Cost Acctg Reviewer

11.A total variance is best defined as the difference between totala. actual cost and total cost applied for the standard output of the period.b. standard cost and total cost applied to production.c. actual cost and total standard cost of the actual input of the period.d. actual cost and total cost applied for the actual output of the period.

12. The term “standard hours allowed” measuresa. budgeted output at actual hours.b. budgeted output at standard hours.c. actual output at standard hours.d. actual output at actual hours.

13. A large labor efficiency variance is prorated to which of the following at year-end?

WIP FGCost of Goods Sold Inventory Inventory

a. no no no

b. no yes yes

c. yes no no

d. yes yes yes

14. Which of the following factors should not be considered when deciding whether to investigate a variance?a. magnitude of the varianceb. trend of the variances over timec. likelihood that an investigation will reduce or eliminate future occurrences of the varianced. whether the variance is favorable or unfavorable

15. At the end of a period, a significant material quantity variance should bea. closed to Cost of Goods Sold.b. allocated among Raw Material, Work in Process, Finished Goods, and Cost of Goods

Sold.c. allocated among Work in Process, Finished Goods, and Cost of Goods Sold.d. carried forward as a balance sheet account to the next period.

16. When computing variances from standard costs, the difference between actual and standard price multiplied by actual quantity used yields aa. combined price-quantity variance.b. price variance.c. quantity variance.d. mix variance.

17. A company wishing to isolate variances at the point closest to the point of responsibility will determine its material price variance whena. material is purchased.b. material is issued to production.c. material is used in production.d. production is completed.

18. The material price variance (computed at point of purchase) isa. the difference between the actual cost of material purchased and the standard cost of

material purchased.b. the difference between the actual cost of material purchased and the standard cost of

material used.c. primarily the responsibility of the production manager.d. both a and c.

20. A company would most likely have an unfavorable labor rate variance and a favorable labor efficiency variance ifa. the mix of workers used in the production process was more experienced than the normal

mix.b. the mix of workers used in the production process was less experienced than the normal

mix.c. workers from another part of the plant were used due to an extra heavy production

schedule.d. the purchasing agent acquired very high quality material that resulted in less spoilage.

21. If actual direct labor hours (DLHs) are less than standard direct labor hours allowed and overhead is applied on a DLH basis, a(n)a. favorable variable overhead spending variance exists.b. favorable variable overhead efficiency variance exists.c. favorable volume variance exists.d. unfavorable volume variance exists.

22. The total labor variance can be subdivided into all of the following excepta. rate variance.b. yield variance.c. learning curve variance.d. mix variance.

23. The standard predominantly used in Western cultures for motivational purposes is a(n) ____ standard.a. expected annualb. idealc. practicald. theoretical

24. Which of the following standards can commonly be reached or slightly exceeded by workers in a motivated work environment?

Ideal Practical Expected annual

a. no no no

b. no yes yes

c. yes yes no

d. no yes no

25. Management would generally expect unfavorable variances if standards were based on which of the following capacity measures?

Ideal Practical Expected annual

a. yes no no

b. no no no

c. no yes yes

d. yes yes no

26. Which of the following capacity levels has traditionally been used to compute the fixed overhead application rate?a. expected annualb. normalc. theoretical

d. prior year

29. A variable overhead spending variance is caused bya. using more or fewer actual hours than the standard hours allowed for the production

achieved.b. paying a higher/lower average actual overhead price per unit of the activity base than the

standard price allowed per unit of the activity base.c. larger/smaller waste and shrinkage associated with the resources involved than expected.d. both b and c are causes.

30. Which of the following are considered controllable variances?

VOH spending Total overhead budget Volume

a. yes yes yes

b. no no yes

c. no yes no

d. yes yes no

33. Fixed overhead costs area. best controlled on a unit-by-unit basis of products produced.b. mostly incurred to provide the capacity to produce and are best controlled on a total basis

at the time they are originally negotiated.c. constant on a per-unit basis at all different activity levels within the relevant range.d. best controlled as to spending during the production process.

34. The variance most useful in evaluating plant utilization is thea. variable overhead spending variance.b. fixed overhead spending variance.c. variable overhead efficiency variance.d. fixed overhead volume variance.

35. A favorable fixed overhead volume variance occurs ifa. there is a favorable labor efficiency variance.b. there is a favorable labor rate variance.c. production is less than planned.d. production is greater than planned.

36. The fixed overhead application rate is a function of a predetermined activity level. If standard hours allowed for good output equal the predetermined activity level for a given period, the volume variance will bea. zero.b. favorable.c. unfavorable.d. either favorable or unfavorable, depending on the budgeted overhead.

37. Actual fixed overhead minus budgeted fixed overhead equals thea. fixed overhead volume variance.b. fixed overhead spending variance.c. noncontrollable variance.d. controllable variance.

38. Total actual overhead minus total budgeted overhead at the actual input production level equals thea. variable overhead spending variance.b. total overhead efficiency variance.c. total overhead spending variance.

d. total overhead volume variance.

39. A favorable fixed overhead spending variance indicates thata. budgeted fixed overhead is less than actual fixed overhead.b. budgeted fixed overhead is greater than applied fixed overhead.c. applied fixed overhead is greater than budgeted fixed overhead.d. actual fixed overhead is less than budgeted fixed overhead.

40. An unfavorable fixed overhead volume variance is most often caused bya. actual fixed overhead incurred exceeding budgeted fixed overhead.b. an over-application of fixed overhead to production.c. an increase in the level of the finished inventory.d. normal capacity exceeding actual production levels.

41. In a standard cost system, when production is greater than the estimated unit or denominator level of activity, there will be a(n)a. unfavorable capacity variance.b. favorable material and labor usage variance.c. favorable volume variance.d. unfavorable manufacturing overhead variance.

42. In analyzing manufacturing overhead variances, the volume variance is the difference between thea. amount shown in the flexible budget and the amount shown in the debit side of the

overhead control account.b. predetermined overhead application rate and the flexible budget application rate times

actual hours worked.c. budget allowance based on standard hours allowed for actual production for the period and

the amount budgeted to be applied during the period.d. actual amount spent for overhead items during the period and the overhead amount

applied to production during the period.43. Variance analysis for overhead normally focuses on

a. efficiency variances for machinery and indirect production costs.b. volume variances for fixed overhead costs.c. the controllable variance as a lump-sum amount.d. the difference between budgeted and applied variable overhead.

44. The efficiency variance computed on a three-variance approach isa. equal to the efficiency variance computed on the four-variance approach.b. equal to the variable overhead spending variance plus the efficiency variance computed on

the four-variance approach.c. computed as the difference between applied variable overhead and actual variable

overhead.d. computed as actual variable overhead minus the flexible budget for variable overhead

based on actual hours worked.45. The use of separate variable and fixed overhead rates is better than a combined rate because such a

systema. is less expensive to operate and maintain.b. does not result in underapplied or overapplied overhead.c. is more effective in assigning overhead costs to products.d. is easier to develop.

46. Under the two-variance approach, the volume variance is computed by subtracting ____ based on standard input allowed for the production achieved from budgeted overhead.a. applied overheadb. actual overhead

c. budgeted fixed overhead plus actual variable overheadd. budgeted variable overhead

47. The overhead variance calculated as total budgeted overhead at the actual input production level minus total budgeted overhead at the standard hours allowed for actual output is thea. efficiency variance.b. spending variance.c. volume variance.d. budget variance.

Crichton CompanyThe following information is for Crichton Company’s July production:

Standards:Material 3.0 feet per unit @ $4.20 per footLabor 2.5 hours per unit @ $7.50 per hour

Actual:Production 2,750 units produced during the monthMaterial 8,700 feet used; 9,000 feet purchased @ $4.50 per footLabor 7,000 direct labor hours @ $7.90 per hour(Round all answers to the nearest dollar.)

50. Refer to Crichton Company. What is the material price variance (calculated at point of purchase)?

Material Price Variance = (AP - SP) * AQ = ($4.50 - $4.20) * 9,000 feet purchased = $2,700 U

51. Refer to Crichton Company. What is the material quantity variance?Material Quantity Variance = (AQ - SQ) * SP = (8,700 - (2,750 * 3)) * $4.20 = $1,890 U

52. Refer to Crichton Company. What is the labor rate variance?

Labor Rate Variance = (AP - SP) * AQ = ($7.90 - $7.50) * 7,000 hr used = $2,800 U

53. Refer to Crichton Company. What is the labor efficiency variance?Labor Efficiency Variance = (AQ - SQ) * SP = (7,000 hr - (2.5 hr/unit * 2,750 units)) * $7.50 = $938 U (rounded)

Reichs Company

The following information is for Reichs Company’s September production:

Standards:Material 4.0 feet per unit @ $3.75 per footLabor 3.0 hours per unit @ $8.25 per hour

Actual:Production 3,500 units produced during the monthMaterial 14,200 feet used; 14,700 feet purchased @ $3.70 per footLabor 10,400 direct labor hours @ $8.35 per hour(Round all answers to the nearest dollar.)

54. Refer to Reichs Company. What is the material price variance (calculated at point of purchase)?

Material Price Variance = (AP - SP) * AQ = ($3.70 - $3.75) * 14,700 feet purchased = $735 F

55. Refer to Reichs Company. What is the material quantity variance?Material Quantity Variance = (AQ - SQ) * SP = (14,200 - (3,500 * 4)) * $3.75 = $750 U

56. Refer to Reichs Company. What is the labor rate variance?Labor Rate Variance = (AP - SP) * AQ = ($8.35 - $8.25) *10,400 hr used = $1,040 U

57. Refer to Reichs Company. What is the labor efficiency variance?

Labor Efficiency Variance = (AQ - SQ) * SP = (10,400 hr - (3 hr/unit * 3,500 units)) * $8.25 = $825 F

Hazelton CompanyHazelton Company has the following information available for December when 3,500 units were produced (round answers to the nearest dollar).

Standards:Material 3.5 pounds per unit @ $4.50 per poundLabor 5.0 hours per unit @ $10.25 per hour

Actual:Material purchased 12,300 pounds @ $4.25Material used 11,750 pounds17,300 direct labor hours @ $10.20 per hour

58. Refer to Hazelton Company. What is the labor rate variance?

Labor Rate Variance = (AP - SP) * AQ = ($10.20 - $10.25) * 17,300 hrs. = $865 F

59. Refer to Hazelton Company. What is the labor efficiency variance?

Labor efficiency variance = (AQ - SQ)* SP

=(17,300 hrs -(3,500 units * 5.0 hr/unit)) * $10.25/hr = $2,050 F

60. Refer to Hazelton Company. What is the material price variance (based on quantity purchased)?Material price variance = (AP - SP) * AQ = ($4.25 - $4.50) * 12,300 = $3,075 F

61. Refer to Hazelton Company. What is the material quantity variance?Material quantity variance = (AQ - SQ) * SP = (11,750 - (3,500 units * 3.5 hr/unit)) * $4.25 = $2,250 F

62. Refer to Hazleton Company. Assume that the company computes the material price variance on the basis of material issued to production. What is the total material variance?Total Variance = (11,750 * $4.25) - (3,500 * 3.5 * $4.50) = $49,937.00 - $55,125.00 = $5188 F

Wimberly Company

Wimberly Company has the following information available for March when 4,200 units were produced (round answers to the nearest dollar).

Standards:Material 4.0 pounds per unit @ $5.25 per poundLabor 6.0 hours per unit @ $10.00 per hour

Actual:Material purchased 17,500 pounds @ $5.10Material used 16,700 pounds25,500 direct labor hours @ $9.85 per hour

63. Refer to Wimberly Company. What is the labor rate variance?

Labor Rate Variance = (AP - SP) * AQ = ($9.85 - $10.00) * 25,500 hrs. = $3,825 F

64. Refer to Wimberly Company. What is the labor efficiency variance?

Labor efficiency variance = (AQ - SQ)* SP =(25,500 hrs -(4,200 units * 6.0 hr/unit)) * $10.00/hr = $3,000 U

65. Refer to Wimberly Company. What is the material price variance (based on quantity purchased)?

Material price variance = (AP - SP) * AQ = ($5.10 - $5.25) * 17,500 = $2,625 F

66. Refer to Wimberly Company. What is the material quantity variance?

Material quantity variance = (AQ - SQ) * SP = (16,700 - (4,200 units * 4.0 lb/unit)) * $5.25 = $525 F

67. Refer to Wimberly Company. Assume that the company computes the material price variance on the basis of material issued to production. What is the total material variance?

Total Variance = (16,700 * $5.10) - (4,200 * 4.0 * $5.25) = $85,170.00 - $88,200.00 = $3,030 FStrong Manufacturing

The following information is available for Strong Manufacturing Company for the month of June when the company produced 2,100 units:

Standard:Material 2 pounds per unit @ $5.80 per poundLabor 3 direct labor hours per unit @ $10.00 per hour

Actual:Material 4,250 pounds purchased and used @ $5.65 per poundLabor 6,300 direct labor hours at $9.75 per hour

68. Refer to Strong Manufacturing Company. What is the material price variance?Material price variance = (AP - SP) * AQ = ($5.65 - $5.80) * 4,250 lbs = $637.50 F

69. Refer to Strong Manufacturing Company. What is the material quantity variance?Material quantity variance = (AQ - SQ) * SP = (4,250 - (2 lbs/unit * 2,100 units))* $5.80/unit = $290 U

70. Refer to Strong Manufacturing Company. What is the labor rate variance?

Labor Rate Variance = (AP - SP) * AQ =($9.75 - $10.00) * 6,300 hrs = $1,575 F

71. Refer to Strong Manufacturing Company. What is the labor efficiency variance?

Labor efficiency variance = (AQ - SQ) * SP = (6,300 - (2,100 units * 3 hrs/unit) * $10.00 = $0

Fleetwood Company

Fleetwood Company uses a standard cost system for its production process and applies overhead based on direct labor hours. The following information is available for May when Fleetwood produced 4,500 units:Standard:

DLH per unit 2.50Variable overhead per DLH $1.75Fixed overhead per DLH $3.10Budgeted variable overhead $21,875Budgeted fixed overhead $38,750

Actual:Direct labor hours 10,000Variable overhead $26,250Fixed overhead $38,000

72. Refer to Fleetwood Company. Using the one-variance approach, what is the total overhead variance?

Total Variance = Actual Overhead - Applied Overhead = $(26,250 + 38,000) - ($(1.75 + 3.10) * 2.50 hrs/unit * 4,500 units) = $64,250.00 - $54,462.50 = $9,687.50U

73. Refer to Fleetwood Company. Using the two-variance approach, what is the controllable variance?Controllable Variance = Actual Overhead - Budgeted Overhead Based on Standard Quantity = $64,250.00 - $((4,500 units * 2.5 DLH/unit * $1.75) + 38,750) = $(64,250 - $58,437.50) = $5,812.50 U

74. Refer to Fleetwood Company. Using the two-variance approach, what is the noncontrollable variance?

Uncontrollable Variance = Budgeted Overhead Based on SQ - Applied Overhead = $(58,437.50 - 54,562.50) = $3,875.00 U

75. Refer to Fleetwood Company. Using the three-variance approach, what is the spending variance?OH Spending Variance = Actual OH - Budgeted OH based upon Inputs Used = $64,250 - ((10,000 hrs * $1.75) + $38,750) = $(64,250 - 56,250) = $8,000.00 U

