Subject: Business    / Accounting
I. Multiple choice questions- (Give the most correct answer/s for the statement from the
choices given below.)
1. Which of the following characteristic / characteristics are associated with process costing
a. Heterogeneous products
b. Homogeneous products.
c. Continuous production
d. Discontinuous production.
e. Costs are traced to processing departments.
f. Costs are traced to jobs.
2. The best example of a business requiring a process costing system would be:
a. Custom cabinet shop
b. Antique Furniture restorer
c. Soap Manufacturer
d. Automobile Repair shop
3. Match the following terms with the definitions shown below:
a. Conversion costs
b. Equivalent units
c. Transferred-in costs.
d. Cost per equivalent units
1. The costs associated with the units received from a preceding department
within the company for further processing.
2. The unit cost in a process costing system.
3. The costs associated with changing units of direct materials into finished
products; they include both direct labor and manufacturing overhead.
4. The quantity of partially completed units expressed in terms of whole units.
4. If raw materials are introduced into a production department at the beginning of the process,
which statement is correct about the equivalent units in ending work-in-process for materials?
a. All of the units in work-in-process are 100 percent complete with respect to materials.
b. All of the units in work-in-process are 50% complete with respect to materials.
c. Equivalent units of materials are not a function of when materials are entered into the
d. All of the preceding statements are correct.
5. Transferred-in cost occurs in:
a. All production departments.
b. The first and last production departments.
c. All Production departments after the first.
d. None of the above is correct.

II. Problem solving questionMarquita Filters produces an air filter for use in jet aircraft. Parts are added at several
points in their production process. In August, production began with 600 filers in work-inprocess, 80% complete as to materials and 70% complete as to labor and overhead. During the
month, an additional 3,200 units were started into production. 800 filters were in work-inprocess at the end of the month, and they were 60% complete as to material and 50% complete
as to labor and overhead.
Cost information for August :
Beginning workin-process Inventory
Direct Material
Direct Labor
Manufacturing Overhead
Total 48,000
144,000 Cost added
in August
1,002,800 Required:
a. Calculate the cost per equivalent unit for each of the 3 cost items and in total.
b. Calculate the cost of items completed in August and the cost of ending work-in-process

III. Short answer Questions.
1. Explain the concept of ‘equivalent units’.
2. What is meant by the term ‘conversion costs’?
3. State the differences between Job costing and Process costing.
4. Give an example for calculating Cost per equivalent unit.

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