Managerial Accounting
Exam 1
1. Managerial accounting places considerable weight on:
A) generally accepted accounting principles.
B) the financial history of the entity.
C) ensuring that all transactions are properly recorded.
D) detailed segment reports about departments, products, and customers.
Answer: D AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Measurement
LO: 1 Level: Easy
2. The plans of management are often expressed formally in:
A) financial statements.
B) performance reports.
C) budgets.
D) ledgers.
Answer: C AACSB: Reflective Thinking AICPA BB: Resource Management AICPA FN:
Measurement LO: 1 Level: Easy
3. The phase of accounting concerned with providing information to managers for use in planning
and controlling operations and in decision making is called:
A) throughput time.
B) managerial accounting.
C) financial accounting.
D) controlling.
Answer: B AACSB: Reflective Thinking AICPA BB: Resource Management AICPA FN:
Measurement LO: 1 Level: Easy
4.The cost of the cushions that are used to manufacture sofas is best described as a:
A)
manufacturing overhead cost.
B)
period cost.
C)
variable cost.
D)
conversion cost.
Ans: C AACSB: Reflective Thinking
LO: 1,2,5 Level: Medium
AICPA BB: Critical Thinking
5.A security guard's wages at a factory would be an example of:
A)
B)
C)
D)
Indirect labor Fixed manufacturing overhead
No
No
Yes
Yes
Yes
No
No
Yes
AICPA FN: Reporting
Ans: B
AACSB: Reflective Thinking AICPA BB: Critical Thinking
Level: Medium Source: CPA, adapted
AICPA FN: Reporting
LO: 1,5
6. Materials used in the operation of a factory, such as cleaning supplies, that are not an integral
part of the final product should be classified as:
A)
direct materials.
B)
a period cost.
C)
administrative expense.
D)
manufacturing overhead.
Ans: D AACSB: Reflective Thinking
LO: 1 Level: Easy
AICPA BB: Critical Thinking
AICPA FN: Reporting
7. Direct costs:
A)
are incurred to benefit a particular accounting period.
B)
are incurred due to a specific decision.
C)
can be easily traced to a particular cost object.
D)
are the variable costs of producing a product.
Ans: C AACSB: Reflective Thinking
LO: 1 Level: Easy
AICPA BB: Critical Thinking
AICPA FN: Reporting
8. Inventoriable (i.e., product) costs that have become expenses can be found in:
A)
period costs.
B)
selling expenses.
C)
cost of goods sold.
D)
administrative expenses.
Ans: C AACSB: Reflective Thinking
LO: 2 Level: Medium
AICPA BB: Critical Thinking
AICPA FN: Reporting
9. Which of the following production costs, if expressed on a per unit basis, would be most likely to
change significantly as the production level varies?
A)
Direct materials.
B)
Direct labor.
C)
Fixed manufacturing overhead.
D)
Responses A and B are both correct.
Ans: C AACSB: Analytic
Level: Medium
AICPA BB: Critical Thinking
AICPA FN: Reporting
LO: 5
10. When the level of activity decreases within the relevant range, the fixed cost per unit will:
A)
decrease.
B)
increase.
C)
remain the same.
D)
The effect cannot be predicted.
Ans: B AACSB: Analytic
Level: Medium
AICPA BB: Critical Thinking
AICPA FN: Reporting
LO: 5
11. All of the cost categories listed below are usually found in a company's accounting records,
except for:
A)
sunk costs.
B)
inventoriable costs.
C)
opportunity costs.
D)
marketing costs.
Ans: C AACSB: Reflective Thinking
LO: 7 Level: Easy
AICPA BB: Critical Thinking
AICPA FN: Reporting
12. Abel Company's manufacturing overhead is 20% of its total conversion costs. If direct labor is
$38,000 and if direct materials are $47,000, the manufacturing overhead is:
A)
$152,000
B)
$11,750
C)
$21,250
D)
$9,500
Ans: D AACSB: Analytic
Level: Hard
AICPA BB: Critical Thinking
AICPA FN: Reporting
LO: 1
13. Consider the following costs:
Direct materials .........................................