76. Refer to Fleetwood Company. Using the three-variance approach, what is the efficiency variance?OH Efficiency Variance = Budgeted OH based on Actual - Budgeted OH based on Standard = ((10,000 * $1.75)+ $38,750) - ((4,500 * 2.50 * $1.75) + $38,750) = $(56,250.00 - 58,437.50) = $2,187.50 F

77. Refer to Fleetwood Company. Using the three-variance approach, what is the volume variance?

Volume Variance = Budget Based on Standard Quantity - Overhead Applied = $(58,437.50 - 54,562.00) = $3,875.00 U

78. Refer to Fleetwood Company. Using the four-variance approach, what is the variable overhead spending variance?

Variable Overhead Spending Variance = Actual VOH - Budgeted VOH/Actual Quantity = $26,250.00 - (10,000 * $1.75/VOH hr) = $(26,250.00 - 17,500.00) = $8,750.00 U

79. Refer to Fleetwood Company. Using the four-variance approach, what is the variable overhead efficiency variance?VOH Efficiency Variance = Budgeted VOH based on Actual - Budgeted VOH/Standard Qty = ((10,000 * $1.75/hr) - ((4,500 * 2.50hrs/unit * $1.75/hr)) = $(17,500.00 - 19,687.50) = $2,187.50 F

80. Refer to Fleetwood Company. Using the four-variance approach, what is the fixed overhead spending variance?Fixed OH Spending Variance = Actual Fixed OH - Applied Fixed OH = $(38,000 - 38,750) = $750.00 F

81. Refer to Fleetwood Company. Using the four-variance approach, what is the volume variance?Volume Variance = Budget Based on Standard Quantity - Overhead Applied = $(58,437.50 - 54,562.00) = $3,875.00 UGenesis CompanyGenesis Company uses a standard cost system for its production process and applies overhead based on direct labor hours. The following information is available for September when Genesis produced 5,000 units:Standard:DLH per unit 3.00Variable overhead per DLH $1.80Fixed overhead per DLH $3.25Budgeted variable overhead $27,250Budgeted fixed overhead $49,500

Actual:Direct labor hours 16,000Variable overhead $31,325Fixed overhead $49,750

82. Refer to Genesis Company. Using the one-variance approach, what is the total overhead variance?Total Variance = Actual Overhead - Applied Overhead = $(31,325 + 49,750) - ($(1.80 + 3.25) * 3.00 hrs/unit * 5,000 units) = $81,075.00 - $75,750.00 = $5,325.00 U

83. Refer to Genesis Company. Using the two-variance approach, what is the controllable variance?Controllable Variance = Actual Overhead - Budgeted Overhead Based on Standard Quantity = $81,075 - $((5,000 units * 3.0 DLH/unit * $1.80) + 49,500) = $(81,075 - $76,500) = $4,575 U

84. Refer to Genesis Company. Using the two-variance approach, what is the noncontrollable variance?Uncontrollable Variance = Budgeted Overhead Based on SQ - Applied Overhead = $(76,500 - 75,750) = $750 U

85. Refer to Genesis Company. Using the three-variance approach, what is the spending variance?OH Spending Variance = Actual OH - Budgeted OH based upon Inputs Used = $81,075 - ((16,000 hrs * $1.80) + $49,500) = $(81,075 - 78,300) = $2,775 U

86. Refer to Genesis Company. Using the three-variance approach, what is the efficiency variance?OH Efficiency Variance = Budgeted OH based on Actual - Budgeted OH based on Standard = ((16,000 * $1.80)+ $49,500) - ((5,000 * 3.00 * $1.80) + $49,500) = $(78,300.00 - 76,500.00) = $1,800.00 U

87. Refer to Genesis Company. Using the three-variance approach, what is the volume variance?Volume Variance = Budget Based on Standard Quantity - Overhead Applied = $(76,500.00 - 75,750.00) = $750 U

88. Refer to Genesis Company. Using the four-variance approach, what is the variable overhead spending variance?Variable Overhead Spending Variance = Actual VOH - Budgeted VOH/Actual Quantity = $31,325 - (16,000 * $1.80/VOH hr) = $(31,325 - 28,800) = $2,525 U

89. Refer to Genesis Company. Using the four-variance approach, what is the variable overhead efficiency variance?VOH Efficiency Variance = Budgeted VOH based on Actual - Budgeted VOH/Standard Qty = ((16,000 * $1.80/hr) - ((5,000 * 3 hrs/unit * $1.80/hr)) = $(28,800 - 27,000) = $1,800 U

90. Refer to Genesis Company. Using the four-variance approach, what is the fixed overhead spending variance?Fixed OH Spending Variance = Actual Fixed OH - Applied Fixed OH = $(49,750 - 49,500) = $250 U

91. Refer to Genesis Company. Using the four-variance approach, what is the volume variance?Volume Variance = Budget Based on Standard Quantity - Overhead Applied = $(49,500 - (5,000 x 3 x 3.25)) = $49,500 - $48,750 = $750 URitchie Company

Ritchie Company uses a standard cost system for its production process. Ritchie Company applies overhead based on direct labor hours. The following information is available for July:Standard:Direct labor hours per unit 2.20Variable overhead per hour $2.50Fixed overhead per hour (based on 11,990 DLHs) $3.00

Actual:Units produced 4,400Direct labor hours 8,800Variable overhead $29,950Fixed overhead $42,300

92. Refer to Ritchie Company Using the four-variance approach, what is the variable overhead spending variance?

Variable OH Spending Variance = Actual VOH - Budgeted VOH/Actual = $(29,950 - 22,000) = $7,950

93. Refer to Ritchie Company Using the four-variance approach, what is the variable overhead efficiency variance?VOH Efficiency Variance = Budgeted OH/Actual - Budgeted OH/Standard = (8,800 DLH * $2.50/DLH) - (4400 units*2.20 DLH/unit * $2.50) = $(22,000 - 24,200) = $2,200 F

94. Refer to Ritchie Company Using the four-variance approach, what is the fixed overhead spending variance?Fixed OH Spending Variance = Actual OH - Standard Fixed OH = $42,300 - (11,990 DLH’s * $3.00/DLH) = $(42,300 - 35,970) = $6,330 U

95. Refer to Ritchie Company Using the four-variance approach, what is the volume variance?Volume Variance = Budgeted OH/Standard Quantity - Standard Overhead Applied=( 4,400 units * $2.50/hr*2.20 hrs/unit + $35,970)- (4,400 units*$5.50/hr*2.20 DLH/unit)= $60,170 - $53,240= $6,930 U

96. Refer to Ritchie Company Using the three-variance approach, what is the spending variance?Spending Variance = Actual Overhead - Budget OH/Actual Use= $72,250 - ((8,800 hrs * $2.50/hr) + $35,970)= $(72,250 - 57,970) = $14,280 U

97. Refer to Ritchie Company Using the three-variance approach, what is the efficiency variance?Efficiency Variance = Budget OH/Actual Use - Budgeted OH/Standard Quantity - Standard Overhead Applied= ((8,800 hrs * $2.50/hr) + $35,970)-( 4,400 units * $2.50/hr*2.20 hrs/unit + $35,970)= $(57,970 - 60,170) = $2,200 F

98. Refer to Ritchie Company Using the three-variance approach, what is the volume variance?Volume Variance = Budgeted OH/Standard Quantity - Standard Overhead Applied=( 4,400 units * $2.50/hr*2.20 hrs/unit + $35,970)- (4,400 units*$5.50/hr*2.20 DLH/unit)= $60,170 - $53,240

= $6,930 U99. Refer to Ritchie Company Using the two-variance approach, what is the controllable variance?

Controllable Variance = Actual Overhead - Budgeted Overhead Based on Standard Quantity = $72,250.00 - ( 4,400 units * $2.50/hr*2.20 hrs/unit + $35,970) = $(72,250- 60,170) = $12,080 U

100. Refer to Ritchie Company Using the two-variance approach, what is the noncontrollable variance?Noncontrollable Variance = Budgeted OH/Standard Quantity - Standard Overhead Applied=( 4,400 units * $2.50/hr*2.20 hrs/unit + $35,970)- (4,400 units*$5.50/hr*2.20 DLH/unit)= $60,170 - $53,240= $6,930 U

101. Refer to Ritchie Company Using the one-variance approach, what is the total variance?

Total Variance = Actual Overhead - Applied Overhead =$72,250 - (4,400 * 2.20 *($2.50 + $3.00)) =$72,250 - $53,240 =$19,010 U

102. Actual fixed overhead is $33,300 (12,000 machine hours) and fixed overhead was estimated at $34,000 when the predetermined rate of $3.00 per machine hour was set. If 11,500 standard hours were allowed for actual production, applied fixed overhead is11,500 hrs. * $3.00/hr. = $34,500

103. One unit requires 2 direct labor hours to produce. Standard variable overhead per unit is $1.25 and standard fixed overhead per unit is $1.75. If 330 units were produced this month, what total amount of overhead is applied to the units produced?330 units * ($1.25 + $1.75) = $990

104. Ponca City Company uses a standard cost accounting system. The following overhead costs and production data are available for September:

Standard fixed OH rate per DLH $1Standard variable OH rate per DLH $4Budgeted monthly DLHs 40,000Actual DLHs worked 39,500Standard DLHs allowed for actual production 39,000Overall OH variance-favorable $2,000

The total applied manufacturing overhead for September should be39,000 DL hrs * $5.00/hr = $195,000

105. Luther Manufacturing Company uses a standard cost system and prepared the following budget at normal capacity for October:

Direct labor hours 24,000Variable OH $48,000

Fixed OH $108,000Total OH per DLH $6.50

Actual data for October were as follows:Direct labor hours worked 22,000Total OH $147,000Standard DLHs allowed for capacity attained 21,000

Using the two-way analysis of overhead variances, what is the controllable variance for October?

ANS: AControllable Variance = Actual Overhead - Budget Based on SQ for Actual Output = $147,000 - ((21,000 * $2.00/hr) + $108,000) = $(147,000 - 150,000) = $3,000 F

106. The following information is available from the Fitzgerald Company:

Actual OH $15,000Fixed OH expenses, actual $7,200Fixed OH expenses, budgeted $7,000Actual hours 3,500Standard hours 3,800Variable OH rate per DLH $2.50

Assuming that Fitzgerald uses a three-way analysis of overhead variances, what is the overhead spending variance?Spending Variance = Actual Overhead - Budgeted Overhead/Actual Hours = $15,000 - ((3,500 * $2.50) + $7,000) = $(15,000 - 15,750) = $750 F

107. Norris Company uses a two-way analysis of overhead variances. Selected data for the March production activity are as follows:

Actual variable OH incurred $196,000Variable OH rate per MH $6Standard MHs allowed 33,000Actual MHs 32,000

Assuming that budgeted fixed overhead costs are equal to actual fixed costs, the controllable variance for March is

ANS: AControllable Variance = Actual OH - Budgeted OH based on Standard Qty = $196,000 - (33,000 * $6/hr) = $2,000 F

PTS: 1 DIF: Moderate OBJ: 7-3 NAT: AACSB: Analytical SkillsLOC: AICPA Functional Competencies: Measurement, Reporting

108. Superior Fuel Company uses a standard cost system. Overhead cost information for January is as follows:

Total actual overhead incurred $12,600Fixed overhead budgeted $3,300Total standard overhead rate per MH $4Variable overhead rate per MH $3Standard MHs allowed for actual production 3,500

What is the total overhead variance?a. $1,200 Fb. $1,200 Uc. $1,400 Fd. $1,400 U

ANS: CTotal Overhead Variance = Actual Overhead - Standard Overhead = $(12,600 - (3,500 MH * $4/MH)) = $(12,600 - 14,000) = $1,400 F

PTS: 1 DIF: Easy OBJ: 7-3 NAT: AACSB: Analytical SkillsLOC: AICPA Functional Competencies: Measurement, Reporting

National Toy Company

National Toy Company has developed standard overhead costs based on a capacity of 180,000 machine hours as follows:

Standard costs per unit:Variable portion 2 hours @ $3 = $ 6Fixed portion 2 hours @ $5 = 10

$16

During November, 85,000 units were scheduled for production, but only 80,000 units were actually produced. The following data relate to November:

Actual machine hours used were 165,000.Actual overhead incurred totaled $1,378,000 ($518,000 variable plus $860,000 fixed).All inventories are carried at standard cost.

109. Refer to National Toy Company. The variable overhead spending variance for November wasa. $15,000 U.b. $23,000 U.c. $38,000 F.d. $38,000 U.

ANS: BVariable OH Spending Variance = Actual VOH - Budgeted FOH/Actual Input = $518,000 - (165,000 DLH * $3/hr) = $(518,000 - 495,000) = $23,000 U


110. Refer to National Toy Company. The variable overhead efficiency variance for November wasa. $15,000 U.b. $23,000 U.c. $38,000 F.d. $38,000 U.

ANS: AVariable OH Efficiency Variance = Budgeted VOH/Actual - Budgeted VOH/Standard = $495,000 - (80,000 units * 2 hrs/unit * $3) = $(495,000 - 480,000) = $15,000 U


111. Refer to National Toy Company. The fixed overhead spending variance for November wasa. $40,000 U.b. $40,000 F.c. $60,000 F.d. $60,000 U.

ANS: BFixed Overhead Spending Variance = Actual Fixed OH - Budgeted Fixed OH = $(860,000 - (180,000 MH * $5/hr) = $(860,000 - $900,000) = $40,000 F


112. Refer to National Toy Company. The fixed overhead volume variance for November wasa. $60,000 U.b. $60,000 F.c. $100,000 F.d. $100,000 U.

ANS: DFixed FOH Volume Variance = Budgeted Fixed FOH - Applied FOH = $(900,000 - 800,000) = $100,000 U


Classic Cleaning Company

Classic Cleaning Company manufactures a cleaning solvent. The company employs both skilled and unskilled workers. To produce one 55-gallon drum of solvent requires Materials A and B as well as skilled labor and unskilled labor. The standard and actual material and labor information is presented below:

Standard:Material A: 30.25 gallons @ $1.25 per gallonMaterial B: 24.75 gallons @ $2.00 per gallon

Skilled Labor: 4 hours @ $12 per hourUnskilled Labor: 2 hours @ $ 7 per hour

Actual:Material A: 10,716 gallons purchased and used @ $1.50 per gallonMaterial B: 17,484 gallons purchased and used @ $1.90 per gallon

Skilled labor hours: 1,950 @ $11.90 per hourUnskilled labor hours: 1,300 @ $7.15 per hourDuring the current month Classic Cleaning Company manufactured 500 55-gallon drums.

Round all answers to the nearest whole dollar.

