Deck 6: Process Costing

Question 1

Many service organizations and just-in-time (JIT) manufacturing firms operate in an environment without work-in-process inventories.

Answer 1

True

Question 2

FIFO follows the job-order costing principle.

Answer 2

False

Question 3

In firms with ending work-in-process inventories, output is measured using equivalent units.

Answer 3

True

Question 4

The major benefit of the weighted average method is simplicity. The major disadvantage is that accuracy and performance measurements are impaired.

Question 5

The cost flows for a process-costing system are totally different from those of a job order costing system.

Question 6

Process systems are characterized by a larger number of homogeneous products passing through a series of processes.

Question 7

Equivalent units are the incomplete units that could have been produced given the total amount of effort expended.

Question 8

For the receiving department of a process-costing manufacturer, transferred-in goods are materials that are added at the end of the process.

Question 9

A process is a series of activities or operations, which are linked to perform a specific objective.

Question 10

In a process-costing system, the costing of goods transferred out in BWIP inventory is difficult because there are multiple categories of completed units.

Question 11

In calculating equivalent units of production using the weighted average method, the transferred-in goods are treated as materials added at the beginning of the process.

Question 12

The FIFO costing method recognizes that the work and costs carried over from the prior period legitimately belong to that period.

Question 13

In JIT manufacturing, work cells are created that produce a product from start to finish.

Question 14

When manufacturing companies exhibit characteristics of both job and process environments, they use batch production processes.

Question 15

Transferred-in goods, must be converted to the units of measure used by the current department.

Question 16

The production report is the document that summarizes the manufacturing activity that takes place in a work-in-process department.

Question 17

The FIFO method unit costs are used to value output that is related to future periods.

Question 18

In a process-costing system, work-in-process inventory, materials are added uniformly so that multiple calculations of equivalent units are needed for each type of input.

Question 19

Services that are basically homogeneous and repetitive cannot take advantage of a process-costing approach.

Question 20

The weighted average method treats the equivalent output and costs in beginning work-in-process inventories as if they belong to the current period when calculating unit cost.

Question 21

The weighted average costing method picks up __________ inventory costs and outputs and treats them as if they belong in the current period.

Question 22

Spoilage in a process costing process means that more units enter the process than leave it.

Question 23

A key input to the cost of production report is __________ costs.

Question 24

In a __________ costing system, production costs are accumulated by process.

Question 25

Abnormal spoilage costs are treated the same as normal spoilage for process costing.

Question 26

Operation costing uses a blend of job-order and process-costing procedures whenever batches of dissimilar products are produced.

Question 27

Companies using JIT manufacturing do not use __________ inventories for their process costing.

Question 28

The unit-costing method that excludes prior-period work and costs in computing current-period unit work and costs is called the __________ costing method.

Question 29

For beginning work-in-process category using FIFO, the manufacturing cost is the sum of the current-period __________ and the current __________ to complete the BWIP.

Question 30

FIFO follows the __________ principle.

Question 31

The basic characteristics of process costing include: cost flows, journal entries, and
the __________ report.

Question 32

The accounting system which accumulates production costs by process and uses a work-in-process account for each process is called __________ .

Question 33

The __________ method is a unit-costing method that merges prior-period work and costs with current period work and costs.

Question 34

When materials are not added uniformly using a work-in-process system, __________ of equivalent units are needed, one for each type of input.

Question 35

The process that determines the equality of the costs in beginning work in process and the costs incurred during the period is called __________ .

Question 36

In process costing, __________ costing can be used to assign shared overhead to processes.

Question 37

Using the weighted average costing method, the costing of goods transferred out is __________ since there is only one category of completed units.

Question 38

In operation costing, job-order procedures are used to assign direct materials costs and process procedures are used to assign conversion costs.

Question 39

When spoilage is assumed to be normal, it is not tracked separately, it is simply included in the total cost of good units.

