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Chapter 4-3A

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Softcloth Textile Co., manufactures a variety of fabrics. All materials are introduced at the beginning of production; conversion cost is incurred evenly through manufacturing. The Weaving Department had 1,000 units of work in process on April 1 that were 20% complete as to conversion costs. During April, 8,000 units were completed and on April 30, 4,000 units remained in production, 50% complete as to conversion costs.

1. The equivalent units of conversion for April total:
A) 8,800.
B) 9,000.
C) 9,800.
D) 10,000.
E) 12,000.

Ans: D

2. The equivalent units of direct materials for April total:
A) 8,800.
B) 9,000.
C) 9,800.
D) 10,000.
E) 12,000.

Ans: E

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

Ans: C

4. The main difference between the FIFO method and the weighted average method for evaluating equivalent conversion costs is that when calculating under the FIFO method the ending inventory is not used.
A) True.
B) False; the costs incurred in the period are ignorored under the FIFO method.
C) False; the beginning inventory is ignored when calculating under the weighted average method.
D) False; the beginning inventory is ignored when calculating under the FIFO method.
E) False, but for none of the reasons listed above.

Ans: D

5. Under a normal costing system costs, which type of manufacturing overhead is added to direct labor and material?
A) Normal.
B) Actual.
C) Applied.
D) Indirect.
E) Direct.

Ans: C

6. Process costing would be appropriate for each of the following except:
A) custom furniture.
B) oil refining.
C) grain milling.
D) newprint production.
E) B & D.

Ans: A

7. The chief difference between process-costing and job-order costing systems is:
A) job-order costing systems accumulate production by job or batch, while process-costing systems accumulate production costs by department.
B) job-order costing is usually easier and cheaper to calculate.
C) law firms usually use process costing, while grain manufacturers use job-order costing.
D) B & C only.
E) all of the above.

Ans: A

8. The main difference between the FIFO method and the weighted average method for evaluating equivalent conversion costs is that when calculating under the FIFO method the ending inventory is not used.
A) True.
B) False; the costs incurred in the period are ignorored under the FIFO method.
C) False; the beginning inventory is ignored when calculating under the weighted average method.
D) False; the beginning inventory is ignored when calculating under the FIFO method.
E) False, but for none of the reasons listed above.

Ans: D

9. Either acutal or normal costing may be used in conjunction with a process-costing system.
A) True.
B) False; only normal costing can be used in a process costing system.
C) False; only actual costing can be used in a process costing system.
D) False; neither acutal or normal costing may be used in conjuction with a process costing system.
E) False; but for none of the above reasons.

Ans: A

10. A manufacturer of mass produced blank CDs (for burning, or copying, computer programs) would use process costing.
A) True; their products are homogenious.
B) False; they would have to use job-order costing.
C) False; they would use a hybrid system, such as operation costing.
D) False; batch manufacuturing is the correct costing system.
E) False; but for none of the above reasons.

Ans: A

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