# Cost Accounting: Foundations and Evolutions 9th Edition by Michael R. Kinney – Test Bank

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###### Cost Accounting: Foundations and Evolutions 9th Edition by Michael R. Kinney – Test Bank

Chapter 2–Cost Terminology and Cost Behaviors

Student: ___________________________________________________________________________

1. A cost object is anything for which management wants to collect or accumulate costs.
True    False

1. A production plant could be a cost object.
True    False

1. A specific product cannot be a cost object.
True    False

1. The portion of an asset’s value on the balance sheet is referred to as an expired cost.
True    False

1. The portion of an asset that was consumed during a period is referred to an expired cost.
True    False

1. A variable cost remains constant on a per-unit basis as production increases.
True    False

1. A fixed cost remains constant on a per-unit basis as production changes.
True    False

1. The relevant range is valid for all levels of activity.
True    False

1. An indirect cost can be easily traced to a cost object.
True    False

1. Both accountants and economists view variable costs as linear in nature.
True    False

1. Fixed cost per unit varies directly with production.
True    False

1. Variable cost per unit remains constant within the relevant range.
True    False

1. A cost that shifts upward or downward when activity changes by a certain interval is referred to as a mixed cost.
True    False

1. A cost that shifts upward or downward when activity changes by a certain interval is referred to as a step cost.
True    False

1. If the cost of an additive is \$5,000 + \$0.50 for every unit of solvent produced, the cost is classified as a mixed cost.
True    False

1. If the cost of an additive is \$5,000 + \$0.50 for every unit of solvent produced, the cost is classified as a step cost.
True    False

1. A predictor which has an absolute cause and effect relationship to a cost is referred to a cost driver.
True    False

1. A mixed cost will be an effective cost driver.
True    False

1. A variable cost will be an effective cost driver.
True    False

1. Unexpired costs are reflected on the balance sheet.
True    False

1. Expired costs are reflected on the balance sheet.
True    False

1. Distribution costs are an example of product costs.
True    False

1. Distribution costs are an example of period costs.
True    False

1. Retailers generally have a much higher degree of conversion than do manufacturing or professional firms.
True    False

1. Retailers generally have a much lower degree of conversion than do manufacturing or professional firms.
True    False

1. In a service industry, direct materials are usually insignificant in amount and can not easily be traced to a cost object.
True    False

1. In a service industry, direct materials are usually significant in amount and can be easily traced to a cost object.
True    False

1. There is typically an inverse relationship between prevention costs and failure costs.
True    False

1. There is typically a direct relationship between prevention costs and failure costs.
True    False

1. In an actual cost system, actual production overhead costs are typically accumulated in an Overhead Control account and assigned to Work in Process at the end of the period.
True    False

1. In a normal cost system, actual production overhead costs are typically accumulated in an Overhead Control account and assigned to Work in Process at the end of the period.
True    False

1. In a normal cost system, factory overhead is applied to Work in Process using a predetermined overhead rate.
True    False

1. In an actual cost system, factory overhead is applied to Work in Process using a predetermined overhead rate.
True    False

1. In an actual cost system, overhead is assigned to Work in Process Inventory with a debit entry to the account.
True    False

1. In an actual cost system, overhead is assigned to Work in Process Inventory with a credit entry to the account.
True    False

1. It is not necessary to prepare the Cost of Goods Manufactured statement prior to preparing the Cost of Goods Sold statement.
True    False

1. Anything for which management wants to accumulate or collect costs is known as a _________________________.
________________________________________

1. Costs that can be conveniently traced to a cost object are referred to as ____________________ costs.
________________________________________

1. Costs that cannot be conveniently traced to a cost object are known as ____________________ costs.
________________________________________

1. A cost that remains unchanged in total within the relevant range is known as a ____________________ cost.
________________________________________

1. A cost that varies in total in direct proportion to changes in activity is known as a ____________________ cost
________________________________________

1. The assumed range of activity that reflects the company’s normal operating range is referred to as the ______________________________.
________________________________________

1. A cost that remains constant on a per unit basis within the relevant range is a ____________________ cost.
________________________________________

1. A cost that varies inversely with the level of production is known as a ____________________ cost.
________________________________________

1. A cost that has both fixed and variable components is known as a ____________________ cost.
________________________________________

1. A cost that shifts upward or downward when activity changes by a certain interval is referred to as a ____________________ cost.
________________________________________

1. Another name for inventoriable costs is ____________________ costs.
________________________________________

1. The three stages of production for a manufacturing firm are _________________________, ______________________________, and _________________________.
________________________________________

1. Costs that are incurred to improve quality by precluding defects and improper processing are referred to as ____________________ costs.
________________________________________

1. Costs incurred for monitoring or inspecting products are known as ____________________ costs.
________________________________________

1. Costs that result from defective units, product returns, and complaints are referred to as ____________________ costs.
________________________________________

1. The term “relevant range” as used in cost accounting means the range over which
A. costs may fluctuate.
B. cost relationships are valid.
C. production may vary.
D. relevant costs are incurred.

1. Which of the following defines variable cost behavior?
 Total cost reaction to increase in activity Cost per unit reaction to increase in activity
1. remains constant                      remains constant
B. remains constant                      increases
C. increases                                 increases
D. increases                                 remains constant

1. When cost relationships are linear, total variable prime costs will vary in proportion to changes in
A. direct labor hours.
B. total material cost.
D. production volume.

1. Which of the following would generally be considered a fixed factory overhead cost?
 Straight-line Factory Units-of-production depreciation insurance depreciation
1. no          no           no
B.      yes         no           yes
C.      yes         yes          no
D.      no          yes          no

1. An example of a fixed cost is
A. total indirect material cost.
B. total hourly wages.
C. cost of electricity.
D. straight-line depreciation.

1. A cost that remains constant in total but varies on a per-unit basis with changes in activity is called a(n)
A. expired cost.
B. fixed cost.
C. variable cost.
D. mixed cost.

1. A(n) ____ cost increases or decreases in intervals as activity changes.
A. historical cost
B. fixed cost
C. step cost
D. budgeted cost

1. When the number of units manufactured increases, the most significant change in unit cost will be reflected as a(n)
A. increase in the fixed element.
B. decrease in the variable element.
C. increase in the mixed element.
D. decrease in the fixed element.

1. Which of the following always has a direct cause-effect relationship to a cost?
 Predictor Cost driver
1. yes         yes
B. yes         no
C. no          yes
D. no          no

1. A cost driver
A. causes fixed costs to rise because of production changes.
B. has a direct cause-effect relationship to a cost.
C. can predict the cost behavior of a variable, but not a fixed, cost.
D. is an overhead cost that causes distribution costs to change in distinct increments with changes in production volume.

1. Product costs are deducted from revenue
B. when production is completed.
C. as goods are sold.
D. to minimize taxable income.

1. A selling cost is a(n)
 product cost period cost inventoriable cost
1. yes          yes          no
B. yes          no           no
C. no           yes          no
D. no           yes          yes

1. Which of the following is not a product cost component?
A. rent on a factory building
B. indirect production labor wages
C. janitorial supplies used in a factory
D. commission on the sale of a product

1. Period costs
A. are expensed in the same period in which they are incurred.
B. are always variable costs.
C. remain unchanged over a given period of time.
D. are associated with the periodic inventory method.

1. Period costs include
 distribution costs outside processing costs sales commissions
1. yes                    no                 yes
B. no                     yes                yes
C. no                     no                 no
D. yes                    yes                yes

1. The three primary inventory accounts in a manufacturing company are
A. Merchandise Inventory, Supplies Inventory, and Finished Goods Inventory.
B. Merchandise Inventory, Work in Process Inventory, and Finished Goods Inventory.
C. Supplies Inventory, Work in Process Inventory, and Finished Goods Inventory.
D. Raw Material Inventory, Work in Process Inventory, and Finished Goods Inventory.

1. Cost of Goods Sold is an
A. unexpired product cost.
B. expired product cost.
C. unexpired period cost.
D. expired period cost.

1. The indirect costs of converting raw material into finished goods are called
A. period costs.
B. prime costs.
D. conversion costs.

1. Which of the following would need to be allocated to a cost object?
A. direct material
B. direct labor
C. direct production costs
D. indirect production costs

1. Conversion cost does not include
A. direct labor.
B. direct material.
C. factory depreciation.
D. supervisors’ salaries.

1. The distinction between direct and indirect costs depends on whether a cost
A. is controllable or non-controllable.
B. is variable or fixed.
C. can be conveniently and physically traced to a cost object under consideration.
D. will increase with changes in levels of activity.

1. Hunnicutt Company is a construction company that builds greenhouses on special request. What is the proper classification of the carpenters’ wages?
 Product Period Direct
1. yes      yes      no
B. yes      no       yes
C. no       no       no
D. no       yes      yes

1. Hunnicutt Company is a construction company that builds greenhouses on special request. What is the proper classification of the cost of the cement building slab used?
 Direct Fixed
1. no      no
B. no      yes
C. yes     yes
D. yes     no

1. Hunnicutt Company is a construction company that builds greenhouses on special request. What is the proper classification of indirect material used?
 Prime Conversion Variable
1. no      no           no
B. no      yes          yes
C. yes     yes          yes
D. yes     no           no

1. Which of the following costs would be considered overhead in the production of chocolate chip cookies?
A. flour
B. chocolate chips
C. sugar
D. oven electricity

1. All costs related to the manufacturing function in a company are
A. prime costs.
B. direct costs.
C. product costs.
D. conversion costs.

