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) B) C) D) manufacturing overhead cost. period cost. variable cost. conversion cost.

Ans: C AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: 1,2,5 Level: Medium 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

Ans: B AACSB: Reflective Thinking AICPA FN: Reporting LO: 1,5

AICPA BB: Critical Thinking Level: Medium Source: CPA, adapted

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) B) C) D) direct materials. a period cost. administrative expense. manufacturing overhead.

Ans: D AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: 1 Level: Easy 7. Direct costs: A) B) C) D) are incurred to benefit a particular accounting period. are incurred due to a specific decision. can be easily traced to a particular cost object. are the variable costs of producing a product.

Ans: C AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: 1 Level: Easy 8. Inventoriable (i.e., product) costs that have become expenses can be found in: A) B) C) D) period costs. selling expenses. cost of goods sold. administrative expenses.

Ans: C AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: 2 Level: Medium

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) B) C) D) Direct materials. Direct labor. Fixed manufacturing overhead. Responses A and B are both correct.

Ans: C AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 5 Level: Medium 10. When the level of activity decreases within the relevant range, the fixed cost per unit will: A) B) C) D) decrease. increase. remain the same. The effect cannot be predicted.

Ans: B AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 5 Level: Medium 11. All of the cost categories listed below are usually found in a company's accounting records, except for: A) B) C) D) sunk costs. inventoriable costs. opportunity costs. marketing costs.

Ans: C AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: 7 Level: Easy

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) B) C) D) $152,000 $11,750 $21,250 $9,500

Ans: D AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 1 Level: Hard 13. Consider the following costs:

Direct materials.......................................... Depreciation on factory equipment........... Factory janitors salary.............................. Direct labor................................................ Utilities for factory.................................... Selling expenses........................................ Production supervisors salary................... Administrative expenses............................

$33,00 0 $12,00 0 $23,00 0 $28,00 0 $9,000 $16,00 0 $34,00 0 $21,00 0

What is the total amount of manufacturing overhead included above? A) B) C) D) $78,000 $139,000 $44,000 $37,000

Ans: A AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 1 Level: Medium

Solution:

Depreciation on factory equipment........... Factory janitors salary.............................. Utilities for factory.................................... Production supervisors salary................... Total...........................................................

$12,00 0 23,000 9,000 34,000 $78,00 0

14.Manufacturing overhead includes: A) B) C) D) all direct material, direct labor and administrative costs. all manufacturing costs except direct labor. all manufacturing costs except direct labor and direct materials. all selling and administrative costs.

Ans: C AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: 1 Level: Easy 15.All of the following are examples of product costs except: A) B) C) D) depreciation on the company's retail outlets. salary of the plant manager. insurance on the factory equipment. rental costs of the factory facility.

Ans: A AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: 2 Level: Easy

16. Conversion costs consist of: A) B) C) D) direct and indirect labor. direct labor and direct materials. direct labor and manufacturing overhead. prime costs and manufacturing overhead.

Ans: C AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: 2 Level: Easy Source: CMA, adapted

17.Which of the following statements is correct concerning job-order costing? A) B) C) D) Job-order costing would be appropriate for a textbook publisher. All the costs appearing on a job cost sheet are actual costs. Indirect materials are charged to a specific job. Job-order costing is mainly used in firms with homogeneous products such as oil refineries.

Ans: A AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: 1,2 Level: Medium

18. Which of the following types of firms typically would use process costing rather than job-order costing? A) B) C) D) A small appliance repair shop. A manufacturer of commercial passenger aircraft. A specialty equipment manufacturer. A breakfast cereal manufacturer.

Ans: D AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: 1 Level: Easy

19. The job cost sheet: A) B) C) D) summarizes all costs charged to a particular job. contains only direct costs such as direct materials and direct labor. is discarded after production is completed on a particular job. is useful only in process costing.

