Question 1

In a process costing system,the cost of ending work in process inventory for a period can be verified by reference to supporting analysis in

Accepted Answer

The cost recap included in the process cost report provides a summary of the costs incurred throughout the production process for a particular period, including the costs of beginning and ending work in process inventory. Therefore, by referencing this report, the cost of ending work in process inventory for a period can be verified. Materials requisitions and labor time tickets can provide additional detail on the costs incurred, but do not necessarily provide a summary of the total costs for ending work in process inventory. The cost recap included in the statement of production may not exist or may not provide sufficient detail to verify the cost of ending work in process inventory.

Question 2

A process costing system accounts for product costs

Accepted Answer

A process costing system accounts for product costs for a specific period of time, typically over a certain production cycle or accounting period. The costs are accumulated and assigned to the products produced during that period. The costs may be tracked in multiple work-in-process inventory accounts if there are multiple stages or departments within the production process. The system is designed to allocate costs based on the process that created the cost, rather than for specific orders.

Question 3

It is not necessary to ascertain the portion of ending Work in Process Inventory applicable to direct materials costs versus conversion costs.

Accepted Answer

It is necessary to ascertain the portion of ending Work in Process Inventory applicable to direct materials costs versus conversion costs for accurate cost accounting and to determine the cost of goods manufactured.

Question 4

Which of the following cost flow assumptions most closely follows the logical product flow in a process costing environment?

Accepted Answer

First-In, First-Out (FIFO) assumes that the first units produced are also the first ones sold or transferred out of inventory. In a process costing environment, this closely follows the logical product flow where goods move through each department or process in a sequential manner. This means that units produced and completed in an earlier process are transferred to the next process, while newer units are worked on in the initial process. Therefore, FIFO is the best cost flow assumption to use in a process costing environment.

Question 5

One of the steps in preparing the process cost report under FIFO method requires dividing current costs charged to the Work in Process Inventory account of each department or production process by equivalent units to calculate the cost per equivalent unit.

Accepted Answer

This statement is true. When using the FIFO method for process costing, it is necessary to calculate the cost per equivalent unit in order to properly allocate costs to units that are partially completed. This involves dividing the current costs charged to the Work in Process Inventory account by the equivalent units of production, which takes into account both completed units and partially completed units.

Question 6

In a process costing system,the amount of total costs to be accounted for is made up of direct materials and conversion costs incurred during the current period plus those costs included in the beginning Work in Process Inventory account.

Accepted Answer

The total costs to be accounted for in a process costing system includes the direct materials and conversion costs incurred during the current period as well as the costs included in the beginning Work in Process Inventory (WIP) account.

Question 7

Unit costs are determined by dividing the total costs of the period by the equivalent units.

Accepted Answer

The answer of Unit costs are determined by dividing the...

Question 8

Which of the following items most likely would be manufactured using a process costing system?

Accepted Answer

Process costing is used for products that are mass-produced in continuous or repetitive processes, such as producing soup in a factory or manufacturing cars. The other options do not involve manufacturing physical products that would typically use process costing.

Question 9

Which of the following is not a characteristic of a process costing system?

Accepted Answer

The characteristic of customized products being manufactured is not part of a process costing system. Process costing is used when a large volume of similar products are produced, whereas customized products would require a job costing system.

Question 10

The basis used in computing unit cost for the process costing system is made up of certain specific jobs worked on during the fiscal year.

Accepted Answer

The process costing system does not use specific jobs to compute unit cost, but rather calculates the average cost of all the units produced during the fiscal year.

Question 11

The equivalent units of production must be computed before the value of ending inventory can be determined in a process costing system.

Accepted Answer

This is because the value of ending inventory in a process costing system is calculated by multiplying the cost per equivalent unit by the number of equivalent units in the ending inventory. Therefore, the number of equivalent units must be calculated first.

Question 12

Process costing information can inform managers about the amounts and types of products ordered by specific customers.

Accepted Answer

Process costing is a method of determining and allocating production costs to products or services. It is typically used in industries that produce large quantities of identical products, such as manufacturing, chemical processing, and food production. While process costing can provide useful information about the cost of producing a particular product or service, it does not provide information about specific customer orders or preferences. Other types of costing methodologies, such as job costing or activity-based costing, may be more appropriate for analyzing customer-specific information.

Question 13

A company should use process costing rather than job order costing if

Accepted Answer

Process costing is most appropriate when producing homogeneous products in large quantities, such as in mass production. Job order costing is more appropriate when producing customized products in smaller quantities. Since the product is composed of homogeneous units, process costing would be the best choice.

Question 14

If a company uses a process costing system to account for costs in its four production departments,how many Work in Process accounts will it use?

Accepted Answer

Since the company has four production departments, it will have a Work in Process account for each department. Therefore, it will use four Work in Process accounts.

Question 15

Which of the following entities probably would use a process costing system?

Accepted Answer

Process costing is useful for industries that produce large quantities of identical or similar products, such as the oil industry. The other options involve creating unique or customized products, which would be better suited for job costing systems.

Question 16

In a process cost report,accounting for physical units excludes the physical units in beginning inventory to arrive at "units to be accounted for."

Accepted Answer

In a process cost report, accounting for physical units includes both the units in beginning inventory and the units started into production during the period to arrive at "units to be accounted for."

Question 17

Under the average costing method in process costing system,the costs in beginning inventory are combined with current period costs to compute an average product unit cost.

Accepted Answer

This is the correct definition of the average costing method in process costing.

Question 18

Regardless of beginning inventory levels,the unit costs are determined by dividing the equivalent units by the total costs of the period.

Accepted Answer

The unit costs are determined by dividing the total costs of the period by the total equivalent units, not the other way around.

Question 19

One reason for preparing a process cost report for a particular department is to determine the amount of costs to transfer to the next department or to the Finished Goods Inventory account at the end of the period.

Accepted Answer

A process cost report provides information on the total costs incurred by a department during a particular period, including direct materials, direct labor, and overhead costs. This information is used to calculate the unit cost of production and the total cost of goods completed and transferred out of the department. The total cost is then transferred to the next department or to the Finished Goods Inventory account at the end of the period. Therefore, the statement is true.

Question 20

Process costing is applicable to production operations that

Accepted Answer

Process costing is used in situations where production involves multiple processes, departments, or work cells that occur in a series. The costs are tracked for each process to determine the total cost of the products produced in that process. This method is used in industries such as chemical manufacturing, pharmaceuticals, and food processing. Choices B, C, and D are incorrect because assigning overhead costs to operations is a key feature of process costing, large and unique machines would be better accounted for using job costing, and process costing is applicable in many industries.

Quiz 18: Costing Systems- Process Costing