TEST BANK MANAGERIAL ACCOUNTING 2ND EDITION DAVIS tf2

T2 – Topic Focus: Process Costing
TRUE-FALSE STATEMENTS
1. Companies that mass produce similar products or employ a continuous production process
typically use a process costing system.
LO1 – True

LO: 1, Bloom: K, Unit: TF02-1, Difficulty: Easy, Min: 1, AACSB: Analytic, AICPA FN: Reporting, AICPA PC: Communication, IMA:
Cost Management

2. Companies that mass produce similar products or employ a continuous production process
typically use a job order system.
LO1 – False – Companies that mass produce similar products or employ a continuous production process
typically use a process costing system.
LO: 1, Bloom: K, Unit: TF02-1, Difficulty: Easy, Min: 1, AACSB: Analytic, AICPA FN: Reporting, AICPA PC: Communication, IMA:
Cost Management

3. In a process costing system, all product costs for the period are accumulated and divided evenly
over all units produced during the period.
LO1 – True

LO: 1, Bloom: K, Unit: TF02-1, Difficulty: Moderate, Min: 1, AACSB: Analytic, AICPA FN: Measurement, AICPA PC: Problem Solving
and Decision Making, IMA: Cost Management

4. In a job order costing system, all product costs for the period are accumulated and divided
evenly over all units produced during the period.
LO1 – False - In a process costing system, all product costs for the period are accumulated and divided
evenly over all units produced during the period.

LO: 1, Bloom: K, Unit: TF02-1, Difficulty: Moderate, Min: 1, AACSB: Analytic, AICPA FN: Measurement, AICPA PC: Problem Solving
and Decision Making, IMA: Cost Management

5. The soft drink bottler Dr. Pepper is an example of a company that would use a process costing
system.
LO1 – True

LO: 1, Bloom: C, Unit: TF02-1, Difficulty: Moderate, Min: 1, AACSB: Analytic, AICPA FN: Reporting, AICPA PC: Problem Solving and
Decision Making, IMA: Cost Management

6. The accounting firm PriceWaterhouseCoopers is an example of a company that would use a
process costing system.
LO1 – False - The accounting firm PriceWaterhouseCoopers is an example of a company that would use a
job order costing system.

LO: 1, Bloom: C, Unit: TF02-1, Difficulty: Moderate, Min: 1, AACSB: Analytic, AICPA FN: Reporting, AICPA PC: Problem Solving and
Decision Making, IMA: Cost Management

7. Costs incurred in a process costing system include direct material, direct labor and overhead.
LO1 – True

LO: 1, Bloom: K, Unit: TF02-1, Difficulty: Easy, Min: 1, AACSB: Analytic, AICPA FN: Measurement, AICPA PC: Problem Solving and
Decision Making, IMA: Cost Management

T2-1


8. The costs incurred in a process costing system, direct material, direct labor and overhead, are
the same as the costs incurred in a job order costing system.
LO1 – True

LO: 1, Bloom: C, Unit: TF02-1, Difficulty: Moderate, Min: 1, AACSB: Analytic, AICPA FN: Measurement, AICPA PC: Problem Solving
and Decision Making, IMA: Cost Management

9. The inventories used in a process costing system include work-in-process and finished goods, but
not raw materials.
LO1 – False – The inventories used in a process costing system include raw materials, work-in-process
and finished goods.
LO: 1, Bloom: K, Unit: TF02-1, Difficulty: Easy, Min: 1, AACSB: Analytic, AICPA FN: Reporting, AICPA PC: Communication, IMA:
Cost Management

10. The inventories used in a process costing system are the same as those used in a job order
costing system.
LO1 – True

LO: 1, Bloom: C, Unit: TF02-1, Difficulty: Easy, Min: 1, AACSB: Analytic, AICPA FN: Reporting, AICPA PC: Communication, IMA:
Cost Management

11. Both process costing systems and job order costing systems accumulate costs on a job cost
sheet.
LO1 – False – In a job order costing system, the costs of each job are accumulated on a job cost sheet. In
process costing, by contrast, the costs are accumulated by department.
LO: 1, Bloom: K, Unit: TF02-1, Difficulty: Easy, Min: 1, AACSB: Analytic, AICPA FN: Measurement, AICPA PC: Problem Solving and
Decision Making, IMA: Cost Management

12. In a job order costing system, the costs of each job are accumulated on a job cost sheet, while in
process costing, the costs are accumulated by department.
LO1 – True
LO: 1, Bloom: K, Unit: TF02-1, Difficulty: Easy, Min: 1, AACSB: Analytic, AICPA FN: Measurement, AICPA PC: Problem Solving and
Decision Making, IMA: Cost Management

13. In process costing, all materials are added at the beginning of the production process, then labor
and overhead is added during the production process.

LO1 – False – Direct materials may be added at different points of the department’s production process.

