D E L A S A L L E U N I V E R S I T Y -M A N IL A

R V R C O B D e p a r tm e n t o f A c c o u n ta n c y
MODCOS2
A n s w e r K e y - Q u iz 1
D ir e c tio n :
True or False: Write the word TRUE if the statement is correct; Write the word FALSE if the
statement is incorrect.
Multiple-Choice: Choose the best answer among the given choices.
Problem Solving: Show your solution in good form using your 10-column worksheet.
TRUE OR FALSE

1 . P ro c e ss-c o stin g sy ste m s se p a ra te c o sts in to c o st c a te g o rie s a c c o rd in g to th e tim in g o f w h e n

c o sts a re in tro d u c e d in to th e p ro c e ss.
Answer: TRUE
2 . E stim a tin g th e d e g re e o f c o m p le tio n fo r th e c a lc u la tio n o f e q u iv a le n t u n its is u su a lly
e a sie r fo r c o n v e rsio n c o sts th a n it is fo r d ire c t m a te ria ls.
Answer: FALSE
E x p la n a tio n : E stim a tin g th e d e g re e o f c o m p le tio n is e a sie r fo r th e c a lc u la tio n o f d ire c t
m a te ria ls sin c e d ire c t m a te ria ls c a n b e m e a su re d m o re e a sily th a n c o n v e rsio n c o sts.
3 . Jo b -o rd e r c o stin g w o u ld b e m o st lik e ly u se d b y a firm th a t p ro d u c e s h o m o g e n e o u s
p ro d u c ts.
Answer: FALSE
E x p la n a tio n :
P ro c e ss c o stin g w o u ld b e m o st lik e ly u se d b y a firm th a t p ro d u c e s
h o m o g e n e o u s p ro d u c ts.
4 . T h e la st ste p in a p ro c e ss -c o stin g sy ste m is to c o m p u te c o st p e r e q u iv a le n t u n it.
Answer: FALSE
E x p la n a tio n : T h e la st ste p in a p ro c e ss-c o stin g sy ste m is to a ssig n to ta l c o sts to u n its
c o m p le te d a n d to u n its in e n d in g w o rk in p ro c e s s .
5 . T h e e q u iv a le n t u n it c o n c e p t is a m e a n s b y w h ic h a p ro c e ss c o stin g sy ste m c a n c o m p a re
p a rtia lly c o m p le te d w o rk d o n e in e a c h o f th e v a rio u s p ro c e ss c a te g o rie s to o b ta in a to ta l
m e a su re o f w o rk d o n e .
Answer: TRUE
6 . E q u iv a le n t u n its a re c a lc u la te d se p a ra te ly fo r e a c h in p u t.
Answer: TRUE
7 . In a p ro c e ss-c o stin g sy ste m , th e re is a lw a y s a se p a ra te W o rk -in -P ro c e ss a c c o u n t fo r e a c h
d iffe re n t p ro c e ss.
Answer: TRUE
8 . P ro c e ss-c o stin g jo u rn a l e n trie s a n d jo b -c o stin g jo u rn a l e n trie s a re sim ila r w ith re sp e c t to
d ire c t m a te ria ls a n d c o n v e rsio n c o sts.
Answer: TRUE
9 . T h e a c c o u n tin g e n try to re c o rd th e tra n sfe r o f ro lls fro m th e a sse m b ly d e p a rtm e n t to th e
fin is h in g d e p a rtm e n t is :
W o rk in P ro c e ss-A s s e m b ly D e p a rtm e n t
W o rk in P ro c e ss-F in is h in g D e p a rtm e n t
A n s w e r : F A L S E - o p p o site
1 0 . In th e w e ig h te d -a v e ra g e c o stin g m e th o d , th e c o sts o f d ire c t m a te ria ls in b e g in n in g
in v e n to ry a re N O T in c lu d e d in th e c o st p e r u n it c a lc u la tio n sin c e d ire c t m a te ria ls a re
a lm o st a lw a y s a d d e d a t th e sta rt o f th e p ro d u c tio n p ro c e ss.
Answer: FALSE
E x p la n a tio n : T h e c o sts o f th e d ire c t m a te ria ls a re in c lu d e d in th e c o st p e r u n it c a lc u la tio n .

