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ABC:

 Activity rate = total estimated o.H cost / TOTAL activity

 Total allocated O.H = activity rate x actual activity
 product cost =DM+DL+OH allocated
 Customer margin = sales – product cost
……………………………………………………………………

traditional method

𝑡𝑜𝑡𝑎𝑙 𝑒𝑠𝑡𝑖𝑚𝑎𝑡𝑒𝑑 𝑚𝑎𝑛𝑢𝑓𝑎𝑐𝑡𝑢𝑟𝑖𝑛𝑔 𝑂.𝐻 𝐶𝑜𝑠𝑡

1- predetermined O.H rate =
𝑡𝑜𝑡𝑎𝑙 𝑒𝑠𝑡𝑖𝑚𝑎𝑡𝑒𝑑 𝑎𝑙𝑙𝑜𝑐𝑎𝑡𝑖𝑜𝑛 𝑏𝑎𝑠𝑒

2- MOH applied on order = POHR X actual allocation base used

 product cost =DM+DL+OH allocated

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True or false section:

1. The managers of process manufacturing systems focus on the series of processes needed to complete
the production of products.

Answer: True

2. In a process manufacturing system, products pass through a series of sequential processes.

Answer: True.

3. Process manufacturing usually reflects a manufacturer that produces large quantities of identical
products.

Answer: True

4. A production department is an organizational unit of a factory that has the responsibility for at least
partially manufacturing or producing a product or service.

Answer: True

5. To determine unit cost under a process cost accounting system, equivalent units produced must be
calculated if the company has goods in process inventories.

Answer: True

6. Equivalent units of production refer to the number of units that would be completed if all effort
during a period had been applied only to those units that were started and completed in a period.

Answer: True

7. In a process cost accounting system, a department's production should be measured in terms of

equivalent units when its beginning or ending inventory includes goods in process.

Answer: True

8. Equivalent units of production are always the same as the total number of physical units
finished during the period. Answer: False

9. Equivalent units of production need to be determined only if a processing department adds

materials and labor to its products at different rates. Answer: False

10. "Equivalent units of production" is an engineering term used to describe the process by which one
company attempts to manufacture units of a product that are equivalent to the product manufactured by a
competitor. Answer: False

11. The last step in the four-step accounting procedure for process costing is the calculation of equivalent
units of production. Answer: False

12. The process cost summary is an important managerial accounting report produced by a process cost
accounting system. Answer: True
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13. A process cost summary is an accounting report that describes the costs charged to a department, the
equivalent units of production by the department, and how the costs were assigned to the output.
Answer: True

14. A process cost summary includes the amounts of equivalent finished units of production for the
period. Answer: True

15. A process cost summary for a production department accounts for all costs assigned to that
department during the period plus costs that were in the department's Goods in Process Inventory account
at the beginning of the period. Answer: True

16. A process cost summary shows the cost of a particular job manufactured in the reporting period.
Answer: False

17. The process cost summary presents calculations of the cost of units completed during the reporting
period but does not present any information about the ending goods in process inventory. Answer: False

18. The weighted-average method of process costing computes the cost per equivalent unit based solely
on the current period’s EUPs and costs. Answer: False

19. Process cost accounting systems are commonly used by companies that produce a large volume of
standardized units on a continuous basis. Answer: True

20. A manufacturing company may choose to use either a job order cost accounting system or a process cost
accounting system, without considering the manner in which it produces its products. Answer: False

21. Process and job order manufacturing operations both combine materials, labor, and overhead
items in the process of producing products. Answer: True

25. Accountants use the term "process cost accounting system" because these systems use a number of
trained individuals and computers to process the collected cost information. Answer: False

26. Process costing is applied to operations with repetitive production and heterogeneous products.
Answer: False

27. A company that uses a process cost accounting system maintains separate Goods in Process Inventory
accounts for each of its manufacturing departments. Answer: True

28. Companies that use a series of manufacturing processes to produce standardized products should use
a process cost accounting system. Answer: True

29. When defining direct costs and indirect costs in process costing, the process is the cost object.
Answer: True

30. Process cost accounting systems are used only by companies that manufacture physical products;
companies and other organizations that provide services to their customers do not use process cost
accounting. Answer: False

31. Process cost accounting systems are commonly used by companies that manufacture standardized
products by passing them through a series of manufacturing steps. Answer: True
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32. The use of process costing is of little benefit to a service type of operation. Answer: False

33. In process cost accounting, the classification of materials as direct or indirect depends on whether
they are clearly linked with a specific process. Answer: True

34. In process cost accounting, materials are always classified as indirect if they are not physically
incorporated into the final product. Answer: False

35- Direct costs in process cost accounting include only those costs that can be readily identified with
particular product units. Answer: False

36. Process cost accounting systems consider direct costs to include those costs that can be readily
identified with a particular process. Answer: True

37. Process cost accounting focuses on the process involved in mass-producing products that are
very similar in nature. Ans: T,

38. Process cost systems are used to apply costs to a specific job, such as the manufacturing of a
specialized machine. Ans: F

39. A company that produces motion pictures would likely use a process cost system. Ans: F

40. In a process cost system, costs are tracked through a series of connected manufacturing processes
or departments, rather than by individual jobs. Ans: T

41 .In a process cost system, total costs are determined at the end of a month or year. Ans: T

42 .Separate work in process accounts are maintained for each production department or
manufacturing process in a process cost system. Ans: T

43 In a process cost system, materials, labor and overhead are only added in the first production
department. Ans: F

44.The assignment of the three manufacturing cost elements to Work in Process in a process cost
system is the same as in a job order cost system. Ans: F

45 Fewer materials requisitions are generally required in a process cost system than in a job order cost
system. Ans: T

46. In a process cost system, labor costs incurred maybe captured on time tickets. Ans: T

47-A primary driver of overhead costs in continuous manufacturing operations is machine time used.
Ans: T

48.Equivalent units of production are used to determine the cost per unit of completed products. Ans: T

49 Equivalent units of production measure the work done during a period, expressed in fully completed
units. Ans: T

50 Equivalent units of production is the sum of units completed and transferred out plus equivalent
units of beginning work in process. Ans: F
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51.The weighted-average method of computing equivalent units is the most widely used method in
practice. Ans: T,

52.There are no units in process at the beginning of the period, 1,500 units in process at the end of
the period that are 40% complete, and 15,000 units transferred out during the period. Based on this
information, there were 14,400 equivalent units of production during the period. Ans: F

53.The first step performed in preparing a production cost report is computing the equivalent units of
production. Ans: F

54.Equivalent units of production must be calculated before the unit production costs can be computed.

Ans: T

55.The physical units in a department are another name for the equivalent units of production. Ans: F

56.Unit material cost is computed by taking total material costs charged to the department for the
period and dividing by the physical units in the process during the period. Ans: F

57.When equivalent units of production are different for materials and conversion costs, unit costs
are computed for materials, conversion, and total manufacturing. Ans: T

58 The total manufacturing cost per unit is used in costing the units completed and transferred
during the period. Ans: T

59.A production cost report is an internal document for management that shows production quantity
and cost data for a particular job. Ans: F

60.Production cost reports provide a basis for evaluating the productivity of a department. Ans: T

61.Companies often use a combination of a process cost and a job order cost system, called
operations costing. Ans: T
62
.Companies using the weighted-average method do not complete units left over from the previous
accounting periods, they start new units. Ans: F

63.In continuous process manufacturing, generally once the production begins, it continues until the
finished product emerges. Ans: T

64.One similarity of process cost accounting with job order cost accounting is that both determine
total manufacturing costs after each job. Ans: F

65The flow of costs in a process costing system requires that materials be added in one department,
labor added in another department and manufacturing overhead in a third department. Ans: F

66.When finished goods are sold, the entry to record the cost of goods sold is a debit to Finished
Goods Inventory and a credit to Cost of Goods Sold. Ans: F

67.When there is no beginning work in process and materials are entered at the beginning of the process,
equivalent units of materials are the same as the units started into production. Ans: T
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68.In order to compute the physical unit flow, a company must first compute unit production costs.

Ans: F

69. Departments are the cost objects when the plantwide overhead rate method is used. Answer: False

70. The plant-wide overhead rate is determined by using volume-related measures. Answer: True

71. The departmental overhead rate method uses a different overhead rate for each production
department. Answer: True

72. The premise of ABC is that it takes activities to make products and provide services and these
activities drive costs. Answer: True

73. Activities are the cost objects of the second stage of ABC. Answer: False

74. A cost pool is a collection of costs that are related to the same or similar activity. Answer: True

75. Activity-based costing first assigns costs to products and then uses these product costs to assign
costs to manufacturing activities. Answer: False

76. Multiple cost pools are used when allocating overhead using the plantwide overhead rate
method. Answer: False

77. Management’s pricing and cost decisions for a product are influenced by that product’s
cost assignments .Answer: True

78. ABC is significantly less costly to implement and maintain than more traditional
overhead costing systems. Answer: False

79. When using the plantwide overhead rate method, total budgeted overhead costs are
combined into one overhead cost pool. Answer: True

80. Activity-based costing eliminates the need for overhead allocation rates. Answer: False

81. Activity-based costing often shifts overhead costs from large volume, standardized
products to low-volume, specialty products that consume disproportionate resources.

Answer: True

82 Traditional costing systems use multiple predetermined overhead rates. Ans: F

83. Traditionally, overhead is allocated based on direct labor cost or direct labor hours. Ans: T

84. Current trends in manufacturing include less direct labor and more overhead. Ans: T

85. Activity-based costing allocates overhead to multiple cost pools and assigns the cost
pools to products using cost drivers. Ans: T
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86. A cost driver does not generally have a direct cause-effect relationship with the
resources consumed. Ans: F

87. The first step in activity-based costing is to assign overhead costs to products, using
cost drivers. Ans: F

88. To achieve accurate costing, a high degree of correlation must exist between the cost
driver and the actual consumption of the activity cost pool. Ans: T

89. When overhead is properly assigned in ABC, it will usually decrease the unit cost of
high-volume products. Ans: T

90. ABC leads to enhanced control over overhead costs. Ans: T

91. ABC usually results in less appropriate management decisions. Ans: F

92. ABC is generally more costly to implement than traditional costing. Ans: T

93. ABC eliminates all arbitrary cost allocations. Ans: F

94. ABC is particularly useful when product lines differ greatly in volume and
manufacturing complexity. Ans: T

95. ABC is particularly useful when overhead costs are an insignificant portion of total
costs. Ans: F

96. Activity-based management focuses on reducing costs and improving processes.

Ans: T

97. The overall objective of installing ABC in service firms is no different than it is in a
manufacturing company. Ans: T

98. What sometimes makes implementation of activity-based costing difficult in service

industries is that a smaller proportion of overhead costs are company-wide costs. Ans: F

99-The general approach to identifying activities, activity cost pools, and cost drivers is used
by a service company in the same manner as a manufacturing company. Ans: T

100.Activity-based costing is a costing method that is designed to provide managers with

product cost information for external financial reports ANS. T

101 .costs are accumulated by department in a process costing system ANS. T

102 activity based costing is a costing technique that uses a two stage allocation process and
assigns costs to departments and then to products based upon their activity resources
ANS. T

103 The basic difference between a first-stage cost allocation and a second-stage cost allocation is that: cost
pools are not used in first-stage cost allocations ANS. F
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Multiple choice theoretical section:

1. Process costing is used to account for:
A. large numbers of identical products that are produced in a continuous manufacturing
environment.
B. small numbers of products that are produced in batches.
C. raw materials that are converted directly to finished goods.
D. finished goods that are refined and processed further.
E. large numbers of products that are produced in a non-repetitive process.

2. Which of the following manufacturers would most likely not use a process-cost accounting
system?
A. A producer of computer monitors B. A paint manufacturer.
C. A producer of frozen orange juice. D. A builder of customized yachts. E. A lumber mill.

3. Process costing would be used in all of the following industries except:

A. petroleum refining. B. chemicals. C. truck tire manufacturing.
D. wood pulp production. E. automobile repair

4. Which of the following companies would likely use a process-costing system?

A. Choice A B. Choice B C. Choice C D. Choice D E. Choice E

5. Which of the following statements about similarities between process costing and job-
order costing are true?

I. Both systems assign production costs to units of output.

II. Both systems require extensive knowledge of financial accounting.
III. The flow of costs through the manufacturing accounts is essentially the same.
A. I only. B. I and III. C. II and III. D. III only. E. I, II, and III.
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6. Companies that use a process-cost accounting system would:

A. establish a separate Work-in-Process Inventory account for each manufacturing department.
B. establish a separate Finished-Goods Inventory account for each manufacturing department.
C. pass completed production directly to Cost of Goods Sold.
D. charge goods produced with actual overhead amounts rather than applied overhead amounts.
E. eliminate the need for the Finished-Goods Inventory account.

7. Which of the following statements is false?

A. In job-order costing, costs are accumulated by job order.
B. In process costing, costs are accumulated by department.
C. In process costing, the cost per unit in a department is found by spreading the period's
manufacturing costs over the production activity.
D. In process costing, the total cost of each unit is found by dividing the total factory costs by the
number of units completed.
E. In job-order costing, the unit cost is found by dividing the job's total cost by the job's total units.

8. In a process-costing system, manufacturing costs are accumulated by:

A. batch.
B. batch and time period.
C. department.
D. department and time period.
E. department or process, and time period.

9. Which of the following data are needed to calculate total equivalent units under the weighted-average
method?
A. Work-to-date on ending work in process, units started during the period.
B. Units completed during the period, work-to-date on ending work in process.
C. Work to complete beginning work in process, work-to-date on ending work in process.
D. Work to complete beginning work in process, units completed, work done on ending work in process.
E. Units completed, work to complete beginning work in process

10. Michael, Inc., uses a process-costing system. A newly hired accountant has identified the following procedures
that must be performed by the close of business on Friday:

1—Calculation of equivalent units

2—Analysis of physical flows of units
3—Assignment of costs to completed units and units still in process
4—Calculation of unit costs

Which of the following choices correctly expresses the proper order of the preceding tasks?
A. 1, 2, 3, 4. B. 1, 2, 4, 3. C. 1, 4, 3, 2. D. 2, 1, 4, 3. E. 2, 1, 3, 4.
 13 | P a g e MR. YEHIA 01009010200

11. When calculating unit costs under the weighted-average process-costing method, the unit cost is based on:
A. only the current period's manufacturing costs.
B. only costs in the period's beginning work-in-process inventory.
C. a summation of the costs in the beginning work-in-process inventory plus costs incurred in the current period.
D. only costs incurred in previous accounting periods.
E. a summation of the costs in the beginning work-in-process inventory plus costs to be incurred in the upcoming
period.

12. When computing the conversion cost per equivalent unit under the weighted-average method of process
costing, all of the following information would be needed except:
A. the number of units completed during the current accounting period.
B. the conversion work performed during the current period on the ending work-in-process inventory.
C. the conversion work performed during the current period on the beginning work-in-process inventory.
D. the conversion cost in the beginning work-in-process inventory.
E. the conversion cost incurred during the current accounting period.

13. Equivalent-unit calculations are necessary to allocate manufacturing costs between:

A. units completed and ending work in process.
B. beginning work in process and units completed.
C. units sold and ending work in process.
D. cost of goods manufactured and beginning work in process.
E. cost of goods manufactured and cost of goods sold.

14. Which of the following is a key document in a typical process-costing system?

A. Departmental production report. B. Master schedule. C. Production budget.
D. Sequential product report. E. Materials requirement report.

15. Operation costing might be used to determine the cost of all of the following products except:
A. sweaters. B. automobiles. C. living-room sofas. D. dishwashing detergent.
E. high-definition (HD) and surround-sound cables.

16. Which of the following statements about operation costing is (are) true?
I. Conversion costs are accumulated by department.
II. Direct material costs are accumulated by batch.
III. Operation costing is a hybrid product-costing system.
A. I only. B. I and II. C. I and III.
D. II and III. E. I, II, and III.

17. Which of the following five types of products is least likely to be produced in a process
manufacturing system?
A. Compact disks. B. Slacks for casual wear. C. Baseball hats.
D. Calculators. E. Oil paintings. Answer: E
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18. Which of the following characteristics does not usually apply to process manufacturing
systems?
A. Each unit of product is separately identifiable.
B. Partially completed products are transferred between processes.
C. Different managers are responsible for different processes.
D. The output of all processes except the final process is an input to the next process.
E. In a multistep process, there will be multiple Goods in Process accounts. Answer: A

19. An expression of the activity of a process as the number of units that would have been processed
during a period if all effort had been applied to units that were started and finished during the period is
called:
A. Manufacturing overhead. B. Units in process.
C. A job cost sheet. D. Equivalent units of production. E. Process cost summary. Answer: D

20. Equivalent units of production are equal to:

A. The number of units that could have been completed if all effort had been applied to units that
were started and completed that period.
B. The number of finished units actually produced that period.
C. The number of units introduced into the process that period.
D. The number of units still in process that period.
E. Physical units that were completed this period from all effort being applied to them. Answer: A

21. A system of accounting in which the costs of each process are accumulated separately and then
assigned to the units of product that passed through the process is a:
A. General cost accounting system. B. Process cost accounting system.
C. Job order cost accounting system. D. Manufacturing cost accounting system.
E. Goods in process accounting system. Answer: B

22. Which of the following characteristics applies to process cost accounting and not to job order cost
accounting?
A. Use of a predetermined overhead rate. B. Identifiable lots of production.
C. Equivalent units of production. D. Labor time ticket for each employee.
E. Use of a single Goods in Process account. Answer: C

23. A company that applies process costing is most frequently characterized by:
A. Low standardization and high production volume. B. Custom orders and homogeneous products.
C. Repetitive production and heterogeneous products.
D. Repetitive production and low production volume.
E. Homogeneous product and high production volume. Answer: E

24 An organizational unit of a factory that has the responsibility for partially manufacturing or
producing a product is called a:
A. Production department. B. Service department.
C Primary department. D. Responsibility department. E. Control department. Answer: A
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25.A process cost accounting system is most appropriate when

a. a variety of different products are produced, each one requiring different types of materials, labor, and
overhead.
b. the focus of attention is on a particular job or order.
c. similar products are mass-produced.
d. individual products are custom made to the specification of customers.

26-A characteristic of products that are mass-produced in a continuous fashion is that

a. the products are identical or very similar in nature.

b. they are grouped in batches.
c. they are produced at the time an order is received.
d. their costs are accumulated on job cost sheets.

27.A process cost system would be used for all of the following products except

a. chemicals. b. computer chips. c. motion pictures. d. soft drinks.

Ans: C

28. In a process cost system,

a. a Work in Process account is maintained for each product.

b. a materials requisition must identify the job on which the materials will be used.
c. a Work in Process account is maintained for each process.
d. one Work in Process account is maintained for all the processes, similar to a job order cost system.
Ans: C

29. Differences between a job order cost system and a process cost system include all of the following
except the

a. documents used to track costs.

b. point at which costs are totaled.
c. unit cost computations.
d. flow of costs.

Ans: D

30.Which of these best reflects a distinguishing factor between a job order cost system and a process
cost system?

a. The detail at which costs are calculated. b. The time period each covers.
c. The number of work in process accounts.
d. The manufacturing cost elements included. Ans: C

31. Which of the following is a true statement about process cost systems?
a. In process cost systems, costs are accumulated but not assigned.
b. A process cost system has one work in process account for each process.
c. In process cost systems, costs are summarized on job cost sheets.
d. Unit costs are not computed in process cost systems.

Ans: B
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32. In a process cost system, unit costs are determined using a

a. numerator of costs of each job.

b. denominator of units produced during the period.
c. denominator of units produced for the job.
d. denominator of units produced for the day.

Ans: B

33.In process cost accounting, manufacturing costs are summarized on a

a. job order cost sheet.

b. process order cost sheet.
c. production cost report.
d. manufacturing cost sheet.

Ans: C

34. Which of the following manufacturing cost elements occurs in a process cost system?

a. Direct materials.
b. Direct labor.
c. Manufacturing overhead.
d. All of these.
Ans: D

35. In a process cost system, product costs are summarized:

a. on job cost sheets.

b. on production cost reports.
c. after each unit is produced.
d. when the products are sold.
Ans: B

36.Which of the following is not a necessary step in preparing a production cost report?

a. Compute the equivalent units of production.

b. Compute the physical unit flow.
c. Prepare the job order cost sheet.
d. Prepare a cost reconciliation schedule.

Ans: C

37.In a process cost system, units to be accounted for in a department are equal to the

a. number of units started or transferred into the department.

b. number of units transferred out of the department.
c. units in the beginning inventory plus the units started or transferred into the department.
d. ending inventory plus the units started or transferred into the department.

Ans: C
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38. The total units accounted for equals units in

a. beginning work in process – units transferred out.

b. beginning work in process + ending work in process.
c. ending work in process + units transferred out.
d. ending work in process – units started into production.

Ans: C

39.Total units to be accounted for less units in beginning work in process equals

a. total units accounted for.

b. units transferred out.
c. units started into production.
d. equivalent units.

Ans: C

40.In a process cost system, a production cost report is prepared

a. only for the first processing department.

b. for all departments in the aggregate.
c. for each processing department.
d. only for the last processing department.

Ans: C

41. A production cost report

a. is prepared for each product.

b. is prepared from a job cost sheet.
c. will show quantity and cost data for a production department.
d. will not identify a specific department if more than one department is involved in the
production process.

Ans: C

42. In the production cost report, the total

a. physical units accounted for equals the costs accounted for.

b. physical units accounted for equals the units to be accounted for.
c. costs charged equals the units to be accounted for.
d. costs accounted for equals the costs of the units started into production.

Ans: B
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43.A process cost system would be used by all of the following except a(n)

a. chemical company.
b. advertising company.
c. oil company.
d. computer chip company.

Ans: B

44. Which of the following is considered a difference between a job order cost and a process cost
system?

a. The manufacturing cost elements.

b. Documents used to track costs.
c. The accumulation of the costs of materials, labor, and overhead.
d. The flow of costs.

Ans: B

45 The basic similarities between job order cost and process cost systems include all of the following
except the

a. manufacturing cost elements.

b. flow of costs.
c. point at which costs are totaled.
d. accumulation of the costs of materials, labor, and overhead.

Ans: C

46-Equivalent units of production are a measure of

a. units completed and transferred out.

b. units transferred out.
c. units in ending work in process.
d. the work done in a period expressed in fully completed units.
Ans: D

47. Total physical units to be accounted for are equal to the units

a. started (or transferred) into production.

b. started (or transferred) into production plus the units in beginning work in process.
c. started (or transferred) into production less the units in beginning work in process.
d. completed and transferred out.

Ans: B

48.In computing equivalent units, ___________ is not part of the equivalent units of production
formula.

a. units transferred out b. beginning work in process

c. ending work in process
d. None of these is correct. Ans: B
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49 .The total units to be accounted for is computed by adding

a. beginning units in process to units transferred out.

b. ending units in process to units started into production.
c. beginning units in process to units started into production.
d. ending units in process to total units accounted for.

Ans: C

50-In the Camria Company, materials are entered at the beginning of the process. If there is no
beginning work in process, but there is an ending work in process inventory, the number of equivalent
units as to materials costs will be

a. the same as the units started.

b. the same as the units completed.
c. less than the units started.
d. less than the units completed.
Ans: A

51.The total costs accounted for in a production cost report equal the

a. cost of units completed and transferred out only.

b. cost of units started into production.
c. cost of units completed and transferred out plus the cost of ending work in process.
d. cost of beginning work in process plus the cost of units completed and transferred out.
Ans: C

52 .In a production cost report, which one of the following sections is not shown under Costs?

a. Unit costs.
b. Costs to be accounted for.
c. Costs during the period.
d. Units accounted for. Ans: D

53. A method of assigning overhead costs to a product using a single overhead rate is:
A. Plantwide overhead rate method. B. Cost pool overhead rate method.
C. Departmental overhead rate method. D. Activity-based costing.
E. Overhead cost allocation method. Answer: A

54. Which types of overhead allocation methods result in the use of more than one
overhead rate during the same time period?
A. Plantwide overhead rate method and departmental overhead rate method.
B. Cost pool overhead rate method and plantwide overhead rate method.
C. Departmental overhead rate method and activity-based costing.
D. Activity-based costing and plantwide overhead rate method.
E. Departmental overhead rate method and cost pool overhead rate method. Answer: C
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55. Which of the following would not be considered a product cost?

A. Direct labor costs. B. Factory supervisor’s salary.
C. Factory line worker’s salary. D. Cost accountant’s salary. E. Manufacturing overhead costs.
Answer: D

56. Overhead costs:

A. Are directly related to production.
B. Can be traced to units of product in the same way that direct materials can.
C. Cannot be traced to units of product in the same way that direct labor can.
D. Are period costs. E. Include only fixed costs. Answer: C

57. The cost object of the plantwide overhead rate method is:
A. The unit of product. B. The production departments of the company.
C. The production activities of the company. D. Manufacturing cost pools. E.the time period. Answer: A

58. Which of the following statements is true with regard to the plantwide overhead rate method?
A. The rate is determined using volume-related measures.
B. It is logical to use this method when overhead costs are not closely tied to volume-related measures.
C. This method uses multiple overhead rates.
D. The rate is determined using measures that are not closely related to volume.
E. The method provides the most accurate means of allocating overhead costs. Answer: A

59. The cost object(s) of the departmental overhead rate method is:
A. The unit of product. B. The production departments of the company.
C. The production departments in the first stage and the unit of product in the second stage.
D. The unit of product in the first stage and the production departments in the second stage.
E. The production activities of the company. Answer: C

60. Which of the following statements is true with regard to the departmental overhead rate
method?
A. It is logical to use this method when overhead resources are consumed by various products in
substantially the same way throughout multiple departments.
B. It is logical to use this method when overhead resources are consumed by various products in
substantially different ways throughout multiple departments.
C. Each department has the same rate for the same activity pool.
D. It requires one overhead cost pool and one rate.
E. It is synonymous with activity-based costing. Answer: B

61. The cost object(s) of the activity-based costing method is(are):

A. The unit of product.
B. The production departments of the company.
C. The production activities of the company.
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D. The production activities in the first stage and the unit of product in the second stage.
E. The unit of product in the first stage and the production activities in the second stage. Answer: D

62. From an ABC perspective, what causes costs to be incurred?

A. Financial transactions. B. The volume of units produced.
C. Debits and credits. D. Management decisions. E. Activities. Answer: E

63. Which of the following statements is true with regard to activity-based costing rates?
A. The premise of ABC is that activities are what cause costs to be incurred.
B. ABC is another way to refer to a multiple departmental rate situation.

C. There one basic stage to ABC.

D. ABC is simpler and less expensive to implement than other traditional methods of allocating
overhead costs.
E. All cost drivers used to determine the rates will be unit-level drivers. Answer: A

64. What is the reason for pooling costs?

A. To shift costs from low-volume to high-volume products.
B. It is a budgeting technique designed to accurately track fixed costs.
C. Determining a pool rate for all costs incurred by the same activity reduces the number of cost
assignments required.
D. This procedure helps to determine which costs are directly related to production volume.

E. It simplifies departmental overhead costing procedures. Answer: C

65. Which of the following are advantages of using the plantwide overhead rate method?
A. The use of cost pools is considerably more accurate than other overhead allocations.
B. The necessary information is readily available.
C. It is more accurate than traditional overhead allocations.
D. Each department has its own overhead rate and its own allocation base.
E. It takes into account that when products differ in batch size and complexity, they usually
consume different amounts of overhead resources. Answer: B

66. Which of the following companies would be best served by a plantwide overhead rate?
A. A company that manufactures many different products and whose operations are an equal mix
of labor and mechanized work.
B. A company that manufactures few products and whose operations are labor intensive.
C. A company that manufactures many different products and whose operations are highly
mechanized.
D. A company whose products use overhead resources in very different ways.
E. A company whose products differ in batch size and complexity and consume different amounts
of overhead resources. Answer: B

67. Which of the following is true?

A. Overhead costs are often affected by many issues and are frequently too complex to be
explained by any one factor.
B. The departmental overhead rate is not usually based on measures closely related to production
volume.
C. The departmental overhead rate is most accurate in assigning overhead costs that are not driven
 22 | P a g e MR. YEHIA 01009010200

by production volume.
D. Allocated overhead costs will be the same no matter which allocation method is used.
E. When cost analysts are able to logically trace cost objects to costs, costing accuracy is improved.

Answer: A

68. Which of the following is a disadvantage of the departmental overhead rate method?
A. The departmental overhead rate method assigns overhead on the basis of volume-related
measures.
B. The departmental overhead rate method is more refined than the plant-wide overhead rate
method.
C. The departmental overhead rate method does not assign overhead on the basis of volume-
related measures.
D. The departmental overhead rate method is simpler and less costly to implement than the
plant-wide rate method.
E. There are no disadvantages of the departmental overhead rate method. Answer: A

69. Which of the following is not true?

A. The departmental overhead method assigns overhead on the basis of volume-related
measures.
B. The departmental overhead rate method is more refined than the plantwide overhead rate
method.
C. Overhead costing accuracy is improved by the use of multiple departmental rates rather than a
single overhead rate.
D. The departmental overhead rate method does not assign overhead on the basis of volume-
related measures.
E. The departmental overhead rate method is more costly to implement than the traditional
overhead rate method. Answer: D

70. What are three advantages of activity-based costing over traditional volume-based allocation
methods?

A. Ease of use, more accurate product costing, and more effective cost control.
B. Fewer allocation bases, ease of use, and a direct correlation to production volume.
C. More accurate product costing, more effective cost control, and better focus on the relevant factors
for decision making.
D. More accurate product costing, fewer cost objects, and a direct correlation to production volume.
E. More accurate product costing, ease of use, less costly to implement.