113. Refer to Classic Cleaning Company. What is the total material price variance?a. $877 Fb. $877 Uc. $931 Ud. $931 F

ANS: CTotal Material Price Variance = Actual Mix,Qty,Price - Actual Mix,Quantity,Std Price = $(49,294 - 48,363) = $931 U


114. Refer to Classic Cleaning Company. What is the total material mix variance?a. $3,596 Fb. $3,596 Uc. $4,864 Fd. $4,864 U

ANS: BTotal Material Mix Variance = Actual Mix,Qty, Std Price - Std Mix, Price,Actual Qty = $(48,363 - 44,767) = $3,596 U

PTS: 1 DIF: Difficult OBJ: 7-7 NAT: AACSB: Analytical SkillsLOC: AICPA Functional Competencies: Measurement, Reporting

115. Refer to Classic Cleaning Company. What is the total material yield variance?a. $1,111 Ub. $1,111 Fc. $2,670 Ud. $2,670 F

ANS: AMaterial Yield Variance = Std Mix, Std Price,Actual Qty - Std Mix, Qty, Price = $(44,767 - $43,656) = $1,111 U


116. Refer to Classic Cleaning Company. What is the labor rate variance?a. $0b. $1,083 Uc. $2,583 Ud. $1,083 F

ANS: ALabor Rate Variance = Actual Mix, Qty,Price - Actual Mix,Qty,Std Price = $(32,500 - 32,500) = $0


117. Refer to Classic Cleaning Company. What is the labor mix variance?a. $1,083 Ub. $2,588 Uc. $1,083 Fd. $2,588 F

ANS: CLabor Mix Variance = Actual Mix,Qty, Std Price - Std Mix, Actual Qty, Std Price = $(32,500 - 33,583) = $1,083 F


118. Refer to Classic Cleaning Company. What is the labor yield variance?a. $2,583 Ub. $2,583 Fc. $1,138 Fd. $1,138 U

ANS: ALabor Yield Variance = Std Mix, Act Qty, Std Price - Std Mix, Qty, Price = $(33,583 - $31,000)

= $2,583 U


119. The sum of the material mix and material yield variances equalsa. the material purchase price variance.b. the material quantity variance.c. the total material variance.d. none of the above.

ANS: B PTS: 1 DIF: Easy OBJ: 7-7NAT: AACSB: Analytical SkillsLOC: AICPA Functional Competencies: Measurement, Reporting

120. The sum of the labor mix and labor yield variances equalsa. the labor efficiency variance.b. the total labor variance.c. the labor rate variance.d. nothing because these two variances cannot be added since they use different costs.

ANS: A PTS: 1 DIF: Easy OBJ: 7-7NAT: AACSB: Analytical SkillsLOC: AICPA Functional Competencies: Measurement, Reporting

PROBLEM

Moore Company

Moore Company has the following information available for the current year:

Standard:Material 3.5 feet per unit @ $2.60 per footLabor 5 direct labor hours @ $8.50 per unit

Actual:Material 95,625 feet used (100,000 feet purchased @ $2.50 per foot)Labor 122,400 direct labor hours incurred per unit @ $8.35 per hour

25,500 units were produced

1. Refer to Moore Company. Compute the material purchase price and quantity variances.

ANS:Material price variance:100,000 $2.50 = $250,000

100,000 $2.60 = 260,000 $ 10,000 F

Material quantity variance:

95,625 $2.60 = $248,625

89,250 $2.60 = 232,050 $ 16,575 U


2. Refer to Moore Company. Compute the labor rate and efficiency variances.

ANS:Labor rate variance:122,400 $8.35 = $1,022,040

122,400 $8.50 = 1,040,400 $ 18,360 F

Labor efficiency variance:122,400 $8.50 = $1,040,400

127,500 $8.50 = 1,083,750 $ 43,350 F


Hoover Company

Hoover Company applies overhead based on direct labor hours and has the following available for the current month:

Standard:Direct labor hours per unit 5Variable overhead per DLH $.75Fixed overhead per DLH (based on 8,900 DLHs) $1.90


3. Refer to Hoover Company. Compute all the appropriate variances using the two-variance approach.

ANS:Actual ($6,400 + $17,500) $23,900 Budget Variance: $240 UBFOH (8,900 $1.90) $16,910VOH (1,800 5 $.75) 6,750 $23,660 Volume Variance: $190 FApplied OH:(1,800 5 $2.65) $23,850


4. Refer to Hoover Company. Compute all the appropriate variances using the three-variance approach.

ANS:Actual $23,900 Spending Variance: $315 UFlexible Budget Based on Actual InputBFOH $16,910VOH (8,900 $.75) 6,675 $23,585 Efficiency Variance: $75 FFlexible Budget Based on Standard DLHsBFOH $16,910VOH (1,800 5 $.75) 6,750 $23,660 Volume Variance: $190 FApplied OH:(1,800 5 $2.65) $23,850


5. Refer to Hoover Company. Compute all the appropriate variances using the four-variance approach.

ANS:Actual VOH $6,400 Variable Spending Variance: $275 FFlex. Bud. Based on ActualInput Hours (8,900 $.75) $6,675 Variable Efficiency Variance: $75 FApplied VOH (1,800 5 $.75) $6,750

Actual FOH $17,500 FOH Spending Variance: $590 UBUDGETED FOH $16,910 FOH Volume Variance: $190 FApplied FOH (1,800 5 $1.90) $17,100


Truman Company

Truman Company applies overhead based on direct labor hours and has the following available for the current month:

Standard:Direct labor hours per unit 6Variable overhead per DLH $.80Fixed overhead per DLH (based on 11,900 DLHs) $2.10


6. Refer to Truman Company. Compute all the appropriate variances using the two-variance approach.

ANS:Actual ($9,900 + $25,500) $35,400 Budget Variance: $810 UBFOH (11,900 $2.10) $24,990VOH (2000 6 $.80) 9,600 $34,590 Volume Variance: $210 FApplied OH:(2,000 6 $2.90) $34,800


7. Refer to Truman Company. Compute all the appropriate variances using the three-variance approach.

ANS:Actual $35,400 Spending Variance: $890 UFlexible Budget Based on Actual InputBFOH $24,990VOH (11,900 $.80) 9,520 $34,510 Efficiency Variance: $80 FFlexible Budget Based on Standard DLHsBFOH $24,990VOH (2,000 6 $.80) 9,600 $34,590 Volume Variance: $210 FApplied OH:(2,000 6 $2.90) $34,800


8. Refer to Truman Company. Compute all the appropriate variances using the four-variance approach.

ANS:Actual VOH $9,900 Variable Spending Variance: $380 U Flex. Bud. Based on ActualInput Hours (11,900 $.80) $9,520 Variable Efficiency Variance: $80 FApplied VOH (2,000 6 $.80) $9,600

Actual FOH $25,500 FOH Spending Variance: $510 UBUDGETED FOH (11,900 x $2.10) $24,990 FOH Volume Variance: $210 FApplied FOH (2,000 6 $2.10) $25,200


4.A process costing system is used by a company thata. produces heterogeneous products.b. produces items by special request of customers.c. produces homogeneous products.d. accumulates costs by job.

ANS: C PTS: 1 DIF: Easy OBJ: 6-1NAT: AACSB: Reflective ThinkingLOC: AICPA Functional Competencies: Measurement, Reporting

5. Which is the best cost accumulation procedure to use for continuous mass production of like units?a. actualb. standardc. job orderd. process

6. Equivalent units of production are equal to thea. units completed by a production department in the period.b. number of units worked on during the period by a production department.c. number of whole units that could have been completed if all work of the period had been

used to produce whole units.d. identifiable units existing at the end of the period in a production department.

7. In a process costing system using the weighted average method, cost per equivalent unit for a given cost component is found by dividing which of the following by EUP?a. only current period costb. current period cost plus the cost of beginning inventoryc. current period cost less the cost of beginning inventoryd. current period cost plus the cost of ending inventory

8. The weighted average method is thought by some accountants to be inferior to the FIFO method because ita. is more difficult to apply.b. only considers the last units worked on.c. ignores work performed in subsequent periods.d. commingles costs of two periods.

9. The first step in determining the cost per EUP per cost component under the weighted average method is toa. add the beginning Work in Process Inventory cost to the current period's production cost.b. divide the current period's production cost by the equivalent units.c. subtract the beginning Work in Process Inventory cost from the current period's

production cost.d. divide the current period's production cost into the EUP.

10. The difference between EUP calculated using FIFO and EUP calculated using weighted average is the equivalent unitsa. started and completed during the period.b. residing in beginning Work in Process Inventory.c. residing in ending Work in Process Inventory.d. uncompleted in Work in Process Inventory.

ANS: B PTS: 1 DIF: Moderate OBJ: 6-3NAT: AACSB: Reflective ThinkingLOC: AICPA Functional Competencies: Measurement, Reporting

11. EUP calculations for standard process costing are the same asa. the EUP calculations for weighted average process costing.b. the EUP calculations for FIFO process costing.c. LIFO inventory costing for merchandise.d. the EUP calculations for LIFO process costing.


12. In a FIFO process costing system, which of the following are assumed to be completed first in the current period?a. units started this periodb. units started last periodc. units transferred outd. units still in process

ANS: B PTS: 1 DIF: Easy OBJ: 6-4NAT: AACSB: Reflective ThinkingLOC: AICPA Functional Competencies: Measurement, Reporting

13. To compute equivalent units of production using the FIFO method of process costing, work for the current period must be stated in unitsa. completed during the period and units in ending inventory.b. completed from beginning inventory, units started and completed during the period, and

units partially completed 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.


14. The FIFO method of process costing will produce the same cost of goods transferred out amount as the weighted average method whena. the goods produced are homogeneous.b. there is no beginning Work in Process Inventory.c. there is no ending Work in Process Inventory.d. beginning and ending Work in Process Inventories are each 50 percent complete.


15. The primary difference between the FIFO and weighted average methods of process costing isa. in the treatment of beginning Work in Process Inventory.b. in the treatment of current period production costs.c. in the treatment of spoiled units.d. none of the above.

ANS: A PTS: 1 DIF: Easy OBJ: 6-4NAT: AACSB: Reflective ThinkingLOC: AICPA Functional Competencies: Measurement, Reporting

16. Material is added at the beginning of a process in a process costing system. The beginning Work in Process Inventory for the process was 30 percent complete as to conversion costs. Using the FIFO method of costing, the number of equivalent units of material for the process during this period is equal to thea. beginning inventory this period for the process.b. units started and completed this period in the process.c. units started this period in the process plus the beginning Work in Process Inventory.d. units started and completed this period plus the units in ending Work in Process Inventory.

ANS: D PTS: 1 DIF: Moderate OBJ: 6-4NAT: AACSB: Reflective ThinkingLOC: AICPA Functional Competencies: Measurement, Reporting

17. In a cost of production report using process costing, transferred-in costs are similar to thea. cost of material added at the beginning of production.b. conversion cost added during the period.c. cost transferred out to the next department.d. cost included in beginning inventory.


18. In a process costing system, the journal entry to record the transfer of goods from Department #2 to Finished Goods Inventory is aa. debit Work in Process Inventory #2, credit Finished Goods Inventory.b. debit Finished Goods Inventory, credit Work in Process Inventory #1.c. debit Finished Goods Inventory, credit Work in Process Inventory #2.d. debit Cost of Goods Sold, credit Work in Process Inventory #2.


19. Transferred-in cost represents the cost froma. the last department only.b. the last production cycle.c. all prior departments.d. the current period only.


20. Which of the following is(are) the same between the weighted average and FIFO methods of calculating EUPs?

Units to EUP Total cost toaccount for calculations account for

a. no yes no

b. yes yes yes

c. yes no no

d. yes no yes

ANS: D PTS: 1 DIF: Easy OBJ: 6-4NAT: AACSB: Reflective ThinkingLOC: AICPA Functional Competencies: Measurement, Reporting

21. Process costing techniques should be used in assigning costs to productsa. if a product is manufactured on the basis of each order received.b. when production is only partially completed during the accounting period.c. if a product is composed of mass-produced homogeneous units.d. whenever standard-costing techniques should not be used.


22. Averaging the total cost of completed beginning work-in-process inventory and units started and completed over all units transferred out is known asa. strict FIFO.b. modified FIFO.c. weighted average costing.d. normal costing.


23. A process costing systema. cannot use standard costs.b. restates Work in Process Inventory in terms of completed units.c. accumulates costs by job rather than by department.d. assigns direct labor and manufacturing overhead costs separately to units of production.


24. A process costing system does which of the following?

Calculates EUPs Assigns costs to inventories

a. no no

b. no yes

c. yes yes

d. yes no


25. A process costing system

Calculates average cost Determines total units toper whole unit account for

a. yes yes

b. no no

c. yes no

d. no yes


26. A hybrid costing system combines characteristics ofa. job order and standard costing systems.b. job order and process costing systems.c. process and standard costing systems.d. job order and normal costing systems.


27. When standard costs are used in process costing,a. variances can be measured during the production period.b. total costs rather than current production and current costs are used.c. process costing calculations are made simpler.d. the weighted average method of calculating EUPs makes computing transferred-out costs

easier.


28. Which of the following is subtracted from weighted average EUP to derive FIFO EUP?a. beginning WIP EUP completed in current periodb. beginning WIP EUP produced in prior periodc. ending WIP EUP not completedd. ending WIP EUP completed


29. The cost of abnormal continuous losses isa. considered a product cost.b. absorbed by all units in ending inventory and transferred out on an equivalent unit basis.c. written off as a loss on an equivalent unit basis.d. absorbed by all units past the inspection point.


30. Abnormal spoilage can be

continuous discrete

a. yes nob. no noc. yes yesd. no yes


31. When the cost of lost units must be assigned, and those same units must be included in an equivalent unit schedule, these units are considereda. normal and discrete.b. normal and continuous.c. abnormal and discrete.d. abnormal and continuous.

ANS: D PTS: 1 DIF: Moderate OBJ: 6-8NAT: AACSB: Reflective Thinking

LOC: AICPA Functional Competencies: Measurement, Reporting

32. A continuous lossa. occurs unevenly throughout a process.b. never occurs during the production process.c. always occurs at the same place in a production process.d. occurs evenly throughout the production process.


33. Which of the following would be considered a discrete loss in a production process?a. adding the correct ingredients to make a bottle of ketchupb. putting the appropriate components together for a stereoc. adding the wrong components when assembling a stereod. putting the appropriate pieces for a bike in the box


34. The method of neglect handles spoilage that isa. discrete and abnormal.b. discrete and normal.c. continuous and abnormal.d. continuous and normal.


35. The cost of normal discrete losses isa. absorbed by all units past the inspection point on an equivalent unit basis.b. absorbed by all units in ending inventory.c. considered a period cost.d. written off as a loss on an equivalent unit basis.


36. The cost of abnormal continuous losses isa. considered a product cost.b. absorbed by all units in ending inventory and transferred out on an equivalent unit basis.c. written off as a loss on an equivalent unit basis.d. absorbed by all units past the inspection point.


37. Normal spoilage units resulting from a continuous processa. are extended to the EUP schedule.b. result in a higher unit cost for the good units produced.c. result in a loss being incurred.d. cause estimated overhead to increase.


38. When the cost of lost units must be assigned, and those same units must be included in an equivalent unit schedule, these units are considereda. normal and discrete.b. normal and continuous.c. abnormal and discrete.d. abnormal and continuous.


39. Which of the following accounts is credited when abnormal spoilage is written off in an actual cost system?a. Miscellaneous Revenueb. Loss from Spoilagec. Finished Goodsd. Work in Process


40. The cost of abnormal discrete units must be assigned to

good units lost units

a. yes yesb. no noc. yes nod. no yes


41. Which of the following statements is false? The cost of rework on defective units, ifa. abnormal, should be assigned to a loss account.b. normal and if actual costs are used, should be assigned to material, labor and overhead

costs of the good production.c. normal and if standard costs are used, should be considered when developing the overhead

application rate.d. abnormal, should be prorated among Work In Process, Finished Goods, and Cost of Goods

Sold.