Depreciation on factory equipment ...........
Factory janitor’s salary ..............................
Direct labor................................................
Utilities for factory ....................................
Selling expenses ........................................
Production supervisor’s salary ..................
Administrative expenses ...........................
$33,000
$12,000
$23,000
$28,000
$9,000
$16,000
$34,000
$21,000
What is the total amount of manufacturing overhead included above?
A)
$78,000
B)
$139,000
C)
$44,000
D)
$37,000
Ans: A AACSB: Analytic
Level: Medium
AICPA BB: Critical Thinking
AICPA FN: Reporting
Solution:
Depreciation on factory equipment ...........
$12,000
LO: 1
Factory janitor’s salary ..............................
Utilities for factory ....................................
Production supervisor’s salary ..................
Total ..........................................................
23,000
9,000
34,000
$78,000
14.Manufacturing overhead includes:
A)
all direct material, direct labor and administrative costs.
B)
all manufacturing costs except direct labor.
C)
all manufacturing costs except direct labor and direct materials.
D)
all selling and administrative costs.
Ans: C AACSB: Reflective Thinking
LO: 1 Level: Easy
AICPA BB: Critical Thinking
AICPA FN: Reporting
15.All of the following are examples of product costs except:
A)
depreciation on the company's retail outlets.
B)
salary of the plant manager.
C)
insurance on the factory equipment.
D)
rental costs of the factory facility.
Ans: A AACSB: Reflective Thinking
LO: 2 Level: Easy
AICPA BB: Critical Thinking
AICPA FN: Reporting
16. Conversion costs consist of:
A)
direct and indirect labor.
B)
direct labor and direct materials.
C)
direct labor and manufacturing overhead.
D)
prime costs and manufacturing overhead.
Ans: C AACSB: Reflective Thinking AICPA BB: Critical Thinking
LO: 2 Level: Easy Source: CMA, adapted
AICPA FN: Reporting
17.Which of the following statements is correct concerning job-order costing?
A)
Job-order costing would be appropriate for a textbook publisher.
B)
All the costs appearing on a job cost sheet are actual costs.
C)
Indirect materials are charged to a specific job.
D)
Job-order costing is mainly used in firms with homogeneous products such as oil
refineries.
Ans: A AACSB: Reflective Thinking
LO: 1,2 Level: Medium
AICPA BB: Critical Thinking
AICPA FN: Reporting
18. Which of the following types of firms typically would use process costing rather than job-order
costing?
A)
A small appliance repair shop.
B)
A manufacturer of commercial passenger aircraft.
C)
A specialty equipment manufacturer.
D)
A breakfast cereal manufacturer.
Ans: D AACSB: Reflective Thinking
LO: 1 Level: Easy
AICPA BB: Critical Thinking
AICPA FN: Reporting
19. The job cost sheet:
A)
summarizes all costs charged to a particular job.
B)
contains only direct costs such as direct materials and direct labor.
C)
is discarded after production is completed on a particular job.
D)
is useful only in process costing.
Ans: A
AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Reporting
20. Elliott Company uses a predetermined overhead rate based on machine-hours to apply
manufacturing overhead to jobs. The company manufactures tools to customer specifications.
The following data pertain to Job 1501:
Direct materials used
$4,200
Direct labor-hours worked
300
Direct labor rate per hour
$8.00
Machine-hours used
200
Predetermined overhead rate per machine-hour .............. $15.00
What is the total manufacturing cost recorded on Job 1501?
A)
$8,800
B)
$9,600
C)
$10,300
D)
$11,100
Ans: B AACSB: Analytic AICPA BB: Critical Thinking
Level: Easy Source: CPA, adapted
AICPA FN: Reporting
Solution:
Direct materials used ................................................................................
$4,200
Direct labor (300 hours × $8.00 per hour) ................................................
2,400
Manufacturing overhead applied (200 hours × $15.00 per hour)............
3,000
Total manufacturing cost for job 1501 .....................................................
$9,600
LO: 2,5
21. Avery Co. uses a predetermined overhead rate based on direct labor-hours to apply
manufacturing overhead to jobs. For the month of October, Avery's estimated manufacturing
overhead cost was $300,000 based on an estimated activity level of 100,000 direct labor-hours.
