Principles of Cost Accounting 17th Edition by Vanderbeck – Test Bank

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Sample Questions Posted Below

 

 

 

 

 

1. Process costing techniques should be used in assigning costs to products:

  a. If the product is manufactured on the basis of each order received.
  b. In all manufacturing situations.
  c. When production is only partially completed during the accounting period.
  d. If the product is composed of mass-produced homogeneous units.

 

ANSWER:   d
RATIONALE:   Process costing techniques should be used in assigning costs to products if the product is composed of mass-produced homogeneous units.
POINTS:   1
DIFFICULTY:   Easy
LEARNING OBJECTIVES:   PRIN.EDWA.16.30 – LO 5:1
ACCREDITING STANDARDS:   AACSB Reflective Thinking
ACCT.AICPA.FN.03 – Measurement
BUSPROG.06 – Reflective Thinking
IMA-Cost Management
OTHER:   Bloom’s: Understanding

 

2.
Which of the following firms is least likely to use process costing?

  a. A yogurt manufacturer.
  b. A refiner of petroleum products.
  c. A machine tool manufacturer.
  d. A manufacturer of concrete products.

 

ANSWER:   c
RATIONALE:   Makers of machine tools use job costing due to customized products. The other firms produce homogeneous products in continuous production.
POINTS:   1
DIFFICULTY:   Moderate
LEARNING OBJECTIVES:   PRIN.EDWA.16.30 – LO 5:1
ACCREDITING STANDARDS:   AACSB Reflective Thinking
ACCT.AICPA.FN.03 – Measurement
BUSPROG.06 – Reflective Thinking
IMA-Cost Management
OTHER:   Bloom’s: Understanding

 

3. Which of the following characteristics applies to process costing?

  a. Differentiated products are provided on a special order basis.
  b. Cost are accumulated by department.
  c. Cost are accumulated by jobs.
  d. Direct labor workers must keep detailed records as to the jobs on which they worked.

 

ANSWER:   b
RATIONALE:   In a process costing system, costs may be accumulated by department, not by job; therefore requiring more detailed labor records. Job costing would be used for special order items.
POINTS:   1
DIFFICULTY:   Easy
LEARNING OBJECTIVES:   PRIN.EDWA.16.30 – LO 5:1
ACCREDITING STANDARDS:   AACSB Reflective Thinking
ACCT.AICPA.FN.03 – Measurement
BUSPROG.06 – Reflective Thinking
IMA-Cost Management
OTHER:   Bloom’s: Understanding

 

4. A cost object in a process cost system is usually a:

  a. Department.
  b. Job.
  c. Specific product.
  d. Employee.

 

ANSWER:   a
RATIONALE:   A cost object is a unit to which costs are accumulated. In a process cost system, this is typically a department.
POINTS:   1
DIFFICULTY:   Easy
LEARNING OBJECTIVES:   PRIN.EDWA.16.30 – LO 5:1
ACCREDITING STANDARDS:   AACSB Analytic
ACCT.AICPA.FN.03 – Measurement
BUSPROG.03 – Analytic
IMA-Cost Management
OTHER:   Bloom’s: Remembering

 

5. Characteristics that job order costing and process costing have in common include all of the following except:

  a. The use of predetermined factory overhead rates.
  b. Each can be used by service firms.
  c. The costs of materials and labor are charged to the departments where they are incurred.
  d. The primary objective is to complete a unit cost for products.

 

ANSWER:   c
RATIONALE:   Charging the costs of material and labor to the departments in which they are incurred is a characteristic of process costing. In job order costing, these costs are charged directly to jobs.
POINTS:   1
DIFFICULTY:   Moderate
LEARNING OBJECTIVES:   PRIN.EDWA.16.30 – LO 5:1
ACCREDITING STANDARDS:   AACSB Reflective Thinking
ACCT.AICPA.FN.03 – Measurement
BUSPROG.06 – Reflective Thinking
IMA-Cost Management
OTHER:   Bloom’s: Understanding

 

6. A true process costing system could make use of each of the following except:

  a. Predetermined factory overhead rates.
  b. Individual jobs.
  c. Cost centers.
  d. General ledger control accounts.

 

ANSWER:   b
RATIONALE:   A true process costing system would not make use of individual jobs. Both process and job order cost accounting systems can use predetermined factory overhead rates, cost centers, and responsibility accounting.
POINTS:   1
DIFFICULTY:   Easy
LEARNING OBJECTIVES:   PRIN.EDWA.16.30 – LO 5:1
ACCREDITING STANDARDS:   AACSB Reflective Thinking
ACCT.AICPA.FN.03 – Measurement
BUSPROG.06 – Reflective Thinking
IMA-Cost Management
OTHER:   Bloom’s: Understanding

 

7. All of the following could be included in the cost of a product located in the final production department of a multi-step process except:

  a. The costs of materials, labor and overhead identifiable with that department.
  b. Logistics (product fulfilment) costs.
  c. The costs of service departments that have been allocated to production departments.
  d. The costs of prior production departments.

 

ANSWER:   b
RATIONALE:   Marketing and distribution costs are not manufacturing costs.
POINTS:   1
DIFFICULTY:   Easy
LEARNING OBJECTIVES:   PRIN.EDWA.16.31 – LO 5:2
ACCREDITING STANDARDS:   AACSB Reflective Thinking
ACCT.AICPA.FN.03 – Measurement
BUSPROG.06 – Reflective Thinking
IMA-Cost Management
OTHER:   Bloom’s: Understanding

 

8. Brown Company incurred costs of $20,000 for material, $10,000 for labor, and $16,000 for factory overhead.  There was no beginning or ending work in process.  5,000 units were completed and transferred out.  The unit cost for material is:

  a. $4.00
  b. $2.00
  c. $9.20
  d. $3.20

 

ANSWER:   a
RATIONALE:   Material unit cost: $20,000 / 5,000 = $4.00
POINTS:   1
DIFFICULTY:   Easy
LEARNING OBJECTIVES:   PRIN.EDWA.16.31 – LO 5:2
ACCREDITING STANDARDS:   AACSB Analytic
ACCT.AICPA.FN.03 – Measurement
BUSPROG.03 – Analytic
IMA-Cost Management
OTHER:   Bloom’s: Applying

 

9. Daniel LLC incurred cost of $45,000 for material, $25,000 for labor, and $24,000 for factory overhead.  There was no beginning or ending work in process.  5,000 units were completed and transferred out.  The cost per unit is:

  a. $9.00
  b. $5.00
  c. $18.80
  d. $4.80

 

ANSWER:   c
RATIONALE:  
Material $45,000
Labor 25,000
Factory overhead 24,000
Total costs $94,000
Divided by the number of units 5,000
Cost per unit $18.80
POINTS:   1
DIFFICULTY:   Easy
LEARNING OBJECTIVES:   PRIN.EDWA.16.31 – LO 5:2
ACCREDITING STANDARDS:   AACSB Analytic
ACCT.AICPA.FN.03 – Measurement
BUSPROG.03 – Analytic
IMA-Cost Management
OTHER:   Bloom’s: Applying

 

10. Which of the following is not included in departmental product costs?

  a. Costs identifiable with the department.
  b. Costs added by prior production departments carried to the department.
  c. Cost of sales and administrative departments that have been allocated to the production department.
  d. Costs of factory service departments that have been allocated to the production department.

 

ANSWER:   c
RATIONALE:   Sales and administrative costs are not product or manufacturing costs.
POINTS:   1
DIFFICULTY:   Moderate
LEARNING OBJECTIVES:   PRIN.EDWA.16.31 – LO 5:2
ACCREDITING STANDARDS:   AACSB Reflective Thinking
ACCT.AICPA.FN.03 – Measurement
BUSPROG.06 – Reflective Thinking
IMA-Cost Management
OTHER:   Bloom’s: Understanding

 

11. The primary task of process costing is to allocate total cost between:

  a. units finished during the period and units still in process at the end of the period.
  b. materials and conversion costs.
  c. units in process at the beginning of the period and units started during the period.
  d. units started during the period and units finished during the period.

 

ANSWER:   a
RATIONALE:   The primary task of process costing is to allocate total cost between units finished during the period and units still in process at the end of the period.
POINTS:   1
DIFFICULTY:   Easy
LEARNING OBJECTIVES:   PRIN.EDWA.16.32 – LO 5:3
ACCREDITING STANDARDS:   AACSB Analytic
ACCT.AICPA.FN.03 – Measurement
BUSPROG.03 – Analytic
IMA-Cost Management
OTHER:   Bloom’s: Remembering

 

12. Using the average cost method of process costing, the computation of manufacturing cost per equivalent unit considers:

  a. Current costs only.
  b. Current costs plus cost of beginning work in process inventory.
  c. Current costs plus cost of ending work in process inventory.
  d. Current costs less cost of beginning work in process inventory.

 

ANSWER:   b
RATIONALE:   The average cost method of process costing considers current cost plus cost of beginning work in process inventory.
POINTS:   1
DIFFICULTY:   Moderate
LEARNING OBJECTIVES:   PRIN.EDWA.16.32 – LO 5:3
ACCREDITING STANDARDS:   AACSB Reflective Thinking
ACCT.AICPA.FN.03 – Measurement
BUSPROG.06 – Reflective Thinking
IMA-Cost Management
OTHER:   Bloom’s: Remembering

 

13. The number of whole units that could have been completed during a period, using the production costs incurred during that period is called:

  a. Standard production.
  b. Equivalent production.
  c. Total units.
  d. Manufactured units.

 

ANSWER:   b
RATIONALE:   The number of whole units that could have been completed during a period, using the production costs incurred during that period is called equivalent production.
POINTS:   1
DIFFICULTY:   Easy
LEARNING OBJECTIVES:   PRIN.EDWA.16.32 – LO 5:3
ACCREDITING STANDARDS:   AACSB Analytic
ACCT.AICPA.FN.03 – Measurement
BUSPROG.03 – Analytic
IMA-Cost Management
OTHER:   Bloom’s: Remembering

 

14. A characteristic of a process cost accounting system is:

  a. Costs are accumulated by order.
  b. Work in process inventory is restated in terms of equivalent production.
  c. It is used by a company manufacturing custom machinery.
  d. None of these is correct.

 

ANSWER:   b
RATIONALE:   With a process costing system, work in process inventory is restated in terms of equivalent production, which represents the number of whole units that could have been completed during the period. Costs are accumulated by order in a job order cost system, which would be used, for example, by a company manufacturing custom machinery. Standard costs can be used with job order or process systems.
POINTS:   1
DIFFICULTY:   Moderate
LEARNING OBJECTIVES:   PRIN.EDWA.16.32 – LO 5:3
ACCREDITING STANDARDS:   AACSB Analytic
ACCT.AICPA.FN.03 – Measurement
BUSPROG.03 – Analytic
IMA-Cost Management
OTHER:   Bloom’s: Remembering

 

15. All of the following are characteristics of a production report except:

  a. It includes the number of units completed during the period.
  b. It includes the costs incurred by the department during the period.
  c. It includes the number of units in ending work-in-process and the estimated stage of completion.
  d. The department manager completes the report on a monthly basis.