LO: 1, Bloom: C, Unit: TF02-1, Difficulty: Moderate, Min: 1, AACSB: Analytic, AICPA FN: Measurement, AICPA PC: Problem Solving
and Decision Making, IMA: Cost Management

14. In process costing, direct materials may be added at different points of a department’s
production process.
LO1 – True

LO: 1, Bloom: K, Unit: TF02-1, Difficulty: Easy, Min: 1, AACSB: Analytic, AICPA FN: Measurement, AICPA PC: Problem Solving and
Decision Making, IMA: Cost Management

15. The journal entries used to record cost flows in a process costing system are the same as those
used to record cost flows in a job order costing system.
LO1 – True

LO: 1, Bloom: C, Unit: TF02-1, Difficulty: Moderate, Min: 1, AACSB: Analytic, AICPA FN: Measurement, AICPA PC: Problem Solving
and Decision Making, IMA: Cost Management

T2-2


16. The journal entries used to record cost flows in a process costing system differ from those used
to record cost flows in a job order costing system.
LO1 – False – The journal entries used to record cost flows in a process costing system are the same as
those used to record cost flows in a job order costing system.

LO: 1, Bloom: C, Unit: TF02-1, Difficulty: Moderate, Min: 1, AACSB: Analytic, AICPA FN: Measurement, AICPA PC: Problem Solving
and Decision Making, IMA: Cost Management

17. Both the process costing and job order costing systems accumulate product costs throughout the
production process and assign those costs to individual units of production.
LO1 – True
LO: 1, Bloom: C, Unit: TF02-1, Difficulty: Moderate, Min: 1, AACSB: Analytic, AICPA FN: Measurement, AICPA PC: Problem Solving
and Decision Making, IMA: Cost Management

18. Like process costing, job order costing makes no attempt to track an individual product’s costs,
all the products have similar costs.
LO1 – False – Job order costing tracks individual product costs.

LO: 1, Bloom: C, Unit: TF02-1, Difficulty: Difficult, Min: 1, AACSB: Analytic, AICPA FN: Measurement, AICPA PC: Problem Solving
and Decision Making, IMA: Cost Management

19. When there is no work in process inventory at the end of a period, cost accumulation and
reporting is extremely easy under process costing, as the product costs are simply added up and
divided evenly among the products produced.
LO1 – True

LO: 1, Bloom: C, Unit: TF02-1, Difficulty: Moderate, Min: 1, AACSB: Analytic, AICPA FN: Measurement, AICPA PC: Problem Solving
and Decision Making, IMA: Cost Management

20. When work is in process at the end of an accounting period, cost accumulation and reporting is
extremely easy under process costing, as the product costs are simply added up and divided
evenly among the products produced.
LO1 – False - When work is in process at the end of an accounting period, cost accumulation and
reporting is more complicated as cost must be assigned to the completed units and to the partially
completed units that remain in work in process inventory.
LO: 1, Bloom: C, Unit: TF02-1, Difficulty: Difficult, Min: 1, AACSB: Analytic, AICPA FN: Measurement, AICPA PC: Problem Solving
and Decision Making, IMA: Cost Management

21. Equivalent units (EU) of production is based on the percentage of completion for work in process
inventory at the end of the period.
LO3 – True
LO: 3, Bloom: K, Unit: TF02-3, Difficulty: Easy, Min: 1, AACSB: Analytic, AICPA FN: Measurement, AICPA PC: Problem Solving and
Decision Making, IMA: Cost Management

22. In a process costing system, labor and overhead costs are typically combined and referred to as
conversion costs.
LO2 – True
LO: 2, Bloom: K, Unit: TF02-2, Difficulty: Easy, Min: 1, AACSB: Analytic, AICPA FN: Reporting, AICPA PC: Communication, IMA:
Cost Management

T2-3


23. In a process costing system, labor and overhead costs are typically combined and referred to as
equivalent costs.
LO2 – False – In a process costing system, labor and overhead costs are typically combined and referred
to as conversion costs.
LO: 2, Bloom: K, Unit: TF02-2, Difficulty: Moderate, Min: 1, AACSB: Analytic, AICPA FN: Reporting, AICPA PC: Communication,
IMA: Cost Management

24. Equivalent units for direct materials and conversion costs should be added separately to total
units completed to arrive at the total equivalent units for materials and the total equivalent units
for conversion.
LO3 – True
LO: 3, Bloom: K, Unit: TF02-3, Difficulty: Moderate, Min: 1, AACSB: Analytic, AICPA FN: Measurement, AICPA PC: Problem Solving
and Decision Making, IMA: Cost Management

25. The objective of process costing is the same as job order costing: to assign all costs to specific

jobs.
LO1 – False – The object for process costing is the same as job order costing: to develop a product unit
cost to use in decision making and inventory valuation.

LO: 1, Bloom: C, Unit: TF02-1, Difficulty: Moderate, Min: 1, AACSB: Analytic, AICPA FN: Measurement, AICPA PC: Problem Solving
and Decision Making, IMA: Cost Management

T2-4


MULTIPLE-CHOICE QUESTIONS
26. Companies that mass-produce similar products or employ a continuous production process
typically use which of the following costing systems?
a. Job order
b. Process
c. Accumulation
d. Variable
LO1 – B

LO: 1, Bloom: K, Unit: TF02-1, Difficulty: Easy, Min: 2, AACSB: Analytic, AICPA FN: Reporting, AICPA PC: Communication, IMA:
Cost Management

27. Companies that mass-produce similar products or employ a continuous production process
typically use which of the following costing systems?
a. Process
b. Job order
c. Either process or job order
d. Neither process nor job order
LO1 –A

