What is the best rationale for why many companies use a hybrid costing system?

MULTIPLE CHOICE QUESTIONS

1. Process costing is used to account for: A. large numbers of identical products that are produced in a continuous manufacturing environment. B. small numbers of products that are produced in batches. C. raw materials that are converted directly to finished goods. D. finished goods that are refined and processed further. E. large numbers of products that are produced in a non-repetitive process.

Answer: A LO: 1 Type: RC

1. Which of the following manufacturers would most likely not use a process-cost accounting system? A. A producer of computer monitors. B. A paint manufacturer. C. A producer of frozen orange juice. D. A builder of customized yachts. E. A lumber mill.

Answer: D LO: 1 Type: RC

1. Process costing would be used in all of the following industries except: A. petroleum refining. B. chemicals. C. truck tire manufacturing. D. wood pulp production. E. automobile repair.

Answer: E LO: 1 Type: RC

1. Which of the following companies would likely use a process-costing system? Custom Furniture Manufacturer

Chemical Producer

Soft Drink Bottler A. Yes Yes Yes B. Yes Yes No C. No Yes No D. No Yes Yes E. No No Yes

Answer: D LO: 1 Type: RC

78 Hilton, Managerial Accounting, Seventh Edition

1. Which of the following statements regarding similarities between process costing and job-order costing are true?

I systems assign production costs to units of output. II systems require extensive knowledge of financial accounting. III flow of costs through the manufacturing accounts is essentially the same.

A. I only. B. I and III. C. II and III. D. III only. E. I, II, and III.

Answer: B LO: 1 Type: RC

1. Companies that use a process-cost accounting system would: A. establish a separate Work-in-Process Inventory account for each manufacturing department. B. establish a separate Finished-Goods Inventory account for each manufacturing department. C. pass completed production directly to Cost of Goods Sold. D. charge goods produced with actual overhead amounts rather than applied overhead amounts. E. eliminate the need for the Finished-Goods Inventory account.

Answer: A LO: 1 Type: RC

1. Which of the following statements is false? A. In job-order costing, costs are accumulated by job order. B. In process costing, costs are accumulated by department. C. In process costing, the cost per unit in a department is found by spreading the period's manufacturing costs over the production activity. D. In process costing, the total cost of each unit is found by dividing the total factory costs by the number of units completed. E. In job-order costing, the unit cost is found by dividing the job's total cost by the job's total units.

Answer: D LO: 1 Type: RC

1. In a process-costing system, manufacturing costs are accumulated by: A. batch. B. batch and time period. C. department. D. department and time period. E. department or process, and time period.

Answer: E LO: 1 Type: N

79 Hilton, Managerial Accounting, Seventh Edition

1. Hamilton, which uses a process-costing system, had a balance in its Work-in-Process account of P68,000 on January 1. The account was charged with direct materials, direct labor, and manufacturing overhead of P450,000 throughout the year. If a review of the accounting records determined that P86,000 of goods were still in production at year-end, Hamilton should make a journal entry on December 31 that includes: A. a debit to Cost of Goods Sold for P432,000. B. a credit to Finished-Goods Inventory for P432,000. C. a credit to Work-in-Process Inventory for P432,000. D. a debit to Finished-Goods Inventory for P86,000. E. a credit to Work-in-Process Inventory for P86,000.

Answer: C LO: 2 Type: A

1. Unit costs in a process-costing system are derived by using: A. in-process units. B. completed units. C. physical units. D. equivalent units. E. a measure of activity other than those listed above.

Answer: D LO: 3 Type: RC

1. Barnett Corporation had 6,500 units of work in process on April 1. During April, 19,100 units were completed and as of April 30, 5,100 units remained in production. How many units were started during April? A. 11,600. B. 17,700. C. 20,500. D. 30,700. E. None of the above.

Answer: B LO: 3 Type: A

1. XYZ Co., had 3,000 units of work in process on April 1 that were 60% complete. During April, 10,000 units were completed and as of April 30, 4,000 units that were 40% complete remained in production. How many units were started during April? A. 8,600. B. 9,800. C. 11,000. D. 12,200. E. None of the above.

Answer: C LO: 3 Type: A

81 Hilton, Managerial Accounting, Seventh Edition

1. Ohio, Inc., which uses a process-cost accounting system, began operations on January 1 of the current year. The company incurs conversion cost evenly throughout manufacturing. If Ohio started work on 3,000 units during the period and these units were 70% of the way through manufacturing, it would be correct to say that the company has: A. 3,000 physical units in production. B. 2,100 completed units. C. 900 in-process units. D. 900 equivalent units of production. E. 3,000 equivalent units of production.

