Question 1

Harrington Industries, which uses a process-costing system, had a balance in its Work-in-Process account of $68,000 on January 1. The account was charged with direct materials, direct labor, and manufacturing overhead of $450,000 throughout the year. If a review of the accounting records determined that $86,000 of goods were still in production at year-end, Harrington should make a journal entry on December 31 that includes:

Accepted Answer

The total costs for the year are the beginning balance plus additional costs, totaling $68,000 + $450,000 = $518,000. With $86,000 still in production, the cost of goods manufactured is $518,000 - $86,000 = $432,000. This amount should be moved out of Work-in-Process Inventory, hence a credit to Work-in-Process Inventory for $432,000 is correct.

Question 2

Which of the following statements is false?

Accepted Answer

In process costing, the total cost of each unit is not simply found by dividing the total factory costs by the number of units completed. Instead, it involves allocating the costs to batches of products and then calculating the cost per unit based on the production activity in each department or process stage. This may involve complex calculations to account for work in process at the beginning and end of the period, making statement D false.

Question 3

Gulliver, Inc., which uses a process-costing system, transfers completed production from Department no. 1 to Department no. 2 for further work. Which of the following best describes the account that would be debited to record this transfer?

Accepted Answer

When production is transferred from one department to another in a process-costing system, the account debited is the Work-in-Process Inventory of the receiving department. In this case, Department no. 2 is the receiving department, so Work-in-Process Inventory: Department no. 2 would be debited.

Question 4

Linder Corporation had 8,200 units of work in process on November 1. During November, 26,800 units were started and as of November 30, 7,900 units remained in production. How many units were completed during November?

Accepted Answer

The answer of Linder Corporation had 8,200 units of work...

Question 5

Xin Co., had 3,000 units of work in process on April 1 that were 60% complete. During April, 10,000 units were completed and as of April 30, 4,000 units that were 40% complete remained in production. How many units were started during April?

Accepted Answer

Units started during April = Units completed + Ending WIP - Beginning WIP adjusted for completion percentage = 10,000 + 4,000 - (3,000 * 60%) = 11,000.

Question 6

Which of the following data are needed to calculate total equivalent units under the weighted-average method?

Accepted Answer

The weighted-average method of calculating total equivalent units requires the number of units completed during the period and the work-to-date (percentage of completion) on the ending work in process inventory. These data allow for the calculation of equivalent units for both completed and in-process work, combining work done in the current and previous periods.

Question 7

Companies that use a process-cost accounting system would:

Accepted Answer

In a process-cost accounting system, costs are tracked through sequential production stages or departments, necessitating a separate Work-in-Process Inventory account for each department to accurately capture the costs incurred at each stage.

Question 8

Breight, Inc., which uses a process-costing system, transfers completed production from Department no. 1 to Department no. 2 for further work. Which of the following best describes the account that would be credited to record this transfer?

Accepted Answer

When production is completed in Department no. 1 and transferred to Department no. 2 for further processing in a process-costing system, the account credited is Work-in-Process Inventory: Department no. 1. This reflects the transfer of costs from one department's work-in-process to another's, indicating the completion of the first department's work on the items.

Question 9

Agee Company uses a process-costing system for its single product. Material A is added at the beginning of the process; in contrast, material B is added when the units are 50% complete. The firm's ending work-in-process inventory consists of 4,000 units that are 75% complete. Which of the following correctly expresses the equivalent units of production with respect to materials A and B in the ending work-in-process inventory?

Accepted Answer

The answer of Agee Company uses a process-costing system for...

Question 10

Ashley Corporation uses a process-cost accounting system. The company adds direct materials and direct labor at the start of its production process; overhead cost is incurred evenly throughout manufacturing. The firm has no beginning work-in-process inventory; its ending work in process is 40% complete. Which of the following sets of percentages would be used to calculate the correct number of equivalent units in the ending work-in-process inventory?

Accepted Answer

Since materials and labor are added at the start, they are 100% complete for units in ending work-in-process, while overhead is incurred evenly, making it 40% complete for these units.

Question 11

Forte Co., had 3,000 units of work in process on April 1 that were 60% complete. During April, 11,000 units were started and as of April 30, 4,000 units that were 40% complete remained in production. How many units were completed during April?

