Deck 20: Process Cost Systems

Question 1

Equivalent units are the sum of direct materials used and direct labor incurred.

Answer 1

False

Question 2

Process cost systems use job order cost cards to accumulate cost data.

Answer 2

False

Question 3

In a process costing system, each process will have a work in process inventory account.

Answer 3

True

Question 4

Equivalent units of production are the number of units that could have been manufactured from start to finish during an accounting period.

Question 5

If the products of a manufacturing process are produced to customer specifications, a process cost system is more appropriate than a job order cost system.

Question 6

Industries that typically use process cost systems include chemicals, oil, metals, food, paper, and pharmaceuticals.

Question 7

In a process costing system, a separate work in process inventory account is maintained for each customer's job.

Question 8

Conversion costs include materials, direct labor, and factory overhead.

Question 9

Process manufacturers typically use large machines to process a continuous flow of raw materials into a finished state.

Question 10

In a process cost system, product costs are accumulated by processing department rather than by job.

Question 11

Direct materials, direct labor, and factory overhead are assigned to each manufacturing process in a process costing system.

Question 12

If the principal products of a manufacturing process are identical, a process cost system is more appropriate than a job order cost system.

Question 13

Custom-made goods would be accounted for using a process costing system.

Question 14

Conversion costs are usually incurred evenly throughout a process.

Question 15

Both process and job order cost systems maintain perpetual inventory accounts with subsidiary ledgers.

Question 16

Both job order and process cost accounting use equivalent units of production to determine costs.

Question 17

The direct labor costs and factory overhead costs incurred by a production department are referred to as conversion costs.

Question 18

Process manufacturing usually reflects a manufacturer that produces small quantities of unique items.

Question 19

The first step in determining the cost of goods completed and ending inventory valuation using process costing is to calculate equivalent units of production.

Question 20

The direct materials costs and direct labor costs incurred by a production department are referred to as conversion costs.

Question 21

Conversion costs are generally added evenly throughout the process.

Question 22

If 16,000 units of materials enter production during the first year of operations, 12,000 of the units are finished, and 4,000 are 75% completed, the number of equivalent units of production would be 15,000.

Question 23

In a process costing system, the cost per equivalent unit is computed before computing equivalent units.

Question 24

If the costs of direct materials, direct labor, and factory overhead were $277,300, $52,600, and $61,000, respectively, for 14,000 equivalent units of production, the total conversion cost was $390,900.

Question 25

The cost of production report reports the cost of the goods sold.

Question 26

In applying the first-in, first-out method of costing inventories, if 8,000 units that are 30% completed are in process on June 1, 28,000 units are completed during June, and 4,000 units are 75% completed on June 30, the number of equivalent units of production for June is 33,400.

Question 27

The cost of production report reports the costs charged to production and the costs allocated to finished goods and work in process.

Question 28

Equivalent units should be computed separately for direct materials and conversion costs.

Question 29

In applying the first-in, first-out method of costing inventories, if 8,000 units that are 30% completed are in process on June 1, 28,000 units are completed during June, and 4,000 units are 80% completed on June 30, the number of equivalent units of production for June is 28,600.

Question 30

In a process costing system, costs flow into finished goods inventory only from the work in process inventory of the last manufacturing process.

Question 31

If the costs of direct materials, direct labor, and factory overhead were $60,000, $35,000, and $25,000, respectively, for 20,000 equivalent units of production, the conversion cost per equivalent unit was $6.

Question 32

Costs of ending work in process inventory are included in the cost per equivalent unit computation.

Question 33

If 30,000 units of materials enter production during the first year of operations, 25,000 of the units are finished, and 5,000 are 50% completed, the number of equivalent units of production would be 28,500.

Question 34

One of the differences in accounting for a process costing system compared to a job order system is that the amounts used to transfer goods from one department to the next come from the cost of production report instead of job cost cards.