 

ANSWER:   b
RATIONALE:   The production report is prepared by the department manager monthly and contains information about the number of units completed and on hand. It does not contain information about department costs.
POINTS:   1
DIFFICULTY:   Moderate
LEARNING OBJECTIVES:   PRIN.EDWA.16.32 – LO 5:3
ACCREDITING STANDARDS:   AACSB Analytic
ACCT.AICPA.FN.03 – Measurement
BUSPROG.03 – Analytic
IMA-Cost Management
OTHER:   Bloom’s: Remembering

 

16. The cost of an equivalent unit is equal to:

  a. A unit of work in process inventory.
  b. The amount of cost necessary to start a unit of production into work in process.
  c. The cost necessary to complete one unit of production.
  d. A unit of work in process inventory.

 

ANSWER:   c
RATIONALE:   An equivalent unit of cost is equal to the amount of cost necessary to complete one unit of production. An equivalent of material or conversion cost is the amount of these elements that is required to complete one unit of a manufactured product. For example, if 10 units are 50 percent completed, in terms of equivalency, they are equivalent to 5 units 100 percent completed.
POINTS:   1
DIFFICULTY:   Moderate
LEARNING OBJECTIVES:   PRIN.EDWA.16.32 – LO 5:3
ACCREDITING STANDARDS:   AACSB Analytic
ACCT.AICPA.FN.03 – Measurement
BUSPROG.03 – Analytic
IMA-Cost Management
OTHER:   Bloom’s: Understanding

 

17. The production report for Phillips Industries, which had no beginning inventory at the beginning of the month,  included the following information for September:

  Number of Units Completion
Units started in production 81,000  
Units transferred to finished goods 72,000  
     

If the equivalent units for September’s production were 77,400, how many units were in process at the end of the month, and how complete were they?

  a. 9,000; 30%
  b. 9,000; 60%
  c. 3,000; 90%
  d. 6,000; 90%

 

ANSWER:   b
RATIONALE:  
Units started in production 81,000
Less: Units transferred to finished goods 72,000
Ending units in process 9,000

If Phillips started 81,000 units during the month, and transferred 72,000 to finished goods, 9,000 units would be left in ending inventory. Further, if equivalent units of production are equal to 77,400, the equivalent units of ending Work in Process would be 5,400 (77,400 – 72,000). 5,400 / 9,000 = 60% The units in ending Work in Process are 60% complete.

POINTS:   1
DIFFICULTY:   Moderate
LEARNING OBJECTIVES:   PRIN.EDWA.16.32 – LO 5:3
ACCREDITING STANDARDS:   AACSB Analytic
ACCT.AICPA.FN.03 – Measurement
BUSPROG.03 – Analytic
IMA-Cost Management
OTHER:   Bloom’s: Applying

 

18. If there is no beginning work in process inventory and the ending work in process inventory is 90 percent complete, the number of equivalent units would be:

  a. The same as the units placed in process.
  b. The same as the units completed.
  c. Less than the units placed in process.
  d. Less than the units completed.

 

ANSWER:   c
RATIONALE:  
Proof: Units
In process, beginning of period None
Placed in process 10,000
Completed and transferred 9,000
Work in process, end of period 1,000
Stage of completion 90%
   
Equivalent production:  
   Completed during period 9,000
   Equivalent units of work in process, end of period (1,000 units, 90%    completed)   900
      Total equivalent production 9,900
POINTS:   1
DIFFICULTY:   Challenging
LEARNING OBJECTIVES:   PRIN.EDWA.16.32 – LO 5:3
ACCREDITING STANDARDS:   AACSB Reflective Thinking
ACCT.AICPA.FN.03 – Measurement
BUSPROG.06 – Reflective Thinking
IMA-Cost Management
OTHER:   Bloom’s: Analyzing

 

19. An error was made in the computation of the stage of completion of the current year’s ending work in process inventory.  The error resulted in assigning a lower stage of completion to each component of the inventory than actually was the case.  What is the resultant effect of this error upon:

(1) The computation of equivalent units in total?
(2) The computation of costs per equivalent unit?
(3) Costs assigned to cost of goods completed for the period?

 (1)                        (2)                            (3)  

 

 

 

 

 

 

 

 

  a.      Understate      Overstate      Overstate
  b.      Understate      Understate     Overstate
  c.      Overstate       Understate     Understate
  d.      Overstate       Overstate      Understate

 

ANSWER:   a
RATIONALE:  
Proof: Actual As computed incorrectly  
Equivalent units in ending work in process    2,000    1,000  
Equivalent units in goods completed   20,000   20,000  
Total equivalent units   22,000   21,000 (u)
Production cost $462,000 $462,000  
Unit cost (Production cost / Total equivalent units) $ 21.00 $ 22.00 (o)
Cost of goods completed:  20,000 units × $21 unit   cost $420,000    
20,000 units × $22 unit cost   $440,000 (o)
POINTS:   1
DIFFICULTY:   Challenging
LEARNING OBJECTIVES:   PRIN.EDWA.16.32 – LO 5:3
ACCREDITING STANDARDS:   AACSB Reflective Thinking
ACCT.AICPA.FN.03 – Measurement
BUSPROG.06 – Reflective Thinking
IMA-Cost Management
OTHER:   Bloom’s: Analyzing

 

20. Which of the following is not a duty of the cost accountant in a process cost system?

  a. Estimating the stage of completion of in-process units at the end of the month.
  b. Collecting the periodic production costs.
  c. Preparing the journal entries to record the factory operations.
  d. Computing the amount of equivalent units.

 

ANSWER:   a
RATIONALE:   The production supervisor prepares the production report which contains estimates of the stage of completion of ending work in process.
POINTS:   1
DIFFICULTY:   Moderate
LEARNING OBJECTIVES:   PRIN.EDWA.16.33 – LO 5:4
ACCREDITING STANDARDS:   AACSB Reflective Thinking
ACCT.AICPA.FN.03 – Measurement
BUSPROG.06 – Reflective Thinking
IMA-Cost Management
OTHER:   Bloom’s: Remembering

 

21. The cost of production summary for Maha Industries follows:

Maha Industries
Cost of Production Summary
For the Month Ended May 31, 20–
Cost of production for month:    
   Materials $ 8,000  
   Labor 4,000  
   Factory overhead 3,000  
Total costs to be accounted for $15,000  
Unit output for month:    
   Finished and transferred to Finished goods    
   during month 3,500  
   Equivalent units of work in process, end of    
   month (2,000 units, 25% completed)     500  
      Total equivalent production 4,000  
Unit cost for month:    
   Materials ($8,000 / 4,000) $2.00  
   Labor ($4,000 / 4,000) 1.00  
   Factory overhead ($3,000 / 4,000) .75  
      Total $3.75  
Inventory costs:    
   Cost of goods finished and transferred to    
   Finished goods during month:  (3,500 × $3.75)   $13,125
Cost of work in process, end of month:    
   Materials (2,000 × .25 × $2.00) $1,000  
   Labor (2,000 × .25 × $1.00) 500  
   Factory overhead (1,000 × .25 × $.75)   375   1,875
Total production costs accounted for   $15,000

What is the journal entry to record materials issued into production?

  a. Finished goods            8,000

Materials                           8,000

  b. Work-in-process           8,000

Materials                           8,000

  c. Work-in-process           1,000

Materials                           1,000

  d. Materials                 8,000

Accounts payable                    8,000

 

ANSWER:   b
RATIONALE:   The entry to record materials issued into production is:

Work-in-process 8,000

Materials 8,000

POINTS:   1
DIFFICULTY:   Moderate
LEARNING OBJECTIVES:   PRIN.EDWA.16.33 – LO 5:4
ACCREDITING STANDARDS:   AACSB Analytic
ACCT.AICPA.FN.03 – Measurement
BUSPROG.03 – Analytic
IMA-Cost Management
OTHER:   Bloom’s: Applying

 

22. The cost of production summary for Maha Industries follows:

Maha Industries
Cost of Production Summary
For the Month Ended May 31, 20–
Cost of production for month:    
   Materials $ 8,000  
   Labor 4,000  
   Factory overhead 3,000  
Total costs to be accounted for $15,000  
Unit output for month:    
   Finished and transferred to Finished goods    
   during month 3,500  
   Equivalent units of work in process, end of    
   month (2,000 units, 25% completed)   500  
      Total equivalent production 4,000  
Unit cost for month:    
   Materials ($8,000 / 4,000) $2.00  
   Labor ($4,000 / 4,000) 1.00  
   Factory overhead ($3,000 / 4,000) .75  
      Total $3.75  
Inventory costs:    
   Cost of goods finished and transferred to    
   Finished goods during month:  (3,500 × $3.75)   $13,125
Cost of work in process, end of month:    
   Materials (2,000 × .25 × $2.00) $1,000  
   Labor (2,000 × .25 × $1.00) 500  
   Factory overhead (1,000 × .25 × $.75)   375   1,875
Total production costs accounted for   $15,000

What is the journal entry to record the distribution of labor to production?

  a. Finished goods              4,000

Payroll                                4,000

  b. Work in process             4,000

Overhead                               4,000

  c. Work in process             4,000

Payroll                                4,000

  d. Payroll                     4,000

Accrued payroll                        4,000

 

ANSWER:   c
RATIONALE:   The entry to record the distribution of labor to production is:

Work in process 4,000

Payroll 4,000

POINTS:   1
DIFFICULTY:   Moderate
LEARNING OBJECTIVES:   PRIN.EDWA.16.33 – LO 5:4
ACCREDITING STANDARDS:   AACSB Analytic
ACCT.AICPA.FN.03 – Measurement
BUSPROG.03 – Analytic
IMA-Cost Management
OTHER:   Bloom’s: Applying

 

23. The cost of production summary for Maha Industries follows:

Maha Industries
Cost of Production Summary
For the Month Ended May 31, 20–
Cost of production for month:    
   Materials $ 8,000  
   Labor 4,000  
   Factory overhead 3,000  
Total costs to be accounted for $15,000  
Unit output for month:    
   Finished and transferred to Finished goods    
   during month 3,500  
   Equivalent units of work in process, end of    
   month (2,000 units, 25% completed)   500  
      Total equivalent production 4,000  
Unit cost for month:    
   Materials ($8,000 / 4,000) $2.00  
   Labor ($4,000 / 4,000) 1.00  
   Factory overhead ($3,000 / 4,000) .75  
      Total $3.75  
Inventory costs:    
   Cost of goods finished and transferred to    
   Finished goods during month:  (3,500 × $3.75)   $13,125
Cost of work in process, end of month:    
   Materials (2,000 × .25 × $2.00) $1,000  
   Labor (2,000 × .25 × $1.00) 500  
   Factory overhead (1,000 × .25 × $.75)   375   1,875
Total production costs accounted for   $15,000