Ans: A AACSB: Reflective Thinking AICPA FN: Reporting

AICPA BB: Critical Thinking

20. Elliott Company uses a predetermined overhead rate based on machinehours to apply manufacturing overhead to jobs. The company manufactures tools to customer specifications. The following data pertain to Job 1501:

Direct materials used Direct labor-hours worked Direct labor rate per hour Machine-hours used Predetermined overhead rate per machine-hour..............

$4,20 0 300 $8.00 200 $15.0 0

What is the total manufacturing cost recorded on Job 1501? A) B) C) D) $8,800 $9,600 $10,300 $11,100

Ans: B AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 2,5 Level: Easy Source: CPA, adapted

Solution:

Direct materials used......................................................... Direct labor (300 hours $8.00 per hour)......................... Manufacturing overhead applied (200 hours $15.00 per hour)............................................................................ Total manufacturing cost for job 1501...............................

$4,20 0 2,400 3,00 0 $9,60 0

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) B) C) D) $25,000 overapplied $25,000 underapplied $5,000 overapplied $5,000 underapplied

Ans: C AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 3,5,8 Level: Medium Source: CPA, adapted

Solution:

Actual manufacturing overhead......................................... Applied manufacturing overhead ($3 per DLH* 110,000 DLHs)................................................................................. Manufacturing overhead overapplied................................

$325,00 0 330,000 $ 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 laborhours 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) B) C) D) $7.80 $8.00 $8.20 $8.40

Ans: A AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 3,5,8 Level: Hard

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) B) C) D) $12,500 underapplied $16,500 overapplied $17,600 underapplied $29,000 overapplied

Ans: B AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 3,5,8 Level: Medium

Solution:

Predetermined overhead rate = $200,000 160,000 pounds = $1.25 per pound

Actual manufacturing overhead........................... Applied manufacturing overhead (150,000 $1.25)............................................................... Manufacturing overhead overapplied.................. $171,000 187,500 $ 16,500

Since applied manufacturing overhead exceeds actual manufacturing overhead, manufacturing overhead is overapplied.

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 15,000 $300,000

Actual 14,800 $287,12 0

What was Brusveen's underapplied or overapplied overhead for last year? A) B) C) D) $4,000 underapplied $8,880 underapplied $8,880 overapplied $9,000 underapplied

Ans: C AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 3,5,8 Level: Medium

Solution:

Predetermined overhead rate = $300,000 15,000 direct labor-hours = $20 per direct labor-hour
Actual manufacturing overhead.......................... Applied manufacturing overhead (14,800 $20) Manufacturing overhead overapplied................. $287,120 296,000 $ 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 $39,00 0 11,000 $37,00 0

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) B) C) D) $39,050 $42,600 $35,750 $36,960

Ans: C AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 3,5 Level: Medium

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

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...............................

$60,00 0 $90,00 0 6,000 2,000

$40,00 0 $45,00 0 9,000 15,000

What predetermined overhead rates would be used in Dept A and Dept B, respectively? A) B) C) D) 67% and $3.00 150% and $5.00 150% and $3.00 67% and $5.00

Ans: C AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 3 Level: Easy

Solution:

Department A: Predetermined = overhead rate = Department B: Predetermined = overhead rate

Estimated total manufacturing overhead cost Estimated total amount of the allocation base $90,000 $60,000 = 150% of direct labor cost

Estimated total manufacturing overhead cost Estimated total amount of the allocation base

$45,000 15,000

= $3.00 per machine-hour

27. Reamer Company uses a predetermined overhead rate based on machinehours 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........................

$1,00 0 $3,00 0 $4,00 0 $2,00 0 $400 $800 $1,00 0

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) B) C) D) $6.80 $6.00 $3.00 $3.40

Ans: D AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 3 Level: Medium

Solution:

Manufacturing overhead: Salary of production supervisor...... Indirect materials........................... $2,000 400

Rent on factory equipment............. Total estimated manufacturing overhead...........................................

1,000 $3,400

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) B) C) D) Under both costing methods, manufacturing overhead costs are included in the computation of unit product costs. Under both costing methods, the journal entry to record the completion of production will involve crediting a work in process account. Under both costing methods, the journal entry to record the cost of goods sold will involve crediting the finished goods account. All of the above are true.