Question 40

The units that could have been produced in a period given the amount of manufacturing inputs used are called __________ .

Question 41

Which of the following is true of a production report prepared under a process-costing system?

A)It provides information about the physical units processed in a department.
B)It has a unit information section, a cost information section, and a revenue information section.
C)It summarizes the manufacturing activity of a company only at the end of a reporting period.
D)It is prepared at the final stage of a manufacturing activity.

Question 42

__________ is a costing system that blends job-order and process-costing procedures applied to batches of homogeneous products.

Question 43

The appropriate cost accounting system to use when inventory items are produced on an assembly line is

A)weighted average.
B)job-order costing.
C)process costing.
D)perpetual method.

Question 44

In process costing, costs are accounted for by

A)job.
B)batch.
C)process.
D)year.

Question 45

For the receiving department, transferred in goods are added at the __________ of the process.

Question 46

Leandro Corp. manufactures wooden desks. Production consists of three processes: cutting, assembly, and finishing. The following costs are given for April: $$\begin{array} { | l | r | r | r | } \hline &{ \text { Cutting } } & { \text { Assembly } } & { \text { Finishing } } \\\hline \text { direct materials } & \$ 7,000 & \$ 10,000 & \$ 3,000 \\\hline \text { direct labor } & 3,000 & 14,000 & 2,000 \\\hline \text { applied overhead } & 4,000 & 5,000 & 6,000 \\\hline\end{array}$$ There were no work in process inventories and 1,000 podiums were produced.
What is the cost transferred out of the assembly department.

A)$43,000
B)$54,000
C)$29,000
D)$14,000
E)none of the above

Question 47

The documents used to collect production costs for each batch in operation costing are called __________ .

Question 48

When spoilage is due to the exacting nature of a particular job it is called __________ spoilage.

Question 49

The Allen Company has the following information for the Assembly Department for the month of October: $\begin{array}{lr}\text { Materials purchased } & 45,000 \\\text { Materials used } & 49,000 \\\text { Direct labor } & 30,000 \\\text { Actual manufacturing overhead } & 56,000 \\\text { Cost of goods completed and transferred to the Finishing Dept. } & 125,000\end{array}$ Overhead rate is 200 percent of direct labor costs. Allen Company uses a process costing system for the Assembly Department.
What is the total amount of debits to Work in Process-Assembly Department for October?

A)$125,000
B)$131,000
C)$139,000
D)$109,000

Question 50

What system would a manufacturer of unique special orders or batch processes most likely use to accumulate costs?

A)contract costing
B)variable costing
C)process costing
D)job-order costing

Question 51

The cost assigned to goods from a prior process is called the __________ cost.

Question 52

The Allen Company has the following information for the Assembly Department for the month of October: $\begin{array}{lr}\text { Materials purchased } & \$ 4,000 \\\text { Materials used } & 49,000 \\\text { Direct labor } & 30,000 \\\text { Actual manufacturing overhead } & 56,000 \\\text { Cost of goods completed and transferred to the Finishing Dept. } & 125,000\end{array}$ Overhead rate is 200 percent of direct labor costs. Allen Company uses a process costing system for the Assembly Department.
The journal entry to record goods completed and transferred out of the Assembly Department would include a

A)debit to Finished Goods Inventory for $125,000.
B)credit to Materials Inventory for $125,000.
C)debit to Work in Process-Assembly Department for $125,000.
D)debit to Work in Process-Finishing Department for $125,000.

Question 53

Which of the following is a difference between a job-order costing system and a process-costing system?

A)A job-order costing system accumulates costs by department, while a process costing-system accumulates costs by job.
B)A job-order costing system is used only by manufacturing firms, while a process-costing system is used by both manufacturing firms and service firms.
C)A job-order costing system uses a single work-in-process account, while a process-costing system has a work-in-process account for every process.
D)A job-order costing system uses cost-sheets for assigning labor costs, while a process-costing system uses time tickets for assigning labor costs to processes.

