Acct 2302 Exam 1_v2_key

Managerial Accounting

Exam 1

1. Managerial accounting places considerable weight on:

A) generally accepted accounting principles.

B) the financial history of the entity.

C) ensuring that all transactions are properly recorded.

D) detailed segment reports about departments, products, and customers.

Answer: D AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Measurement LO: 1 Level: Easy

2. The plans of management are often expressed formally in:

A) financial statements.

B) performance reports.

C) budgets.

D) ledgers.

Answer: C AACSB: Reflective Thinking AICPA BB: Resource Management AICPA FN: Measurement LO: 1 Level: Easy

3. The phase of accounting concerned with providing information to managers for use in planning and controlling operations and in decision making is called:

A) throughput time.

B) managerial accounting.

C) financial accounting.

D) controlling.

Answer: B AACSB: Reflective Thinking AICPA BB: Resource Management AICPA FN: Measurement LO: 1 Level: Easy

4.The cost of the cushions that are used to manufacture sofas is best described as a:

A) manufacturing overhead cost.

B) period cost.

C) variable cost.

D) conversion cost.

Ans: C AACSB: Reflective Thinking 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:

Indirect labor Fixed manufacturing overheadA) No NoB) Yes YesC) Yes NoD) No Yes

Ans: B AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: 1,5 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) direct materials.

B) a period cost.

C) administrative expense.

D) manufacturing overhead.

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

7. Direct costs:

A) are incurred to benefit a particular accounting period.

B) are incurred due to a specific decision.

C) can be easily traced to a particular cost object.

D) are the variable costs of producing a product.

Ans: C AACSB: Reflective Thinking 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) period costs.

B) selling expenses.

C) cost of goods sold.

D) 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) Direct materials.

B) Direct labor.

C) Fixed manufacturing overhead.

D) 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) decrease.

B) increase.

C) remain the same.

D) 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) sunk costs.

B) inventoriable costs.

C) opportunity costs.

D) marketing costs.


12. Abel Company's manufacturing overhead is 20% of its total conversion costs. If direct labor is $38,000 and if direct materials are $47,000, the manufacturing overhead is:

A) $152,000

B) $11,750

C) $21,250

D) $9,500

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

13. Consider the following costs:

Direct materials.......................................... $33,000Depreciation on factory equipment............ $12,000Factory janitor’s salary.............................. $23,000Direct labor................................................ $28,000Utilities for factory..................................... $9,000Selling expenses......................................... $16,000Production supervisor’s salary................... $34,000Administrative expenses............................ $21,000

What is the total amount of manufacturing overhead included above?

A) $78,000

B) $139,000

C) $44,000

D) $37,000

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

Solution:

Depreciation on factory equipment............ $12,000Factory janitor’s salary.............................. 23,000Utilities for factory..................................... 9,000Production supervisor’s salary................... 34,000 Total........................................................... $78,000

14.Manufacturing overhead includes:

A) all direct material, direct labor and administrative costs.

B) all manufacturing costs except direct labor.

C) all manufacturing costs except direct labor and direct materials.

D) all selling and administrative costs.


15.All of the following are examples of product costs except:

A) depreciation on the company's retail outlets.

B) salary of the plant manager.

C) insurance on the factory equipment.

D) rental costs of the factory facility.

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

16. Conversion costs consist of:

A) direct and indirect labor.

B) direct labor and direct materials.

C) direct labor and manufacturing overhead.

D) prime costs and manufacturing overhead.

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

17.Which of the following statements is correct concerning job-order costing?

A) Job-order costing would be appropriate for a textbook publisher.

B) All the costs appearing on a job cost sheet are actual costs.

C) Indirect materials are charged to a specific job.

D) Job-order costing is mainly used in firms with homogeneous products such as oil refineries.

Ans: A AACSB: Reflective Thinking 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) A small appliance repair shop.

B) A manufacturer of commercial passenger aircraft.

C) A specialty equipment manufacturer.

