Question 1

In process costing, the equivalent units computed for materials is generally the same as that computed for conversion costs.

Accepted Answer

In process costing, the equivalent units for materials and conversion costs often differ because materials are typically added at the beginning of the production process, while labor and overhead (conversion costs) are incurred throughout the process.

Question 2

A flour manufacturer is more likely to use process costing than job-order costing whereas a manufacturer of customized leather jackets is more likely to use job-order costing than process costing.

Accepted Answer

This statement is true because process costing is used when a company produces large quantities of homogeneous products, such as flour, while job-order costing is used when a company produces customized products, like leather jackets.

Question 3

A job-order costing system would be best suited for production of a large quantity of a homogeneous product.

Accepted Answer

A job-order costing system is best suited for production of a variety of unique products, rather than a large quantity of a homogeneous product. This is because each product requires its own set of materials, labor and overhead costs, which can be accurately tracked through job-order costing. For a homogeneous product, a process costing system is typically more appropriate.

Question 4

In calculating cost per equivalent unit under the weighted-average method, prior period costs are combined with current period costs.

Accepted Answer

The weighted-average method combines prior period costs with current period costs in calculating the cost per equivalent unit.

Question 5

The following journal entry would be made in a processing costing system when units that have been completed in the final processing department are transferred to the finished goods warehouse:

Accepted Answer

The answer of The following journal entry would be made...

Question 6

Under the weighted-average method, the cost of ending work in process inventory is determined by dividing the equivalent units of production for ending inventory by the cost per equivalent unit for each cost category and then summing the result.

Accepted Answer

Under the weighted-average method, the cost of ending work in process inventory is determined by multiplying the equivalent units of production for ending inventory by the cost per equivalent unit for each cost category and then summing the results.

Question 7

The cost reconciliation report has two sections: "Costs to be accounted for" followed by "Costs accounted for". The "Costs accounted for" portion of the cost reconciliation report includes the cost of ending work in process inventory and the cost of beginning work in process inventory.

Accepted Answer

The "Costs accounted for" portion of the cost reconciliation report includes the cost of ending work in process inventory and the cost of units completed during the period, not the cost of beginning work in process inventory. The cost of beginning work in process inventory is included in the "Costs to be accounted for" section.

Question 8

Job-order costing would be more likely to be used than process costing in situations where many different products or services are produced each period to customer specifications.

Accepted Answer

Job-order costing is used when specific products or services are produced to customer specifications, whereas process costing is used when large quantities of identical products are produced through a continuous process. Therefore, when there are many different products or services produced each period to customer specifications, job-order costing would be more appropriate.

Question 9

The cost reconciliation report has two sections: "Costs to be accounted for" followed by "Costs accounted for". The "Costs accounted for" portion of the cost reconciliation report includes the cost of beginning work in process inventory and the cost of units transferred out.

Accepted Answer

The "Costs accounted for" portion of the cost reconciliation report typically includes the cost of units transferred out and the cost of ending work in process inventory, not the cost of beginning work in process inventory. The cost of beginning work in process inventory is included in the "Costs to be accounted for" section.

Question 10

The equivalent units in beginning work in process inventory plus the equivalent units in ending work in process inventory equals the units transferred out plus the equivalent units for the work done during the period.

Accepted Answer

The equivalent units in beginning work in process inventory are not added to the equivalent units in ending work in process inventory to equal units transferred out plus the equivalent units for the work done during the period. Instead, equivalent units are calculated for the work done during the period, considering both completed and ending work in process inventory, without adding the beginning inventory equivalent units.

Question 11

Any difference in the equivalent units calculated under the weighted-average and the first-in, first-out methods is due to the units in the ending work in process inventory.

Accepted Answer

The difference in equivalent units between the weighted-average and the first-in, first-out (FIFO) methods is primarily due to how each method treats the units in the beginning work in process inventory, not the ending work in process inventory. FIFO separates the work and costs of the beginning inventory from the work and costs of the current period, while the weighted-average method blends them together.

Question 12

When comparing the two process costing methods for the same company, equivalent units computed under the first-in, first-out method will always be less than or equal to equivalent units computed under the weighted-average method.

Accepted Answer

Under the FIFO method, only the work done on units in the current period is considered, whereas the weighted-average method averages the work done across both current and prior periods, potentially leading to a higher equivalent unit count.

Question 13

When materials are purchased in a process costing system, a work in process account is debited with the cost of the materials.

Accepted Answer

In a process costing system, when materials are purchased, they are typically debited to a Raw Materials Inventory account, not directly to a Work in Process account.

Question 14

In a process costing system, manufacturing overhead cost is also called conversion cost.

Accepted Answer

Conversion cost includes direct labor and manufacturing overhead costs, but does not solely refer to manufacturing overhead cost.

Question 15

The cost reconciliation report has two sections: "Costs to be accounted for" followed by "Costs accounted for". The "Costs accounted for" portion of the cost reconciliation report includes the cost of beginning work in process inventory and the costs added during the period.

Accepted Answer

The "Costs accounted for" portion includes the costs of ending work in process inventory and the costs of goods manufactured during the period, not the cost of beginning work in process inventory.

Question 16

When computing the cost per equivalent unit, it is necessary to consider the percentage completion of the units in beginning inventory under the weighted-average method.

Accepted Answer

Under the weighted-average method, the costs of the beginning inventory and the costs added during the period are combined and averaged; the percentage completion of the beginning inventory is not separately considered in computing the cost per equivalent unit.

Question 17

When all materials are added at the beginning of the production process, under a weighted-average process costing system the equivalent units for materials is equal to the units completed and transferred out.

Accepted Answer

The answer of When all materials are added at the...

Question 18

Process costing is employed in industries that produce basically homogeneous products such as bricks, flour, or cement but would not be appropriate for assembly-type operations such as those that manufacture computers.

Accepted Answer

The answer of Process costing is employed in industries that...

Question 19

The units in beginning work in process inventory plus the units started into production must equal the units transferred out of the department plus the units in ending work in process inventory.

Accepted Answer

This is known as the production flow equation and it is true for any manufacturing process. It ensures that all units produced are accounted for, either as finished goods or as work in process inventory.

Question 20

In a process costing system, overhead is allocated to departments after being applied to units of product.

Accepted Answer

In a process costing system, overhead is allocated to departments and then applied to units of product based on departmental rates, not after being applied to units.

Quiz 4: Process Costing