MULTIPLE-CHOICE

1. In a process-costing system average unit costs are calculated

a. by dividing total costs in a given accounting period by total units produced in that period.
b. by multiplying total costs in a given accounting period by total units produced in that period.
c. by dividing total costs in a given accounting period by units started in that period.
d. by multiplying total costs in a given accounting period by units started in that period.
Answer: A
2. The purpose of the equivalent-unit computation is to:
a. convert completed units into the amount of partially completed output units that could be made
with that quantity of input
b. assist the business in determining the cost assigned to ending inventory and work-in-process
inventory.
c. convert partially completed units into the amount of completed output units that could be made
with that quantity of input
d. Both B and C are correct.
Answer: D
3. When a Bakery transfers goods from the Mixing Department to the Baking Department, the
accounting entry is:
a. Work in Process - Mixing Department
Work in Process - Baking Department
b. Work in Process - Baking Department
Accounts Payable
c. Work in Process - Baking Department
Work in Process - Mixing Department
d. Work in Process - Mixing Department
Accounts Payable
Answer: C
4. The weighted-average process-costing method calculates the equivalent units by:
a. considering only the work done during the current period
b. the units started during the current period minus the units in ending inventory
c. the units started during the current period plus the units in ending inventory
d. the equivalent units completed during the current period plus the equivalent units in ending
inventory
Answer: D
5. In the computation of the cost per equivalent unit, the weighted-average method of process costing
considers all the costs:
a. entering work in process from the units in beginning inventory plus the costs for the work
completed during the current accounting period
b. costs that have entered work in process from the units started or transferred in during the current
accounting period
c. that have entered work in process during the current accounting period from the units started or
transferred in minus the costs associated with ending inventory
d. that have entered work in process during the current accounting period from the units started or
transferred in plus the costs associated with ending inventory
Answer: A
6. Under the weighted-average method, the stage of completion of beginning work in process:
a. is relevant in determining the equivalent units
b. must be combined with the work done during the current period to determine the equivalent units
c. is irrelevant in determining the equivalent-unit calculation
d. can almost always be determined with a high degree of precision
Answer: C
7. A distinct feature of the FIFO process-costing method is that the:
a. work done on beginning inventory before the current period is blended with the work done during
the current period in the calculation of equivalent units
b. work done on beginning inventory before the current period is kept separate from the work done
during the current period in the calculation of equivalent units

c. work done on ending inventory is kept separate from the work done during the current period in
the calculation of equivalent units and is usually not included in the calculation
d. FIFO process-costing method is only minimally different from the weighted-average processcosting method
Answer: B
8. On occasion, the FIFO and the weighted-average methods of process costing will result in the same
dollar amount of costs being transferred to the next department. Which of the following scenarios
would have that result?
a. when the beginning and ending inventories are equal in terms of unit numbers
b. when the beginning and ending inventories are equal in terms of the percentage of completion for
both direct materials, and conversion costs
c. when there is no ending inventory
d. when there is no beginning inventory
Answer: D
9. An assumption of the FIFO process-costing method is that:
a. the units in beginning inventory are not necessarily assumed to be completed by the end of the
period
b. the units in beginning inventory are assumed to be completed first
c. ending inventory will always be completed in the next accounting period
d. no calculation of conversion costs is possible
Answer: B
10. A major advantage of using the FIFO process-costing method is that:
a. FIFO makes the unit cost calculations simpler
b. in contrast with the weighted-average method, FIFO is considered GAAP
c. FIFO provides managers with information about changes in the costs per unit from one period to
the next
d. All of these answers are correct.
Answer: C
11. Which of the following manufactured products would NOT use process costing?
a. 747 jet aircraft
b. 46-inch television sets
c. Construction of a commercial office building
d. Both A and C are correct.
Answer: D
12. 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.

Answer: C
13. Conversion costs:

a. include all the factors of production

b. include direct labor and overhead
c. in process costing are usually considered to be added evenly throughout the production process
d. Both B and C are correct.
Answer: D
14. 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.

