Question 1

When is a process cost accounting system most appropriate?

Accepted Answer

Process cost accounting system is most appropriate when mass produced products are manufactured that are very similar in nature. This system is used for continuous and repetitive production of homogeneous products where the cost of each unit produced is determined by dividing the total production cost by the number of units produced.

Question 2

When material costs and conversion costs do NOT occur in the same process at the same time, the weighted-average method cannot be used effectively.

Accepted Answer

The weighted-average method can still be used effectively even if material costs and conversion costs occur at different times, as it averages out costs over units regardless of timing.

Question 3

The FIFO method is easier to understand and use than the weighted-average method.

Accepted Answer

The answer of The FIFO method is easier to understand...

Question 4

There are no units in ending Work in Process at the end of the period under the FIFO method.

Accepted Answer

Under the FIFO method, the units in ending work in process are assumed to be the units that were most recently started in production. Therefore, there are units in ending work in process and they need to be accounted for in the calculation of cost of goods manufactured.

Question 5

The cost reconciliation schedule shows that total costs accounted for equal the total costs to be accounted for.

Accepted Answer

The purpose of a cost reconciliation schedule is to ensure that all costs have been properly accounted for and that there is no discrepancy between the total costs accounted for and the total costs to be accounted for. Therefore, if the schedule is prepared correctly, the answer should be A - true.

Question 6

Which of the following statements is true?

Accepted Answer

Both job-order cost and process cost systems track direct materials, direct labour and manufacturing overhead.

Question 7

The FIFO method is conceptually superior to the weighted-average method.

Accepted Answer

The FIFO (First-In, First-Out) method assumes that the first inventory items purchased or produced are the first ones sold. This method reflects the actual flow of goods, which makes it conceptually superior to the weighted-average method that blends costs from different periods, although both methods have their advantages and disadvantages depending on the circumstances.

Question 8

In order to calculate the physical unit flow, a company must first calculate the equivalent units of production.

Accepted Answer

The physical unit flow is calculated by tracking the actual number of units moving through production, while equivalent units of production are used to allocate costs in process costing systems.

Question 9

When comparing the FIFO with the weighted-average method, the FIFO method provides current cost information.

Accepted Answer

The FIFO method assumes that the first items purchased are also the first items sold, allowing for current cost information. The weighted-average method, on the other hand, spreads the cost of goods available for sale evenly across all units, which does not provide current cost information.

Question 10

Under the weighted-average method, unit material cost is calculated by taking total beginning material costs plus the material costs added during the period, then dividing by the equivalent units in the process during the period.

Accepted Answer

The weighted-average method calculates unit material cost by taking total beginning material costs plus material costs added during the period, then dividing by the equivalent units in the process during the period.

Question 11

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

Accepted Answer

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

Question 12

Which of the following items is NOT a characteristic of a process cost system?

Accepted Answer

A process cost system is designed for producing homogeneous products, where the focus is on continually producing similar products. Once production begins, it continues until the finished product emerges, and all units have the same amount of materials, labor, and overhead. Therefore, option B is not a characteristic of a process cost system since it states that the products are heterogeneous in nature.

Question 13

Under the weighted-average method, the physical units in a department are the actual units in a department regardless of the degree of any work performed.

Accepted Answer

The weighted-average method considers all units in a department as physical units, regardless of the stage of completion, to calculate equivalent units for cost allocation.

Question 14

The weighted-average method of computing equivalent units assumes that products are at the same point of completion for both materials and conversion costs.

Accepted Answer

The weighted-average method does not assume that products are at the same point of completion for materials and conversion costs; it averages out costs over all units, regardless of their stage of completion.

Question 15

The first step performed in preparing a production cost report is computing the physical unit flow.

Accepted Answer

Computing the physical unit flow is the first step in preparing a production cost report. This involves determining the number of units that were started and completed during the period, as well as the number of units that are in process at the end of the period.

Question 16

Unit production costs must be calculated before the equivalent units of production can be calculated.

Accepted Answer

Equivalent units of production are calculated to determine the cost per unit, which is then used to calculate unit production costs.

Question 17

Companies using the weighted-average method do NOT complete units left over from the previous accounting periods.They always start new units.

Accepted Answer

Companies using the weighted-average method include units left over from the previous accounting periods in their calculations by adding their costs to the costs of newly started units.

Question 18

Conversion cost is another name for manufacturing overhead.

Accepted Answer

Conversion cost includes both direct labor and manufacturing overhead, not just manufacturing overhead.

Question 19

There are no units in process at the beginning of the period, 500 units in process at the end of the period that are 30% complete, and 3,000 units transferred out during the period.Based on this information, there were 3,500 units started during the period under the weighted-average method.

Accepted Answer

Under the weighted-average method, we consider the units started during the period as equivalent to the total units accounted for (i.e., units completed and transferred out plus units in ending work in process). 
So, using the given information: 
Units accounted for = Units in ending WIP (30% complete) + Units transferred out = 500 + 3000 = 3500 
Therefore, the answer is A - there were 3,500 units started during the period under the weighted-average method.

Question 20

Beginning Work in Process is added to units completed and transferred out to determine equivalent units of production under the weighted-average method.

Accepted Answer

Under the weighted-average method, equivalent units of production are calculated by adding units completed and transferred out to the ending work in process, not the beginning work in process.

Quiz 4: Process Cost Accounting