LO: 1, Bloom: K, Unit: TF02-1, Difficulty: Easy, Min: 2, AACSB: Analytic, AICPA FN: Reporting, AICPA PC: Communication, IMA:
Cost Management

28. The costing systems in which all product costs for the period are accumulated and divided evenly
over all units produced during the period is referred to as
a. Job order costing system
b. Accumulation costing system
c. Departmental costing system
d. Process costing system
LO1 – D
LO: 1, Bloom: K, Unit: TF02-1, Difficulty: Easy, Min: 2, AACSB: Analytic, AICPA FN: Measurement, AICPA PC: Problem Solving and
Decision Making, IMA: Cost Management

29. Which of the following types of entities would probably use a process costing system?
a. Construction
b. Ship building
c. Soft drink bottler
d. CPA firm
LO1 – C

LO: 1, Bloom: C, Unit: TF02-1, Difficulty: Moderate, Min: 2, AACSB: Analytic, AICPA FN: Reporting, AICPA PC: Communication,
IMA: Cost Management

30. Which of the following types of entities would probably use a process costing system?
a. Automobile repair shop
b. Paint manufacturer
c. Printing company
d. Law firm
LO1 – B

LO: 1, Bloom: C, Unit: TF02-1, Difficulty: Moderate, Min: 2, AACSB: Analytic, AICPA FN: Reporting, AICPA PC: Communication,
IMA: Cost Management

T2-5


31. Which of the following types of entities would probably use a process costing system?
a. Oil refiner
b. Construction company
c. Airplane manufacturer
d. CPA firm
LO1 – A

LO: 1, Bloom: C, Unit: TF02-1, Difficulty: Moderate, Min: 2, AACSB: Analytic, AICPA FN: Reporting, AICPA PC: Communication,
IMA: Cost Management

32. Which of the following costs are incurred in a process costing system?
a. Direct material
b. Direct labor
c. Manufacturing overhead
d. All of these answer choices are correct
LO1 – D

LO: 1, Bloom: C, Unit: TF02-1, Difficulty: Easy, Min: 2, AACSB: Analytic, AICPA FN: Reporting, AICPA PC: Communication, IMA:
Cost Management

33. Which of the following inventory accounts is not used in a process costing system?
a. Work in process
b. Finished goods
c. Cost of goods sold

d. All of these answer choices are used in a process costing system
LO1 – C

LO: 1, Bloom: C, Unit: TF02-1, Difficulty: Moderate, Min: 2, AACSB: Analytic, AICPA FN: Reporting, AICPA PC: Communication,
IMA: Cost Management

34. Which of the following inventory accounts is used in a process costing system?
a. Raw materials
b. Work in process
c. Finished goods
d. All of these answer choices are correct
LO1 – D

LO: 1, Bloom: C, Unit: TF02-1, Difficulty: Easy, Min: 2, AACSB: Analytic, AICPA FN: Reporting, AICPA PC: Communication, IMA:
Cost Management

35. In a job order costing system, the costs of each job are accumulated on a
a. Job cost sheet.
b. Departmental cost sheet.
c. End-of-job accumulation sheet.
d. None of these answer choices are correct.
LO1 – A

LO: 1, Bloom: K, Unit: TF02-1, Difficulty: Easy, Min: 2, AACSB: Analytic, AICPA FN: Measurement, AICPA PC: Problem Solving and
Decision Making, IMA: Cost Management

36. In a process costing system, when raw material is received in which of the following balance
sheet accounts is it recorded?
a. Raw materials inventory
b. Work in process inventory

T2-6


LO1 – A

c. Finished goods inventory
d. Cost of goods sold

LO: 1, Bloom: C, Unit: TF02-1, Difficulty: Moderate, Min: 2, AACSB: Analytic, AICPA FN: Measurement, AICPA PC: Problem Solving
and Decision Making, IMA: Cost Management

37. In a process costing system, when raw materials are moved into the mixing department, in which
of the following balance sheet accounts is it recorded?
a. Raw materials inventory – mixing
b. Work in process inventory – mixing
c. Finished goods inventory – mixing
d. Cost of goods sold
LO1 – B
LO: 1, Bloom: C, Unit: TF02-1, Difficulty: Moderate, Min: 2, AACSB: Analytic, AICPA FN: Measurement, AICPA PC: Problem Solving
and Decision Making, IMA: Cost Management

38. Which of the following is a similarity between job order costing and process costing systems?
a. Both accumulate product costs throughout the production process and assign those
costs to individual units of production
b. Both track individual product costs
c. Both accumulate product costs in each production department during the period
d. Both accumulate costs on a job cost sheet
LO1 – A

LO: 1, Bloom: C, Unit: TF02-1, Difficulty: Moderate, Min: 2, AACSB: Analytic, AICPA FN: Measurement, AICPA PC: Problem Solving

and Decision Making, IMA: Cost Management

39. Which of the following is a similarity between job order costing and process costing systems?
a. Both mass-produce identical products
b. Both accumulate direct materials, direct labor and manufacturing overhead costs
c. Both accumulate product cost on a departmental production report
d. None of these answer choices are similarities between job costing and process costing
systems.
LO1 – B

LO: 1, Bloom: C, Unit: TF02-1, Difficulty: Moderate, Min: 2, AACSB: Analytic, AICPA FN: Measurement, AICPA PC: Problem Solving
and Decision Making, IMA: Cost Management

40. Which of the following is a similarity between job order costing and process costing systems?
a. Both accumulate costs on a job cost sheet
b. Both accumulate product costs in each production department during the period
c. Both systems track cost flows from raw materials to work in process, from work in
process to finished goods, and from finished goods to cost of goods sold
d. Both produce many different types of products, often to customer specifications
LO1 – C

LO: 1, Bloom: C, Unit: TF02-1, Difficulty: Moderate, Min: 2, AACSB: Analytic, AICPA FN: Measurement, AICPA PC: Problem Solving
and Decision Making, IMA: Cost Management

T2-7


41. Which of the following is a similarity between job order costing and process costing systems?
a. Both accumulate product costs throughout the production process and assign those
costs to individual units of production

b. Both accumulate direct materials, direct labor, and manufacturing overhead costs
c. Both track cost flows from raw materials to work in process, from work in process to
finished goods, and from finished goods to cost of goods sold
d. All of these answer choices are similarities between job costing and process costing
systems
LO1 – D

LO: 1, Bloom: C, Unit: TF02-1, Difficulty: Moderate, Min: 2, AACSB: Analytic, AICPA FN: Measurement, AICPA PC: Problem Solving
and Decision Making, IMA: Cost Management

42. Which of the following is a difference between job order costing and process costing systems?
a. Companies that use a process costing system mass-produce identical products while
companies that use a job order costing system produce many different types of
products.
b. Companies that use a process costing system accumulate product costs throughout the
production process while companies that use a job order costing system accumulate
product cost only at the end of the production process.
c. Companies that use a process costing system accumulate direct material and direct
labor, but not manufacturing overhead while companies that use a job order costing
systems accumulate direct material, direct labor and manufacturing overhead.
d. All of these answer choices are differences between process costing and job order
costing systems.
LO1 – A
LO: 1, Bloom: C, Unit: TF02-1, Difficulty: Difficult, Min: 2, AACSB: Analytic, AICPA FN: Measurement, AICPA PC: Problem Solving
and Decision Making, IMA: Cost Management

43. Which of the following is a difference between job order costing and process costing systems?
a. Companies that use a process costing system accumulate product costs throughout the
production process while companies that use a job order costing system accumulate
product cost only at the end of the production process.

b. Companies that use a process costing system accumulate product costs in each
production department and allocate the costs evenly across all units produced in the
department during the period while companies that use job order costing accumulate
product costs by job and allocate those costs only to the units in that particular job.
c. Companies that use a process costing system accumulate direct material and direct
labor, but not manufacturing overhead while companies that use a job order costing
systems accumulate direct material, direct labor and manufacturing overhead.
d. All of these answer choices are differences between process costing and job order
costing systems.
LO1 – B
LO: 1, Bloom: C, Unit: TF02-1, Difficulty: Difficult, Min: 2, AACSB: Analytic, AICPA FN: Measurement, AICPA PC: Problem Solving
and Decision Making, IMA: Cost Management

T2-8


44. Which of the following is a difference between job order costing and process costing systems?
a. Companies that use a process costing system accumulate product costs throughout the
production process while companies that use a job order costing system accumulate
product cost only at the end of the production process.
b. Companies that use a process costing system accumulate direct material and direct
labor, but not manufacturing overhead while companies that use a job order costing
systems accumulate direct material, direct labor and manufacturing overhead.
c. Companies that use a process costing system accumulate product costs on the
departmental production report while companies that use a job order costing system
accumulate product costs on the job cost sheet.
d. All of these answer choices are differences between process costing and job order
costing systems.
LO1 – C
LO: 1, Bloom: C, Unit: TF02-1, Difficulty: Difficult, Min: 2, AACSB: Analytic, AICPA FN: Measurement, AICPA PC: Problem Solving

and Decision Making, IMA: Cost Management

45. When a department has work in process at the end of the period, the incomplete units must be
converted to
a. Actual units
b. Equivalent units
c. Transferred-in units
d. None of these answer choices are correct
LO3 – B

LO: 3, Bloom: C, Unit: TF02-3, Difficulty: Moderate, Min: 2, AACSB: Analytic, AICPA FN: Measurement, AICPA PC: Problem Solving
and Decision Making, IMA: Cost Management

46. When a department has work in process at the end of the period, we need to determine the
percentage of completion for the work in process. Based on that percentage we calculate
a. Actual units of production
b. Particular units of production
c. Equivalent units of production
d. Half-units of production
LO3 – C

LO: 3, Bloom: K, Unit: TF02-3, Difficulty: Moderate, Min: 2, AACSB: Analytic, AICPA FN: Measurement, AICPA PC: Problem Solving
and Decision Making, IMA: Cost Management

47. At the end of January, Monroe Industries had completed 65,000 units and left 8,000 units in
Work In process, 60% complete with respect to materials and 80% complete with respect to
conversion. How many equivalent units will be used to determine the cost per equivalent unit
for materials?
a. 66,600
b. 68,200

c. 69,800
d. 71,400
LO3 – C
LO: 3, Bloom: AP, Unit: TF02-4, Difficulty: Moderate, Min: 3, AACSB: Analytic, AICPA FN: Measurement, AICPA PC: Problem
Solving and Decision Making, IMA: Cost Management
Solution: 65,000 units + (60% x 8,000 units) = 69,800 equivalent units

