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Process costing

1. The purpose of the equivalent-unit computation is to:

a. convert partially completed units into the amount of completed output units that could be made with that quantity of input
b. assist the business in determining ending inventory
c. convert completed units into the amount of partially completed output units that could be made with that quantity of input
d. both B and C are correct.

2. In a process-costing system, the calculation of equivalent units is used for calculating:

a. the dollar amount of the cost of goods sold for the accounting period
b. the dollar amount of ending inventory
c. the dollar cost of a particular job
d. both A and B are correct.

3. Process costing should be used to assign costs to products when the:

a. units produced are similar
b. units produced are dissimilar
c. calculation of unit costs requires the averaging of unit costs over all units produced
d. either A or C are correct.

4. Conversion costs:

a. include all the factors of production
b. in process costing are usually considered to be added evenly throughout the production process
c. include direct materials
d. both B and C are correct.

5. Answer the following questions using the information below:

Injection Molding, Inc., manufactures plastic moldings for car seats. Its costing system utilizes two cost categories, direct materials and conversion costs. Each product must pass through Department A and Department B. Direct materials are added at the beginning of production. Conversion costs are allocated evenly throughout production.

Data for Department A for February 20X5 are:
Work in process, beginning inventory, 40% converted 200 units
Units started during February 600 units
Work in process, ending inventory 100 units

Costs for Department A for February 20X5 are:
Work in process, beginning inventory:
Direct materials $100,000
Conversion costs $100,000
Direct materials costs added during February $1,000,000
Conversion costs added during February $1,250,000

What is the unit cost per equivalent unit in Department A?

a. $1,750
b. $3,500
c. $3,750
d. $1,000

6. The weighted-average process-costing method calculates the equivalent units by:

a. the equivalent units completed during the current period plus the equivalent units in ending inventory
b. considering only the work done during the current period
c. the units started during the current period minus the units in ending inventory
d. the units started during the current period plus the units in ending inventory

7. If there was no beginning work in process and no ending work in process under the weighted-average process costing method, the number of equivalent units for direct materials, if direct materials were added at the start of the process, would be:

a. equal to the units started or transferred in
b. equal to the units completed
c. less than the units completed
d. both A and B are correct.

8. Cedar Rapids Chemical placed 220,000 liters of direct materials into the mixing process. At the end of the month, 10,000 liters were still in process, 30% converted as to labor and factory overhead. All direct materials are placed in mixing at the beginning of the process and conversion costs occur evenly during the process. Cedar Rapids Chemical uses weighted-average costing.

Required:

a. Determine the equivalent units in process for direct materials and conversion costs, assuming there was no beginning inventory.
b. Determine the equivalent units in process for direct materials and conversion costs, assuming that 12,000 liters of chemicals were 40% complete prior to the addition of the 220,000 liters.

9. A disadvantage of the weighted-average method compared to the FIFO process-costing method is that:

a. the information it provides about changes in unit prices from one period to the next is less useful than the information provided by FIFO
b. FIFO provides better management information for planning and control purposes
c. FIFO is computationally simpler
d. when unit cost per input prices fluctuate markedly from month to month, its per unit cost is less representative than FIFO

10. In the computation of the cost per equivalent unit, the weighted-average method of process costing considers all the costs:

a. entering work in process from the units in beginning inventory plus the costs for the work completed during the current accounting period
b. costs that have entered work in process from the units started or transferred in during the current accounting period
c. that have entered work in process during the current accounting period from the units started or transferred in minus the costs associated with ending inventory
d. that have entered work in process during the current accounting period from the units started or transferred in plus the costs associated with ending inventory

11. Answer the following questions using the information below:

Injection Molding, Inc., manufactures plastic moldings for car seats. Its costing system utilizes two cost categories, direct materials and conversion costs. Each product must pass through Department A and Department B. Direct materials are added at the beginning of production. Conversion costs are allocated evenly throughout production.

Data for Department A for February 20X5 are:
Work in process, beginning inventory, 40% converted 200 units
Units started during February 600 units
Work in process, ending inventory 100 units

Costs for Department A for February 20X5 are:
Work in process, beginning inventory:
Direct materials $100,000
Conversion costs $100,000
Direct materials costs added during February $1,000,000
Conversion costs added during February $1,250,000

How many units were completed and transferred out of Department A during February?

a. 600 units
b. 700 units
c. 800 units
d. 100 units

Solution Summary

The solution explains some multiple choice questions relating to process costing

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