1. Prime cost consists of
1. no             yes        no
B. yes            yes        no
C. yes            no         yes
D. no             yes        yes

1. Plastic used to manufacture dolls is a
 prime cost product cost direct cost fixed cost
1. no        yes         yes        yes
B. yes       no          yes        no
C. yes       yes         no         yes
D. yes       yes         yes        no

1. The term “prime cost” refers to
A. all manufacturing costs incurred to produce units of output.
B. all manufacturing costs other than direct labor and raw material costs.
C. raw material purchased and direct labor costs.
D. the raw material used and direct labor costs.

1. Conversion of inputs to outputs is recorded in the
A. Work in Process Inventory account.
B. Finished Goods Inventory account.
C. Raw Material Inventory account.
D. both a and b.

1. In a perpetual inventory system, the sale of items for cash consists of two entries. One entry is a debit to Cash and a credit to Sales. The other entry is a debit to
A. Work in Process Inventory and a credit to Finished Goods Inventory.
B. Finished Goods Inventory and a credit to Cost of Goods Sold.
C. Cost of Goods Sold and a credit to Finished Goods Inventory.
D. Finished Goods Inventory and a credit to Work in Process Inventory.

1. The formula to compute cost of goods manufactured is
A. beginning Work in Process Inventory plus purchases of raw material minus ending Work in Process Inventory.
B. beginning Work in Process Inventory plus direct labor plus direct material used plus overhead incurred minus ending Work in Process Inventory.
C. direct material used plus direct labor plus overhead incurred.
D. direct material used plus direct labor plus overhead incurred plus beginning Work in Process Inventory.

1. The final figure in the Schedule of Cost of Goods Manufactured represents the
A. cost of goods sold for the period.
B. total cost of manufacturing for the period.
C. total cost of goods started and completed this period.
D. total cost of goods completed for the period.

1. The formula for cost of goods sold for a manufacturer is
A. beginning Finished Goods Inventory plus Cost of Goods Manufactured minus ending Finished Goods Inventory.
B. beginning Work in Process Inventory plus Cost of Goods Manufactured minus ending Work in Process Inventory.
C. direct material plus direct labor plus applied overhead.
D. direct material plus direct labor plus overhead incurred plus beginning Work in Process Inventory.

1. Which of the following replaces the retailing component “Purchases” in computing Cost of Goods Sold for a manufacturing company?
A. direct material used
B. cost of goods manufactured
C. total prime cost
D. cost of goods available for sale

1. Costs that are incurred to preclude defects and improper processing are:
A. prevention costs
B. detection costs
C. appraisal costs
D. failure costs

1. Costs that are incurred for monitoring and inspecting are:
A. prevention costs
B. detection costs
C. appraisal costs
D. failure costs

1. Costs that are incurred when customers complain are:
A. prevention costs
B. detection costs
C. appraisal costs
D. failure costs

1. Richards Company

The following information has been taken from the cost records of Richards Company for the past year:
 Raw material used in production \$326 Total manufacturing costs charged to production during the year (includes direct material, direct labor, and overhead equal to 60% of direct labor cost) 686 Cost of goods available for sale 826 Selling and Administrative expenses 25

 Inventories Beginning Ending Raw Material \$75 \$ 85 Work in Process 80 30 Finished Goods 90 110

Refer to Richards Company. The cost of raw material purchased during the year was
A. \$316.
B. \$336.
C. \$360.
D. \$411.

1. Richards Company

The following information has been taken from the cost records of Richards Company for the past year:
 Raw material used in production \$326 Total manufacturing costs charged to production during the year (includes direct material, direct labor, and overhead equal to 60% of direct labor cost) 686 Cost of goods available for sale 826 Selling and Administrative expenses 25

 Inventories Beginning Ending Raw Material \$75 \$ 85 Work in Process 80 30 Finished Goods 90 110

Refer to Richards Company. Direct labor cost charged to production during the year was
A. \$135.
B. \$216.
C. \$225.
D. \$360.

1. Richards Company

The following information has been taken from the cost records of Richards Company for the past year:
 Raw material used in production \$326 Total manufacturing costs charged to production during the year (includes direct material, direct labor, and overhead equal to 60% of direct labor cost) 686 Cost of goods available for sale 826 Selling and Administrative expenses 25

 Inventories Beginning Ending Raw Material \$75 \$ 85 Work in Process 80 30 Finished Goods 90 110

Refer to Richards Company. Cost of Goods Manufactured was
A. \$636.
B. \$716.
C. \$736.
D. \$766.

1. Richards Company

The following information has been taken from the cost records of Richards Company for the past year:
 Raw material used in production \$326 Total manufacturing costs charged to production during the year (includes direct material, direct labor, and overhead equal to 60% of direct labor cost) 686 Cost of goods available for sale 826 Selling and Administrative expenses 25

 Inventories Beginning Ending Raw Material \$75 \$ 85 Work in Process 80 30 Finished Goods 90 110

Refer to Richards Company. Cost of Goods Sold was
A. \$691.
B. \$716.
C. \$736.
D. \$801.

1. Bridges Corporation

The following information has been taken from the cost records of Bridges Corporation for the past year:
 Raw material used in production \$336 Total manufacturing costs charged to production during the year (includes direct material, direct labor, and overhead equal to 50% of direct labor cost) 711 Cost of goods available for sale 851 Selling and Administrative expenses 35

 Inventories Beginning Ending Raw Material \$80 \$ 90 Work in Process 85 25 Finished Goods 80 105

Refer to Bridges Corporation. The cost of raw material purchased during the year was
A. \$326.
B. \$346
C. \$375
D. \$426

1. Bridges Corporation

The following information has been taken from the cost records of Bridges Corporation for the past year:
 Raw material used in production \$336 Total manufacturing costs charged to production during the year (includes direct material, direct labor, and overhead equal to 50% of direct labor cost) 711 Cost of goods available for sale 851 Selling and Administrative expenses 35

 Inventories Beginning Ending Raw Material \$80 \$ 90 Work in Process 85 25 Finished Goods 80 105

Refer to Bridges Company. Direct labor cost charged to production during the year was
A. \$125
B. \$188
C. \$250
D. \$375.

1. Bridges Corporation

The following information has been taken from the cost records of Bridges Corporation for the past year:
 Raw material used in production \$336 Total manufacturing costs charged to production during the year (includes direct material, direct labor, and overhead equal to 50% of direct labor cost) 711 Cost of goods available for sale 851 Selling and Administrative expenses 35

 Inventories Beginning Ending Raw Material \$80 \$ 90 Work in Process 85 25 Finished Goods 80 105

Refer to Bridges Company. Cost of Goods Manufactured was
A. \$651
B. \$736
C. \$771
D. \$796

1. Bridges Corporation

The following information has been taken from the cost records of Bridges Corporation for the past year:
 Raw material used in production \$336 Total manufacturing costs charged to production during the year (includes direct material, direct labor, and overhead equal to 50% of direct labor cost) 711 Cost of goods available for sale 851 Selling and Administrative expenses 35

 Inventories Beginning Ending Raw Material \$80 \$ 90 Work in Process 85 25 Finished Goods 80 105

Refer to Bridges Company. Cost of Goods Sold was
A. \$711
B. \$746
C. \$796
D. \$816

1. Jackson Company.

Jackson Company manufactures wood file cabinets. The following information is available for June of the current year.
 Beginning Ending Raw Material Inventory \$ 6,000 \$ 7,500 Work in Process Inventory 17,300 11,700 Finished Goods Inventory 21,000 16,300

The direct labor rate is \$9.60 per hour and overhead for the month was \$9,600.

Refer to Jackson Company.  Compute total manufacturing costs for June, if there were 1,500 direct labor hours and \$21,000 of  raw material was purchased.
A. \$58,500
B. \$46,500
C. \$43,500
D. \$43,100

1. Jackson Company.

Jackson Company manufactures wood file cabinets. The following information is available for June of the current year.
 Beginning Ending Raw Material Inventory \$ 6,000 \$ 7,500 Work in Process Inventory 17,300 11,700 Finished Goods Inventory 21,000 16,300

The direct labor rate is \$9.60 per hour and overhead for the month was \$9,600.

Refer to Jackson Company.  What are prime costs and conversion costs, respectively if there were 1,500 direct labor hours and \$21,000 of raw material was purchased?
A. \$29,100 and \$33,900
B. \$33,900 and \$24,000
C. \$33,900 and \$29,100
D. \$24,000 and \$33,900

1. Jackson Company.

Jackson Company manufactures wood file cabinets. The following information is available for June of the current year.
 Beginning Ending Raw Material Inventory \$ 6,000 \$ 7,500 Work in Process Inventory 17,300 11,700 Finished Goods Inventory 21,000 16,300

The direct labor rate is \$9.60 per hour and overhead for the month was \$9,600.

Refer to Jackson Company.  If there were 1,500 direct labor hours and \$21,000 of raw material purchased, Cost of Goods Manufactured is:
A. \$49,100.
B. \$45,000.
C. \$51,000.
D. \$49,500.

1. Jackson Company.

Jackson Company manufactures wood file cabinets. The following information is available for June of the current year.
 Beginning Ending Raw Material Inventory \$ 6,000 \$ 7,500 Work in Process Inventory 17,300 11,700 Finished Goods Inventory 21,000 16,300

The direct labor rate is \$9.60 per hour and overhead for the month was \$9,600.

Refer to Jackson Company.  If there were 1,500 direct labor hours and \$21,000 of raw material purchased, how much is Cost of Goods Sold?
A. \$64,500.
B. \$59,800.
C. \$38,800.
D. \$53,800.

1. Davis Company manufactures desks. The beginning balance of Raw Material Inventory was \$4,500; raw material purchases of \$29,600 were made during the month. At month end, \$7,700 of raw material was on hand. Raw material used during the month was
A. \$26,400.
B. \$34,100.
C. \$37,300.
D. \$29,600.

1. McCoy Company manufactures tables. The beginning balance of Raw Material Inventory was \$5,500; raw material purchases of \$31,500 were made during the month. At month end, \$8,200 of raw material was on hand. Raw material used during the month was
A. \$28,800
B. \$31,500
C. \$37,000.
D. \$39,200

1. Parker Company manufactures tables. If raw material used was \$80,000 and Raw Material Inventory at the beginning and end of the period, respectively, was \$17,000 and \$21,000, what was amount of raw material was purchased?
A. \$76,000
B. \$118,000
C. \$84,000
D. \$101,000

1. Petrie Company manufactures chairs. If raw material used was \$100,000 and Raw Material Inventory at the beginning and end of the period, respectively, was \$27,000 and \$31,000, what was amount of raw material was purchased?
A. \$  96,000
B. \$104,000
C. \$158,000
D. \$131,000

1. Denson Company manufactures computer stands. What is the beginning balance of Finished Goods Inventory if Cost of Goods Sold is \$107,000; the ending balance of Finished Goods Inventory is \$20,000; and Cost of Goods Manufactured is \$50,000 less than Cost of Goods Sold?
A. \$70,000
B. \$77,000
C. \$157,000
D. \$127,000

1. Wyman Enterprises

 Inventories: March 1 March 31 Raw material \$18,000 \$15,000 Work in process 9,000 6,000 Finished goods 27,000 36,000 Additional information for March: Raw material purchased \$42,000 Direct labor payroll \$30,000 Direct labor rate per hour \$  7.50 Overhead rate per direct labor hour \$ 10.00

Refer to Wyman Enterprises. For March, prime cost incurred was
A. \$75,000.
B. \$69,000.
C. \$45,000.
D. \$39,000.

1. Wyman Enterprises

 Inventories: March 1 March 31 Raw material \$18,000 \$15,000 Work in process 9,000 6,000 Finished goods 27,000 36,000 Additional information for March: Raw material purchased \$42,000 Direct labor payroll \$30,000 Direct labor rate per hour \$  7.50 Overhead rate per direct labor hour \$ 10.00

Refer to Wyman Enterprises. For March, conversion cost incurred was
A. \$30,000.
B. \$40,000.
C. \$70,000.
D. \$72,000.

1. Wyman Enterprises

 Inventories: March 1 March 31 Raw material \$18,000 \$15,000 Work in process 9,000 6,000 Finished goods 27,000 36,000 Additional information for March: Raw material purchased \$42,000 Direct labor payroll \$30,000 Direct labor rate per hour \$  7.50 Overhead rate per direct labor hour \$ 10.00

Refer to Wyman Enterprises. For March, Cost of Goods Manufactured was
A. \$118,000.
B. \$115,000.
C. \$112,000.
D. \$109,000.

1. Stayton Enterprises

 Inventories: April 1 April 30 Raw material \$20,000 \$17,000 Work in process 12,000 8,000 Finished goods 30,000 39,000 Additional information for April: Raw material purchased \$45,000 Direct labor payroll \$36,000 Direct labor rate per hour \$  8.00 Overhead rate per direct labor hour \$ 10.00

Refer to Stayton Enterprises. For April, prime cost incurred was
A. \$78,000.
B. \$84,000
C. \$51,000.
D. \$45,000.

1. Stayton Enterprises

 Inventories: April 1 April 30 Raw material \$20,000 \$17,000 Work in process 12,000 8,000 Finished goods 30,000 39,000 Additional information for April: Raw material purchased \$45,000 Direct labor payroll \$36,000 Direct labor rate per hour \$  8.00 Overhead rate per direct labor hour \$ 10.00

Refer to Stayton Enterprises. For April, conversion cost incurred was
A. \$36,000
B. \$45,000.
C. \$81,000.
D. \$84,000.

1. Stayton Enterprises

 Inventories: April 1 April 30 Raw material \$20,000 \$17,000 Work in process 12,000 8,000 Finished goods 30,000 39,000 Additional information for April: Raw material purchased \$45,000 Direct labor payroll \$36,000 Direct labor rate per hour \$  8.00 Overhead rate per direct labor hour \$ 10.00

Refer to Stayton Enterprises. For April, Cost of Goods Manufactured was
A. \$141,000
B. \$133,000.
C. \$125,000.
D. \$121,000.

1. Define the relevant range and explain its significance.

1. Define a variable cost and a fixed cost. What causes changes in these costs? Give two examples of each.

1. What is the difference between a product cost and a period cost? Give three examples of each. What is the difference between a direct cost and indirect cost? Give two examples of each.

1. What are three reasons that overhead must be allocated to products?

1. Why should predetermined overhead rates be used?

1. List and explain three types of quality costs.

1. Given the following information for Simpson Corporation, prepare the necessary journal entries, assuming that the Raw Material Inventory account contains both direct and indirect material.
 a. Purchased raw material on account \$28,500. b. Put material into production: \$15,000 of direct material and \$3,000 of indirect material. c. Accrued payroll of \$90,000, of which 70 percent was direct and the remainder was indirect. d. Incurred and paid other overhead items of \$36,000. e. Transferred items costing \$86,500 to finished goods. f. Sold goods costing \$71,300 on account for \$124,700.

1. Given the following information for Gregg Corporation, prepare the necessary journal entries, assuming that the Raw Material Inventory account contains both direct and indirect material.

Chapter 11–Allocation of Joint Costs and Accounting for By-Products

Student: ___________________________________________________________________________

1. Joint costs occur after the split-off point in a production process.
True    False

1. Joint costs occur before the split-off point in a production process.
True    False

1. Joint costs may be allocated to by-products as well as primary products.
True    False

1. The primary distinction between by-products and scrap is the difference in sales value.
True    False

1. The primary distinction between by-products and scrap is the difference in volume produced.
True    False

1. The point at which individual products are first identifiable in a joint process is referred to as the split-off point.
True    False

1. Joint costs include all materials, labor and overhead that are incurred before the split-off point.
True    False

1. Two methods of allocating joint costs to products are physical measure allocation and monetary allocation.
True    False

1. A decision that must be made at split-off is to sell a product or process it further.
True    False

1. Allocating joint costs based upon a physical measure ignores the revenue-generating ability of individual products.
True    False

1. Allocating joint costs based upon a physical measure considers the revenue-generating ability of individual products.
True    False

1. Monetary allocation measures recognize the revenue generating ability of each product in a joint process.
True    False

1. The relative sales value method requires a common physical unit for measuring the output of each product.
True    False

1. Joint costs may be allocated to main products, but not to by-products.
True    False

1. Net realizable value equals product sales revenue at split-off plus any costs necessary to prepare and dispose of the product.
True    False

1. Net realizable value equals product sales revenue at split-off minus any costs necessary to prepare and dispose of the product.
True    False

1. If incremental revenues beyond split-off are less than incremental costs, a product should be sold at the split-off point.
True    False

1. If incremental revenues beyond split-off exceed incremental costs, a product should be processed further.
True    False

1. The net realizable value approach requires that the net realizable value of by-products and scrap be treated as a reduction in joint costs allocated to primary products.
True    False

1. Net realizable value is considered to be the best measure of the expected contribution of each product to the coverage of joint costs.
True    False

1. The net realizable value approach is used to account for scrap and by-products when the net realizable value is insignificant.
True    False

1. The net realizable value approach is used to account for scrap and by-products when the net realizable value is significant.
True    False

1. Under the realized value approach, no value is recognized for by-products or scrap until they are actually sold.
True    False

1. Under the net realizable value approach, no value is recognized for by-products or scrap until they are actually sold.
True    False

1. Not-for-profit entities are required to allocate joint costs among fund-raising, program, and administrative functions.
True    False

1. A single process in which one product cannot be manufactured without producing others is referred to as a _________________________.
________________________________________

1. Costs that are incurred in the manufacture of two or more products from a common process are referred to as _________________________.
________________________________________

1. Costs that are incurred after the split-off point in a production process are referred to as ______________________________.
________________________________________

1. Three types of products that result from a joint process are _________________________, ____________________, and ____________________.
________________________________________

1. Two incidental products of a joint process are ____________________ and ____________________.
________________________________________

1. The point at which individual products are first identifiable in a joint process is referred to as the _________________________.
________________________________________

1. Two methods of allocating joint costs to individual products are ________________________________________ and ________________________________________.
________________________________________

1. Three monetary measures used to allocate joint costs to products are ________________________________________, ________________________________________, and ____________________________________________________________.
________________________________________

1. Sales revenue at split-off less disposal costs equals ______________________________.
________________________________________

1. If a company obtains two salable products from the refining of one ore, the refining process should be accounted for as a(n)
A. mixed cost process.
B. joint process.
C. extractive process.
D. reduction process.