T2-9


48. At the end of January, Monroe Industries had completed 65,000 units and left 8,000 units in
Work In process, 60% complete with respect to materials and 80% complete with respect to
conversion. Conversion costs will be assigned to how many equivalent units in the ending work
in process inventory?
a. 1,600
b. 6,400
c. 4,800
d. 8,000
LO3 – B

LO: 3, Bloom: AP, Unit: TF02-4, Difficulty: Difficult, Min: 3, AACSB: Analytic, AICPA FN: Measurement, AICPA PC: Problem Solving
and Decision Making, IMA: Cost Management
Solution: 8,000 units x 80% = 6,400 equivalent units

49. The mixing department of the Glasson Company started the month with 20,000 units in its
beginning work in process inventory. An additional 309,000 units were transferred into the
mixing department during the month. At the end of the month 29,000 units were in ending work
in process inventory in the mixing department. How many units were transferred out of the
mixing department during the period?
a. 280,000

b. 300,000
c. 318,000
d. 329,000
LO3 - B
LO: 3, Bloom: AP, Unit: TF02-4, Difficulty: Moderate, Min: 3, AACSB: Analytic, AICPA FN: Measurement, AICPA PC: Problem
Solving and Decision Making, IMA: Cost Management
Solution: 20,000 + 309,000 – 29,000 = 300,000 units

50. On December 31, Berry Company recorded the following information in the Mixing
Department’s Work in Process account:
Beginning balance (80% complete)
Started into production
Completed and transferred to Packaging
Ending balance (60% complete)

LO4 – C

Units
5,000
100,000
95,000
10,000

Cost
$50,000
$500,000

Assume that the unfinished units in ending inventory are 60% complete for both materials and
conversion. What is the cost per equivalent unit?
a. $5.18

b. $5.23
c. $5.44
d. $5.55

LO: 4, Bloom: AP, Unit: TF02-5, Difficulty: Moderate, Min: 3, AACSB: Analytic, AICPA FN: Measurement, AICPA PC: Problem
Solving and Decision Making, IMA: Cost Management
Solution: ($500,000 + $50,000) ÷ [95,000 + (10,000 x 60%) = $5.44

T2-10


51. On December 31, Berry Company recorded the following information in the Mixing
Department’s Work in Process account:
Beginning balance (80% complete)
Started into production
Completed and transferred to Packaging
Ending balance (60% complete)

Units
5,000
100,000
95,000
10,000

Cost
$50,000
$500,000

Assume that the unfinished units in ending inventory are 60% complete for both materials and
conversion. What is balance in the ending Work in Process on December 31?

a. $32,640
b. $33,300
c. $51,800
d. $52,300
LO4 – A

LO: 4, Bloom: AP, Unit: TF02-5, Difficulty: Difficult, Min: 3, AACSB: Analytic, AICPA FN: Measurement, AICPA PC: Problem Solving
and Decision Making, IMA: Cost Management
Solution: (10,000 x 60%) x $5.44 = $32,640

52. On March 31, Morgan Company recorded the following information in the Assembly
Department’s Work in Process account:
Beginning balance (70% complete)
Started into production
Completed and transferred to Packaging
Ending balance (80% complete)

LO4 – B

Units
14,000
80,000
90,000
4,000

Cost
$60,000
$229,852

Assume that the unfinished units in ending inventory are 80% complete for both materials and

conversion. What is the total cost assigned to ending work in process?
a. $9,856
b. $9,952
c. $12,880
d. $14,480

LO: 4, Bloom: AP, Unit: TF02-6, Difficulty: Difficult, Min: 3, AACSB: Analytic, AICPA FN: Measurement, AICPA PC: Problem Solving
and Decision Making, IMA: Cost Management
Solution: (4,000 x 80%) x [($229,852 + $60,000) ÷ [90,000 + (4,000 x 80%)] = $9,952

T2-11


53. Bemis Corporation’s Assembly Department had 2,000 units in beginning inventory that were
70% complete with respect to conversion. An additional 60,000 units were transferred into
Assembly during the period. Assembly had 12,000 units remaining in work in process at the end
of the period. These units were 60% complete with respect to conversion. What were the
equivalent units for conversion?
a. 54,800
b. 57,200
c. 64,800
d. 72,000
LO3 – B

LO: 3, Bloom: AP, Unit: TF02-4, Difficulty: Difficult, Min: 3, AACSB: Analytic, AICPA FN: Measurement, AICPA PC: Problem Solving
and Decision Making, IMA: Cost Management
Solution: 2,000 + 48,000 + (12,000 x 60%) = 57,200 equivalent units

54. Which of the following is not a step in calculating the unit product cost?
a. Calculate the equivalent units of production

b. Allocate the equivalent unit costs of production
c. Divide the total equivalent costs by the total units
d. Reconcile the costs of production
LO4 – C

LO: 4, Bloom: K, Unit: TF02-5, Difficulty: Easy, Min: 2, AACSB: Analytic, AICPA FN: Measurement, AICPA PC: Problem Solving and
Decision Making, IMA: Cost Management