D) A breakfast cereal manufacturer.

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

19. The job cost sheet:

A) summarizes all costs charged to a particular job.

B) contains only direct costs such as direct materials and direct labor.

C) is discarded after production is completed on a particular job.

D) is useful only in process costing.

Ans: A AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting

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

Direct materials used $4,200Direct labor-hours worked 300Direct labor rate per hour $8.00Machine-hours used 200Predetermined overhead rate per machine-hour............... $15.00

What is the total manufacturing cost recorded on Job 1501?

A) $8,800

B) $9,600

C) $10,300

D) $11,100

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

Solution:

Direct materials used............................................................................... $4,200

Direct labor (300 hours × $8.00 per hour)................................................ 2,400

Manufacturing overhead applied (200 hours × $15.00 per hour)............ 3,000

Total manufacturing cost for job 1501..................................................... $9,600

21. Avery Co. uses a predetermined overhead rate based on direct labor-hours to apply manufacturing overhead to jobs. For the month of October, Avery's estimated manufacturing overhead cost was $300,000 based on an estimated activity level of 100,000 direct labor-hours. Actual overhead amounted to $325,000 with actual direct labor-hours totaling 110,000 for the month. How much was the overapplied or underapplied overhead?

A) $25,000 overapplied

B) $25,000 underapplied

C) $5,000 overapplied

D) $5,000 underapplied

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

Solution:

Actual manufacturing overhead............................................................... $325,000

Applied manufacturing overhead ($3 per DLH* × 110,000 DLHs)............ 330,000

Manufacturing overhead overapplied...................................................... $ 5,000

*Predetermined overhead rate = $300,000 ÷ 100,000 direct labor-hours = $3 per direct labor-hour

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

22. Darrow Company uses a predetermined overhead rate based on direct labor-hours to apply manufacturing overhead to jobs. Last year, the company worked 10,000 direct labor-hours and incurred $80,000 of actual manufacturing overhead cost. If overhead was underapplied by $2,000, the predetermined overhead rate for the company for the year must have been:

A) $7.80

B) $8.00

C) $8.20

D) $8.40

Ans: A AACSB: Analytic 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 overhead10,000 × Predetermined overhead rate = $78,000

Predetermined overhead rate = $78,000 ÷ 10,000 direct labor-hoursPredetermined overhead rate = $7.80 per direct labor-hour

23. Linh Corporation applies manufacturing overhead to jobs on the basis of pounds of direct material used. Linh estimated 160,000 pounds of material usage and $200,000 of manufacturing overhead cost for the year. During the year, Linh actually used 150,000 pounds of material and incurred $171,000 of manufacturing overhead cost. What was Linh's underapplied or overapplied overhead for the year?

A) $12,500 underapplied

B) $16,500 overapplied

C) $17,600 underapplied

D) $29,000 overapplied

Ans: B AACSB: Analytic 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............................................. $171,000

Applied manufacturing overhead (150,000 × $1.25).............. 187,500

Manufacturing overhead overapplied.................................... $ 16,500


24. Brusveen Corporation applies manufacturing overhead to jobs on the basis of direct labor-hours. The following information relates to Brusveen for last year:

Estimated ActualDirect labor-hours.......................... 15,000 14,800Manufacturing overhead cost......... $300,000 $287,120

What was Brusveen's underapplied or overapplied overhead for last year?

A) $4,000 underapplied

B) $8,880 underapplied

C) $8,880 overapplied

D) $9,000 underapplied

Ans: C AACSB: Analytic 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............................................ $287,120

Applied manufacturing overhead (14,800 × $20).................. 296,000

Manufacturing overhead overapplied................................... $ 8,880


25. Washtenaw Corporation uses a job-order costing system. The following data are for last year:

Estimated direct labor-hours 12,000Estimated manufacturing overhead costs $39,000Actual direct labor-hours 11,000Actual manufacturing overhead costs $37,000

Washtenaw applies overhead using a predetermined rate based on direct labor-hours. What amount of overhead was applied to work in process last year?