1. Joint costs are allocated to joint products to
A. obtain a cost per unit for financial statement purposes.
B. provide accurate management information on production costs of each type of product.
C. compute variances from expected costs for each joint product.
D. allow the use of high-low analysis by the company.

1. Joint costs are allocated to which of the following products?
 By-products Scrap
1. yes       yes
B. yes       no
C. no        no
D. no        yes

1. Joint cost allocation is useful for
A. decision making.
B. product costing.
C. control.
D. evaluating managers’ performance.

1. Joint costs are useful for
A. setting the selling price of a product.
B. determining whether to continue producing an item.
C. evaluating management by means of a responsibility reporting system.
D. determining inventory cost for accounting purposes.

1. Which of the following components of production are allocable as joint costs when a single manufacturing process produces several salable products?
A. direct material, direct labor, and overhead
B. direct material and direct labor only
C. direct labor and overhead only
D. overhead and direct material only

1. Each of the following is a method to allocate joint costs except
A. relative sales value.
B. relative net realizable value.
C. relative weight, volume, or linear measure.
D. average unit cost.

1. Joint costs are most frequently allocated based upon relative
A. profitability.
B. conversion costs.
C. prime costs.
D. sales value.

1. When allocating joint process cost based on tons of output, all products will
A. be salable at split-off.
B. have the same joint cost per ton.
C. have a sales value greater than their costs.
D. have no disposal costs at the split-off point.

1. If two or more products share a common process before they are separated, the joint costs should be assigned in a manner that
A. assigns a proportionate amount of the total cost to each product on a quantitative basis.
B. maximizes total earnings.
C. minimizes variations in unit production costs.
D. does not introduce an element of estimation into the process of accumulating costs for each product.

1. Scrap is defined as a
A. finished unit of product that has no sales value.
B. residual of the production process that has limited sales value.
C. residual of the production process that can be reworked for sale as an irregular unit of product.
D. residual of the production process that has no sales value.

1. Waste created by a production process is
A. accounted for in the same manner as defective units.
B. accounted for as an abnormal loss.
C. material that can be sold as an irregular product.

1. While preparing a salad, the chef removes the core from a head of lettuce. This core would be classified as
A. defective.
B. shrinkage.
C. waste.
D. scrap.

1. Which of the following is/are synonyms for joint products?
 Main products Co-products
1. no            no
B.  yes           yes
C.  yes           no
D.  no            yes

1. In a lumber mill, which of the following would most likely be considered a primary product?
A. 2 ´ 4 studs
B. sawdust
C. wood chips
D. tree bark

1. Witte Company produces three products from a joint process. The products can be sold at split-off or processed further. In deciding whether to sell at split-off or process further, management should
A. allocate the joint cost to the products based on relative sales value prior to making the decision.
B. allocate the joint cost to the products based on a physical quantity measure prior to making the decision.
C. subtract the joint cost from the total sales value of the products before determining relative sales value and making the decision.
D. ignore the joint cost in making the decision.

1. By-products are
A. items resulting from a joint process that have no further value.
B. not sufficient alone, in terms of sales value, for management to justify undertaking the joint process.
C. also known as scrap.
D. the primary reason management undertook the production process.

1. Which of the following statements is true regarding by-products or scrap?
A. Process costing is the only method that should result in by-products or scrap.
B. Job order costing systems will never have by-products or scrap.
C. Job order costing systems may have instances where by-products or scrap result from the production process.
D. Process costing will never have by-products or scrap from the production process.

1. Which of the following has sales value?
 By-products Waste
1. no         no
B. yes        no
C. yes        yes
D. no         yes

1. Under an acceptable method of costing by-products, inventory costs of the by-product are based on the portion of the joint production cost allocated to the by-product
A. but any subsequent processing cost is debited to the cost of the main product.
B. but any subsequent processing cost is debited to revenue of the main product.
C. plus any subsequent processing cost.
D. minus any subsequent processing cost.

1. Which of the following is a false statement about scrap and by-products?
A. Both by-products and scrap are salable.
B. A by-product has a higher sales value than does scrap.
C. Management’s goal is to produce both scrap and by-products.
D. Both scrap and by-products are incidental outputs to the joint process.

1. The split-off point is the point at which
A. output is first identifiable as individual products.
B. joint costs are allocated to joint products.
C. some products may first be sold.
D. all of the above.

1. A product may be processed beyond the split-off point if management believes that
A. its marketability will be enhanced.
B. the incremental cost of further processing will be less than the incremental revenue of further processing.
C. the joint cost assigned to it is not already greater than its prospective selling price.
D. both a and b.

1. In a joint costing process, which of the following would not be considered a sunk cost?
A. direct material cost
B. direct labor cost
C. joint cost
D. costs incurred to further refine a product created by the process

1. The definition of a sunk cost is
A. a cost that cannot be recovered regardless of what happens.
B. a cost that relates to money poured into the ground.
C. considered the original cost of an item.
D. also known as an opportunity cost.

1. The net realizable value approach mandates that the NRV of the by-products/scrap be treated as
A. an increase in joint costs.
B. a sunk cost.
C. a reduction of joint costs.
D. a cost that can be ignored totally.

1. The net realizable value approach is normally used when the NRV is expected to be
 insignificant significant
1. yes           yes
B. no            yes
C. no            no
D. yes           no

1. Approximated net realizable value at split-off for joint products is computed as
A. selling price at split-off minus further processing and disposal costs.
B. final selling price minus further processing and disposal costs.
C. selling price at split-off minus allocated joint processing costs.
D. final selling price minus a normal profit margin.

1. Which of the following is a commonly used joint cost allocation method?
A. high-low method
B. regression analysis
C. approximated sales value at split-off method
D. weighted average quantity technique

1. Incremental separate costs are defined as all costs incurred between ____ and the point of sale.
A. inception
B. split-off point
C. transfer to finished goods inventory
D. point of addition of disposal costs

1. All costs that are incurred between the split-off point and the point of sale are known as
A. sunk costs.
B. incremental separate costs.
C. joint cost.
D. committed costs.

1. Incremental revenues and costs need to be considered when using which allocation method?
 Physical measures Sales value at split-off
1. yes                 yes
B.   yes                 no
C.   no                  no
D.   no                  yes

1. The method of pricing by-products/scrap where no value is assigned to these items until they are sold is known as the
A. net realizable value at split-off point method.
B. sales value at split-off method.
C. realized value approach.
D. approximated net realizable value at split-off method.

1. Relative sales value at split-off is used to allocate
 costs beyond split-off joint costs
1. yes              yes
B.    yes              no
C.    no               yes
D.    no               no

1. For purposes of allocating joint costs to joint products using the relative sales value at split-off method, the costs beyond split-off
A. are allocated in the same manner as the joint costs.
B. are deducted from the relative sales value at split-off.
C. are deducted from the sales value at the point of sale.
D. do not affect the allocation of the joint costs.

1. In joint-product costing and analysis, which of the following costs is relevant in the decision when a product should be sold to maximize profits?
A. Separable costs after the split-off point
B. Joint costs to the split-off point
C. Sales salaries for the production period
D. Costs of raw materials purchased for the joint process.

1. Not-for-profit organizations are required by the ____ to allocate joint costs.
A. AICPA
B. FASB
C. CASB
D. GASB

1. Chambers Company

Chambers Company produces two products from a joint process: X and Z. Joint processing costs for this production cycle are \$8,000.
 Yards Sales price per yard at split-off Disposal cost per yard at split-off Further processing per yard Final sale price per yard X 1,500 \$6.00 \$3.50 \$1.00 \$ 7.50 Z 2,200 9.00 5.00 3.00 11.25

If X and Z are processed further, no disposal costs will be incurred or such costs will be borne by the buyer.

Refer to Chambers Company. Using a physical measure, what amount of joint processing cost is allocated to Product X (round to the nearest dollar)?
A. \$4,000
B. \$4,757
C. \$5,500
D. \$3,243

1. Chambers Company

Chambers Company produces two products from a joint process: X and Z. Joint processing costs for this production cycle are \$8,000.
 Yards Sales price per yard at split-off Disposal cost per yard at split-off Further processing per yard Final sale price per yard X 1,500 \$6.00 \$3.50 \$1.00 \$ 7.50 Z 2,200 9.00 5.00 3.00 11.25

If X and Z are processed further, no disposal costs will be incurred or such costs will be borne by the buyer.

Refer to Chambers Company. Using a physical measure, what amount of joint processing cost is allocated to Product Z (round to the nearest dollar)?
A. \$4,000
B. \$3,243
C. \$5,500
D. \$4,757

1. Chambers Company

Chambers Company produces two products from a joint process: X and Z. Joint processing costs for this production cycle are \$8,000.
 Yards Sales price per yard at split-off Disposal cost per yard at split-off Further processing per yard Final sale price per yard X 1,500 \$6.00 \$3.50 \$1.00 \$ 7.50 Z 2,200 9.00 5.00 3.00 11.25

If X and Z are processed further, no disposal costs will be incurred or such costs will be borne by the buyer.

Refer to Chambers Company. Using sales value at split-off, what amount of joint processing cost is allocated to Product X (round to the nearest dollar)?
A. \$5,500
B. \$2,500
C. \$4,000
D. \$3,243

1. Chambers Company

Chambers Company produces two products from a joint process: X and Z. Joint processing costs for this production cycle are \$8,000.
 Yards Sales price per yard at split-off Disposal cost per yard at split-off Further processing per yard Final sale price per yard X 1,500 \$6.00 \$3.50 \$1.00 \$ 7.50 Z 2,200 9.00 5.00 3.00 11.25

If X and Z are processed further, no disposal costs will be incurred or such costs will be borne by the buyer.

Refer to Chambers Company. Using sales value at split-off, what amount of joint processing cost is allocated to Product Z (round to the nearest dollar)?
A. \$5,500
B. \$4,000
C. \$2,500
D. \$4,757

1. Chambers Company

Chambers Company produces two products from a joint process: X and Z. Joint processing costs for this production cycle are \$8,000.
 Yards Sales price per yard at split-off Disposal cost per yard at split-off Further processing per yard Final sale price per yard X 1,500 \$6.00 \$3.50 \$1.00 \$ 7.50 Z 2,200 9.00 5.00 3.00 11.25

If X and Z are processed further, no disposal costs will be incurred or such costs will be borne by the buyer.

Refer to Chambers Company. Using net realizable value at split-off, what amount of joint processing cost is allocated to Product X (round to the nearest dollar)?
A. \$4,000
B. \$5,610
C. \$2,390
D. \$5,500

1. Chambers Company

Chambers Company produces two products from a joint process: X and Z. Joint processing costs for this production cycle are \$8,000.
 Yards Sales price per yard at split-off Disposal cost per yard at split-off Further processing per yard Final sale price per yard X 1,500 \$6.00 \$3.50 \$1.00 \$ 7.50 Z 2,200 9.00 5.00 3.00 11.25

If X and Z are processed further, no disposal costs will be incurred or such costs will be borne by the buyer.

Refer to Chambers Company. Using net realizable value at split-off, what amount of joint processing cost is allocated to Product Z (round to the nearest dollar)?
A. \$5,500
B. \$4,000
C. \$2,390
D. \$5,610

1. Chambers Company

Chambers Company produces two products from a joint process: X and Z. Joint processing costs for this production cycle are \$8,000.
 Yards Sales price per yard at split-off Disposal cost per yard at split-off Further processing per yard Final sale price per yard X 1,500 \$6.00 \$3.50 \$1.00 \$ 7.50 Z 2,200 9.00 5.00 3.00 11.25

If X and Z are processed further, no disposal costs will be incurred or such costs will be borne by the buyer.

Refer to Chambers Company. Using approximated net realizable value at split-off, what amount of joint processing cost is allocated to Product X (round to the nearest dollar)?
A. \$3,090
B. \$5,204
C. \$4,000
D. \$2,390

1. Chambers Company

Chambers Company produces two products from a joint process: X and Z. Joint processing costs for this production cycle are \$8,000.
 Yards Sales price per yard at split-off Disposal cost per yard at split-off Further processing per yard Final sale price per yard X 1,500 \$6.00 \$3.50 \$1.00 \$ 7.50 Z 2,200 9.00 5.00 3.00 11.25

If X and Z are processed further, no disposal costs will be incurred or such costs will be borne by the buyer.

Refer to Chambers Company. Using approximated net realizable value at split-off, what amount of joint processing cost is allocated to Product Z (round to the nearest dollar)?
A. \$2,796
B. \$4,910
C. \$4,000
D. \$2,390

1. Chambers Company

Chambers Company produces two products from a joint process: X and Z. Joint processing costs for this production cycle are \$8,000.
 Yards Sales price per yard at split-off Disposal cost per yard at split-off Further processing per yard Final sale price per yard X 1,500 \$6.00 \$3.50 \$1.00 \$ 7.50 Z 2,200 9.00 5.00 3.00 11.25

If X and Z are processed further, no disposal costs will be incurred or such costs will be borne by the buyer.

Refer to Chambers Company. Which products would be processed further?
A. only Product X
B. only Product Z
C. both Products X and Z
D. neither Product X or Z

1. Riley Company

Riley Company produces two products from a joint process: A and C. Joint processing costs for this production cycle are \$9,000.
 Yards Sales price per yard at split-off Disposal cost per yard at split-off Further processing per yard Final sale price per yard A 1,800 \$7.00 \$4.50 \$1.50 \$ 8.00 C 2,600 10.00 6.00 3.50 12.25

If A and C are processed further, no disposal costs will be incurred or such costs will be borne by the buyer.

Refer to Riley Company. Using a physical measure, what amount of joint processing cost is allocated to Product A (round to the nearest dollar)?
A. \$2,938
B. \$3,682
C. \$4,500
D. \$5,318

1. Riley Company

Riley Company produces two products from a joint process: A and C. Joint processing costs for this production cycle are \$9,000.
 Yards Sales price per yard at split-off Disposal cost per yard at split-off Further processing per yard Final sale price per yard A 1,800 \$7.00 \$4.50 \$1.50 \$ 8.00 C 2,600 10.00 6.00 3.50 12.25

If A and C are processed further, no disposal costs will be incurred or such costs will be borne by the buyer.

Refer to Riley Company. Using a physical measure, what amount of joint processing cost is allocated to Product C (round to the nearest dollar)?
A. \$3,682
B. \$4,500
C. \$5,318
D. \$6,062

1. Riley Company

Riley Company produces two products from a joint process: A and C. Joint processing costs for this production cycle are \$9,000.
 Yards Sales price per yard at split-off Disposal cost per yard at split-off Further processing per yard Final sale price per yard A 1,800 \$7.00 \$4.50 \$1.50 \$ 8.00 C 2,600 10.00 6.00 3.50 12.25

If A and C are processed further, no disposal costs will be incurred or such costs will be borne by the buyer.

Refer to Riley Company. Using sales value at split-off, what amount of joint processing cost is allocated to Product A (round to the nearest dollar)?
A. \$2,938
B. \$3,682
C. \$4,500
D. \$6,062

1. Riley Company

Riley Company produces two products from a joint process: A and C. Joint processing costs for this production cycle are \$9,000.
 Yards Sales price per yard at split-off Disposal cost per yard at split-off Further processing per yard Final sale price per yard A 1,800 \$7.00 \$4.50 \$1.50 \$ 8.00 C 2,600 10.00 6.00 3.50 12.25

If A and C are processed further, no disposal costs will be incurred or such costs will be borne by the buyer.

Refer to Riley Company. Using sales value at split-off, what amount of joint processing cost is allocated to Product C (round to the nearest dollar)?
A. \$2,938
B. \$3,682
C. \$4,500
D. \$6,062

1. Riley Company

Riley Company produces two products from a joint process: A and C. Joint processing costs for this production cycle are \$9,000.
 Yards Sales price per yard at split-off Disposal cost per yard at split-off Further processing per yard Final sale price per yard A 1,800 \$7.00 \$4.50 \$1.50 \$ 8.00 C 2,600 10.00 6.00 3.50 12.25

If A and C are processed further, no disposal costs will be incurred or such costs will be borne by the buyer.

Refer to Riley Company. Using net realizable value at split-off, what amount of joint processing cost is allocated to Product A (round to the nearest dollar)?
A. \$2,718
B. \$4,500
C. \$6,062
D. \$6,282

1. Riley Company

Riley Company produces two products from a joint process: A and C. Joint processing costs for this production cycle are \$9,000.
 Yards Sales price per yard at split-off Disposal cost per yard at split-off Further processing per yard Final sale price per yard A 1,800 \$7.00 \$4.50 \$1.50 \$ 8.00 C 2,600 10.00 6.00 3.50 12.25

If A and C are processed further, no disposal costs will be incurred or such costs will be borne by the buyer.

Refer to Riley Company. Using net realizable value at split-off, what amount of joint processing cost is allocated to Product C (round to the nearest dollar)?
A. \$2,718
B. \$4,500
C. \$6,062
D. \$6,282

1. Riley Company

Riley Company produces two products from a joint process: A and C. Joint processing costs for this production cycle are \$9,000.
 Yards Sales price per yard at split-off Disposal cost per yard at split-off Further processing per yard Final sale price per yard A 1,800 \$7.00 \$4.50 \$1.50 \$ 8.00 C 2,600 10.00 6.00 3.50 12.25

If A and C are processed further, no disposal costs will be incurred or such costs will be borne by the buyer.

Refer to Riley Company. Using approximated net realizable value at split-off, what amount of joint processing cost is allocated to Product A (round to the nearest dollar)?
A. \$2,718
B. \$2,934
C. \$3,014
D. \$4,500

1. Riley Company

Riley Company produces two products from a joint process: A and C. Joint processing costs for this production cycle are \$9,000.
 Yards Sales price per yard at split-off Disposal cost per yard at split-off Further processing per yard Final sale price per yard A 1,800 \$7.00 \$4.50 \$1.50 \$ 8.00 C 2,600 10.00 6.00 3.50 12.25

If A and C are processed further, no disposal costs will be incurred or such costs will be borne by the buyer.

Refer to Riley Company. Using approximated net realizable value at split-off, what amount of joint processing cost is allocated to Product C (round to the nearest dollar)?
A. \$4,500
B. \$5,986
C. \$6,062
D. \$6,282

1. Riley Company

Riley Company produces two products from a joint process: A and C. Joint processing costs for this production cycle are \$9,000.
 Yards Sales price per yard at split-off Disposal cost per yard at split-off Further processing per yard Final sale price per yard A 1,800 \$7.00 \$4.50 \$1.50 \$ 8.00 C 2,600 10.00 6.00 3.50 12.25

If A and C are processed further, no disposal costs will be incurred or such costs will be borne by the buyer.

Refer to Riley Company. Which products would be processed further?
A. only Product A
B. only Product C
C. both Products A and C
D. neither Product A or C

1. Baker Company

Baker Company produces three products: A, B, and C from the same process. Joint costs for this production run are \$2,100.
 Pounds Sales price per lb. at split-off Disposal cost per lb. at split-off Further processing per pound Final sales price per pound A 800 \$6.50 \$3.00 \$2.00 \$ 7.50 B 1,100 8.25 4.20 3.00 10.00 C 1,500 8.00 4.00 3.50 10.50

If the products are processed further, Baker Company will incur the following disposal costs upon sale: A, \$3.00; B, \$2.00; and C, \$1.00.

Refer to Baker Company. Using a physical measurement method, what amount of joint processing cost is allocated to Product A (round to the nearest dollar)?
A. \$700
B. \$679
C. \$927
D. \$494

1. Baker Company

Baker Company produces three products: A, B, and C from the same process. Joint costs for this production run are \$2,100.
 Pounds Sales price per lb. at split-off Disposal cost per lb. at split-off Further processing per pound Final sales price per pound A 800 \$6.50 \$3.00 \$2.00 \$ 7.50 B 1,100 8.25 4.20 3.00 10.00 C 1,500 8.00 4.00 3.50 10.50

If the products are processed further, Baker Company will incur the following disposal costs upon sale: A, \$3.00; B, \$2.00; and C, \$1.00.

Refer to Baker Company. Using a physical measurement method, what amount of joint processing cost is allocated to Product B (round to the nearest dollar)?
A. \$494
B. \$679
C. \$927
D. \$700

1. Baker Company

Baker Company produces three products: A, B, and C from the same process. Joint costs for this production run are \$2,100.
 Pounds Sales price per lb. at split-off Disposal cost per lb. at split-off Further processing per pound Final sales price per pound A 800 \$6.50 \$3.00 \$2.00 \$ 7.50 B 1,100 8.25 4.20 3.00 10.00 C 1,500 8.00 4.00 3.50 10.50

If the products are processed further, Baker Company will incur the following disposal costs upon sale: A, \$3.00; B, \$2.00; and C, \$1.00.

Refer to Baker Company. Using sales value at split-off, what amount of joint processing cost is allocated to Product B (round to the nearest dollar)?
A. \$700
B. \$416
C. \$725
D. \$959

1. Baker Company

Baker Company produces three products: A, B, and C from the same process. Joint costs for this production run are \$2,100.
 Pounds Sales price per lb. at split-off Disposal cost per lb. at split-off Further processing per pound Final sales price per pound A 800 \$6.50 \$3.00 \$2.00 \$ 7.50 B 1,100 8.25 4.20 3.00 10.00 C 1,500 8.00 4.00 3.50 10.50

If the products are processed further, Baker Company will incur the following disposal costs upon sale: A, \$3.00; B, \$2.00; and C, \$1.00.

Refer to Baker Company. Using sales value at split-off, what amount of joint processing cost is allocated to Product C (round to the nearest dollar)?
A. \$959
B. \$725
C. \$700
D. \$416

1. Baker Company

Baker Company produces three products: A, B, and C from the same process. Joint costs for this production run are \$2,100.
 Pounds Sales price per lb. at split-off Disposal cost per lb. at split-off Further processing per pound Final sales price per pound A 800 \$6.50 \$3.00 \$2.00 \$ 7.50 B 1,100 8.25 4.20 3.00 10.00 C 1,500 8.00 4.00 3.50 10.50

If the products are processed further, Baker Company will incur the following disposal costs upon sale: A, \$3.00; B, \$2.00; and C, \$1.00.

Refer to Baker Company. Using net realizable value at split-off, what amount of joint processing cost is allocated to Product A (round to the nearest dollar)?
A. \$706
B. \$951
C. \$700
D. \$444

1. Baker Company

Baker Company produces three products: A, B, and C from the same process. Joint costs for this production run are \$2,100.
 Pounds Sales price per lb. at split-off Disposal cost per lb. at split-off Further processing per pound Final sales price per pound A 800 \$6.50 \$3.00 \$2.00 \$ 7.50 B 1,100 8.25 4.20 3.00 10.00 C 1,500 8.00 4.00 3.50 10.50

If the products are processed further, Baker Company will incur the following disposal costs upon sale: A, \$3.00; B, \$2.00; and C, \$1.00.

Refer to Baker Company. Using net realizable value at split-off, what amount of joint processing cost is allocated to Product C (round to the nearest dollar)?
A. \$706
B. \$951
C. \$444
D. \$700

1. Fulton Company

Fulton Company is placing an ad in the local paper to advertise its products. The ad will run for one week at a total cost of \$5,500. Fulton Company has four categories of products as follows:

 % of floor space occupied Expected sales value Hardware 20% \$35,000 Hand Tools 15 15,000 Lawn Furniture 45 64,500 Light Fixtures 20 25,500

Refer to Fulton Company. What amount of advertising cost should be allocated to hardware, assuming Fulton allocates based on percent of floor space occupied?
A. \$1,375
B. \$1,100
C. \$2,475
D. \$ 825

1. Fulton Company

Fulton Company is placing an ad in the local paper to advertise its products. The ad will run for one week at a total cost of \$5,500. Fulton Company has four categories of products as follows:

 % of floor space occupied Expected sales value Hardware 20% \$35,000 Hand Tools 15 15,000 Lawn Furniture 45 64,500 Light Fixtures 20 25,500

Refer to Fulton Company. Assume that Fulton decides to allocate based on expected sales value. What amount of advertising cost should be allocated to light fixtures (round to the nearest dollar)?
A. \$1,375
B. \$589
C. \$1,002
D. \$2,534

1. Shiny Floors Company

Shiny Floors Company produces four floor cleaners from the same process: C, D, E, and G. Joint product costs are \$9,000. (Round all answers to the nearest dollar.)
 Barrels Sales price per barrel at split-off Disposal cost per barrel at split-off Further processing costs Final sales price per barrel C 750 \$10.00 \$6.50 \$2.00 \$13.50 D 1,000 8.00 4.00 2.50 10.00 E 1,400 11.00 7.00 4.00 15.50 G 2,000 15.00 9.50 4.50 19.50

If Shiny Floors sells the products after further processing, the following disposal costs will be incurred: C, \$2.50; D, \$1.00; E, \$3.50; G, \$6.00.

Refer to Shiny Floors Company. Using a physical measurement method, what amount of joint processing cost is allocated to Product D?
A. \$1,748
B. \$2,447
C. \$1,311
D. \$3,495

a. Purchased raw material on account \$45,500.
b. Put material into production: \$28,000 of direct material and \$5,000 of indirect material.
c. Accrued payroll of \$95,000, of which 65 percent was direct and the remainder was indirect.
d. Incurred and paid other overhead items of \$42,000.
e. Transferred items costing \$92,500 to finished goods.
f. Sold goods costing \$79,900 on account for \$134,200.