55. Which of the following is not a step in calculating the unit product cost?
a. Calculate the physical unit flow
b. Calculate the equivalent units of production
c. Calculate the cost per equivalent unit
d. Multiply the physical unit flow by the equivalent unit cost.
LO4 – D

LO: 4, Bloom: K, Unit: TF02-5, Difficulty: Easy, Min: 2, AACSB: Analytic, AICPA FN: Measurement, AICPA PC: Problem Solving and
Decision Making, IMA: Cost Management

56. When using a process costing system, the formula to reconcile the physical unit flow is
a. Beginning WIP units + Units started = Units transferred out + Ending WIP units
b. Beginning WIP units + Units transferred out = Units started + Ending WIP units
c. Units started – Beginning WIP units= Units transferred out + Ending WIP units
d. Beginning WIP units + Units transferred out = Units started – Ending inventory
LO4 – A

LO: 4, Bloom: K, Unit: TF02-5, Difficulty: Moderate, Min: 2, AACSB: Analytic, AICPA FN: Measurement, AICPA PC: Problem Solving
and Decision Making, IMA: Cost Management

57. The units of product in the ending work in process inventory must be converted to equivalent
units of production separately for the direct materials and conversion costs because

a. The units may be in different departments at the end of the period
b. The units may not be at the same stage of completion
c. The conversion cost may have been added at the beginning of the process
d. None of these answer choices are correct
LO4 – B
LO: 4, Bloom: C, AN, Unit: TF02-5, Difficulty: Difficult, Min: 2, AACSB: Analytic, AICPA FN: Measurement, AICPA PC: Problem
Solving and Decision Making, IMA: Cost Management

T2-12


58. To determine the equivalent units produced,
a. Multiply the percentage of completion for each cost category by the number of physical
units in the ending work in process inventory.
b. Divide the percentage of completion for each cost category by the number of physical
units in the ending work in process inventory.
c. Add the cost of production to beginning work in process inventory and divide this total
by the physical units transferred out.
d. Multiply the number of physical units in ending work in process by the cost per physical
units.
LO3 – A

LO: 3, Bloom: K, Unit: TF02-3, Difficulty: Moderate, Min: 2, AACSB: Analytic, AICPA FN: Measurement, AICPA PC: Problem Solving
and Decision Making, IMA: Cost Management

59. When using a process costing system, the formula for reconciling the costs of production is
a. Beginning WIP balance + Costs transferred out during the period + Ending WIP = Total
costs accounted for
b. Beginning WIP balance + Cost added during the period = Cost transferred out during the
period + Ending WIP balance

c. Cost added during the period – Beginning WIP balance = Cost transferred out during the
period + Ending WIP balance
d. Beginning WIP balance + Cost transferred out – Ending inventory = Total costs to
accounted for
LO4 – B
LO: 4, Bloom: K, Unit: TF02-5, Difficulty: Easy, Min: 2, AACSB: Analytic, AICPA FN: Measurement, AICPA PC: Problem Solving and
Decision Making, IMA: Cost Management

T2-13


MATCHING
60. Match the following terms to the appropriate statement by placing the letter to the left of each
statement.
a.
b
.
c.
d
.
___
_
___
_
___
_
___
_
___
_

___
_
___
_
___
_

Brewery
Conversion costs

e.
f.

Reconciliation of physical unit flow formula
Reconciliation of costs of production formula

Equivalent units
Process costing system

g.
h.

Shipbuilding
Work in process

1. Beginning WIP units + Units started = Units transferred out + Ending WIP units
2. A way of representing partially completed units in completed form
3. Units in ending inventory at the end of the period
4. An example of a company that would use process costing
5. Beginning WIP balance + Costs added during the period = Costs transferred out during the

period + Ending WIP balance
6. Labor plus manufacturing overhead
7. Used by companies that mass-produce similar products or employ a continuous production
process
8. An example of a company that would not use process costing

LO1, 2, 3, 4, 5, 6
Solution:
1.
2.
3.
4.
5.
6.
7.
8.

e – Reconciliation of physical unit flow formula
c– Equivalent units
h – Work in process
a –Brewery
f –Reconciliation of costs of production formula
b– Conversion costs
d –Process costing system
g – Shipbuilding

LO: 1,2,3,4,5,6, Bloom: C, K, Unit: TF02-1, TF02-2, TF02-3, TF02-4, TF02-5, TF02-6, Difficulty: Moderate, Min: 8, AACSB: Analytic,
AICPA FN: Reporting, AICPA PC: Problem Solving and Decision Making, IMA: Cost Management

T2-14

BRIEF EXERCISES
61. Identify which costing method is more likely to be used to accumulate costs for the following
products or services by marking an “X” in the appropriate column.
Process

Job Order

High-rise office building
Cooking oil
Artwork
M&M candy
Light bulbs
LO1
Solution:
Process
High-rise office building
Cooking oil
Artwork
M&M candy
Light bulbs

Job Order
X

X
X
X
X

LO: 1, Bloom: C, Unit: TF02-1, Difficulty: Moderate, Min: 5, AACSB: Analytic, AICPA FN: Reporting, AICPA PC: Problem Solving and
Decision Making, IMA: Cost Management

62. Identify which costing method is more likely to be used to accumulate costs for the following
products or services by marking an “X” in the appropriate column.
Process