What is the journal entry to record factory overhead applied to production?

  a. Work in process           3,000

Factory overhead                     3,000

  b. Factory overhead          3,000

Various accounts                     3,000

  c. Work-in-process             375

Factory overhead                       375

  d. Factory overhead            375

Work in process                        375

 

ANSWER:   a
RATIONALE:   The entry to record factory overhead applied to production is:

Work in process 3,000

Factory overhead 3,000

POINTS:   1
DIFFICULTY:   Moderate
LEARNING OBJECTIVES:   PRIN.EDWA.16.33 – LO 5:4
ACCREDITING STANDARDS:   AACSB Analytic
ACCT.AICPA.FN.03 – Measurement
BUSPROG.03 – Analytic
IMA-Cost Management
OTHER:   Bloom’s: Applying

 

24. The cost of production summary for Maha Industries follows:

Maha Industries
Cost of Production Summary
For the Month Ended May 31, 20–
Cost of production for month:    
   Materials $ 8,000  
   Labor 4,000  
   Factory overhead 3,000  
Total costs to be accounted for $15,000  
Unit output for month:    
   Finished and transferred to Finished goods    
   during month 3,500  
   Equivalent units of work in process, end of    
   month (2,000 units, 25% completed)   500  
      Total equivalent production 4,000  
Unit cost for month:    
   Materials ($8,000 / 4,000) $2.00  
   Labor ($4,000 / 4,000) 1.00  
   Factory overhead ($3,000 / 4,000) .75  
      Total $3.75  
Inventory costs:    
   Cost of goods finished and transferred to    
   Finished goods during month:  (3,500 × $3.75)   $13,125
Cost of work in process, end of month:    
   Materials (2,000 × .25 × $2.00) $1,000  
   Labor (2,000 × .25 × $1.00) 500  
   Factory overhead (1,000 × .25 × $.75)   375   1,875
Total production costs accounted for   $15,000

What is the journal entry to record completed production and transfer to the warehouse?

  a. Work in process           13,125
Finished goods                     13,125
  b. Finished goods             1,875
Work in process                     1,875
  c. Finished goods             3,000
Factory overhead                    3,000
  d. Finished goods            13,125
Work in process                    13,125

 

ANSWER:   d
RATIONALE:   The entry to completed production and transfer to the warehouse is: Finished goods 13,125 Work in process 13,125
POINTS:   1
DIFFICULTY:   Moderate
LEARNING OBJECTIVES:   PRIN.EDWA.16.33 – LO 5:4
ACCREDITING STANDARDS:   AACSB Analytic
ACCT.AICPA.FN.03 – Measurement
BUSPROG.03 – Analytic
IMA-Cost Management
OTHER:   Bloom’s: Applying

 

25. In a given process costing system, the equivalent units of production are computed using the average cost method.  The percentage of completion for the current period only is included in the calculation of the:

Beginning Work in
Process Inventory
Ending Work in
Process Inventory

 

  a.    No                No
  b.    No                Yes
  c.    Yes               No
  d.    Yes               Yes

 

ANSWER:   b
RATIONALE:   In computing equivalent units of production, the percentage of completion of the current period is used only in the calculation of the ending work in process inventory.
POINTS:   1
DIFFICULTY:   Moderate
LEARNING OBJECTIVES:   PRIN.EDWA.16.34 – LO 5:5
ACCREDITING STANDARDS:   AACSB Reflective Thinking
ACCT.AICPA.FN.03 – Measurement
BUSPROG.06 – Reflective Thinking
IMA-Cost Management
OTHER:   Bloom’s: Remembering

 

26. Omega Corporation uses process costing to calculate the cost of manufacturing pool systems.  Beginning work in process included 30,000 units 60 percent complete.  During the month 170,000 units were completed, 20,000 units remain in work in process at 80 percent complete.  Using the average cost method, the equivalent units are:

  a. 170,000
  b. 196,000
  c. 186,000
  d. 190,000

 

ANSWER:   c
RATIONALE:   Units output for the month: Finished during month 170,000 Equivalent units of work in process, end of month (20,000 x 80% completed) 16,000 186,000
POINTS:   1
DIFFICULTY:   Moderate
LEARNING OBJECTIVES:   PRIN.EDWA.16.34 – LO 5:5
ACCREDITING STANDARDS:   AACSB Analytic
ACCT.AICPA.FN.03 – Measurement
BUSPROG.03 – Analytic
IMA-Cost Management
OTHER:   Bloom’s: Applying

 

27. Norma Company had 10,000 units in work in process at January 1 that were 50 percent complete.  During January, 25,000 units were completed.  At January 31, 6,000 units remained in work in process that were 80 percent complete.  Using the average cost method, the equivalent units for January were:

  a. 31,000.
  b. 29,800.
  c. 35,000.
  d. 36,000.

 

ANSWER:   b
RATIONALE:  
Unit output for month:  
   Finished during month 25,000
   Equivalent units of work in process, end of month (6,000 units, 75% completed)  4,800
  29,800
POINTS:   1
DIFFICULTY:   Moderate
LEARNING OBJECTIVES:   PRIN.EDWA.16.34 – LO 5:5
ACCREDITING STANDARDS:   AACSB Analytic
ACCT.AICPA.FN.03 – Measurement
BUSPROG.03 – Analytic
IMA-Cost Management
OTHER:   Bloom’s: Applying

 

28. The records of Andrews Company reflect the following data:

Work in process, beginning of the month – 4,500 units; 1 / 3 completed at a cost of $2,400 for materials, $825 for labor, and $3,000 for overhead.

Production costs for the month – materials – $20,695; labor – $13,050; overhead – $41,500

Units completed and transferred to finished goods – 35,000

Work in process, end of month – 3,000 units; 3 / 4 completed

Compute the equivalent units of production.

  a. 32,750
  b. 37,250
  c. 38,000
  d. 36,500

 

ANSWER:   b
RATIONALE:  
Units completed and transferred to finished goods (35,000 x 100%) 35,000
Ending in process (3,000 x 3 / 4) 2,250
Equivalent units of production 37,250
POINTS:   1
DIFFICULTY:   Easy
LEARNING OBJECTIVES:   PRIN.EDWA.16.34 – LO 5:5
ACCREDITING STANDARDS:   AACSB Analytic
ACCT.AICPA.FN.03 – Measurement
BUSPROG.03 – Analytic
IMA-Cost Management
OTHER:   Bloom’s: Applying

 

29. The beginning work in process inventory is 60 percent complete, and the ending work in process inventory is 50 percent complete.  The dollar amount of the production cost included in the ending work in process inventory (using the average cost method) is determined by multiplying the average unit costs by what percentage of the total units in the ending work in process inventory?

  a. 100 percent
  b. 60 percent
  c. 55 percent
  d. 50 percent

 

ANSWER:   d
RATIONALE:   The dollar amount of production cost included in the ending work in process inventory is determined by multiplying the average unit costs by the percentage of completion of the ending work in process inventory (50 percent).
POINTS:   1
DIFFICULTY:   Moderate
LEARNING OBJECTIVES:   PRIN.EDWA.16.34 – LO 5:5
ACCREDITING STANDARDS:   AACSB Analytic
ACCT.AICPA.FN.03 – Measurement
BUSPROG.03 – Analytic
IMA-Cost Management
OTHER:   Bloom’s: Remembering

 

30. The Kluesner Company started the month of June with 3,000 units in process which were  60% completed.  The company started 25,000 units during June, and at the end of the month had 3,000 units on hand which were 40% completed.  The number of units transferred to finished goods during June was:

  a. 25,500
  b. 28,500
  c. 24,500
  d. 25,000

 

ANSWER:   d
RATIONALE:  
Beginning units in process 3,000
Plus: Units started in production 25,000
Total units to account for 28,000
Less: Units transferred to finished goods ???
Ending units in process 3,000

If Kluesner started the month with 3,000 units in process and started 25,000 more, there are 28,000 units to account for. Those units were either completed and transferred to finished goods during the month or still in process at the end of the month. The number of units transferred would have been 25,000 (28,000 – 3,000).

POINTS:   1
DIFFICULTY:   Moderate
LEARNING OBJECTIVES:   PRIN.EDWA.16.34 – LO 5:5
ACCREDITING STANDARDS:   AACSB Analytic
ACCT.AICPA.FN.03 – Measurement
BUSPROG.03 – Analytic
IMA-Cost Management
OTHER:   Bloom’s: Applying

 

31. The production report for Marck Company included the following information for August:

  Number of Units Completion
Units started in production 44,500  
Units transferred to finished goods 46,200  
Ending units in process 3,000 70%
     

How many units were in process at the beginning of the month?

  a. 1,700
  b. 1,000
  c. 4,700
  d. 5,700

 

ANSWER:   c
RATIONALE:  
Beginning units in process ???
Plus: Units started in production 44,500
Total units to account for 49,200
Less: Units transferred to finished goods 46,200
Ending units in process 3,000

If Marck transferred 46,200 units to finished goods during the month and had 3,000 units in process at the end of the month, there were 49,200 units to account for during the month (46,200 + 3,000). If Marck started 44,500 units during the month, it must have had 4,700 in beginning in process (49,200 – 44,500).

POINTS:   1
DIFFICULTY:   Moderate
LEARNING OBJECTIVES:   PRIN.EDWA.16.34 – LO 5:5
ACCREDITING STANDARDS:   AACSB Analytic
ACCT.AICPA.FN.03 – Measurement
BUSPROG.03 – Analytic
IMA-Cost Management
OTHER:   Bloom’s: Applying

 

32. The production report for Matthews, Inc. included the following information for May:

  Number of Units Completion
Beginning units in process 7,800 20%
Units transferred to finished goods 45,300  
Ending units in process 6,000 40%
     

How many units were started during the period?

  a. 43,500
  b. 58,700
  c. 47,500
  d. 50,900

 

ANSWER:   a
RATIONALE:  
Beginning units in process 7,800
Plus: Units started in production ???
Total units to account for 51,300
Less: Units transferred to finished goods 45,300
Ending units in process 6,000

If Matthews transferred 45,300 units to finished goods during the month and had 6,000 units in process at the end of the month, there were 51,300 units to account for during the month (45,300 + 6,000). If Matthews started the month with 7,800 units in process, it must have started 43,500 (51,300 – 7,800).

