Under which of the following conditions will the FIFO method produce the same?

True/False Questions 1. In a process costing system, the costs of one processing department become part of the costs of the next processing department. Ans: True 2. The equivalent units of production will be the same under the weighted-average and the FIFO method if there is no beginning work in process inventory. Ans: True 3. Under the weighted-average method, the equivalent units used to compute the unit costs of ending inventories relate only to work done during the current period. Ans: False

4. In order to equitably allocate costs in a process costing system, dissimilar products are restated in terms of equivalent units by weighting the number of units produced by their market values. Ans: False In a process costing system, units transferred to the next processing department are presumed to be 100% complete with respect to the work performed by the transferring department. Ans: True 5. Under a weighted-average process costing system when all materials are added at the beginning of the production process, the equivalent units for materials is equal to the units completed and transferred out. Ans: False

6. In calculating cost per equivalent unit under the weighted-average method, prior period costs are combined with current period costs. Ans: True 7. The equivalent units of production for a department using the FIFO process costing method is equal to the number of units completed plus the equivalent units in the ending inventory. Ans: False 8. The step-down method of cost allocation is more accurate than the direct method since the step-down method considers services that service departments provide to each other. Ans: True 9. The step-down method and the direct method of cost allocation will result in the same amount of service department cost being allocated to a given operating department, although the step-down method is easier to apply than the direct method.

Ans: False

10. The order in which the costs of service departments are allocated will affect the amounts allocated to an operating department when the direct method is used.

Ans: False

11. The units in beginning work in process inventory plus the units started into production must equal the units transferred out of the department plus the units in ending work in process inventory.

Ans: True

12. In a process costing system, direct labor cost combined with manufacturing overhead cost is known as conversion cost. Ans: True

13. Process costing is employed in industries that produce basically homogeneous products such as bricks, flour, or cement but would not be appropriate for assembly-type operations such as those that manufacture computers. Ans: False

14. Process costing is used where many different products are produced each period to customer specifications. Ans: False

Multiple Choice Questions 1. Which of the following statements related to job-order costing and process costing are true? a.

Under both costing methods, manufacturing overhead costs are included in the computation of unit product costs.

b.

Under both costing methods, the journal entry to record the completion of production will involve crediting a work in process account.

c.

Under both costing methods, the journal entry to record the cost of goods sold will involve crediting the finished goods account. d. All of the above are true. 2. The completion of goods is recorded as a decrease in the work in process inventory account when using:

Job-order costing a. Yes b. Yes c. No d. No

Process costing No Yes Yes No

3. In process costing, a separate work in process account is kept for each: a. individual order. b. equivalent unit. c. processing department. d. cost category (i.e., materials, conversion cost). 4. The weighted-average method of process costing differs from the FIFO method of process costing in that the weighted-average method: a. does not consider the degree of completion of beginning work in process inventory when computing equivalent units of production. b. considers ending work in process inventory to be fully complete. c. will always yield a higher cost per equivalent unit. d. All of the above. 5. Which of the following are needed to compute equivalent units for conversion costs under the weighted-average method of process costing?

A) B)

Percentage completion of beginning work in process Yes No

Percentage completion of ending work in process Yes Yes

C) D)

Yes No

No No

6. Malcolm Company uses a weighted-average process costing system. All materials at Malcolm are added at the beginning of the production process. The equivalent units for materials at Malcolm would be the sum of: a. units in ending work in process and the units started. b. units in beginning work in process and the units started. c. units in ending work in process and the units started and completed. d. units in beginning work in process and the units started and completed 7. In the computation of costs per equivalent unit, the weighted-average method of process costing considers: a. costs incurred during the current period only. b. costs incurred during the current period plus cost of ending work in process inventory. c. costs incurred during the current period plus cost of beginning work in process inventory. d. costs incurred during the current period less cost of beginning work in process inventory. 8. Which of the following are needed to compute the cost per equivalent unit for materials under the weighted-average method of process costing?

A) B) C) D)

Material cost assigned to beginning work in process last period Yes No Yes No

Material cost added to production during the current period Yes Yes No No

9. Under which of the following conditions will the FIFO method of process costing result in the same amount of cost being transferred to the next department as the weighted-average method? a.

b. c. d.

When the beginning and ending inventories are each fifty percent complete.

When there is no beginning inventory. When there is no ending inventory. When units in the beginning inventory are all completed and transferred at the same time.

10. In order to compute equivalent units of production using the FIF0 method of process costing, work for the period must be broken down into parts: a. completed during the period and units in ending inventory. b. completed from beginning inventory, started and completed during the month, 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. 11. Which of the following methods of allocating service departments take into account all of the effects of interdepartmental services? A) B) C) D)

Direct Step-Down Yes Yes Yes No No Yes No No

12. All of the following statements are correct when referring to process costing except:

a.

Process costing would be appropriate for a jeweler who makes custom jewelry to order. b. A process costing system has the same basic purposes as a job-order costing system. c. Units produced are indistinguishable from each other. d. Costs are accumulated by department. 13. For which of the following would it be best to use an operation costing system? a. home remodeling b. automobile production c. cement used for roadways d. trash bags used for yard waste

14. Health Beverage Company uses a process costing system to collect costs related to the production of its celery flavored cola. The cola is first processed in a Mixing Department at Health and is then transferred out and finished up in the Bottling Department. The finished cases of cola are then transferred to Finished Goods Inventory. The following information relates to Health's two departments for the month of January:

Cases of cola in work in process, January 1.................... Cases of cola completed/transferred out during January. Cases of cola in work in process, January 31..................

Mixing Bottling 10,000 3,000 77,000 ? 4,000 8,000

How many cases of cola were completed and transferred to Finished Goods Inventory during January? a. 66,000 b. 71,000 c. 72,000 d. 74,000 15. The Assembly Department started the month with 83,000 units in its beginning work in process inventory. An additional 334,000 units were transferred in from the prior department during the month to begin processing in the Assembly Department. There were 34,000 units in the ending work in process inventory of the Assembly Department. How many units were transferred to the next processing department during the month?

a. b. c. d.

417,000 285,000 451,000 383,000

16. Colby Company has a process costing system in which the weighted-average method is used. The company adds all materials at the beginning of the process in the Molding Department, which is the first of two stages of its production process. Information concerning the materials used in the Molding Department during March is as follows:

Work in process at March 1............................................. Units started during March.............................................. Units completed and transferred to next department during March................................................................

Materials Units Costs 22,00 0 $11,000 90,00 0 $46,120 97,00 0

What was the materials cost of the work in process inventory at March 31? a. $11,220 b. $7,500 c. $5,100 d. $7,650 17. Barnett Company uses the weighted-average method in its process costing system. The company adds materials at the beginning of the process in Department M. Conversion costs were 75% complete with respect to the

4,000 units in work in process at May 1 and 50% complete with respect to the 6,000 units in work in process at May 31. During May, 12,000 units were completed and transferred to the next department. An analysis of the costs relating to work in process at May 1 and to production activity for May follows: Materials Conversion Work in process 5/1....................... $13,800 $3,740 Costs added during May................ $42,000 $26,260 The total cost per equivalent unit for May was: a. $5.02 b. $5.10 c. $5.12 d. $5.25 18. Maurice Company uses the weighted-average method in its process costing system. The company adds materials at the beginning of the process in the Forming Department, which is the first of two stages of its production process. Information concerning the materials used in the Forming Department in April follows:

Work in process at April 1............................................... Units started during April................................................ Units completed and transferred to next department during April..................................................................

Materials Units Costs 12,000 $6,000 100,00 0 $51,120 88,000

What was the materials cost of the work in process at April 30? a. $6,120 b. $11,040 c. $12,000 d. $12,240 19. Limber Company uses the weighted-average method in its process costing system. Operating data for the first processing department for the month of June appear below:

Beginning work in process inventory........ Started into production during June...........

Percent Complete with Respect to Units Conversion 18,00 0 80% 81,00 0 17,00

Ending work in process inventory.............

