Question 1

Under process costing when the product is through the last production process,the journal entry for total manufacturing cost includes a debit to Work in Process Inventory and a credit to Finished Goods Inventory.

Accepted Answer

In process costing, when a product moves through the last production process and is completed, the journal entry to transfer the total manufacturing cost includes a debit to Finished Goods Inventory and a credit to Work in Process Inventory, not the other way around.

Question 2

Which of the following is a characteristic of process costing?

Accepted Answer

Process costing is employed by companies that use standardized and homogeneous processes, such as in the manufacturing of chemicals, oil refining, or food processing. This characteristic allows for the accumulation of costs by process rather than by individual product. Therefore, options A and B are incorrect. Option D is also incorrect because process costing can be used for both manufacturing and service firms that use standardized processes.

Question 3

Process costing often combines direct materials and direct labor into a single category called conversion costs.

Accepted Answer

Conversion costs combine direct labor and manufacturing overhead costs, not direct materials. Direct materials are typically accounted for separately in process costing.

Question 4

The total cost of Work in Process incurred in one department during the period must be allocated between costs transferred to the next department and costs transferred to Finished Goods.

Accepted Answer

The total cost of Work in Process in one department is allocated between costs transferred to the next department and costs remaining in Work in Process, not directly to Finished Goods.

Question 5

Under the weighted-average method,the only partially completed units that need to be addressed are the units in beginning inventory.

Accepted Answer

Under the weighted-average method, partially completed units in both beginning and ending inventory must be addressed.

Question 6

Consider a winery that employs eight people who work 40 hours per week (full time),four people who work 20 hours per week,and one person who works 10 hours per week.How many full-time equivalent employees does the winery employ?

Accepted Answer

To calculate the full-time equivalent employees, we need to add up the total number of hours worked and divide by the number of hours that a full-time employee works in a week (which is typically 40).

Total hours worked by full-time employees = 8 x 40 = 320
Total hours worked by part-time employees = (4 x 20) + 10 = 90
Total hours worked by all employees = 320 + 90 = 410

To calculate full-time equivalent employees, we divide the total hours worked by 40 (the number of hours a full-time employee works in a week):
410/40 = 10.25

Therefore, the winery employs 10.25 full-time equivalent employees.

Question 7

A separate Work in Process Inventory account is used in process costing for each major production process.

Accepted Answer

In process costing, a separate Work in Process Inventory account is used for each major production process to track the costs incurred during that process. This allows for more accurate costing and better control over the production process.

Question 8

The process costing production report can be prepared using either the weighted-average method or the last-in,first-out (LIFO)method.

Accepted Answer

The process costing production report can be prepared using either the weighted-average method or the first-in, first-out (FIFO) method, not LIFO.

Question 9

Under the FIFO method,the units completed during the period must be allocated between beginning units in process and units started and completed.

Accepted Answer

This is true for the FIFO (First-In-First-Out) method of inventory costing. Under this method, the units completed during the period are allocated first to the beginning inventory in process, then to the units started and completed during the period.

Question 10

The production report contains information about the number of physical units and equivalent units,but not their costs.

Accepted Answer

The production report includes information about the number of physical units, equivalent units, and their associated costs, especially in processes using process costing methods.

Question 11

Process costing is used to calculate the cost of homogenous goods or services.

Accepted Answer

Process costing is a costing method used in industries that produce homogenous goods or services, such as oil refining, chemical production, or food processing. It calculates the average cost per unit by dividing the total cost of production by the number of units produced. This method is different from job costing, which is used for goods or services with unique characteristics or features.

Question 12

Which of the following statements is not correct with respect to Fetzer Vineyards' sustainability efforts?

Accepted Answer

Barney Fetzer began producing wine in 1968, but the incorporation of triple bottom line sustainability accounting in 2014 cannot be directly attributed to him, especially considering the timeline and the evolution of sustainability practices in business. The triple bottom line approach, focusing on profit, planet, and people, was adopted by the company as part of its sustainability efforts, but this specific change in accounting practices would have been implemented by the company's leadership at the time, not by Barney Fetzer himself.

Question 13

A major difference between job order costing and process costing is the treatment of nonmanufacturing costs.

Accepted Answer

Both job order costing and process costing systems typically only include manufacturing costs (direct materials, direct labor, and manufacturing overhead) in the product costs. Nonmanufacturing costs (like selling and administrative expenses) are not treated differently between the two systems; they are usually expensed in the period incurred for both costing methods.

Question 14

Cost per equivalent unit is calculated separately for direct materials and for conversion costs.

Accepted Answer

Cost per equivalent unit is calculated separately for direct materials and for conversion costs in process costing systems.

Question 15

The process costing production report is used to determine how much manufacturing cost to transfer out of Finished Goods Inventory and into Cost of Goods Sold.

Accepted Answer

The process costing production report is used to calculate the cost of products manufactured during a period, not to determine the transfer of costs from Finished Goods Inventory to Cost of Goods Sold. That transfer occurs based on the cost of goods that have been sold.

Question 16

Equivalent units for materials may differ from the equivalent units for conversion costs.

Accepted Answer

Equivalent units for materials represent the amount of materials that have been partially completed and need further processing, while equivalent units for conversion costs represent the amount of labor and overhead costs that have been incurred in partially completing units. Therefore, the two types of equivalents can differ.

Question 17

Which of the following companies would most likely use process costing?

Accepted Answer

Process costing is used when products are mass-produced in a continuous fashion such as soft drinks, which have a standardized production process. The other options involve customized and variable production processes that would be better suited for job costing.

Question 18

The key difference between a process costing production report prepared using one of the two acceptable methods is how they deal with any units and costs that are in ending Work in Process Inventory.

Accepted Answer

The answer of The key difference between a process costing...

Question 19

Which of the following is not a characteristic of process costing?

Accepted Answer

Service firms can use process costing, as long as they have standardized processes and produce homogenous services. Therefore, option C is not a correct characteristic of process costing.

Question 20

An equivalent unit is a measure used to convert costs incurred in the previous period to costs incurred in the current period.

Accepted Answer

An equivalent unit is a measure used in process costing that converts partially completed units into a smaller number of fully completed units, allowing for the calculation of per-unit costs at various stages of production, not for converting costs between periods.

Quiz 3: Process Costing