TEST BANK managerial accounting 13e by garrison chapter 04

Chapter 4 Systems Design: Process Costing
True/False Questions
1. In a process costing system, the costs of one processing department become part of the
costs of the next processing department.
Ans: True AACSB: Reflective Thinking AICPA BB: Critical Thinking
AICPA FN: Reporting LO: 1 Level: Easy
2. The equivalent units of production will be the same under the weighted-average and
the FIFO method if there is no beginning work in process inventory.
Ans: True AACSB: Reflective Thinking AICPA BB: Critical Thinking
AICPA FN: Reporting Appendix: 4A LO: 2,5 Level: Medium
3. Under the weighted-average method, the equivalent units used to compute the unit
costs of ending inventories relate only to work done during the current period.
Ans: False AACSB: Analytic
AICPA FN: Reporting LO: 2

AICPA BB: Critical Thinking
Level: Hard

4. In order to equitably allocate costs in a process costing system, dissimilar products are
restated in terms of equivalent units by weighting the number of units produced by
their market values.
Ans: False AACSB: Reflective Thinking AICPA BB: Critical Thinking
AICPA FN: Reporting LO: 2 Level: Easy
5. In a process costing system, units transferred to the next processing department are
presumed to be 100% complete with respect to the work performed by the transferring
department.
Ans: True AACSB: Reflective Thinking AICPA BB: Critical Thinking
AICPA FN: Reporting LO: 2 Level: Easy
6. Under a weighted-average process costing system when all materials are added at the
beginning of the production process, the equivalent units for materials is equal to the
units completed and transferred out.

Ans: False AACSB: Analytic
AICPA FN: Reporting LO: 2

AICPA BB: Critical Thinking
Level: Hard

Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition

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Chapter 4 Systems Design: Process Costing
7. In calculating cost per equivalent unit under the weighted-average method, prior
period costs are combined with current period costs.
Ans: True AACSB: Reflective Thinking AICPA BB: Critical Thinking
AICPA FN: Reporting LO: 3 Level: Easy
8. The equivalent units of production for a department using the FIFO process costing
method is equal to the number of units completed plus the equivalent units in the
ending inventory.
Ans: False AACSB: Analytic AICPA BB: Critical Thinking
AICPA FN: Reporting Appendix: 4A LO: 5 Level: Hard
9. The step-down method of cost allocation is more accurate than the direct method since
the step-down method considers services that service departments provide to each
other.
Ans: True AACSB: Reflective Thinking AICPA BB: Critical Thinking
AICPA FN: Reporting Appendix: 4B LO: 8,9 Level: Easy
10. The step-down method and the direct method of cost allocation will result in the same
amount of service department cost being allocated to a given operating department,
although the step-down method is easier to apply than the direct method.
Ans: False AACSB: Reflective Thinking AICPA BB: Critical Thinking

AICPA FN: Reporting Appendix: 4B LO: 8,9 Level: Medium
11. The order in which the costs of service departments are allocated will affect the
amounts allocated to an operating department when the direct method is used.
Ans: False AACSB: Analytic AICPA BB: Critical Thinking
AICPA FN: Reporting Appendix: 4B LO: 8 Level: Medium
12. The units in beginning work in process inventory plus the units started into production
must equal the units transferred out of the department plus the units in ending work in
process inventory.
Ans: True AACSB: Reflective Thinking AICPA BB: Critical Thinking
AICPA FN: Reporting LO: 10 Level: Easy

4-8

Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition


Chapter 4 Systems Design: Process Costing
13. In a process costing system, direct labor cost combined with manufacturing overhead
cost is known as conversion cost.
Ans: True AACSB: Reflective Thinking AICPA BB: Critical Thinking
AICPA FN: Reporting LO: 10 Level: Easy
14. Process costing is employed in industries that produce basically homogeneous
products such as bricks, flour, or cement but would not be appropriate for assemblytype operations such as those that manufacture computers.
Ans: False AACSB: Analytic AICPA BB: Critical Thinking
AICPA FN: Reporting LO: 10 Level: Medium
15. Process costing is used where many different products are produced each period to
customer specifications.
Ans: False AACSB: Reflective Thinking AICPA BB: Critical Thinking
AICPA FN: Reporting LO: 10 Level: Easy
Multiple Choice Questions

16. 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 AICPA BB: Critical Thinking
AICPA FN: Reporting LO: 1 Level: Hard

Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition

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Chapter 4 Systems Design: Process Costing
17. 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
AICPA FN: Reporting LO: 1 Level: Easy Source: CPA, adapted
18. 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 AICPA BB: Critical Thinking
AICPA FN: Reporting LO: 1 Level: Easy
19. 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 AICPA BB: Critical Thinking
AICPA FN: Reporting Appendix: 4A LO: 2,3,5,6 Level: Hard

4-10

Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition


Chapter 4 Systems Design: Process Costing

20. 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
21. 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 AICPA BB: Critical Thinking
AICPA FN: Reporting LO: 2 Level: Hard
22. 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
AICPA FN: Reporting LO: 3 Level: Easy Source: CPA, adapted

Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition

4-11


Chapter 4 Systems Design: Process Costing
23. 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
24. Under which of the following conditions will the FIFO method of process costing
result in the same amount of cost being transferred to the next department as the
weighted-average method?
A) When the beginning and ending inventories are each fifty percent complete.
B) When there is no beginning inventory.
C) When there is no ending inventory.
D) When units in the beginning inventory are all completed and transferred at the
same time.
Ans: B AACSB: Analytic AICPA BB: Critical Thinking
AICPA FN: Reporting Appendix: 4A LO: 4,7 Level: Hard
Source: CMA, adapted
25. In order to compute equivalent units of production using the FIF0 method of process
costing, work for the period must be broken down into parts:
A) completed during the period and units in ending inventory.
B) completed from beginning inventory, started and completed during the month,

and units in ending inventory.
C) started during the period and units transferred out during the period.
D) processed during the period and units completed during the period.
Ans: B AACSB: Analytic AICPA BB: Critical Thinking
AICPA FN: Reporting Appendix: 4A LO: 5 Level: Medium
Source: CPA, adapted

4-12

Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition


Chapter 4 Systems Design: Process Costing
26. Which of the following methods of allocating service departments take into account
all of the effects of interdepartmental services?
A)
B)
C)
D)

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

Ans: D AACSB: Analytic AICPA BB: Critical Thinking
AICPA FN: Reporting Appendix: 4B LO: 8,9 Level: Medium
27. 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 AACSB: Reflective Thinking AICPA BB: Critical Thinking
AICPA FN: Reporting LO: 10 Level: Medium
28. For which of the following would it be best to use an operation costing system?
A) home remodeling
B) automobile production
C) cement used for roadways
D) trash bags used for yard waste
Ans: B AACSB: Analytic AICPA BB: Critical Thinking
AICPA FN: Reporting LO: 10 Level: Medium

Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition

4-13


Chapter 4 Systems Design: Process Costing
29. 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 AICPA BB: Critical Thinking
AICPA FN: Reporting LO: 1 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.......

4-14

3,000
77,000
8,000
72,000

Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition


Chapter 4 Systems Design: Process Costing
30. 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 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

Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition

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Chapter 4 Systems Design: Process Costing
31. Colby Company has a process costing system in which the weighted-average method

is used. The company adds all materials at the beginning of the process in the Molding
Department, which is the first of two stages of its production process. Information
concerning the materials used in the Molding Department during March is as follows:
Materials
Units
Costs
Work in process at March 1............................................. 22,000
$11,000
Units started during March.............................................. 90,000 $46,120
Units completed and transferred to next department
during March................................................................ 97,000
What was the materials cost of the work in process inventory at March 31?
A) $11,220
B) $7,500
C) $5,100
D) $7,650
Ans: D AACSB: Analytic AICPA BB: Critical Thinking
AICPA FN: Reporting LO: 2,3 Level: Medium Source: CPA, adapted

4-16

Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition


Chapter 4 Systems Design: Process Costing
Solution:
To solve for ending work in process:
+ Work in process, beginning...................................................
+ Units started into production during the month....................
− Units completed and transferred out during the month........

= Work in process, ending........................................................

22,000
90,000
97,000
15,000

Equivalent units of production
Materials
Transferred to next department...........................................
97,000
Ending work in process (materials: 15,000 units × 100%
complete).........................................................................
15,000
Equivalent units of production........................................... 112,000
Cost per Equivalent Unit
Cost of beginning work in process.....................................
Cost added during the period..............................................
Total cost (a).......................................................................