Ans: D AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 1 Level: Hard

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 Yes Yes No No

Process costing No Yes Yes No

Ans: B AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: 1 Level: Easy Source: CPA, adapted

30. In process costing, a separate work in process account is kept for each: A) B) C) D) individual order. equivalent unit. processing department. cost category (i.e., materials, conversion cost).

Ans: C AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: 1 Level: Easy

31. The weighted-average method of process costing differs from the FIFO method of process costing in that the weighted-average method: A) B) C) D) does not consider the degree of completion of beginning work in process inventory when computing equivalent units of production. considers ending work in process inventory to be fully complete. will always yield a higher cost per equivalent unit. All of the above.

Ans: A AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting Appendix: 4A LO: 2,3,5,6 Level: Hard

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

Percentage completion of ending work in process Yes Yes No No

Ans: B AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: 2 Level: Easy

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) B) C) D) 66,000 71,000 72,000 74,000

Ans: C AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 1 Level: Medium

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

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) B) C) D) 417,000 285,000 451,000 383,000

Ans: D AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 1 Level: Easy

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

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) B) C) D) $5.02 $5.10 $5.12 $5.25

Ans: B AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 2,3 Level: Medium

Solution:

Equivalent units of production Materials Transferred to next department.............. Ending work in process (materials: 6,000 units 100% complete; conversion: 12,000 6,000 Conversio n 12,000 3,000

6,000 units 50% complete)............... Equivalent units of production................. 18,000 15,000

Cost per Equivalent Unit Materials Cost of beginning work in process........... $13,800 Cost added during the period.................. 42,000 Conversio n Total $ 3,740 26,260 $30,000

Total cost (a)............................................ $55,800

Equivalent units of production (b)............ Cost per equivalent unit, (a) (b)...........

18,000 $3.10

15,000 $2.00 $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) B) C) D) $6.400 $6.334 $6.209 $4.811

Ans: C AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 2,3 Level: Medium

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

Conversio n Transferred to next department............................ Ending work in process (conversion: 19,000 units 70% complete)............................................... Equivalent units of production.............................. 51,000 13,300 64,300

Cost per Equivalent Unit Conversio n 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)......................... Cost per equivalent unit, (a) (b)........................

64,300 $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.............

Units 18,00 0 81,00 0 17,00 0

Percent Complete with Respect to Conversion 80%

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) B) C) D) $0.873 $0.696 $0.842 $1.060

Ans: A AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 2,3 Level: Medium

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 Conversio n Transferred to next department............................. Ending work in process (conversion: 17,000 units 80% complete)....... Equivalent units of production................................ 82,000 13,600 95,600

Cost per Equivalent Unit Conversio n 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).......................... Cost per equivalent unit, (a) (b)..........................

95,600 $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) B) C) D) $4.300 $4.147 $2.524 $3.667

Ans: B AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 2,3 Level: Medium

Solution:

Equivalent units of production Conversion Transferred to next department....................................... Ending work in process (conversion: 24,000 units 70% complete)................. Equivalent units of production.......................................... 45,000 16,800 61,800

Cost per Equivalent Unit Conversion Cost of beginning work in process.................................... Cost added during the period........................................... Total cost (a).................................................................... $ 61,920 194,340 $256,260

Equivalent units of production (b).................................... Cost per equivalent unit, (a) (b)....................................

61,800 $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% 56,00 0 58,40 0 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) B) C) D) $5.500 $5.666 $5.766 $6.202

Ans: C AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 2,3 Level: Medium

Solution:

Units transferred out Add: equivalent units in the ending inventory (5300 90% complete) Equivalent units of production Cost in the beginning inventory Cost added during the month Total cost $364,260 63,170 units = $5.766 per unit

58,400 4,770 63,170 $ 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 weightedaverage 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 75,00 0 16,00 0 60,00 0

What were the equivalent units for conversion costs for January? A) B) C) D) 235,000 247,000 251,000 253,000

Ans: B AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 2 Level: Medium Source: CPA, adapted

Solution:

To calculate units transferred out: Units sold + Ending finished goods inventory........... Beginning finished goods inventory...... = Units transferred out..............................