Answer: B
15. 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

Answer: B
PROBLEM SOLVING

Problem 1 (3 points)
The Zygon Corporation was recently formed to produce a semiconductor chip that
forms an essential part of the personal computer manufactured by a major corporation.
The direct materials are added at the start of the production process while conversion
costs are added uniformly throughout the production process. June is Zygon's first
month of operations, and therefore, there was no beginning inventory. Direct materials
cost for the month totaled P895,000, while conversion costs equaled P4,225,000.
Accounting records indicate that 475,000 chips were started in June and 425,000 chips
were completed.
Ending inventory was 50% complete as to conversion costs.
Required:
1. What is the total manufacturing cost per chip for June?
2. Allocate the total costs between the completed chips and the chips in ending
inventory.
Answer:
1.
Direct Materials Conversion Costs
Total
Cost to account for
P895,000
P4,225,000
P5,120,000
Divided by equiv units
475,000
450,000
Cost per equivalent units
P1.88
P9.39
P11.27
Equivalent unit for conversion costs =
425,000 completed + (50,000 0.5 completed) =
425,000 + 25,000 = 450,000
2. Completed units = P11.27 425,000 = P4,789,750 Rounded
Ending work in process = Direct materials = 50,000 P1.88 = P 94,000
Conversion costs = 25,000 P9.39 =
234,750
Total
Rounded P328,750
______________________________________________________________________________

Problem 2 (9 points)
The Cuckoo Clock Shop manufactures clocks on a highly automated assembly line. Its
costing system uses two cost categories, direct materials and conversion costs. Each
product must pass through the Assembly Department and the Testing Department.
Direct materials are added at the beginning of the production process. Conversion
costs are allocated evenly throughout production. Cuckoo Clock Shop uses weightedaverage costing.
Data for the Assembly Department for June 2013 are:
Work in process, beginning inventory
250 units
Direct materials (100% complete)
Conversion costs (50% complete)
Units started during June
Work in process, ending inventory:
Direct materials (100% complete)
Conversion costs (75% complete)
Costs for June 2013:
Work in process, beginning inventory:
Direct materials
Conversion costs
Direct materials costs added during June
Conversion costs added during June

800 units
150 units

P90,000
P135,000
P500,000
P500,000

Required:
1. What are the equivalent units for direct materials and conversion costs, respectively, for June?
Explanation:

Direct materials
900
150
1,050

Completed and transferred out

Work in process, ending
Total equivalent units

Conversion costs
900.0
112.5
1,012.5

2. What is the total amount debited to the Work-in-Process account during the month of June?
Explanation: P500,000 + P500,000 = P1,000,000
3. What is the direct materials cost per equivalent unit during June?
Explanation:

Direct materials
900
150
1,050

Completed and transferred out

Work in process, ending
Total equivalent units

Conversion costs
900.0
112.5
1,012.5

P90,000 + P500,000 = P590,000

P590,000/1,050 units =P561.90
4. What is the conversion cost per equivalent unit in June?
Explanation:

Direct materials
900
150
1,050

Completed and transferred out

Work in process, ending
Total equivalent units

Conversion costs
900.0
112.5
1,012.5

P135,000 + P500,000 = P635,000

P635,000/1,012.5 = P627.16
5. What amount of direct materials costs is assigned to the ending Work-in-Process account for June?
Explanation:

Direct materials
900
150
1,050

Completed and transferred out

Work in process, ending
Total equivalent units

Conversion costs
900.0
112.5
1,012.5

(P500,000 = P90,000)/1,050= P561.90 cost per equivalent unit

P561.90 150= P84,285
6. What amount of conversion costs are assigned to the ending Work-in-Process account for June?
Explanation:
P135,000 + P500,000 = P635,000
P635,000/1,012.5 = P627.16
(150 units 75%) P627.16 = P70,555.50