42. If normal spoilage is detected at an inspection point within the process (rather than at the end), the cost of that spoilage should bea. included with the cost of the units sold during the period.b. included with the cost of the units completed in that department during the period.c. allocated to ending work in process units and units transferred out based on their relative

values.d. allocated to the good units that have passed the inspection point.


43. Dallas Co. has a production process in which the inspection point is at 65 percent of conversion. The beginning inventory for July was 35 percent complete and ending inventory was 80 percent complete. Normal spoilage costs would be assigned to which of the following groups of units, using FIFO costing?

Beginning Ending Units StartedInventory Inventory & Completed

a. no yes yes

b. yes yes yes

c. no no yes

d. yes no no


44. Which of the following is not a question that needs to be answered with regard to quality control?a. What happens to the spoiled units?b. What is the actual cost of spoilage?c. How can spoilage be controlled?d. Why does spoilage happen?

ANS: A PTS: 1 DIF: Moderate OBJ: 6-8NAT: AACSB: Reflective ThinkingLOC: AICPA Functional Competencies: Measurement, Reporting

45. Normal spoilage units resulting from a continuous processa. are extended to the EUP schedule.b. result in a higher unit cost for the good units produced.c. result in a loss being incurred.d. cause estimated overhead to increase.


46. The addition of material in a successor department that causes an increase in volume is calleda. accretion.b. reworked units.c. complex procedure.d. undetected spoilage.


47. Wood Company transferred 5,500 units to Finished Goods Inventory during October. On October 1, the company had 300 units on hand (40 percent complete as to both material and conversion costs). On October 31, the company had 800 units (10 percent complete as to material and 20 percent complete as to conversion costs). The number of units started and completed during October was:a. 5,200.b. 5,380.c. 5,500.d. 6,300.

ANS: AUnits Transferred Out 5,500 Less: Units in Beginning Inventory (300) Units Started and Completed 5,200


48. Cole Company transferred 6,000 units to Finished Goods Inventory during August. On August 1, the company had 400 units on hand (35 percent complete as to both material and conversion costs). On August 31, the company had 750 units (20 percent complete as to material and 30 percent complete as to conversion costs). The number of units started and completed during August was:a. 5,600b. 5,860c. 6,000d. 6,750

ANS: AUnits Transferred Out 6,000 Less: Units in Beginning Inventory (400) Units Started and Completed 5,600


49. Boggs Company started 9,000 units in March. The company transferred out 7,000 finished units and ended the period with 3,500 units that were 40 percent complete as to both material and conversion costs. Beginning Work in Process Inventory units werea. 500.b. 600.c. 1,500.d. 2,000.

ANS: CBeginning Work in Process 1,500 Add: Units Started 9,000

Deduct: Units Transferred Out (7,000)

Ending Work in Process 3,500


50. Williams Company started 8,600 units in April. The company transferred out 6,400 finished units and ended the period with 3,200 units that were 40 percent complete as to both material and conversion costs. Beginning Work in Process Inventory units werea. 400.b. 1,000.c. 1,280.d. 2,200.

ANS: BBeginning Work in Process 1,000 Add: Units Started 8,600

Deduct: Units Transferred Out (6,400)



51. Lincoln Company had beginning Work in Process Inventory of 5,000 units that were 40 percent complete as to conversion costs. Lincoln Company started and completed 42,000 units this period and had ending Work in Process Inventory of 12,000 units. How many units were started this period?a. 42,000b. 47,000c. 54,000d. 59,000

ANS: CBeginning Work in Process 5,000 Add: Units Started 54,000 Deduct: Units Transferred Out ( 47,000)



52. Douglas Company had beginning Work in Process Inventory of 6,000 units that were 45 percent complete as to conversion costs. Douglas Company started and completed 46,000 units this period and had ending Work in Process Inventory of 11,000 units. How many units were started this period?a. 46,000b. 52,000c. 57,000d. 63,000

ANS: CBeginning Work in Process 6,000 Add: Units Started 57,000 Deduct: Units Transferred Out ( 52,000)



53. Streete Company uses a weighted average process costing system. Material is added at the start of production. Streete Company started 13,000 units into production and had 4,500 units in process at the start of the period that were 60 percent complete as to conversion costs. If Streete Company transferred out 11,750 units, how many units were in ending Work in Process Inventory?a. 1,250b. 3,000c. 3,500d. 5,750

ANS: DBeginning Work in Process 4,500 Add: Units Started 13,000

Deduct: Units Transferred Out ( 11,750)



54. Roache Company uses a weighted average process costing system. Material is added at the start of production. Roache Company started 14,000 units into production and had 5,000 units in process at the start of the period that were 75 percent complete as to conversion costs. If Roache Company transferred out 12,250 units, how many units were in ending Work in Process Inventory?a. 1,750b. 3,000c. 5,500d. 6,750

ANS: D

Beginning Work in Process 5,000 Add: Units Started 14,000

Deduct: Units Transferred Out ( 12,250)



55. Jones Company uses a weighted average process costing system and started 30,000 units this month. Jones had 12,000 units that were 20 percent complete as to conversion costs in beginning Work in Process Inventory and 3,000 units that were 40 percent complete as to conversion costs in ending Work in Process Inventory. What are equivalent units for conversion costs?a. 37,800b. 40,200c. 40,800d. 42,000

ANS: BBeginning Work in Process 12,000 20% 2,400 + Completion of Units in Process 12,000 80% 9,600

+ Units Started and Completed 27,000 100% 27,000

+ Ending Work in Process 3,000 40% 1,200

Equivalent Units of Production 40,200


56. Summers Company uses a weighted average process costing system and started 36,000 units this month. Jones had 15,000 units that were 25 percent complete as to conversion costs in beginning Work in Process Inventory and 6,000 units that were 35 percent complete as to conversion costs in ending Work in Process Inventory. What are equivalent units for conversion costs?a. 43,350b. 47,100c. 48,900d. 51,000

ANS: BBeginning Work in Process 15,000 25% 3,750 + Completion of Units in Process 15,000 75% 11,250





57. Weston Company makes small metal containers. The company began April with 250 containers in process that were 30 percent complete as to material and 40 percent complete as to conversion costs. During the month, 5,000 containers were started. At month end, 1,700 containers were still in process (45 percent complete as to material and 80 percent complete as to conversion costs). Using the weighted average method, what are the equivalent units for conversion costs?a. 3,450b. 4,560c. 4,610d. 4,910

ANS: DBeginning Work in Process 250 40% 100 + Completion of Units in Process 250 60% 150





58. Meade Company makes small metal containers. The company began October with 300 containers in process that were 35 percent complete as to material and 45 percent complete as to conversion costs. During the month, 6,000 containers were started. At month end, 1,900 containers were still in process (40 percent complete as to material and 75 percent complete as to conversion costs). Using the weighted average method, what are the equivalent units for conversion costs?a. 4,265b. 5,590c. 5,825d. 6,300

ANS: CBeginning Work in Process 300 45% 135 + Completion of Units in Process 300 55% 165 + Units Started and Completed 4,100 100% 4,100




59. Ormandy Company uses a FIFO process costing system. The company had 5,000 units that were 60 percent complete as to conversion costs at the beginning of the month. The company started 22,000 units this period and had 7,000 units in ending Work in Process Inventory that were 35 percent complete as to conversion costs. What are equivalent units for material, if material is added at the beginning of the process?a. 18,000b. 22,000c. 25,000d. 27,000

ANS: BThe material is added at the beginning of the process; therefore there are 22,000 equivalent units of material.


60. Bernstein Company uses a FIFO process costing system. The company had 6,000 units that were 75 percent complete as to conversion costs at the beginning of the month. The company started 25,000 units this period and had 8,000 units in ending Work in Process Inventory that were 40 percent complete as to conversion costs. What are equivalent units for material, if material is added at the beginning of the process?a. 18,500b. 25,000c. 26,500d. 31,000

ANS: BThe material is added at the beginning of the process; therefore there are 25,000 equivalent units of material.


61. Montgomery Company makes fabric-covered hatboxes. The company began July with 500 boxes in process that were 100 percent complete as to cardboard, 80 percent complete as to cloth, and 60 percent complete as to conversion costs. During the month, 3,300 boxes were started. On April 30, 350 boxes were in process (100 percent complete as to cardboard, 70 percent complete as to cloth, and 55 percent complete as to conversion costs). Using the FIFO method, what are equivalent units for cloth?a. 3,295b. 3,395c. 3,450d. 3,595

ANS: ABeginning Work in Process (Ignored for FIFO) 500 0% - + Completion of Units in Process 500 20% 100


+ Ending Work in Process 350 70% 245



62. Hahn Company makes fabric-covered storage totes. The company began July with 600 totes in process that were 100 percent complete as to cardboard, 75 percent complete as to cloth, and 65 percent complete as to conversion costs. During the month, 3,600 totes were started. On April 30, 450 totes were in process (100 percent complete as to cardboard, 60 percent complete as to cloth, and 50 percent complete as to conversion costs). Using the FIFO method, what are equivalent units for cloth?a. 3,570b. 3,750c. 3,870d. 4,020

ANS: ABeginning Work in Process (Ignored for FIFO) 600 0% - + Completion of Units in Process 600 25% 150


+ Ending Work in Process 450 60% 270



Brewer Corporation

Brewer Corporation. has the following information for August:

Beginning Work in Process Inventory(70% complete as to conversion) 6,000 units

Started 24,000 units

Ending Work in Process Inventory(10% complete as to conversion) 8,500 units

Beginning WIP Inventory Costs:Material $23,400

Conversion 50,607

Current Period Costs:Material $31,500

Conversion 76,956

All material is added at the start of the process and all finished products are transferred out.

63. Refer to Brewer Corporation. How many units were transferred out in August?a. 15,500b. 18,000c. 21,500d. 24,000

ANS: CBeginning Work in Process 6,000 Add: Units Started 24,000 Deduct: Units Transferred Out (21,500)Ending Work in Process 8,500


64. Refer to Brewer Corporation. Assume that weighted average process costing is used. What is the cost per equivalent unit for material?a. $0.55b. $1.05c. $1.31d. $1.83

ANS: D

Material Costs:Beginning $23,400 Current Period 31,500

54,900 ÷ 30,000 units = $ 1.83


65. Refer to Brewer Corporation. Assume that FIFO process costing is used. What is the cost per equivalent unit for conversion?a. $3.44b. $4.24c. $5.71d. $7.03

ANS: BConversion Costs:

Beginning (Ignored for FIFO) $ - Current Period 76,956

$ 76,956 Equivalent Units

Beginning Inventory (6,000 * 30%) 1,800 Started and Completed (15,500) 15,500 Ending Inventory (8,500 * 10%) 850

18,150 eq units

Cost per equivalent unit $ 4.24


Collins Corporation

Collins Corporation. has the following information for May:


Started 27,000 units

Ending Work in Process Inventory(15% complete as to conversion) 9,400 units

Beginning WIP Inventory Costs:Material $25,500

Conversion 52,725

Current Period Costs:Material $34,300

Conversion 80,845

All material is added at the start of the process and all finished products are transferred out.

66. Refer to Collins Corporation. How many units were transferred out in May?a. 17,600b. 19,500c. 25,100d. 27,000

ANS: CBeginning Work in Process 7,500 Add: Units Started 27,000 Deduct: Units Transferred Out (25,100) Ending Work in Process 9,400


67. Refer to Collins Corporation. Assume that weighted average process costing is used. What is the cost per equivalent unit for material?a. $0.99b. $1.18c. $1.64d. $1.73

ANS: DMaterial Costs:

Beginning $25,500 Current Period _34,300

$59,800 ÷ 34,500 units = $ 1.73


68. Refer to Collins Corporation. Assume that FIFO process costing is used. What is the cost per equivalent unit for conversion?a. $3.05b. $3.87c. $4.25d. $6.40

ANS: BConversion Costs:

Beginning (Ignored for FIFO) $ - Current Period 80,845

$ 80,845 Equivalent Units

Beginning Inventory (7,500 * 25%) 1,875 Started and Completed (17,600) 17,600 Ending Inventory (9,400 * 15%) 1,410

20,885 equivalent units

Cost per equivalent unit ($80,845/20885) $ 3.87


Fantastic Decorations Corporation

The Fantastic Decorations Corporation makes wreaths in two departments: Forming and Decorating. Forming began the month with 500 wreaths in process that were 100 percent complete as to material and 40 percent complete as to conversion. During the month, 6,500 wreaths were started. At month end, Forming had 2,100 wreaths that were still in process that were 100 percent complete as to material and 50 percent complete as to conversion. Assume Forming uses the weighted average method of process costing. Costs in the Forming Department are as follows:

Beginning Work in Process Costs:Material $1,000

Conversion 1,500

Current Costs:Material $3,200

Conversion 5,045

The Decorating Department had 600 wreaths in process at the beginning of the month that were 80 percent complete as to material and 90 percent complete as to conversion. The department had 300 units in ending Work in Process that were 50 percent complete as to material and 75 percent complete as to conversion. Decorating uses the FIFO method of process costing, and costs associated with Decorating are:

Beginning WIP Inventory:Transferred In $1,170

Material 4,320

Conversion 6,210

Current Period:Transferred In ?

Material $67,745

Conversion 95,820

69. Refer to Fantastic Decorations Corporation. How many units were transferred to Decorating during the month?a. 600b. 4,900c. 5,950d. 7,000

ANS: BWreaths completed from BWIP 500Wreaths started and completed 4,400

4,900


70. Refer to Fantastic Decorations Corporation. What was the cost transferred out of Forming during the month?a. $5,341b. $6,419c. $8,245

d. $8,330

ANS: DUnits Transferred Out Cost per Eq. Unit Total

4,900 1.70 $8,330


71. Refer to Fantastic Decorations Corporation. Assume 8,000 units were transferred to Decorating. Compute the number of equivalent units as to costs in Decorating for the transferred-in cost component.a. 7,400b. 7,700c. 8,000d. 8,600

ANS: CThe transferred-in cost component is the 8,000 units that were transferred in.


72. Refer to Fantastic Decorations Corporation. Assume 8,000 units were transferred to Decorating. Compute the number of equivalent units in Decorating for material.a. 7,970b. 8,000c. 8,330d. 8,450

ANS: AMaterials: Decorating: FIFO Units % Complete Eqiv. UnitsBeginning Work in Process 600 20% 120 + Units Started and Completed 7,700 100% 7,700 + Ending Work in Process 300 50% 150 Equivalent Units of Production 7,970


73. Refer to Fantastic Decorations Corporation. Assume 8,000 units were transferred to Decorating. Compute the number of equivalent units in Decorating for conversion.a. 7,925b. 7,985c. 8,360d. 8,465

ANS: BConversion: Decorating: FIFO Units % Complete Equiv.

Units

Beginning Work in Process 600 10% 60


+ Ending Work in Process 300 75% 225 Equivalent Units of Production 7,985


74. Refer to Fantastic Decorations Corporation. Assume that 8,000 units were transferred to Decorating at a total cost of $16,000. What is the material cost per equivalent unit in Decorating?a. $8.50 b. $8.65c. $8.80d. $9.04

ANS: AWhen FIFO is used, consider only current costs.

