acycst2 process costing

1. Process costing is used when identical units are produced through an ongoing series of uniform steps.

T

2. A utility such as the water company would typically use a process costing system.

T

3. If processing departments are arranged in a parallel manner, all units will go through all departments.

F

4. Costing is more difficult in a process costing system than it is in a job- order costing system.

F

5. In a process costing system, the cost of production report takes the place of the job cost sheet.

T

6. Process and job-order costing are similar in that costs are accumulated (and unit costs are computed) for each separate customer order.

F

7. In a process costing system, a Work in Process account is maintained for each department.

T

8. It is important to identify labor costs with each customer order in a process costing system.

F

9. Operation costing employs aspects of both job-order and process costing systems.

T

10. Since costs are accumulated by department, there is no need for a Finished Goods inventory account in a process costing system.

F

11. In a process costing system, costs incurred in one department remain there rather than being transferred on to the next department.

F

12. On a production report, labor and overhead costs are often added together and called conversion costs.

T

13. If materials are added 100% at the beginning of the process, then the work in process, end will get 100%.

F

14. The purpose of the quantity schedule is to show the costs charged to the department.

F

15. If all units do go through all processing departments, then the departments are probably arranged in a sequential pattern.

T

1. In a process costing system that assumes that normal spoilage occurs at the end of a process, the costs attributable to normal spoilage should be assigned to:

a. ending work in process inventory.

b. cost of goods manufactured and ending work in process inventory.

c.  cost of goods completed.

d. a specific loss account highlighting the inefficiencies.

C

2. An equivalent unit of material or conversion cost is defined as:

a. the amount of material or conversion cost necessary to complete one unit of production.

b. a unit of work in process inventory.

c. the amount of material or conversion cost necessary to start a unit or production.

d. 50% of the material or conversion cost of a unit of finished goods inventory assuming a linear production pattern.

A

3. In a process costing system, how is the unit cost affected in a cost of production report when materials are added in a department subsequent to the first department and the added materials result in additional units?

a. It causes an increase in the preceding department's unit cost.

b. It causes a decrease in the preceding department's unit cost that requires an adjustment of the transferred-in cost.

c. It causes an increase in the preceding department's unit cost but does not require an adjustment of the transferred-in cost.

d. It causes a decrease in the preceding department's unit cost but does not require an adjustment of the transferred-in unit cost.

B

4. Which of the following does not occur with process costing?

a. Allocation of on a periodic basis.

b. Allocation of cost upon completion of job.

c. Allocation of cost with regards to stage of completion.

d. Calculation of equivalent units.

B

5. Which of the following is true of abnormal spoilage?

a. It is considered to be part of production.

b. It is normally treated as a period cost.

c. It is normally treated as a product cost.

d. It is prorated between cost of goods sold and inventory.

B

6. Prior department costs are most similar to:

a. conversion costs that are added continuously throughout the process.

b. costs in beginning inventory.

c. materials added at the beginning of the period.

d. transferred-out cost.

D

7. Normal spoilage costs are most often classified as:

a. a product cost.

b. a period cost.

c. deferred charge.

d. extraordinary item.

A

8. Which of the following products would most likely be accounted for with a process costing system?

a. A public accounting firm.

b. A retailer.

c. Airplane manufacture.

d. Gasoline refinery.

D

9. Process costing should be used in assigning cost to products in which of the following situations?

a. If the product is composed of mass-produced homogeneous units.

b. If the product is manufactured individually based on an order received.

c. When the product is composed of heterogeneous units made in a job shop.

d. Whenever cost allocation is not used.

A

10. An error was made by RAGC Company in computing the percentage-of- completion of the current year's ending work in process inventory. The error resulted in the assignment of a lower percentage of completion to each component of the inventory than actually was the case. There was no beginning work in process inventory. What is the effect on the following?