P r o b le m 3 ( 8 p o i n t s )
T h e R e st-a -L o t c h a ir c o m p a n y m a n u fa c tu re rs a sta n d a rd re c lin e r. D u rin g F e b ru a ry , th e firm 's
A s s e m b ly D e p a rtm e n t s ta rte d p ro d u c tio n o f 7 5 ,0 0 0 c h a irs . D u rin g th e m o n th , th e firm
c o m p le te d 8 0 ,0 0 0 c h a irs, a n d tra n sfe rre d th e m to th e F in ish in g D e p a rtm e n t. T h e f irm e n d e d
th e m o n th w ith 1 0 ,0 0 0 c h a irs in e n d in g in v e n to ry . T h e re w e re 1 5 ,0 0 0 c h a irs in b e g in n in g
in v e n to ry . A ll d ire c t m a te ria ls c o sts a re a d d e d a t th e b e g in n in g o f th e p ro d u c tio n c y c le a n d
c o n v e rsio n c o sts a re a d d e d u n ifo rm ly th ro u g h o u t th e p ro d u c tio n p r o c e ss. T h e F IF O m e th o d o f
p ro c e ss c o stin g is u se d b y R e st-a -L o t. B e g in n in g w o rk in p ro c e ss w a s 3 0 % c o m p le te a s to
c o n v e rsio n c o sts, w h ile e n d in g w o rk in p ro c e ss w a s 8 0 % c o m p le te a s to c o n v e rsio n c o sts.
B e g in n in g in v e n to ry :
D ire c t m a te ria ls
C o n v e rsio n c o sts

P 2 4 ,0 0 0
P 3 5 ,0 0 0

M a n u fa c tu r in g c o s ts a d d e d d u rin g th e a c c o u n tin g p e r io d:
D ire c t m a te ria ls
P 1 6 8 ,0 0 0
C o n v e rsio n c o sts
P 2 7 8 ,0 0 0
R e q u ir e d :
1 . H o w m a n y o f th e u n its th a t w e re s ta rte d d u rin g F e b ru a ry w e re c o m p le te d d u rin g F e b ru a ry ?
E x p la n a tio n : 7 5 ,0 0 0 - 1 0 ,0 0 0 = 6 5 ,0 0 0

2 . W h a t w e re th e e q u iv a le n t u n its fo r c o n v e rsio n c o sts d u rin g F e b ru a ry ?

E x p la n a tio n :

(1 5 ,0 0 0 0 .7 ) + 6 5 ,0 0 0 + (1 0 ,0 0 0 0 .8 ) = 8 3 ,5 0 0

3 . W h a t is th e a m o u n t o f d ire c t m a te ria ls c o st a ssig n e d to e n d in g w o rk-in -p ro c e ss in v e n to ry

a t th e e n d o f F e b ru a ry ?
E x p la n a tio n : P 1 6 8 ,0 0 0 /7 5 ,0 0 0 = P 2 .2 4 1 0 ,0 0 0 = P 2 2 ,4 0 0
4 . W h a t is th e c o st o f th e g o o d s tra n sfe rre d o u t d u rin g F e b ru a ry ?
E x p la n a tio n :
7 5 ,0 0 0 - 1 0 ,0 0 0 = 6 5 ,0 0 0
(1 5 ,0 0 0 0 .7 ) + 6 5 ,0 0 0 + (1 0 ,0 0 0 0 .8 ) = 8 3 ,5 0 0
P 1 6 8 ,0 0 0 /7 5 ,0 0 0 = P 2 .2 4 1 0 ,0 0 0 = P 2 2 ,4 0 0
T h e c o sts in b e g in n in g in v e n to ry P 2 4 ,0 0 0 + P 3 5 ,0 0 0 =
P 5 9 ,0 0 0
D ire c t m a te ria ls = P 2 .2 4 x 6 5 ,0 0 0 =
1 4 5 ,6 0 0
C o n v e rsio n c o sts =
[P 2 7 8 ,0 0 0 /(1 0 ,5 0 0 + 8 ,0 0 0 + 6 5 ,0 0 0 )] 6 5 ,0 0 0 =
2 1 6 ,4 5 0
a lso F G b e g in n in g in v e n to ry (1 5 ,0 0 0 0 .7 P 3 .3 3 ) =
3 4 ,9 6 5
T o ta l
P 4 5 6 ,0 1 5
_____________________________________________________________________________________
P r o b le m 4 ( 1 5 p o i n t s )
F o u r S e a so n s C o m p a n y m a k e s s n o w b lo w e rs. M a te ria ls a re a d d e d a t th e b e g in n in g o f th e
p ro c e ss a n d c o n v e rsio n c o sts a re u n ifo rm ly in c u rre d . A t th e b e g in n in g o f S e p te m b e r, w o rk in
p ro c e ss is 4 0 % c o m p le te a n d a t th e e n d o f th e m o n th it is 6 0 % c o m p le te . O th e r da ta fo r th e
m o n th in c lu d e :
B e g in n in g w o rk -in -p ro c e ss
in v e n to ry
U n its s ta rte d
U n its p la c e d in fin is h e d g o o d s
C o n v e rsio n c o sts
C o st o f d ire c t m a te ria ls
B e g in n in g w o rk -in -p ro c e ss
c o sts:
M a te ria ls
C o n v e rsio n