Answer: A LO: 3 Type: A

1. Which of the following data are needed to calculate total equivalent units under the weighted- average method? A. Work-to-date on ending work in process, units started during the period. B. Units completed during the period, work-to-date on ending work in process. C. Work to complete beginning work in process, work-to-date on ending work in process. D. Work to complete beginning work in process, units completed, work done on ending work in process. E. Units completed, work to complete beginning work in process.

Answer: B LO: 3 Type: RC

1. Kentucky Corporation uses a process-cost accounting system. The company adds direct materials at the start of its production process; conversion cost, on the other hand, is incurred evenly throughout manufacturing. The firm has no beginning work-in-process inventory; its ending work in process is 40% complete. Which of the following sets of percentages would be used to calculate the correct number of equivalent units in the ending work-in-process inventory? A. Materials, 40%; conversion cost, 40%. B. Materials, 40%; conversion cost, 100%. C. Materials, 100%; conversion cost, 40%. D. Materials, 100%; conversion cost, 60%. E. Materials, 100%; conversion cost, 100%.

Answer: C LO: 3 Type: A

1. Agora Company uses a process-cost system for its single product. Material A is added at the beginning of the process; in contrast, material B is added when the units are 75% complete. The firm's ending work-in-process inventory consists of 6,000 units that are 80% complete. Which of the following correctly expresses the equivalent units of production with respect to materials A and B in the ending work-in-process inventory? A. A, 4,800; B, 0. B. A, 4,800; B, 4,800. C. A, 6,000; B, 0. D. A, 6,000; B, 4,800. E. A, 6,000; B, 6,000.

Answer: E LO: 3 Type: A, N

Chapter 4 82

1. Columbia Corporation adds all materials at the beginning of production and incurs conversion cost evenly throughout manufacturing. The company completed 50,000 units during the year and had 15,000 units in process at December 31, 30% complete with respect to conversion cost. Equivalent units for the year total: A. materials, 50,000; conversion, 50,000. B. materials, 50,000; conversion, 4,500. C. materials, 54,500; conversion, 54,500. D. materials, 65,000; conversion, 54,500. E. materials, 65,000; conversion, 65,000.

Answer: D LO: 3 Type: A

1. Gregory, which uses a process-costing system, adds all material at the beginning of production and incurs conversion cost evenly throughout manufacturing. The information that follows relates to the period just ended:

Units started and completed: 75, Units in ending work-in-process inventory: 15,000, 60% complete

Which of the following choices correctly expresses the total equivalent units of production with respect to material and conversion cost? Material Conversion A. 75,000 75, B. 84,000 84, C. 90,000 81, D. 90,000 84, E. 90,000 90,

Answer: D LO: 3 Type: A

1. Gorski began operations on January 1 of the current year. The company uses a process-costing system, and conversion cost is incurred evenly throughout manufacturing. By January 31, the firm had completed 56,000 units. Which of the following statements could be true about the ending work-in-process inventory if equivalent units for conversion cost totaled 59,000 units? A. There is no ending work-in-process inventory. B. The ending work-in-process inventory totaled 3,000 physical units. C. The ending work-in-process inventory of 10,000 physical units was 30% complete. D. The ending work-in-process inventory of 20,000 physical units was 85% complete. E. More than one of the above could be true.

Answer: C LO: 3 Type: A, N

Chapter 4 84

1. Majestic, which uses a process-costing system, adds material at the beginning of production and incurs conversion cost evenly throughout manufacturing. The following selected information was taken from the company's accounting records:

Total equivalent units of materials: 5, Total equivalent units of conversion: 4, Units started and completed during the period: 3,

On the basis of this information, the ending work-in-process inventory's stage of completion is: A. 40%. Error! Hyperlink reference not valid. B. 60%. C. 70%. D. 80%. E. some other percentage not listed above.

Answer: B LO: 3 Type: A, N

1. Corruption, Inc., overstated the percentage of work completed with respect to conversion cost on the ending work-in-process inventory. What is the effect of this overstatement on conversion-cost equivalent units and physical units manufactured, respectively? A. Overstated, overstated. B. Overstated, understated. C. Overstated, none. D. None, overstated. E. None, none.

Answer: C LO: 3 Type: N

1. Michael, Inc., uses a process-costing system. A newly hired accountant has identified the following procedures that must be performed by the close of business on Friday:

1—Calculation of equivalent units 2—Analysis of physical flows of units 3—Assignment of costs to completed units and units still in process 4—Calculation of unit costs

Which of the following choices correctly expresses the proper order of the preceding tasks? A. 1, 2, 3, 4. B. 1, 2, 4, 3. C. 1, 4, 3, 2. D. 2, 1, 4, 3. E. 2, 1, 3, 4.