Chapter 6–Process Costing

Student: ___________________________________________________________________________

1. Process costing is most appropriate when manufacturing large batches of homogenous products.
True    False

1. Conversion costs include all manufacturing costs other than direct materials.
True    False

1. Equivalent units are computed to assign costs to partially completed units.
True    False

1. The weighted average method combines beginning inventory and current production to compute cost per unit of production.
True    False

1. The FIFO method combines beginning inventory and current production to compute cost per unit of production.
True    False

1. The weighted average method separates beginning inventory and current production to compute cost per unit of production.
True    False

1. The FIFO method separates beginning inventory and current production to compute cost per unit of production.
True    False

1. The numerator in the formula for equivalent units includes all beginning inventory costs when using the weighted average costing assumption.
True    False

1. The numerator in the formula for equivalent units includes all beginning inventory costs when using the FIFO costing assumption.
True    False

1. The weighted average costing method assumes that units in beginning inventory are the first units transferred.
True    False

1. The FIFO costing method assumes that units in beginning inventory are the first units transferred.
True    False

1. Standard costing is compatible with both FIFO and weighted average methods of costing.
True    False

1. When a standard costing system is used with process costing, Work in Process inventory is recorded using standard costs.
True    False

1. When a standard costing system is used with process costing, Work in Process inventory is recorded using actual costs.
True    False

1. Calculations for standard process costing are identical to those for FIFO process costing.
True    False

1. Calculations for standard process costing are identical to those for weighted average process costing.
True    False

1. A hybrid costing system would be appropriate for a company that manufactures cake flour.
True    False

1. A hybrid costing system would be appropriate for a company that manufactures several varieties of jam.
True    False

1. A hybrid costing system would be appropriate for a company that manufactures automobiles.
True    False

1. In a complex production environment, it is more difficult to compute a single EUP rate for conversion costs.
True    False

1. Using FIFO costing, equivalent units of production (EUP) can be determined by subtracting EUP’s in Beginning work in process from weighted average EUP.
True    False

1. Weighted average equivalent units of production (EUP) can be determined by adding EUP’s in ending work in process to units transferred out.
True    False

1. Continuous production losses are assumed to occur uniformly throughout the process.
True    False

1. Discrete production losses are assumed to occur throughout the process.
True    False

1. Discrete production losses are assumed to occur at the end of a process.
True    False

1. Continuous production losses are assumed to occur at the end of a process.
True    False

1. Abnormal continuous losses are absorbed by all units in ending inventory and transferred out on a EUP basis.
True    False

1. Normal continuous losses are absorbed by all units in ending inventory and transferred out on a EUP basis.
True    False

1. Costs of normal shrinkage and normal continuous losses in a process costing environment are handled by the method of neglect.
True    False

1. Costs of normal shrinkage and normal continuous losses in a process costing environment are handled by the method of accretion.
True    False

1. A continuous loss is assumed to occur at a specific point in the production process.
True    False

1. A discrete loss is assumed to occur at a specific point in the production process.
True    False

1. Abnormal spoilage is always accounted for on an equivalent unit basis.
True    False

1. All manufacturing costs other than direct materials are referred to as _________________________.
________________________________________

1. The process costing system that computes equivalent units on beginning work in process inventory as well as work done in the current period is known as a _________________________________________________________________.
________________________________________

1. The process costing system that computes equivalent units only on work done in the current period is known as a __________________________________________________.
________________________________________

1. The number of completed units that could have been produced from the inputs applied is referred to as ______________________________.
________________________________________

1. Two methods of accounting for cost flows in process costing are ______________________________ and ____________________.
________________________________________

1. The costing method that excludes beginning work in process inventory from the computation of equivalent units is the ________ method.
________________________________________

1. The costing method that includes beginning work-in-process inventory in the computation of equivalent units is the ________ method.
________________________________________

1. The ______________________________ report details all manufacturing quantities and costs, shows computation of EUP, and indicates cost assignments to goods manufactured.
________________________________________

1. A ____________________ costing system is appropriate where products manufactured have different direct materials but similar processing techniques.
________________________________________

1. Costs of normal shrinkage and normal continuous losses in a process costing environment are handled by the method of ____________________.
________________________________________

1. A loss that occurs uniformly throughout a production process is referred to as a __________________ loss.
________________________________________

1. A loss that occurs at a specific point in a production process is referred to as a ____________ loss.
________________________________________

1. Which cost accumulation procedure is most applicable in continuous mass-production manufacturing environments?
A. standard
B. actual
C. process
D. job order

1. Process costing is used in companies that
A. engage in road and bridge construction.
B. produce sailboats made to customer specifications.
C. produce bricks for sale to the public.
D. construct houses according to customer plans.

1. A producer of ____ would not use a process costing system.
A. gasoline
B. potato chips
C. blank videotapes
D. stained glass windows

1. 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.

1. Which is the best cost accumulation procedure to use for continuous mass production of like units?
A. actual
B. standard
C. job order
D. process

1. 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.

1. 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

1. 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.

1. The first step in determining the cost per EUP per cost component under the weighted average method is to
A. add the beginning Work in Process Inventory cost to the current period’s production cost.
B. divide the current period’s production cost by the equivalent units.
C. subtract the beginning Work in Process Inventory cost from the current period’s production cost.
D. divide the current period’s production cost into the EUP.

1. 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.

1. EUP calculations for standard process costing are the same as
A. the EUP calculations for weighted average process costing.
B. the EUP calculations for FIFO process costing.
C. LIFO inventory costing for merchandise.
D. the EUP calculations for LIFO process costing.

1. In a FIFO process costing system, which of the following are assumed to be completed first in the current period?
A. units started this period
B. units started last period
C. units transferred out
D. units still in process

1. To compute equivalent units of production using the FIFO method of process costing, work for the current period must be stated in units
A. completed during the period and units in ending inventory.
B. completed from beginning inventory, units started and completed during the period, and units partially completed in ending inventory.
C. started during the period and units transferred out during the period.
D. processed during the period and units completed during the period.

1. The FIFO method of process costing will produce the same cost of goods transferred out amount as the weighted average method when
A. the goods produced are homogeneous.
B. there is no beginning Work in Process Inventory.
C. there is no ending Work in Process Inventory.
D. beginning and ending Work in Process Inventories are each 50 percent complete.

1. The primary difference between the FIFO and weighted average methods of process costing is
A. in the treatment of beginning Work in Process Inventory.
B. in the treatment of current period production costs.
C. in the treatment of spoiled units.
D. none of the above.

1. Material is added at the beginning of a process in a process costing system. The beginning Work in Process Inventory for the process was 30 percent complete as to conversion costs. Using the FIFO method of costing, the number of equivalent units of material for the process during this period is equal to the
A. beginning inventory this period for the process.
B. units started and completed this period in the process.
C. units started this period in the process plus the beginning Work in Process Inventory.
D. units started and completed this period plus the units in ending Work in Process Inventory.

1. 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.

1. In a process costing system, the journal entry to record the transfer of goods from Department #2 to Finished Goods Inventory is a
A. debit Work in Process Inventory #2, credit Finished Goods Inventory.
B. debit Finished Goods Inventory, credit Work in Process Inventory #1.
C. debit Finished Goods Inventory, credit Work in Process Inventory #2.
D. debit Cost of Goods Sold, credit Work in Process Inventory #2.

1. Transferred-in cost represents the cost from
A. the last department only.
B. the last production cycle.
C. all prior departments.
D. the current period only.

1. 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
1. no         yes           no
B. yes        yes           yes
C. yes        no            no
D. yes        no            yes

1. Process costing techniques should be used in assigning costs to products
A. if a product is manufactured on the basis of each order received.
B. when production is only partially completed during the accounting period.
C. if a product is composed of mass-produced homogeneous units.
D. whenever standard-costing techniques should not be used.

1. Averaging the total cost of completed beginning work-in-process inventory and units started and completed over all units transferred out is known as
A. strict FIFO.
B. modified FIFO.
C. weighted average costing.
D. normal costing.

1. A process costing system
A. cannot use standard costs.
B. restates Work in Process Inventory in terms of completed units.
C. accumulates costs by job rather than by department.
D. assigns direct labor and manufacturing overhead costs separately to units of production.

1. A process costing system does which of the following?
 Calculates EUPs Assigns costs to inventories
1. no                 no
B. no                 yes
C. yes                yes
D. yes                no

1. A process costing system
 Calculates average cost Determines total units to per whole unit account for
1. yes                        yes
B. no                         no
C. yes                        no
D. no                         yes

1. A hybrid costing system combines characteristics of
A. job order and standard costing systems.
B. job order and process costing systems.
C. process and standard costing systems.
D. job order and normal costing systems.

1. When standard costs are used in process costing,
A. variances can be measured during the production period.
B. total costs rather than current production and current costs are used.
C. process costing calculations are made simpler.
D. the weighted average method of calculating EUPs makes computing transferred-out costs easier.

1. Which of the following is subtracted from weighted average EUP to derive FIFO EUP?
A. beginning WIP EUP completed in current period
B. beginning WIP EUP produced in prior period
C. ending WIP EUP not completed
D. ending WIP EUP completed

1. 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.