Answer: C

71. What are the main advantages of traditional volume-based allocation methods compared to activity-
based costing?
A. Traditional volume-based methods are easier to use and less costly to implement and maintain.
B. Traditional volume-based methods are more accurate and allowed by GAAP.
 23 | P a g e MR. YEHIA 01009010200

C. Traditional volume-based methods are less accurate and easier to use.

D. Traditional volume-based methods are harder to use and more costly to implement and maintain.
E. There are no advantages to using traditional volume-based methods.

Answer: A

72. Consider the following statements regarding traditional costing systems:

I. Overhead costs are applied to products on the basis of volume-related measures.
II. All manufacturing costs are easily traceable to the goods produced.
III. Traditional costing systems tend to distort unit manufacturing costs when numerous goods are made that have
widely varying production requirements.

Which of the above statements is (are) true?

A. I only. B. II only. C. III only. D. I and III. E. II and III.

73. Many traditional costing systems:

A. trace manufacturing overhead to individual activities and require the development of numerous activity-
costing rates.
B. write off manufacturing overhead as an expense of the current period.
C. combine widely varying elements of overhead into a single cost pool.
D. use a host of different cost drivers (e.g., number of production setups, inspection hours, orders processed) to
improve the accuracy of product costing.
E. produce results far superior to those achieved with activity-based costing.

74. The following tasks are associated with an activity-based costing system:

1—Calculation of pool rates 2—Identification of cost drivers

3—Assignment of cost to products 4—Identification of cost pools

Which of the following choices correctly expresses the proper order of the preceding tasks?
A. 1, 2, 3, 4. B. 2, 4, 1, 3. C. 3, 4, 2, 1. D. 4, 2, 1, 3. E. 4, 2, 3, 1.

75. Which of the following is the proper sequence of events in an activity-based costing system?
A. Identification of cost drivers, identification of cost pools, calculation of pool rates, assignment of cost to
products.
B. Identification of cost pools, identification of cost drivers, calculation of pool rates, assignment of cost to
products.
C. Assignment of cost to products, identification of cost pools, identification of cost drivers, calculation of pool
rates.
D. Calculation of pool rates, identification of cost drivers, identification of cost pools, assignment of cost to
products.
E. Some other sequence of the four activities listed above.

76. Which of the following tasks is not normally associated with an activity-based costing system?
A. Calculation of pool rates. B. Identification of cost pools. C. Preparation of allocation matrices.
D. Identification of cost drivers. E. Assignment of cost to products.
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77. Which of the following is not a broad, cost classification category typically used in activity-based
costing?
A. Unit-level. B. Batch-level. C. Product-sustaining level. D. Facility-level. E. Management-level.

78. In an activity-based costing system, direct materials used would typically be classified as a:
A. unit-level cost. B. batch-level cost.
C. product-sustaining cost.
D. facility-level cost.
E. matrix-level cost.

79. Which of the following is least likely to be classified as a batch-level activity in an activity-based costing system?
A. Shipping. B. Receiving and inspection. C. Production setup.
D. Property taxes. E. Quality assurance.

80. In an activity-based costing system, materials receiving would typically be classified as a:

A. unit-level activity. B. batch-level activity.
C. product-sustaining activity. D. facility-level activity. E. period-level activity.

81. Foster, Inc., an appliance manufacturer, is developing a new line of ovens that uses controlled-laser technology.
The research and testing costs associated with the new ovens is said to arise from a:
A. unit-level activity. B. batch-level activity. C. product-sustaining activity.
D. facility-level activity. E. competitive-level activity.

82. Consider the following statements regarding product-sustaining activities:

I. They must be performed for each batch of product that is made.

II. They must be performed for each unit of product that is made.
III. They are needed to support an entire product line.

Which of the above statements is (are) true?

A. I only. B. II only. C. III only. D. I and II. E. II and III.

83. Which of the following is least likely to be classified as a facility-level activity in an activity-based costing
system?
A. Plant maintenance. B. Property taxes.
C. Machine processing cost. D. Plant depreciation. E. Plant management salaries.

84. The salaries of a manufacturing plant's management are said to arise from:
A. unit-level activities.
B. batch-level activities. C. product-sustaining activities. D. facility-level activities. E. direct-cost activities.

85. The division of activities into unit-level, batch-level, product-sustaining level, and facility-level categories is
commonly known as a cost:
A. object. B. application method. C. hierarchy.
D. estimation method.
E. classification scheme that is useful in traditional, volume-based systems.
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86. Activity-based costing systems:

A. use a single, volume-based cost driver.
B. assign overhead to products based on the products' relative usage of direct labor.
C. often reveal products that were under- or overcosted by traditional costing systems.
D. typically use fewer cost drivers than more traditional costing systems.
E. have a tendency to distort product costs.

87. In comparison with a system that uses a single, volume-based cost driver, an activity-based costing
system is preferred when a company has:
A. a large proportion of nonunit-level activities.
B. product-line diversity or a large proportion of nonunit-level activities.
C. minimal product-line diversity and a small proportion of nonunit-level activities.
D. existing variances from budgeted amounts.
E. a situation other than those noted above.

88. Consider the following factors:

I. The degree of correlation between consumption of an activity and consumption of a particular cost driver.
II. The likelihood that a particular cost driver will induce a desired behavioral effect.
III. The likelihood that a particular cost driver will cause an increase in the cost of measurement.

Which of these factors should be considered in the selection of a cost driver?

A. I only.
B. I and II.
C. I and III.
D. II and III.
E. I, II, and III.

89. Customer profitability analysis is tied closely to:

A. just-in-time systems. B. activity-based costing. C. job costing. D. process costing. E. operation costing.

90. Which of the following is not typical of traditional costing systems?

a. Use of a single predetermined overhead rate.

b. Use of direct labor hours or direct labor cost to assign overhead.
c. Assumption of correlation between direct labor and incurrence of overhead cost.
d. Use of multiple cost drivers to allocate overhead. Ans: d

91 In traditional costing systems, overhead is generally applied based on

a. direct labor.
b. machine hours.
c. direct material dollars.
d. units of production.

Ans: a
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92-An activity that has a direct cause-effect relationship with the resources consumed is a(n)

a. cost driver.
b. overhead rate.
c. cost pool.
d. product activity.

Ans: a

93.Which best describes the flow of overhead costs in an activity-based costing system?

a. Overhead costs  direct labor cost or hours  products

b. Overhead costs  products
c. Overhead costs  activity cost pools  cost drivers  products
d. Overhead costs  machine hours  products Ans: c

94.The costs that are easiest to trace directly to products are

a. direct materials and direct labor.

b. direct labor and overhead.
c. direct materials and overhead.
d. none of the above; all three costs are equally easy to trace to the product. Ans: a

95.Often the most difficult part of computing accurate unit costs is determining the proper amount of
_________ to assign to each product, service, or job.

a. direct materials
b. direct labor
c. overhead
d. direct materials and direct labor Ans: c

96. Predetermined overhead rates in traditional costing are often based on

a. direct labor cost for job order costing and machine hours for process costing.
b. machine hours for job order costing and direct labor cost for process costing.
c. multiple bases for job order costing and direct labor cost for process costing.
d. multiple bases for both job order costing and process costing. Ans: a

97. Direct labor is sometimes the appropriate basis for assigning overhead cost to products. It is
appropriate to use direct labor when which of the following is true?

(1) Direct labor constitutes a significant part of total product cost.

(2) A high correlation exists between direct labor and changes in the amount of overhead
costs.
a. (1) only
b. (2) only
c. Either (1) or (2)
d. Both (1) and (2)
Ans: d
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98.Activity-based costing

a. allocates overhead to multiple activity cost pools, and it then assigns the activity cost
pools to products and services by means of cost drivers.
b. accumulates overhead in one cost pool, then assigns the overhead to products and
services by means of a cost driver.
c. assigns activity cost pools to products and services, then allocates overhead back to the
activity cost pools.
d. allocates overhead directly to products and services based on activity levels.

Ans: a

99. Ordering materials, setting up machines, assembling products, and inspecting products are
examples of

a. cost drivers. b. overhead cost pools.

c. direct labor costs. d. nonmanufacturing activities.

Ans: b

100. An ―Ordering and Receiving Materials‖ cost pool would most likely have as a cost driver:

a. machine hours. b. number of setups.

c. number of purchase orders. d. number of inspection tests. Ans: c

101. The last step in activity-based costing is to

a. assign manufacturing overhead costs for each activity cost pool to products.
b. compute the activity-based overhead rate per cost driver.
c. identify and classify the major activities involved in the manufacture of specific products.
d. identify the cost driver that has a strong correlation to the activity cost pool.
Ans: a

101. The first step in activity-based costing is to

a. assign manufacturing overhead costs for each activity cost pool to products.
b. compute the activity-based overhead rate per cost driver.
c. identify and classify the major activities involved in the manufacture of specific products.
d. identify the cost driver that has a strong correlation to the activity cost pool.
Ans: c

102. A well-designed activity-based costing system starts with

a. identifying the activity-cost pools.

b. computing the activity-based overhead rate.
c. assigning manufacturing overhead costs for each activity cost pool to products.
d. analyzing the activities performed to manufacture a product.

Ans: d
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103 Which of the following is not an example of an activity cost pool?

a. Setting up machines
b. Machining
c. Inspecting
d. Machine hours

Ans: d

104. An example of an activity cost pool is

a. machine hours.
b. setting up machines.
c. number of setups.
d. number of inspections.

Ans: b

105. Which would be an appropriate cost driver for the machining activity cost pool?

a. Machine setups
b. Purchase orders
c. Machine hours
d. Inspections

Ans: c

106 .Which would be an appropriate cost driver for the purchasing activity cost pool?

a. Machine setups
b. Purchase orders
c. Machine hours
d. Inspections

Ans: b

107. An activity-based overhead rate is computed as follows:

a. actual overhead divided by actual use of cost drivers.

b. estimated overhead divided by actual use of cost drivers.
c. actual overhead divided by estimated use of cost drivers.
d. estimated overhead divided by estimated use of cost drivers.

Ans: d
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108. Use of activity-based costing will result in the development of

a. one overhead rate based on direct labor hours.

b. one plantwide activity-based overhead rate.
c. multiple activity-based overhead rates.
d. no overhead rates; overhead rates are not used in activity-based costing.

Ans: c

109. To use activity-based costing, it is necessary to know the

a. cost driver for each activity cost pool.

b. expected use of cost drivers per activity.
c. expected use of cost drivers per product.
d. all of the above.

Ans: d

110. To assign overhead costs to each product, the company

a. multiplies the activity-based overhead rates per cost driver by the number of cost drivers
expected to be used per product.
b. multiplies the overhead rate by the number of direct labor hours used on each product.
c. assigns the cost of each activity cost pool in total to one product line.
d. multiplies the rate of cost drivers per estimated cost for the cost pool by the estimated cost
for each cost pool.
Ans: a

111. As compared to a low-volume product, a high-volume product

a. usually requires less special handling.

b. is usually responsible for more overhead costs per unit.
c. requires relatively more machine setups.
d. requires use of direct labor hours as the primary cost driver to ensure proper allocation of
overhead.

Ans: a

112. Assigning overhead using ABC will usually

a. decrease the cost per unit for low volume products as compared to a traditional overhead
allocation.
b. increase the cost per unit for low volume products as compared to a traditional overhead
allocation.
c. provide less accurate cost per unit for low volume products than will traditional costing.
d. result in the same cost per unit for low volume products as does traditional costing.

Ans: b
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113. Companies that switch to ABC often find they have

a. been overpricing some products.

b. possibly losing market share to competitors.
c. been sacrificing profitability by underpricing some products.
d. all of the above. Ans: d

114. Which of the following is a limitation of activity-based costing?

a. More cost pools

b. Less control over overhead costs
c. Poorer management decisions
d. Some arbitrary allocations continue

Ans: d

115. Which of the following factors would suggest a switch to activity-based costing?

a. Product lines similar in volume and manufacturing complexity.

b. Overhead costs constitute a significant portion of total costs.
c. The manufacturing process has been stable.
d. Production managers use data provided by the existing system. Ans: b

116. Which of the following is true of activity-based costing?

a. More cost pools

b. Same base as traditional costing
c. Less costly to use
d. Eliminates arbitrary allocations Ans: a

117. The primary benefit of ABC is it provides

a. better management decisions.

b. enhanced control over overhead costs.
c. more cost pools.
d. more accurate product costing.

Ans: d

118. Which of the following is not a benefit of activity-based costing?

a. More accurate product costing

b. Enhanced control over overhead costs
c. Better management decisions
d. Less costly to use

Ans: d
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119. Each of the following is a limitation of activity-based costing except that

a. it can be expensive to use.

b. it is more complex than traditional costing.
c. more cost pools are used.
d. some arbitrary allocations continue.
Ans: c

120. The presence of any of the following factors would suggest a switch to ABC except when

a. product lines differ greatly in volume.

b. overhead costs constitute a minor portion of total costs.
c. the manufacturing process has changed significantly.
d. production managers are ignoring data provided by the existing system. Ans: b

121. Which of the following is a limitation of activity-based costing?

a. More cost pools

b. Less control over overhead costs
c. ABC can be expensive to use
d. Poorer management decisions Ans: c

122. Which of the following is true about activity-based costing?

a. Less cost pools

b. Same base as traditional costing
c. More costly to use
d. Eliminates arbitrary allocations

Ans: c

123. Each of the following is a limitation of activity-based costing except that

a. it can be expensive to use.

b. it decreases control over overhead costs
c. it is complex and can be difficult to understand
d. some arbitrary allocations continue.

Ans: b

124. The presence of any of the following factors would suggest a switch to ABC except when

a. product lines differ greatly in volume.

b. overhead costs constitute a major portion of total costs.
c. the manufacturing process has changed significantly.
d. production managers are using data provided by the existing system

Ans: d
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125. Activity-based costing uses

a. one plantwide pool and a single cost driver.

b. departmental pools and a single cost driver.
c. numerous cost pools and numerous cost drivers.
d. one plantwide pool and numerous cost drivers

Ans: c

126. Which of the following statements is false?

a. ABC can weaken control over overhead costs.

b. Under ABC, companies can trace many overhead costs directly to activities.
c. ABC allows some indirect costs to be identified as direct costs.
d. managers become more aware of their responsibility to control the activities that generate
costs.

Ans: a

127. Activity-based costing has been found to be useful in each of the following service industries
except

a. airlines.
b. railroads.
c. hotels.
d. ABC has been useful in all of these industries.

Ans: d

128. Activity-based costing is used in

Service industries Manufacturing industries

a. Yes No

b. Yes Yes

c. No Yes

d. No No

Ans: b

129. In service industries

a. activities cannot be labeled as value-added or non-value-added.

b. the overall objective of ABC is different than in manufacturing industries.
c. a larger proportion of overhead costs are company-wide costs.
d. activity cost pools cannot be identified..
Ans: c

130. Activity-based costing is used by

 33 | P a g e MR. YEHIA 01009010200

a. accounting firms.
b. law firms.
c. consulting firms.
d. all of the above.
Ans: d

131. Activity-based costing has been found to be useful in each of the following service industries
except

a. banks.
b. hospitals.
c. telephone companies.
d. ABC has been useful in any of these industries.