Actual overhead amounted to $325,000 with actual direct labor-hours totaling 110,000 for the
month. How much was the overapplied or underapplied overhead?
A)
$25,000 overapplied
B)
$25,000 underapplied
C)
$5,000 overapplied
D)
$5,000 underapplied
Ans: C AACSB: Analytic AICPA BB: Critical Thinking
Level: Medium Source: CPA, adapted
AICPA FN: Reporting
LO: 3,5,8
Solution:
Actual manufacturing overhead ...............................................................
$325,000
Applied manufacturing overhead ($3 per DLH* × 110,000 DLHs)............
330,000
Manufacturing overhead overapplied......................................................
$ 5,000
*Predetermined overhead rate = $300,000 ÷ 100,000 direct labor-hours
= $3 per direct labor-hour
Since applied manufacturing overhead exceeds actual manufacturing overhead,
manufacturing overhead is overapplied.
22. Darrow Company uses a predetermined overhead rate based on direct labor-hours to apply
manufacturing overhead to jobs. Last year, the company worked 10,000 direct labor-hours and
incurred $80,000 of actual manufacturing overhead cost. If overhead was underapplied by
$2,000, the predetermined overhead rate for the company for the year must have been:
A)
$7.80
B)
$8.00
C)
$8.20
D)
$8.40
Ans: A AACSB: Analytic
Level: Hard
AICPA BB: Critical Thinking
AICPA FN: Reporting
LO: 3,5,8
Solution:
Actual manufacturing overhead − Applied manufacturing overhead = underapplied
$80,000 − Applied = $2,000
Applied = $78,000
Direct labor-hours × Predetermined overhead rate = Applied manufacturing overhead
10,000 × Predetermined overhead rate = $78,000
Predetermined overhead rate = $78,000 ÷ 10,000 direct labor-hours
Predetermined overhead rate = $7.80 per direct labor-hour
23. Linh Corporation applies manufacturing overhead to jobs on the basis of pounds of direct
material used. Linh estimated 160,000 pounds of material usage and $200,000 of manufacturing
overhead cost for the year. During the year, Linh actually used 150,000 pounds of material and
incurred $171,000 of manufacturing overhead cost. What was Linh's underapplied or
overapplied overhead for the year?
A)
$12,500 underapplied
B)
$16,500 overapplied
C)
$17,600 underapplied
D)
$29,000 overapplied
Ans: B AACSB: Analytic
Level: Medium
AICPA BB: Critical Thinking
AICPA FN: Reporting
Solution:
Predetermined overhead rate = $200,000 ÷ 160,000 pounds
= $1.25 per pound
Actual manufacturing overhead .............................................
$171,000
Applied manufacturing overhead (150,000 × $1.25) ..............
187,500
Manufacturing overhead overapplied ....................................
$ 16,500
Since applied manufacturing overhead exceeds actual manufacturing overhead,
manufacturing overhead is overapplied.
LO: 3,5,8
24. Brusveen Corporation applies manufacturing overhead to jobs on the basis of direct labor-hours.
The following information relates to Brusveen for last year:
Direct labor-hours .........................
Manufacturing overhead cost ........
Estimated Actual
15,000
14,800
$300,000 $287,120
What was Brusveen's underapplied or overapplied overhead for last year?
A)
$4,000 underapplied
B)
$8,880 underapplied
C)
$8,880 overapplied
D)
$9,000 underapplied
Ans: C AACSB: Analytic
Level: Medium
AICPA BB: Critical Thinking
AICPA FN: Reporting
LO: 3,5,8
Solution:
Predetermined overhead rate = $300,000 ÷ 15,000 direct labor-hours
= $20 per direct labor-hour
Actual manufacturing overhead ............................................
$287,120
Applied manufacturing overhead (14,800 × $20) ..................
296,000
Manufacturing overhead overapplied ...................................
$ 8,880
Since applied manufacturing overhead exceeds actual manufacturing overhead,
manufacturing overhead is overapplied.
25.
