Question 1

What considerations are important in estimating product costs in continuous processing plants?

Accepted Answer

The answer of What considerations are important in estimating product...

Question 2

If overhead cost driver rates are calculated monthly,distortions might occur because of:
A)rental costs paid monthly.
B)property tax payments made in July and December.
C)routine, monthly preventive maintenance costs that benefit future months.
D)property tax payments made in July and December,and routine,monthly preventative maintenance costs that benefit future months.

Accepted Answer

The answer of If overhead cost driver rates are calculated...

Question 3

Roland Company uses a manufacturing process that has two distinct stages: P1 and P2.Raw material is consumed in P1 at the beginning of the process.No additional material is required in the second stage of the process (in P2).The following information pertains to the production of 10,000 units of output in March 2012:
  
Required:
a.Determine the direct material cost per unit of output.
b.Determine the conversion cost per unit of output for Stage P1 and Stage P2.

Accepted Answer

The answer of Roland Company uses a manufacturing process that...

Question 4

Process costing should be used to assign costs to products when:
A)the units produced are similar.
B)the units produced are dissimilar.
C)the calculation of unit costs requires the averaging of all manufacturing costs over all units produced.
D)Either A or C are present.

Accepted Answer

The answer of Process costing should be used to assign...

Question 5

The goal of both job order costing and process costing is accurate product cost.

Accepted Answer

Both job order costing and process costing aim to accurately determine the cost of products. However, they differ in the way costs are assigned to products. Job order costing assigns costs to specific jobs or batches of products, while process costing assigns costs to specific processes or stages of production.

Question 6

JB Juice Company uses a manufacturing process that has two distinct stages: the juicing process (P1)and the straining process (P2). Raw material is consumed in P1 at the beginning of the process. No additional raw material is required in the second stage of the process (in P2). The following information pertains to the production of 5,000 units of output in March 2011:
Assume 5,000 units are 100% complete with respect to raw materials and conversion costs at the end of March.
 
-The conversion cost per unit of output for stage PI for the JB Juice Company totals:
A)$84 per unit.
B)$36 per unit.
C)$64 per unit.
D)$20 per unit.

Accepted Answer

B)$36 per unit = $180,000/5,000 units

Question 7

Conversion costs:
A)include all the factors of production.
B)include direct materials.
C)in process costing are usually considered to be added evenly throughout the production process.
D)include direct materials,and in process costing are usually considered to be added evenly throughout the production process.

Accepted Answer

Conversion costs include manufacturing costs except for the cost of raw materials. Specifically, they encompass direct labor and manufacturing overhead. In process costing, these costs are typically assumed to be incurred uniformly throughout the production process, unlike direct materials which may be added at specific stages.

Question 8

Process costing:
A)allocates conversion costs.
B)results in different costs for different jobs.
C)is commonly used by general contractors who construct custom-built homes.
D)assigns costs to unique jobs based on a overhead cost driver.

Accepted Answer

Process costing allocates conversion costs, which are the costs incurred to convert raw materials into finished goods. This method is used in industries where large quantities of homogeneous products are produced, such as chemicals, food, and pharmaceuticals, where it is not practical to identify costs for individual products or jobs.

Question 9

An example of a situation in which process costing might be used would be a consulting engagement.

Accepted Answer

An example of a situation in which job order costing might be used would be a consulting engagement.

Question 10

Which of the following manufactured products would use process costing?
A)polo shirts imprinted with individualized logos
B)picnic packs containing ketchup, mustard, and relish
C)customized boats used for racing
D)handmade stained-glass lamps for recreational rooms

Accepted Answer

Process costing is best suited for products that are homogenous and produced in large quantities through a continuous process. Picnic packs containing ketchup, mustard, and relish are an example of a product that is mass-produced using a continuous process, making it suitable for process costing. The other choices involve products that are either customized or handmade, which would not be appropriate for process costing.

Question 11

While costs are measured for individual jobs in a job order costing system,they are measured for individual process stages in a process costing system.

Accepted Answer

In process costing system, costs are measured for individual process stages rather than for individual jobs. The cost of production is accumulated and assigned to each process, and the total cost is divided by the number of units produced in that process to calculate the cost per unit. This method is commonly used in industries where large quantities of identical products are manufactured, such as chemical production or food manufacturing.

Question 12

(Appendix)The direct method of allocating service department costs assigns indirect costs to products in two stages.In the first stage,production department costs are allocated to the service departments.

