Question 1

If indirect materials costing $37,500 that were not clearly linked with any specific production process or department were used during a reporting period, the following journal entry would be recorded in the process costing system:
$\begin{array}{llr}
  \text {  Factory Overhead} &37,500\
 \text { Raw Materials Inventory } &&37,500\
\end{array}$

Accepted Answer

This journal entry correctly records the indirect materials used in the production process by debiting the Factory Overhead account and crediting the Raw Materials Inventory account.

Question 2

In a process costing system, the purchase of raw materials is credited to the Raw Materials Inventory.

Accepted Answer

In a process costing system, the purchase of raw materials is debited to the Raw Materials Inventory account, indicating an increase in inventory.

Question 3

The following journal entry would be made to record the use of $6,100 of direct labor in a production department during the reporting period:
$\begin{array}{llr}
  \text {  Factory Payroll.} &6,100\
 \text { Goods in Process Inventory } &&6,100\
\end{array}$

Accepted Answer

The correct journal entry should debit Goods in Process Inventory and credit Factory Payroll to reflect the use of direct labor in production.

Question 4

In process costing there is never a balance remaining in Factory Overhead that needs to be closed at period end.

Accepted Answer

In process costing, there can be a balance remaining in Factory Overhead at the end of a period. This balance needs to be closed out by either transferring it to Work in Process or to Cost of Goods Sold depending on the company's accounting practices.

Question 5

In a process costing system, the entry to record cost of materials assigned to a production department requires a debit to the Work in Process Inventory account for that department and a credit to the Raw Materials Inventory account.

Accepted Answer

When cost of materials is assigned to a production department in a process costing system, the entry requires a debit to the Work in Process Inventory account for that department and a credit to the Raw Materials Inventory account. This is because raw materials become part of the work in process as they are used in the production process.

Question 6

If Department C uses $10,000 of direct materials and Department D uses $15,000 of direct materials, the following journal entry would be recorded by the process costing system:
$\begin{array}{l}
\text { Work in Process Inventory, Department C } & 10,000 \
\text { Work in Process Inventory, Department D } & 15,000\
\text { Raw Materials Inventory }&&25,000
\end{array}$

Accepted Answer

The journal entry correctly records the transfer of direct materials from Raw Materials Inventory to the Work in Process Inventory accounts for both Department C and Department D.

Question 7

In a process costing system, the purchase of raw materials is debited to the Raw Materials Inventory.

Accepted Answer

In a process costing system, the purchase of raw materials is initially debited to the Raw Materials Inventory account. This account is then used to track the cost of the raw materials throughout the production process until they are used up or turned into finished goods.

Question 8

In some circumstances, a process costing system can classify wages paid to maintenance workers as direct labor costs instead of factory overhead.

Accepted Answer

If maintenance workers are specifically working on a particular product or batch, their wages can be classified as direct labor costs rather than factory overhead. This would depend on the specific circumstances and the allocation method used in the process costing system.

Question 9

If the indirect labor cost in August for clerical and maintenance that help production in all departments was $123,000, the following journal entry would be recorded in a process costing system:
$\begin{array}{llr}
  \text { Factory Overhead } &123,000\
 \text {Factory Wages Payable  } &&123,000\
\end{array}$

Accepted Answer

This journal entry correctly records the indirect labor cost in a process costing system. The Factory Overhead account is debited for the total amount of the indirect labor cost, and the Factory Payroll Payable account is credited for the same amount, indicating that this amount is owed but not yet paid to the employees who performed the indirect labor tasks.

Question 10

Hybrid costing systems can only be applied to manufacturing.

Accepted Answer

Hybrid costing systems can be applied to both manufacturing and non-manufacturing industries. They combine elements of both job costing and process costing to provide a more accurate cost analysis for a variety of industries.

Question 11

In process costing, direct labor includes only the labor that is applied directly to individual units of product.

