Cost Accounting

Exam Chapters 6-7

1. The process costing system that computes equivalent units on beginning wor in process inventory as well as wor
!one in the current perio! is nown as a """"""""""""""""""""""""""".
A#$% weighte! average process costing metho!
&. The number o' complete! units that coul! have been pro!uce! 'rom the inputs applie! is re'erre! to as
""""""""""""""""""""""".
A#$% equivalent units
(. A """""""""""""" costing system is appropriate where pro!ucts manu'acture! have !i''erent !irect materials but
similar processing techniques.
A#$% hybri!
). The two components o' total material*labor variance are """""""""""""""""""" an! """""""""""""""""
A#$% price*rate variance+ quantity*e''iciency variance
,. -hen multiple materials are use!. the e''ect o' substituting a non-stan!ar! mix o' materials !uring the pro!uction
process is re'erre! to as a """"""""""""""""""""" variance.
A#$% material mix
6. A primary purpose o' using a stan!ar! cost system is
a. to mae things easier 'or managers in the pro!uction 'acility.
b. to provi!e a !istinct measure o' cost control.
c. to minimi/e the cost per unit o' pro!uction.
!. b an! c are correct.
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7. -hich o' the 'ollowing statements regar!ing stan!ar! cost systems is true6
a. 3avorable variances are not necessarily goo! variances.
b. 7anagers will investigate all variances 'rom stan!ar!.
c. The pro!uction supervisor is generally responsible 'or material price variances.
!. $tan!ar! costs cannot be use! 'or planning purposes since costs normally change in the
'uture.
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8. A total variance is best !e'ine! as the !i''erence between total
a. actual cost an! total cost applie! 'or the stan!ar! output o' the perio!.
b. stan!ar! cost an! total cost applie! to pro!uction.
c. actual cost an! total stan!ar! cost o' the actual input o' the perio!.
!. actual cost an! total cost applie! 'or the actual output o' the perio!.
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9. A company wishing to isolate variances at the point closest to the point o' responsibility will !etermine its material
price variance when
a. material is purchase!.
b. material is issue! to pro!uction.
c. material is use! in pro!uction.
!. pro!uction is complete!.
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1:. A company woul! most liely have an un'avorable labor rate variance an! a 'avorable labor e''iciency variance i'
a. the mix o' worers use! in the pro!uction process was more experience! than the normal
mix.
b. the mix o' worers use! in the pro!uction process was less experience! than the normal
mix.
c. worers 'rom another part o' the plant were use! !ue to an extra heavy pro!uction
sche!ule.
!. the purchasing agent acquire! very high quality material that resulte! in less spoilage.
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11.-hich o' the 'ollowing stan!ar!s can commonly be reache! or slightly excee!e! by worers in a motivate! wor
environment6
2!eal ;ractical Expecte! annual
a.
no no no
b.
no yes yes
c.
yes yes no
!.
no yes no
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1&. -hich cost accumulation proce!ure is most applicable in continuous mass-pro!uction manu'acturing environments6
a. stan!ar!
b. actual
c. process
!. <ob or!er
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1(. 2n a process costing system using the weighte! average metho!. cost per equivalent unit 'or a given cost component
is 'oun! by !ivi!ing which o' the 'ollowing by E=;6
a. only current perio! cost
b. current perio! cost plus the cost o' beginning inventory
c. current perio! cost less the cost o' beginning inventory
!. current perio! cost plus the cost o' en!ing inventory
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1). The 'irst step in !etermining the cost per E=; per cost component un!er the weighte! average metho! is to
a. a!! the beginning -or in ;rocess 2nventory cost to the current perio!>s pro!uction cost.
b. !ivi!e the current perio!>s pro!uction cost by the equivalent units.
c. subtract the beginning -or in ;rocess 2nventory cost 'rom the current perio!>s pro!uction
cost.
!. !ivi!e the current perio!>s pro!uction cost into the E=;.
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1,. The !i''erence between E=; calculate! using 3234 an! E=; calculate! using weighte! average is the equivalent
units
a. starte! an! complete! !uring the perio!.
b. resi!ing in beginning -or in ;rocess 2nventory.
c. resi!ing in en!ing -or in ;rocess 2nventory.
!. uncomplete! in -or in ;rocess 2nventory.
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16. The 3234 metho! o' process costing will pro!uce the same cost o' goo!s trans'erre! out amount as the weighte!
average metho! when
a. the goo!s pro!uce! are homogeneous.
b. there is no beginning -or in ;rocess 2nventory.
c. there is no en!ing -or in ;rocess 2nventory.
!. beginning an! en!ing -or in ;rocess 2nventories are each ,: percent complete.
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17. The primary !i''erence between the 3234 an! weighte! average metho!s o' process costing is
a. in the treatment o' beginning -or in ;rocess 2nventory.
b. in the treatment o' current perio! pro!uction costs.
c. in the treatment o' spoile! units.
!. none o' the above.
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18. -hich o' the 'ollowing is?are@ the same between the weighte! average an! 3234 metho!s o' calculating E=;s6
=nits to E=; Total cost to
account 'or calculations account 'or
a.
no yes no
b.
yes yes yes
c.
yes no no
!.
yes no yes
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19. A hybri! costing system combines characteristics o'
a. <ob or!er an! stan!ar! costing systems.
b. <ob or!er an! process costing systems.
c. process an! stan!ar! costing systems.
!. <ob or!er an! normal costing systems.
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&:.A continuous loss
a. occurs unevenly throughout a process.
b. never occurs !uring the pro!uction process.
c. always occurs at the same place in a pro!uction process.
!. occurs evenly throughout the pro!uction process.
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&1. 1e'ine the 'ollowing terms% stan!ar! cost system. total variance. material price variance. an! labor e''iciency
variance.