POINTS:   1
DIFFICULTY:   Moderate
LEARNING OBJECTIVES:   PRIN.EDWA.16.34 – LO 5:5
ACCREDITING STANDARDS:   AACSB Analytic
ACCT.AICPA.FN.03 – Measurement
BUSPROG.03 – Analytic
IMA-Cost Management
OTHER:   Bloom’s: Applying

 

33. Michael Company had 2,000 units in work in process at January 1 that were 80 percent complete.  During January, 15,000 units were completed.  At January 31, 4,000 units remained in work in process that were 40 percent complete.  Using the average cost method, how many units were started during January?

  a. 21,000
  b. 18,200
  c. 17,000
  d. 19,000

 

ANSWER:   c
RATIONALE:  
Units in beginning work-in-process 2,000
Units started during month ???
Total units worked on during month 19,000
Units completed during month 15,000
Units in ending work-in-process 4,000

Ending work-in-process and units completed during the month total 19,000 units. 19,000 units less 2,000 units equal 17,000 units.

POINTS:   1
DIFFICULTY:   Moderate
LEARNING OBJECTIVES:   PRIN.EDWA.16.34 – LO 5:5
ACCREDITING STANDARDS:   AACSB Analytic
ACCT.AICPA.FN.03 – Measurement
BUSPROG.03 – Analytic
IMA-Cost Management
OTHER:   Bloom’s: Applying

 

34. The records of Andrews Company reflect the following data:

Work in process, beginning of the month – 4,500 units; 1 / 3 completed at a cost of $2,400 for materials, $825 for labor, and $5,000 for overhead.

Production costs for the month – materials – $20,695; labor – $13,050; overhead – $41,500

Units completed and transferred to finished goods – 35,000

Work in process, end of month – 3,000 units; 3 / 4 completed

What is the unit cost for material?

  a. $.66
  b. $.59
  c. $.56
  d. $.62

 

ANSWER:   d
RATIONALE:  
Cost of material in beginning work in process   $ 2,400
Material costs for the current month   20,695
Total material costs   $23,095
     
Units completed and transferred to finished goods (35,000 x 100%) 35,000
Ending in process (3,000 x 3 / 4) 2,250
Equivalent units of production 37,250

Unit cost of material = $23,095 / 37,250 = $.62

POINTS:   1
DIFFICULTY:   Moderate
LEARNING OBJECTIVES:   PRIN.EDWA.16.34 – LO 5:5
ACCREDITING STANDARDS:   AACSB Analytic
ACCT.AICPA.FN.03 – Measurement
BUSPROG.03 – Analytic
IMA-Cost Management
OTHER:   Bloom’s: Applying

 

35. The production report for Glenway Company for February contained the following information:

Work in process, beginning of the month – 3,500 units; 1 / 5 completed
Units completed and transferred to finished goods – 25,000
Work in process, end of month – 4,000 units; 1 / 4 completed

Production costs for the month were:  materials – $25,325; labor – $20,175; overhead – $38,950.  Costs in beginning work in process were $5,250.

What is the cost per equivalent unit?

  a. $3.45
  b. $3.59
  c. $3.20
  d. $3.25

 

ANSWER:   a
RATIONALE:  
Cost of beginning work in process   $ 5,250
     
Production costs for the current month:    
Material $25,325  
Labor 20,175  
Factory Overhead 38,950 84,450
    $89,700

 

Units completed and transferred to finished goods (25,000 x 100%) 25,000
Ending in process (4,000 x 1 / 4) 1,000
Equivalent units of production 26,000

Cost per equivalent unit = $89,700 / 26,000 = $3.45

POINTS:   1
DIFFICULTY:   Moderate
LEARNING OBJECTIVES:   PRIN.EDWA.16.34 – LO 5:5
ACCREDITING STANDARDS:   AACSB Analytic
ACCT.AICPA.FN.03 – Measurement
BUSPROG.03 – Analytic
IMA-Cost Management
OTHER:   Bloom’s: Applying

 

36. Information concerning the materials used in the Blending Department in November is as follows:

  Units Materials Costs
Work in Process, November 1 3,200 $13,200
Units started during November 8,400  37,400
Units completed and transferred to next department
during November
  9,200  
Work in Process, November 30 2,400  

If the ending work-in-process inventory is 75% complete, using the average cost method, what was the materials cost in Work in Process at November 30?

  a. $7,852
  b. $8,280
  c. $6,120
  d. $7,317

 

ANSWER:   b
RATIONALE:   (B) Units in Work in Process, November 30:

Units in process, November 30 2,400
Percentage of completion 75%
Equivalent units in process 1,800

 

Total materials cost =
Units completed plus ending inventory

 

($13,200 + $37,000) = $50,600 = $4.60 per unit
(9,200 + 1,800)    11,000

Materials cost for Work in Process, November 30:   1,800 units × $4.60 = $8,280

POINTS:   1
DIFFICULTY:   Moderate
LEARNING OBJECTIVES:   PRIN.EDWA.16.34 – LO 5:5
ACCREDITING STANDARDS:   AACSB Analytic
ACCT.AICPA.FN.03 – Measurement
BUSPROG.03 – Analytic
IMA-Cost Management
OTHER:   Bloom’s: Applying

 

37. Information for the month of January concerning Department A, the first stage of Cando Corporation’s production cycle, follows:

  Materials Conversion
Beginning work in process $17,200 $16,400
Current costs  50,000  34,000
Total costs $67,200 $50,400
Equivalent units using average cost method 112,000 112,000
Average unit costs $  0.60 $  0.45
Goods completed   100,000 units
Ending work in process   24,000 units

The ending work in process is 50 percent complete.  How would the total costs accounted for be distributed using the average cost method?

Goods
Completed
Ending Work
in Process

 

  a. $105,000       $12,600
  b. $ 67,200       $14,400
  c. $ 67,200       $50,400
  d. $105,000       $14,400

 

ANSWER:   a
RATIONALE:  
Cost of the completed goods:  
   Materials (100,000 × $.60) $ 60,000
   Conversion costs (100,000 × $.45)   45,000
   Total cost of completed goods $105,000
Cost of ending work in process:  
   Materials (24,000 x 50% × $.60) $  7,200
   Conversion costs (24,000 units × 50% × $.45)   5,400
Total cost of ending work in process $ 12,600
POINTS:   1
DIFFICULTY:   Moderate
LEARNING OBJECTIVES:   PRIN.EDWA.16.34 – LO 5:5
ACCREDITING STANDARDS:   AACSB Analytic
ACCT.AICPA.FN.03 – Measurement
BUSPROG.03 – Analytic
IMA-Cost Management
OTHER:   Bloom’s: Applying

 

38. Howell Company uses the average cost method of process costing.  Howell had 1,000 units in beginning work-in-process which were 75% complete.  Costs associated with this inventory were $3,200.  When calculating the cost per equivalent unit for the month of June, Howell’s controller should:

  a. Not consider the $3,200 as those costs were incurred in a prior period.
  b. Calculate the cost to complete the 1,000 items in beginning work-in-process separately.
  c. Include the $3,200 with the current month’s cost to arrive at total cost for production to date.
  d. Include the equivalent units to complete the beginning work-in-process inventory to arrive at the equivalent units for the period.

 

ANSWER:   c
RATIONALE:   When using the average cost method, the costs associated with the beginning work-in-process inventory should be added to the current month’s cost to arrive at the total cost of production to date. This amount is then divided by the equivalent production for the month. The equivalent production is amount of units completed added to the equivalent units of ending inventory (units in ending work-in-process x the stage of completion).
POINTS:   1
DIFFICULTY:   Moderate
LEARNING OBJECTIVES:   PRIN.EDWA.16.34 – LO 5:5
ACCREDITING STANDARDS:   AACSB Reflective Thinking
ACCT.AICPA.FN.03 – Measurement
BUSPROG.06 – Reflective Thinking
IMA-Cost Management
OTHER:   Bloom’s: Understanding

 

39. Information concerning the materials used in the Mixing Department in October is as follows:

  Units Materials Costs
Work in Process, October 1 11,700 $ 4,100
Units started during October 43,300  22,900
Units completed and transferred to next department
during October
45,000  

If the ending work-in-process inventory is 50% complete, using the average cost method, what was the materials cost in Work in Process at October 31?

  a. $2,644
  b. $2,700
  c. $4,330
  d. $4,811

 

ANSWER:   b
RATIONALE:   (B) Units in Work in Process, October 31:

In process, October 1 11,700
Started during October 43,300
Total units to account for 55,000
Units transferred 45,000
Units in process, October 31 10,000
Percentage of completion 50%
Equivalent units in process 5,000

 

Total materials cost =
Units completed plus ending inventory

 

($4,100 + $22,900) = $27,000 = $.54 per unit
(45,000 + 5,000)    50,000

Materials cost for Work in Process, October 31:    5,000 units × $.54 = $2,700

POINTS:   1
DIFFICULTY:   Challenging
LEARNING OBJECTIVES:   PRIN.EDWA.16.34 – LO 5:5
ACCREDITING STANDARDS:   AACSB Analytic
ACCT.AICPA.FN.03 – Measurement
BUSPROG.03 – Analytic
IMA-Cost Management
OTHER:   Bloom’s: Applying

 

40. In a company that uses process costing, the cost of goods manufactured is equal to:

  a. total production costs added during the period.
  b. total production costs accounted for.
  c. the cost of goods completed in the period.
  d. the cost of ending work in process at the end of the period.

 

ANSWER:   c
RATIONALE:   The cost of goods manufactured is equal to the production costs added during the period plus beginning work in process, which is equal to the total production costs accounted for less the ending work in process. This is also the cost of goods completed during the period.
POINTS:   1
DIFFICULTY:   Moderate
LEARNING OBJECTIVES:   PRIN.EDWA.16.34 – LO 5:5
ACCREDITING STANDARDS:   AACSB Reflective Thinking
ACCT.AICPA.FN.03 – Measurement
BUSPROG.06 – Reflective Thinking
IMA-Cost Management
OTHER:   Bloom’s: Understanding

 

41. In a production cost report using process costing, transferred-in costs are similar to:

  a. Material added at the beginning of the process.
  b. Conversion costs added during the process.
  c. Costs transferred to the next process.
  d. Costs included in beginning inventory.