Job Order

Process

Job Order
X

Movies
Cotton fabric
Sculptures
Rice-A-Roni
Auto repair
LO1
Solution:

Movies
Cotton fabric
Sculptures
Rice-A-Roni
Auto repair

X

X
X
X

T2-15


LO: 1, Bloom: C, Unit: TF02-1, Difficulty: Moderate, Min: 5, AACSB: Analytic, AICPA FN: Reporting, AICPA PC: Problem Solving and
Decision Making, IMA: Cost Management

63. Fill in the missing data (ignore indirect materials)

Beginning Balance
Material purchased
Direct material used
Conversion costs incurred
Completed units transferred
Cost of goods sold
Ending balance

Raw Materials
Inventory
$ 4,000
10,000
12,000

(a)

WIP - Mixing

WIP - Assembly

$6,000

$10,000

10,000
8,000

(c)
3,000
(d)

21,000

(b)

(e)

$3,000

LO2
Solution:

Beginning Balance
Material purchased
Direct material used
Conversion costs incurred
Completed units transferred
Cost of goods sold

Ending balance

Raw Materials
Inventory
$ 4,000
10,000
12,000

WIP - Mixing
$6,000

$10,000

10,000
8,000

(c)2,000
3,000
(d)21,00
0

21,000

(a)$2,000

WIP - Assembly

(b)
$3,000

(e)33,000

$3,000

LO: 2, Bloom: AN, Unit: TF02-1, Difficulty: Moderate, Min: 10, AACSB: Analytic, AICPA FN: Measurement, AICPA PC: Problem
Solving and Decision Making, IMA: Cost Management

64. In March, Connor’s, Inc. completed 150,000 units; 12,000 units still in process at the end of the
period were 60% complete with respect to materials and conversion.
Required:
a. How many equivalent units were in Connor’s ending work in process inventory?
b. How many equivalent units will be used to calculate the cost per equivalent unit?
LO4
Solution:

T2-16


a. 12,000 x 60% = 7,200 with respect to materials and conversion
b. 150,000 + 7,200 = 157,200 with respect to materials and conversion
LO: 4, Bloom: AP, Unit: TF02-4, Difficulty: Moderate, Min: 8, AACSB: Analytic, AICPA FN: Reporting, AICPA PC: Problem Solving
and Decision Making, IMA: Cost Management

EXERCISES
65. Identify which costing method is more likely to be used to accumulate costs for the following
products or services by marking an “X” in the appropriate column.
Process

Job Order

Bricks
Law firm
Advertising agency
Beverages
Appliance repair
Baby diapers
Airplanes
Chemicals
Movie studio
Breakfast cereal
LO1
Solution:
Process
X

Bricks
Law firm
Advertising agency
Beverages
Appliance repair
Baby diapers
Airplanes
Chemicals
Movie studio
Breakfast cereal

Job Order
X
X

X
X
X
X
X
X
X

LO: 1, Bloom: C, Unit: TF02-1, Difficulty: Moderate, Min: 10, AACSB: Analytic, AICPA FN: Reporting, AICPA PC: Problem Solving
and Decision Making, IMA: Cost Management

T2-17


66. Identify which costing method is described in the statements below by marking an “X” in the
appropriate column (some items may apply to both).
Process

Job-Order

Process
X
X

Job-Order

Accumulates cost by department
Manufacturing costs include direct material, direct labor and overhead
Many different products produced, each with different material, labor
and/or overhead requirements

Key document is job cost sheet
Accumulates cost by job
Cost flows from Raw Materials to Work in Process to Finished Goods to
Cost of Goods Sold
Requires calculation of equivalent units
Key document is department production report
Identical products produced over a long period, often in a continuous
production process
LO1
Solution:

Accumulates cost by department
Manufacturing costs include direct material, direct labor and overhead
Many different products produced, each with different material, labor
and/or overhead requirements
Key document is job cost sheet
Accumulates cost by job
Cost flows from Raw Materials to Work in Process to Finished Goods to
Cost of Goods Sold
Requires calculation of equivalent units
Key document is department production report
Identical products produced over a long period, often in a continuous
production process

X
X
X
X

X

X

X
X
X

LO: 1, Bloom: C, Unit: TF02-1, Difficulty: Moderate, Min: 10, AACSB: Analytic, AICPA FN: Reporting, AICPA PC: Problem Solving
and Decision Making, IMA: Cost Management

67. Stewart Manufacturing uses a process costing system. Information regarding units processed and
processing costs for the Packaging Department for the most recent period are given below:

Beginning work in process inventory
Units started into production
Units completed and transferred out of Packaging
Ending work in process inventory

T2-18

Number
of Units
1,200
10,000
9,400
1,800

Percentage
Complete
25%

35%


The beginning work in process had processing costs of $10,000. During the month, an additional
$290,000 in processing costs were incurred. Materials and conversion costs are incurred at the
same rate.
Required:
a. What are the equivalent units for processing costs for the Packaging Department for the
month?
b. What is the cost per equivalent unit for the month?
LO3,4
Solution:
a. Equivalent units:
Units to account for:
Work in process, beginning
Started into production
Total units
Units accounted for:
Transferred out
Ending inventory
Total Units
b. Cost per equivalent unit
Cost to account for:
Work in process, beginning
Cost added
Total cost

