Question 1

If beginning inventory consisted of 400 units, ending inventory was 600 units, and 7,700 units were started during the period, the number of units completed during the period was 8,700.

Accepted Answer

The calculation to find the number of units completed during the period is:

Started - Ending Inventory + Beginning Inventory = Completed
7,700 - 600 + 400 = 7,500

Therefore, the correct answer is B) False. The number of units completed during the period was 7,500, not 8,700.

Question 2

Which of the following describes the differences between job-order and process costing?

Accepted Answer

Job-order costing is used when products or services are unique and produced in limited quantities, while process costing is used when products or services are homogeneous and produced in large quantities. Job-order costing traces costs to individual jobs or projects, while process costing traces costs to departments or processes and averages the costs among the units worked on during the period.

Question 3

When computing the cost of the ending Work in Process Inventory, the number of equivalent units in Work in Process inventory is multiplied by the cost per equivalent unit separately for material, and separately for conversion costs.

Accepted Answer

This statement is true. When calculating the cost of the ending Work in Process Inventory, the cost per equivalent unit is calculated separately for materials and for conversion costs. Each of these costs is then multiplied by the number of equivalent units in the ending Work in Process Inventory, resulting in the total cost of the ending inventory.

Question 4

Labor and overhead are often grouped together and referred to as

Accepted Answer

Labor and overhead are both costs incurred during the conversion of raw materials into finished goods, so they are grouped together and referred to as conversion costs. A is incorrect because prime costs only include direct materials and direct labor. C is incorrect because total manufacturing costs include all costs incurred in the manufacturing process, including both prime costs and overhead expenses. D is incorrect because equivalent unit costs refer to the cost per unit of production, not the grouping of labor and overhead costs.

Question 5

In a process costing system, when raw materials are put into process, the cost of the materials is moved from

Accepted Answer

When raw materials are put into process, their cost is moved from the Raw Materials inventory account to the Work in Process inventory account in a process costing system. This is because the raw materials are being used to create a product, and their cost is thus part of the cost of the product being produced. Once the product is completed, its total cost will be transferred to the Finished Goods inventory account. The cost of the finished goods sold will then be transferred to the Cost of Goods Sold account when the product is sold.

Question 6

Which of the following sequences describes the typical flow of costs in a company that is using process costing?

Accepted Answer

The typical flow of costs in a company using process costing starts with Raw Materials Inventory, then moves to Work in Process, then to Finished Goods, and finally to Cost of Goods Sold. This sequence reflects the progression of materials as they are transformed into finished products and sold.

Question 7

Which one of the following is a costing system commonly used by companies that produce a large number of homogeneous units in a continuous production process?

Accepted Answer

A process costing system is commonly used by companies that produce a large number of homogeneous units in a continuous production process. This method assigns costs to each production process and then allocates those costs to the units produced within that process. This allows for a more accurate cost estimation and pricing for each unit.

Question 8

Which of the following costs is not a cost added to the Work in Process account in a process costing system?

Accepted Answer

Cost of goods sold is a cost that is deducted from the finished goods inventory account, not added to the work in process account. The work in process account only includes costs that are incurred during the production process, such as direct materials, direct labor, and manufacturing overhead. Once the products are completed, the costs are transferred to the finished goods inventory account, and when they are sold, the costs are then transferred to the cost of goods sold account.

Question 9

In a process costing system with three departments, when items are sold, the cost of the items is moved from

Accepted Answer

In a process costing system, when items are sold, the cost of the items is moved from Finished Goods to Cost of Goods Sold.

Question 10

When direct labor costs are incurred in the Mixing Department, the journal entry to record the transaction includes a

Accepted Answer

Direct labor costs incurred in the Mixing Department are a part of the manufacturing process and are therefore debited to Work in Process, Mixing Department. This is because direct labor is a part of the production process and is considered a manufacturing cost. The other options, such as crediting Manufacturing Overhead or Wages Payable, are not appropriate for recording direct labor costs in the Mixing Department.

Question 11

Which of the following statements about process costing is true?

Accepted Answer

In process costing, the costs of inventory completed in its final department in the manufacturing process will be transferred to Finished Goods inventory. This is because the products are now complete and ready to be sold or shipped out. Option A is incorrect because total transferred-in cost is not necessarily equal to total transferred-out cost since some inventory may be carried forward to the next period. Option C is incorrect as transferred-in costs are a normal occurrence in process costing and do not indicate incorrect closing of inventory accounts. Option D is incorrect as there is at least one correct answer choice.

Question 12

A cost incurred by the Baking Department that is transferred to the Packaging Department is called a

Accepted Answer

A cost incurred by the Baking Department that is transferred to the Packaging Department is referred to as a transferred-in cost by the Packaging Department. This is because the cost is transferred from one department to another within the production process. The other options are not correct as they do not accurately describe the nature of the cost being transferred.

Question 13

The cost of the items completed and transferred out of a department is the total cost per equivalent unit times the number of units completed.

Accepted Answer

This statement is true according to the weighted-average method of process costing. The total cost per equivalent unit includes both the cost of direct materials and the cost of conversion (direct labor and manufacturing overhead) and is used to calculate the total cost of the units completed and transferred out of the department.

Question 14

Total cost accounted for is the sum of the cost of the units transferred out of the department plus the cost of the ending Work in Process inventory.

Accepted Answer

This is the correct formula for calculating total cost accounted for in a department.

Question 15

In a process costing system, manufacturing overhead is added to Work in Process

Accepted Answer

Manufacturing overhead is added to Work in Process using a predetermined overhead rate or based on actual overhead in a process costing system. This is done to allocate the indirect costs of production to each unit of product.

Question 16

In which of the following industries are companies least likely to use a process costing system?

Accepted Answer

Companies providing office cleaning services are least likely to use a process costing system as the services provided are not homogeneous and may vary significantly depending on the client's requirements. The cost of providing services is also influenced by factors such as the size of the office, the type of cleaning required, and the number of times cleaning is requested. Therefore, it would be difficult to assign costs to each service using process costing.

Question 17

Which of the following companies will most likely use a process costing system?

Accepted Answer

A process costing system is used for businesses that produce a large number of identical or similar products, such as in the case of a food manufacturer. The other businesses listed (law office, custom home builder, car repair business) do not involve the mass production of identical products, and therefore would not likely use a process costing system.

Question 18

The cost per equivalent unit used in process costing is the average of fixed and variable costs.

Accepted Answer

The cost per equivalent unit used in process costing is calculated by adding up the total costs (both fixed and variable) and dividing by the total equivalent units. It is not an average of fixed and variable costs.

Question 19

Which one of the following is true of the manufacturing operations of a company using process costing?

Accepted Answer

In process costing, direct materials are added at the beginning of the process, and manufacturing overhead and direct labor costs are added during production. These costs are referred to as conversion costs.

Question 20

Conversion costs

Accepted Answer

Conversion costs include direct labor and overhead costs that are incurred to convert raw materials into finished goods. These costs are assumed to be added evenly throughout the production process within each department. Therefore, option D is the correct answer.

Quiz 3: Process Costing