Accepted Answer

The reciprocal method assigns indirect costs to products in two stages. In the first stage, the reciprocal cost of each service department is computed. In the second stage these reciprocal costs are used to allocate the service department costs to the production departments.

Question 13

(Appendix)The direct allocation method recognizes possible interactions between service departments when allocating service department's costs to production departments.

Accepted Answer

The reciprocal allocation method recognizes possible interactions between service departments when allocating service department's costs to production departments.

Question 14

Process costing systems are used when products manufactured are relatively homogeneous and there are few and relatively small differences in the production requirements for different products.

Accepted Answer

This is because process costing systems are designed to allocate the costs of producing a large volume of identical or similar products, which are produced using a consistent process. The emphasis is on the production process itself, rather than on individual products, and so the system works best for products with relatively similar production requirements.

Question 15

JB Juice Company uses a manufacturing process that has two distinct stages: the juicing process (P1)and the straining process (P2). Raw material is consumed in P1 at the beginning of the process. No additional raw material is required in the second stage of the process (in P2). The following information pertains to the production of 5,000 units of output in March 2011:
Assume 5,000 units are 100% complete with respect to raw materials and conversion costs at the end of March.
 
-The conversion costs for P1,the juicing process,total:
A)$120,000.
B)$160,000.
C)$100,000.
D)$180,000.

Accepted Answer

D)$180,000 = $40,000 + $60,000 + $80,000

Question 16

Fixed manufacturing overhead costs remain constant at $400,000 per month and are allocated based on a monthly professional labor-hour allocation rate.Professional labor hours are estimated at 12,000 for high-output months and 3,000 for low-output months.The final customer price includes a markup of 50% of cost.As a result:
A)low-output months will allocate less manufacturing overhead costs to each job.
B)low-output months will deter customers due to the higher prices.
C)the high-output months present a more accurate method of pricing.
D)an annual allocation rate would result in lower prices during the high-output months than the monthly allocation rate.

Accepted Answer

In low-output months, fewer labor hours are available to allocate the fixed overhead, resulting in a higher overhead cost per hour, which increases the cost and thus the price, potentially deterring customers.

Question 17

Job order costing is an approach to costing that estimates costs for specific customer orders because the orders vary from customer to customer.

Accepted Answer

Job order costing is also known as job costing or job cost accounting, and it is used to accumulate and track the costs of producing a unique product or service. Each job or customer order is treated as a separate cost unit, and the costs are assigned to each job based on the materials, labor, and overhead used to produce it. This approach is typically used in industries such as construction, custom manufacturing, and professional services where each project or order is unique and requires customized pricing and costing.

Question 18

Which one of the following statements is FALSE?
A)In a job order costing system, individual jobs use different quantities of production resources.
B)In a process-costing system, each unit uses approximately the same amount of resources.
C)An organization that manufactures several types of cereal would use a job order costing system.
D)A corporation whose sole business activity is processing the customer deposits of several banks would use a process-costing system.

Accepted Answer

An organization that manufactures several types of cereal would typically use a process-costing system because each type of cereal would be a separate production process with similar resources used for each unit. Job order costing systems are typically used for custom-made products where each job requires unique production resources.

Question 19

Costing systems that are used for the costing of like or similar units of products in mass production are called:
A)inventory-costing systems.
B)job order costing systems.
C)process-costing systems.
D)conversion costing systems.

Accepted Answer

Process-costing systems are used for mass-produced, homogeneous products that go through a continuous production process. This system calculates the cost of each unit by averaging the total cost of production over the total number of units produced. Inventory-costing systems, job order costing systems, and conversion costing systems are not appropriate for mass production settings.

Question 20

(Appendix)Using the direct method for service department's cost allocations are likely to undercost low-volume products.

Accepted Answer

The direct method does not consider the extent of service department usage by different production departments, and simply allocates service department costs based on a predetermined allocation base, such as the number of employees or square footage. This can result in undercosting of low-volume products that may not use service departments as much as high-volume products.

Quiz 4: Accumulating and Assigning Costs to Products

What considerations are important in estimating product costs in continuous processing plants?

If overhead cost driver rates are calculated monthly,distortions might occur because of:

Process costing should be used to assign costs to products when:

The goal of both job order costing and process costing is accurate product cost.

Conversion costs:

Process costing: