager reported that the beginning work in process was 30% complete as to conversion costs,while ending work-in process was 80% completed as to conversion costs.

Required:
Using the FIFO method,determine how many units that were started in February were completed during February?

A)20,000 units.
B)25,000 units.
C)30,000 units.
D)35,000 units.
E)40,000 units.

Question 52

The manager at Puppet and Doll Factory reported 50,000 units of direct materials in the processing division.All direct materials are placed in the processing at the beginning of the process and conversion costs occur evenly during the process.The managerial accountant uses the weighted-average costing method and their first goal was to have 10,000 left in processing and 20% converted to factory and labor overhead.
Required
a.Determine the total equivalent units in process and transferred out for direct materials and conversion costs,assuming there is no beginning inventory.
b.With the installation of a new sewing machine,the forecast for the end of the month was to have 2,000 left in process and 80 % converted as to labor and factory overhead.Compute the equivalent units in process and transferred out for direct materials and conversion costs,assuming there was no beginning inventory.

Question 53

Under FIFO,ending work-in-process inventory comes from units that were started but not fully completed during the current period.

Question 54

Managerial accountants realize that a distinct feature of the first-in,first-out (FIFO)process-costing method is that:

A)it keeps work done on beginning inventory blended with work done during the current period in the calculation of equivalent units.
B)it keeps separate work completed on beginning inventory before the current period from work completed in the current period.
C)work done on ending inventory is kept separate from the work during the calculation of equivalent units and is usually not included in the calculation.
D)managerial accountants fail to assign the costs of the previous accounting period's equivalent units in beginning work-in-process inventory.
E)it is really the same as the weighted-average process-costing method.

Question 55

The weighted-average cost is the total of all costs entering the work-in process account divided by total equivalent units of work done to date.

Question 56

Managerial accountants base their choice between the weighted-average method and the first-in,first-out method based on a desired effect on taxes,operating income,performance evaluation,and debt covenants.

Question 57

The system that blends characteristics from both job-costing and process-costing systems is a:

A)job-costing system.
B)hybrid-costing system.
C)process-costing system.
D)operation-costing system.
E)manufactured-costing system.

Question 58

The owner of Sammy's Uniform Shoppe hired a new accounting manager to oversee the accounting operations at the firm.The new accounting manager discussed the recession with the owner and the owner asked the new accounting manager if it mattered to use the weighted average method or the last-in,first-out method of accounting in periods of economic downturn.What should the new accounting manager say to the owner?

Question 59

Which of the following is not true about operation-costing systems?

A)Uses work orders that specify the needed direct materials.
B)Product costs are compiled for each work order.
C)Each unit is assumed to use an identical amount of conversion costs.
D)Focuses on the control of physical processes,or operations,or a given production system.
E)Managers assume that operation unit costs are different regardless of the work order.

Question 60

Equivalent-unit and cost-per-equivalent-unit calculations under the weighted-average process-costing method ________ unit costs in beginning inventory with units and costs of work done in the current period.

A)detracts
B)merges
C)divides
D)multiplies
E)subtracts

Question 61

The method that determines the weights for cost allocation by considering each user of the cost as a separate entity is:

A)first-in,first-out.
B)weighted average.
C)joint-cost allocation.
D)stand-alone cost-allocation.
E)incremental cost-allocation.

Question 62

In T-account entries,costs can be added throughout the fiscal year in the Conversion Costs ________ account;and,the Conversion Control ________ account.

A)costing;control
B)control;process
C)allocated;process
D)control;allocated
E)process;control

Question 63

A ________ cost is a cost of operating a facility,department,activity,or similar cost object that two or more users share.

A)zero
B)joint
C)single
D)common
E)separable

Question 64

Sally is an accounting student at the state college.On her exam,she is asked to define the operation-costing system and explain when she should use the method of job-costing versus the method of process-costing.How should Sally respond to the test question?

Question 65

In process-costing systems,all product units in any work order are assumed to consume identical amounts of conversion costs of a particular operation.

Question 66

In a ________-________ ________,any overallocation or underallocation of conversion costs is disposed of in the same way as overallocated or underallocated manufacturing overhead.

A)job-costing system
B)process-costing system
C)inventory-costing system
D)weighted average-costing system
E)last-in,first-out processing system

Question 67

The method that ranks the individual users of a costs object in the order of users most responsible for the common cost and uses the ranking to allocate costs among users is:

A)first-in,first-out.
B)weighted average.
C)joint-cost allocation.
D)stand-alone cost-allocation.
E)incremental cost-allocation.

Question 68

All costs incurred beyond the splitoff point that are assignable to each specific product identified at the splitoff point are:

A)zero costs.
B)joint costs.
C)single costs.
D)common costs.
E)separable costs.

Question 69

The costs of a production process that yields multiple products simultaneously are:

A)zero costs.
B)joint costs.
C)single costs.
D)common costs.
E)separable costs.

Question 70

Marcy's Manicure Shop has budgeted conversion costs in Operation 1 of solar nails in 2013 of $100,000;and,30,000 budgeted product units in 2013.Compute the Operation 1 budgeted conversion-cost for 2013.

A)$1.97.
B)$3.03.
C)$3.13.
D)$3.33.
E)$3.53.

Question 71

In regards to budgeted-conversion costs,if some units have not been completed,managerial accountants compute the conversion-cost rate by:

A)adding budgeted conversion costs to the equivalent units of conversion costs.
B)subtracting budgeted conversion costs from the equivalent units of conversion costs.
C)multiplying budgeted conversion costs from the equivalent units of conversion costs.
D)dividing budgeted conversion costs by the equivalent units of conversion costs.
E)subtracting the budgeted conversion units by the equivalent units of conversion costs.

Question 72

Operation-costing systems use work orders that specify the amount of direct materials needed and step-by-step operations.

Question 73

The costs incurred beyond the splitoff point that are assignable to each of the specific products identified at the splitoff point is known as:

A)joint costs.
B)individual costs.
C)separable costs.
D)production costs.
E)manufacturing costs.

Question 74

________-cost allocation is arbitrary and mangers generally have a lot less discretion in choosing a method,unlike the choice of the weighted-average or FIFO method in process costing.

A)Zero
B)Joint
C)Single
D)Common
E)Operation

Question 75

A key point in the operation-costing system is that each batch does not move through the same operations as other batches.

Question 76

The managerial accountant at the Williamsburg Outlet Shoppe reported the following stand-alone costs:

Required:
Use the two stand-alone costs to allocate the common cost of $140,000,000 in millions for the Williamsburg Outlet Shoppe using the stand-alone cost-allocation method.

A)80 million
B)81 million
C)90 million
D)91 million
E)95 million

Question 77

Managerial accountants find operation costing useful in cost management because operation costing focuses on control of physical processes,or operations,of a given production system.

Question 78

The basic point in operation costing is that managers assume operation unit costs are the same regardless of the work order,but direct material costs:

A)are never relevant in the operation unit costs.
B)vary across orders when the materials used for each work order vary.
C)never vary across orders when the materials used for each work order vary.
D)can vary across orders but not when the materials used for each work order vary.
E)never vary across orders but only when the materials used for each work order vary.

Question 79

The juncture in a joint-production process when two or more products become separately identifiable is known as:

A)the common point.
B)the spinoff point.
C)the splitoff point.
D)the production point.
E)the manufacturing point.

Question 80

The Chief Financial Officer at Ford Motor Company is said to use a hybrid-costing system.Write a short essay and define the hybrid-costing system.Explain the advantages to this company to use this system.