Current Costs EquivUnits

Cost/Equiv Unit

$67,745 7,970 $8.50


75. Refer to Fantastic Decorations Corporation. Assume that 8,000 units were transferred to Decorating at a total cost of $16,000. What is the conversion cost per equivalent unit in Decorating?a. $11.32b. $11.46c. $12.00d. $12.78

ANS: CWhen FIFO is used, consider only current costs.

Current Costs EquivUnits

Cost/Equiv Unit

$95,820 7,985 $12.00


76. Refer to Fantastic Decorations Corporation. Assume the material cost per EUP is $8.00 and the conversion cost per EUP is $15 in Decorating. What is the cost of completing the units in beginning inventory?a. $ 960b. $ 1,380c. $ 1,860d. $11,940

ANS: CCosts to

Complete Beg Inv UnitsPercent toComplete

Cost per Unit Total

Materials 600 20% $8 $960 Conversion 600 10% $15 $900Total Costs to Complete $1,860


Four Seasons Company

Four Seasons Company adds material at the start to its production process and has the following information available for August:


Started this period 32,000 unitsEnding Work in Process Inventory

(25% complete as to conversion) 2,500 unitsTransferred out ?

77. Refer to Four Seasons Company. Compute the number of units started and completed in August.a. 29,500b. 34,500c. 36,500d. 39,000

ANS: AUnits started this period 32,000Less: Ending Work in Process 2,500

Units started and completed this period 29,500


78. Refer to Four Seasons Company. Calculate equivalent units of production for material using FIFO.a. 32,000b. 36,800c. 37,125d. 39,000

ANS: AMaterials are added at the beginning of the process. 32,000 units were started in the current period; therefore there are 32,000 equivalent units for materials.


79. Refer to Four Seasons Company. Calculate equivalent units of production for conversion using FIFO.a. 30,125b. 34,325c. 37,125 d. 39,000

ANS: BEquivalent Units for Conversion

Beginning Inventory (7,000 * 60%) 4,200 Started and Completed (29,500) 29,500 Ending Inventory (2,500 * 25%) 625

34,325 eq. units


80. Refer to Four Seasons Company. Calculate equivalent units of production for material using weighted average.a. 32,000b. 34,325c. 37,125d. 39,000

ANS: DEquivalent Units--Materials

Beginning Inventory (7,000 units) 7,000 Started this Period (32,000) 32,000

39,000 eq. units


81. Refer to Four Seasons Company. Calculate equivalent units of production for conversion using weighted average.a. 34,325b. 37,125c. 38,375d. 39,925

ANS: BEquivalent Units--Conversion

Beginning Inventory (7,000 * 100%) 7,000 Started and Completed (29,500) 29,500

Ending Inventory (2,500 * 25%) 625

37,125 eq. units


Simpson Company

Simpson Company adds material at the start of production. The following production information is available for September:


Started this period 120,000 unitsEnding Work in Process Inventory

(80% complete as to conversion) 8,200 units

Beginning Work in Process Inventory Costs:Material $24,500

Conversion 68,905

Current Period Costs:Material $ 75,600

Conversion 130,053

82. Refer to Simpson Company. How many units must be accounted for?a. 118,200b. 128,200c. 130,000d. 138,200

ANS: CBeginning Work in Process 10,000Units Started 120,000Total Units 130,000


83. Refer to Simpson Company. What is the total cost to account for?a. $ 93,405b. $205,653c. $274,558d. $299,058

ANS: DBWIP: Materials $ 24,500BWIP: Conversion 68,905Current Period: Materials 75,600Current Period: Conversion 130,053Total Costs $299,058

84. Refer to Simpson Company. How many units were started and completed in the period?a. 111,800b. 120,000c. 121,800d. 130,000

ANS: AUnits started this period 120,000 Less: Ending Work in Process 8,200Units started and completed this period 111,800


85. Refer to Simpson Company. What are the equivalent units for material using the weighted average method?a. 120,000b. 123,860c. 128,360d. 130,000

ANS: DEquivalent Units

Beginning Inventory (10,000 * 100%) 10,000 Started and Completed (111,800) 111,800 Ending Inventory (8,200 * 25%) 8,200

130,000 eq. units


86. Refer to Simpson Company. What are the equivalent units for material using the FIFO method?a. 111,800b. 120,000c. 125,500d. 130,000

ANS: BEquivalent Units

Beginning Inventory (Ignored for FIFO) 0Started and Completed (111,800) 111,800 Ending Inventory (8,200 * 25%) 8,200

120,000 eq. units


87. Refer to Simpson Company. What are the equivalent units for conversion using the weighted average method?a. 120,000

b. 123,440c. 128,360d. 130,000

ANS: CBeginning Work in Process 10,000 45% 4,500 + Completion of Units in Process 10,000 55% 5,500 + Units Started and Completed 111,800 100% 111,800 + Ending Work in Process 8,200 80% 6,560 Equivalent Units of Production 128,360


88. Refer to Simpson Company. What are the equivalent units for conversion using the FIFO method?a. 118,360b. 122,860c. 123,860d. 128,360

ANS: CBeginning Work in Process (ignored) 10,000 0% - + Completion of Units in Process 10,000 55% 5,500 + Units Started and Completed 111,800 100% 111,800 + Ending Work in Process 8,200 80% 6,560 Equivalent Units of Production 123,860


89. Refer to Simpson Company. What is the material cost per equivalent unit using the weighted average method?a. $.58b. $.62c. $.77d. $.82

ANS: CMaterial Costs:

Beginning $ 24,500 Current Period 75,600

100,100 ÷ 130,000 units= $ 0.77 per unit


90. Refer to Simpson Company. What is the conversion cost per equivalent unit using the weighted average method?a. $1.01b. $1.05

c. $1.55d. $1.61

ANS: CConversion Costs:


198,958 ÷ 128,360 units= $ 1.55 per unit


91. Refer to Simpson Company. What is the cost of units completed using the weighted average method?a. $237,510b. $266,742c. $278,400d. $282,576

ANS: DUnits Completed Costs per Equivalent Unit Total

121,800 (1.55 + .77) = $2.32 $282,576


92. Refer to Simpson Company. What is the conversion cost per equivalent unit using the FIFO method?a. $1.05b. $.95c. $1.61d. $1.55

ANS: AConversion Costs:

Beginning (Ignored)Current Period $130,053

$130,053 ÷ 123,860 units= $1.05 per unit


93. Refer to Simpson Company. What is the cost of all units transferred out using the FIFO method?a. $204,624b. $191,289c. $287,004d. $298,029

ANS: CBeginning Inventory10,000 units: Raw Materials (prior period) $24,500 Direct Labor (prior period 68,905 FOH (10,000 * .55 * $1.05) 5,775

$99,180Units Started and Completed

111,800 units * $ (.63+1.05): $187,824 Total $287,004


Mercury Corporation

Beginning inventory (30% complete as to Material B and 60% complete for conversion)

700 units

Started this cycle 2,000 unitsEnding inventory (50% complete as to Material B and 80% complete for conversion)

500 units

Beginning inventory costs:Material A $14,270

Material B 5,950

Conversion 5,640

Current Period costs:Material A $40,000

Material B 70,000

Conversion 98,100

Material A is added at the start of production, while Material B is added uniformly throughout the process.

94. Refer to Mercury Corporation. Assuming a weighted average method of process costing, compute EUP units for Materials A and B.a. 2,700 and 2,280, respectivelyb. 2,700 and 2,450, respectivelyc. 2,000 and 2,240, respectivelyd. 2,240 and 2,700, respectively

ANS: BWeighted Average Material A Material BBeginning Work in Process 700 700Units Started and Completed 1,500 1,500Ending Work in Process 500 250

EUP Materials 2,700 2,450


95. Refer to Mercury Corporation Assuming a FIFO method of process costing, compute EUP units for Materials A and B.a. 2,700 and 2,280, respectivelyb. 2,700 and 2,450, respectivelyc. 2,000 and 2,240, respectivelyd. 2,450 and 2,880, respectively

ANS: CFIFO Material A Material BBeginning Work in Process 0 490Units Started and Completed 1,500 1,500Ending Work in Process 500 250 EUP Materials 2,000 2,240


96. Refer to Mercury Corporation Assuming a weighted average method of process costing, compute EUP for conversion.a. 2,600b. 2,180c. 2,000d. 2,700

ANS: AWeighted AverageBeginning Work in Process 700Units Started and Completed 1,500Ending Work in Process 400

2,600


97. Refer to Mercury Corporation Assuming a FIFO method of process costing, compute EUP for conversion.a. 2,240b. 2,180c. 2,280d. 2,700

ANS: BFIFOBeginning Work in Process (700 * 40%) 280Units Started and Completed 1,500Ending Work in Process (500 * 80%) 400

2,180


98. Refer to Mercury Corporation Assuming a weighted average method of process costing, compute the average cost per unit for Material A.a. $20.10b. $20.00c. $31.25d. $31.00

ANS: AWeighted Average: Material A


54,270 ÷ 2,700 units= $ 20.10 per unit


99. Refer to Mercury Corporation Assuming a FIFO method of process costing, compute the average cost per EUP for Material A.a. $31.25b. $20.10c. $20.00d. $31.00

ANS: CMaterial A Costs(Current Period)

Equivalent Units Average Cost per EUP

$40,000 2,000 $20.00


100. Refer to Mercury Corporation Assuming a FIFO method of process costing, compute the average cost per EUP for Material B.a. $20.10b. $31.25c. $20.00d. $31.00

ANS: BMaterial B Costs(Current Period) Equivalent Units Average Cost per EUP

$70,000 2,240 $31.25


101. Refer to Mercury Corporation Assuming a weighted average method of process costing, compute the average cost per EUP for Material B.a. $20.00b. $31.25c. $20.10d. $31.00

ANS: DMaterial B Costs

(Beginning Inventory and Current Period) Equivalent Units Average Cost per EUP$75,950 2,450 $31.00


102. Refer to Mercury Corporation Assuming a FIFO method of process costing, compute the average cost per EUP for conversion.a. $45.50b. $45.00c. $43.03d. $47.59

ANS: BConversion Costs(Current Period)

Equivalent Units Average Cost per EUP

$98,100 2,180 $45.00


103. Refer to Mercury Corporation Assuming a weighted average method of process costing, compute the average cost per EUP for conversion.a. $39.90b. $45.00c. $43.03d. $47.59

ANS: AConversion Costs

(Beginning WIP and Current Period) Equivalent Units Average Cost per EUP

$(98,100 + $5,640)=$103,640 2,600 $39.90


Guthrie Corporation

The following information is available for Guthrie Corporation for the current year:

Beginning Work in Process Costs of Beginning Work in Process: (75% complete) 14,500 units Material $25,100

Started 75,000 units Conversion 50,000

Ending Work in Process Current Costs: (60% complete) 16,000 units Material $120,000

Abnormal spoilage 2,500 units Conversion 300,000

Normal spoilage (continuous)

5,000 units

Transferred out 66,000 units

All materials are added at the start of production.

104. Refer to Guthrie Corporation. Using weighted average, what are equivalent units for material?a. 82,000b. 89,500c. 84,500d. 70,000

ANS: CMaterials: Weighted Average Units % Complete Eq. UnitsBeginning Work in Process 14,500 100% 14,500 + Units Started and Completed 51,500 100% 51,500 + Ending Work in Process 16,000 100% 16,000 + Abnormal Spoilage 2,500 100% 2,500



105. Refer to Guthrie Corporation. Using weighted average, what are equivalent units for conversion costs?a. 80,600b. 78,100c. 83,100d. 75,600

ANS: BConversion: Weighted Average Units % Complete Eq UnitsBeginning Work in Process 14,500 100% 14,500 + Units Started and Completed 51,500 100% 51,500 + Ending Work in Process 16,000 60% 9,600 + Abnormal Spoilage 2,500 100% 2,500



106. Refer to Guthrie Corporation. What is the cost per equivalent unit for material using weighted average?a. $1.72b. $1.62c. $1.77d. $2.07

ANS: AWeighted Average: Materials


145,100 ÷ 84,500 units= $1.72 per unit


107. Refer to Guthrie Corporation. What is the cost per equivalent unit for conversion costs using weighted average?a. $4.62b. $4.21c. $4.48d. $4.34

ANS: CWeighted Average: Conversion


$ 350,000 ÷ 78,100 units = $ 4.48 per unit

108. Refer to Guthrie Corporation. What is the cost assigned to normal spoilage using weighted average?a. $31,000b. $15,500c. $30,850d. None of the responses are correct

ANS: DNo costs are assigned to normal, continuous spoilage. Higher costs are assigned to good units produced.


109. Refer to Guthrie Corporation. Assume that the cost per EUP for material and conversion are $1.75 and $4.55, respectively. What is the cost assigned to ending Work in Process?a. $100,800b. $87,430c. $103,180d. $71,680

ANS: DEquivalent

UnitsCost per

Equivalent Unit Total16,000 $1.75 $28,000 9,600 $4.55 $43,680

$71,680


110. Refer to Guthrie Corporation. Using FIFO, what are equivalent units for material?a. 75,000b. 72,500c. 84,500d. 70,000

ANS: DMaterials: FIFOBeginning Work in Process - 0% - + Units Started and Completed 51,500 100% 51,500 + Ending Work in Process 16,000 100% 16,000 + Abnormal Spoilage 2,500 100% 2,500



111. Refer to Guthrie Corporation. Using FIFO, what are equivalent units for conversion costs?a. 72,225b. 67,225c. 69,725

d. 78,100

ANS: BConversion: FIFOBeginning Work in Process 14,500 25% 3,625 + Units Started and Completed 51,500 100% 51,500 + Ending Work in Process 16,000 60% 9,600 + Abnormal Spoilage 2,500 100% 2,500



112. Refer to Guthrie Corporation. Using FIFO, what is the cost per equivalent unit for material?a. $1.42b. $1.66c. $1.71d. $1.60

ANS: CFIFO: Materials

Current Period $ 120,000

120,000 ÷ 70,000 units = $1.71 per unit


113. Refer to Guthrie Corporation. Using FIFO, what is the cost per equivalent unit for conversion costs?a. $4.46b. $4.15c. $4.30d. $3.84

ANS: AFIFO: Conversion


300,000 ÷ 67,225 units = $ 4.46 per unit


114. Refer to Guthrie Corporation. Assume that the FIFO EUP cost for material and conversion are $1.50 and $4.75, respectively. Using FIFO what is the total cost assigned to the units transferred out?a. $414,194b. $339,094c. $445,444d. $396,975

ANS: ATransferred Out Units: FIFO Equiv

UnitsCost per

Equiv UnitTotal

Beginning Work in Process 75,100

+ Completion of Beginning Inventory (14,500 * 25%) 3,625 4.75 17,219 +Units Started and Completed 51,500 6.25 321,875



Crafton Corporation

Crafton Corporation has the following information for the current month:

Units started 100,000 unitsBeginning Work in Process: (35% complete) 20,000 unitsNormal spoilage (discrete) 3,500 unitsAbnormal spoilage 5,000 unitsEnding Work in Process: (70% complete) 14,500 unitsTransferred out 97,000 unitsBeginning Work in Process Costs:

Material $15,000

Conversion 10,000

All materials are added at the start of the production process. Crafton Corporation inspects goods at 75 percent completion as to conversion.

