OpenStax Principles of Accounting, Volume 2: Managerial Accounting
Chapter 5: Process Costing
Principles of Accounting, Volume 2: Managerial Accounting
Chapter 5: Process Costing
Multiple Choice
1. LO 5.1 Which of the following production characteristics is better suited for process costing
and not job order costing?
A. Each product batch is distinguishable from the prior batch.
B. The costs are easily traced to a specific product.
C. Costs are accumulated by department.
D. The value of work in process is the direct material used, the direct labor incurred,
and the overhead applied to the job in process.
Solution
C
2. LO 5.1 A process costing system is most likely used by which of the following?
A. airplane manufacturing
B. a paper manufacturing company
C. an accounting firm specializing in tax returns
D. a hospital
Solution
B
3. LO 5.1 Which of the following is a prime cost?
A. direct labor
B. work in process inventory
C. administrative labor
D. factory maintenance expenses
Solution
A
4. LO 5.1 Which of the following is a conversion cost?
A. raw materials
B. direct labor
C. sales commissions
D. direct material used
Solution
B
5. LO 5.1 During production, how are the costs in process costing accumulated?
A. to cost of goods sold
B. to each individual product
C. to manufacturing overhead
D. to each individual department
Solution
D
6. LO 5.2 Which is not needed to compute equivalent units of production?
A. the percentage of completion for inventory still in process
B. the number of units transferred out
C. the number of units started and completed
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,OpenStax Principles of Accounting, Volume 2: Managerial Accounting
Chapter 5: Process Costing
D. the material cost per unit
Solution
D
7. LO 5.2 What is the cost of direct labor if the conversion costs are $330,000 and manufacturing
overhead is $275,000?
A. $55,000
B. $275,000
C. $330,000
D. $605,000
Solution
A
8. LO 5.2 What is the conversion cost to manufacture insulated travel cups if the costs are: direct
materials, $17,000; direct labor, $33,000; and manufacturing overhead, $70,000?
A. $16,000
B. $50,000
C. $103,000
D. $120,000
Solution
C
9. LO 5.2 Which of the following lists contains only conversion costs for an inflatable raft
manufacturing corporation?
A. vinyl for raft, machine operator, electricity, insurance
B. machine operator, electricity, depreciation, plastic for air valves
C. machine operator, electricity, depreciation, insurance
D. vinyl for raft, electricity, insurance, plastic for air valves
Solution
C
10. LO 5.3 Direct material costs $3 per unit, direct labor costs $5 per unit, and overhead is
applied at the rate of 100% of the direct labor cost. What is the value of the inventory transferred
to the next department if beginning inventory was 2,000 units; 9,000 units were started; and
1,000 units were in ending inventory?
A. $1,000
B. $13,000
C. $130,000
D. $20,000
Solution
C. $3 + $5 + $5 = $13; 2,000 + 9,000 – 1,000 = 10,000; $13 × 10,000 = $130,000
11. LO 5.3 Beginning inventory and direct material cost added during the month total $55,000.
What is the value of the ending work in process inventory if beginning inventory was 2,000
units; 9,000 units were started; and 1,000 units were in ending inventory?
A. $1,000
B. $5,000
C. $50,000
D. $55,000
Solution
B. $55,,000 = $5; $5 × 1,000 = $5,000
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,OpenStax Principles of Accounting, Volume 2: Managerial Accounting
Chapter 5: Process Costing
12. LO 5.3 The initial processing department had a beginning inventory of 750 units and an
ending inventory of 1,350 units, and it started 9,500 units into production. How many were
transferred out to the next department?
A. 750
B. 1,350
C. 8,900
D. 10,250
Solution
C
Units
Beginning inventory 750
Started in production 9,500
Total units to account for 10,250
Transferred out 8,900
Ending inventory 1,350
Total units accounted for 10,250
13. LO 5.3 There were 1,000 units in ending inventory after transferring 16,000 units to finished
goods inventory. If the beginning inventory was 2,000 units, how many units were started in
process?
A. 1,000
B. 2,000
C. 15,000
D. 17,000
Solution
C
Units
Beginning inventory 2,000
Started in production 15,000
Total units to account for 17,000
Transferred out 16000
Ending inventory 1,000
Total units accounted for 17,000
14. LO 5.4 The costs to be accounted for consist of which of the following?
A. cost of the units added during the period
B. costs of the units in ending inventory
C. cost of the units started and transferred during the period
D. cost of the units in the beginning inventory and costs added during the period
Solution
D
15. LO 5.4 Which of the following is the step in which materials, labor, and overhead are
detailed?
A. determining the units to which costs are assigned
B. determining the equivalent units of production
C. determining the cost per equivalent units
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, OpenStax Principles of Accounting, Volume 2: Managerial Accounting
Chapter 5: Process Costing
D. allocating the costs to the units transferred out and the units partially completed
Solution
C
16. LO 5.5 The journal entry to record the $500 of work in process ending inventory that
consists of $300 of direct materials, $50 of manufacturing overhead, and $150 of direct labor is
which of the following?
A.
B.
C.
D.
Solution
B
17. LO 5.5 Assigning indirect costs to departments is completed by ________.
A. applying the predetermined overhead rate
B. debiting the manufacturing costs incurred
C. applying the costs to manufacturing overhead
D. applying the costs to work in process inventory
Solution
C
18. LO 5.5 In a process costing system, which account shows the overhead assigned to the
department?
