Chapter 4
Systems Design: Process Costing
True/False
1. When materials are purchased in a process costing system, a work in process account is debited with
the cost of the materials.
Level: Easy LO: 1 Ans: F
2. The equivalent units in beginning work in process inventory plus the equivalent units for the work done
during the period equals the units transferred out plus the equivalent units in ending work in process
inventory.
Level: Hard LO: 2 Ans: T
3. Under the weighted-average method of process costing, costs from the prior period are averaged with
those of the current period in computing unit costs.
Level: Medium LO: 4 Ans: T
4. Costs are accumulated by department in a process costing system.
Level: Easy LO: 10 Ans: T
5. Operation costing is a hybrid system that employs certain aspects of both job-order and process
costing.
Level: Easy LO: 10 Ans: T
6. Under job-order costing, costs are accumulated by department and are assigned equally to all units
passing through the department during the period.
Level: Easy LO: 10 Ans: F
Brewer, Introduction to Managerial Accounting, 3/e 131
,Multiple Choice
7. Which of the following journal entries would be used to record direct labor costs in a company having
two processing departments (Department A and Department B)?
A) A Above
B) B Above
C) C Above
D) D Above
Level: Medium LO: 1 Ans: C
8. Which of the following journal entries would be used to record application of manufacturing overhead
to work in process in a process costing system with two processing departments, department A and
department B?
A) A Above
B) B Above
C) C Above
D) D Above
Level: Easy LO: 1 Ans: B
132 Brewer, Introduction to Managerial Accounting, 3/e
,9. Costs in an operation costing system are accumulated by:
A) department.
B) by individual job.
C) by both job and departments.
D) by neither job nor department.
Level: Easy LO: 1 Ans: C
10. Which of the following statements about process costing system is incorrect?
A) In a process costing system, each processing department has a work in process account.
B) In a process costing system, equivalent units are separately computed for materials and for conversion
costs.
C) In a process costing system, overhead can be under- or overapplied just as in job-order costing.
D) In a process costing system, materials costs are traced to units of products.
Level: Hard LO: 2,10 Ans: D
11. When the weighted-average method of process costing is used, a department’s equivalent units are
computed by:
A) subtracting the equivalent units in beginning inventory from the equivalent units in ending inventory.
B) subtracting the equivalent units in beginning inventory from the equivalent units for work performed
during the period.
C) adding the units transferred out to the equivalent units in ending inventory.
D) subtracting the equivalent units in beginning inventory from the sum of the units transferred out and
the equivalent units in ending inventory.
Level: Medium LO: 2 Ans: C
12. Which of the following types of entities would be most likely to use a process costing system?
A) a shipbuilder
B) a furniture manufacturer
C) a law firm
D) a utility producing natural gas
Level: Easy LO: 10 Ans: D
13. Darvin Company uses the weighted-average method in its process costing system. The first
processing department, the Welding Department, started the month with 20,000 units in its beginning
work in process inventory that were 10% complete with respect to conversion costs. The conversion cost
in this beginning work in process inventory was $7,000. An additional 63,000 units were started into
production during the month. There were 10,000 units in the ending work in process inventory of the
Welding Department that were 10% complete with respect to conversion costs. A total of $237,600 in
conversion costs were incurred in the department during the month.
What would be the cost per equivalent unit for conversion costs for the month? (Round off to three
decimal places.)
A) $3.255
B) $3.771
C) $3.500
D) $3.305
Level: Medium LO: 2,3,4 Ans: D
Brewer, Introduction to Managerial Accounting, 3/e 133
, 14. Dedra Company uses the weighted-average method in its process costing system. The first processing
department, the Welding Department, started the month with 10,000 units in its beginning work in
process inventory that were 50% complete with respect to conversion costs. The conversion cost in this
beginning work in process inventory was $37,500. An additional 98,000 units were started into
production during the month. There were 17,000 units in the ending work in process inventory of the
Welding Department that were 80% complete with respect to conversion costs. A total of $727,080 in
conversion costs were incurred in the department during the month.
What would be the cost per equivalent unit for conversion costs for the month? (Round off to three
decimal places.)
A) $6.322
B) $7.419
C) $7.500
D) $7.310
Level: Medium LO: 2,3,4 Ans: D
15. Luster Company uses the weighted-average method in its process costing system. Operating data for
the first processing department for the month of June appear below:
According to the company’s records, the conversion cost in beginning work in process inventory was
$39,364 at the beginning of June. Additional conversion costs of $721,035 were incurred in the
department during the month.
What was the cost per equivalent unit for conversion costs for the month? (Round off to three decimal
places.)
A) $6.615
B) $7.358
C) $7.361
D) $7.570
Level: Medium LO: 2,3,4 Ans: C
134 Brewer, Introduction to Managerial Accounting, 3/e
Systems Design: Process Costing
True/False
1. When materials are purchased in a process costing system, a work in process account is debited with
the cost of the materials.