Question 35

If 10,000 units that were 40% completed were in process on November 1, 80,000 units were completed during November, and 12,000 units were 20% completed on November 30, the number of equivalent units of production for November was 75,600.
(Assume no loss of units in production and that inventories are costed by the first-in, first-out method.)​

Question 36

The cost of production report summarizes
(1) the units for which the department is accountable and the units to be assigned costs and
(2) the costs charged to the department and the allocation of those costs.

Question 37

If the costs of direct materials, direct labor, and factory overhead were $522,200, $82,700, and $45,300, respectively, for 16,000 equivalent units of production, the conversion cost per equivalent unit was $8.

Question 38

Costs are transferred, along with the units, from one work in process inventory account to the next in a process costing system.

Question 39

One of the primary uses of a cost of production report is to assist management in controlling production costs.

Question 40

If 10,000 units that were 50% completed were in process on November 1, 90,000 units were completed during November, and 20,000 units were 20% completed on November 30, the number of equivalent units of production for November was 90,000.
(Assume no loss of units in production and that inventories are costed by the first-in, first-out method.)

Question 41

Gilbert Corporation had 25,000 finished units and 8,000 units 35% complete. The equivalent units totaled 30,200.

Question 42

Yield measures the ratio of the materials output quantity to the materials input quantity.

Question 43

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

Question 44

The FIFO method of process costing is simpler than the average cost method.

Question 45

Companies that use the average costing method for process costing have unit costs that include costs from more than one accounting period.

Question 46

In lean manufacturing, processing functions are combined into work centers, sometimes called departments.

Question 47

The closer a company moves toward lean manufacturing processing, the more differences in unit costs between average costing and FIFO will be reduced.

Question 48

The amount journalized showing the cost added to finished goods is taken from the cost of production report.

Question 49

Conversion and direct materials are generally both added at the end of the production process.

Question 50

All costs of the processes in a process costing system ultimately pass through the cost of goods sold account.

Question 51

If a department that applies FIFO process costing starts the reporting period with 50,000 physical units that were 25% complete with respect to direct materials and 40% complete with respect to conversion, it must add 12,500 equivalent units of direct materials and 20,000 equivalent units of direct labor to complete them.

Question 52

The entry to transfer goods in process from Department X to Department Y includes a debit to Work in Process-Department X.

Question 53

In a process costing system, indirect materials are charged to Work in Process.

Question 54

The FIFO method separates work done on beginning inventory in the previous period from work done on it in the current period.

Question 55

Once equivalent units are calculated for materials, this number will also be used for direct labor and factory overhead.

Question 56

The last step in the preparation of a cost of production report is the calculation of equivalent units of production.

Question 57

When a process cost accounting system records the purchase of materials, the materials account is credited.

Question 58

Companies recognizing the need to simultaneously produce products with high quality, low cost, and instant availability have adopted a lean manufacturing philosophy.

Question 59

A process cost accounting system records all actual factory overhead costs directly in the work in process account.

Question 60

If a company uses average costing instead of FIFO, it will still get the same unit costs.

Question 61

A process cost system would be appropriate for a

A) natural gas refinery
B) jet airplane builder
C) catering business
D) custom cabinet builder

Question 62

All of the following are characteristics of a process cost system except

A) the system may use several work in process inventory accounts
B) manufacturing costs are grouped by department rather than by job
C) the system accumulates costs per job
D) the system emphasizes time periods rather than the time it takes to complete a job

Question 63

Department M had 2,000 units 40% completed in process at the beginning of June, 12,000 units completed during June, and 1,200 units 25% completed at the end of June. What was the number of equivalent units of production for conversion costs for June if the first-in, first-out method is used to cost inventories?

A) 11,500 units
B) 11,200 units
C) 15,200 units
D) 10,000 units

Question 64

Which of the following would use a process costing system?