 

ANSWER:   a
RATIONALE:   The costs transferred in from another department are treated in a manner similar to materials added in a department at the very beginning of processing in the department. They are finished units of the preceding department but will require additional processing in the department to which they were transferred.
POINTS:   1
DIFFICULTY:   Moderate
LEARNING OBJECTIVES:   PRIN.EDWA.16.35 – LO 5:6
ACCREDITING STANDARDS:   AACSB Reflective Thinking
ACCT.AICPA.FN.03 – Measurement
BUSPROG.06 – Reflective Thinking
IMA-Cost Management
OTHER:   Bloom’s: Understanding

 

42. What are transferred-in costs as used in a process cost accounting system?

  a. Labor that is transferred from another department within the same plant instead of hiring temporary workers from the outside
  b. Costs that have been incurred in a prior department on units that have been moved into a subsequent department
  c. Supervisory salaries that are transferred from an overhead cost center to a production cost center
  d. Ending work in process inventory of a previous process that will be used in a succeeding process

 

ANSWER:   b
RATIONALE:   Transferred-in costs, as used in a process cost system, represent the cost of the production of a previous internal process or department subsequently used in a succeeding internal process.
POINTS:   1
DIFFICULTY:   Moderate
LEARNING OBJECTIVES:   PRIN.EDWA.16.35 – LO 5:6
ACCREDITING STANDARDS:   AACSB Analytic
ACCT.AICPA.FN.03 – Measurement
BUSPROG.03 – Analytic
IMA-Cost Management
OTHER:   Bloom’s: Remembering

 

43. The Columbus Company has three departments A, B and C.  Material requisitions amounted to $10,000, $8,000 and $5,000, respectively, for departments A, B and C.  In addition, $3,000 of indirect materials were used during the period.  What is the entry to record the materials used during the period?

  a. Work-in-process                  23,000

Materials – Department A               10,000

Materials – Department B                8,000

Materials – Department C                5,000

  b. Work-in-process – Department A       10,000

Work-in-process – Department B    8,000

Work-in-process – Department C    5,000

Materials                              23,000

  c. Work-in-process – Department A   10,000

Work-in-process – Department B    8,000

Work-in-process – Department C    5,000

Factory overhead                  3,000

Materials                              26,000

  d. Work-in-process                  23,000

Factory overhead              3,000

Materials                             26,000

 

ANSWER:   c
RATIONALE:   The entry to record the use of the materials in departments A, B and C and the indirect materials is: Work-in-process – Department A 10,000 Work-in-process – Department B 8,000 Work-in-process – Department C 5,000 Factory overhead 3,000* Materials 26,000 *Indirect materials
POINTS:   1
DIFFICULTY:   Moderate
LEARNING OBJECTIVES:   PRIN.EDWA.16.35 – LO 5:6
ACCREDITING STANDARDS:   AACSB Analytic
ACCT.AICPA.FN.03 – Measurement
BUSPROG.03 – Analytic
IMA-Cost Management
OTHER:   Bloom’s: Applying

 

44. Wolf Company has two departments, Mixing and Curing.  The following information is available for September:

Mixing Department: Number of units Cost per equivalent unit
  Transferred to the curing department 9,000 $2.00
  Ending work in process inventory
70 % completed
4,000 $2.00
Curing Department:    
   Completed and transferred out 8,000 $3.00
   Ending work in process inventory
30% completed
5,000 $3.00
     

The entry to record the transfer of inventory from the mixing to the curing department is:

  a. Work in process – Curing           18,000
Work in process – Mixing                 18,000
  b. Finished goods                     18,000
Work in process – Mixing                 18,000
  c. Work in process – Mixing            5,600
Work in process – Curing                 5,600
  d. Work in process – Curing           18,000
Transferred in costs                    18,000

 

ANSWER:   a
RATIONALE:   The entry to transfer the cost of inventory from the mixing to the curing department is: Work in process – Curing 18,000* Work in process – Mixing 18,000 * 9,000 x $2.00
POINTS:   1
DIFFICULTY:   Moderate
LEARNING OBJECTIVES:   PRIN.EDWA.16.35 – LO 5:6
ACCREDITING STANDARDS:   AACSB Analytic
ACCT.AICPA.FN.03 – Measurement
BUSPROG.03 – Analytic
IMA-Cost Management
OTHER:   Bloom’s: Applying

 

45. Wolf Company has two departments, Mixing and Curing.  The following information is available for September:

Mixing Department: Number of units Cost per equivalent unit
  Transferred to the curing department 9,000 $2.00
  Ending work in process inventory
70 % complete
4,000 $2.00
Curing Department:    
   Completed and transferred out 8,000 $3.00
   Ending work in process inventory
30% complete
5,000 $3.00
     

The entry to record the transfer of inventory from the curing department to the warehouse is:

  a. Finished goods                  18,000
Work in process – Mixing              18,000
  b. Finished goods                  24,000
Work in process – Curing              24,000
  c. Work in process – Curing        24,000
Work in process – Mixing             24,000
  d. Work in process – Curing         4,500
Finished goods                        4,500

 

ANSWER:   b
RATIONALE:   The entry to record the completion of production and transfer of the goods to the finished goods warehouse is: Finished goods 24,000* Work in process – Curing 24,000 * 8,000 x $3.00
POINTS:   1
DIFFICULTY:   Moderate
LEARNING OBJECTIVES:   PRIN.EDWA.16.35 – LO 5:6
ACCREDITING STANDARDS:   AACSB Analytic
ACCT.AICPA.FN.03 – Measurement
BUSPROG.03 – Analytic
IMA-Cost Management
OTHER:   Bloom’s: Applying

 

46. The total number of units to be accounted for in the second department of a process is:

  a. the number of units in process at the beginning of the period plus the units received from another department during the period.
  b. the number of units in process at the beginning of the period plus the units transferred out to another department during the period.
  c. the number of units in process at the end of the period plus the units completed and on hand.
  d. the number of units in process at the end of the period plus the units received from another department during the period.

 

ANSWER:   a
RATIONALE:   The total number of units to be accounted for in the second department of a process is the number of units in process at the beginning of the period plus the units received from another department during the period. Generally, units must be received from a previous department before work is started.
POINTS:   1
DIFFICULTY:   Moderate
LEARNING OBJECTIVES:   PRIN.EDWA.16.36 – LO 5:7
ACCREDITING STANDARDS:   AACSB Reflective Thinking
ACCT.AICPA.FN.03 – Measurement
BUSPROG.06 – Reflective Thinking
IMA-Cost Management
OTHER:   Bloom’s: Understanding

 

47. The Binding Department is the second stage of News Printing’s production cycle.  On May 1, the beginning work in process contained 30,000 units that were 60 percent complete.  During May, 170,000 units were transferred in from the first stage of Pine’s production cycle and 160,000 units were completed and transferred to Finished Goods.  On May 31, the ending work in process contained 40,000 units that were 25 percent complete.  Using the average cost method, the equivalent units of the Assembly Department are:

Transferred-In
      Costs      
Materials Conversion
     Costs    

 

  a.  170,000         54,000        50,000
  b.  200,000        160,000       160,000
  c.  200,000        170,000       170,000
  d.  240,000        200,000       200,000

 

ANSWER:   c
RATIONALE:  
  Units
Transferred-in costs:  
   Units completed and transferred out 160,000
   Ending work in process: (40,000 x 100% completed)  40,000
   Equivalent units 200,000
Material and Conversion Costs:  
   Units completed and transferred (see above) 160,000
   Ending work in process: (40,000 x 25% complete)  10,000
   Equivalent units 170,000
POINTS:   1
DIFFICULTY:   Moderate
LEARNING OBJECTIVES:   PRIN.EDWA.16.36 – LO 5:7
ACCREDITING STANDARDS:   AACSB Analytic
ACCT.AICPA.FN.03 – Measurement
BUSPROG.03 – Analytic
IMA-Cost Management
OTHER:   Bloom’s: Applying

 

48. The Assembly Department is the second stage of Pine Company’s production cycle.  On May 1, the beginning work in process contained 15,000 units that were 40 percent complete.  During May, 85,000 units were transferred in from the first stage of Pine’s production cycle.  On May 31, the ending work in process contained 20,000 units that were 75 percent complete.  Using the average cost method, the equivalent units of the Assembly Department are:

Transferred-In
      Costs      
Materials Conversion
     Costs    

 

  a.   85,000         70,000        70,000
  b.  100,000         80,000        80,000
  c.  100,000         95,000        95,000
  d.  120,000        100,000       100,000

 

ANSWER:   c
RATIONALE:  
  Units
Cost flow analysis:  
   Units in beginning work in process  15,000
   Transferred in during month  85,000
   Total units worked on 100,000
Less ending work-in-process 20,000
   Units transferred out  80,000
Transferred-in costs:  
   Units completed and transferred out (see above) 80,000
   Ending work in process: (20,000 x 100% completed)  20,000
   Equivalent units 100,000
Material and Conversion Costs:  
   Units completed and transferred (see above)  80,000
   Ending work in process: (20,000 x 75% complete)  15,000
   Equivalent units  95,000
POINTS:   1
DIFFICULTY:   Challenging
LEARNING OBJECTIVES:   PRIN.EDWA.16.36 – LO 5:7
ACCREDITING STANDARDS:   AACSB Analytic
ACCT.AICPA.BB.07 – Critical Thinking
BUSPROG.03 – Analytic
IMA-Cost Management
OTHER:   Bloom’s: Applying

 

49. “Goods completed and on hand” refers to:

  a. goods in the finished goods warehouse.
  b. goods awaiting sale.
  c. finished goods purchased directly from suppliers.
  d. finished goods in a department that have not yet been transferred to the next department.

 

ANSWER:   d
RATIONALE:   “Goods completed and on hand” refers to finished goods in a department that have not yet been transferred to the next department.
POINTS:   1
DIFFICULTY:   Easy
LEARNING OBJECTIVES:   PRIN.EDWA.16.36 – LO 5:7
ACCREDITING STANDARDS:   AACSB Analytic
ACCT.AICPA.FN.03 – Measurement
BUSPROG.03 – Analytic
IMA-Cost Management
OTHER:   Bloom’s: Remembering

 

50. Department B had 1,000 units in beginning work-in-process which had transferred in costs of $2,500 from Department A associated with them.  During the period, 12,000 more units having costs of $36,000 were transferred in to Department B from Department A.  What is the unit cost for the units transferred from Department A.

  a. $2.00
  b. $2.75
  c. $2.96
  d. $3.00

 

ANSWER:   c
RATIONALE:   When costs transferred in have different unit costs in different periods, these costs must be averaged as follows:

  Units Costs
Beginning work-in-process 1,000 $ 2,500
Current period 12,000 36,000
  13,000 $38,500

Cost per unit = 38,500 / 13,000 = $2.96

POINTS:   1
DIFFICULTY:   Moderate
LEARNING OBJECTIVES:   PRIN.EDWA.16.37 – LO 5:8
ACCREDITING STANDARDS:   AACSB Analytic
ACCT.AICPA.FN.03 – Measurement
BUSPROG.03 – Analytic
IMA-Cost Management
OTHER:   Bloom’s: Applying

 

51. Daniel LLC incurred the following cost in the month of October:

Material $55,000
Labor $46,000
Factory Overhead $23,000

There was no beginning inventory.  Ending work in process was 10,000 units at 50 percent complete.  15,000 units were completed and transferred out.

Prepare a cost of production summary for the month, assuming Daniel uses the average cost method of process costing.

