N12401 MAD II

Seminar 2 Part 1
Process Costing

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These exercises are meant to confirm your understanding of the topic concerned. You are expected
to have gone through the class materials and directed readings thoroughly before attempting these
exercises. As you work through these questions, you may find new terminologies/ideas popping out
occasionally, dont get worried at all, as these are deliberate to trigger further exploration of the
issues concerned. So be adventurous and have fun!
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You are to assume that all the scenarios below follow
the WEIGHTED-AVERAGE METHOD when accounting for units and costs.
1. Process costing should be used to assign costs to products when:
A. the units produced are similar
B. the units produced are dissimilar
C. the calculation of unit costs requires the averaging of all manufacturing costs over all units
produced
D. either (A) or (C) are present
2. A process cost system would be used for all of the following products except
A. chemicals.
B. computer chips.
C. motion pictures.
D. soft drinks.
3. A product requires processing in two departments, Department A and then Department B, before
it is completed. Costs transferred out of Department A will be transferred to
A. Finished Goods Inventory.
B. Cost of Goods Sold.
C. Work in ProcessDepartment B.
D. Manufacturing Overhead.
4. It is necessary to calculate equivalent units of production in a department because
A. a physical count of units is impossible.
B. some units worked on in the department are not fully complete.
C. the physical units in the department are always 100% complete.
D. at times a department may use a job order cost system and then switch to a process cost
system.
5. In a process cost system, units to be accounted for in a department are equal to the
A. number of units started or transferred into the department.
B. number of units transferred out of the department.
C. units in the beginning inventory plus the units started or transferred into the department.
D. ending inventory plus the units started or transferred into the department.
6. If there are no units in process at the beginning of the period, then
A. the company must be using a job order cost system.
B. only one computation of equivalent units of production will be necessary.
C. the units started into production will equal the number of units transferred out.
D. the units to be accounted for will equal the units transferred out and the units in process
at the end of the period.
Use the following information for questions 7 & 8.
A department adds raw materials to a process at the beginning of the process and incurs conversion
costs uniformly throughout the process. For the month of January, there were no units in the
beginning work in process inventory; 20,000 units were started into production in January; and there
were 5,000 units that were 40% complete in the ending work in process inventory at the end of

N12401 MAD II

Seminar 2 Part 1
Process Costing

January.
7. What were the equivalent units of production for materials for the month of January?
A. 22,000 equivalent units
B. 18,000 equivalent units
C. 15,000 equivalent units
D. 20,000 equivalent units
8. What were the equivalent units of production for conversion costs for the month of January?
A. 15,000 equivalent units
B. 18,000 equivalent units
C. 17,000 equivalent units
D. 20,000 equivalent units
9. Minor Company had the following department data:
Work in process, July 1
Completed and transferred out
Work in process, July 31

Physical Units
6,000
27,000
9,000

Materials are added at the beginning of the process. What is the total number of equivalent units
for materials in July?
A. 27,000.
B. 30,000.
C. 42,000.
D. 36,000.
10. Gantner Company had the following department information about physical units and percentage
of completion:
Work in process, May 1 (60%)
Completed and transferred out
Work in process, May 31 (40%)

Physical Units
14,400
36,000
12,000

If materials are added at the beginning of the production process, what is the total number of
equivalent units for materials during May?
A. 50,400.
B. 48,000.
C. 46,560.
D. 40,800.
Use the following information to answer questions 1113.
In the month of June, a department had 6,000 units in beginning work in process that were 70%
complete. During June, 24,000 units were transferred into production from another department. At
the end of June there were 3,000 units in ending work in process that were 40% complete. Materials
are added at the beginning of the process while conversion costs are incurred uniformly throughout
the process.
11. How many units were transferred out of the process in June?
A. 24,000 units
B. 21,000 units
C. 27,000 units
D. 30,000 units