Answer: D LO: 3 Type: RC

85 Hilton, Managerial Accounting, Seventh Edition

1. Garrison Company uses a weighted-average process-costing system. Company records disclosed that the firm completed 50,000 units during the month and had 10,000 units in process at month- end, 25% complete. Conversion costs associated with the beginning work-in-process inventory amounted to P105,000, and amounts that relate to the current month totaled P840,000. If conversion is incurred uniformly throughout manufacturing, Garrison's equivalent-unit cost is: A. P15. B. P16. C. P18. D. P18. E. some other amount.

Answer: C LO: 4 Type: A

Use the following to answer questions 34-35:

Universal Manufacturing uses a weighted-average process-costing system. All materials are introduced at the start of manufacturing, and conversion costs are incurred evenly throughout the process. The company's beginning and ending work-in-process inventories totaled 10,000 units and 15,000 units, respectively, with the latter units being 2/3 complete at the end of the period. Universal started 30, units into production and completed 25,000 units. Manufacturing costs follow.

Beginning work in process: Materials, P60,000; conversion cost, P150, Current costs: Materials, P180,000; conversion cost, P480,

1. Universal's equivalent-unit cost for materials is: A. P4. B. P6. C. P8. D. P9. E. some other amount.

Answer: B LO: 4 Type: A

1. Universal's equivalent-unit cost for conversion cost is: A. P13. B. P18. C. P21. D. P25. E. some other amount.

Answer: B LO: 4 Type: A

87 Hilton, Managerial Accounting, Seventh Edition

1. Gilbert adds materials at the beginning of production and incurs conversion cost uniformly throughout manufacturing. Consider the data that follow.

Units Beginning work in process 20, Started in August 60, Production completed 55, Ending work in process, 40% complete 25,

Conversion cost in the beginning work-in-process inventory totaled P120,000, and August conversion cost totaled P270,000. Assuming use of the weighted-average method, which of the following choices correctly depicts the number of equivalent units for materials and the conversion cost per equivalent unit? Equivalent Units: Materials

Conversion Cost Per Equivalent Unit A. 55,000 P4. B. 65,000 P4. C. 65,000 P6. D. 80,000 P4. E. 80,000 P6.

Answer: E LO: 4 Type: A

1. Which of the following are needed to calculate the total cost of the ending work-in-process inventory under the weighted-average process-costing method?

Unit Cost Equivalent Units A. Yes Yes B. Yes No C. No Yes D. No No E. Yes Yes, but only in specialized cases

Answer: A LO: 5 Type: RC

1. Which of the following are needed under weighted-average process costing to calculate the cost of goods completed during the period?

Unit Cost Equivalent Units A. Yes Yes B. Yes No C. No Yes D. No No E. Yes Yes, but only in specialized cases

Answer: A LO: 5 Type: RC

Chapter 4 88

1. Using the weighted-average method of process costing, the cost per unit of direct materials is: A. P1. B. P1. C. P1. D. P1. E. some other amount.

Answer: B LO: 4 Type: A

1. Using the weighted-average method of process costing, the cost per unit of conversion activity is: A. P2. B. P2. C. P2. D. P2. E. some other amount.

Answer: C LO: 4 Type: A

1. Using the weighted-average method of process costing, the cost of goods completed and transferred during May is: A. P249,560. B. P250,240. C. P258,400. D. P263,840. E. some other amount.

Answer: D LO: 5 Type: A

1. Using the weighted-average method of process costing, the total costs remaining in work in process on May 31 are: A. P0. B. P12,040. C. P17,480. D. P25,640. E. some other amount.

Answer: B LO: 5 Type: A

Chapter 4 90

Use the following to answer questions 46-47:

Chen Corporation, a new company, adds material at the beginning of its production process; conversion cost, in contrast, is incurred evenly throughout manufacturing. During May, the firm completed 15, units and had ending work in process of 2,000 units, 60% complete. Equivalent-unit costs were: materials, P15; conversion, P22.

1. The cost of Chen's completed production is: A. P225,000. B. P330,000. C. P333,000. D. P555,000. E. some other amount.

Answer: D LO: 5 Type: A

1. The cost of the company's ending work-in-process inventory is: A. P26,640. B. P44,400. C. P56,400. D. P74,000. E. some other amount.

Answer: C LO: 5 Type: A

Use the following to answer questions 48-49:

Copley uses a weighted-average process-costing system. All materials are added at the beginning of the process; conversion costs are incurred evenly throughout production. The company finished 40,000 units during the period and had 15,000 units in progress at year-end, the latter at the 40% stage of completion. Total material costs amounted to P220,000; conversion costs were P414,000.