Accepted Answer

Equivalent units in beginning work in process = 3,000 x 60% = 1,800 unitsEquivalent units started and completed during April = 11,000 unitsEquivalent units in ending work in process = 4,000 x 40% = 1,600 unitsTotal equivalent units completed and transferred out = 1,800 + 11,000 + 1,600 = 14,400 unitsUnits completed and transferred out = 14,400 / 100% = 14,400 units

Question 12

Which of the following statements about similarities between process costing and job-order costing are true?
I. Both systems assign production costs to units of output.
II. Both systems require extensive knowledge of financial accounting.
III. The flow of costs through the manufacturing accounts is essentially the same.

Accepted Answer

I and III are true because both process costing and job-order costing systems assign production costs to units of output and have a similar flow of costs through the manufacturing accounts. Extensive knowledge of financial accounting is beneficial for both, but not a direct similarity in how they operate.

Question 13

Oxford, Inc., which uses a process-cost accounting system, began operations on January 1 of the current year. The company incurs conversion cost evenly throughout manufacturing. If Oxford started work on 3,000 units during the period and these units were 70% of the way through manufacturing, it would be correct to say that the company has:

Accepted Answer

Oxford has 3,000 physical units in production because it started work on 3,000 units, regardless of their completion percentage.

Question 14

Bratton Corporation had 6,500 units of work in process on April 1. During April, 19,100 units were completed and as of April 30, 5,100 units remained in production. How many units were started during April?

Accepted Answer

The answer of Bratton Corporation had 6,500 units of work...

Question 15

Process costing would likely be used in all of the following industries except:

Accepted Answer

Automobile repair typically uses job costing rather than process costing because each repair job is unique and can vary significantly in terms of labor and parts required. Process costing is used where identical or similar products are mass-produced.

Question 16

Covington Corporation uses a process-cost accounting system. The company adds direct materials at the start of its production process; conversion cost, on the other hand, is incurred evenly throughout manufacturing. The firm has no beginning work-in-process inventory; its ending work in process is 40% complete. Which of the following sets of percentages would be used to calculate the correct number of equivalent units in the ending work-in-process inventory?

Accepted Answer

Since materials are added at the start of the production process, they are 100% complete in the ending work-in-process inventory. Conversion costs are incurred evenly throughout, so for the ending inventory that is 40% complete, the conversion costs would be 40% complete as well.

Question 17

Alton Company uses a process-costing system for its single product. Material A is added at the beginning of the process; in contrast, material B is added when the units are 75% complete. The firm's ending work-in-process inventory consists of 6,000 units that are 80% complete. Which of the following correctly expresses the equivalent units of production with respect to materials A and B in the ending work-in-process inventory?

Accepted Answer

The answer of Alton Company uses a process-costing system for...

Question 18

Hornsby has a single production department, and uses a process-costing system. The balance in its Work-in-Process account on January 1 was $68,000. The account was charged with direct materials, direct labor, and manufacturing overhead of $450,000 throughout the year. If a review of the accounting records determined that $86,000 of goods were still in production at year-end, Hornsby should make a journal entry on December 31 that includes:

Accepted Answer

CThe correct answers are B) a debit to Finished-Goods Inventory for $432,000 and C) a debit to Work-in-Process Inventory for $432,000. The total costs for the year are the beginning balance of Work-in-Process ($68,000) plus additional costs incurred ($450,000), totaling $518,000. With $86,000 of goods still in production at year-end, the cost of goods manufactured and transferred out of Work-in-Process would be $518,000 - $86,000 = $432,000. This amount ($432,000) should be debited to Finished-Goods Inventory as it represents the cost of goods completed during the year. However, the inclusion of option C as correct was an error, as it suggests an additional debit to Work-in-Process Inventory, which is not correct in this context. The correct entry to reflect the transfer of goods from Work-in-Process to Finished Goods would involve a debit to Finished-Goods Inventory (B) and a credit to Work-in-Process Inventory for the cost of goods manufactured ($432,000), not a debit to Work-in-Process. Therefore, the only correct answer should be B, not C. My explanation mistakenly included C as a correct choice due to an oversight in interpreting the process of transferring costs in a process-costing system.

Question 19

Unit costs in a process-costing system are derived by using:

Accepted Answer

Equivalent units are used in process costing to derive unit costs. This method accounts for the partial completion of units at the end of a period by converting them into an equivalent number of fully completed units.

Question 20

In a process-costing system, manufacturing costs are accumulated by:

Accepted Answer

In a process-costing system, manufacturing costs are accumulated by department or process, and over a specific time period. This method is used in industries where products are indistinguishable from each other, such as chemicals or petroleum.

Quiz 4: Process Costing and Hybrid Product-Costing Systems