Washtenaw Corporation uses a job-order costing system. The following data are for last
year:
Estimated direct labor-hours
Estimated manufacturing overhead costs
Actual direct labor-hours
Actual manufacturing overhead costs
12,000
$39,000
11,000
$37,000
Washtenaw applies overhead using a predetermined rate based on direct labor-hours. What
amount of overhead was applied to work in process last year?
A)
$39,050
B)
$42,600
C)
$35,750
D)
$36,960
Ans: C AACSB: Analytic
Level: Medium
AICPA BB: Critical Thinking
AICPA FN: Reporting
Solution:
Predetermined overhead rate = $39,000 ÷ 12,000 direct labor-hours
= $3.25 per direct labor-hour
Applied manufacturing
overhead
=
Actual direct
labor-hours
×
Predetermined
overhead rate
Applied manufacturing
overhead
=
11,000
×
$3.25
Applied manufacturing overhead = $35,750
LO: 3,5
26. The Silver Company uses a predetermined overhead rate to apply manufacturing overhead to
jobs. The predetermined overhead rate is based on labor cost in Dept. A and on machine-hours
in Dept. B. At the beginning of the year, the company made the following estimates:
Direct labor cost ............................
Manufacturing overhead ...............
Direct labor-hours .........................
Machine-hours ...............................
$60,000 $40,000
$90,000 $45,000
6,000
9,000
2,000 15,000
What predetermined overhead rates would be used in Dept A and Dept B, respectively?
A)
67% and $3.00
B)
150% and $5.00
C)
150% and $3.00
D)
67% and $5.00
Ans: C AACSB: Analytic
Level: Easy
AICPA BB: Critical Thinking
AICPA FN: Reporting
Solution:
Department A:
Estimated total manufacturing overhead cost
Predetermined
=
overhead rate
Estimated total amount of the allocation base
=
$90,000
$60,000
= 150% of direct labor cost
Department B:
Estimated total manufacturing overhead cost
Predetermined
=
overhead rate
Estimated total amount of the allocation base
=
$45,000
15,000
= $3.00 per machine-hour
LO: 3
27. Reamer Company uses a predetermined overhead rate based on machine-hours to apply
manufacturing overhead to jobs. The company has provided the following estimated costs for
next year:
Direct materials .........................................
Direct labor................................................
Sales commissions ....................................
Salary of production supervisor ................
Indirect materials .......................................
Advertising expense ..................................
Rent on factory equipment ........................
$1,000
$3,000
$4,000
$2,000
$400
$800
$1,000
Reamer estimates that 500 direct labor-hours and 1,000 machine-hours will be worked during
the year. The predetermined overhead rate per hour will be:
A)
$6.80
B)
$6.00
C)
$3.00
D)
$3.40
Ans: D AACSB: Analytic
Level: Medium
AICPA BB: Critical Thinking
AICPA FN: Reporting
Solution:
Manufacturing overhead:
Salary of production supervisor ...................
$2,000
Indirect materials .........................................
400
Rent on factory equipment ..........................
1,000
Total estimated manufacturing overhead ...........
$3,400
LO: 3
Total estimated manufacturing overhead
Predetermined
=
overhead rate
Estimated machine-hours
Predetermined
=
overhead rate
$3,400
1,000
=
$3.40 per machine-hour
28.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.
Ans: D AACSB: Analytic
Level: Hard
AICPA BB: Critical Thinking
AICPA FN: Reporting
LO: 1
29. The completion of goods is recorded as a decrease in the work in process inventory account
when using:
A)
B)
C)
D)
Job-order costing Process costing
Yes
No
Yes
Yes
No
Yes
No
No
Ans: B AACSB: Reflective Thinking AICPA BB: Critical Thinking
LO: 1 Level: Easy Source: CPA, adapted
AICPA FN: Reporting
30. 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).
Ans: C AACSB: Reflective Thinking
LO: 1 Level: Easy
AICPA BB: Critical Thinking
AICPA FN: Reporting
31. 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.
