Deck 6: Process Cost Accounting Additional Procedures

Question 1

During June, Birch Bay Company's Department B equivalent unit product costs computed under the average cost method were as follows: 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.

Answer 1

C
Because materials are introduced at the end of the process, no materials cost would be included in the ending work in process.

Question 2

The following information is available for the month of August from the First department of the Twigg Corporation: 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?

Answer 2

D

Question 3

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.

Answer 3

C
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.

Question 4

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

Question 5

Normal losses that occur in the manufacturing process are properly classified as:

A)Extraordinary items.
B)Product costs.
C)Period costs.
D)Deferred charges.

Question 6

Information concerning Department A of Ali Company for the month of June is as follows: 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.

Question 7

What losses should not affect the recorded cost of inventories?

A)Normal losses
B)Abnormal losses
C)Seasonal losses
D)Standard losses

Question 8

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.

Question 9

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: 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

Question 10

If the amount of loss in a manufacturing process is abnormal, it should be classified as a:

A)Period cost.
B)Deferred charge.
C)Joint cost.
D)Product cost.

Question 11

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.

Question 12

Stanley Company adds materials at the beginning of the process in Department M. Data concerning the materials used in the March production follows: 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.

Question 13

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)

Question 14

The following information is available for the month of April from the First department of the Armque Corporation: 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

Question 15

The following information is available for the month of April from the First department of the Armque Corporation: 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?

Question 16

The following information is available for the month of August from the First department of the Twigg Corporation: 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

Question 17

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

Question 18

Van Pelt Company uses the average cost method of process costing. The production report for the Mixing department follows: In process, beginning of period
1,000 units
800 units - materials 50% complete; conversion costs 40% complete
200 units - materials 25% complete; conversion costs 15% complete
Placed in process during period
5,000 units
Transferred to packing department
4,800 units
In process, end of period
1,200 units
700 units - materials 75% complete; conversion costs 50% complete
500 units - materials 25% complete; conversion costs 20% complete
What are the equivalent units for:

Question 19

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: 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

Question 20

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.

Question 21

During June, Birch Bay Company's Department B equivalent unit product costs computed under the FIFO method were as follows: 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.

Question 22

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: 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

Question 23

Information for Tyson Company in May for Department One, the first stage of the production cycle, is as follows: 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?

Question 24

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

Question 25

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.

Question 26

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.

Question 27

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

Question 28

The following information is available for the month of April from the First department of the Armque Corporation: 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?

Question 29

Which of the following statements best describes a by-product?

A)A product with a value that can easily and accurately be determined.
B)A product that has a greater value than the main product.
C)A product created along with the main product whose sales value does not cover the cost of its production.
D)A product that usually produces a small amount of revenue when compared to the main product revenue.

Question 30

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

Question 31

Highlander Corporation is a manufacturer that uses the average cost method to account for costs of production. Highlander manufactures a product that is produced in three separate departments: molding, assembling, and finishing. The following information was obtained for the assembling department for the month of June:
Work in process, June 1: 4,000 units composed of the following: The following activity occurred during the month of June:
(1)
20,000 units were transferred in from the molding department at a cost of $300,000.
(2)
Costs were added by the assembling department as follows: (3) Materials are added at the end of the process.
(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:
a.Equivalent units of production.
b.Total manufacturing costs.
c.Cost per equivalent unit.
d.Dollar amount of ending work in process.
e.
Dollar amount of inventory cost transferred out.

Question 32

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

Question 33

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.

Question 34

Joint costs are commonly allocated based upon relative:

A)Sales value.
B)Marketing costs.
C)Conversion costs.
D)Prime costs.

Question 35

Information concerning Department A of Ali Company for the month of June is as follows: 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.

Question 36

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

Question 37

The following information is available for the month of April from the First department of the Armque Corporation: 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

Question 38

Which of the following is most likely to be accounted for as a by-product?

A)Heating oil resulting from processing crude oil at a refinery.
B)Cream resulting from processing raw milk at a dairy.
C)Sawdust resulting from processing lumber at a lumber mill.
D)Ground beef resulting from processing beef at a meat packer.

Question 39

If two or more products share a common process before they are separated, the joint costs should be allocated in a manner that:

A)Assigns a proportionate amount of the total cost to each product by means of a quantitative basis.
B)Maximizes total earnings.
C)Minimizes variations in a unit of production cost.
D)Does not introduce an element of estimation into the process of accumulating costs for each product.

Question 40

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

Question 41

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.

Question 42

Howard Poster Incorporated had 12,000 units of work in process in Department A on October 1. These units were 60 percent complete as to conversion costs. Materials are added in the beginning of the process. During the month of October, 38,000 units were started and 40,000 units were completed. Howard had 10,000 units of work in process on October 31. These units were 75 percent complete as to conversion costs.
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.

Question 43

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?

Question 44

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: (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.

Question 45

The Roberto Company had computed the flow of units for Department A for the month of May as follows: 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?

Question 46

Kyle, Inc., instituted a new process in October. During October, 18,000 units were started in Department A. Of the units started, 2,000 were lost in the process, 12,000 were transferred to Department B, and 4,000 remained in work in process at October 31. The work in process at October 31 was 100 percent complete as to material costs and 15% complete as to conversion costs. Material costs of $78,400 and conversion costs of $52,920 were charged to Department A in October. What were the total costs transferred to Department B and assigned to ending work in process using the average cost method?

Question 47

Keith Company manufactures Products A, B, and C from a joint process. Additional information is as follows: 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?

Question 48

Howard Poster Incorporated had 12,000 units of work in process in Department A on October 1. These units were 60 percent complete as to conversion costs. Materials are added at the end of the process. During the month of October, 38,000 units were started and 40,000 units were completed. Howard had 10,000 units of work in process on October 31. These units were 75 percent complete as to conversion costs.
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.

Question 49

The Roberto Company had computed the flow of units for Department A for the month of May as follows: 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?