Level: Easy LO: 1 Ans: F
2. The equivalent units in beginning work in process inventory plus the equivalent units for the work done
during the period equals the units transferred out plus the equivalent units in ending work in process
inventory.
Level: Hard LO: 2 Ans: T
3. Under the weighted-average method of process costing, costs from the prior period are averaged with
those of the current period in computing unit costs.
Level: Medium LO: 4 Ans: T
4. Costs are accumulated by department in a process costing system.
Level: Easy LO: 10 Ans: T
5. Operation costing is a hybrid system that employs certain aspects of both job-order and process
costing.
Level: Easy LO: 10 Ans: T
6. Under job-order costing, costs are accumulated by department and are assigned equally to all units
passing through the department during the period.
Level: Easy LO: 10 Ans: F
Brewer, Introduction to Managerial Accounting, 3/e 131
,Multiple Choice
7. Which of the following journal entries would be used to record direct labor costs in a company having
two processing departments (Department A and Department B)?
A) A Above
B) B Above
C) C Above
D) D Above
Level: Medium LO: 1 Ans: C
8. Which of the following journal entries would be used to record application of manufacturing overhead
to work in process in a process costing system with two processing departments, department A and
department B?
A) A Above
B) B Above
C) C Above
D) D Above
Level: Easy LO: 1 Ans: B
132 Brewer, Introduction to Managerial Accounting, 3/e
,9. Costs in an operation costing system are accumulated by:
A) department.
B) by individual job.
C) by both job and departments.
D) by neither job nor department.
Level: Easy LO: 1 Ans: C
10. Which of the following statements about process costing system is incorrect?
A) In a process costing system, each processing department has a work in process account.
B) In a process costing system, equivalent units are separately computed for materials and for conversion
costs.
C) In a process costing system, overhead can be under- or overapplied just as in job-order costing.
D) In a process costing system, materials costs are traced to units of products.
Level: Hard LO: 2,10 Ans: D
11. When the weighted-average method of process costing is used, a department’s equivalent units are
computed by:
A) subtracting the equivalent units in beginning inventory from the equivalent units in ending inventory.
B) subtracting the equivalent units in beginning inventory from the equivalent units for work performed
during the period.
C) adding the units transferred out to the equivalent units in ending inventory.
D) subtracting the equivalent units in beginning inventory from the sum of the units transferred out and
the equivalent units in ending inventory.
Level: Medium LO: 2 Ans: C
12. Which of the following types of entities would be most likely to use a process costing system?
A) a shipbuilder
B) a furniture manufacturer
C) a law firm
D) a utility producing natural gas
Level: Easy LO: 10 Ans: D
13. Darvin Company uses the weighted-average method in its process costing system. The first
processing department, the Welding Department, started the month with 20,000 units in its beginning
work in process inventory that were 10% complete with respect to conversion costs. The conversion cost
in this beginning work in process inventory was $7,000. An additional 63,000 units were started into
production during the month. There were 10,000 units in the ending work in process inventory of the
Welding Department that were 10% complete with respect to conversion costs. A total of $237,600 in
conversion costs were incurred in the department during the month.
What would be the cost per equivalent unit for conversion costs for the month? (Round off to three
decimal places.)
A) $3.255
B) $3.771
C) $3.500
D) $3.305
Level: Medium LO: 2,3,4 Ans: D
Brewer, Introduction to Managerial Accounting, 3/e 133
, 14. Dedra Company uses the weighted-average method in its process costing system. The first processing
department, the Welding Department, started the month with 10,000 units in its beginning work in
process inventory that were 50% complete with respect to conversion costs. The conversion cost in this
beginning work in process inventory was $37,500. An additional 98,000 units were started into
production during the month. There were 17,000 units in the ending work in process inventory of the
Welding Department that were 80% complete with respect to conversion costs. A total of $727,080 in
conversion costs were incurred in the department during the month.
What would be the cost per equivalent unit for conversion costs for the month? (Round off to three
decimal places.)
A) $6.322
B) $7.419
C) $7.500
D) $7.310
Level: Medium LO: 2,3,4 Ans: D
15. Luster Company uses the weighted-average method in its process costing system. Operating data for
the first processing department for the month of June appear below:
According to the company’s records, the conversion cost in beginning work in process inventory was
$39,364 at the beginning of June. Additional conversion costs of $721,035 were incurred in the
department during the month.
What was the cost per equivalent unit for conversion costs for the month? (Round off to three decimal
places.)
A) $6.615
B) $7.358
C) $7.361
D) $7.570
Level: Medium LO: 2,3,4 Ans: C
134 Brewer, Introduction to Managerial Accounting, 3/e