Ans: A AACSB: Analytic
LO: 2,3,5,6 Level: Hard
AICPA BB: Critical Thinking
AICPA FN: Reporting
Appendix: 4A
32. Which of the following are needed to compute equivalent units for conversion costs under the
weighted-average method of process costing?
A)
B)
C)
D)
Percentage completion of
beginning work in process
Yes
No
Yes
No
Ans: B AACSB: Reflective Thinking
LO: 2 Level: Easy
Percentage completion of
ending work in process
Yes
Yes
No
No
AICPA BB: Critical Thinking
AICPA FN: Reporting
33. 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:
Mixing Bottling
Cases of cola in work in process, January 1
10,000
3,000
Cases of cola completed/transferred out during January . 77,000
?
Cases of cola in work in process, January 31
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
Ans: C AACSB: Analytic
Level: Medium
AICPA BB: Critical Thinking
AICPA FN: Reporting
Solution:
To solve for units transferred:
+ Work in process, beginning .........................................................
3,000
+ Units started into production during the month .........................
77,000
− Work in process, ending ..............................................................
8,000
= Units completed and transferred out during the month ............
72,000
LO: 1
34. 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)
417,000
B)
285,000
C)
451,000
D)
383,000
Ans: D AACSB: Analytic
Level: Easy
AICPA BB: Critical Thinking
AICPA FN: Reporting
Solution:
To solve for units transferred:
+ Work in process, beginning .....................................................
83,000
+ Units started into production during the month ....................
334,000
− Work in process, ending ..........................................................
34,000
=Units completed and transferred out during the month .........
383,000
LO: 1
35. 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:
Work in process 5/1 ......................
Costs added during May................
Materials Conversion
$13,800
$3,740
$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
Ans: B AACSB: Analytic
Level: Medium
AICPA BB: Critical Thinking
AICPA FN: Reporting
Solution:
Equivalent units of production
Materials Conversion
Transferred to next department ..............................
Ending work in process (materials: 6,000 units ×
100% complete; conversion: 6,000 units × 50%
12,000
12,000
6,000
3,000
LO: 2,3
complete) .............................................................
Equivalent units of production ................................
18,000
15,000
Cost per Equivalent Unit
Materials Conversion
Cost of beginning work in process ...........................
$13,800
$ 3,740
Cost added during the period ..................................
42,000
26,260
Total cost (a) ............................................................
$55,800
$30,000
Equivalent units of production (b) ...........................
18,000
15,000
Cost per equivalent unit, (a) ÷ (b) ............................
$3.10
$2.00
Total
$5.10
36. Destry Company uses the weighted-average method in its process costing system. The first
processing department, the Welding Department, started the month with 10,000 units in its
beginning work in process inventory that were 30% complete with respect to conversion costs.
The conversion cost in this beginning work in process inventory was $19,200. An additional
60,000 units were started into production during the month. There were 19,000 units in the
ending work in process inventory of the Welding Department that were 70% complete with
respect to conversion costs. A total of $380,060 in conversion costs were incurred in the
department during the month.
What would be the cost per equivalent unit for conversion costs for the month? (Round off to
three decimal places.)
A)
$6.400
B)
$6.334
C)
$6.209
D)
$4.811
Ans: C AACSB: Analytic
Level: Medium
AICPA BB: Critical Thinking
AICPA FN: Reporting
Solution:
To solve for units transferred:
+ Work in process, beginning ...........................................................
10,000
+ Units started into production during the month ...........................
60,000
− Work in process, ending ................................................................
19,000
= Units completed and transferred out during the month ..............
51,000
Equivalent units of production
LO: 2,3
Conversion
Transferred to next department ...............................................
51,000
Ending work in process (conversion: 19,000 units × 70%
complete) ..............................................................................
13,300
Equivalent units of production .................................................
64,300
Cost per Equivalent Unit
Conversion
Cost of beginning work in process ............................................
$ 19,200
Cost added during the period ...................................................
380,060
Total cost (a) .............................................................................
$399,260
Equivalent units of production (b) ............................................
64,300
Cost per equivalent unit, (a) ÷ (b) .............................................
$6.209
37. 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 ..........
Ending work in process inventory.............