Ans: d

132. The use of activity-based costing in service industries

a. has the same objective as in manufacturing.

b. results in improved costing of services provided.
c. uses cost pools to assign overhead.
d. all of these.

Ans: d

133.An activity cost driver is

A a measure of the volume of units produced or customers sold.

B a number of activities combined into one cost pool.

C the cost assigned to an activity.

D a measure of the underlying activity that occurs in each activity cost pool.

134-Which of the following is not true of activity cost drivers?

A. They are measures of the underlying activity that occurs in each activity cost pool.
B. They ideally have a cause and effect relationship with underlying activities.
C. They are the cost related to each activity cost pool
D. They are used in Stage 2 cost allocations
e- all of these are characteristics of a cost driver

135-The basic difference between a first-stage cost allocation and a second-stage cost allocationis
that:
A. cost pools are not used in first-stage cost allocations.
B. predetermined overhead rates are used in first-stage cost allocations but not in second- stage cost allocations.
C. the first stage prohibits firms from aligning the allocation of costs with the use of resources.
D. when used in an ABC system, the first stage assigns costs to activities.
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136 . Which of the following types of companies would most likely use process costing?
A. Aircraft manufacturers. B. Textile manufacturers. C. Textbook publishers. D. Custom-machining firms.

E. Shipbuilders.

137-process costing would be suitable for

a automobile repair b kitchen modeling

c production of television sets d custom cabinets e boat building

138-Process costing:

A. Traces direct costs to a specific production process.

B. Applies overhead using an activity base .

C. Averages direct and indirect costs across mass-produced identical units.

D. All of the above.

139 Process cost systems:

A. Are good when companies produce homogeneous units.
B. May have work-in-process accounts for each department.
C. Use equivalent units of production.
D.All of the above.

140. To assign overhead costs to each product, the company

multiplies the rate of cost drivers per estimated cost for the cost pool by the estimated cost for each cost
pool.
A

multiplies the activity-based overhead rates per cost driver by the number of cost drivers expected
to be used per product.
B

multiplies the overhead rate by the number of direct labor hours used on each product.
C

assigns the cost of each activity cost pool in total to one product line.
D

141 A measure of the productivity of a process with respect to its use of direct materials,
direct labor, or overhead, and an expression of the activity of a process as the number of
units that would have been processed during a period if all effort had been applied to units
that were started and finished during the period

A -units in process b- process cost summary c- manufacturing overhead

d -job cost sheet E equivalent units of production

142which of the following reports show total cost accounted for ?

a quantity schedule b cost reconciliation schedule c- cost per equivalent schedule
d - process order cost sheet e job order cost sheet
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143-It is necessary to calculate equivalent units of production in a department because

a-a physical count of units is impossible.
b-the physical units in the department are always 100% complete.
c-some units worked on in the department are not fully complete.
d-at times a department may use a job order cost system and then switch to a process cost system.

144. Which of the following Companies is least likely to use a process-cost accounting system for the majority
of its products ?

A-dupont chemical b- adidas bags c Boeing d Samsung TV

Multiple choice problems section:

1- In kapler company , the cutting department had 8,000 units were in beginning inventory, 25,000 units
were transferred out and 4,000 units were in the ending inventory, how many units were started by kapler
during the month ?
A. 17,000 B. 21,000 C.29,000 D. 25000

4,000 + 25,000 - 8,000 = 21,000

2. A department had 12,500 units that were 20% complete in beginning Goods in Process
Inventory. During the current period 60,000 units were transferred in. Ending Goods in Process
Inventory was 15,000 units that were 70% complete. Assume this company uses the weighted-
average method of process costing and direct material is added uniformly throughout the process.
What are the equivalent units produced with respect to direct material?
A. 65,500 B. 57,500 C. 37,000 D. 47,500 E. 68,000 Answer: E

Feedback:

Units Completed and Transferred Out = Beginning Inventory + Units Transferred In – Ending Inventory.

Units Completed and Transferred Out = 12,500 +60,000 -15,000 = 57,500

Equivalent Units = 57,500 + (15,000) (70%) = 68,000

3. A company's beginning work in process inventory consisted of 20,000 units that were 1/5 complete
with respect to direct labor. These beginning units were completed and another 90,000 units were
started during the current period. Of those started, 60,000 were finished and the remaining 30,000 were
one-third complete at the end of the period. Using the weighted-average method, the equivalent units of
production were:
A. 60,000 B. 74,000 C. 76,000 D. 86,000 E. 90,000 Answer: E

Feedback: 80,000 + (30,000)(1/3) = 90,000

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4. At the beginning of the recent period, there were 900 units of product in a department, one-third
completed. These units were finished and an additional 5,000 units were started and completed during
the period. 800 units were still in process at the end of the period, one-fourth completed. Using the
weighted-average valuation method, the equivalent units produced by the department were:
A. 6,700 units B. 5,900 units. C. 5,800 units. D. 6,100 units. E. 8,500 units.

Answer: D

Feedback: 5,900 + (800 x ¼) = 6,100

5. A company uses a process cost accounting system. Its Sewing Department's beginning inventory
consisted of 50,000 units (25% complete with respect to direct labor and overhead). The Sewing
Department started and finished 120,000 units this period. Its ending inventory consists of 40,000
units (25% complete with respect to direct labor and overhead). All direct materials are added at the
beginning of the process. Under the weighted-average inventory valuation method, what are the
equivalent units of production for the Sewing Department for direct materials and for direct labor and
overhead, respectively?
A. 210,000;120,000 B. 210,000; 180,000 C. 167,500; 167,500
D. 160,000; 162,500 E. 160,000; 167,500 Answer: B

Feedback: Direct materials: 170,000 + 40,000 = 210,000

Direct labor and overhead: 170,000 + (40,000 x .25) = 180,000

6. A department had 600 units which were 40% complete in beginning Goods in Process Inventory.
During the current period, 7,000 units were transferred out. Ending Goods in Process Inventory was
800 units which were 40% complete. Using the weighted-average method, what are the equivalent
units produced if all direct material and direct labor are added uniformly throughout the process?
A. 7,080 B. 6,960 C. 7,320 D. 7,680 E. 7,800 Answer: C

Feedback: 7,000 + (800 x .4) = 7,320

7. A company uses a process cost accounting system and the weighted-average inventory
valuation method. Its Assembly Department's beginning inventory consisted of 50,000 units, 75%
complete with respect to direct labor and overhead. The department started and finished 127,500
units this period. The ending inventory consists of 40,000 units that are 25% complete with
respect to direct labor and overhead. All direct materials are added at the beginning of the
process. Goods in Process included direct labor costs of $30,000 and overhead costs of $40,000
for the period. The overhead cost per equivalent unit is:
A. $0.126
B. $0.160
C. $0.178
D. $0.213
E. $0.373

Answer: D
 37 | P a g e MR. YEHIA 01009010200

Feedback: $40,000/[(127500 + 50000) + (40,000)(25 %)] = .213

8. The following is an account for a production department, showing its costs for one month:

Goods in Process Inventory

Balance 5,400

Direct materials 21,600

Direct labor 17,600

Overhead 10,800

If the units in ending goods in process inventory cost $5400, what was the cost of units
completed and transferred out?
A. $54000 B. $50000 C. $37260 D. $49410 E. $48600

Answer: B

Feedback: Total costs = $5,400 + $21,600 + 17,600 + $10,800 = $55,400

Total transferred out = $55,400 - $5400 = $50000

9. Barnett Corporation had 6,500 units of work in process on April 1. During April, 19,100 units were
completed and as of April 30, 5,100 units remained in production. How many units were started during
April?
A. 11,600. B. 17,700. C. 20,500. D. 30,700. E. None of these.

Started units = (19100 + 5100) – 6500 = 17700

10. Lester Corporation had 8,200 units of work in process on November 1. During November, 26,800 units were
started and as of November 30, 7,900 units remained in production. How many units were completed during
November?
A. 16,100. B. 26,500. C. 27,100. D. 42,800. E. None of these.

Units completed = (26800+ 8200) – 7900 = 27100

 38 | P a g e MR. YEHIA 01009010200

11. XYZ Co., had 3,000 units of work in process on April 1 that were 60% complete. During April,
10,000 units were completed and as of April 30, 4,000 units that were 40% complete remained in
production. How many units were started during April?
A. 8,600. B. 9,800. C. 11,000. D. 12,200. E. None of these.

Units started = ( 10000+ 4000) – 3000 =11000

12. Ohio, Inc., which uses a process-cost accounting system, began operations on January 1 of the current year.
The company incurs conversion cost evenly throughout manufacturing. If Ohio started work on 3,000 units during
the period and these units were 70% of the way through manufacturing, it would be correct to say that the company
has:
A. 3,000 physical units in production. B. 2,100 completed units.
C. 900 in-process units. D. 900 equivalent units of production.
E. 3,000 equivalent units of production.

13. 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, 40%; conversion cost, 40%. B. Materials, 40%; conversion cost, 100%.
C. Materials, 100%; conversion cost, 40%. D. Materials, 100%; conversion cost, 60%.
E. Materials, 100%; conversion cost, 100%.

14- Hampton 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 2,000 units
of work in process on April 1 that were 30% complete as to conversion costs. During April, 9,000 units were
completed and on April 30, 4,000 units remained in production, 40% complete with respect to conversion costs.

a. The equivalent units of direct materials for April total:

A. 9,000. B. 13,000. C. 13,600. D. 14,400. E. 15,000.

9000+ 4000 = 13000

b .The equivalent units of conversion for April total:

A. 9,000. B. 10,600. C. 11,200. D. 12,000. E. 12,600.

9000+ (4000 x 40%) = 10600

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15. Gregory, which uses a process-costing system, the mixing department had 5000 units of work in
process inventory on October 1 that were 40% complete as material costs . During October the
information that follows relates to the period just ended: Units started and completed: 75,000, Units
in ending work-in-process inventory: 15,000, 60% complete. Which of the following choices correctly
expresses the total equivalent units of production with respect to material and conversion cost?

A. Choice A B. Choice B C. Choice C D. Choice D E. Choice E

material = 75000+ 15000 (100%) = 90000 , conversion = 75000+ 15000 (60%) =84000

16. Gorski began operations on January 1 of the current year. The company uses a process-costing system,
and conversion cost is incurred evenly throughout manufacturing. By January 31, the firm had completed
56,000 units.

Which of the following statements could be true about the ending work-in-process inventory if
equivalent units for conversion cost totaled 59,000 units?
A. There is no ending work-in-process inventory.
B. The ending work-in-process inventory totaled 3,000 physical units.
C. The ending work-in-process inventory of 10,000 physical units was 30% complete.
D. The ending work-in-process inventory of 20,000 physical units was 85% complete.
E. More than one of the above could be true.

ending work in process after conversion completion = 59000 – 56000 = 3000

ending work in process before conversion completion = 10000 , conversion 30%

17. Majestic, which uses a process-costing system, adds material at the beginning of production and incurs
conversion cost evenly throughout manufacturing. The following selected information was taken from the
company's accounting records:

Total equivalent units of materials: 5,000

Total equivalent units of conversion: 4,400
Units started and completed during the period: 3,500

On the basis of this information, the ending work-in-process inventory's stage of completion is:
A. 40%. B. 60%. C. 70%. D. 80%. E. some other percentage not listed above
40 | P a g e MR. YEHIA 01009010200

18. Tulsa Corporation, which adds materials at the beginning of production, uses a weighted-
average process-costing system. Consider the data that follow.

The company's cost per equivalent unit for materials is:

A. $1.24. B. $1.66. C. $1.67. D. $2.05. E. some other amount.

Cost per equivalent unit = (80600+ 124400) + (75000+ 25000) = 2.05

19. peach’s Company uses a weighted-average process-costing system. Company records disclosed
that the firm completed 40,000 units during the month and had 10,000 units in process at month-end,
70% complete. Conversion costs associated with the beginning work-in-process inventory amounted
to $231,000, and amounts that relate to the current month totaled $966,000. If conversion is incurred
uniformly throughout manufacturing, peach's equivalent-unit cost is:
A. $27.84. B. $25.47 C. $26.60 D. $28.50. E. some other amount.

Equivalent – unit cost = (966000+ 231000) / ( 40000+ (10000x70%)) = 25.47 $

41 | P a g e MR. YEHIA 01009010200

20- Universal Manufacturing uses a weighted-average process-costing system. All materials are
introduced at the start of manufacturing, and conversion costs are incurred evenly throughout the
process. The company's beginning and ending work-in-process inventories totaled 10,000 units and
15,000 units, respectively, with the latter units being 2/3 complete at the end of the period.
Universal started 30,000 units into production and completed 25,000 units. Manufacturing costs
follow.

Beginning work in process: Materials, $60,000; conversion cost, $150,000

Current costs: Materials, $180,000; conversion cost, $480,000

a. Universal's equivalent-unit cost for materials is:

A. $4.50. B. $6.00. C. $8.00. D. $9.60. E. some other amount.

(180000+ 60000) / ( 25000+ (15000 X 100% )) = 6

b- Universal's equivalent-unit cost for conversion cost is:

A. $13.71. B. $18.00. C. $21.00. D. $25.20. E. some other amount.

(150000+480000)/ ( 25000+ (15000 X 2/3) ) = 18

21. Gilbert adds materials at the beginning of production and incurs conversion cost uniformly
throughout manufacturing. Consider the data that follow.

Conversion cost in the beginning work-in-process inventory totaled $120,000, and August conversion
cost totaled $270,000. Assuming use of the weighted-average method, which of the following
choices correctly depicts the number of equivalent units for materials and the conversion cost per
equivalent unit?

A. Choice A B. Choice B C. Choice C D. Choice D E. Choice E

UNITS material = 55000 + (25000 x 100%) = 80000

Cost conversion per unit = (120000+270000) / (55000+ (25000x40%)) = 6 $

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22- South River Chemical manufactures a product called Zbek. Direct materials are added at the
beginning of the process, and conversion activity occurs uniformly throughout production. The
beginning work-in-process inventory is 60% complete with respect to conversion; the ending work-
in-process inventory is 20% complete. The following data pertain to May:

a. Using the weighted-average method of process costing, the equivalent units of direct materials
total:
A. 68,000. B. 69,400. C. 74,000. D. 75,000. E. some other amount.

68000+ (7000 X 100%) = 75000

b. Using the weighted-average method of process costing, the equivalent units of conversion activity
total:
A. 60,400. B. 68,000. C. 69,400. D. 74,000. E. some other amount.

68000+ (7000 X 20%) = 69400

c. Using the weighted-average method of process costing, the cost per unit of direct materials is:
A. $1.17. B. $1.18. C. $1.20. D. $1.28. E. some other amount.