A#$%
A stan!ar! cost system recor!s both stan!ar! costs an! actual costs in the accounting recor!s. This process allows
'or better cost control because actual costs can be easily compare! to stan!ar! costs.
A total variance is the !i''erence between actual input cost 'or material or labor an! the stan!ar! cost 'or material
or labor 'or the output pro!uce!.
The material price variance is the !i''erence between the actual price pai! 'or material an! the stan!ar! price o'
the material times the actual quantity use! or purchase!.
The labor e''iciency variance compares the number o' hours actually wore! with the stan!ar! hours allowe! 'or
the pro!uction achieve! an! values this !i''erence at the stan!ar! labor rate.
PROBLEM
Landers Company
Aan!ers Company has the 'ollowing in'ormation available 'or 7ay%
0eginning -or in ;rocess 2nventory
?&,B complete as to conversion@
10,000
units
$tarte!
120,000
units
En!ing -or in ;rocess 2nventory
?(:B complete as to conversion@
30,000
units
Beginning Work in Process Inventory Costs:
7aterial
$ 2,100
Conversion
2,030
Current Period Costs:
7aterial
$ 33,000
Conversion
109,695
All material is a!!e! at the start o' pro!uction an! all pro!ucts complete! are trans'erre! out.
1. Ce'er to Aan!ers Company. ;repare an equivalent units sche!ule using the ?a@ 3234 an! ?b@ weighte! average
metho!.
A#$%
Aan!ers Company
$che!ule o' Equivalent =nits 'or
3i'o an! -eighte! Average
7ay (1. &:D,
FIFO Weighted verage
0eginning -or 2n ;rocess
10,000
0eginning -or 2n
;rocess
10,000
=nits $tarte!
120,000
=nits $tarte!
120,000
=nits to Acct. 3or
130,000
=nits to Acct. 3or
130,000
0eginning -or 2n ;rocess
10,000
Trans'erre! 4ut
100,000
$tarte! E Complete!
90,000
En!ing -or in
;rocess
30,000
En!ing -or in ;rocess
30,000
=nits Accounte! 3or
130,000
=nits Accounte! 3or
130,000
?a@ FIFO ?b@ Weighted verage
7at. CC 7at. CC
0-2;
0 7,500
$ E C
90,000 90,000
T4
100,000 100,000
E-2;
30,000 9,000
E2
30,000 9,000
E=;
120,000 106,500
E=;
130,000 109,000
123% 7o!erate 405% 6-(.6-)
&. Ce'er to Aan!ers Company. ;repare a sche!ule showing the computation 'or cost per equivalent unit assuming the
?a@ 3234 an! ?b@ weighte! average metho!.
A#$%
Aan!ers Company
$che!ule o' Average Cost ;er =nit
3234 an! -eighte! Average
7ay (1. &:D,
?a@ FIFO ?b@ Weighted verage
7at. CC 7at. CC
Costs F((.::: F1:9.69, F (,.1:: F111.7&,
Eq =nits 1&:.::: 1:6.,:: 1(:.::: 1:9.:::
F.&7,*eq unit F 1.:(*eq
unit
F .&7*eq
unit
F 1.:&,*eq
unit
!ota" cost#e$% unit & '%()*#e$
unit
& '%+,*#e$
unit
123% 7o!erate 405% 6-(.6-)
(. Ce'er to Aan!ers Company. ;repare a sche!ule showing the assignment o' costs assuming the ?a@ 3234 an! ?b@
weighte! average metho!.
A#$%
Aan!ers Company
$che!ule o' Assigne! Costs
3234 an! -eighte! Average
7ay (1. &:D,
?a@ 3234
0eginning -or in ;rocess
$ 4,130
To complete ?7.,:: x F1.:(@ G
7,725
$ 11,855
$tarte! an! Complete!
9:.::: x F1.(:, G
117,450
Total costs trans'erre! out
$129,305
En!ing -or in ;rocess
(:.::: x F .&7, G
$ 8,250
9.::: x F1.:( G
9,270
$ 17,520
Total costs accounte! 'or
$146,825
?b@ -eighte! Average
Complete!
1::.::: x F1.&9, G
$129,500
En!ing -or in ;rocess
(:.::: x F .&7 G
$ 8,100
9.::: x F1.:&, G
9,225
$ 17,325
Total costs accounte! 'or
$146,825
123% 1i''icult 405% 6-(.6-)
PROBLEM
Fit-hugh Company
3it/hugh Company has the 'ollowing in'ormation available 'or the current year%
.tandard:
7aterial (., 'eet per unit H F&.6: per 'oot
Aabor , !irect labor hours H F8.,: per unit
ctua":
7aterial 9,.6&, 'eet use! ?1::.::: 'eet purchase! H F&.,: per 'oot@
Aabor 1&&.):: !irect labor hours incurre! per unit H F8.(, per hour
&,.,:: units were pro!uce!
&,. Ce'er to 3it/hugh Company. Compute the material purchase price an! quantity variances.
A#$%
7aterial price variance%
1::.::: F&.,: G
$250,000
1::.::: F&.6: G
260,000
$ 10,000 F
7aterial quantity variance%
9,.6&, F&.6: G
$248,625
89.&,: F&.6: G
232,050
$ 16,575 U
123% 7o!erate 405% 7-(
&6. Ce'er to 3it/hugh Company. Compute the labor rate an! e''iciency variances.
A#$%
Aabor rate variance%
1&&.):: F8.(, G
$1,022,040
1&&.):: F8.,: G
1,040,400
$ 18,360 F
Aabor e''iciency variance%
1&&.):: F8.,: G
$1,040,400
1&7.,:: F8.,: G
1,083,750
$ 43,350 F
123% 7o!erate 405% 7-(