0

80%

According to the company's records, the conversion cost in beginning work in process inventory was $15,264 at the beginning of June. Additional conversion costs of $68,208 were incurred in the department during the month. What was the cost per equivalent unit for conversion costs for the month? (Round off to three decimal places.) a. $0.873 b. $0.696 c. $0.842 d. $1.060 20. Jimmy Company uses the weighted-average method in its process costing system. The ending work in process inventory consists of 9,000 units. The ending work in process inventory is 100% complete with respect to materials and 70% complete with respect to labor and overhead. If the cost per equivalent unit for the period is $3.75 for material and $1.25 for labor and overhead, what is the balance of the ending work in process inventory account? a. $41,625 b. $33,750 c. $45,000 d. $31,500 21. Jersey Company has a process costing system in which it uses the weightedaverage method. The equivalent units for conversion costs for the month were 47,500 units. The beginning work in process inventory consisted of 15,000 units, 60% complete with respect to conversion costs. The ending work in process inventory consisted of 10,000 units, 75% complete with respect to conversion costs. The number of units started during the month was: a. 25,000 units b. 34,000 units c. 35,000 units d. 40,000 units

22. Wit Company uses the weighted-average method in its process costing system. Information for the month of May concerning Department A, the first stage of the company's production process follows: Materials Conversion Work in process, beginning....................... $ 4,000 $ 3,000 Current costs added................................... 20,000 16,000 Total costs.................................................. $24,000 $19,000 Equivalent units......................................... 100,000 95,000 Costs per equivalent unit........................... $0.24 $0.20 Goods completed....................................... 90,000 units Work in process, ending............................ 10,000 units

Material costs are added at the beginning of the process. The ending work in process is 50% complete with respect to conversion costs. How would the costs be distributed?

A) B) C) D)

Goods completed and transferred out $39,600 $39,600 $43,000 $44,000

Ending work in process $3,400 $4,400 $0 $3,400

23. Koehl Corporation uses the direct method to allocate service department costs to operating departments. The company has two service departments, Administrative and Facilities, and two operating departments, Assembly and Wholesaling.

Service Department

Departmental costs.... Employee hours........ Space occupied.........

Administrative Facilities $19,440 $71,340 4,000 2,000 3,000 1,000

Operating Department Assembl y Wholesaling $185,580 $392,950 22,000 14,000 39,000 2,000

Administrative costs are allocated on the basis of employee hours and Facilities costs are allocated on the basis of space occupied. The total Wholesaling Department cost after the allocations of service department costs is closest to: a. $403,990 b. $396,430 c. $403,642 d. $402,601

24. Behrend Clinic uses the direct method to allocate service department costs to operating departments. The clinic has two service departments, Personnel and Support, and two operating departments, Prenatal and Pediatrics. Service Department Operating Department Personnel Support Prenatal Pediatrics Departmental costs.... $29,200 $55,040 $242,050 $423,200 Employee hours........ 5,000 1,000 26,000 14,000 Space occupied......... 3,000 2,000 35,000 8,000 Personnel Department costs are allocated on the basis of employee hours and Support Department costs are allocated on the basis of space occupied in square feet. The total Pediatrics Department cost after the allocations of service department costs is closest to: a. $441,260 b. $443,660 c. $433,440 d. $444,471

Ans: A AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting Appendix: 4B LO: 8 Level: Easy Solution: Service Department AdminFacilistrative ities

Operating Department Assem- Wholebly saling

Total

Departmental costs before allocation..... $19,440 $71,340 $185,580 $392,950 $669,310 Allocation: Administrative costs (22/36, 14/36) *...... (19,440) 11,880 7,560 Facilities costs (39/41, 2/41)**....... (71,340) 67,860 3,480 Total cost after allocation................ $ 0 $ 0 $265,320 $403,990 $669,310 Based on the employee hours in the two operating departments, which are 22,000 hours + 14,000 hours = 36,000 hours **Based on the space occupied by the two operating departments, which is 39,000 + 2,000 = 41,000.

Ans: B AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting Appendix: 4B LO: 8 Level: Easy Solution: Service Department Operating Department Personnel Support Prenatal Pediatrics Total Departmental costs before allocation............ Allocation: Personnel costs (26/40, 14/40)* Support costs (35/43, 8/43)** Total cost after allocation............

$29,200 $55,040 $242,050 (29,200) (55,040) $

0

$

$423,200 $749,490

18,980

10,220

44,800

10,240

0 $305,830

$443,660 $749,490

Under which of the following conditions will the first in first out method produce the same cost ofgoods manufactured as the weighted

What are the features of FIFO method?

Is FIFO more accurate than weighted

Which of the following Organisation would most likely use a process costing system?