88500 / 75000 = 1.18

d. Using the weighted-average method of process costing, the cost per unit of conversion activity is:
A. $2.50. B. $2.53. C. $2.70. D. $2.76. E. some other amount.

187380 / 69400 = 2.70

e. Using the weighted-average method of process costing, the cost of goods completed and
transferred during May is:
A. $249,560. B. $250,240. C. $258,400. D. $263,840. E. some other amount.

(68000 x 1.18) + (68000 X 2.70) = 263840

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F. Using the weighted-average method of process costing, the total costs remaining in work
in process at the end on May 31 are:
A. $0. B. $12,040. C. $17,480. D. $25,640. E. some other amount.

(7000 X 100% X 1.18) + (7000 X 20% X 2.70) = 12040

23- Chen Corporation, a new company, adds material at the beginning of its production process;
conversion cost, in contrast, is incurred evenly throughout manufacturing. During May, the firm
completed 15,000 units and had ending work in process of 2,000 units, 60% complete. Equivalent-
unit costs were: materials, $15; conversion, $22.

A. The cost of Chen's completed production is:

A. $225,000. B. $330,000. C. $333,000. D. $555,000. E. some other amount.

= ( 15000 x 15 ) + (15000 x 22) = 555000

b. The cost of the company's ending work-in-process inventory is:

A. $26,640. B. $44,400. C. $56,400. D. $74,000. E. some other amount.

= (2000 x100% x 15) + (2000 x 60% x 22) = 56400 $

24- Copley uses a weighted-average process-costing system. All materials are added at the beginning
of the process; conversion costs are incurred evenly throughout production. The company finished
40,000 units during the period and had 15,000 units in progress at year-end, the latter at the 40% stage
of completion. Total material costs amounted to $220,000; conversion costs were $414,000.

a. The cost of goods completed is:

A. $312,000. B. $414,000. C. $520,000. D. $634,000. E. some other amount.

 equivalent units in material = 40000 + (15000 x 100%) = 55000

 unit – cost for material = 220000 / 55000 = 4
 completed cost for material = 40000 x 4 = 160000
 equivalent units in conversion = 40000 + (15000 x 40%) = 46000
 unit – cost for conversion = 414000 / 46000 = 9
 completed cost for conversion = 40000 x 9 = 360000

Total cost completed for foods = 360000+ 160000 = 520000

b. The cost of the ending work in process is:

A. $54,000. B. $78,000. C. $114,000. D. $195,000. E. some other amount.

Cost ending work in process = ( 15000 x 100% x 4) + ( 15000 x 40% x 9) = 114000$

 44 | P a g e MR. YEHIA 01009010200

25. First Corporation adds all materials at the beginning of production and incurs conversion cost evenly
throughout manufacturing. The company completed 70,000 units during the year and had 12,000 units in process
at December 31, 20% complete with respect to conversion cost. Equivalent units for the year total:
A. materials, 70,000; conversion, 70,000. B. materials, 70,000; conversion, 2,400.
C. materials, 72,400; conversion, 72,400. D. materials, 82,000; conversion, 72,400.
E. materials, 82,000; conversion, 82,000.

Material = 70000 + 12000 = 82000 , conversion = 70000 + (12000 x 20%) = 72400

26- A company uses the weighted average method for inventory costing. During a period, a production
department had 20,000 units in beginning goods in process inventory which were 40% complete; the
department completed and transferred 165,000 units. At the end of the period, 22,000 units were in the
ending goods in process inventory and are 75% complete. All of these are with respect to labor. The
production department had labor costs in the beginning goods is process inventory and total labor costs
added during the period are $ 825825. Compute the equivalent cost per unit for labor.

a-4.76 b 4.55 c 4.19 d 4.40 e 4.61

Units completed and transferred 165000

Ending goods in process inventory 16500 =22000*75%

Equivalent units for labor 181500

Total costs for labor $825825

Divide by Equivalent units for labor 181500

Equivalent cost per unit for labor 4.55

27-A production department's output for the most recent month consisted of 10,000 units completed and
transferred to the next stage of production and 10,000 units in ending goods in process inventory. The units in
ending goods in process inventory were 50% complete with respect to both direct materials and conversion
costs. There were 1,000 units in beginning goods in process inventory, and they were 70% complete with
respect to both direct materials and conversion costs. Calculate the equivalent units of production for the
month, assuming the company uses the weighted average method.
A. 10,000 units. B. 10,300 units. C. 15,000 units. D. 15,300 units. E. 10,700 units.

10000 + (10000 x 50%) = 15000

28-The Mixing Department started the current month with a beginning goods in process inventory of
$10,000. During the month, it was assigned the following costs: direct materials, $119000; direct labor,
$24,000; and factory overhead, 50% of direct labor cost. Also, inventory with a cost of $109,000 was
transferred out of the department to the next phase in the process. The ending balance of the Goods in
Process Inventory account for the assembly Department is:
 45 | P a g e MR. YEHIA 01009010200

a-$110000 b 13000$ c 59000$ d 165000$ e -56000$

 Beginning goods in process inventory of $10,000

 direct materials, $119000

 direct labor, $24,000

 factory overhead, 50% of $24,000 = 12000

 Total = 165000

 Inventory transferred = $109000

 The ending balance of the Goods in Process Inventory account = $165000 – 109000 = $56000

29-The Mixing Department started the current month with a beginning goods in process inventory of
$10,000. During the month, it was assigned the following costs: direct materials, $76000; direct labor,
$24,000; and factory overhead, 50% of direct labor cost. Also, inventory with a cost of $109,000 was
transferred out of the department to the next phase in the process. The ending balance of the Goods in
Process Inventory account for the assembly Department is:
a-$110000 b 13000$ c 59000$ d 165000$ e -56000$

 Beginning goods in process inventory of $10,000

 direct materials, $76000

 direct labor, $24,000

 factory overhead, 50% of $24,000 = 12000

 Total = 122000

 Inventory transferred = $109000

 The ending balance of the Goods in Process Inventory account = $122000 – 109000 = $13000

30- In February, one of the processing departments at smith Corporation had beginning work in process inventory of
$16,000 and ending work in process inventory of $27,000. During the month, $334,000 of costs units started into
production and the cost of units transferred out from the department was $323,000.in the departments production
cost report for February the total cost to be accounted for would be
a- 350000 b 358000 c- 49000 d 187000 e 190000

27000+ 323000 = 350000

31- In June, one of the processing departments at smith Corporation had beginning work in process inventory of
$74,000 and ending work in process inventory of $50,000. During the month, $300,000 of costs units started into
production and the cost of units transferred out from the department was $324,000.in the departments production
cost report for June the total cost to be accounted for would be
b- 358000 b 374000 c- 43000 d 187000 e 190000
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50000+ 324000 = 374000

32- During a period, Department A finished and transferred 50,000 units to Department B. Of the
50,000 units, 20,000 were 20% complete with respect to direct labor at the beginning of the period
and 30,000 were started and completed during the period. Also, during the period, 10,000 units were
started but brought only to a stage of being 40% completed. Using the weighted-average inventory
valuation method, the number of equivalent units of labor added by the end of the period was:
A. 46,000 units. B. 50,000 units. C. 52,000 units. D. 54,000 units. E. 56,000 units.

Answer: E Feedback: 50,000 + (10,000 x 40%) = 54,000

33. A department had 65 units which were 20% complete in beginning Goods in Process
Inventory. During the current period, 77 units were transferred out. Ending Goods in Process
Inventory was 30 units which were 20% complete. Using the weighted-average method, what are
the equivalent units produced if all direct material and direct labor are added uniformly
throughout the process?
A. 83 B. 70 C. 100 D. 77 E. 107

Answer: A Feedback: 77 + (30 x .2) = 83

34. The Filtering Department started the current month with beginning goods in process inventory of
$55,000. During the month, it was assigned the following costs: direct materials, $77,000; direct labor,
$44,000; and factory overhead, 20% of direct material cost. Also, inventory with a cost of $66,000 was
transferred out of the department to the next phase in the process. The ending balance of the Goods
in Process Inventory account for the Filtering Department is:
A. $66,000
B. $110,000
C. $132,000
D. $125,400
E. $191,400

Answer: D

Feedback: $55,000 + $77,000 + $44,000 + $15,400 - $66,000 = $125,400

35. During the current period, Department A finished and transferred 50,000 units to Department B. Of
the 50,000 units, 20,000 were 20% complete at the beginning of the period and 30,000 were started and
completed during the period. Also during the period, 10,000 units were started but brought only to a
stage of being 60% completed. If the weighted-average method is used and $14,000 of overhead was
 47 | P a g e MR. YEHIA 01009010200

charged to Department A during the period, how much overhead should be allocated to the ending goods
in process inventory?
A. $1,615 B. $3,250 C. $2,600 D. $2,500 E. $1,500

Answer: E

Feedback: EU = 50,000 + (10,000 x 60%) = 56,000

EU in ending inventory = (10,000 x 60% ) = 6,000
Overhead allocated to ending inventory: (6,000/56,000) x $14,000 = $1,500

36 Gloria Company had no beginning work in process. During the period, 16,000 units were completed, and there
were 1,200 units of ending work in process. How many units were started into production?
A) 14,800. B) 17,200. C) 16000. D) 1,200.

16000 units completed + 1200 in process = 17200 started in production

37- Crawford Company has the following equivalent units for July: materials 20,000 and conversion costs 18,000.
Production cost data are: Materials , Conversion Work in process, July 1 $ 6,400 $ 3000 Costs added in July 50400 ,
42,000 The unit production costs for July are: Materials Conversion Costs
a-$2.52 $2.50
b- $2.84 $2.50
c-$2.84 $2.33
d-$2.52 $2.33

 Material cost per unit = (Beginning WIP material cost + Cost added) / No of equivalent units for material

 = (6400 + 50400) / 20000 = 2.84

 Conversion cost per unit = (Beginning WIP conversion cost + Cost added) / No of equivalent units for
conversion = (3000 + 42000) / 18000 = 2.50

38- In may, one of the processing departments at stilzer Corporation had beginning work in process inventory of
$23,000 and ending work in process inventory of $57,000. During the month the cost of units transferred out from
the department was $231,000.in the departments cost reconciliation report for may , the total cost accounted for
would be :
A-57000 b 254000 c- 80000 d 187000 e 288000
57000+ 231000 = 288000

39- In moyer company , the cutting department had 6,000 units were in beginning inventory, 24,000
units were transferred out and 3,000 units were in the ending inventory, how many units were started by
moyer during the month ?
A. 27,000 B. 21,000 C.18,000 D. 24000
3,000 + 24,000 - 6,000 = 21,000
40 For the month of January, there were no units in the beginning work in process inventory; 90,000 units were
completed and transferred out in January; and there were 20,000 units that were 40% complete in the ending
work in process inventory at the end of January. What were the equivalent units of production for the month of
January?
a 70000 equivalent units b 98000 equivalent units c 90000 equivalent units d 82000 equivalent units
 48 | P a g e MR. YEHIA 01009010200

90000 + (20000x 40%) = 98000 equivalent units

41 a process with no units in the beginning work in process inventory; 85,000 units were completed and
transferred out in January; and there were 50,000 units that were 30% complete in the ending work in process
inventory at the end of the period .What were the equivalent units of production for the month?
a 70000 equivalent units b 35000 equivalent units c 100000 equivalent units d 85000 equivalent units

85000 + (50000x 30%) = 100000 equivalent units

41. The following data relates to Lead Company’s estimated amounts for next year.

Estimated: Department 1 Department 2

Manufacturing overhead costs $1,200,000 $3,400,000

Direct labor hours 560,000 DLH 780,000 DLH

Machine hours 91,000 MH 23,000 MH

What is the company’s plantwide overhead rate if direct labor hours are the allocation
base?
(Round to two decimal places)
A. $3.43 per direct labor hour. B. $2.14 per direct labor hour.
C. $4.36 per direct labor hour. D. $.29 per direct labor hour.
E. $.47 per direct labor hour. Answer: A

Feedback: ($1,200,000 + $3,400,000)/(560,000 + 780,000)DLH = $3.43 per DLH

42. The following data relates to All-Out Company’s estimated amounts for next year.

Estimated: Department 1 Department 2

Manufacturing overhead costs $200,000 $400,000

Direct labor hours 60,000 DLH 80,000 DLH

Machine hours 1,000 MH 3,000 MH

What is the company’s plantwide overhead rate if machine hours are the allocation base?
(Round to two decimal places.)
A. $200.00 per MH B. $150.00 per MH C. $100.00 per MH D. $4.29 per MH E. $5.00 per MH

Answer: B Feedback: ($200,000 + $400,000)/(1,000 + 3,000)MH = $150 per MH

43. Lake Prairie Company uses a plantwide overhead rate with machine hours as the allocation
base. Next year, 500,000 units are expected to be produced taking .75 machine hours each. How
 49 | P a g e MR. YEHIA 01009010200

much overhead will be assigned to each unit produced given the following estimated amounts
using traditional approach?

Estimated: Department 1 Department 2

Manufacturing overhead costs $3,107,500 $1,520,000

Direct labor hours 150,000 DLH 200,000 DLH

Machine hours 200,000 MH 175,000 MH

A. $12.34 per unit

B. $7.77 per unit
C. $9.25 per unit
D. $15.20 per unit
E. $10.36 per unit

Answer: C

Feedback:

($3,107,500 + $1,520,000)/(200,000 + 175,000) MH = $12.34 per MH

$12.34 x .75 = $9.25 per unit

44. Rain Maker Company uses a plantwide overhead rate with direct labor hours as the allocation
base. Next year, 350,000 units are expected to be produced taking .80 direct-labor hours each. How
much overhead will be assigned to each unit produced given the following estimated amounts
using traditional approach?

Estimated: Department 1 Department 2

Manufacturing overhead costs $2,730,000 $910,000

Direct labor hours 168,000 DLH 112,000 DLH

Machine hours 30,000 MH 7,000 MH

A. $13.00 per unit B. $10.40 per unit C. $16.25 per unit D. $6.50 per unit
E. $8.13 per unit Answer: B

Feedback: ($2,730,000 + $910,000)/(168,000 + 112,000) DLH = $13 per DLH

$13 x .80 = $10.40 per unit

45. A company uses activity-based costing to determine the costs of its three products: A, B, and C.
The budgeted cost and activity for each of the company’s three activity cost pools are shown in the
 50 | P a g e MR. YEHIA 01009010200

following table:

Budgeted Activity

Activity Cost Budgeted

Pool Cost
Product A Product B Product C

Activity 1 $70,000 6,000 9,000 20,000

Activity 2 $45,000 7,000 15,000 8,000

Activity 3 $82,000 2,500 1,000 1,625

Which of the following statements is true regarding this company’s activity rates?
A. The activity rate under the activity-based costing system for Activity 2 is $2.00.
B. The activity rate under the activity-based costing system for Activity 2 is $16.00.
C. The activity rate under the activity-based costing system for Activity 2 is $1.50.
D. The activity rate under the activity-based costing system for Activity 2 is $19.50.
E. The activity rate under the activity-based costing system for Activity 2 is $2.81.