A) $39,050

B) $42,600

C) $35,750

D) $36,960

Ans: C AACSB: Analytic 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............................. $60,000 $40,000Manufacturing overhead................ $90,000 $45,000Direct labor-hours.......................... 6,000 9,000Machine-hours............................... 2,000 15,000

What predetermined overhead rates would be used in Dept A and Dept B, respectively?

A) 67% and $3.00

B) 150% and $5.00

C) 150% and $3.00

D) 67% and $5.00

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

Solution:

Department A:Predetermined overhead rate

=Estimated total manufacturing overhead costEstimated total amount of the allocation base

=$90,000

= 150% of direct labor cost$60,000

Department B:Predetermined overhead rate

=Estimated total manufacturing overhead costEstimated total amount of the allocation base

=$45,000

= $3.00 per machine-hour15,000

27. Reamer Company uses a predetermined overhead rate based on machine-hours to apply manufacturing overhead to jobs. The company has provided the following estimated costs for next year:

Direct materials.......................................... $1,000Direct labor................................................ $3,000Sales commissions..................................... $4,000Salary of production supervisor................. $2,000Indirect materials....................................... $400Advertising expense................................... $800Rent on factory equipment......................... $1,000

Reamer estimates that 500 direct labor-hours and 1,000 machine-hours will be worked during the year. The predetermined overhead rate per hour will be:

A) $6.80

B) $6.00

C) $3.00

D) $3.40

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

Solution:

Manufacturing overhead:

Salary of production supervisor................... $2,000

Indirect materials......................................... 400

Rent on factory equipment.......................... 1,000

Total estimated manufacturing overhead........... $3,400

Predetermined overhead rate

=Total estimated manufacturing overhead

Estimated machine-hours

Predetermined overhead rate

=$3,400

= $3.40 per machine-hour1,000

28.Which of the following statements related to job-order costing and process costing are true?

A) Under both costing methods, manufacturing overhead costs are included in the computation of unit product costs.

B) Under both costing methods, the journal entry to record the completion of production will involve crediting a work in process account.

C) Under both costing methods, the journal entry to record the cost of goods sold will involve crediting the finished goods account.

D) All of the above are true.

Ans: D AACSB: Analytic 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:

Job-order costing Process costingA) Yes NoB) Yes YesC) No YesD) No 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) individual order.

B) equivalent unit.

C) processing department.

D) cost category (i.e., materials, conversion cost).


31. The weighted-average method of process costing differs from the FIFO method of process costing in that the weighted-average method:

A) does not consider the degree of completion of beginning work in process inventory when computing equivalent units of production.

B) considers ending work in process inventory to be fully complete.

C) will always yield a higher cost per equivalent unit.

D) All of the above.

Ans: A AACSB: Analytic 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?

Percentage completion of beginning work in process

Percentage completion of ending work in process

A) Yes YesB) No YesC) Yes NoD) 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 BottlingCases of cola in work in process, January 1 10,000 3,000Cases 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......................................................... 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) 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:


+ 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:

Materials ConversionWork in process 5/1....................... $13,800 $3,740Costs 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%

6,000 3,000

complete).............................................................

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)........................... 18,000 15,000

Cost per equivalent unit, (a) ÷ (b)............................ $3.10 $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) $6.400

B) $6.334

C) $6.209

D) $4.811


Solution:


+ 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


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


Conversion

Cost of beginning work in process............................................ $ 19,200

Cost added during the period................................................... 380,060

Total cost (a)............................................................................ $399,260

Equivalent units of production (b)............................................ 64,300

Cost per equivalent unit, (a) ÷ (b)............................................. $6.209

37. Limber Company uses the weighted-average method in its process costing system. Operating data for the first processing department for the month of June appear below:

Units

Percent Complete with

Respect to Conversion

Beginning work in process inventory........ 18,000 80%Started into production during June........... 81,000Ending 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