A) custom home builder
B) custom helicopter manufacturer
C) graduation photographer
D) lumber mill

Question 65

In a process cost system, the cost of completed production in Department A is transferred to Department B by which of the following entries?

A) debit Work in Process-Dept. B; credit Work in Process-Dept. A
B) debit Work in Process-Dept. B; credit Finished Goods-Dept. A
C) debit Work in Process-Dept. B; credit Cost of Goods Sold-Dept. A
D) debit Finished Goods-Dept. A; credit Work in Process-Dept. B

Question 66

Which of the following costs incurred by a tool manufacturer would not be included in conversion costs?

A) factory supervisor's salary
B) machine operator's wages
C) raw steel
D) factory maintenance personnel supplies

Question 67

In a process cost system, the amount of work in process inventory is valued by

A) finding the sum of all open job costs
B) allocating departmental costs between completed and partially completed units
C) multiplying units in ending inventory by the direct materials cost per unit
D) finding the sum of all completed jobs

Question 68

The three categories of manufacturing costs comprising the total cost of work in process are direct labor, direct materials, and

A) selling expenses
B) direct expenses
C) accounting salaries expense
D) factory overhead

Question 69

For which of the following businesses would a process cost system be appropriate?

A) boat repair service
B) shampoo manufacturer
C) dressmaker
D) custom furniture manufacturer

Question 70

Department M had 600 units 60% completed in process at the beginning of June, 6,000 units completed during June, and 700 units 30% completed at the end of June. Using the first-in, first-out method of inventory costing, what was the number of equivalent units of production for conversion costs for the period?

A) 7,300 units
B) 5,640 units
C) 6,700 units
D) 5,850 units

Question 71

All direct materials are placed in process at the beginning of production, and the first-in, first-out method of inventory costing is used. What is the total cost of the departmental work in process inventory at the end of the period (round unit cost calculations to whole dollars)?

A) $16,163
B) $21,432
C) $35,670
D) $28,935

Question 72

The two categories of cost comprising conversion costs are

A) direct labor and indirect labor
B) direct labor and factory overhead
C) factory overhead and direct materials
D) direct labor and direct materials

Question 73

If a company uses a process costing system to account for the costs in its five production departments, how many work in process accounts will it use?

A) 6
B) 5
C) 4
D) 2

Question 74

The four steps necessary to complete a cost of production report in a process cost system are:?
1.Allocate costs to transferred and partially completed units.
2.Determine the units to be assigned costs.
3.Determine the cost per equivalent unit.
4.Calculate equivalent units of production.?The correct ordering of the steps is

A)2, 4, 3, 1
B)4, 2, 3, 1
C)2, 3, 4, 1
D)2, 3, 1, 4

Question 75

In the manufacture of 10,000 units of a product, direct materials cost incurred was $165,000, direct labor cost incurred was $105,000, and applied factory overhead was $53,000. What is the total conversion cost?

A) $218,000
B) $158,000
C) $323,000
D) $53,000

Question 76

Which of the following is not a characteristic of a process cost system?

A) Manufacturing costs are grouped by departments.
B) The system may use several work in process accounts.
C) The system measures costs for each completed job.
D) The system allocates costs between completed and partially completed units within a department.

Question 77

In process cost accounting, the costs of direct materials and direct labor are charged directly to

A) service departments
B) processing departments
C) customer accounts receivable
D) job orders

Question 78

The cost system best suited to industries that manufacture a large number of identical units of commodities on a continuous basis is

A) process
B) departmental
C) first-in, first-out
D) job order

Question 79

Process and job order cost systems are similar in all of the following ways except

A) both accumulate product costs-direct materials, direct labor, and factory overhead
B) both allocate product costs to units produced
C) both maintain perpetual inventories
D) both use job order cost cards

Question 80

Which of the following costs incurred by a paper manufacturer would be included in the group of costs referred to as conversion costs?

A) accounting department costs
B) raw lumber
C) assembly labor's wages
D) administrative salaries