Accepted Answer

In process costing, direct labor includes all labor that is used in the production process, both direct and indirect. Direct labor refers to labor that can be easily traced to specific units of product, while indirect labor refers to labor that is necessary for the production process but cannot be easily traced to specific units of product.

Question 12

A materials consumption report is used instead of materials requisitions in companies where materials move continuously through the manufacturing process.

Accepted Answer

A materials consumption report tracks the materials used in different stages of the manufacturing process, allowing for a real-time understanding of inventory levels and material usage. This is preferable to materials requisitions, which only track materials requested at specific points in the manufacturing process.

Question 13

If Grayson Manufacturing incurred $17,400 for direct labor in the assembly department and $10,300 for direct labor in the painting department, the journal entry to record the labor used is:
$\begin{array}{llr}
  \text { Work in Process Inventory, Assembly } &\$17,400\
 \text { Work in Process Inventory, Painting } &\$10,300\
 \text { Raw Materials Inventory } &&\$27,700
\end{array}$

Accepted Answer

The journal entry should debit Work in Process Inventory accounts for both departments and credit Wages Payable or Cash, not Raw Materials Inventory, as it involves labor costs, not materials.

Question 14

In a process costing system, the entry to record cost of materials assigned to a production department requires a debit to the Raw Materials Inventory account and a credit to the Work in Process Inventory account for that department.

Accepted Answer

In a process costing system, the entry to record cost of materials assigned to a production department requires a debit to the Work in Process Inventory account and a credit to the Raw Materials Inventory account.

Question 15

A unique feature of process costing systems is the use of a single Work in Process Inventory account regardless of the number of production departments that exist.

Accepted Answer

In process costing systems, each production department typically has its own Work in Process Inventory account to track costs separately.

Question 16

Hybrid systems contain features of both process and job order operations.

Accepted Answer

Hybrid systems combine the characteristics of both process and job order operations. They are designed to handle customized products as well as high volumes of standardized products efficiently.

Question 17

In a process costing system, factory overhead costs are allocated to production departments by using a predetermined overhead allocation rate.

Accepted Answer

In a process costing system, factory overhead costs are allocated to production departments using a predetermined overhead allocation rate. This rate is determined by dividing the estimated overhead costs for the period by the estimated activity level, such as direct labor hours or machine hours. This rate is then applied to the products produced in each department based on the actual activity level achieved. This method ensures that factory overhead costs are allocated to products based on the resources they consume and provides a more accurate reflection of the true cost of production.

Question 18

If Department R uses $60,000 of direct materials and Department S uses $15,000 of direct materials, the following journal entry would be recorded by the process costing system:
$\begin{array}{l}
\text { Work in Process Inventory, Department R } & 60,000 \
\text { Work in Process Inventory, Department S } & 15,000\
\text { Raw Materials Inventory }&&75,000
\end{array}$

Accepted Answer

The journal entry for the use of direct materials in Department R and Department S would be:

Work in Process Inventory, Department R  - $60,000
Work in Process Inventory, Department S  - $15,000
Raw Materials Inventory  - $75,000

Therefore, the given journal entry is true and matches the correct format.

Question 19

If Department L uses $53,000 of direct labor and Department M uses $21,000 of direct labor, the following journal entry would be recorded using a process costing system:
$\begin{array}{l}
\text { Work in Process Inventory, Department L } & 53,000 \
\text { Work in Process Inventory, Department M } & 21,000 \
\text { Factory Wages Payable } &&74,000
\end{array}$

Accepted Answer

This journal entry is correct for a process costing system as it records the direct labor costs for each department into the appropriate work in process inventory account and also records the total amount of factory payroll payable.

Question 20

In a process costing system, factory labor costs incurred in a reporting period are presented on the income statement as Factory Labor Expense.

Accepted Answer

In a process costing system, factory labor costs are included in the cost of production and are allocated to the cost of goods manufactured, not directly expensed on the income statement.

Quiz 20: Process Costing