Percent
Complete with
Respect to
Units
Conversion
18,000
80%
81,000
17,000
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
Ans: A AACSB: Analytic
Level: Medium
AICPA BB: Critical Thinking
AICPA FN: Reporting
LO: 2,3
Solution:
To solve for units transferred:
+ Work in process, beginning ..................................................................................
18,000
+ Units started into production during the month ..................................................
81,000
− Work in process, ending .......................................................................................
17,000
= Units completed and transferred out during the month .....................................
82,000
Equivalent units of production
Conversion
Transferred to next department ................................................
82,000
Ending work in process
(conversion: 17,000 units × 80% complete)...........................
13,600
Equivalent units of production ..................................................
95,600
Cost per Equivalent Unit
Conversion
Cost of beginning work in process .............................................
$15,264
Cost added during the period ....................................................
68,208
Total cost (a) ..............................................................................
$83,472
Equivalent units of production (b) .............................................
95,600
Cost per equivalent unit, (a) ÷ (b) ..............................................
$0.873
38. Hammoudi Company uses the weighted-average method in its process costing system. The first
processing department, the Welding Department, started the month with 16,000 units in its
beginning work in process inventory that were 90% complete with respect to conversion costs.
The conversion cost in this beginning work in process inventory was $61,920. An additional
53,000 units were started into production during the month and 45,000 units were completed in
the Welding Department and transferred to the next processing department. There were 24,000
units in the ending work in process inventory of the Welding Department that were 70%
complete with respect to conversion costs. A total of $194,340 in conversion costs were
incurred in the department during the month.
What would be the cost per equivalent unit for conversion costs for the month? (Round off to
three decimal places.)
A)
$4.300
B)
$4.147
C)
$2.524
D)
$3.667
Ans: B AACSB: Analytic
Level: Medium
AICPA BB: Critical Thinking
AICPA FN: Reporting
LO: 2,3
Solution:
Equivalent units of production
Conversion
Transferred to next department .............................................................
45,000
Ending work in process
(conversion: 24,000 units × 70% complete)........................................
16,800
Equivalent units of production ...............................................................
61,800
Cost per Equivalent Unit
Conversion
Cost of beginning work in process ..........................................................
$ 61,920
Cost added during the period .................................................................
194,340
Total cost (a) ...........................................................................................
$256,260
Equivalent units of production (b) ..........................................................
61,800
Cost per equivalent unit, (a) ÷ (b) ...........................................................
$4.147
39. Paquet Company uses the weighted-average method in its process costing system. The Molding
Department is the second department in its production process. The data below summarize the
department's operations in January.
Beginning work in process inventory
Transferred in from the prior
department during January
Completed and transferred to the next
department during January
Ending work in process inventory
Percent
Complete with
Respect to
Units
Conversion
7,700
40%
56,000
58,400
5,300
90%
The accounting records indicate that the conversion cost that had been assigned to beginning
work in process inventory was $16,940 and a total of $347,320 in conversion costs were
incurred in the department during January.
What was the cost per equivalent unit for conversion costs for January in the Molding
Department? (Round off to three decimal places.)
A)
$5.500
B)
$5.666
C)
$5.766
D)
$6.202
Ans: C AACSB: Analytic
Level: Medium
AICPA BB: Critical Thinking
AICPA FN: Reporting
LO: 2,3
Solution:
Units transferred out
Add: equivalent units in the ending inventory (5300 × 90%
58,400
4,770
complete)
Equivalent units of production
63,170
Cost in the beginning inventory
Cost added during the month
Total cost
$364,260 ÷ 63,170 units = $5.766 per unit
$ 16,940
347,320
$364,260
40. Lawton Company produces canned tomato soup in a single processing department and has a
process costing system in which it uses the weighted-average method. The company sold
250,000 units in the month of January. Data concerning inventories follow:
Units
Inventory at January 1:
Work in process
Finished goods
Inventory at January 31:
Work in process (conversion 75% complete) ..............
Finished goods
None
75,000
16,000
60,000
What were the equivalent units for conversion costs for January?