Answer: C

Feedback: $45,000/(7,000 + 15,000 + 8,000) = $1.50

46. A company uses activity-based costing to determine the costs of its three products: A, B,
and C. The budgeted cost and activity for each of the company’s three activity cost pools are
shown in the following table:

Budgeted Activity

Activity Cost Budgeted

Pool Cost
Product A Product B Product C

Activity 1 $70,000 6,000 9,000 20,000

Activity 2 $45,000 7,000 15,000 8,000

Activity 3 $82,000 2,500 1,000 1,625

What are the activity rates for the three activities under activity based costing?

A. (1) $2.00; (2) $3.00; (3) $3.50.

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B. (1) $3.50; (2) $1.50; (3) $32,80.

C. (1) $3.50; (2) $3.00; (3) $16.00.

D. (1) $2.00; (2) $1.50; (3) $16.00.

E. (1) $2.00; (2) $1.50; (3) $32.80.

Answer: D

Feedback:
(1) $70,000/(6,000+9,000+20,000) = $2.00
(2) $45,000/(7,000 + 15,000 + 8,000) = $1.50
(3) $82,000/(2,500+1,000+1,625) = $16.00

[Question]

47. A company uses activity-based costing to determine the costs of its three products: A, B
and C. The budgeted cost and activity for each of the company’s three activity cost pools are
shown in the following table:

Budgeted Activity

Activity Cost Budgeted

Pool Cost
Product A Product B Product C

Activity 1 $70,000 6,000 9,000 20,000

Activity 2 $45,000 7,000 15,000 8,000

Activity 3 $82,000 2,500 1,000 1,625

How much overhead will be assigned to Product B using activity-based costing?

A. $56,500 B. $78,000 C. $62,500 D. $197,000
E. $70,000

Answer: A

Feedback: (9,000)($2.00) + (15,000)($1.50) + (1,000)($16.00) = $56,500

48. A company has two products: A and B. It uses activity-based costing and has prepared the
following analysis showing budgeted cost and activity for each of its three activity cost pools:

Budgeted Activity
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Activity Cost Budgeted

Pool Cost
Product A Product B

Activity 1 $87,000 3,000 2,800

Activity 2 $62,000 4,500 5,500

Activity 3 $93,000 2,500 5,250

Annual production and sales level of Product A is 34,300 units, and the annual production
and sales level of Product B is 69,550 units. What is the approximate overhead cost per unit
of Product B under activity-based costing?
A. $3.00 B. $2.00 C. $10.28 D. $15.00 E. $2.33

Answer: B

Feedback:

Activity 1 allocated to Product B line: $87,000 x 2,800/5,800 = $42,000

Activity 2 allocated to Product B line: $62,000 x 5,500/10,000 = $34,100
Activity 3 allocated to Product B line: $93,000 x 5,250/7,750 = $63,000
Total overhead allocated to Product B = $139,100
Overhead per unit of Product B: $139,100/69,550 = $2.00

49. A company has two products: A and B. It uses activity-based costing and has prepared
the following analysis showing budgeted cost and activity for each of its three activity cost
pools:

Budgeted Activity

Activity Cost Budgeted

Pool Cost
Product A Product B

Activity 1 $87,000 3,000 2,800

Activity 2 $62,000 4,500 5,500

Activity 3 $93,000 2,500 5,250

Annual production and sales level of Product A is 34,300 units, and the annual production
and sales level of Product B is 69,550 units. What is the approximate overhead cost per unit
of Product A under activity-based costing?
A. $3.00 B. $2.00 C. $10.28 D. $15.00 E. $2.33 Answer: A
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Feedback:

Activity 1 allocated to Product A line: $87,000 x 3,000/5,800 = $45,000

Activity 2 allocated to Product A line: $62,000 x 4,500/10,000 = $27,900
Activity 3 allocated to Product A line: $93,000 x 2,500/7,750 = $30,000
Total overhead allocated to Product B = $102,900
Overhead per unit of Product B: $102,900/34,300 = $3.00

50. A company has two products: A1 and B2. It uses activity-based costing and has prepared the
following analysis showing budgeted cost and activity for each of its three activity cost pools:

Budgeted Activity

Activity Cost Budgeted

Pool Cost
Product A1 Product B2

Activity 1 $48,000 1,200 4,800

Activity 2 $63,000 2,240 4,760

Activity 3 $80,000 7,200 800

Annual production and sales level of Product A1 is 8,480 units, and the annual production
and sales level of Product B2 is 22,310 units. What is the approximate overhead cost per
unit of Product A1 under activity-based costing?

A. $8.00 B. $9.00 C. $10.00 D. $12.00 E. $4.00 Answer: D

Feedback:

Activity 1 allocated to Product A1 line: $48,000 x 1,200/6,000 = $9,600

Activity 2 allocated to Product A1 line: $63,000 x 2,240/7,000 = $20,160
Activity 3 allocated to Product A1 line: $80,000 x 7,200/8,000 = $72,000
Total overhead allocated to Product A1 = $101,760
Overhead per unit of Product A1: $101,760/8,480 = $12.00

51. A company has two products: A1 and B2. It uses activity-based costing and has prepared
the following analysis showing budgeted cost and activity for each of its three activity cost
pools:
54 | P a g e MR. YEHIA 01009010200

Budgeted Activity

Activity Cost Budgeted

Pool Cost
Product A1 Product B2

Activity 1 $48,000 1,200 4,800

Activity 2 $63,000 2,240 4,760

Activity 3 $80,000 7,200 800

Annual production and sales level of Product A1 is 8,480 units, and the annual production
and sales level of Product B2 is 22,310 units. What is the approximate overhead cost per
unit of Product B2 under activity-based costing?

A. $8.00 B. $9.00 C. $10.00 D. $12.00 E. $4.00

Answer: E

Feedback:

Activity 1 allocated to Product B2 line: $48,000 x 4,800/6,000 = $38,400

Activity 2 allocated to Product B2 line: $63,000 x 4,760/7,000 = $42,840
Activity 3 allocated to Product B2 line: $80,000 x 800/8,000 = $8,000
Total overhead allocated to Product A1 = $89,240
Overhead per unit of Product A1: $89,240/22,310 = $4.00

52. A company has two products: A and B. It uses a plant-wide overhead allocation method
based on activity 2 which is direct labor hours and has prepared the following analysis
showing budgeted costs and activities. Use this information to compute (a) the company’s
plant-wide overhead rate and (b) the amount of overhead allocated to Product A. using
traditional approach

Budgeted Activity

Budgeted

Activity Cost Pool Overhead Cost Product A Product B Total

Activity 1 $160,000 400 1,600 2,000

Activity 2 $210,000 2,000 1,000 3,000

Activity 3 $180,000 1,200 10,800 12,000

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Total budgeted $550,000

overhead

a 183.33 , 36666.66 b -198 , 359000 c- 150 , 300000 d -112.5 , 225000 e- 137.5 , 225000

Answer: (a) $550,000/3,000 units of activity 2 = $183.33per direct labor hours

(b) (2000 units)*($183.33/unit) = $36666.666

53. A company has two products: A and B. It uses activity-based costing and has prepared
the following analysis showing budgeted costs and activities. Use this information to
compute (a) the company’s overhead rates for each of the three activities and (b) the
amount of overhead allocated to Product A.

Budgeted Budgeted Activity

Overhead Cost
Activity Cost Pool Product A Product B Total

Activity 1 $160,000 400 1,600 2,000

Activity 2 $110,000 2,000 1,000 3,000

Activity 3 $180,000 1,200 10,800 12,000

Total budgeted $450,000

overhead

Answer: (a) (1) rate = $160,000/2,000 = $80/unit

(2) rate = $110,000/3,000 units = $36.67/unit
(3) rate = $180,000/12,000 = $15.00/unit

(b) (400)*($80) + (2,000)*($36.67) + (1,200)*($15.00) = $123,340

54-Activity rates from Quattrone Corporation's activity-based costing system are listed below.
The company uses the activity rates to assign overhead costs to products: Activity Cost Pools
Activity Rate Processing Cutomer Orders 92.86 Assembling Products 1.78 Setting Up Batches
 56 | P a g e MR. YEHIA 01009010200

52.09 Last year, Product F76D involved 2 customer orders, 443 assembly hours, and 20
batches. How much overhead cost would be assigned to Product F76D using the activity-based
costing system?

a- 2016.06 b-2185.76 c 2201.78 d 2000.04

= 92.86*2 + 443*1.78 + 20*52.09 = 2016.06

55-Activity rates from Quattrone Corporation's activity-based costing system are listed below.
The company uses the activity rates to assign overhead costs to products: Activity Cost Pools
Activity Rate Processing Cutomer Orders 92.86 Assembling Products 1.78 Setting Up Batches
52.09 Last year, Product F76D involved 4 customer orders, 443 assembly hours, and 20
batches. How much overhead cost would be assigned to Product F76D using the activity-based
costing system?

a- 2016.06 b-2185.76 c 2201.78 d 2000.04

= 92.86*4 + 443*1.78 + 20*52.09 = 2201.78

56-Activity rates from Quattrone Corporation's activity-based costing system are listed below.
The company uses the activity rates to assign overhead costs to products: Activity Cost Pools
Activity Rate Processing Cutomer Orders 92.86 Assembling Products 1.78 Setting Up Batches
52.09 Last year, Product F76D involved 2 customer orders, 434 assembly hours, and 20
batches. How much overhead cost would be assigned to Product F76D using the activity-based
costing system?

a- 2016.06 b-2185.76 c 2201.78 d 2000.04

= 92.86*2 + 434*1.78 + 20*52.09 = 2000.04

57.ABC company uses ABC system with four cost pools . The company has two overhead
departments whose costs are listed as follows:
Manufacturing overhead……………………………….. $450,000
non manufacturing over head …………………300,000
Total overhead costs…………………………………………750,000
Distribution of Resource Consumption Across Activity Cost Pools
Assembling customer order
Units support processing machining
Manufacturing Overhead 30% 30% 30% 10%
Non manufacturing Overhead 45% 15% 20% 20%
How much overhead allocated in total in the first stage allocation to customer support cost pool?

a- 106000 b- 270000 c -195000 d- 210000 e- 180000

(450000 x 30%) + (300000 x 15%) = 180000

58. ABC company uses ABC system with four cost pools . The company has two overhead
departments whose costs are listed as follows:
 57 | P a g e MR. YEHIA 01009010200

Manufacturing overhead……………………………….. $450,000

non manufacturing over head …………………300,000
Total overhead costs…………………………………………750,000
Distribution of Resource Consumption Across Activity Cost Pools
Assembling customer order
Units support processing machining
Manufacturing Overhead 30% 30% 30% 10%
Non manufacturing Overhead 45% 15% 20% 20%
How much overhead allocated in total in the first stage allocation to machining cost pool?

a- 106000 b- 270000 c -105000 d- 210000 e- 180000

(450000 x 10%) + (300000 x 20%) = 105000

59. ABC company uses ABC system with four cost pools . The company has two overhead
departments whose costs are listed as follows:
Manufacturing overhead……………………………….. $450,000
non manufacturing over head …………………300,000
Total overhead costs…………………………………………750,000
Distribution of Resource Consumption Across Activity Cost Pools
Assembling customer order
Units support processing machining
Manufacturing Overhead 30% 30% 30% 10%
Non manufacturing Overhead 45% 15% 20% 20%
How much overhead allocated in total in the first stage allocation to order processing cost pool?

a- 106000 b- 270000 c -195000 d- 210000 e- 180000

(450000 x 30%) + (300000 x 20%) = 195000

60-Solo company uses activity based costing system with the following three activity cost pools.

Activity cost pool Total activity

Machining 20000 machine hours
Customer support 3000 customers
Machine setup 5000 setups
The company provided information’s concerning its costs

Manufacturing overhead 4500000$

Non manufacturing overhead 1300000$

Distribution of resources across cost pools given below:

COST pools
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Machining Customer support Machine setup

Manufacturing OH 10% 30% 60%
Non manufacturing OH 35% 35% 30%

a-calculate activity rate for customer support activity cost pool ?

a- $543.35 per customer

b- $676.83 per customer
c- $734.64 per customer
d- $601.67 per customer

((4500000 x 30%) +( 1300000 x 35%))/ 3000 = 601.67$ per customer

b-calculate activity rate for machine setup cost pool ?

a- $543.35 per setup

b- $676.83 per setup
c- $734.64 per setup
d- $6 18 per setup

((4500000 x 60%) +( 1300000 x 30%))/ 5000 = 618 $ per setup

c-calculate activity rate for machining cost pool ?

a- $45.65 per machine hour

b- $676.83 per machine hour
c- $734.64 per machine hour
d- $45.25 per machine hour

((4500000 x 10%) +( 1300000 x 35%))/ 20000 = 45.25 $ per machine hour

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61- Hi-Tech Products manufactures three types of remote-control devices: Economy, Standard, and
Deluxe. The company, which uses activity-based costing, has identified five activities (and related
cost drivers). Each activity, its budgeted cost, and related cost driver is identified below.

The following information pertains to the three product lines for next year:
60 | P a g e MR. YEHIA 01009010200

a. What is HiTech's pool rate for the material-handling activity?

A. $1.00 per part. B. $2.25 per part. C. $6.62 per labor hour.
D. $13.23 per part. E. A rate other than those listed above.

225000 / ( (10x 10000) + (15 x5000) + ( 25 x 2000 )) =1

b. What is HiTech's pool rate for the automated machinery activity?

A. $24.00 per machine hour.
B. $24.50 per labor hour.
C. $49.42 per unit.
D. $50.00 per machine hour.
E. A rate other than those listed above.

840000 / ( (1x 10000) + (3 x5000) + ( 5 x 2000 )) =24

c. What is HiTech's pool rate for the finishing activity?

A. $5.00 per labor hour. B. $5.00 per machine hour. C. $5.00 per unit.
D. $7.50 per unit. E. A rate other than those listed above.

170000 / ( (2x 10000) + (2 x5000) + ( 2 x 2000 )) = 5

d. What is HiTech's pool rate for the packaging activity?

A. $4.86 per machine hour. B. $5.00 per labor hour.
C. $10.00 per unit. D. $100.00 per order shipped. E. A rate other than those listed above.

170000 / ( 1000 + 500 + 200 ) = 100

e. What is HiTech's pool rate for the material insertion?

A. $15.30 per part. B. 12.$50 per part
C. $10.00 per part D. $11.00 per part . E. A rate other than those listed above.

2475000 /( (10x 10000) + (15 x5000) + ( 25 x 2000 )) = 11

f. Under an activity-based costing system, what is the per-unit cost of Economy?

A. $141. B. $164. C. $225. D. $228.
E. An amount other than those listed above.

g. Under an activity-based costing system, what is the per-unit cost of Standard?