Question 54

In operation costing, the process which produces batches of different products which are identical in many ways but differ in others is called __________ process

Question 55

The costing system that uses job-order procedures to assign direct material costs to batches and process procedures to assign conversion costs is called __________ costing.

Question 56

When spoilage is assumed to be __________ it is embedded in the total cost of good units.

Question 57

When products and their costs are moved from one process to the next process, these costs are referred to as

A)unit costs.
B)transferred-in costs.
C)WIP inventory costs.
D)equivalent unit costs.

Question 58

Leandro Corp. manufactures wooden desks. Production consists of three processes: cutting, assembly, and finishing. The following costs are given for April: There were no work in process inventories and 1,000 podiums were produced.
The journal entry to assign costs to the Assembly process would be

Question 59

The usual approach in process manufacturing is to treat transferred-in goods as a separate material category when calculating __________ .

Question 60

Manufacturing firms that have characteristics of both job and process environments often use __________ processes.

Question 61

The following information is available from the records of Diamond Cut, Inc.: $$\begin{array} { l c } \text { Direct Materials-Assembly Department } & \$ 10,000 \\\text { Direct Materials-Finishing Department } & 15,000 \\\text { Direct Labor-Assembly Department } & 11,000 \\\text { Direct Labor-Finishing Department } & 20,000 \\\text { Applied Overhead-Assembly Department } & 11,000 \\\text { Applied Overhead-Finishing Department } & 20,000 \\\text { Actual Overhead-Assembly Department } & 12,500 \\\text { Actual Overhead-Finishing Department } & 17,500\end{array}$$ What are the conversion costs in the Finishing Department?

A)$35,000
B)$37,500
C)$40,000
D)$57,500

Question 62

Maynard Inc. manufactures desks. The following data was given for production in February: $$\begin{array} { l r } \text { units, beginning work in process } & 0 \\\text { units started } & 200 \\\text { units completed } & ? \\\text { units, ending work in process ( } 40 \% \text { complete) } & 50\end{array}$$ What were the total number of units to account for?

A)50
B)150
C)200
D)400
E)none of the above

Question 63

The following information is available from the records of Diamond Cut, Inc.: $$\begin{array} { l c } \text { Direct Materials-Assembly Department } & \$ 10,000 \\\text { Direct Materials-Finishing Department } & 15,000 \\\text { Direct Labor-Assembly Department } & 11,000 \\\text { Direct Labor-Finishing Department } & 20,000 \\\text { Applied Overhead-Assembly Department } & 11,000 \\\text { Applied Overhead-Finishing Department } & 20,000 \\\text { Actual Overhead-Assembly Department } & 12,500 \\\text { Actual Overhead-Finishing Department } & 17,500\end{array}$$ What are the "total costs to account for" in the Assembly Department?

A)$32,000
B)$44,500
C)$21,000
D)$10,000

Question 64

When conversion costs are uniform,

A)materials, labor, and overhead are applied at different rates throughout the process.
B)materials, labor, and overhead are added throughout the process at the same rate.
C)labor and overhead are added at the same rate but different materials are added at a different point.
D)materials and labor are added at the same rate but overhead is applied uniformly.

Question 65

As production occurs, materials, direct labor, and applied manufacturing overhead are recorded in

A)cost of goods sold.
B)work in process.
C)materials.
D)finished goods.

Question 66

Equivalent units expresses all activity of the period in terms of

A)direct labor hours.
B)partially completed units.
C)fully completed units.
D)units of input.

Question 67

Moccasin Company produces 15,000 bars of chocolates and has the following cost data for the month of January: $$\begin{array} { l r r } & \text { Blending } & \text { Molding } \\& \text { Process } & \text { Process } \\\text { Direct materials } & \$ 12,000 & \$ 3,000 \\\text { Direct labor } & 9,000 & 6,000 \\\text { Applied overhead } & 3,500 & 2,500\end{array}$$
Calculate the costs transferred out of the Molding Department for the month of January. Assume no work-in-process inventories.