Materials
$11,000
46,120
$57,120

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

112,000
$0.51

Materials

Ending work in process inventory:
Equivalent units of production (materials: 15,000 units ×
100% complete; conversion: 15,000 units × %
complete).........................................................................
Cost per equivalent unit......................................................
Cost of ending work in process inventory..........................

Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition

15,000
$0.51
$7,650

4-17


Chapter 4 Systems Design: Process Costing
32. Barnett Company uses the weighted-average method in its process costing system.
The company adds materials at the beginning of the process in Department M.
Conversion costs were 75% complete with respect to the 4,000 units in work in
process at May 1 and 50% complete with respect to the 6,000 units in work in process
at May 31. During May, 12,000 units were completed and transferred to the next
department. An analysis of the costs relating to work in process at May 1 and to
production activity for May follows:
Materials Conversion
Work in process 5/1........................ $13,800
$3,740
Costs added during May................ $42,000

$26,260
The total cost per equivalent unit for May was:
A) $5.02
B) $5.10
C) $5.12
D) $5.25
Ans: B AACSB: Analytic AICPA BB: Critical Thinking
AICPA FN: Reporting LO: 2,3 Level: Medium
Solution:
Equivalent units of production
Materials Conversion
Transferred to next department..........................
12,000
12,000
Ending work in process (materials: 6,000 units
× 100% complete; conversion: 6,000 units ×
50% complete)...............................................
6,000
3,000
Equivalent units of production...........................
18,000
15,000
Cost per Equivalent Unit
Materials Conversion Total
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).....................
Cost per equivalent unit, (a) ÷ (b)......................

4-18

18,000
$3.10

15,000
$2.00

$5.10

Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition


Chapter 4 Systems Design: Process Costing
33. Maurice Company uses the weighted-average method in its process costing system.
The company adds materials at the beginning of the process in the Forming
Department, which is the first of two stages of its production process. Information
concerning the materials used in the Forming Department in April follows:
Units
Work in process at April 1............................................... 12,000
Units started during April................................................ 100,000
Units completed and transferred to next department
during April.................................................................. 88,000

Materials
Costs

$6,000
$51,120

What was the materials cost of the work in process at April 30?
A) $6,120
B) $11,040
C) $12,000
D) $12,240
Ans: D AACSB: Analytic AICPA BB: Critical Thinking
AICPA FN: Reporting LO: 2,3 Level: Medium Source: CPA, adapted

Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition

4-19


Chapter 4 Systems Design: Process Costing
Solution:
To solve for ending work in process:
+ Work in process, beginning............................................. 12,000
+ Units started into production during the month.............. 100,000
− Units completed and transferred out during the month... 88,000
= Work in process, ending.................................................. 24,000
Equivalent units of production
Materials
Transferred to next department...........................................
88,000
Ending work in process (materials: 24,000 units × 100%
complete).........................................................................
24,000

Equivalent units of production........................................... 112,000
Cost per Equivalent Unit
Cost of beginning work in process.....................................
Cost added during the period..............................................
Total cost (a).......................................................................

Materials
$ 6,000
51,120
$57,120

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

112,000
$0.51
Materials

Ending work in process inventory:
Equivalent units of production (materials: 24,000 units ×
100% complete)..............................................................
Cost per equivalent unit......................................................
Cost of ending work in process inventory..........................

4-20

24,000
$0.51
$12,240

Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition


Chapter 4 Systems Design: Process Costing
34. 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 AICPA BB: Critical Thinking
AICPA FN: Reporting LO: 2,3 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........

10,000
60,000
19,000

51,000

Equivalent units of production
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
Cost of beginning work in process....................................
Cost added during the period............................................
Total cost (a)......................................................................

Conversion
$ 19,200
380,060
$399,260

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

64,300
$6.209

Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition

4-21

Chapter 4 Systems Design: Process Costing
35. 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:
Percent
Complete with
Respect to
Units
Conversion
Beginning work in process inventory........ 18,000
80%
Started into production during June........... 81,000
Ending work in process inventory............. 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 AICPA BB: Critical Thinking
AICPA FN: Reporting LO: 2,3 Level: Medium

4-22

Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition

Chapter 4 Systems Design: Process Costing
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)......................................

Cost per equivalent unit, (a) ÷ (b).......................................

Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition

95,600
$0.873

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Chapter 4 Systems Design: Process Costing
36. Roy Company manufactures a product in Departments A and B. Materials are added at
the beginning of the process in Department B. Roy uses the weighted-average method
in its process costing system. Conversion costs for Department B were 50% complete
with respect to the 6,000 units in the beginning work in process and 75% complete
with respect to the 8,000 units in the ending work in process. A total of 12,000 units
were completed and transferred out of Department B during February. An analysis of
the costs in Department B for February follows:
Transferred In Materials Conversion
Work in process, February 1..........
$12,000
$2,500
$1,000
Costs added during February.........
$29,000
$5,500
$5,000
The total cost per equivalent unit during February was closest to:
A) $2.75
B) $2.78

C) $2.82
D) $2.85
Ans: B AACSB: Analytic AICPA BB: Critical Thinking
AICPA FN: Reporting LO: 2,3 Level: Medium Source: CPA, adapted
Solution:

Transferred to next department..........................
Ending work in process:
Materials: 8,000 units × 100% complete........
Conversion: 8,000 units × 75% complete.......
Equivalent units of production...........................

Work in process, beginning...
Cost added during the month
Total cost (a)..........................
Equivalent units (above) (b). .
Cost per equivalent unit
(a) ÷ (b)..............................

4-24

Materials
12,000
8,000
20,000

Transferred
In
Materials
$12,000

$2,500
29,000
5,500
$41,000
$8,000
20,000
20,000
$2.05

Conversion
12,000

$0.40

6,000
18,000

Conversion
$1,000
5,000
$6,000
18,000

Total

$0.33

$2.78

Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition

Chapter 4 Systems Design: Process Costing
37. 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 AICPA BB: Critical Thinking
AICPA FN: Reporting LO: 2,3 Level: Medium
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
Cost of beginning work in process.................................................
Cost added during the period..........................................................
Total cost (a)...................................................................................

Conversion
$ 61,920
194,340
$256,260

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

61,800
$4.147

Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition

4-25


Chapter 4 Systems Design: Process Costing
38. 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.
Percent
Complete with
Respect to
Units

Conversion
7,700
40%

Beginning work in process inventory....................
Transferred in from the prior..................................
department during January..................................... 56,000
Completed and transferred to the next...................
department during January..................................... 58,400
Ending work in process inventory......................... 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 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

4-26

58,400
4,770
63,170
$ 16,940
347,320
$364,260

Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition


Chapter 4 Systems Design: Process Costing
39. Jimmy Company uses the weighted-average method in its process costing system. The
ending work in process inventory consists of 9,000 units. The ending work in process
inventory is 100% complete with respect to materials and 70% complete with respect
to labor and overhead. If the cost per equivalent unit for the period is $3.75 for
material and $1.25 for labor and overhead, what is the balance of the ending work in
process inventory account?
A) $41,625
B) $33,750
C) $45,000
D) $31,500
Ans: A AACSB: Analytic AICPA BB: Critical Thinking
AICPA FN: Reporting LO: 2,4 Level: Medium
Solution:

Ending work in process:
Materials: 9,000 units × 100% complete....
Conversion: 9,000 units × 70% complete...
Ending work in process:
Equivalent units of production............
Cost per equivalent unit......................
Cost of ending work in process...........

Materials
9,000
$3.75
$33,750

9,000
6,300

Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition

Conversion
6,300
$1.25
$7,875

Total
$41,625

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Chapter 4 Systems Design: Process Costing

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............................................................
None
Finished goods.............................................................. 75,000
Inventory at January 31:
Work in process (conversion 75% complete)............... 16,000
Finished goods.............................................................. 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
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

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

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235,000
12,000
247,000

Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition


Chapter 4 Systems Design: Process Costing
41. 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 AICPA BB: Critical Thinking
AICPA FN: Reporting LO: 2 Level: Hard
Solution:
Units transferred out.............................................................
Ending work in process (10,000 units × 75% complete).....

Equivalent units for conversion costs..................................
* Solve backwards: 47,500 − 7,500 = 40,000

40,000 *
7,500
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

Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition

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Chapter 4 Systems Design: Process Costing
42. 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 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...
Transferred to next department........................................
Ending work in process (18,000 units × 20% complete).
Equivalent units of production.........................................

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6,000
52,000
18,000
40,000
Conversion
40,000
3,600
43,600

Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition


Chapter 4 Systems Design: Process Costing
43. 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 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

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

Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition

57,100
5,840
62,940

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