Solution:


+ 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


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


Conversion

Cost of beginning work in process............................................. $15,264

Cost added during the period.................................................... 68,208

Total cost (a).............................................................................. $83,472

Equivalent units of production (b)............................................. 95,600

Cost per equivalent unit, (a) ÷ (b).............................................. $0.873

38. Hammoudi Company uses the weighted-average method in its process costing system. The first processing department, the Welding Department, started the month with 16,000 units in its beginning work in process inventory that were 90% complete with respect to conversion costs. The conversion cost in this beginning work in process inventory was $61,920. An additional 53,000 units were started into production during the month and 45,000 units were completed in the Welding Department and transferred to the next processing department. There were 24,000 units in the ending work in process inventory of the Welding Department that were 70% complete with respect to conversion costs. A total of $194,340 in conversion costs were incurred in the department during the month.

What would be the cost per equivalent unit for conversion costs for the month? (Round off to three decimal places.)

A) $4.300

B) $4.147

C) $2.524

D) $3.667

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

Solution:


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


Conversion

Cost of beginning work in process.......................................................... $ 61,920

Cost added during the period................................................................. 194,340

Total cost (a)........................................................................................... $256,260

Equivalent units of production (b).......................................................... 61,800

Cost per equivalent unit, (a) ÷ (b)........................................................... $4.147

39. Paquet Company uses the weighted-average method in its process costing system. The Molding Department is the second department in its production process. The data below summarize the department's operations in January.

Units

Percent Complete with

Respect to Conversion

Beginning work in process inventory 7,700 40%Transferred in from the priordepartment during January 56,000Completed and transferred to the nextdepartment during January 58,400Ending 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


Solution:

Units transferred out 58,400Add: equivalent units in the ending inventory (5300 × 90% 4,770

complete)Equivalent units of production 63,170

Cost in the beginning inventory $ 16,940Cost added during the month 347,320 Total cost $364,260

$364,260 ÷ 63,170 units = $5.766 per unit

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 NoneFinished goods 75,000

Inventory at January 31:Work in process (conversion 75% complete)............... 16,000Finished 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 250,000+ Ending finished goods inventory........... 60,000− Beginning finished goods inventory...... 75,000 = Units transferred out.............................. 235,000

Units transferred out......................................................... 235,000Ending work in process (16,000 units × 75% complete).. 12,000 Equivalent units of production.......................................... 247,000

41. Boswal Company uses the weighted-average method in its process costing system. The Assembly Department started the month with 6,000 units in its beginning work in process inventory that were 80% complete with respect to conversion costs. An additional 52,000 units were transferred in from the prior department during the month to begin processing in the Assembly Department. There were 18,000 units in the ending work in process inventory of the Assembly Department that were 20% complete with respect to conversion costs.

What were the equivalent units for conversion costs in the Assembly Department for the month?

A) 43,600

B) 40,000

C) 38,800

D) 64,000


Solution:


Work in process, beginning....................................................... 6,000

+ Units started into production during the month.................... 52,000

− Work in process, ending......................................................... 18,000

= Units completed and transferred out during the month........ 40,000

ConversionTransferred to next department 40,000Ending work in process (18,000 units × 20% complete). 3,600 Equivalent units of production 43,600

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:

Units

Percent Complete

with Respect to Conversion

Beginning work in process inventory 4,700 90%Transferred in from the prior department during April. . 59,700Ending work in process inventory 7,300 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


Solution:

Units in beginning inventory.................... 4,700+ Units started into production................. 59,700− Units in ending inventory...................... 7,300 = Units transferred out.............................. 57,100

Equivalent units transferred out 57,100Add: Equivalent units in the ending work in process

inventory (7,300 units × 80% complete) 5,840 Equivalent units for conversion costs 62,940