A. $164. B. $228. C. $272. D. $282.
E. An amount other than those listed above.
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h. Under an activity-based costing system, what is the per-unit cost of Deluxe?

A. $272. B. $282. C. $320. D. $440. E. An amount other than those listed above.

i. Assume that HiTech is using a volume-based costing system, and the preceding manufacturing costs
are applied to all products based on direct labor hours. How much of the preceding cost would be
assigned to Deluxe?
A. $456,471.
B. $646,471.
C. $961,176.
D. $1,141,176.
E. An amount other than those listed above.

j. Assume that HiTech is using a volume-based costing system, and the preceding manufacturing costs
are applied to all products based on direct labor hours. How much of the preceding cost would be
assigned to Standard?
A. $456,471.
B. $646,471.
C. $961,176.
D. $1,141,176.
E. An amount other than those listed above.

62-Wings Co. budgeted $555,600 manufacturing direct wages, 2,315 direct labor hours, and had the
following manufacturing overhead:

Budgeted Budgeted Level

Overhead Cost Pool Overhead Cost for Cost Driver Overhead Cost Driver

Materials handling $ 160,000 3,200 pounds Weight of materials

Machine setup 13,200 390 setups Number of setups

Machine repair 1,380 30,000 machine hours Machine hours

Inspections 10,560 160 inspections Number of inspections

Requirements for Job #971 which manufactured 4 units of product:

Direct labor 20 hours

Direct materials 130 pounds

Machine setup 30 setups

Machine hours 15,000 machine hours

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Inspections 15 inspections

a-Using ABC, the materials handling overhead cost assigned to Job #971 is:
A. $3,250.
B. $1,200.
C. $8,400.
D. $948.
E. $6,500.

Materials 3,200 Weight of 160,000/3,200 = 130 x 50

160,000 130 pounds
handling pounds materials $50 = 6,500

b-Using ABC, the machine setup overhead cost assigned to Job #971 is:
A. $3,250.
B. $1,200.
C. $8,400.
D. $948.
E. $1015.

Number 30 x
Machine 390 13,200/390 30
13,200 of 34 =
setups setups = $33.33 setups
setups 1,015

c-Using ABC, the machine repair overhead cost assigned to Job #971 is:
A. $3,250.
B. $1,200.
C. $8,400.
D. $690
E. $1015.

30,000 15,000 15,000 x

Machine Machine 1,380/30,000 =
1,380 machine machine 0.046 =
repair hours $0.05
hours hours 690

d-Using ABC, the inspection overhead cost assigned to Job #971 is:
A. $3,250.
B. $1,200.
C. $8,400.
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D. $990.
E. $1015.

160 Number of 15 15 x 66 =
Inspection 10,560 10560/160=$66
inspections inspections inspections 990

63-St. James, Inc., currently uses traditional costing procedures, applying $800,000 of overhead to
products Beta and Zeta on the basis of direct labor hours. The company is considering a shift to
activity-based costing and the creation of individual cost pools that will use direct labor hours (DLH),
production setups (SU), and number of parts components (PC) as cost drivers. Data on the cost pools
and respective driver volumes follow.

A. The overhead cost allocated to Beta by using traditional costing procedures would be:
A. $240,000. B. $356,000. C. $444,000. D. $560,000.
E. some other amount.

800000 / (1200 + 2800) X 1200 = 240000

b. The overhead cost allocated to Zeta by using traditional costing procedures would be:
A. $240,000. B. $356,000. C. $444,000. D. $560,000. E. some other amount.

800000 / (1200 + 2800) X 2800 = 560000

C. The overhead cost allocated to Beta by using activity-based costing procedures would be:
A. $240,000. B. $356,000. C. $444,000. D. $560,000. E. some other amount.

Expected
Estimated Use of Cost Activity Based
activity Cost Driver Overhead Driver Overhead Rate

Pool 1 DLH 160000 4000 $ 40.00

Pool 2 Set Up 280000 100 $ 2,800.00

Pool 3 PC 360000 3000 $ 120.00

64 | P a g e MR. YEHIA 01009010200

Determine the amount of overhead cost that would be assigned to each product using activity-based
costing.

Total Overhead Cost of

Product ZETa

Activity Based Expected Use Estimated

Activity Overhead Rate of Cost Driver Overhead

Pool 1 $40.00 1200

Pool 2 $2,800.00 45

Pool 3 120 2250

444000$

D. The overhead cost allocated to Zeta by using activity-based costing procedures would be:
A. $240,000. B. $356,000. C. $444,000. D. $560,000. E. some other amount.

Expected
Estimated Use of Cost Activity Based
activity Cost Driver Overhead Driver Overhead Rate

Pool 1 DLH 160000 4000 $ 40.00

Pool 2 Set Up 280000 100 $ 2,800.00

Pool 3 PC 360000 3000 $ 120.00

Determine the amount of overhead cost that would be assigned to each product using activity-based
costing.

Total Overhead Cost of

Product ZETa
 65 | P a g e MR. YEHIA 01009010200

Activity Based Expected Use Estimated

Activity Overhead Rate of Cost Driver Overhead

Pool 1 $40.00 2800 $112,000

Pool 2 $2,800.00 55 $154,000

Pool 3 120 750 $90,000

$356,000

64- Riverside Florists uses an activity-based costing system to compute the cost of making floral
bouquets and delivering the bouquets to its commercial customers. Company personnel who earn
$180,000 typically perform both tasks; other firm-wide overhead is expected to total $70,000. These
costs are allocated as follows:

Riverside anticipates making 20,000 bouquets and 4,000 deliveries in the upcoming year.

A. The cost of wages and salaries and other overhead that would be charged to each bouquet made is:
A. $7.15. B. $8.75. C. $12.50. D. $13.75. E. some other amount.

((180000 X 60%) + (70000X50%)) / 20000 = 7.15

B. The cost of wages and salaries and other overhead that would be charged to each delivery is:
A. $19.63. B. $20.31. C. $26.75. D. $40.63. E. some other amount.

((180000 X 30%) + (70000X 35%)) / 4000 = 19.63

65-On December 31, Talley Company recorded the following information in the Grating Department's
Work in Process Inventory account:

Units Cost

Beginning balance (80% complete) 5,000 56,000 $

Started into production 115,000 $1,505,800

Completed and transferred to Assembly Department 105,000 ?

Ending balance (60% complete) 15,000 ?

 66 | P a g e MR. YEHIA 01009010200

ASSUME that unfinished units in ending inventory are 60% complete for both material and
conversion what is the cost per equivalent unit ?
(a)$13.58 (b) $13.70 (c)$13.02 (d)$13.0

Equivalent units = 105000 + (15000 x 60%) = 114000

Cost –equivalent unit = (56000+ 1505800) / 114000 = 13.70 4

66. Youd Corporation uses an activity-based costing system with three activity cost pools.
The company has provided the following data concerning its costs and its activity based
costing system:

COST S:

Wages and salaries …. 470000

Depreciation …… 190000

Total ……….. = 660000

Distribution of resources across cost pools given below:

COST pools

Assembly Setting up Customer total

support
Wages and salaries 15% 60% 25% 100%
Deprecation 20% 35% 45% 100%

a- How much cost, in total, would be allocated in the first-stage allocation to the customer
support activity cost pool?
A. $203,000 B. $208,000 C. $242,000 D. $165,000

(470000 x 25%) + ( 190000 x 45%)= 203000

b- How much cost, in total, would be allocated in the first-stage allocation to the setting up
activity cost pool?
A. $339,000 B. $208,000 C. $242,000 D. $165,000

(470000 x 60%) + ( 190000 x 35%)= 339000

c- How much cost, in total, would be allocated in the first-stage allocation to the assembly
activity cost pool?
A. $108,500 B. $208,000 C. $242,000 D. $165,000

(470000 x 15%) + ( 190000 x 20%)= 108500

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67. mckenrick Corporation uses an activity-based costing system with three activity cost
pools. The company has provided the following data concerning its costs and its activity
based costing system:

COST S:

Wages and salaries …. 340000

Depreciation …… 280000

Total ……….. = 620000

Distribution of resources across cost pools given below:

COST pools

Assembly Setting up Customer total

support
Wages and salaries 50% 25% 25% 100%
Deprecation 5% 45% 50% 100%

a- How much cost, in total, would be allocated in the first-stage allocation to the customer
support activity cost pool?
A. $225,000 B. $208,000 C. $242,000 D. $165,000

(340000 x 25%) + ( 280000 x 50%)= 225000

b- How much cost, in total, would be allocated in the first-stage allocation to the setting up
activity cost pool?
A. $211,000 B. $208,000 C. $242,000 D. $165,000

(340000 x 25%) + ( 280000 x 45%)= 211000

c- How much cost, in total, would be allocated in the first-stage allocation to the assembly
activity cost pool?
A. $184000 B. $208,000 C. $242,000 D. $165,000

(340000 x 50%) + ( 280000 x 5%)= 184000

68 | P a g e MR. YEHIA 01009010200

68. Matt Company uses activity-based costing. The company has two products: A and B. The annual
production and sales of Product A is 8,000 units and of Product B is 6,000 units. There are three
activity cost pools, with total cost and total activity as follows:

Total cost Product A activity Product B activity Total activity

Customer support 20000 100 400 500

Number of
customers

Order processing 37000 800 200 1000

Number of orders
A-The activity-based costing cost per unit of Product A is closest to:
A. $2.40 B. $3.90 C. $10.59 D. $4.20

 The activity rates for each activity cost pool are computed as follows:
 customer support = 20000 / 500 = 40
 order processing = 37000 / 1000 =37

The overhead cost charged to Product A is:

rate x actual activity
 Customer support = 40 x 100 = 4000
 Order processing = 37 x 800 = 29600
 total = 4000 + 29600 =33600
 Cost per unit = $33600  8,000 units = 4.2 per unit

B-The activity-based costing cost per unit of Product B is closest to:

A. $2.40 B. $3.90 C. $10.59 D. $4.20

 The activity rates for each activity cost pool are computed as follows:
 customer support = 20000 / 500 = 40
 order processing = 37000 / 1000 =37

The overhead cost charged to Product B is:

rate x actual activity
 Customer support = 40 x 400 = 16000
 Order processing = 37 x 200 = 7400
 total = 16000 + 7400 =23400
 Cost per unit = $23400  6,000 units = 3.9 per unit
 69 | P a g e MR. YEHIA 01009010200

69. Wecker Corporation uses the following activity rates from its activity-based costing to assign
overhead costs to products:

Data concerning two products appear below:

How much overhead cost would be assigned to Product V09X using the activity-based costing
system?
A. $157.87 B. $91,722.47 C. $10,385.22 D. $5,485.50

The overhead cost charged to Product V09X is:

70. Ekmark Corporation uses the following activity rates from its activity-based costing to assign overhead
costs to products:

Data for one of the company's products follow:

How much overhead cost would be assigned to Product P59G using the activity-based costing system?
A. $54,482.56 B. $5,301.76 C. $10,014.40 D. $154.78
 70 | P a g e MR. YEHIA 01009010200

The overhead cost charged to Product P59G is:

70 walkers Texas produces two kinds of recliners, standard and deluxe information about two
products follows:

Product X Product Y
Units produced 5000 2000
Direct material cost per unit 50$ 25$
Direct labor cost per unit 25$ 32$
Direct labor hours required for 1500 500
production
Machine hours required for 3000 5000
production
Number orders 4500 2300
Production costs are as follows
Activity Costs Activity driver
Machining 250000$ Machine hours
Order processing 210000$ Number orders
Total overhead cost 460000$

a-What is the total cost of product X?

A- 607720.6$
B- 638680.4$
C- 540865.2$
D- 438860.7$
 O.H rate of machining = 250000 /(3000+5000) = 31.25
 O.H rate of order processing = 210000 /(4500+2300) = 30.88
 total cost =(50x5000) + (25 x 5000) + (3000 x 31.25) +( 4500 x 30.88) =607720.6$

a-What is the total cost of product Y?

A. 341274$
B. 638680.4$
C. 540865.2$
D. 438860.7$
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 O.H rate of machining = 250000 /(3000+5000) = 31.25

 O.H rate of order processing = 210000 /(4500+2300) = 30.88
 total cost =(25x2000) + (32 x 2000) + (5000 x 31.25) +( 2300 x 30.88) =341274$

71. Boswell company manufactures two products, regular and supreme. Boswell’s total estimated
overhead cost is 4500000$. Information on two products is

Regular supreme
Direct labor hours
10000 15000

Machine hours 10000 30000

Number of parts 90000 160000

a- overhead applied to supreme using traditional costing using machine hours is

a-3375000 $ b 3210000 $ c 2771000 $ d 3380000$

O.H rate = 4500000 / (30000+ 10000) = 112.5

OH applied to supreme = 112.5 x 30000 = 3375000

b- overhead applied to regular using traditional costing using machine hours is

A-1,125,000 $ b 3210000 $ c 2771000 $ d 3380000$

O.H rate = 4500000 / (30000+ 10000) = 112.5

OH applied to supreme = 112.5 x 10000 = 1,125,000$

c- overhead applied to supreme using traditional costing using direct labor hours is
a-3375000 $ b 3210000 $ c 2700000 $ d 3380000$

O.H rate = 4500000 / (10000+ 15000) = 180

OH applied to supreme = 180 x 15000 = 2700000$

d- overhead applied to regular using traditional costing using direct labor hours is
a-3375000 $ b 3210000 $ c 1,800,000 $ d 3380000$

O.H rate = 4500000 / (10000+ 15000) = 180

OH applied to supreme = 180 x 10000 = 1800000$

72. Boswell company manufactures two products, regular and supreme. Boswell’s total estimated
overhead cost is 5500, 000$. Information on two products is
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Regular supreme
Direct labor hours
10000 15000

Machine hours 10000 30000

Number of parts 90000 160000

- overhead applied to regular using traditional costing using machine hours is

A-1375000 $ b 3210000 $ c 2771000 $ d 3380000$

 O.H rate = 5500000 / (30000+ 10000) = 137.5

 OH applied to supreme = 137.5 x 10000 = 1375000$

73-. McCaskey Corporation uses an activity-based costing system with three activity cost pools. The
company has provided the following data concerning its costs and its activity based costing system:

Activity cost pool Total activity

Fabrication 40000 machine Hrs
Order processing 500 orders
Customer support 100 customers

COST S:

Wages and salaries …. 480,000

Depreciation …… 160,000

Total ……….. = 640,000

Distribution of resources across cost pools given below:
COST pools
fabrication Order Customer total
processing support
Wages and salaries 5% 80% 15% 100%
Deprecation 15% 45% 40% 100%

a- the activity rate for the fabrication activity cost pool is closest to

A. 1.2 $ per machine hour B. 0.80$ per machine hour C. 2 $ per machine hour D-3 $ per machine hour

(480000 x 5%) + ( 160000 x 15%)= 48000

activity rate = 48000 / 40000 = 1.2 $ per machine hour

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b- the activity rate for the order processing activity cost pool is closest to

