EXERCISE OF CHAPTER 3

I. MULTIPLE TESTS
1. Which of the following characteristics are associated with a process costing system?
(Choose all that apply).
a. Heterogeneous products.
b. Homogeneous products.
c. Continuous production.
d. Discontinuous production.
e. Costs are traced to jobs.
f. Costs are traced to processing departments.
2. The best example of a business requiring a process costing system would be a:
a. Custom cabinet shop. Cửa hàng tủ tùy chỉnh.
b. Antique furniture restorer.
c. Soap manufacturer.
d. Automobile repair shop.
3. The costs in a process cost system are traced to:
a. Specific jobs.
b. Specific customers.
c. Specific company administrators.
d. Specific production departments.
4. Match the following terms with the definitions in the numbered list below.
a. Conversion costs3 CONVERSION COSTS is Direct Labor + Manufacturing Overhead.
một. Chi phí chuyển đổib.
b. Equivalent units 4 Đơn vị tương đươngc.
Chi phí chuyển nhượngd.
c. Transferred-in costs 1 Chi phí cho mỗi đơn vị tương đương

d. Cost per equivalent unit 2

(1) The costs associated with units received from a preceding department for further
processing.
(2) The unit cost in a process costing system.
(3) The costs associated with changing units of direct

Transferred-in costs Chi phí kết chuyển còn được gọi là chi phí lũy kế của một sản phẩm khi nó lần đầu tiên đến bộ phận sản xuất.
materials into finished products; they include both
direct labor and manufacturing overhead.
(4) The quantity of partially completed units expressed
in terms of whole units.
5. Determine the amount of conversion cost in the following list of costs.
a. Direct material $25,000
b. Direct labor $35,000
c. Manufacturing overhead $45,000
d. Selling expenses $10,000
e. Administrative expenses $50,000
6. If raw materials are introduced into a production department at the beginning of the
process, which statement is correct about the equivalent units in ending Work in Process
for materials?
a. All of the units in Work in Process are 100 percent complete with respect to materials.
b. All of the units in Work in Process are 50 percent complete with respect to materials.
c. Equivalent units of materials are not a function of when the materials are entered into
the process.
d. All of these choices are correct.
7. A transfer of units from Production Department 1 to Production Department 2 would
be recorded as a:
a. Debit to Work in Process, Department 1; credit to Work in Process, Department 2.
b. Debit to Work in Process, Department 2; credit to Work in Process, Department 1.
c. Debit to Cost of Goods Sold; credit to Work in Process, Department 1.
d. Debit to Cost of Goods Sold; credit to Work in Process, Department 2.
8. The unit reconciliation section of a production cost report includes all of the following
except:
a. Beginning units in process.
b. Ending units in process.
c. Units in finished goods.

2
d. Units completed and transferred out.
e. Units started during the period.
9. The units as shown in the unit reconciliation section of a production cost report are:
a. Equivalent units of production.
b. Units without regard to stage of completion.
c. Units complete as to materials.
d. Units complete as to prime costs.
10. Transferred-in costs occur in:
a. All production departments.
b. The first and last production departments.
c. All production departments after the first.
d. None of these answer choices is correct

II. ESSAY TESTS

1. Explain the major differences between job-order and process costing systems.
2. Identify three types of manufacturing companies for which process costing would be
an appropriate product costing system. What characteristic(s) do the products of these
companies
have that would make process costing a good choice?
3. Explain the concept of an “equivalent unit,” including how it is calculated.
4. What is meant by the term conversion costs?
5. What is meant by the term transferred-in cost?
6. Why are units often in a different stage of completion with respect to raw materials and
conversion costs?
7. What items of production cost make up the “costs to account for” in a production cost
report?
8. What is accomplished by preparing a reconciliation of the physical units as a part of
the production cost report?
9. Do transferred-in costs occur in all departments of a manufacturer using a process

3
costing system? Explain.
10. What are the four steps involved in the preparation of a production cost report?
11. In each case below, fill in the missing amount
Work in Process, October 1 5,000 gallons
Units started during October ?
Case 1
Units completed during October 15,000 gallons
Work in Process, October 31 2,500 gallons
Work in Process, March 1 16,000 tons
Units started during March 4,000 tons
Case 2
Units completed during March 14,400 tons
Work in Process, March 31 ?
Work in Process, December 1 300,000 pounds
Units started during December 950,000 pounds
Case 3
Units completed during December ?
Work in Process, December 31 350,000 pounds

12. Unit reconciliation. During August the Panama Paint Company completed 90,000
cans of paint. At the beginning of August, the company had 850 units that were 75 percent
complete with respect to material and 50 percent complete with respect to conversion costs.
During the month, the company started production of 95,000 units.
RequiRed: How many units were in Work in Process at the end of August?

13. Cost per equivalent unit. The balance in beginning Work in Process at Bing Rubber
Company for direct labor was $140,000. During the month of March, an additional
$800,000 of direct labor was incurred, and 35,000 pounds of rubber were produced. At the
end of March, 10,000 pounds of rubber were in process and the units were 50 percent
complete. At the start of March, the company had 6,000 pounds of rubber that were 40
percent complete.
RequiRed: Calculate the cost per equivalent unit for labor, assuming that labor is added
uniformly throughout the production process.

14. Cost reconciliation. During December, Western Solvent completed 40,000 units. At
the end of December, there were 10,000 units in ending Work in Process that were 30
4
percent complete with respect to labor and overhead and 100 percent complete with respect
to material. During the month of December, the company incurred $260,000 of material
cost, $120,000 of labor cost, and $161,000 of manufacturing overhead. Costs per
equivalent unit for material, labor, and manufacturing overhead equal $6, $3, and $4,
respectively.
RequiRed: Calculate the amount of material cost, labor cost, and overhead cost in
beginning Work in Process inventory.

15. Calculation of equivalent units. The McMillian Tire Company produces tires used on
small trailers. The month of June ended with 600 tires in process, 90 percent complete as
to direct materials, and 50 percent complete as to conversion costs; 2,000 tires were
transferred to finished goods during the month, and 2,400 were started during the month.
The beginning Work in Process inventory was 60 percent complete as to direct materials
and 40 percent complete as to conversion costs.
RequiRed: Determine the denominators to be used in the calculations of cost per
equivalent unit for materials and conversion costs.

16. K/9 Plus Dog Treats has two departments, Mixing and Packaging. The Packaging
Department started in December with work in process inventory of 20,000 pounds (a 1
pound bag is a unit of production). The units had $12,000 of transferred-in costs but no
costs from Packaging. During December, Packaging received 100,000 more pounds from
Mixing and additional transferred-in cost of $54,000. Packaging also incurred $17,250 of
material cost, $13,800 of labor, and $8,050 of overhead during the month of December. At
the end of December, Packaging had work in process inventory of 5,000 pounds. These
units were zero percent complete with respect to material, labor, and overhead in Packaging
(they had just been received from Mixing and had not been worked on by that department).
RequiRed: Prepare a production cost report for Packaging for the month of December.