ANSWER:    

Daniel LLC
Cost of Production Summary
For the Month Ended October 31, 20–

 
Cost of production for month:    
      Materials $ 55,000  
       Labor 46,000  
       Factory Overhead 23,000  
            Total cost to be accounted for   $124,000
     
Unit output for the month    
      Finished during month 15,000  
      Equivalent units of work in process, end    
          of month (10,000 units, one-half completed) 5,000  
                Total equivalent production   20,000
     
Unit cost for month:    
      Material ($55,000 /20,000) $2.75  
       Labor    (46,000 / 20,000) 2.30  
       Factory Overhead  (23,000 / 20,000) 1.15  
            Total   $6.20
     
Inventory Costs:    
      Cost of goods finished during month (15,000 x 6.20)   $ 93,000
      Cost of work in process, end of month:    
              Material (10,000 x 1/2 x 2.75) $ 13,750  
              Labor ( 10,000 1/2 2.30) 11,500  
              Factory Overhead ( 10,000 1/2 1.15) 5,750 31,000
Total production cost accounted for     $124,000
     
     
POINTS:   1
DIFFICULTY:   Moderate
LEARNING OBJECTIVES:   PRIN.EDWA.16.33 – LO 5:4
ACCREDITING STANDARDS:   AACSB Analytic
ACCT.AICPA.FN.03 – Measurement
BUSPROG.03 – Analytic
IMA-Cost Management
OTHER:   Bloom’s: Applying

 

52. Using the data presented below, determine the figures that should be inserted in the blank spaces.

  Beginning units in process Units started in production Units transferred to finished goods

Ending units in process

Equivalent units of production
a 15,000 80,000 ________ 10,000 – 1/5 completed ______
b _____ 2,300 ________ 400 – 1/2 completed 2,450
c 1,200 4,500 5,100 __________________ 5,500
d 1,000 _______ 8,200 ___ – 1/2 completed 8,800
e 3,200 _______ 17,800 2,800 – 1/4 completed ______
f ______ 22,000 25,000 ___ – 1/2 completed 25,200

 

ANSWER:  
(a) Units Stage of completion Equivalent Units
Beginning units in process 15,000    
+ Units started in production 80,000    
= Total units to account for 95,000    
– Units transferred to finished goods _ _??? 100% ???
= Ending units in process 10,000 1/5 2,000
        ???

The units transferred to finished goods is equal to 85,000 (95,000 – 10,000), therefore the equivalent units of production is equal to 87,000 (85,000 + 2,000).

(b) Units Stage of completion Equivalent Units
Beginning units in process ???    
+ Units started in production 2,300    
= Total units to account for ???    
– Units transferred to finished goods __??? 100% ???
= Ending units in process   400 1/2   200
      2,450

The number of units transferred to finished goods is 2,250 (2,450 – 200).
The total number of units to account for is 2,650 (2,250 + 400), therefore the number of units in beginning work-in-process is 350 (2,650 – 2,300).

(c) Units Stage of completion Equivalent Units
Beginning units in process 1,200    
+ Units started in production 4,500    
= Total units to account for 5,700    
– Units transferred to finished goods 5,100 100% 5,100
= Ending units in process   ??? ???   ???
      5,500

The number of equivalent units for ending work-in-process is 400 (5,500 – 5,100).
The number of units in ending work-in-process is 600 (5,700 – 5,100), therefore, the stage of completion of the ending work-in-process is 2/3 (400 / 600).

(d) Units Stage of completion Equivalent Units
Beginning units in process 1,000    
+ Units started in production   ???    
= Total units to account for ???    
– Units transferred to finished goods 8,200 100% 8,200
= Ending units in process   ??? 1/2   ???
      8,800

The number of equivalent units for ending work-in-process is 600 (8,800 – 8,200).
The number of units in ending work-in-process is 1,200 (600 / (1/2)), therefore, the number of units to account for is 9,400 (8,200 + 1,200) and the number of units started in production is
8,400 (9,400 – 1,000).

(e) Units Stage of completion Equivalent Units
Beginning units in process 3,200    
+ Units started in production    ???    
= Total units to account for ???    
– Units transferred to finished goods 17,800 100% 17,800
= Ending units in process 2,800 1/4    700
         ???

The number of equivalent units is 18,500 (17,800 + 700).
The total number of units to account for is 20,600 (17,800 + 2,800), therefore the number of units started in production is 17,400 (20,600 – 3,200).

(f) Units Stage of completion Equivalent Units
Beginning units in process ???    
+ Units started in production 22,000    
= Total units to account for ???    
– Units transferred to finished goods 25,000 100% 25,000
= Ending units in process    ??? 1/2    ???
      25,200

The number of equivalent units for ending work-in-process is 200 (25,200 – 25,000).
The number of units in ending work-in-process is 400 (200 / (1/2)), therefore, the number of units to account for is 25,400 (25,000 + 400) and the number of units in beginning work-in- process is 3,400 (25,400 – 22,000).

POINTS:   1
DIFFICULTY:   Moderate
LEARNING OBJECTIVES:   PRIN.EDWA.16.34 – LO 5:5
ACCREDITING STANDARDS:   AACSB Analytic
ACCT.AICPA.BB.07 – Critical Thinking
BUSPROG.03 – Analytic
IMA-Cost Management
OTHER:   Bloom’s: Applying

 

53. The records of Jordan Company reflect the following data:

Work in process, beginning of the month – 4,500 units; 30% completed at a cost of $16,700 for materials, $7,600 for labor, and $10,400 for overhead.

Production costs for the month – materials – $54,300 labor; – $25,400; overhead – $34,600

Units completed and transferred to finished goods – 18,000

Work in process, end of month – 5,000 units; 40% completed

Calculate the unit cost for the month for materials, labor and factory overhead.

ANSWER:  
Units completed and transferred to finished goods (18,000 x 100%) 18,000
Ending in process (5,000 x 40%) 2,000
Equivalent units of production 20,000

 

  Material Labor Factory Overhead
Costs in beginning in process $16,700 $ 7,600 $10,400
Production costs for month 54,300 25,400 34,600
Total costs $71,000 $33,000 $45,000
Equivalent units – 20,000      
Cost per unit $3.55 $1.65 $2.25
POINTS:   1
DIFFICULTY:   Moderate
LEARNING OBJECTIVES:   PRIN.EDWA.16.34 – LO 5:5
ACCREDITING STANDARDS:   AACSB Analytic
ACCT.AICPA.FN.03 – Measurement
BUSPROG.03 – Analytic
IMA-Cost Management
OTHER:   Bloom’s: Applying

 

54. Consider the following cost of production summary for Carrigan Products for May.

Carrigan Products
Cost of Production Summary
For the Month Ended May 31, 20–
Cost of work in process, beginning of month:    
   Materials $ 8,200  
   Labor 5,500  
   Factory overhead  2,000 $15,700
Cost of production for month:    
   Materials $24,000  
   Labor 17,600  
   Factory overhead  16,900 58,500
Total costs to be accounted for   $74,200
Unit output for month:    
   Finished and transferred to Finished goods    
   during month   2,000
   Equivalent units of work in process, end of    
   month (1,000 units, 80% completed)     800
      Total equivalent production   2,800
Unit cost for month:    
   Materials [($8,200 + $24,000) / 2,800]   $ 11.50
   Labor [($5,500 + $17,600) / 2,800]   8.25
   Factory overhead [($2,000 + $16,900) / 2,800]     6.75
      Total   $ 26.50
Inventory costs:    
   Cost of goods finished and transferred to    
   Finished goods during month:  (2,000 × $26.50)   $53,000
Cost of work in process, end of month:    
   Materials (1,000 × .8 × $11.50) $ 9,200  
   Labor (1,000 × .8 × $8.25) 6,600  
   Factory overhead (1,000 × .8 × $6.75)  5,400  21,200
Total production costs accounted for   $74,200

a.  Prepare the journal entries to record the production activity.
b.  Prepare the Statement of Cost of Goods Manufactured for May.

ANSWER:   a.

Work-in-process 24,000  
     Materials   24,000
To record requisition of materials    
     
Work-in-process 17,600  
     Payroll   17,600
To record distribution of labor    
     
Work-in-process 16,900  
     Factory overhead   16,900
To record application of factory overhead    
     
Finished goods 53,000  
     Work-in-process   53,000
To record the completion of goods    

b.                                      Carrigan Products
Statement of Cost of Goods Manufactured
For the Month Ended May 31, 20–

   
Materials $24,000
Labor 17,600
Overhead 16,900
Total $58,500
   Add work in process inventories, May 1 15,700
  $74,200
   Less work in process inventories, May 31 21,200
Cost of goods manufactured during the month $53,000
   

Note to instructor:  This problem may be shortened by assigning either a. or b.

POINTS:   1
DIFFICULTY:   Moderate
LEARNING OBJECTIVES:   PRIN.EDWA.16.34 – LO 5:5
ACCREDITING STANDARDS:   AACSB Analytic
ACCT.AICPA.FN.03 – Measurement
BUSPROG.03 – Analytic
IMA-Cost Management
OTHER:   Bloom’s: Applying

 

55. The Paul Manufacturing Company uses the process cost system and the average cost method.  The following production data are for the month of April, 20–.

Production Costs
     
Work in process, beginning of month:    
Materials $ 4,350  
Labor 3,200  
Factory overhead  1,902 $  9,452
Costs incurred during month:    
Materials $43,200  
Labor 32,304  
Factory overhead 19,020  94,524
Total   $103,976

 

Production Report
  Units
In process, beginning of month 500
Finished and transferred during month 11,900
Work in process, end of month 1,200
Stage of completion 65%

Prepare a cost of production summary for the month.

ANSWER:    

Paul Manufacturing Company
Cost of Production Summary
For the Month Ended April 30, 20–
Cost of work in process, beginning of month:    
   Materials $ 4,350  
   Labor 3,200  
   Factory overhead  1,902 $  9,452
Cost of production for month:    
   Materials $43,200  
   Labor 32,304  
   Factory overhead 19,020  94,524
Total costs to be accounted for   $103,976
Unit output for month:    
   Finished and transferred to finished goods during month   11,900
   Equivalent units of work in process, end of month    
    (1,200 units, 65% completed)      780
      Total equivalent production   12,680
Unit cost for month:    
   Materials [($4,350 + $43,200) / 12,680]   $3.75
   Labor [($3,200 + $32,304) / 12,680]   2.80
   Factory overhead [($1,902 + $19,020) / 12,680]   1.65
      Total   $8.20
Inventory costs:    
   Cost of goods finished and transferred to finished goods    
     during month (11,900 × $8.20)   $ 97,580
   Cost of work in process, end of month:    
      Materials (1,200 × .65 × $3.75) $2,925  
      Labor (1,200 × .65 × $2.80) 2,184  
      Factory overhead (1,200 × .65 × $1.65) 1,287   6,396
      Total production costs accounted for   $103,976
POINTS:   1
DIFFICULTY:   Moderate
LEARNING OBJECTIVES:   PRIN.EDWA.16.34 – LO 5:5
ACCREDITING STANDARDS:   AACSB Analytic
ACCT.AICPA.FN.03 – Measurement
BUSPROG.03 – Analytic
IMA-Cost Management
OTHER:   Bloom’s: Applying

 

56. The Joan Company uses the process cost system and average cost method.  The following production data are for the month of July, 20–.