N12401 MAD II

Seminar 2 Part 1
Process Costing

12. The equivalent units of production for materials for June was
A. 27,000 equivalent units.
B. 30,000 equivalent units.
C. 31,200 equivalent units.
D. 24,000 equivalent units.
13. The equivalent units of production for conversion costs for June was
A. 24,000 equivalent units.
B. 28,200 equivalent units.
C. 27,000 equivalent units.
D. 30,000 equivalent units.
Use the following information to answer questions 1416.
In the month of June, a department had 6,000 units in beginning work in process that were 90%
complete for material and 70% complete for conversion. During June, 24,000 units were transferred
into production from another department. At the end of June there were 3,000 units in ending work
in process that were 65% complete for material and 40% complete for conversion.
14. How many units were transferred out of the process in June?
A. 24,000 units
B. 21,000 units
C. 27,000 units
D. 30,000 units
15. The equivalent units of production for materials for June was
A. 28,950 equivalent units.
B. 30,000 equivalent units.
C. 23,550 equivalent units.
D. 23,400 equivalent units
16. The equivalent units of production for conversion costs for June was
A. 24,000 equivalent units.
B. 28,200 equivalent units.
C. 27,000 equivalent units.
D. 30,000 equivalent units.
17. A department adds materials at the beginning of the process and incurs conversion costs
uniformly throughout the process. For the month of July, there was no beginning work in
process; 10,000 units were completed and transferred out; and there were 5,000 units in the
ending work in process that were 40% complete. During July, $108,000 of materials costs and
$94,500 of conversion costs were charged to the department.
The unit production costs for materials and conversion costs for July were
A.
B.
C.
D.

Materials Conversion Costs

$7.20
$6.30
$7.20
$7.88
$9.00
$6.30
$10.80
$9.45

Use the following information to answer questions 1819.

Materials costs of $240,000 and conversion costs of $306,000 were charged to a processing
department in the month of September. Materials are added at the beginning of the process, while
conversion costs are incurred uniformly throughout the process. There were no units in beginning
work in process, 20,000 units were started into production in September, and there were 5,000 units
in ending work in process that were 40% complete at the end of September.

N12401 MAD II

Seminar 2 Part 1
Process Costing

18. What was the total amount of manufacturing costs assigned to those units that were completed
and transferred out of the process in September?
A. $450,000.
B. $600,000.
C. $481,950.
D. $409,500.
19. What was the total amount of manufacturing costs assigned to the 5,000 units in the ending work
in process?
A. $136,500.
B. $150,000.
C. $96,000.
D. $60,000.
20. Roland Company uses a manufacturing process that has two distinct stages: P1 and P2. Raw
material is consumed in P1 at the beginning of the process. No additional material is required in
the second stage of the process (in P2). The following information pertains to the production of
10,000 units of output in March 2005. You are to assume that all units are completed at the end
of March. Assume all costs are added in March.
P1
P2
Direct materials
$100,000
$
0
Direct labour
$ 80,000
$160,000
Equipment maintenance
$ 20,000
$ 40,000
Plant depreciation
$ 40,000
$ 60,000
Required:
(a) Determine the direct material cost per unit of output.
(b) Determine the conversion cost per unit of output for Stage P1 and Stage P2.
21. CafNott Plc produces a special range of brewed coffee for the Asian market. The coffee is sold in
small packs for $12 each. The first stage in the production process is carried out in the Blending
Department which removes foreign objects from the raw materials and mixes them in the proper
proportions in large containers. The company uses the weighted-average method in its process
costing system. Details for the Blending Department for November 2008 are as below:

Work-in-process on 1 Nov was 30,000 units (90% materials, 80% conversion cost added last
month). 200,000 units were started into the production. 190,000 units were transferred to
the next department. Work-in-process on 30 Nov was 40,000 units (75% materials, 60%
conversion cost added this month).
Costs incurred for the WIP as at 1 Nov were $67,800 for materials and $30,200 for
conversion. Cost added during Nov were $579,000 for materials and $248,000 for conversion

The management has approached you, the newly appointed management accountant, to compute
for them the following information:
(a)
(b)
(c)

The equivalent units for each cost category.

The cost per equivalent unit for each cost category.
Summarise the total cost to account for, and assign these costs to units completed and
transferred out and ending WIP units as appropriate.

22. What are the implications of using the weighted average method when accounting for units and
costs in the process costing system? Does this method produce useful information to measure
performance and to evaluate effectiveness of cost control? Explain.