1 ,6 0 0 u n its
2 ,0 0 0 u n its
3 ,2 0 0 u n its
P 2 0 0 ,0 0 0
P 2 6 0 ,0 0 0

P 1 5 4 ,0 0 0
P 8 2 ,0 8 0

R e q u ir e d :
1 . P re p a re a p ro d u c tio n c o s t w o rk s h e e t w ith su p p o rtin g sc h e d u le s u s in g th e w e ig h te d a v e r a g e m e th o d o f p ro c e ss c o stin g .
2 . P re p a re jo u rn a l e n trie s to re c o rd tra n sfe rrin g o f m a te ria ls to p ro c e s s in g a n d fro m
p ro c e ssin g to fin ish e d g o o d s.
A n s w e r: 1 . P R O D U C T IO N C O S T W O R K S H E E T
F lo w o f p ro d u c tio n
W o rk in p ro c e ss,
b e g in n in g
S ta rte d d u rin g p e rio d
T o a c c o u n t fo r

P h y sic a l
U n its

D ir e c t
M a te r ia ls

C o n v e r s io n

1 ,6 0 0
2 ,0 0 0
3 ,6 0 0

U n its c o m p le te d
W o rk in p ro c e ss,
e n d in g
A c c o u n te d fo r

3 ,2 0 0

3 ,2 0 0

3 ,2 0 0

400
3 ,6 0 0

400
3 ,6 0 0

240
3 ,4 4 0

C o sts
W o rk in p ro c e ss,

T o ta ls
P 2 3 6 ,0 8 0

D ir e c t
M a te r ia ls
C o n v e r s io n
P 1 5 4 ,0 0 0
P 8 2 ,0 8 0

b e g in n in g
C o sts a d d e d d u rin g
p e rio d
4 6 0 ,0 0 0
T o ta l c o sts to a c c o u n t fo r P 6 9 6 ,0 8 0
D iv id e d b y e q u iv a le n t
u n its
E q u iv a le n t u n it c o sts
P197
A ssig n m e n t o f c o sts
C o m p le te d u n its (3 ,2 0 0
P197)
W o rk in p ro c e ss, e n d in g
D ire c t m a te ria ls (4 0 0
P115)
C o n v e rsio n (4 0 0 P 8 2
0 .6 0 )
C o sts a c c o u n te d fo r

2 6 0 ,0 0 0
P 4 1 4 ,0 0 0

2 0 0 ,0 0 0
P 2 8 2 ,0 8 0

3 ,6 0 0
P115

3 ,4 4 0
P82

P 6 3 0 ,4 0 0

P 4 6 ,0 0 0
1 9 ,6 8 0

6 5 ,6 8 0
P 6 9 6 ,0 8 0

2.
W o rk in P ro c e ss
M a te ria ls In v e n to ry
F in is h e d G o o d s
W o rk in P ro c e ss

2 6 0 ,0 0 0
2 6 0 ,0 0 0
6 3 0 ,4 0 0
6 3 0 ,4 0 0

________________________________END OF QUIZ 1______________________________________