1. Abnormal spoilage can be
 continuous discrete
1. yes               no
B. no                no
C. yes              yes
D. no               yes

1. When the cost of lost units must be assigned, and those same units must be included in an equivalent unit schedule, these units are considered
A. normal and discrete.
B. normal and continuous.
C. abnormal and discrete.
D. abnormal and continuous.

1. A continuous loss
A. occurs unevenly throughout a process.
B. never occurs during the production process.
C. always occurs at the same place in a production process.
D. occurs evenly throughout the production process.

1. Which of the following would be considered a discrete loss in a production process?
A. adding the correct ingredients to make a bottle of ketchup
B. putting the appropriate components together for a stereo
C. adding the wrong components when assembling a stereo
D. putting the appropriate pieces for a bike in the box

1. The method of neglect handles spoilage that is
A. discrete and abnormal.
B. discrete and normal.
C. continuous and abnormal.
D. continuous and normal.

1. 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.

1. 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.

1. Normal spoilage units resulting from a continuous process
A. are extended to the EUP schedule.
B. result in a higher unit cost for the good units produced.
C. result in a loss being incurred.
D. cause estimated overhead to increase.

1. When the cost of lost units must be assigned, and those same units must be included in an equivalent unit schedule, these units are considered
A. normal and discrete.
B. normal and continuous.
C. abnormal and discrete.
D. abnormal and continuous.

1. Which of the following accounts is credited when abnormal spoilage is written off in an actual cost system?
A. Miscellaneous Revenue
B. Loss from Spoilage
C. Finished Goods
D. Work in Process

1. The cost of abnormal discrete units must be assigned to
 good units lost units
1. yes           yes
B. no             no
C. yes           no
D. no            yes

1. Which of the following statements is false? The cost of rework on defective units, if
A. abnormal, should be assigned to a loss account.
B. normal and if actual costs are used, should be assigned to material, labor and overhead costs of the good production.
C. normal and if standard costs are used, should be considered when developing the overhead application rate.
D. abnormal, should be prorated among Work In Process, Finished Goods, and Cost of Goods Sold.

1. If normal spoilage is detected at an inspection point within the process (rather than at the end), the cost of that spoilage should be
A. included with the cost of the units sold during the period.
B. included with the cost of the units completed in that department during the period.
C. allocated to ending work in process units and units transferred out based on their relative values.
D. allocated to the good units that have passed the inspection point.

1. Dallas Co. has a production process in which the inspection point is at 65 percent of conversion. The beginning inventory for July was 35 percent complete and ending inventory was 80 percent complete. Normal spoilage costs would be assigned to which of the following groups of units, using FIFO costing?
 Beginning Ending Units Started Inventory Inventory & Completed
1. no        yes         yes
B. yes       yes         yes
C. no        no          yes
D. yes       no          no

1. Which of the following is not a question that needs to be answered with regard to quality control?
A. What happens to the spoiled units?
B. What is the actual cost of spoilage?
C. How can spoilage be controlled?
D. Why does spoilage happen?

1. Normal spoilage units resulting from a continuous process
A. are extended to the EUP schedule.
B. result in a higher unit cost for the good units produced.
C. result in a loss being incurred.
D. cause estimated overhead to increase.

1. The addition of material in a successor department that causes an increase in volume is called
A. accretion.
B. reworked units.
C. complex procedure.
D. undetected spoilage.

1. Bartling Company transferred 5,500 units to Finished Goods Inventory during October. On October 1, the company had 300 units on hand (40 percent complete as to both material and conversion costs). On October 31, the company had 800 units (10 percent complete as to material and 20 percent complete as to conversion costs). The number of units started and completed during October was:
A. 5,200.
B. 5,380.
C. 5,500.
D. 6,300.

1. Jackson Company transferred 6,000 units to Finished Goods Inventory during August. On August 1, the company had 400 units on hand (35 percent complete as to both material and conversion costs). On August 31, the company had 750 units (20 percent complete as to material and 30 percent complete as to conversion costs). The number of units started and completed during August was:
A. 5,600
B. 5,860
C. 6,000
D. 6,750

1. Daniels Company started 9,000 units in March. The company transferred out 7,000 finished units and ended the period with 3,500 units that were 40 percent complete as to both material and conversion costs. Beginning Work in Process Inventory units were
A.   500.
B.   600.
C. 1,500.
D. 2,000.

1. Riedel Company started 8,600 units in April. The company transferred out 6,400 finished units and ended the period with 3,200 units that were 40 percent complete as to both material and conversion costs. Beginning Work in Process Inventory units were
A.   400.
B. 1,000.
C. 1,280.
D. 2,200.

1. Garfield Company had beginning Work in Process Inventory of 5,000 units that were 40 percent complete as to conversion costs. Garfield Company started and completed 42,000 units this period and had ending Work in Process Inventory of 12,000 units. How many units were started this period?
A. 42,000
B. 47,000
C. 54,000
D. 59,000

1. Mayer Company had beginning Work in Process Inventory of 6,000 units that were 45 percent complete as to conversion costs. Mayer Company started and completed 46,000 units this period and had ending Work in Process Inventory of 11,000 units. How many units were started this period?
A. 46,000
B. 52,000
C. 57,000
D. 63,000

1. Lewis Company uses a weighted average process costing system. Material is added at the start of production. Lewis Company started 13,000 units into production and had 4,500 units in process at the start of the period that were 60 percent complete as to conversion costs. If Lewis Company transferred out 11,750 units, how many units were in ending Work in Process Inventory?
A. 1,250
B. 3,000
C. 3,500
D. 5,750

1. Mansfield Company uses a weighted average process costing system. Material is added at the start of production. Mansfield Company started 14,000 units into production and had 5,000 units in process at the start of the period that were 75 percent complete as to conversion costs. If Mansfield Company transferred out 12,250 units, how many units were in ending Work in Process Inventory?
A. 1,750
B. 3,000
C. 5,500
D. 6,750

1. Hogan Company uses a weighted average process costing system and started 30,000 units this month. Hogan had 12,000 units that were 20 percent complete as to conversion costs in beginning Work in Process Inventory and 3,000 units that were 40 percent complete as to conversion costs in ending Work in Process Inventory. What are equivalent units for conversion costs?
A. 37,800
B. 40,200
C. 40,800
D. 42,000

1. Winters Company uses a weighted average process costing system and started 36,000 units this month. Winters had 15,000 units that were 25 percent complete as to conversion costs in beginning Work in Process Inventory and 6,000 units that were 35 percent complete as to conversion costs in ending Work in Process Inventory. What are equivalent units for conversion costs?
A. 43,350
B. 47,100
C. 48,900
D. 51,000

1. Rubenstein Company makes small metal containers. The company began April with 250 containers in process that were 30 percent complete as to material and 40 percent complete as to conversion costs. During the month, 5,000 containers were started. At month end, 1,700 containers were still in process (45 percent complete as to material and 80 percent complete as to conversion costs). Using the weighted average method, what are the equivalent units for conversion costs?
A. 3,450
B. 4,560
C. 4,610
D. 4,910

1. Fischer Company makes small metal containers. The company began October with 300 containers in process that were 35 percent complete as to material and 45 percent complete as to conversion costs. During the month, 6,000 containers were started. At month end, 1,900 containers were still in process (40 percent complete as to material and 75 percent complete as to conversion costs). Using the weighted average method, what are the equivalent units for conversion costs?
A. 4,265
B. 5,590
C. 5,825
D. 6,300

1. Riggs Company uses a FIFO process costing system. The company had 5,000 units that were 60 percent complete as to conversion costs at the beginning of the month. The company started 22,000 units this period and had 7,000 units in ending Work in Process Inventory that were 35 percent complete as to conversion costs. What are equivalent units for material, if material is added at the beginning of the process?
A. 18,000
B. 22,000
C. 25,000
D. 27,000

1. Hickman Company uses a FIFO process costing system. The company had 6,000 units that were 75 percent complete as to conversion costs at the beginning of the month. The company started 25,000 units this period and had 8,000 units in ending Work in Process Inventory that were 40 percent complete as to conversion costs. What are equivalent units for material, if material is added at the beginning of the process?
A. 18,500
B. 25,000
C. 26,500
D. 31,000

1. Duffy Company makes fabric-covered hatboxes. The company began July with 500 boxes in process that were 100 percent complete as to cardboard, 80 percent complete as to cloth, and 60 percent complete as to conversion costs. During the month, 3,300 boxes were started. On April 30, 350 boxes were in process (100 percent complete as to cardboard, 70 percent complete as to cloth, and 55 percent complete as to conversion costs). Using the FIFO method, what are equivalent units for cloth?
A. 3,295
B. 3,395
C. 3,450
D. 3,595

1. Becker Company makes fabric-covered storage totes. The company began July with 600 totes in process that were 100 percent complete as to cardboard, 75 percent complete as to cloth, and 65 percent complete as to conversion costs. During the month, 3,600 totes were started. On April 30, 450 totes were in process (100 percent complete as to cardboard, 60 percent complete as to cloth, and 50 percent complete as to conversion costs). Using the FIFO method, what are equivalent units for cloth?
A. 3,570
B. 3,750
C. 3,870
D. 4,020

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