A)$24,500
B)$36,000
C)$11,500
D)$30,000

Question 68

The term given to units that represents the number of completed units that is equal, in terms of production inputs, to a given number of partially completed units is:

A)Units completed
B)Equivalent units
C)Units started and completed
D)Total units in production

Question 69

In order to determine product costs, JIT firms are usually structured so they can use:

A)job-order costing
B)process costing
C)joint costing
D)variable costing

Question 70

Which is TRUE about services?

A)Some services may require that a sequence of uniform processes be performed.
B)Services can never be homogeneous and repetitively produced.
C)Services cannot have work-in-process inventories.
D)All services require job-order costing.

Question 71

Maynard Inc. manufactures desks. The following data was given for production in February: $$\begin{array} { l r } \text { units, beginning work in process } & 0 \\\text { units started } & 200 \\\text { units completed } & ? \\\text { units, ending work in process ( } 40 \% \text { complete) } & 50\end{array}$$ How many units were completed?

A)400
B)200
C)150
D)50
E)none of the above

Question 72

In a process costing system, which of the following would be TRUE?

A)There is no need to use time tickets to assign costs to processes.
B)There is no need to track materials to processes.
C)A process costing system is more expensive to maintain because it has more work-in-process accounts.
D)all of the above are true.

Question 73

That which determine(s) whether the costs assigned to units transferred out and to units in ending work in process are equal to the costs in beginning work in process, plus the manufacturing costs incurred in the current period is(are) called:

A)Equivalent unit of output
B)Cost reconciliation
C)Batch production process
D)Transferred-in costs

Question 74

The complete units that could have been produced given the total amount of productive effort expended for the period under consideration are the:

A)units in ending work in process.
B)units in beginning work in process.
C)total units of output.
D)equivalent units of output.

Question 75

Maynard Inc. manufactures desks. The following data was given for production in February: $$\begin{array} { l r } \text { units, beginning work in process } & 0 \\\text { units started } & 200 \\\text { units completed } & ? \\\text { units, ending work in process ( } 40 \% \text { complete) } & 50\end{array}$$ What are the equivalent units?

A)200
B)170
C)180
D)150
E)none of the above

Question 76

The role of activity-based costing for both cellular and independent process manufacturing is to:

A)determine the profitability of a department.
B)compute the unit fixed costs incurred by a firm.
C)assign overhead shared by processes to individual processes.
D)separate fixed and variable costs incurred by multiple processes.

Question 77

Jamie Hopen, CPA, prepares tax returns. The production costs and the number of tax returns prepared for the month of September are as follows: $$\begin{array} { l r } \text { Direct materials } & \$ 200 \\\text { CPA staff salaries } & 4,000 \\\text { Overhead } & 1,800 \\\text { Total } & \$ 6,000\end{array}$$ Number of tax returns 300
What is the cost of services sold?

A)$1,800
B)$4,000
C)$200
D)$6,000

Question 78

Jamie Hopen, CPA, prepares tax returns. The production costs and the number of tax returns prepared for the month of September are as follows: $$\begin{array} { l r } \text { Direct materials } & \$ 200 \\\text { CPA staff salaries } & 4,000 \\\text { Overhead } & 1,800 \\\text { Total } & \$ 6,000\end{array}$$ Number of tax returns 300
What is the unit cost per tax return?

A)$0.67
B)$15.00
C)$20.00
D)$3.33

Question 79

JIT manufacturing emphasizes

A)continuous improvement.
B)elimination of waste.
C)reduction of work-in-process inventories.
D)all of the above.

Question 80

Leandro Corp. manufactures wooden desks. Production consists of three processes: cutting, assembly, and finishing. The following costs are given for April: There were no work in process inventories and 1,000 podiums were produced.
Record the journal entries to record the transfer of goods from process to process.