A. cost of goods sold
B. finished goods inventory
C. raw material inventory
D. work in process inventory
Solution
D
19. LO 5.5 In a process cost system, factory depreciation expense incurred is debited to
________.
A. finished goods inventory
B. work in process inventory
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Chapter 5: Process Costing
Principles of Accounting, Volume 2: Managerial Accounting
Chapter 5: Process Costing
Multiple Choice
1. LO 5.1 Which of the following production characteristics is better suited for process costing
and not job order costing?
A. Each product batch is distinguishable from the prior batch.
B. The costs are easily traced to a specific product.
C. Costs are accumulated by department.
D. The value of work in process is the direct material used, the direct labor incurred,
and the overhead applied to the job in process.
Solution
C
2. LO 5.1 A process costing system is most likely used by which of the following?
A. airplane manufacturing
B. a paper manufacturing company
C. an accounting firm specializing in tax returns
D. a hospital
Solution
B
3. LO 5.1 Which of the following is a prime cost?
A. direct labor
B. work in process inventory
C. administrative labor
D. factory maintenance expenses
Solution
A
4. LO 5.1 Which of the following is a conversion cost?
A. raw materials
B. direct labor
C. sales commissions
D. direct material used
Solution
B
5. LO 5.1 During production, how are the costs in process costing accumulated?
A. to cost of goods sold
B. to each individual product
C. to manufacturing overhead
D. to each individual department
Solution
D
6. LO 5.2 Which is not needed to compute equivalent units of production?
A. the percentage of completion for inventory still in process
B. the number of units transferred out
C. the number of units started and completed
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,OpenStax Principles of Accounting, Volume 2: Managerial Accounting
Chapter 5: Process Costing
D. the material cost per unit
Solution
D
7. LO 5.2 What is the cost of direct labor if the conversion costs are $330,000 and manufacturing
overhead is $275,000?
A. $55,000
B. $275,000
C. $330,000
D. $605,000
Solution
A
8. LO 5.2 What is the conversion cost to manufacture insulated travel cups if the costs are: direct
materials, $17,000; direct labor, $33,000; and manufacturing overhead, $70,000?
A. $16,000
B. $50,000
C. $103,000
D. $120,000
Solution
C
9. LO 5.2 Which of the following lists contains only conversion costs for an inflatable raft
manufacturing corporation?
A. vinyl for raft, machine operator, electricity, insurance
B. machine operator, electricity, depreciation, plastic for air valves
C. machine operator, electricity, depreciation, insurance
D. vinyl for raft, electricity, insurance, plastic for air valves
Solution
C
10. LO 5.3 Direct material costs $3 per unit, direct labor costs $5 per unit, and overhead is
applied at the rate of 100% of the direct labor cost. What is the value of the inventory transferred
to the next department if beginning inventory was 2,000 units; 9,000 units were started; and
1,000 units were in ending inventory?
A. $1,000
B. $13,000
C. $130,000
D. $20,000
Solution
C. $3 + $5 + $5 = $13; 2,000 + 9,000 – 1,000 = 10,000; $13 × 10,000 = $130,000
11. LO 5.3 Beginning inventory and direct material cost added during the month total $55,000.
What is the value of the ending work in process inventory if beginning inventory was 2,000
units; 9,000 units were started; and 1,000 units were in ending inventory?
A. $1,000
B. $5,000
C. $50,000
D. $55,000
Solution
B. $55,,000 = $5; $5 × 1,000 = $5,000
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,OpenStax Principles of Accounting, Volume 2: Managerial Accounting
Chapter 5: Process Costing
12. LO 5.3 The initial processing department had a beginning inventory of 750 units and an
ending inventory of 1,350 units, and it started 9,500 units into production. How many were
transferred out to the next department?
A. 750
B. 1,350
C. 8,900
D. 10,250
Solution
C
Units
Beginning inventory 750
Started in production 9,500
Total units to account for 10,250
Transferred out 8,900
Ending inventory 1,350
Total units accounted for 10,250
13. LO 5.3 There were 1,000 units in ending inventory after transferring 16,000 units to finished
goods inventory. If the beginning inventory was 2,000 units, how many units were started in
process?
A. 1,000
B. 2,000
C. 15,000
D. 17,000
Solution
C
Units
Beginning inventory 2,000
Started in production 15,000
Total units to account for 17,000
Transferred out 16000
Ending inventory 1,000
Total units accounted for 17,000
14. LO 5.4 The costs to be accounted for consist of which of the following?
A. cost of the units added during the period
B. costs of the units in ending inventory
C. cost of the units started and transferred during the period
D. cost of the units in the beginning inventory and costs added during the period
Solution
D
15. LO 5.4 Which of the following is the step in which materials, labor, and overhead are
detailed?
A. determining the units to which costs are assigned
B. determining the equivalent units of production
C. determining the cost per equivalent units
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, OpenStax Principles of Accounting, Volume 2: Managerial Accounting
Chapter 5: Process Costing
D. allocating the costs to the units transferred out and the units partially completed
Solution
C
16. LO 5.5 The journal entry to record the $500 of work in process ending inventory that
consists of $300 of direct materials, $50 of manufacturing overhead, and $150 of direct labor is
which of the following?
A.
B.
C.
D.
Solution
B
17. LO 5.5 Assigning indirect costs to departments is completed by ________.
A. applying the predetermined overhead rate
B. debiting the manufacturing costs incurred
C. applying the costs to manufacturing overhead
D. applying the costs to work in process inventory
Solution
C
18. LO 5.5 In a process costing system, which account shows the overhead assigned to the
department?
A. cost of goods sold
B. finished goods inventory
C. raw material inventory
D. work in process inventory
Solution
D
19. LO 5.5 In a process cost system, factory depreciation expense incurred is debited to
________.
A. finished goods inventory
B. work in process inventory
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