250,000 60,000 75,000 235,000 235,000 12,000 247,000

Units transferred out......................................................... Ending work in process (16,000 units 75% complete).. Equivalent units of production..........................................

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) B) C) D) 43,600 40,000 38,800 64,000

Ans: A AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 2 Level: Medium

Solution:

To solve for units transferred: Work in process, beginning.................................... + Units started into production during the month. Work in process, ending..................................... = Units completed and transferred out during the month................................................................. 6,000 52,000 18,000 40,000

Transferred to next department Ending work in process (18,000 units 20% complete).

Conversion 40,000 3,600

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:

Equivalent units of production

43,600

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) B) C) D) 62,940 62,300 65,540 57,100

Ans: A AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 2 Level: Medium

Solution:

Units in beginning inventory.................... + Units started into production................. Units in ending inventory...................... = Units transferred out..............................

4,700 59,700 7,300 57,100 57,100 5,840 62,940

Equivalent units transferred out Add: Equivalent units in the ending work in process inventory (7,300 units 80% complete) Equivalent units for conversion costs

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) B) C) D) 32,600 units 29,600 units 33,000 units 30,000 units

Ans: A AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 2 Level: Easy

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

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). .
The equivalent units for conversion cost are: A) B) C) D) 26,000 25,000 24,200 21,800

Units 3,000 25,00 0 20,00 0 8,000

Ans: A AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 2 Level: Medium Source: CPA, adapted

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

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) B) C) D) 102,200 100,600 102,000 88,000

Ans: A AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 2 Level: Easy

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

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:

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

Percent Complete with Respect Units to Conversion 9,100 20% 38,50 0 41,00 0 6,600 70%

What were the equivalent units for conversion costs in the Lubricating Department for October? A) B) C) D) 41,000 43,120 36,000 45,620

Ans: D AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 2 Level: Easy

Solution:

Units in beginning inventory................... + Units started into production................... Units in ending inventory........................ = Units transferred out................................

9,100 38,500 6,600 41,000 41,000 4,620

Equivalent units transferred out Add: Equivalent units in the ending work in process

inventory (6,600 units 70% complete) 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) B) C) D) 9,000 9,800 10,000 11,000

Ans: D AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 2 Level: Medium Source: CPA, adapted

Solution:

To solve for units started into production: + Work in process, ending......................................... + Units completed and transferred out during the month..................................................................... Work in process, beginning.................................... = Units started into production during the month..... 4,000 10,000 3,000 11,000

48.In the computation of costs per equivalent unit, the weighted-average method of process costing considers: A) B) C) D) costs incurred during the current period only. costs incurred during the current period plus cost of ending work in process inventory. costs incurred during the current period plus cost of beginning work in process inventory. costs incurred during the current period less cost of beginning work in process inventory.

Ans: C AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: 3 Level: Easy Source: CPA, adapted

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

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

Ans: A AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: 3 Level: Medium 50. All of the following statements are correct when referring to process costing except: A) B) C) D) Process costing would be appropriate for a jeweler who makes custom jewelry to order. A process costing system has the same basic purposes as a job-order costing system. Units produced are indistinguishable from each other. Costs are accumulated by department.

Ans: A AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: 10 Level: Medium

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) B) C) D) units in ending work in process and the units started. units in beginning work in process and the units started. units in ending work in process and the units started and completed. units in beginning work in process and the units started and completed.

Ans: B AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 2 Level: Hard 52.Jersey Company has a process costing system in which it uses the weightedaverage method. The equivalent units for conversion costs for the month were 47,500 units. The beginning work in process inventory consisted of 15,000 units, 60% complete with respect to conversion costs. The ending work in process inventory consisted of 10,000 units, 75% complete with respect to conversion costs. The number of units started during the month was: A) B) C) D) 25,000 units 34,000 units 35,000 units 40,000 units

Ans: C AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 2 Level: Hard

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