115. Refer to Crafton Corporation. What are equivalent units of production for material, assuming FIFO?a. 100,000b. 96,500c. 95,000d. 120,000

ANS: AMaterials: FIFOBeginning Work in Process - 0% - + Units Started and Completed 77,000 100% 77,000 + Normal Spoilage--Discrete 3,500 100% 3,500 + Abnormal Spoilage 5,000 100% 5,000 + Ending Work in Process 14,500 100% 14,500



116. Refer to Crafton Corporation. What are equivalent units of production for conversion costs, assuming FIFO?a. 108,900b. 103,900c. 108,650d. 106,525

ANS: D

Conversion: FIFOBeginning Work in Process 20,000 65% 13,000 + Units Started and Completed 77,000 100% 77,000 +Normal Spoilage--Discrete 3,500 75% 2,625 + Abnormal Spoilage 5,000 75% 3,750 + Ending Work in Process 14,500 70% 10,150



117. Refer to Crafton Corporation. Assume that the costs per EUP for material and conversion are $1.00 and $1.50, respectively. What is the amount of the period cost for July using FIFO?a. $0b. $9,375c. $10,625d. $12,500

ANS: CAbnormal spoilage is a period cost.Materials 5,000 * $1.00/unit $5,000Conversion Costs 3,750 * $1.50/unit 5,625 Total Abnormal Spoilage $10,625


118. Refer to Crafton Corporation. Assume that the costs per EUP for material and conversion are $1.00 and $1.50, respectively. Using FIFO, what is the total cost assigned to the transferred-out units (rounded to the nearest dollar)?a. $245,750b. $244,438c. $237,000d. $224,938

ANS: BTransferred Out Units: FIFOBeginning Work in Process $ 25,000 + Completion of Beginning Inventory (20,000 * 65%) 13,000 1.50 19,500 + Units Started and Completed 77,000 2.50 192,500 +Normal Spoilage--Discrete-Materials 3,500 1.00 3,500 +Normal Spoilage--Discrete-Conversion 2,625 1.50 3,938 Equivalent Units of Production $244,438


119. Refer to Crafton Corporation. What are equivalent units of production for material assuming weighted average is used?a. 107,000b. 116,500

c. 120,000d. 115,000

ANS: CMaterials: Weighted AverageBeginning Work in Process 20,000 100% 20,000 + Units Started and Completed 77,000 100% 77,000 + Normal Spoilage--Discrete 3,500 100% 3,500 + Abnormal Spoilage 5,000 100% 5,000 + Ending Work in Process 14,500 100% 14,500



120. Refer to Crafton Corporation. What are equivalent units of production for conversion costs assuming weighted average is used?a. 113,525b. 114,400c. 114,775d. 115,650

ANS: AConversion: Weighted AverageBeginning Work in Process 20,000 100% 20,000 + Units Started and Completed 77,000 100% 77,000 +Normal Spoilage--Discrete 3,500 75% 2,625 + Abnormal Spoilage 5,000 75% 3,750 + Ending Work in Process 14,500 70% 10,150



121. Refer to Crafton Corporation. Assume that the costs per EUP for material and conversion are $1.00 and $1.50, respectively. What is the cost assigned to normal spoilage, using weighted average, and where is it assigned?

Value Assigned To

a. $7,438 Units transferred out and Ending Inventoryb. $7,438 Units transferred outc. $8,750 Units transferred out and Ending Inventoryd. $8,750 Units transferred out

ANS: B

Equivalent UnitsCost per

Equivalent Unit Total3,500 $1.00 $3,5002,625 $1.50 3,938

$7,438 This amount is transferred out.


122. Refer to Crafton Corporation. Assume that the costs per EUP for material and conversion are $1.00 and $1.50, respectively. Assuming that weighted average is used, what is the cost assigned to ending inventory?a. $29,725.00b. $37,162.50c. $38,475.00d. $36,250.00

ANS: AEnding Inventory: Weighted AverageMaterials 14,500 $1.00 $ 14,500.00 Conversion (14,500 * 70%) 10,150 1.50 15,225.00

Total $ 29,725.00


Knight Corporation

Knight Corporation has the following information for the current month:

Units started 95,000 unitsBeginning Work in Process: (30% complete) 15,000 unitsNormal spoilage (discrete) 3,000 unitsAbnormal spoilage 4,000 unitsEnding Work in Process: (75% complete) 15,000 unitsTransferred out 88,000 unitsBeginning Work in Process Costs:

Material $18,000

Conversion 14,000

All materials are added at the start of the production process. Knight Corporation inspects goods at 75 percent completion as to conversion.

123. Refer to Knight Corporation. What are equivalent units of production for material, assuming FIFO?a. 91,000b. 92,000c. 95,000d. 110,000

ANS: CMaterials: FIFOBeginning Work in Process - 0% - + Units Started and Completed 73,000 100% 73,000 + Normal Spoilage--Discrete 3,000 100% 3,000 + Abnormal Spoilage 4,000 100% 4,000 + Ending Work in Process 15,000 100% 15,000


124. Refer to Knight Corporation. What are equivalent units of production for conversion costs, assuming FIFO?a. 97,750b. 100,000 c. 101,750 d. 104,500

ANS: BConversion: FIFOBeginning Work in Process 15,000 70% 10,500 + Units Started and Completed 73,000 100% 73,000 +Normal Spoilage--Discrete 3,000 75% 2,250 + Abnormal Spoilage 4,000 75% 3,000 + Ending Work in Process 15,000 75% 11,250



125. Refer to Knight Corporation. Assume that the costs per EUP for material and conversion are $2.00 and $2.25, respectively. What is the amount of the period cost for July using FIFO?a. $0 b. $12,750c. $14,750d. $17,000

ANS: CAbnormal spoilage is a period cost.Materials 4,000 * $2.00/unit $ 8,000Conversion Costs 3,000 * $2.25/unit 6,750 Total Abnormal Spoilage $14,750


126. Refer to Knight Corporation. Assume that the costs per EUP for material and conversion are $2.00 and $2.25, respectively. Using FIFO, what is the total cost assigned to the transferred-out units (rounded to the nearest dollar)?a. $344,938b. $365,875c. $376,938d. $378,625

ANS: CTransferred Out Units: FIFOBeginning Work in Process $ 32,000 + Completion of Beginning Inventory (15,000 * 70%) 10,500 $2.25 23,625 + Units Started and Completed 73,000 4.25 310,250 +Normal Spoilage--Discrete-Materials 3,000 2.00 6,000 +Normal Spoilage--Discrete-Conversion (3,000 * 75%) 2,250 2.25 5,063 Total Costs Assigned to Transferred Units $376,938


127. Refer to Knight Corporation. What are equivalent units of production for material assuming weighted average is used?a. 105,500b. 106,000 c. 107,000 d. 110,000

ANS: DMaterials: Weighted AverageBeginning Work in Process 15,000 100% 15,000 + Units Started and Completed 73,000 100% 73,000 + Normal Spoilage--Discrete 3,000 100% 3,000 + Abnormal Spoilage 4,000 100% 4,000 + Ending Work in Process 15,000 100% 15,000



128. Refer to Knight Corporation. What are equivalent units of production for conversion costs assuming weighted average is used?a. 103,750 b. 104,500 c. 104,750 d. 105,500

ANS: BConversion: Weighted AverageBeginning Work in Process 15,000 100% 15,000 + Units Started and Completed 73,000 100% 73,000 +Normal Spoilage--Discrete 3,000 75% 2,250 + Abnormal Spoilage 4,000 75% 3,000 + Ending Work in Process 15,000 75% 11,250



129. Refer to Knight Corporation. Assume that the costs per EUP for material and conversion are $2.00 and $2.25, respectively. What is the cost assigned to normal spoilage, using weighted average, and where is it assigned?

Value Assigned To

a. $11,063 Units transferred out and Ending Inventoryb. $11,063 Units transferred outc. $12,750 Units transferred out and Ending Inventory

d. $12,750 Units transferred out

ANS: BEquivalent

UnitsCost per

Equivalent Unit Total3,000 $2.00 $6,0002,250 $2.25 5,063

$11,063 This amount is transferred out.


130. Refer to Knight Corporation. Assume that the costs per EUP for material and conversion are $2.00 and $2.25, respectively. Assuming that weighted average is used, what is the cost assigned to ending inventory?a. $55,312.50b. $63,750.00c. $66,375.00d. $72,312.50

ANS: AEnding Inventory: Weighted AverageMaterials 15,000 $2.00 $ 30,000.00 Conversion (15,000 * 75%) 11,250 2.25 25,312.50 Total $ 55,312.50


Chapman Corporation

The following information is available for Chapman Corporation for the current month:

Started this month 80,000 unitsBeginning WIP

(40% complete) 7,500 unitsNormal spoilage (discrete) 1,100 unitsAbnormal spoilage 900 unitsEnding WIP

(70% complete) 13,000 unitsTransferred out 72,500 units

Beginning Work in Process Costs:Material $10,400

Conversion 13,800

Current Costs:Material $120,000

Conversion 350,000

All materials are added at the start of production and the inspection point is at the end of the process.

131. Refer to Chapman Corporation. What are equivalent units of production for material using FIFO?a. 80,000b. 79,100c. 78,900d. 87,500

ANS: AMaterials: FIFO

Beginning Work in Process-

0% - + Units Started and Completed 65,000 100% 65,000 + Ending Work in Process 13,000 100% 13,000 + Normal Spoilage (discrete) 1,100 100% 1,100 + Abnormal Spoilage 900 100% 900 Equivalent Units of Production 80,000


132. Refer to Chapman Corporation. What are equivalent units of production for conversion costs using FIFO?a. 79,700b. 79,500c. 81,100d. 80,600

ANS: DConversion: FIFO

Units% Complete

EUP

Beginning Work in Process 7,500 60% 4,500 + Units Started and Completed 65,000 100% 65,000 + Ending Work in Process 13,000 70% 9,100 + Normal Spoilage (discrete) 1,100 100% 1,100 + Abnormal Spoilage 900 100% 900



133. Refer to Chapman Corporation. What are equivalent units of production for material using weighted average?a. 86,600b. 87,500c. 86,400d. 85,500

ANS: BMaterials: Weighted Average Units % Complete EUP

Beginning Work in Process 7,500 100% 7,500+ Units Started and Completed 65,000 100% 65,000 + Ending Work in Process 13,000 100% 13,000 + Normal Spoilage (discrete) 1,100 100% 1,100

+ Abnormal Spoilage 900 100% 900



134. Refer to Chapman Corporation. What are equivalent units of production for conversion costs using weighted average?a. 83,600b. 82,700c. 82,500d. 81,600

ANS: AConversion: FIFO Units % Complete EUP

Beginning Work in Process 7,500 100% 7,500 + Units Started and Completed 65,000 100% 65,000 + Ending Work in Process 13,000 70% 9,100 + Normal Spoilage (discrete) 1,100 100% 1,100 + Abnormal Spoilage 900 100% 900



135. Refer to Chapman Corporation. What is cost per equivalent unit for material using FIFO?a. $1.63b. $1.37c. $1.50d. $1.56

ANS: CFIFO: Materials


$ 120,000 ÷ 80,000 units=

$ 1.50 per unit


136. Refer to Chapman Corporation. What is cost per equivalent unit for conversion costs using FIFO?a. $4.00b. $4.19c. $4.34d. $4.38

ANS: CFIFO: Conversion


$ 350,000 ÷ 80,600 units = $ 4.34 per unit

137. Refer to Chapman Corporation. What is cost per equivalent unit for material using weighted average?a. $1.49b. $1.63c. $1.56d. $1.44

ANS: AWeighted Average: Materials


130,400 ÷ 87,500 units = $ 1.49 /unit


138. Refer to Chapman Corporation. What is cost per equivalent unit for conversion costs using weighted average?a. $4.19b. $4.41c. $4.55d. $4.35

ANS: DWeighted Average: Conversion


363,800 ÷ 83,600 units = $4.35 per unit


139. Refer to Chapman Corporation. What is the cost assigned to ending inventory using FIFO?a. $75,920b. $58,994c. $56,420d. $53,144

ANS: BEnding Inventory: FIFOMaterials 13,000 $ 1.50 $ 19,500Conversion (13,000 * 70%) 9,100 4.34 39,494 Total $ 58,994


140. Refer to Chapman Corporation. What is the cost assigned to abnormal spoilage using FIFO?a. $1,350b. $3,906

c. $5,256d. $6,424

ANS: CAbnormal

Spoiled Units Price per Equivalent Unit Total900 $5.84 $5,256


141. Refer to Chapman Corporation. What is the cost assigned to normal spoilage and how is it classified using weighted average?a. $6,193 allocated between WIP and Transferred Outb. $6,424 allocated between WIP and Transferred Outc. $6,193 assigned to loss accountd. $6,424 assigned to units Transferred Out

ANS: DNormal

Spoiled Units Price per Equivalent Unit Total1,100 $5.84 $6,424 Transferred Out


142. Refer to Chapman Corporation. What is the total cost assigned to goods transferred out using weighted average?a. $435,080b. $429,824c. $428,656d. $423,400

ANS: BGoods Transferred Out/ Price per Eq Unit Total

73,600 $5.84 $429,824


SHORT ANSWER

1.Discuss the assignment of costs to transferred-out inventories in both process costing methods.

ANS:The assignment of costs in a process costing system first involves determining total production costs. These costs are then assigned to units completed and transferred out during the period and to the units in Work in Process Inventory at the end of the period. To assign costs, the cost per equivalent unit must be established using either the FIFO or weighted average method. The cost per EUP is then multiplied by the number of equivalent units in the component being costed. Transferred-out costs using the weighted average method are computed as the number of units transferred times the total price per equivalent unit. When using FIFO, transferred-out units are computed as follows: the costs in beginning WIP are added to the current period costs to complete the units which sums to the total cost of beginning WIP; the units started and completed are priced at current period costs; the total of the costs of beginning inventory and units started and completed are then transferred out.

PTS: 1 DIF: Moderate OBJ: 6-3 | 6-4NAT: AACSB: Reflective ThinkingLOC: AICPA Functional Competencies: Measurement, Reporting

2. Discuss process costing in a multi-department atmosphere.

ANS:When a business has more than one department in its production process, products are transferred from Department A to Department B and so on. As the products are transferred from department to department so, too, must the costs be transferred. When products are transferred, the units and costs are treated as input material in the next department. The new department may add additional material or may simply add conversion costs and finish the products. The total cost of the products is a cumulative total from all departments within the process.

PTS: 1 DIF: Moderate OBJ: 6-3NAT: AACSB: Reflective ThinkingLOC: AICPA Functional Competencies: Measurement, Reporting

3. List and explain the six steps of cost assignment when using process costing. How does cost assignment differ between the weighted average and FIFO methods?

ANS:Step 1--Determine the total physical units to account for by adding beginning work in process inventory in physical units and the physical units started. The result of this step should be identical for both weighted average and FIFO methods.

Step 2--Determine the total physical units accounted for. The units will either be transferred out, spoiled (normal or abnormal) or remain in ending work in process inventory. The result of this step is identical for both weighted average and FIFO methods.

It is also possible to compute Units started and completed by subtracting units in beginning inventory from units transferred out.

At this point the results from Step 1 should equal the result from Step 2.