Production Costs
     
Work in process, beginning of month:    
   Materials $18,500  
   Labor 8,750  
   Factory overhead  4,850 $ 32,100
Costs incurred during month:    
   Materials $93,500  
   Labor 42,450  
   Factory overhead 33,550 169,500
      Total   $201,600

 

Production Report
  Units
In process, beginning of month 4,000
Finished and transferred during month 28,000
Work in process, end of month 10,000
Stage of completion 40%

(a) Prepare a cost of production summary for the month.
(b) Prepare the journal entries to record production for the month

ANSWER:   (a)

Joan Company
Cost of Production Summary
For the Month Ended July 31, 20–
Cost of work in process, beginning of month:    
   Materials $ 18,500  
   Labor 8,750  
   Factory overhead   4,850 $ 32,100
Cost of production for month:    
   Materials $ 93,500  
   Labor 42,450  
   Factory overhead  33,550 169,500
Total costs to be accounted for   $201,600
Unit output for month:    
   Finished and transferred to finished goods during month   28,000
   Equivalent units of work in process, end of month    
   (10,000 units, one-half completed)    4,000
      Total equivalent production   32,000
Unit cost for month:    
   Materials [($18,500 + $93,500) / 32,000]   $3.50
   Labor [($8,750 + $42,450) / 32,000]   1.60
   Factory overhead [($4,850 + $33,550) / 32,000]   1.20
      Total   $6.30
Inventory costs:    
   Cost of goods finished and transferred to finished goods    
   during month (28,000 × $6.30)   $176,400
   Cost of work in process, end of month:    
      Materials (10,000 × .4 × $3.50) $14,000  
      Labor (10,000 × .4 × $1.60) 6,400  
      Factory overhead (10,000 × .4 × $1.20)   4,800   25,200
Total production costs accounted for   $201,600

(b)

Work-in-process 93,500  
     Materials   93,500
To record requisition of materials    
     
Work-in-process 42,450  
     Payroll   42,450
To record distribution of labor    
     
Work-in-process 33,550  
     Factory overhead   33,550
To record application of factory overhead    
     
Finished goods 176,400  
     Work-in-process   176,400
To record the completion of goods    

Note to instructor:  The difficulty of this problem can be reduced by eliminating requirement (b).

POINTS:   1
DIFFICULTY:   Challenging
LEARNING OBJECTIVES:   PRIN.EDWA.16.34 – LO 5:5
ACCREDITING STANDARDS:   AACSB Analytic
ACCT.AICPA.BB.07 – Critical Thinking
BUSPROG.03 – Analytic
IMA-Cost Management
OTHER:   Bloom’s: Applying

 

57. Bear Printing prints one brochure in two departments on a continuous basis and uses the average cost method of process cost accounting.  The following information was reported for the month of April, 20–:

Production Costs
  Printing
Department
Binding
Department
 
Work in process, beginning of month:      
Cost in Printing Department       $18,000
Materials $ 9,500   $ 1,000  
Labor   8,000     3,000  
Factory overhead   7,000 $24,500   2,000   6,000
Costs incurred during month:      
Materials $23,000   $11,000  
Labor 13,000   25,000  
Factory overhead 36,000 72,000 16,000 52,000
Total   $96,500    

In addition, the cost of production summary for the Binding Department follows:

Bear Printing
Cost of Production Summary–Binding Department
For the Month Ended April 30, 20–
Cost of work in process, beginning of month:    
   Cost in Printing Department   $18,000  
   Cost in Binding Department:      
      Materials $1,000    
      Labor 3,000    
      Factory overhead  2,000   6,000 $ 24,000
Cost of goods received from Printing      
   Department during month     67,500
       
Cost of production for month:      
   Materials   $11,000  
   Labor   25,000  
   Factory overhead    16,000   52,000
Total costs to be accounted for     $143,500
Unit output for month:      
   Finished and transferred to stockroom
during month
    7,500
   Equivalent units of work in process, end      
   of month (2,000 units, 25% completed)          500
      Total equivalent production        8,000
Unit cost for month:      
   Materials [($1,000 + $11,000) / 8,000]     $   1.50
   Labor [($3,000 + $25,000) / 8,000]     3.50
   Factory overhead [($2,000 + $25,000) / 8,000]      2.25
      Total     $   7.25
Inventory costs:      
   Cost of goods finished and transferred      
   to stockroom during month:      
      Cost in Printing Dept. (7,500 x $ 9.00) $ 67,500  
      Cost in Binding Dept. (7,500 x $ 7.25)   54,375  
Total (7,500 x $16.25)   $121,825
Cost of work in process, end of month:      
   Cost in Printing Dept. (600 × $14.50)   $ 18,000  
   Cost in Binding Dept.:      
      Materials (2,000 × 25% × $1.50) $  750    
      Labor (2,000 × 25% × $3.50) 1,750    
      Factory overhead (2,000 × 25% × $2.25) 1,125    3,625   21,625
Total production costs accounted for     $143,500

Prepare the journal entries to record production.

ANSWER:  
Work-in-process – Printing Department 23,000  
Work-in-process – Binding Department 11,000  
     Materials   34,000
To record requisition of materials    
     
Work-in-process – Printing Department 13,000  
Work-in-process – Binding Department 25,000  
     Payroll   38,000
To record distribution of labor    
     
Work-in-process – Printing Department 36,000  
Work-in-process – Binding Department 16,000  
     Factory overhead   52,000
To record application of factory overhead    
     
Work-in-process – Binding Department 67,500  
     Work-in-process – Printing Department   67,500
To record transfer of production from the Printing Department to the Binding Department    
     
Finished goods 143,500  
     Work-in-process – Binding Department   143,500
To record the completion of goods    
POINTS:   1
DIFFICULTY:   Moderate
LEARNING OBJECTIVES:   PRIN.EDWA.16.36 – LO 5:7
ACCREDITING STANDARDS:   AACSB Analytic
ACCT.AICPA.BB.07 – Critical Thinking
BUSPROG.03 – Analytic
IMA-Cost Management
OTHER:   Bloom’s: Applying

 

58. Asia, Inc., manufactures one product in two departments on a continuous basis and uses the average cost method of process cost accounting.  The following information was reported for the month of August, 20–:

Production Costs
  Cutting
Department
Assembly
Department
 
Work in process, beginning of month:      
Cost in Cutting Department       $ 8,700
Materials $ 8,600   $   585  
Labor   4,200     1,600  
Factory overhead   3,500 $ 16,300   1,000   3,185
Costs incurred during month:      
Materials $61,400   $ 5,595  
Labor  26,425    12,820  
Factory overhead  22,750  110,575   8,064  26,479
Total   $126,875    

 

Production Report
  Cutting
Department
Assembly
Department
 
In process, beginning of month 1,100   600
Finished and transferred during month 8,000 8,000
Work in process, end of month 1,500   600
Stage of completion     50%     40%

Prepare a cost of production summary for each department for the month.

ANSWER:    

Asia, Inc.
Cost of Production Summary–Cutting Department
For the Month Ended August 31, 20–
Cost of work in process, beginning of month:    
   Materials $ 8,600  
   Labor 4,200  
   Factory overhead   3,500 $ 16,300
Cost of production for month:    
   Materials $61,400  
   Labor 26,425  
   Factory overhead  22,750  110,575
Total costs to be accounted for   $126,875
Unit output for month:    
   Finished and transferred to Assembly Department    
   during month   8,000
   Equivalent units of work in process, end of    
   month (1,500 units, 50% completed)        750
Total equivalent production      8,750
Unit cost for month:    
   Materials [($8,600 + $61,400)/ 8,750]   $ 8.00
   Labor [($4,200 + $26,425) / 8,750]   3.50
   Factory overhead [($3,500 + $22,750) / 8,750]   3.00
      Total   $14.50
Inventory costs:    
   Cost of goods finished and transferred    
   to Assembly Department during month (8,000 × $14.50)  
    $116,000
Cost of work in process, end of month:    
   Materials (1,500 × 50% × $8.00) $ 6,000  
   Labor (1,500 × 50% × $3.50) 2,625  
   Factory overhead (1,500 × 50% × $3.00)   2,250   10,875
Total production costs accounted for   $126,875

 

Asia, Inc.
Cost of Production Summary–Assembly Department
For the Month Ended August 31, 20–
Cost of work in process, beginning of month:    
   Cost in Cutting Department   $ 8,700  
   Cost in Assembly Department:      
      Materials $  585    
      Labor 1,600    
      Factory overhead  1,000   3,185 $ 11,885
Cost of goods received from Cutting      
   Department during month     116,000
       
Cost of production for month:      
   Materials   $ 5,595  
   Labor   12,820  
   Factory overhead     8,064   26,479
Total costs to be accounted for     $154,364
Unit output for month:      
   Finished and transferred to stockroom
during month
    8,000
   Equivalent units of work in process, end      
   of month (600 units, 40% completed)          240
      Total equivalent production        8,240
Unit cost for month:      
   Materials [($585 + $5,595) / 8,240]     $ .75
   Labor [($1,600 + $12,820) / 8,240]     1.75
   Factory overhead [($1,000 + $8,064) / 8,240]   1.10
      Total     $3.60
Inventory costs:      
   Cost of goods finished and transferred      
   to stockroom during month:      
      Cost in Cutting Dept. (8,000 x $14.50) $116,000  
      Cost in Assembly Dept. (8,000 x $ 3.60)   28,800  
Total (8,000 x $18.10)   $144,800
Cost of work in process, end of month:      
   Cost in Cutting Dept. (600 × $14.50)   $  8,700  
   Cost in Assembly Dept.:      
      Materials (600 × 40% × $.75) $180    
      Labor (600 × 40% × $1.75) 420    
      Factory overhead (600 × 40% × $1.10)  264      864    9,564
Total production costs accounted for     $154,364

Note to instructor:  Difficulty could be modified by requiring the cost of production summary for one department only.