A- 912 $ per order B. 180$ per order C. 200 $ per order D-300 $ per order

(480000 x 80%) + ( 160000 x 45%)= 456,000

activity rate = 456000 / 500 = 912 $ per order

c- The activity rate for the customer support activity cost pool is closest to

a- 1360$ per customer B. 1080$ per customer C. 2000 $ per customer D-3000 $ per customer
 (480000 x 15 %) + ( 160000 x 40%)= 136,000
 activity rate = 136000 / 100 = 1360 $ per customer

74-Goold Corporation uses activity-based costing to compute product margins. Overhead costs
have already been allocated to the company's three activity cost pools-Machining, Order Filling,
and Other. The costs in those activity cost pools appear that Machining costs are assigned to
products using machine-hours (MHs) and Order Filling costs are assigned to products using the
number of orders.. Activity data appear below:

Total cost Product x Product B TOTAL ACTIVITY

Machining 3200$ 3900 16100 20000

(MHrs)
Order filling 7600$ 700 1300 2000
(number of
orders)

A-What is the overhead cost assigned to Product X under activity-based costing?

a. $3564 b. $2,660 c. $7687 d. $3,284

 Machining cost assigned = (3900 / 20000) x 3200 = 624$

 order filling cost assigned = (700 / 2000) x 7600 = 2660$
 total = 624 + 2660 = 3284 $

b-What is the overhead cost assigned to Product Y under activity-based costing?

a. $3564 b. $2,660 c. $7687 d. $7516

- Machining cost assigned = (16100 / 20000) x 3200 = 2576$

- order filling cost assigned = ( 1300 / 2000) x 7600 = 4940$
- total = 2576 + 4940 = 7516$
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75- Sam Co. had 4,000 units of work in process on April 1. During April, 11,000 units were completed and
as
of April 30, 6,000 units remained in production. How many units were started during April?
a- 26000 units b 30000 units c 50000 units d 40000

Answer: 13,000. 11000 + 6000 – 4000 = 26000

76. Unit costs in a process-costing system are derived by using:

a -equivalent units b started in production c total cost d units completed and transferred out

77. Which of the following data are needed to calculate total equivalent units under the weighted-
average
method?

a. Units completed during the period, work-to-date on ending work in process.

b. costs completed during the period , cost on beginning work-in process
c. units beginning during the period , work –to date beginning work in process

78 United Corporation, which adds materials at the beginning of production, uses a weighted-
average process-costing system. Consider the data that follow
Number of Units Cost of Material
Beginning work in process 30,000 22,600
Started in May 80,000 72,000
Production completed 85,000
Ending work in process 25,000

The company's cost per equivalent unit for materials is:

a- 0.86 b 0.75 c- 0.66 d 0.5

Answer: (22600 +72000 / 85000 +25000)

79 Equivalent unit calculations are necessary to allocate manufacturing costs between

Select one:
a. cost of goods manufactured and cost of goods sold.
b. beginning work in process and units completed.
c. cost of goods manufactured and ending work in process.
d. cost of goods manufactured and beginning work in process.

80 -Equivalent-unit calculations are necessary to allocate manufacturing costs between:

A. Units completed and ending work in process.
B. Beginning work-in-process and units completed.
C. Units sold and ending WIP
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D. Cost of goods manufactured and beginning WIP

E. Cost of Goods manufactured and costs of goods sold

81. Which of the following companies would likely use a process-costing system?
Custom Furniture Manufacturer
Chemical Producer
Soft Drink Bottler
A.
Yes Yes , yes B. Yes , Yes , No
C.
No , Yes , No
D.
No , Yes , Yes
E.
No , No , Yes

82- Which of the following is a key document in a typical process-costing system

A. Departmental production report.

B. production budget
C. master schedule
D. material requirement report

83- The total costs to account for equal:

a- The costs in the beginning inventory plus current period costs

b- the cost in the ending inventory plus current period
c- the cost in the ending inventory minus current period

84- Diston Company uses the weighted-average method in its process costing system.
The first processing department, the Welding Department, started the month
with 18,000 units in its beginning work in process inventory that were 30% complete
with respect to conversion costs. The conversion cost in this beginning work in process
inventory was $44,820. An additional 90,000 units were started into production during
the month. There were 21,000 units in the ending work in process inventory of the
Welding Department that were 10% complete with respect to conversion costs.
A total of $677,970 in conversion costs were incurred in the department during the month.
What would be the cost per equivalent unit for conversion costs for the month? (Round off to three decimal
places.)

A. $8.112 b 9.112 c 10.3 d 11.2

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85 - Loll Company uses the weighted-average method in its process costing system. Operating data
for the first processing department for the month of June appear below:

Conversion
beginning work in process inventory 11,000 50%
Started into production during June 98,000
Ending work in process inventory 21,000 80%
According to the company's records, the conversion cost in beginning work in process inventory was
$46,915 at the beginning of June. Additional conversion costs of $825,183 were incurred in the
department during the month.
What was the cost per equivalent unit for conversion costs for the month? (Round off to three
decimal places.)

D. $8.322 b 9.33 c 5.60 d- 7

Answer

Beginning WIP inventory 11,000

Started into production during June 98,000

(-) Ending WIP inventory (21,000)

Units completed and transferred

during the month 88,000

Equivalent units = 88,000 + (21,000 * 80%) = 88,000 + 16,800 = 104,800 units.

Conversion cost = cost beginning + cost added during production = 46,915 + 825,183 =
872,098.

Now, Cost per equivalent units = Total conversion cost / Equivalent units
= $872,098 / 104,800

Cost per equivalent units = 8.322

…………………………………………………………………………………..
24. The following information pertains to Yap Company's Grinding Department for the month of April:

All materials are added at the beginning of the process. Using the weighted-average method, the
cost per equivalent unit for materials is closest to:
A. $0.59
B. $0.55
C. $0.45
D. $0.43
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25. Hardouin Company uses the weighted-average method in its process costing system. The first
processing department, the Welding Department, started the month with 22,000 units in its
beginning work in process inventory that were 20% complete with respect to conversion costs. The
conversion cost in this beginning work in process inventory was $23,320. An additional 97,000 units
were started into production during the month and 101,000 units were completed in the Welding
Department and transferred to the next processing department. There were 18,000 units in the
ending work in process inventory of the Welding Department that were 40% complete with respect
to conversion costs. A total of $529,380 in conversion costs were incurred in the department during
the month. What would be the cost per equivalent unit for conversion costs for the month? (Round
off to three decimal places.)
A. $5.300
B. $5.458
C. $4.603
D. $5.108
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26.Parmentier Company uses the weighted-average method in its process costing system. The
Molding Department is the second department in its production process. The data below summarize
the department's operations in January.

The accounting records indicate that the conversion cost that had been assigned to beginning work
in process inventory was $5,096 and a total of $87,668 in conversion costs were incurred in the
department during January.
What was the cost per equivalent unit for conversion costs for January in the Molding Department?
(Round off to three decimal places.)
A. $1.654
B. $1.752
C. $1.490
D. $1.499
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27. Scheney Company uses the weighted-average method in its process costing system. The
company's work in process inventory on March 31 consisted of 20,000 units. The units in the ending
work in process inventory were 100% complete with respect to materials and 70% complete with
respect to labor and overhead. If the cost per equivalent unit for March was $2.50 for materials and
$4.75 for labor and overhead, the total cost in the March 31 work in process inventory was:
A. $145,000
B. $116,500
C. $101,500
D. $78,500
(20000 x100% 2.50) + ( 20000x70% x 4.75 ) = 116500

28. The following data were taken from the accounting records of the Hazel Corporation which
uses the weighted-average method in its process costing system:

The equivalent units for conversion costs was:

A. 102,000 units
B. 112,000 units
C. 111,000 units
D. 100,000 units

Completed =Beg 30000 +started 90000-ending 20000 = 100000

1000000 + (60% x20000) = 112000

29. Borwan Company uses the weighted-average method in its process costing system. The
Assembly Department started the month with 8,000 units in its beginning work in process inventory
that were 70% complete with respect to conversion costs. An additional 69,000 units were
transferred in from the prior department during the month to begin processing in the Assembly
Department. There were 5,000 units in the ending work in process inventory of the Assembly
Department that were 20% complete with respect to conversion costs.
What were the equivalent units for conversion costs in the Assembly Department for the month?
A. 67,400
B. 73,000
C. 72,000
D. 66,000

8000 + 69000 – 5000 = 72 000

72000 + 5000*20% = 73,000 units

30. Jastak Company uses the weighted-average method in its process costing system. Operating
data for the Painting Department for the month of April appear below:
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What were the equivalent units for conversion costs in the Painting Department for April?
A. 106,100
B. 91,500
C. 98,970
D. 106,270

1000 + 98,800 – 8 300 = 91, 500

91500 + 8300 *90% = 98,970 units

31. Fayard Corporation uses the weighted-average method in its process costing system. The
Assembly Department started the month with 5,000 units in its beginning work in process inventory
that were 70% complete with respect to conversion costs. An additional 67,000 units were
transferred in from the prior department during the month to begin processing in the Assembly
Department. During the month 63,000 units were completed in the Assembly Department and
transferred to the next processing department. There were 9,000 units in the ending work in process
inventory of the Assembly Department that were 50% complete with respect to conversion costs.
What were the equivalent units for conversion costs in the Assembly Department for the month?
A. 71,000
B. 64,000
C. 63,000
D. 67,500

5000 + 67000 – 9000 = 63000 + 9000*50% = 67,500 units

32. Nguyen Corporation uses the weighted-average method in its process costing system.
Operating data for the Lubricating Department for the month of October appear below:

What were the equivalent units for conversion costs in the Lubricating Department for October?
A. 53,700
B. 52,280
C. 54,080
D. 50,100

53700 + (1,900 * 20%) = 54,080 units

33. Sanchez Corporation uses the weighted-average method in its process costing system. The
Fitting Department is the second department in its production process. The data below summarize
the department's operations in March.

The Fitting Department's cost per equivalent unit for conversion cost for March was $8.66.
How much conversion cost was assigned to the units transferred out of the Fitting Department
during March?
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A. $480,630
B. $450,320
C. $444,258
D. $510,940

7000 + 52000 – 3500 = 55500 transferred out * 8.66 = $480,630

34. The Gasson Company uses the weighted-average method in its process costing system. The
company's ending work in process inventory consists of 10,000 units, 100% complete with respect to
materials and 70% complete with respect to labor and overhead. If the costs per equivalent unit are
$4.50 for the materials and $2.00 for labor and overhead, the balance of the ending work in process
inventory account would be:
A. $44,500
B. $50,500
C. $59,000
D. $65,000

(10000*100% x 4.5) + (10000x 70% * 2) = 59,000

35. Ravalt Corporation uses the weighted-average method in its process costing system. The
Molding Department is the second department in its production process. The data below summarize
the department's operations in January.

The Molding Department's cost per equivalent unit for conversion cost for January was $7.90.
How much conversion cost was assigned to the ending work in process inventory in the Molding
Department for January?
A. $27,729
B. $30,810
C. $3,081
D. $5,056

(3900*90%) * 7.9 = $27,729

36. In February, one of the processing departments at Carpentier Corporation had beginning
work in process inventory of $14,000 and ending work in process inventory of $29,000. During the
month, $148,000 of costs were added to production and the cost of units transferred out from the
department was $133,000. In the department's cost reconciliation report for February, the total cost
to be accounted for would be:
A. $310,000
B. $162,000
C. $324,000
D. $43,000
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14000 + 148000 = $162,000

37. In February, one of the processing departments at Whisenhunt Corporation had beginning
work in process inventory of $35,000 and ending work in process inventory of $11,000. During the
month, the cost of units transferred out from the department was $410,000. In the department's
cost reconciliation report for February, the total cost to be accounted for would be:
A. $46,000
B. $807,000
C. $842,000
D. $421,000

= transfer out + end wip: 410000 + 11000 = $421,000

38. Jumper Company uses the weighted-average method in its process costing system. The
following data pertain to operations in the first processing department for a recent month:

How many units were in the ending work in process inventory?

A. 600 units
B. 1,000 units
C. 800 units
D. 1,400 units

400 + 15000 – 14400 = 1,000 unit

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39. Jumper Company uses the weighted-average method in its process costing system. The
following data pertain to operations in the first processing department for a recent month:

What was the cost per equivalent unit for conversion cost?

A. $5.00
B. $12.30
C. $8.50
D. $14.75

3300 + 215000= 218300 / (14400 + 1000*40% ) = $14.75

33. Garrison Company uses a weighted-average process-costing system. Company records disclosed
that the firm completed 50,000 units during the month and had 10,000 units in process at month-
end, 25% complete. Conversion costs associated with the beginning work-in-process inventory
amounted to $105,000, and amounts that relate to the current month totaled $840,000. If
conversion is incurred uniformly throughout manufacturing, Garrison's equivalent-unit cost is:
A. $15.75.
B. $16.43.
C. $18.00.
D. $18.90.
E. some other amount.

(105000 +840000) / (50000+ (10000 x25%)) = 18

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34-Which of the following statements about activity-based costing (ABC) is false?

A. Activity-based costing is more likely to result in major differences from traditional costing systems if the
firm manufactures only one product rather than multiple products.
B. Activity-based costing differs from traditional costing systems in that products are not cross-subsidized.
C. In activity-based costing, cost drivers are what cause costs to be incurred.
D. Activity-based costing is useful for allocating marketing and distribution costs.

35Multiple or departmental overhead rates are considered preferable to a single or plantwide overhead rate
when
A. Individual cost drivers cannot accurately be determined with respect to cause-and-effect relationships.
B. Various products are manufactured that do not pass through the same departments or use the same
manufacturing techniques.
C. Cost drivers, such as direct labor, are the same over all processes.
D. Manufacturing is limited to a single product flowing through identical departments in a fixed sequence.
B. Various products are manufactured that do not pass through the same departments or use the same
manufacturing techniques.

36-A plant has two departments, Machining and Assembly. This year's budget for the
plant contained the following information.
Machining Assembly
Manufacturing overhead
$4,000,000 $2,000,000
Direct labor hours
100,000 200,000
Machine hours
410,000 40,000
If the plant uses a plantwide overhead rate based on direct labor hours, what would
the rate be?
A. $75 per hour.
B. $10 per hour.
C. $20 per hour.
D. $40 per hour.

37-A manufacturing company has two departments, Machining and Assembly, at its Shanghai plant. This
year's budget for the plant contained the following information.
Machining
Assembly
Manufacturing overhead
$4,000,000
$2,000,000
Direct labor hours
100,000
200,000
Machine hours
40,000
40,000
If the Shanghai plant uses departmental allocation based on machine hours for the Machining Department
and direct labor hours for the Assembly Department, what would the rates be when allocating overhead to
 85 | P a g e MR. YEHIA 01009010200

the individual products?

Machining
Assembly

A.
$100/hr.
$50/hr.
B.
$100/hr.
$10/hr.
C.
$75/hr.
$30/hr.
D.
$40/hr.
$10/hr.