Step 3--Calculate equivalent units of production (EUP):

Weighted Average: Beginning WIP Inventory in physical units + Units Started and Completed + (Units in Ending WIP Inventory x Percentage of Completion)FIFO: Beginning WIP inventory in physical units x Percentage of work done in CURRENT period) + Units Started and Completed + (Units in Ending WIP Inventory x Percentage of Completion)Note that the only difference between the weighted average and FIFO methods is the computation of the beginning inventory.

Step 4--Calculate total costs to account for. This equals the total costs in beginning WIP inventory and the costs incurred during the current period. These costs are the same for both weighted average and FIFO. These costs will be separated into materials costs and conversion costs.

Step 5--Calculate cost per equivalent unit for each cost component (materials and conversion).Weighted Average: (Costs in beginning inventory + Current period costs)/EUP (computed in step 3)--Note that all costs in beginning WIP inventory are included in this computation)FIFO: Current period inventory costs/EUP (computed in step 3). Do not include beginning inventory costs in computation of EUP.

The sum of the individual components equal the total cost per completed EU.

Step 6--Assign the costs (from Step 4) to goods transferred out, abnormal spoilage (if any), and ending WIP. The total costs assigned must equal the costs computed in Step 4.Weighted AverageTransferred Out--Units Transferred Out x Total Cost per EUPEnding WIP Inventory--Sum of (EUP per component x Cost per EUP)

FIFOTransferred Out--Beginning WIP Costs + (Units in BI x % completed during current period x Cost per EU Component) + Units Started and Completed during period x Total Cost per EUP)Ending WIP Inventory--Sum of (EUP per component x Cost per EUP)--The EUPs for each component are the same under the FIFO method and the weighted average method; however, the cost per EUP differs under weighted average. Therefore, the total ending WIP inventory will differ between FIFO and weighted average.


4. Discuss standard costing as used in conjunction with process costing.

ANS:When standard costing is used in conjunction with process costing, the costing procedure is simplified. Standard costing eliminates the calculation in each new period of a new production cost because the standards are established as on-going norms for (at least) a one-year period of time. Standard costing in a process costing system is essentially a FIFO system that permits variances to be recognized during the period.


5. What are two alternative calculations that can be used to either verify the number of equivalent units or to obtain the number initially?

ANS:One alternative method of calculating equivalent units for weighted average is to determine units transferred out and add to that the equivalent units of ending work in process. Another alternative method of calculating equivalent units for FIFO is to determine equivalent units of production under weighted average and subtract the beginning work in process equivalent units that were completed in the last period. Both of these methods may be used to "check" original answers.


6. When is a hybrid costing system appropriate in a manufacturing setting?

ANS:A hybrid costing system combines characteristics of both job order and process costing systems. Such a system would be appropriate in a manufacturing setting where products can be mass produced up to a certain point and then must be customized after that point. For example an automobile manufacturer that sells a wide variety of options on vehicles would use a hybrid costing system--process for manufacturing the chassis and motor, then job order for the distinguishing features such as specialized interiors. Likewise a company that manufactured different types of clothes would use job order costing for the materials but process costing for processing the materials into finished products.


7. Discuss how spoilage is treated in EUP computations.

ANS:If spoilage is normal and continuous, the calculations for EUP do not include this spoilage (method of neglect), and the good units simply absorb the cost of such spoilage. If spoilage is normal and discrete, the equivalent units are used in the EUP calculations, and the spoilage cost is assigned to all units that passed through the inspection point during the current period. If the spoilage is abnormal and either discrete or continuous, the equivalent units are used in EUP calculations and costed at the cost per EUP; the total cost is then assigned to a loss account.


8. Discuss why units are lost during production.

ANS:In most production processes, losses are anticipated to a certain degree. Losses may be classified as normal and abnormal depending on management's expectations. A normal loss is one that is expected, while an abnormal loss is one that exceeds the normal loss. The losses may result in spoiled or defective units. Spoiled units cannot be economically reworked; defective units can be. Losses can occur on a continuous or a discrete basis. Quality control points are established at the end of and/or within the process to inspect goods and remove from further processing those units that are either spoiled or defective.


9. Distinguish between discrete and continuous production losses and the method of accounting for these losses.

ANS:

Discrete production losses occur at a specific point in the production process. Such a loss is detectable only when a quality check is performed. The cost of normal discrete losses should be assigned only to units that have passed the inspection point in ending inventory and transferred out on an EUP basis as a product cost. Abnormal discrete losses should be treated as a period cost and written off on an EUP basis.

Continuous production losses occur throughout the production process. Normal continuous production losses are handled through the method of neglect, which ignores the spoiled units in the EUP schedule. This results in a smaller EUP and a greater cost per equivalent unit. Abnormal discrete losses are treated as a period cost and written off on an EUP basis.


PROBLEM

Powers Corporation

Powers Corporation has the following information available for May of the current year:


Started 120,000 unitsEnding Work in Process Inventory


Beginning Work in Process Inventory Costs:Material $ 2,100

Conversion 2,030


Conversion 109,695

All material is added at the start of production and all products completed are transferred out.

1. Refer to Powers Corporation. Prepare an equivalent units schedule using the (a) FIFO and (b) weighted average method.

ANS:

Powers CorporationSchedule of Equivalent Units for

FIFO and Weighted AverageMay 31, current year

FIFO Weighted AverageBeginning Work In Process 10,000 Beginning Work In

Process10,000

Units Started 120,000 Units Started 120,000

Units to Acct. For 130,000 Units to Acct. For 130,000

Beginning Work In Process 10,000 Transferred Out 100,000

Started & Completed 90,000 Ending Work in Process

30,000

Ending Work in Process 30,000 Units Accounted For 130,000

Units Accounted For 130,000

(a) FIFO (b) Weighted AverageMat. CC Mat. CC

BWIP 0 7,500

S & C 90,000 90,000 TO 100,000 100,000

EWIP 30,000 9,000 EI 30,000 9,000

EUP 120,000 106,500 EUP 130,000 109,000

PTS: 1 DIF: Moderate OBJ: 6-3 | 6-4 NAT: AACSB: Analytical SkillsLOC: AICPA Functional Competencies: Measurement, Reporting

2. Refer to Powers Corporation. Prepare a schedule showing the computation for cost per equivalent unit assuming the (a) FIFO and (b) weighted average method.

ANS:

Powers CorporationSchedule of Average Cost Per Unit

FIFO and Weighted AverageMay 31, current year


Costs $33,000 $109,695 $ 35,100 $111,725Eq Units 120,000 106,500 130,000 109,000

$.275/eq unit $ 1.03/eq unit $ .27/eq unit $ 1.025/eq unitTotal cost/eq. unit $ 1.305/eq unit $ 1.295/eq unit


3. Refer to Powers Corporation. Prepare a schedule showing the assignment of costs assuming the (a) FIFO and (b) weighted average method.

ANS:

Powers CorporationSchedule of Assigned CostsFIFO and Weighted Average

May 31, current year

(a) FIFOBeginning Work in Process $ 4,130

To complete (7,500 $1.03) = 7,725 $ 11,855

Started and Completed90,000 $1.305 = 117,450

Total costs transferred out $129,305

Ending Work in Process30,000 $ .275 = $ 8,250

9,000 $1.03 = 9,270 $ 17,520

Total costs accounted for $146,825

(b) Weighted AverageCompleted100,000 $1.295 = $129,500


9,000 $1.025 = 9,225 $ 17,325


PTS: 1 DIF: Difficult OBJ: 6-3 | 6-4 NAT: AACSB: Analytical SkillsLOC: AICPA Functional Competencies: Measurement, Reporting

Crosson Corporation

Crosson Corporation has the following information available for June of the current year:


Started 150,000 unitsEnding Work in Process Inventory


Beginning Work in Process Inventory Costs:Material $ 2,500

Conversion 2,650


Conversion 112,750

All material is added at the start of production and all products completed are transferred out.

4. Refer to Crosson Corporation. Prepare an equivalent units schedule using the (a) FIFO and (b) weighted average method.

ANS:

Crosson CorporationSchedule of Equivalent Units for

FIFO and Weighted AverageJune 30, current year

FIFO Weighted AverageBeginning Work In Process 12,000 Beginning Work In

Process12,000

Units Started 150,000 Units Started 150,000

Units to Acct. For 162,000 Units to Acct. For 130,000

Beginning Work In Process 12,000 Transferred Out 127,000

Started & Completed 115,000 Ending Work in Process

35,000

Ending Work in Process 35,000 Units Accounted For 162,000

Units Accounted For 162,000


BWIP 0 9,600

S & C 115,000 115,000 TO 127,000 127,000

EWIP 35,000 8,750 EI 35,000 8,750

EUP 150,000 133,350 EUP 162,000 135,750


5. Refer to Crosson Corporation. Prepare a schedule showing the computation for cost per equivalent unit assuming the (a) FIFO and (b) weighted average method.

ANS:

Crosson CorporationSchedule of Average Cost Per Unit

FIFO and Weighted AverageJune 30, current year


Costs $36,000 $112,750 $ 38,500 $115,400Eq Units 150,000 133,350 162,000 135,750

$.24/eq unit $ .8455/eq unit $ .2377/eq unit $ .850/eq unitTotal cost/eq. unit $ 1.0855/eq unit $ 1.0877/eq unit


6. Refer to Crosson Corporation. Prepare a schedule showing the assignment of costs assuming the (a) FIFO and (b) weighted average method.

ANS:

Crosson CorporationSchedule of Assigned CostsFIFO and Weighted Average

June 30, current year

(a) FIFOBeginning Work in Process $ 5,150

To complete (9,600 $.8455) = 8,117 $ 13,267

Started and Completed115,000 $1.0855 = 124,833

Total costs transferred out $138,100


8,750 $.8455 = (rounded) 7,400 $ 15,800


(b) Weighted AverageCompleted127,000 $1.0877 = rounded $138,142


8,750 x $.850 7,438 $ 15,758



7. Spectacular Candy Corporation has two processing departments, Cooking and Packaging. Ingredients are placed into production at the beginning of the process in Cooking, where they are formed into various shapes. When finished, they are transferred into Packaging, where the candy is placed into heart and tuxedo boxes and covered with foil. All material added in Packaging is considered as one material for convenience. Since the boxes contain a variety of candies, they are considered partially complete until filled with the appropriate assortment. The following information relates to the two departments for the month of February:Cooking Department:Beginning WIP (30% complete as to conversion) 4,500 unitsUnits started this period 15,000 unitsEnding WIP (60% complete as to conversion) 2,400 unitsPackaging Department:Beginning WIP (90% complete as to material, 80% complete as to conversion)

1,000 units

Units started during period ?

Ending WIP (80% complete as to material and 80% complete as to conversion)

500 units

a. Determine equivalent units of production for both departments using the weighted average method.b. Determine equivalent units of production for both departments using the FIFO method.

ANS:a. Cooking Department

Materials Conversion Costs

Transferred Out 17,100 17,100

Ending Work in Process 2,400 1,440

TOTAL EUP 19,500 18,540

Packaging DepartmentTransferred In Materials. Conversion

CostsTransferred Out 17,600 17,600 17,600

Ending Work in Process 500 400 400

TOTAL EUP 18,100 18,000 18,000

b. Cooking DepartmentMaterials Conversion

CostsBeginning Work in Process 0 3,150

Transferred from Cooking 12,600 12,600

Ending Work in Process 2,400 1,440

TOTAL EUP 15,000 17,190

Packaging DepartmentTransferred In Materials Conversion

CostsBeginning Work in Process 0 100 200

Transferred from Cooking 16,600 16,600 16,600

Ending Work in Process 500 400 400

TOTAL EUP 17,100 17,100 17,200


8. The following costs were accumulated by Department 2 of Tulsa Company during November:

Cost Transferredfrom Dept. 1 Material Conversion

CostsTotal

Beginning Inventory $ 17,050 0 $ 5,450 $ 22,500

Current Period Cost 184,000 $ 34,000 104,000 322,000 $ 201,050 $ 34,000 $ 109,450 $344,500

Production for November in Department 2 (in units):

WIP-November 1 2,000 60% completeComplete period transferred 20,000WIP-November 30 5,000 40% complete

Materials are not added in Department 2 until the very end of processing Department 2.

Required: Compute the cost of units completed and the value of ending WIP for:

a. Weighted average inventory assumption

b. FIFO inventory assumption

ANS:a. Weighted average inventory assumption

Dept 1 MAT CCComplete 20,000 20,000 20,000

Eq-End WIP 5,000 0 2,000

EP-WA 25,000 20,000 22,000

Unit $201,050 = $8.042 $34,000 = $1.70 $109,450 = $4.975 = $14.717Cost 25,000 20,000 22,000

End WIP Dept 1 = 5,000 $8.042 = $40,210

CC = 2,000 units $4.975 = 9,950 $50,160

COGM = $344,500 - $50,160 = $294,340

b. FIFO inventory assumption

Dept 1 MAT CCComplete 20,000 20,000 20,000

Eq-End WIP 5,000 0 2,000

- Eq-Begin (2,000 ) 0 (1,200)

EP-FIFO 23,000 20,000 20,800

Unit $184,000 = $8.00 $34,000 = $1.70 $104,000 = $5.00 = $14.70Cost 23,000 20,000 20,800

End WIP Dept 1 = 5,000 units $8.00 = $40,000

CC = 2,000 units $5.00 = 10,000$50,000

COGM = $344,500 - $50,000 = $294,500


9. The formula for a chemical compound requires one pound of Chemical X and one pound of Chemical Y. One pound of Chemical X is processed in Department A and transferred to Department B for further processing where one pound of Chemical Y is added when the process is 50 percent complete. When the processing is complete in Department B, the finished compound is transferred to finished goods. The process is continuous, operating 24 hours a day.

Normal spoilage occurs in Department A. Five percent of material is lost in the first few seconds of processing. No spoilage occurs in Department B.

The following data are available for the month of October:

Dept. A Dept. BUnits in process, October 1 8,000 10,000

Stage of completion of beginning inventory 3/4 3/10

Units started or transferred in 50,000 ?

Units transferred out 46,500 ?

Units in process, October 31 ? ?

Stage of completion of ending inventory 1/3 1/5

Units of Chemical Y added in Department B 44,500

Required:a. Prepare a schedule showing finished equivalents for Chemical X and for conversion cost for

Department A using the FIFO method.b. Determine for Department B the number of units of good product completed during October

and the number of units in process on October 31.c. Prepare a schedule for Department B showing finished equivalents for preceding department

cost, cost of Chemical Y, and conversion cost using the FIFO method.

ANS:a. c.

Materials Conversion Costs Transferred In Mat CC46,500 46,500 44,500 44,500 44,500 9,000 3,000 12,000 0 2,400 (8,000) (6,000) (10,000) 0 (3,000)47,500 43,500 46,500 44,500 43,900

b. Since the material in the second department goes in at the 50 percent point and the ending WIP inventory is only at the 20 percent point, units complete is the same as the equivalents of material 44,500, given that units started plus units in beginning WIP are equal to units complete plus ending WIP 10,000 + 46,500 - 44,500 = 12,000 units in ending WIP.


