CPA REVIEW SCHOOL OF THE PHILIPPINES
Manila
ADVANCED FINANCIAL ACCOUNTING GERMAN AND VALIX
PROCESS COSTING
Part I: Theory of Accounts
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 homogenous 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. The weighted average method is thought by some accountants to be inferior to the FIFO
method because it
A. is more difficult to apply
B. only considers the last units worked on
C. ignores work performed in subsequent periods
D. commingles costs of two periods
5. The method of neglect handles spoilage that is
A. discrete and abnormal
B. discrete and normal
C. continuous and abnormal
D. continuous and normal.
6. The cost of normal discrete losses is
A. absorbed by all units past the inspection point on an EUP basis
B. absorbed by all units in ending inventory
C. considered a period cost
D. written off as a loss on an EUP basis
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7. The cost if abnormal continuous losses is
A. considered a product cost
B. absorbed by all units in the ending inventory and transferred-out on an EUP basis
C. written off as loss on an EUP basis
D. absorbed by all units past the inspection point
Part II: Problem Solving
Problem 1
AAA Corp. had products that undergo two departments, Assembly and Packaging departments.
The company employed process costing system to record the costs of the products. It was the
policy also to use FIFO in the Assembly and Weighted Average in the Packaging. The following
were the data for the two departments:
Assembly Units
Beginning inventory (70% complete as to conversion) 5,000
Started during the year 20,000
Ending inventory (80% complete as to conversion) 6,000
Cost
Beginning inventory
Direct material P12,500
Conversion P11,600
Cost added during the year
Direct material P46,420
Conversion P71,050
For the assembly department, the following were the policy as to direct materials:
30% of the beginning inventory were added at the start and the remaining were added when
the conversion was 80% complete
60% of the ending inventory were added when the conversion was 70% complete and the
remaining were added at the end
Packaging Units
Beginning inventory (50% complete as to conversion) 10,000
Started during the year ?
Ending inventory (75% complete as to conversion) 8,000
Cost
Beginning inventory
Transferred-in P4,950
Direct material P10,500
Conversion P1,000
Cost added during the year
Transferred-in ?
Direct material P63,000
Conversion P80,000
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For the packaging department, the following were the policy as to direct materials:
40% of the beginning inventory were added when the conversion was 40% complete and the
remaining were added when the conversion was 50% complete
10% of the ending inventory were added when the conversion was 85% complete and the
remaining were added at the end
1. What is the cost of goods transferred-out from the Assembly department?
A. 111,600
B. 116,850
C. 109,150
D. 79,800
2. What is the cost of ending inventory of the Assembly department?
A. 24,720
B. 23,160
C. 22,080
D. 30,000
3. What is the cost of goods manufactured from the Packaging department?
A. 224,700
B. 117,700
C. 136,500
D. 134,150
4. What is the cost of ending inventory of the Packaging department?
A. 76,800
B. 18,000
C. 43,200
D. 51,600
Problem 2
VVV Corp. had products that undergo two departments, Department 1 and Department 2
departments. The company employed process costing system to record the costs of the products.
It was the policy to use Weighted Average in Department 1 and FIFO in Department 2 and also
the normal spoilage was 5% of the completed units. All materials were added at the start of
production. The following were the data for Department 2:
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Department 2 Units
Beginning inventory (40% complete as to conversion) 18,000
Transferred-out from Department 1 105,000
Ending inventory (65% complete as to conversion) 48,000
Completed 65,000
Lost units ?
Cost
Beginning inventory
Transferred-in P15,500
Direct material P26,000
Conversion P33,000
Cost added during the year
Transferred-in P325,500
Direct material P283,500
Conversion P432,400
CASE 1: Assume the company inspects the units when the conversion was 50%.
1. What is the cost of goods manufactured from Department 2?
A. 627,160
B. 612,980
C. 690,180
D. 626,253
2. What is the cost of ending inventory of Department 2?
A. 421,920
B. 285,265
C. 428,974
D. 434,065
CASE 2: Assume the company did not inspect the units.
3. What is the cost of goods manufactured from Department 2?
A. 493,970
B. 617,286
C. 683,150
D. 618,150
4. What is the cost of ending inventory of Department 2?
A. 274,944
B. 294,624
C. 428,544
D. 431,040
END
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