CPA REVIEW SCHOOL OF THE PHILIPPINES
Manila
ADVANCED FINANCIAL ACCOUNTING GERMAN/LIM/VALIX/K. DELA CRUZ/MARASIGAN
PROCESS COSTING
1. Which cost accumulation procedure is most applicable in continuous mass-production
manufacturing environments?
A. Standard
B. Actual
C. Process
D. job order
2. A process costing system is used by a company that
A. Produces heterogeneous products.
B. Produces items by special request of customers.
C. Produces homogeneous products.
D. Accumulates costs by job.
3. Equivalent units of production are equal to the
A. Units completed by a production department in the period.
B. Number of units worked on during the period by a production department.
C. Number of whole units that could have been completed if all work of the period had been used
to produce whole units.
D. Identifiable units existing at the end of the period in a production department.
4. In a process costing system using the weighted average method, cost per equivalent unit for a given
cost component is found by dividing which of the following by EUP?
A. Only current period cost
B. Current period cost plus the cost of beginning inventory
C. Current period cost less the cost of beginning inventory
D. Current period cost plus the cost of ending inventory
5. The difference between EUP calculated using FIFO and EUP calculated using weighted average is
the equivalent units
A. Started and completed during the period.
B. Residing in beginning work in process inventory.
C. Residing in ending work in process inventory.
D. Uncompleted in work in process inventory.
6. In a cost of production report using process costing, transferred-in costs are similar to the
A. Cost of material added at the beginning of production.
B. Conversion cost added during the period.
C. Cost transferred out to the next department.
D. Cost included in beginning inventory.
7. Which of the following is(are) the same between the weighted average and FIFO methods of
calculating EUPs?
Units to EUP Total cost to
account for calculations account for
A. no yes no
B. yes yes yes
C. yes no no
D. yes no yes
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8. The cost of abnormal continuous losses is
A. Considered a product cost.
B. Absorbed by all units in ending inventory and transferred out on an equivalent unit basis.
C. Written off as a loss on an equivalent unit basis.
D. Absorbed by all units past the inspection point.
9. The method of neglect handles spoilage that is
A. Discrete and abnormal.
B. Discrete and normal.
C. Continuous and abnormal.
D. Continuous and normal.
10. The cost of normal discrete losses is
A. Absorbed by all units past the inspection point on an equivalent unit basis.
B. Absorbed by all units in ending inventory.
C. Considered a period cost.
D. Written off as a loss on an equivalent unit basis.
Part II: Problem Solving
Problem 1
Seve’s Co. manufactures XY, a product of a process which combines Mineral X and Mineral Y. It has
the following data for the month of February:
Beginning inventory (60% complete as to conversion cost 1,400 units
Started for the month of February 4,000 units
Ending Inventory (40% complete as to conversion cost) 1,000 units
Beginning inventory costs
Mineral X 28,540
Mineral Y 11,900
Conversion 11,280
Current Period costs:
Mineral X 80,000
Mineral Y 141,000
Conversion 198,000
Mineral X is added at the start of the process, while Mineral Y is added once the product in process
reaches 50% completion.
1. Assuming the use of weighted average method, how much is the cost of ending inventory for
February?
A. 72,290
B. 37,540
C. 40,000
D. 87,000
2. Assuming the use of FIFO method, how much is the cost of goods transferred to finish goods
for the month of February?
A. 351,000
B. 433,180
C. 430,720
D. 79,720
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Problem 2
The La Velle Company makes its product in two departments: Forming and Decorating. Forming
began the month with 500 units in process that were 100 percent complete as to material and 40 percent
complete as to conversion. During the month, 6,500 units were started. At month end, Forming had
2,100 units that were still in process that were 100 percent complete as to material and 50 percent
complete as to conversion. Assume Forming uses the weighted average method of process costing.
Costs in the Forming Department are as follows:
Beginning Work in Process Costs:
Material P1,000
Conversion 1,500
Current Costs:
Material P3,200
Conversion 5,045
The Decorating Department had 600 units in process at the beginning of the month that were 80
percent complete as to material and 90 percent complete as to conversion. The department had 300
units in ending Work in Process that were 50 percent complete as to material and 75 percent complete
as to conversion. Decorating uses the FIFO method of process costing, and costs associated with
Decorating are:
Beginning WIP Inventory:
Transferred In P1,170
Material 4,320
Conversion 6,210
Current Period:
Transferred In ?
Material P68,180
Conversion 97,700
1. How much is the cost of ending inventory in the Forming Department?
A. 4,760
B. 1,850
C. 2,415
D. 4,080
2. How much is the cost of units transferred to Decorating Department?
A. 7,110
B. 4,080
C. 8,330
D. 4,500
3. How much is the cost of units completed in the Decorating Department?
A. 174,930
B. 178,800
C. 164,220
D. 185,640
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Problem 3
The following information is available for KDC Company for the month of February:
Production
Started this month 160,000 units
Beginning Inventory (40% complete) 15,000 units
Ending Inventory (70% complete) 26,000 units
Transferred to Finish Goods 145,000 units
Cost
Beginning Inventory:
Material 20,800
Conversion 27,600
Current Costs:
Material 240,000
Conversion 700,000
All materials are added at the start of the production, and FIFO Process Costing system is used.
1. Case A: Assuming that management’s policy tolerates losses up to a maximum of 3% of units
started during the period, and those losses are assumed to have occurred continuously
throughout the production process. How much is the cost of units transferred out during the
period?
A. 846,998
B. 870,368
C. 867,357
D. 856,346
2. Case B: Assuming that management’s policy tolerates losses of only 1% of units started
during the period, and those losses are discovered via inspection at the end of the production
process. How much is the cost of units transferred out during the period?
A. 856,346
B. 846,998
C. 861,020
D. 870,368
3. Case C: Assuming that management’s policy tolerates losses of only 1% of units started
during the period, and those losses are discovered via inspection once a product reaches 50%
completion. Which of the following statements is true?
A. Spoilage amounting to 8,876 was allocated to goods that passed thru inspection point during the
period.
B. Spoilage amounting to 5,918 was written off as a loss during the period.
C. The cost of units transferred out during the period is 854,581.
D. The cost of units transferred out during the period is 859,692.
END
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