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Exam 8: Process Costing

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Question 1

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In general,weighted-average costing is simpler to use while first-in,first-out (FIFO)costing provides greater decision-making benefits to managers.Weighted-average is simpler since there is less attention paid to when units are completed.FIFO does a better job for cost control since it identifies the period better.

A) True
B) False

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Question 2

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In the weighted-average approach,the number of physical units transferred out cannot be greater than the equivalent number of units produced during the period.EUP = transferred out + % completed × ending inventory.The number transferred can equal EUP,but can never be greater.

A) True
B) False

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Question 3

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Additional materials are added in the second department of a four-department production process.However,this addition does not increase the number of units being produced in the second department,but will:

Operation costing is used in manufacturing goods that have some common characteristics and some individual characteristics.The common characteristics are normally conversion costs;individual characteristics are the materials.

A company should use process costing,rather than job order costing,if:

The WISCO Company uses a weighted-average process costing system.The following data are available: Unit cost of labor and overhead is:

If materials are only added at the beginning of the production process,then the degree of completion for materials in the ending Work-in-Process Inventory will be the same as the degree of completion for the conversion costs.This would be true if materials are added continuously.

Blue Company has beginning and ending Work-in-Process Inventories that are 45% and 10% complete,respectively.Materials are added at the beginning of the process.If first-in,first-out (FIFO) process costing is used,the total equivalent units for materials will equal the number of units:

Operations costing systems are used when the products have:

In a production cost report using process costing,transferred-in costs are most similar to:

Materials are added at the beginning of a process in a process costing system.The beginning Work-in-Process Inventory was 30% complete as to conversion costs.Using first-in,first-out (FIFO) process costing,the total equivalent units for material are:

The more prices change,the greater the difference between the costs assigned to units transferred out using weighted-average costing and the costs assigned to units transferred out using first-in,first-out (FIFO).Weighted-average combines several periods' costs,so the larger the change,the greater the difference.

If the beginning Work-in-Process inventory is zero,first-in,first-out (FIFO)and weighted-average process costing will assign the same amount to the units transferred out.It is the beginning WIP costs that creates differences between weighted-average and FIFO.If there is no beginning WIP,there will be no difference.

Kimbeth Manufacturing uses process costing to control costs in the manufacture of Dust Sensors for the mining industry.The following information pertains to operations for November.(CMA Exam adapted) The beginning inventory was 60% complete as to materials and 20% complete as to conversion costs.The ending inventory was 90% complete as to materials and 40% complete as to conversion costs.Costs pertaining to November are as follows: Beginning inventory: direct materials,$54,560;direct labor,$20,320;manufacturing overhead,$15,240.Costs incurred during the month: direct materials,$468,000;direct labor,$182,880;manufacturing overhead,$391,160.What is the equivalent unit cost for the conversion costs assuming Kimbeth uses weighted-average process costing?

An equivalent unit of conversion costs is equal to the amount of conversion costs required to:

Which of the following statements is (are) true? I.For cost control,the FIFO method of process costing is better than the weighted-average method.II.The weighted-average method of process costing assigns more cost to units completed (transferred out) than the FIFO method.

The following information pertains to Lap Co.'s Palo Division for the month of April: All materials are added at the beginning of the process.Using the weighted-average method,the cost per equivalent unit of materials is: (CPA adapted)

First-in,first-out (FIFO)process costing transfers out the costs in beginning inventory before transferring out the costs associated with units started and completed.This is a basic concept of FIFO.

The Wisco Company has a process cost system.All materials are added when the process is first begun.At the beginning of September,there were no units of product in process.During September 50,000 units were started;5,000 of these were still in process at the end of September and were 3/5 finished.The equivalent units for the conversion costs in September were:

Equivalent units for a process costing system,using the weighted-average method,would be equal to: