Question 1

When units are transferred from one production process to another,the journal entry will include a debit and a credit to two different Work-in-Process Inventory accounts.

Accepted Answer

When units are transferred from one production process to another, the journal entry will include a debit to the receiving department's Work-in-Process Inventory account and a credit to the sending department's Work-in-Process Inventory account. This is done to accurately track the costs associated with each department's production process.

Question 2

In a process costing system,partially completed units in Work-in-Process Inventory are typically converted to equivalent completed units.

Accepted Answer

In a process costing system, partially completed units are converted to equivalent completed units using the concept of equivalent units of production. This is done to determine the cost per unit of the finished product.

Question 3

A company that uses process costing may use several Work-in-Process Inventory accounts.

Accepted Answer

A company that uses process costing typically has multiple departments or stages of production, which can each have their own Work-in-Process Inventory account. This allows for more accurate tracking and allocation of costs within each stage of production.

Question 4

When using a process costing system,product costs are tracked by department rather than by job.

Accepted Answer

In process costing, costs are accumulated by department or process rather than by job.

Question 5

When using process costing,only one companywide Work-in-Process account is allowed for tracking product costs.

Accepted Answer

In process costing, companies often use multiple Work-in-Process accounts to track product costs at various stages of production, especially if they have multiple production processes or departments.

Question 6

The unit cost information for process costing comes from the departmental production cost report.

Accepted Answer

The departmental production cost report provides information on the unit cost of production for a specific department in a process costing system. This report is used to calculate the total cost of production for each department, which is then used to calculate the overall cost of production for the entire process.

Question 7

In a process costing system,the department where production begins will never have transferred-in costs from another department.

Accepted Answer

Transferred-in costs refer to costs incurred in a previous department that are transferred to a subsequent department in the production process. Since the first department in the process does not receive any inputs from a previous department, it cannot have any transferred-in costs.

Question 8

Process costing is typically used by service companies that have one department.

Accepted Answer

Process costing is typically used by companies that produce large quantities of homogeneous products through a series of repetitive steps or processes, such as manufacturers of soda, oil, or paper. It is not commonly used by service companies that usually provide a variety of personalized services.

Question 9

In a process costing system,the first step is to summarize the physical flow of units so that Units to be accounted for equals Units sold.

Accepted Answer

In a process costing system, the first step is to summarize the physical flow of units to determine the total units to be accounted for, which includes both units sold and units still in process or finished goods inventory, not just units sold.

Question 10

Because direct materials,direct labor,and overhead may enter a process at varying stages,equivalent units in Work-in-Process Inventory may be different for each of these components of production.

Accepted Answer

Equivalent units are used to measure the amount of work completed in a production process. Since materials, labor, and overhead may enter at different times, the equivalent units for each component may be different. It is important to calculate equivalent units separately for each component in order to accurately measure the progress of production.

Question 11

A job costing system would be appropriate for an oil refinery.

Accepted Answer

An oil refinery typically uses a process costing system because it produces large volumes of identical or similar products, where costs are accumulated by process or department, not by individual jobs.

Question 12

If 10 physical units of product are 30 percent complete at the end of the period,an equivalent of 3 completed units will be used for process costing calculations.

Accepted Answer

Since the 10 physical units of product are 30% complete, it means that only 3 units have been completed (10 x 0.3 = 3). Therefore, for process costing calculations, the equivalent of 3 completed units will be used.

Question 13

The production cost report is often prepared using computerized software to minimize math errors and to speed up the process.

Accepted Answer

Using computerized software can minimize math errors and speed up the process of preparing the production cost report.

Question 14

A process costing system is used by companies that produce similar or identical units of product.

Accepted Answer

Process costing is used by companies that produce homogeneous products in large quantities through a continuous flow process. The costs are accumulated by department or process, and the total cost is divided by the number of units produced to calculate the cost per unit. This method is commonly used in industries such as chemicals, pharmaceuticals, and food processing.

Question 15

A bike repair shop would most likely use a process costing system.

Accepted Answer

A bike repair shop typically provides customized services for each customer's bike, making a job costing system more appropriate than a process costing system, which is used for homogeneous products.

Question 16

For a manufacturing company using process costing,cost per equivalent unit is only calculated for direct labor and direct materials.

Accepted Answer

Cost per equivalent unit is calculated for direct labor, direct materials, and manufacturing overhead in a process costing system.

Question 17

Two important double-checks included in a production cost report are: (1)units to be accounted for matches units accounted for and (2)total costs to be accounted for matches total costs accounted for.

Accepted Answer

These are both important double-checks to ensure accuracy and completeness in a production cost report.

Question 18

A company producing the following product will likely not use process costing?
A)Milk
B)Custom built yachts
C)Oil
D)soda
E)None of the answer choices is correct.

Accepted Answer

Custom built yachts are likely to be produced using job costing as each yacht is unique and requires different materials and labor. Process costing is used for products that are mass-produced and identical, such as milk, oil, and soda.

Question 19

Most companies use either the weighted average or specific identification method to assign costs to inventory in a process costing environment.

Accepted Answer

In a process costing environment, companies typically use process costing methods rather than the weighted average or specific identification method, which are more common in job costing environments.

Question 20

Both process costing and job costing typically include three product costs direct materials,direct labor,and manufacturing overhead.

Accepted Answer

Both process costing and job costing involve the allocation of direct materials, direct labor, and manufacturing overhead as product costs.

Quiz 4: How Is Process Costing Used to Track Production Costs