POINTS:   1
DIFFICULTY:   Challenging
LEARNING OBJECTIVES:   PRIN.EDWA.16.36 – LO 5:7
ACCREDITING STANDARDS:   AACSB Analytic
ACCT.AICPA.BB.07 – Critical Thinking
BUSPROG.03 – Analytic
IMA-Cost Management
OTHER:   Bloom’s: Applying

 

59. Gordon Products manufactures one product in two departments on a continuous basis and uses the average cost method of process cost accounting.  The following information was reported for the month of May, 20–:

Production Costs
        Department A       Department B  
Work in process, beginning        
of month:        
   Cost in Department A       $  1,900
   Materials $ 4,200   $ 1,900  
   Labor 3,500   1,600  
   Factory overhead   1,800 $  9,500     750 4,250
Costs incurred during month:      
   Materials $74,425   $60,225  
   Labor 56,625   51,650  
   Factory overhead  35,200  166,250  17,000  128,875
      Total   $175,750    

 

Production Report
  Department A Department B
In process, beginning of month  1,600    200
Finished and transferred    
during month 18,000 17,000
Work in process, end of month  1,000  1,200
Stage of completion      50%      60%

 

a) Prepare a cost of production summary for Department A for the month.
b) Prepare a cost of production summary for Department B for the month.
c) Prepare the journal entries to record production.

 

ANSWER:   (a)

Gordon Products
Cost of Production Summary–Department A
For the Month Ended May 31, 20–
Cost of work in process, beginning of month:    
   Materials $ 4,200  
   Labor 3,500  
   Factory overhead  1,800 $  9,500
Cost of production for month:    
   Materials $74,425  
   Labor 56,625  
   Factory overhead  35,200  166,250
Total costs to be accounted for   $175,750
Unit output for month:    
   Finished and transferred to Department B    
   during month   18,000
   Equivalent units of work in process, end of    
   month (1,000 units, 50% completed)        500
      Total equivalent production     18,500
Unit cost for month:    
   Materials [($4,200 + $74,425) / 18,500]   $4.25
   Labor [($3,500 + $56,625) / 18,500]   3.25
   Factory overhead [($1,800 + $35,200) / 18,500]       2.00
      Total   $9.50
Inventory costs:    
   Cost of goods finished and transferred to    
   Department B during month:  (18,000 × $9.50)   $171,000
Cost of work in process, end of month:    
   Materials (1,000 × .5 × $4.25) $ 2,125  
   Labor (1,000 × .5 × $3.25) 1,625  
   Factory overhead (1,000 × .5 × $2.00) 1,000    4,750
Total production costs accounted for   $175,750

(b)

Gordon Products
Cost of Production Summary–Department B
For the Month Ended May 31, 20–
Cost of work in process, beginning of month:    
   Cost in Dept. A   $ 1,900  
   Cost in Dept. B:      
      Materials $1,900    
      Labor 1,600    
      Factory overhead    750   4,250 $  6,150
Cost of goods received from Dept A.      
during month     171,000
Cost of production for month:      
   Materials   $60,225  
   Labor   51,650  
   Factory overhead    17,000  128,875
Total costs to be accounted for     $306,025
Unit output for month:      
   Finished and transferred to stockroom      
   during month     17,000
   Equivalent units of work in process, end
of month (1,200 units, 60% completed)
         720
      Total equivalent production       17,720
Unit cost for month:      
   Materials [($1,900 + $60,225) / 17,720]     $3.51
   Labor [($1,600 + $51,650) / 17,720]     3.01
   Factory overhead [($750 + $17,000) / 17,720]       1.00
      Total     $7.52
Inventory costs:      
   Cost of goods finished and transferred to      
   stockroom during month:      
      Cost in Dept. A (17,000 × $9.50)   $161,500  
      Cost in Dept. B (17,000 × 7.52)    127,840  
       
          Total (17,000 × $17.02)     $289,340
       
Cost of work in process, end of month:      
   Cost in Dept. A (1,200 × $9.50)   $ 11,400  
   Cost in Dept. B:      
      Materials (1,200 × 60% × $3.51) $2,527    
      Labor (1,200 × 60% × $3.01) 2,167    
      Factory overhead      
         (1,200 × 60% × $1.00)    720    5,414   16,814
Total production costs accounted for     $306,154*

* Rounding Difference

(c)

Work-in-process – Department A 74,425  
Work-in-process – Department B 60,225  
     Materials   134,650
To record requisition of materials    
     
Work-in-process – Department A 56,625  
Work-in-process – Department B 51,650  
     Payroll   108,275
To record distribution of labor    
     
Work-in-process – Department A 35,200  
Work-in-process – Department B 17,000  
     Factory overhead   52,200
To record application of factory overhead    
     
Work-in-process – Department A 171,000  
     Work-in-process – Department B   171,000
To record transfer of production from Department A to Department B    
     
Finished goods 289,340  
     Work-in-process – Department B   289,340
To record the completion of goods    
POINTS:   1
DIFFICULTY:   Challenging
LEARNING OBJECTIVES:   PRIN.EDWA.16.36 – LO 5:7
ACCREDITING STANDARDS:   AACSB Analytic
ACCT.AICPA.BB.07 – Critical Thinking
BUSPROG.03 – Analytic
IMA-Cost Management
OTHER:   Bloom’s: Applying

 

60. Bear Printing prints one brochure in two departments on a continuous basis and uses the average cost method of process cost accounting.  The following information was reported for the month of April, 20–:

Production Costs
  Printing
Department
Binding
Department
 
Work in process, beginning of month:      
Cost in Printing Department       $18,000
Materials $ 9,500   $ 1,000  
Labor   8,000     3,000  
Factory overhead   7,000 $24,500   2,000   6,000
Costs incurred during month:      
Materials $23,000   $11,000  
Labor 13,000   25,000  
Factory overhead 36,000 72,000 16,000 52,000
Total   $96,500    

In addition, the cost of production summary for the Binding Department follows:

Bear Printing
Cost of Production Summary–Binding Department
For the Month Ended April 30, 20–
Cost of work in process, beginning of month:    
   Cost in Printing Department   $18,000  
   Cost in Binding Department:      
      Materials $1,000    
      Labor 3,000    
      Factory overhead  2,000   6,000 $ 24,000
Cost of goods received from Printing      
   Department during month     67,500
       
Cost of production for month:      
   Materials   $11,000  
   Labor   25,000  
   Factory overhead    16,000   52,000
Total costs to be accounted for     $143,500
Unit output for month:      
   Finished and transferred to stockroom
during month
    7,500
   Equivalent units of work in process, end      
   of month (2,000 units, 25% completed)          500
      Total equivalent production        8,000
Unit cost for month:      
   Materials [($1,000 + $11,000) / 8,000]     $   1.50
   Labor [($3,000 + $25,000) / 8,000]     3.50
   Factory overhead [($2,000 + $25,000) / 8,000]      2.25
      Total     $   7.25
Inventory costs:      
   Cost of goods finished and transferred      
   to stockroom during month:      
      Cost in Printing Dept. (7,500 x $ 9.00) $ 67,500  
      Cost in Binding Dept. (7,500 x $ 7.25)   54,375  
Total (7,500 x $16.25)   $121,825
Cost of work in process, end of month:      
   Cost in Printing Dept. (600 × $14.50)   $ 18,000  
   Cost in Binding Dept.:      
      Materials (2,000 × 25% × $1.50) $  750    
      Labor (2,000 × 25% × $3.50) 1,750    
      Factory overhead (2,000 × 25% × $2.25) 1,125    3,625   21,625
Total production costs accounted for     $143,500

Prepare the Statement of Cost of Goods Manufactured.

ANSWER:                                             Bear Printing
Statement of Cost of Goods Manufactured
For the Month Ended April 30, 20–

   
Materials $ 34,000
Labor 38,000
Overhead 52,000
Total $124,000
   Add work in process inventories, April 1* 48,500
  $172,500
   Less work in process inventories, April 30** 50,625
Cost of goods manufactured during the month $121,825
   

* $24,500 + $18,000 + $6,000 = $48,500
** Total Printing Department costs – costs of products transferred to Binding = Ending WIP – Printing $96,500 – $67,500 = $29,000 + $21,625 = $50,625

POINTS:   1
DIFFICULTY:   Moderate
LEARNING OBJECTIVES:   PRIN.EDWA.16.36 – LO 5:7
ACCREDITING STANDARDS:   AACSB Analytic
ACCT.AICPA.BB.07 – Critical Thinking
BUSPROG.03 – Analytic
IMA-Cost Management
OTHER:   Bloom’s: Applying

 

61. Howard Corporation has two production departments.  Curing has 12,000 units in process at the beginning of the period, 3 / 4 complete.  During the period, 45,000 units were received from  Crushing, 48,000 units were transferred to Finished Goods, and 9,000 units were in process at the end of the period, 2/ 3 complete.  Cost information was as follows:

Cost of beginning Work in Process:  
   Cost in Crushing $ 21,640
   
   Cost in Curing:  
      Materials 8,810
      Labor 1,190
      Factory overhead 2,420
   
Costs during the month:  
   Cost of goods received from Crushing $ 85,520
   
   Cost in Curing:  
      Materials 53,830
      Labor 10,690
      Factory overhead 17,560
           Total costs to be accounted for $201,660

a.   Determine the unit cost for the month in Curing.
b.   Determine the total cost of the products transferred to Finished Goods.
c.   Determine the total cost of the ending Work in Process inventory.

ANSWER:  
a.    
Unit output for month:    
   Finished and transferred to Finished Goods   48,000
   Equivalent units of production of Work in    
       Process (9,000 units x 2 / 3 completed)   6,000
   Total equivalent production   54,000
     
Unit cost per month:    
   Cost from Crushing Department    
      Beginning inventory (12,000 units) $ 21,640  
      Transferred in this month (45,000 units) 85,520  
      Average cost per unit (57,000 units) 107,160 $1.88
     
   Cost in Curing:    
      Materials {(8,810 + 53,830) / 54,000]   $1.16
      Labor [(1,190 + 10,690) / 54,000]   .22
      Factory overhead [(2,420 + 17,560) / 54,000]   .37
    $1.75
b.    
Cost of goods transferred to Finished Goods:    
   Cost in Crushing (48,000 x 1.88) $ 90,240  
   Cost in Curing (48,000 x 1.75) 84,000  
      Total finished and transferred to Finished Goods   $174,240
c.    
Cost of Work in Process, end of month:    
    Cost in Crushing (9,000 x $1.88) $ 16,920  
    Materials (9,000 x 2 / 3 x $1.16) 6,960  
    Labor (9,000 x 2 / 3 x $.22) 1,320  
    Factory overhead (9,000 x 2 / 3 x .37) 2,220  
       Total costs in Work in Process, end of month   27,420
Total production costs accounted for   $201,660
POINTS:   1
DIFFICULTY:   Moderate
LEARNING OBJECTIVES:   PRIN.EDWA.16.37 – LO 5:8
ACCREDITING STANDARDS:   AACSB Analytic
ACCT.AICPA.BB.07 – Critical Thinking
BUSPROG.03 – Analytic
IMA-Cost Management
OTHER:   Bloom’s: Applying

 

 

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