1. The cost of goods completed is: A. P312,000. B. P414,000. C. P520,000. D. P634,000. E. some other amount.

Answer: C LO: 5 Type: A

1. The cost of the ending work in process is: A. P54,000. B. P78,000. C. P114,000. D. P195,000. E. some other amount.

Answer: C LO: 5 Type: A

91 Hilton, Managerial Accounting, Seventh Edition

1. Which of the following is a key document in a typical process-costing system? A. Departmental production report. B. Master schedule. C. Production budget. D. Sequential product report. E. Materials requirement report.

Answer: A LO: 6 Type: RC

1. Which of the following statements about operation costing is (are) true?

I costs are accumulated by department. II material costs are accumulated by batch. III costing is a hybrid product-costing system.

A. I only. B. I and II. C. I and III. D. II and III. E. I, II, and III.

Answer: E LO: 7 Type: RC

1. Operation costing: A. tends to parallel job-order costing with respect to the treatment of conversion cost. B. tends to parallel process costing with respect to the treatment of conversion cost. C. tends to parallel process costing with respect to the treatment of direct materials. D. would likely be used by a manufacturing plant that produces one model of a single product. E. is commonly known as a joint-costing system.

Answer: B LO: 7 Type: RC

1. Which of the following best describes the procedures used in operation costing to assign direct- material and conversion costs to production? Direct-Material Costs Conversion Costs A. Similar to those in job costing Similar to those in job costing B. Similar to those in job costing Similar to those in process costing C. Similar to those in process costing Similar to those in job costing D. Similar to those in process costing Similar to those in process costing E. None of the above, as operation costing is totally unlike both job costing and process costing.

Answer: B LO: 7 Type: RC

93 Hilton, Managerial Accounting, Seventh Edition

1. When determining the cost of a manufactured good under an operation-costing system, a company would: A. trace direct-material cost and actual conversion cost to each product produced. B. trace direct-material cost to each product produced and use a predetermined application rate for conversion cost. C. trace actual conversion cost to each product produced and use a predetermined application rate for direct material. D. use a predetermined application rate for both direct-material cost and conversion cost. E. often switch to a job-costing system to simplify recordkeeping procedures.

Answer: B LO: 7 Type: RC

1. The first processing department in a sequence of three production departments must account for which of the following costs? A. Direct material and transferred-in costs. B. Direct material costs only. C. Conversion and transferred-in costs. D. Direct material and conversion costs. E. Direct material, conversion, and transferred-in costs.

Answer: D LO: 8 Type: RC

1. The second processing department in a sequence of three production departments would typically account for which of the following costs? A. Direct material and transferred-in costs. B. Direct material costs only. C. Transferred-in costs only. D. Direct material and conversion costs. E. Direct material, conversion, and transferred-in costs.

Answer: E LO: 8 Type: RC

1. Department no. 2 receives goods from Department no. 1, adds material, completes the units, and transfers the units to Department no. 3 for final processing. The cost of goods completed by Department no. 2 would include charges for: A. direct materials. B. conversion cost. C. direct materials and conversion cost. D. transferred-in costs. E. transferred-in costs, direct materials, and conversion cost.

Answer: E LO: 8 Type: N

Chapter 4 94

Answer: Units Completed and transferred out during August 1,355,000* Work in process at August 31 120, Percentage complete as to material x 100% 120, Equivalent units: materials 1,475,

Units Completed and transferred out during August 1,355,000* Work in process at August 31 120, Percentage complete as to conversion x 80% 96, Equivalent units: conversion 1,451,

*100,000 + 1,375,000 - 120,000 = 1,355,

Equivalent Units

1. Coronado Products employs a process-costing system for its manufacturing operations. All materials are added at the beginning of the process, and conversion costs are incurred uniformly throughout production. The information that follows relates to September.

Units Work in process, September 1 (30% complete as to conversion) 8, 900 Units started during September 28, Total units to account for 37,

Units completed during September 29, Work in process, September 30 (80% complete as to conversion) 7, Total units accounted for 37,

Required: A. Calculate equivalent units of direct material for September. B. Calculate equivalent units of conversion activity for September.

LO: 3 Type: A

Answer: Units A .

Completed and transferred out during September 29,

Work in process at September 30 7, Percentage complete as to material x 100% 7, Equivalent units: materials 37,

Units B. Completed and transferred out during September 29, Work in process at September 30 7, Percentage complete as to conversion x 80% 6,

Chapter 4 96

Equivalent units: conversion 35,

97 Hilton, Managerial Accounting, Seventh Edition

Why would a company use a hybrid costing system?

Is a hybrid system combining process costing and job costing possible?

Which of the following is a hybrid costing system that applies to batches of like or similar products?

What is the process costing system?