1,200
10,000

11,200
9,400
1,800
11,200

EU – Materials & Conversion
9,400
630
10,030

$ 10,000
290,000
$300,000

Cost per equivalent: $300,000 ÷ 10,030 = $29.91
LO: 3, 4, Bloom: AP, Unit: TF02-4, TF02-5, TF02-6, Difficulty: Moderate, Min: 10-12, AACSB: Analytic, AICPA FN: Measurement,
AICPA PC: Problem Solving and Decision Making, IMA: Cost Management

T2-19


68. Morgan Company reported the following data for the operations of its Mixing Department for
the month of July.

Beginning work in process
(90% complete with respect to material)
(40% complete with respect to conversion)
Started into production
Transferred out
Ending work in process

(50% with respect to materials)
(30% with respect to conversion)

T2-20

Units
200

Material
$1,120

Costs
Conversion
$7,488

15,000
13,600
1,600

$32,000

$360,000


Required:
a. Calculate the equivalent units of production for materials and conversion costs.
b. Determine the cost per equivalent unit for materials and conversion costs.
c. Determine the cost of units transferred out of the Mixing Department during the period.
d. Determine the cost of ending work in process inventory in the Mixing Department.
LO3,4

Solution
Units to account for:
Work in process, beginning
Started into production
Total units
Units accounted for
Transferred out
Work in process, ending
Cost per equivalent unit
Work in process, beginning
Cost added during period
Total cost
Equivalent units
Cost per equivalent unit
Cost per whole unit
Cost accounted for
Transferred out
Work in process, ending
Materials
Conversion
Total work in process, ending
Total Cost

200
15,000
15,200
13,600
1,600
15,200

EU – Material
13,600
800
14,400

EU – Conversion
13,600
480
14,080

Total Cost
$8,608
$392,000
$400,608

Materials
$1,120
$32,000
$33,120

Conversion
$7,488
$360,000
$367,488

14,400
$2.30

14,080
$26.10

Total Cost
$386,240

EU -Materials
13,600

EU - Conversion
13,600

$1,840
$12,528
$14,368
$400,608

800

$28.40

LO: 3,4, Bloom: AP, Unit: TF02-4, TF02-5, TF02-6, Difficulty: Difficult, Min: 18-20, AACSB: Analytic, AICPA FN: Measurement,
AICPA PC: Problem Solving and Decision Making, IMA: Cost Management

T2-21

480


SHORT ANSWER
69. List three goods or services likely to use a process costing system and three that are likely to use
a job order costing system.

LO1
Solution:
Answer will vary, Examples goods or services that are likely to use a process costing system
include textiles, refining, foods, paint, bricks or tiles. Example of goods or services that are likely
to use job order costing include airplanes, furniture, designer dresses, CPA firms, law firms,
hospital procedures.
LO: 1, Bloom: C, Unit: TF02-1, Difficulty: Moderate, Min: 5-7, AACSB: Analytic, AICPA FN: Reporting, AICPA PC: Problem Solving
and Decision Making, IMA: Cost Management

70. List three similarities between process costing and job-order costing.
LO1
Solution:
1. The objective of both is to accumulate and assign manufacturing cost to products.
2. Manufacturing costs for both consist of direct material, direct labor and manufacturing
overhead.
3. The cost flows are the same: from Raw Materials Inventory to Work in Process to Finished
Goods to Cost of Goods Sold.
LO: 1, Bloom: C, Unit: TF02-1, Difficulty: Easy, Min: 5-7, AACSB: Analytic, AICPA FN: Reporting, AICPA PC: Problem Solving and
Decision Making, IMA: Cost Management

T2-22


ESSAY
71. When using a process costing system, explain the steps you use in assigning costs to units
completed and transferred out of a department and to ending work in process.
LO3, 4
Solution:
Calculate the physical unit flow by adding the number of units started into production during the
period to the number of units in beginning inventory, then deduct the units transferred to

calculate ending work in process units.
Calculate the equivalent units of production separately for materials and conversion. To
determine the number of equivalent units produced, multiply the percentage of completion for
each cost category by the number of physical units in the ending work in process inventory. Add
these results to the number of units transferred out of the department to obtain the total
equivalent units of production for the period.
Calculate the cost per equivalent unit by adding the cost of direct materials incurred during the
period to the direct material cost in beginning work in process. Divide this total by the equivalent
units for direct materials. Next do the same calculation for conversion.
Allocate the equivalent unit costs of production by multiplying the number of equivalent units in
the ending work in process inventory by the cost per equivalent unit to determine the amount of
ending work in process. Then multiply the number of units transferred out by the cost per
equivalent unit to determine the total cost transferred out of the department. Separate
calculations should be done for materials and conversion.
Reconcile the costs of production using the following equation:
Beginning WIP balance + Costs added during the period = Costs transferred out during
the period + Ending WIP balance
Repeat the above steps for each department.
LO: 3,4, Bloom: K, Unit: TF02-3, TF02-4, TF02-5,TF02-6, Difficulty: Moderate, Min: 15-20, AACSB: Analytic, AICPA FN:
Measurement, AICPA PC: Problem Solving and Decision Making, IMA: Cost Management

T2-23