43. Parks Company uses the weighted-average method in its process costing system. At the start of the year, the company had 5,000 units in process in Department A that were 60% complete with respect to conversion costs. At the end of the year, 6,500 units were in process, 40% complete with respect to conversion costs. During the year, 30,000 units were completed and transferred on to the next department. The equivalent units for conversion costs would be:

A) 32,600 units

B) 29,600 units

C) 33,000 units

D) 30,000 units

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

Solution:



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:

UnitsWork in process, April 1 (conversion 60% complete).... 3,000Started in April 25,000Completed 20,000Work in process, April 30 (conversion 75% complete). . 8,000

The equivalent units for conversion cost are:

A) 26,000

B) 25,000

C) 24,200

D) 21,800

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

Solution:



45. Fatas Corporation uses the weighted-average method in its process costing system. The Assembly Department started the month with 8,000 units in its beginning work in process inventory that were 20% complete with respect to conversion costs. An additional 95,000 units were transferred in from the prior department during the month to begin processing in the Assembly Department. During the month 102,000 units were completed in the Assembly Department and transferred to the next processing department. There were 1,000 units in the ending work in process inventory of the Assembly Department that were 20% complete with respect to conversion costs.

What were the equivalent units for conversion costs in the Assembly Department for the month?

A) 102,200

B) 100,600

C) 102,000

D) 88,000

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

Solution:


inventory (1,000 units × 20% complete) 200 Equivalent units for conversion costs 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:

Units

Percent Complete

with Respect to Conversion

Beginning work in process inventory 9,100 20%Transferred in from the prior department during

October 38,500Completed and transferred to the next department

during October 41,000Ending work in process inventory 6,600 70%

What were the equivalent units for conversion costs in the Lubricating Department for October?

A) 41,000

B) 43,120

C) 36,000

D) 45,620

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

Solution:

Units in beginning inventory................... 9,100+ Units started into production................... 38,500− Units in ending inventory........................ 6,600 = Units transferred out................................ 41,000


inventory (6,600 units × 70% complete) 4,620

Equivalent units for conversion costs 45,620

47. Kew Company uses the weighted-average method in its process costing system. The company had 3,000 units in work in process at April 1 that were 60% complete with respect to conversion cost. During April, 10,000 units were completed. At April 30, 4,000 units remained in work in process and they were 40% complete with respect to conversion cost. Direct materials are added at the beginning of the process. How many units were started during April?

A) 9,000

B) 9,800

C) 10,000

D) 11,000

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

Solution:

To solve for units started into production:

+ Work in process, ending.............................................................. 4,000

+ Units completed and transferred out during the month............. 10,000

− Work in process, beginning......................................................... 3,000

= Units started into production during the month......................... 11,000

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

A) costs incurred during the current period only.

B) costs incurred during the current period plus cost of ending work in process inventory.

C) costs incurred during the current period plus cost of beginning work in process inventory.

D) costs incurred during the current period less cost of beginning work in process inventory.

Ans: C AACSB: Reflective Thinking AICPA BB: Critical Thinking 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?

Material cost assigned to beginning work in process last period

Material cost added to production during the current period

A) Yes YesB) No YesC) Yes NoD) 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) 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

Bonus

51.Malcolm Company uses a weighted-average process costing system. All materials at Malcolm are added at the beginning of the production process. The equivalent units for materials at Malcolm would be the sum of:

A) units in ending work in process and the units started.

B) units in beginning work in process and the units started.

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

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

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

52.Jersey Company has a process costing system in which it uses the weighted-average method. The equivalent units for conversion costs for the month were 47,500 units. The beginning work in process inventory consisted of 15,000 units, 60% complete with respect to conversion costs. The ending work in process inventory consisted of 10,000 units, 75% complete with respect to conversion costs. The number of units started during the month was:

A) 25,000 units

B) 34,000 units

C) 35,000 units

D) 40,000 units

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

Solution:

Units transferred out............................................................. 40,000 *Ending work in process (10,000 units × 75% complete)..... 7,500

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

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

Acct 2302 Exam 1_v2_key

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