10. Smithfield Company manufactures a specialized product. Department 2 adds new material to the units received from Department 1 at the end of process. A normal loss occurs early in processing. Production and cost data for Department 2 for the month of April are as follows:

Production record (in units):In process, April 1-75% complete for processing cost 4,000

Received from Department 1 20,000

Completed and transferred to finished goods 16,000

Lost in processing (normal) 2,000

In process, April 30-2/3 complete for process cost 6,000

Cost Record:Work in process inventory, April 1:Preceding department cost $ 620

Processing cost 2,000 $2,620

Cost from preceding department in April 1,800

Material cost for April 4,800

Processing cost for April 10,200

Required: Determine the following for Department 2 under (a) weighted average the method of costing and (b) the FIFO method of costing: (1) unit costs for each cost component, (2) cost of production transferred to finished goods, (3) cost of work in process inventory of April 30.

ANS:Equivalent production TI Material Conv. costUnits complete 16,000 16,000 16,000

+ Equiv. ending WIP 6,000 0 4,000

= Equiv. prod. average 22,000 16,000 20,000

- Equiv. begin. WIP (4,000) 0 (3,000)

= Equiv. prod. FIFO 18,000 16,000 17,000

Unit Cost Average Unit Cost FIFOTI = $620 + 1,800 TI = $1,800 22,000 = $0.11 18,000 = $0.10

Mat = $4,800 Mat = $4,80016,000 = $0.30 16,000 = $0.30

CC = $2,000 + 10,200 CC = $10,200 20,000 = $0.61 17,000 = $0.60

End. WIP-WA End. WIP-FIFOPD 6,000 $0.11

=$ 660.00 6,000 $0.10

=$ 600.00

CC 4,000 $0.61 =

2,440.00 4,000 $0.60 =

2,400.00

$3,100.00 $3,000.00

Cost of Goods Complete

WA FIFO$19,420 - 3,100 = $16,320.00 $19,420 - 3,000 = $16,420.00


11. Patterson Manufacturing employs a weighted average process costing system for its products. One product passes through three departments (Molding, Assembly, and Finishing) during production. The following activity took place in the Finishing Department during April:.

Units in beginning inventory 4,200

Units transferred in from Assembly 42,000

Units spoiled 2,100

Good units transferred out 33,600

The costs per equivalent unit of production for each cost failure area as follows:

Cost of prior departments $5.00

Raw material 1.00

Conversion 3.00

Total cost per EUP $9.00

Raw material is added at the beginning of the Finishing process without changing the number of units being processed. Work in process inventory was 40 percent complete as to conversion on April 30. All spoilage was discovered at final inspection. Of the total units spoiled, 1,680 were within normal limits. Spoilage is considered discrete.

Required:a. Calculate the equivalent units of productionb. Determine the cost of units transferred out of Finishingc. Determine the cost of ending Work in Process Inventoryd. The portion of the total transferred in cost associated with beginning Work in Process

Inventory amounted to $18,900. What is the current period cost that was transferred in from Assembly to Finishing?

e. Determine the cost associated with abnormal spoilage for the month.

ANS:a.

TI Mat CCComplete 33,600 33,600 33,600

+ Equiv Ending WIP 10,500 10,500 4,200

+ Normal Sp 1,680 1,680 1,680

+ Abnor Sp 420 420 420 46,200 46,200 39,900

b. 33,600 $9 $302,400 TC = 46,200 $5 $231,000

1,680 $9 15,120 46,200 $1 46,200$317,520 39,900 $3 119,700

$396,900

c. 10,500 $5 $52,500

10,500 $1 10,500

4,200 $3 12,600 $75,600

COGM = $396,900 - 75,600 - 3,780 = $317,520d. $5 = $18,900 + X

46,200

X = $231,000 - 18,900 = $212,100

e. ABN = 420 $9 = $3,780


12. Ellis Industries manufactures wood furniture. In the Lamination Department, varnish is added when the goods are 60 percent complete as to overhead. The units that are spoiled during processing are found upon inspection at the end of production. Spoilage is considered discrete.

Production Data for Current MonthBeginning inventory (80% complete as to labor, 70% complete as to overhead)

1,000 units

Transferred in during month 7,450 unitsEnding inventory (40% complete as to labor, 20% complete as to overhead) 1,500 unitsNormal spoilage (found during final quality inspection) 100 unitsAbnormal spoilage-found at 30% completion of direct labor and 15% of conversion; the sanding machine was misaligned and scarred the chairs

200 units

All other units were transferred to finished goods

Cost Data for Current MonthBeginning work in process inventory:

Prior department costs $7,510

Varnish 950

Direct labor 2,194

Overhead 5,522 $ 16,176

Current period costs:Prior department costs $68,540

Varnish 7,015

Direct labor 23,000

Overhead 56,782 155,337

Total costs to account for $171,513

Required: Determine the proper disposition of the current month costs for the Laminating Department using the weighted average method.

ANS:TI MAT DL MOH

Complete 6,650 6,650 6,650 6,650

+ end 1,500 0 600 300

+ normal 100 100 100 100

+ abnormal 200 0 60 30 8,450 6,750 7,410 7,080

Unit Cost

End WIP

DL 600 $3.40 = $ 2,040

MOH 300 $8.80 = 2,640

TI 1,500 $9.00 = 13,500 $18,180

Abnormal Loss 60 $3.40 = $ 204

DL 30 $8.80 = 264

MOH 200 $9.00 = 1,800

TI $ 2,268

COGM = $171,513 - 18,180 - 2,268 = $151,065


13. Consider the following data for a cooking department for the month of February:

PhysicalUnits

Work in process, beginning inventory* 11,000

Started during current period 74,000

To account for 85,000

Good units completed and transferred out during current period:

From beginning work in process 11,000

Started and completed 50,000

Good units completed 61,000

Spoiled units 8,000

Work in process, ending inventory~ 16,000

Accounted for 85,000

*Direct material, 100% complete; conversion costs, 25% complete~Direct material, 100% complete; conversion costs, 75% complete

Inspection occurs when production is 100 percent completed. Normal spoilage is 11 percent of good units completed and transferred out during the current period.

The following cost data are available:

Work in process, beginning inventory:Direct material $220,000

Conversion costs 30,000 $ 250,000

Costs added during current period:Direct material 1,480,000

Conversion costs 942,000

Costs to account for $2,672,000

Required: Prepare a detailed cost of production report. Use the FIFO method. Distinguish between normal and abnormal spoilage.

ANS:Normal Sp = 11% 61,000 = 6,710 units FIFOAbnormal Sp = 8,000 - 6,710 = 1,290 units

Mat CC Mat = $1,480,000 = $22.00 67,290

Complete 61,000 61,000

+ End 16,000 12,000

+ Ab Sp 1,290 1,290 CC = $942,000 = 13.17

= Ave 78,290 74,290 71,540 $35.17

- Beg (11,000) (2,750)

FIFO 67,290 71,540

WIPMaterial 16,000

$22.00$352,000

CC 12,000 $13.17

158,040

$510,040

Loss = 1,290 $35.17 45,369

COGM = $2,672,000 - 510,040 - 45,369 = $2,116,591


14. Choctaw Industries has two departments. Department 1 uses FIFO costing and Department 2 uses weighted average.

Units are introduced into the process in Department 1 (this is the only material added in Department 1). Spoilage occurs continuously through the department and normal spoilage should not exceed 10 percent of the units started.

Department 2 adds material (packaging) at the 75 percent completion point; this material does not cause an increase in the number of units being processed. A quality control inspection takes place when the goods are 80 percent complete. Spoilage should not exceed 5 percent of the units transferred in from Department 1.

The following production cost data are applicable for operations for August of the current year:

Department 1 Production DataBeginning inventory (65% complete) 1,000

Units started 25,000

Units completed 22,000

Units in ending inventory (40% complete) 2,800

Department 1 Cost DataBeginning inventory:

Material $ 1,550

Conversion 2,300 $ 3,850

Current period:Material $38,080

Conversion 78,645 116,725


Department 2 Production DataBeginning inventory (90% complete) 8,000

Units transferred in 22,000

Units completed 24,000

Units in ending inventory (20% complete) 4,500

Department 2 Cost DataBeginning inventory:

Transferred in $40,800

Material 24,000

Conversion 4,320 $ 69,120*

Current period:Transferred in $113,700

Material` 53,775

Conversion 11,079 178,554


*This may not be the same amount determined for Department 1; ignore any difference and use this figure.

Required:a. Compute the equivalent units of production in each department.b. Determine the cost per equivalent unit in each department and compute the cost transferred out,

the cost in ending inventory, and the cost of spoilage (if necessary).

ANS:a.

Mat CC Mat = $38,080 = $ 1.60 23,800

Complete 22,000 22,000

+ End WIP 2,800 1,120 (2,800 4)

CC = $78,645 = $ 3.50

24,800 23,120 22,470

- Beg WIP (1,000) (650 ) (1,000 .65)

End WIP =

2,800 $1.60

= $ 4,480

23,800 22,470 1,120 $3.50

3,920

$ 8,400 COGM = $120,575 - 8,400 $112,175

b.TI Mat CC Mat = $ 77,775 = $ $3.05

25,500

Complete 24,000 24,000 24,000

+ End WIP 4,500 0 900 CC = $ 15,399 = $ $0.59

+ Normal 1,100 1,100 880 26,100

+ Abnormal 400 400 32030,000 25,500 26,100 TI = $154,500 = $ 5.15

30,000

End WIP Abn Loss 4,500 $5.15 $23,175 400 $3.05 $1,220

900 $0.59 531 320 $0.59 189$23,706 400 $5.15 2,060

$3,469

COGM = $247,674 - 23,706 - 3,469 = $220,499

PTS: 1 DIF: Moderate OBJ: 6-3 | 6-8 NAT: AACSB: Analytical Skills

LOC: AICPA Functional Competencies: Measurement, Reporting

15. Hagler Company manufactures a single product. All material is added at the beginning of the process.

Costs Material Conversion TotalBeginning inventory $ 30,000 $ 3,600 $ 33,600

Current period 885,120 335,088 1,220,208

Total costs $915,120 $338,688 $1,253,808

UNITSBeginning inventory (30% complete-conversion) 6,000 unitsStarted 180,000 unitsCompleted 152,000 unitsEnding inventory (70% complete-conversion) 20,000 unitsNormal spoilage 4,800 units

Required: Find ending WIP inventory, abnormal loss, and COGM. Assume that, for conversion costs, abnormal shrinkage is 60 percent.

ANS:Mat CC

Units Complete 152,000 152,000

+ Equivalents Ending WIP 20,000 14,000

+ Abnormal Loss 9,200 5,520 (9,200 .6)= Equivalent Production-WA 181,200 171,520

= Equivalent Begin WIP (6,000 ) (1,800)

= Equivalent Production-FIFO 175,200 169,720

Unit Costs:WA FIFOMat $915,120 = $5.05 Mat $885,120 = $5.05

181,200 175,200

CC $338,688 = $1.97 CC $335,088 = $1.97 171,520 169,720

Ending WIPMaterial 20,000 $5.05 $101,000

CC 14,000 $1.97 27,580 $128,580

Abnormal SpoilageMaterial 9,200 $5.05 $ 46,460

CC 5,520 $1.97 10,874 $ 57,334

Cost of Good Transferred 1,253,808 - 128,580 - 57,334 = $1,067,894


16. Incredible Ice Cream Company produces ice cream in two departments-Mixing and Finishing. In Mixing, all ingredients except fruit are added at the start of production. In Finishing, fruit is added and then the mixture is placed into containers. Adding the fruit to the basic ice cream mixture increases the volume transferred in by the number of gallons of fruit added. Any spoilage that occurs is in the Finishing Department. Spoilage is detected just before the ice cream is placed into containers or at the 98 percent completion point. All spoilage is abnormal.

Finishing Department

BWIP (100% fruit, 0% container, 30% CC) 5,000 gallonsGallons transferred in 5,500

Gallons of fruit added 1,200

EWIP (100% fruit, 0% container, 60% CC) 1,700 gallonsGallons transferred out 9,000

Abnormal spoilage 1,000

BWIP Costs:Transferred In $ 9,700

Fruit 10,500

CC 15,000

Current Costs:Transferred In 12,400

Fruit 54,000

Containers 11,000

CC 98,000

Total Costs $ 210,600

Prepare a cost of production report for October 20XY. The company uses weighted average.

ANS:

Incredible Ice Cream CompanyCost Report

October 31, 20XYBWIP 5,000

Trans. In 5,500

Fruit 1,200

Acctble. For 11,700

TI Fruit Container CCTransferred Out 9,000 9,000 9,000 9,000

EWIP 1,700 1,700 0 1,020

Abnormal Spoilage 1,000 1,000 0 980 11,700 11,700 9,000 11,000

Costs:

TI Fruit Container CCBWIP $ 9,700 $10,500 $ 0 $ 15,000

Current 12,400 54,000 11,000 98,000 $22,100 $64,500 $11,000 $113,000

EUP 11,700 11,700 9,000 11,000

Per unit $1.89 $5.51 $1.22 $10.27

Cost Assignment:

EWIP1,700 $1.89 = $ 3,213

1,700 $5.51 = 9,367

1,020 $10.27 = 10,475 $ 23,055

Spoilage1,000 $1.89 = $ 1,890

1,000 $5.51 = 5,510

980 $10.27 = 10,065 17,465

Transferred Out$210,600 - 23,055 - 17,465 = 170,080

Total accounted for $210,600


Winthrop Company

The following information is available for Winthrop Company for March of the current year. All materials are added at the start of production.

Beginning Work in Process: (80% complete) 8,000 unitsStarted 35,000 unitsNormal spoilage (continuous) 6,000 unitsAbnormal spoilage 2,500 unitsEnding Work in Process: (55% complete) 15,000 unitsTransferred out 19,500 units

Beginning Work in Process Costs:Material $ 14,000

Conversion 45,000

Current Costs:Material 50,000

Conversion 175,000

Total Costs $ 284,000

17. Refer to Winthrop Company. Prepare a cost of production report for March using FIFO.

ANS:BI 8,000 + Started 35,000 = Accountable for 43,000

Winthrop CompanyCost Report

March 31, 20XY

Material CC

BWIP 8,000 0 1,600

S & C 11,500 11,500 11,500

EWIP 15,000 15,000 8,250

Norm 6,000 0 0

Abnorm. 2,500 2,500 2,500

Acctd. for 43,000 29,000 23,850

Material: $50,000/29,000 = $1.72Conversion Costs: $175,000/23,850 = $7.34

Cost Assignment:

Ending Work in Process15,000 $1.72 = $ 25,800

8,250 $7.34 = 60,555 $ 86,355

Abnormal Spoilage2,500 $9.06 = 22,650

Cost Transferred Out$284,000 - 86,355 - 22,650 = 174,995

Total costs accounted for $ 284,000


18. Refer to Winthrop Company. Prepare the cost of production report assuming the weighted average method.

ANS:BI 8,000 + Started 35,000 = Accountable for 43,000

Winthrop CompanyCost Report

March 31, 20XYMaterial CC

Transferred Out 19,500 19,500 19,500

Ending Work In Process 15,000 15,000 8,250

Normal Spoilage 6,000 0 0

Abnormal Spoilage 2,500 2,500 2,500

Accounted For 43,000 37,000 30,250

Material: $64,000/37,000 = $1.73Conversion Costs: $220,000/30,250 = $ 7.27

Cost Assignment:

Ending Work in Process15,000 $1.73 = $25,950

8,250 $7.27 = 59,978 $ 85,928

Abnormal Spoilage 2,500 $9.00 = 22,500

Transferred Out$284,000 - 85,928 - 22,500 = 175,572

Total costs accounted for $ 284,000


Cost Acctg Reviewer

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