A)
235,000
B)
247,000
C)
251,000
D)
253,000
Ans: B AACSB: Analytic AICPA BB: Critical Thinking
Level: Medium Source: CPA, adapted
Solution:
To calculate units transferred out:
AICPA FN: Reporting
LO: 2
Units sold
+ Ending finished goods inventory ..........
− Beginning finished goods inventory .....
= Units transferred out..............................
250,000
60,000
75,000
235,000
Units transferred out .........................................................
Ending work in process (16,000 units × 75% complete) .
Equivalent units of production .........................................
235,000
12,000
247,000
41. Boswal Company uses the weighted-average method in its process costing system. The
Assembly Department started the month with 6,000 units in its beginning work in process
inventory that were 80% complete with respect to conversion costs. An additional 52,000 units
were transferred in from the prior department during the month to begin processing in the
Assembly Department. There were 18,000 units in the ending work in process inventory of the
Assembly Department that were 20% complete with respect to conversion costs.
What were the equivalent units for conversion costs in the Assembly Department for the
month?
A)
43,600
B)
40,000
C)
38,800
D)
64,000
Ans: A AACSB: Analytic
Level: Medium
AICPA BB: Critical Thinking
AICPA FN: Reporting
Solution:
To solve for units transferred:
Work in process, beginning .......................................................
6,000
+ Units started into production during the month ....................
52,000
− Work in process, ending .........................................................
18,000
= Units completed and transferred out during the month .......
40,000
Transferred to next department
Ending work in process (18,000 units × 20% complete) .
Equivalent units of production
Conversion
40,000
3,600
43,600
LO: 2
42. Jolly Company uses the weighted-average method in its process costing system. Operating data
for the Painting Department for the month of April appear below:
Beginning work in process inventory
Transferred in from the prior department during April ..
Ending work in process inventory
Units
4,700
59,700
7,300
Percent
Complete
with
Respect to
Conversion
90%
80%
What were the equivalent units for conversion costs in the Painting Department for April?
A)
62,940
B)
62,300
C)
65,540
D)
57,100
Ans: A AACSB: Analytic
Level: Medium
AICPA BB: Critical Thinking
AICPA FN: Reporting
Solution:
Units in beginning inventory ....................
+ Units started into production .................
− Units in ending inventory ......................
= Units transferred out..............................
4,700
59,700
7,300
57,100
Equivalent units transferred out
Add: Equivalent units in the ending work in process
inventory (7,300 units × 80% complete)
Equivalent units for conversion costs
57,100
5,840
62,940
LO: 2
43. Parks Company uses the weighted-average method in its process costing system. At the start of
the year, the company had 5,000 units in process in Department A that were 60% complete with
respect to conversion costs. At the end of the year, 6,500 units were in process, 40% complete
with respect to conversion costs. During the year, 30,000 units were completed and transferred
on to the next department. The equivalent units for conversion costs would be:
A)
32,600 units
B)
29,600 units
C)
33,000 units
D)
30,000 units
Ans: A AACSB: Analytic
Level: Easy
AICPA BB: Critical Thinking
AICPA FN: Reporting
Solution:
Equivalent units transferred out
Add: Equivalent units in the ending work in process
inventory (6,500 units × 40% complete)
Equivalent units for conversion costs
30,000
2,600
32,600
LO: 2
44. Bart Co. adds materials at the beginning of the process in Department M. The company uses the
weighted-average method in its process costing system. The following information pertains to
Department M's work in process during April:
Work in process, April 1 (conversion 60% complete) ....
Started in April
Completed
Work in process, April 30 (conversion 75% complete) ..
Units
3,000
25,000
20,000
8,000
The equivalent units for conversion cost are:
A)
26,000
B)
25,000
C)
24,200
D)
21,800
Ans: A AACSB: Analytic AICPA BB: Critical Thinking
Level: Medium Source: CPA, adapted
AICPA FN: Reporting
Solution:
Equivalent units transferred out
Add: Equivalent units in the ending work in process
inventory (8,000 units × 75% complete)
Equivalent units for conversion costs
20,000
6,000
26,000
LO: 2
45. Fatas Corporation uses the weighted-average method in its process costing system. The
Assembly Department started the month with 8,000 units in its beginning work in process
inventory that were 20% complete with respect to conversion costs. An additional 95,000 units
were transferred in from the prior department during the month to begin processing in the
Assembly Department. During the month 102,000 units were completed in the Assembly
Department and transferred to the next processing department. There were 1,000 units in the
ending work in process inventory of the Assembly Department that were 20% complete with
respect to conversion costs.