1. The computation of equivalent units in total.

2. The computation of costs per equivalent unit.

3. Cost assigned to cost of goods completed for the period.

a. understated, understated, overstated

b. understated, overstated, overstated

c. overstated, understated, understated

d. overstated, overstated, understated

B

11. Which of the following production operations would be most likely to employ a process cost system?

a. Shipbuilder

b. Aircraft manufacturer

c. Bottler of mineral water

d. Homebuilder

C

12. The total amount in the Costs To Account For schedule must equal the total amount on the

a. Quantities Schedule

b. Equivalent Production Schedule

c. Cost to Account For Schedule

d. Costs Accounted For Schedule

D

13. The system flow in which the initial raw materials are placed into process in the first department and flow through every department in the factory is called a

a. Sequential product flow

b. Parallel product flow

c. Selective product flow

d. Uniform product flow

A

14. The analysis of the activity in a department or cost center for a period is called a

a. Quantity report

b. Cost of production report

c. Cost of goods manufactured report

d. Equivalent production report

B

The physical units in a department are another name for the equivalent units of production.

F

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

F

The weighted average costing method assumes that units in beginning inventory are the first units transferred. 

F

Transferred in costs are always 100% complete at the beginning of the process in the new department. 

T

The FIFO method separates the beginning WIP Inventory and current period production as well as their costs so that a previous period cost per unit can be calculated. 

F

The portion of whole units that were completed with respect to either materials or conversion costs within a given accounting period is the definition of*

 

A. equivalent units.

 

B. units started and completed.

 

C. conversion costs.

 

D. ending work in process.

A

Equivalent units of production are equal to the

 

A. number of units worked on during the period by a production department.

 

B. units completed by a production department in the period.

 

C. identifiable units existing at the end of the period in a production department.

 

D. number of whole units that could have been completed if all work of the period had been used to produce whole units.

d

A process costing system*

 

A. restates Work in Process Inventory in terms of completed units.

 

B. accumulates costs by job rather than by department.

 

C. cannot assigns direct labor and manufacturing overhead costs separately to units of production.

 

D. cannot use standard costs.

A

In the computation of the cost per equivalent unit, the weighted-average method of process costing considers all the costs:*

 

A. entering work in process from the units in beginning inventory plus the costs for the work completed during the current accounting period

 

B. that have entered work in process during the current accounting period from the units started or transferred in minus the costs associated with ending inventory

 

C. that have entered work in process during the current accounting period from the units started or transferred in plus the costs associated with ending inventory

 

D. costs that have entered work in process from the units started or transferred in during the current accounting period

A

Under the weighted-average method, the stage of completion of beginning work in process:*

 

A. is relevant in determining the equivalent units

 

B. is irrelevant in determining the equivalent-unit calculation

 

C. must be combined with the work done during the current period to determine the equivalent units

 

D. can almost always be determined with a high degree of precision

b

A major advantage of using the FIFO process-costing method is that:*

 

A. in contrast with the weighted-average method, FIFO is considered GAAP

 

B. FIFO makes the unit cost calculations simpler

 

C. FIFO provides managers with information about changes in the costs per unit from one period to the next

 

D. All of these answers are correct.

C

Assume there is no beginning work in process inventory and the ending work in process inventory is 100% complete with respect to materials costs. The number of equivalent units with respect to materials costs under the weighted-average method is: 

 

A. less than the number of units put into production.

 

B. less than the number of units completed.

 

C. the same as the number of units put into production.

 

D. the same as the number of units completed.

C

The weighted-average process-costing method calculates the equivalent units by:

 

A. considering only the work done during the current period

 

B. the units started during the current period minus the units in ending inventory

 

C. the equivalent units completed during the current period plus the equivalent units in ending inventory

 

D. the units started during the current period plus the units in ending inventory

c

Which of the following sustainability practices is NOT commonly associated with process manufacturing?

 

A. Promoting sustainable transportation for distribution.

 

B. Using renewable energy in production processes.

 

C. Implementing water-saving techniques.

D. None of the above

d