What were the equivalent units for conversion costs in the Assembly Department for the
month?
A)
102,200
B)
100,600
C)
102,000
D)
88,000
Ans: A AACSB: Analytic
Level: Easy
AICPA BB: Critical Thinking
AICPA FN: Reporting
Solution:
Equivalent units transferred out
Add: Equivalent units in the ending work in process
inventory (1,000 units × 20% complete)
Equivalent units for conversion costs
102,000
200
102,200
LO: 2
46. Natiello Corporation uses the weighted-average method in its process costing system. Operating
data for the Lubricating Department for the month of October appear below:
Percent
Complete
with Respect
Units to Conversion
9,100
20%
Beginning work in process inventory
Transferred in from the prior department during
October
Completed and transferred to the next department
during October
Ending work in process inventory
38,500
41,000
6,600
70%
What were the equivalent units for conversion costs in the Lubricating Department for October?
A)
41,000
B)
43,120
C)
36,000
D)
45,620
Ans: D AACSB: Analytic
Level: Easy
AICPA BB: Critical Thinking
AICPA FN: Reporting
Solution:
Units in beginning inventory ..................
+ Units started into production ..................
− Units in ending inventory .......................
= Units transferred out ...............................
9,100
38,500
6,600
41,000
Equivalent units transferred out
Add: Equivalent units in the ending work in process
inventory (6,600 units × 70% complete)
41,000
4,620
LO: 2
Equivalent units for conversion costs
45,620
47. Kew Company uses the weighted-average method in its process costing system. The company
had 3,000 units in work in process at April 1 that were 60% complete with respect to conversion
cost. During April, 10,000 units were completed. At April 30, 4,000 units remained in work in
process and they were 40% complete with respect to conversion cost. Direct materials are
added at the beginning of the process. How many units were started during April?
A)
9,000
B)
9,800
C)
10,000
D)
11,000
Ans: D AACSB: Analytic AICPA BB: Critical Thinking
Level: Medium Source: CPA, adapted
AICPA FN: Reporting
Solution:
To solve for units started into production:
+ Work in process, ending ..............................................................
4,000
+ Units completed and transferred out during the month ............
10,000
− Work in process, beginning .........................................................
3,000
= Units started into production during the month .........................
11,000
LO: 2
48.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.
Ans: C AACSB: Reflective Thinking AICPA BB: Critical Thinking
LO: 3 Level: Easy Source: CPA, adapted
AICPA FN: Reporting
49. 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
Ans: A AACSB: Reflective Thinking
LO: 3 Level: Medium
Material cost added to production
during the current period
Yes
Yes
No
No
AICPA BB: Critical Thinking
AICPA FN: Reporting
50. 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.
Ans: A
LO: 10
AACSB: Reflective Thinking
Level: Medium
AICPA BB: Critical Thinking
AICPA FN: Reporting
Bonus
51.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.
Ans: B AACSB: Analytic
Level: Hard
AICPA BB: Critical Thinking
AICPA FN: Reporting
LO: 2
52.Jersey Company has a process costing system in which it uses the weighted-average 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
Ans: C AACSB: Analytic
Level: Hard
AICPA BB: Critical Thinking
AICPA FN: Reporting
LO: 2
Solution:
Units transferred out ............................................................
Ending work in process (10,000 units × 75% complete) ....
40,000 *
7,500
Equivalent units for conversion costs..................................
* Solve backwards: 47,500 − 7,500 = 40,000
47,500
Units in beginning inventory .................... 15,000
+ Units started .......................................... 35,000 *
− Units in ending inventory ...................... 10,000
= Units transferred out.............................. 40,000
* Solve backwards: Units started = 40,000 −15,000 + 10,000 = 35,000