Question 1

A process costing system first accumulates the costs of direct materials, direct labor, and overhead for each process, department, or work cell and then assigns those costs to the products produced during a particular period.

Accepted Answer

This is the correct definition of a process costing system. It accumulates the costs of direct materials, direct labor, and overhead for each process, department, or work cell, and then assigns those costs to the products produced during the period.

Question 2

In order to be classified as a process costing system, the product flow must represent a series of processes in which only one process has input into the next process.

Accepted Answer

A process costing system involves multiple processes where each process can have inputs from multiple sources, not just a single preceding process.

Question 3

In a process costing system, product costs are traced to individual products.

Accepted Answer

In a process costing system, product costs are averaged and assigned to the batches or units produced during the period, rather than being traced to individual products. This is because process costing is used mainly in industries where identical or similar products are produced in large quantities, making it cumbersome to assign costs to each unit individually.

Question 4

Managers track product and cost flows of the entire organization and prepare process cost reports to assign production costs to the products manufactured.

Accepted Answer

The answer of Managers track product and cost flows of...

Question 5

Only one Work in Process Inventory account is used with the process costing system.

Accepted Answer

In process costing system, multiple Work in Process Inventory accounts are used to keep track of the costs associated with each process or department. This is because different products or batches may be processed simultaneously in different stages of completion, and each requires its own record of costs. Therefore, each process or department typically has its own WIP account to track the costs incurred and the units produced in that particular stage.

Question 6

The number of possible combinations of product flows and production processes is limitless.

Accepted Answer

The number of possible combinations is limited by the available resources, technology, and constraints within a production system.

Question 7

The FIFO costing method is a costing method in which the cost flow follows the logical product flow.

Accepted Answer

The FIFO costing method assumes that the first units purchased or produced are the first ones sold or used, hence the cost flow follows the logical product flow.

Question 8

Because process costing is normally associated with a continuous production flow, products that are in process at the beginning of the period are assumed to be the first products completed during the current period.

Accepted Answer

Process costing assumes a continuous production flow, which means products that are in process at the beginning of the period are likely to be the first products completed in the current period. Therefore, the statement is true.

Question 9

A company that manufactures potato chips would probably use a process costing system.

Accepted Answer

Process costing is used when goods are produced in a continuous process, such as manufacturing potato chips. It is used to track the accumulation of costs by process or department rather than by job or specific product.

Question 10

It is difficult to track costs to individual products in a continuous flow manufacturing process.

Accepted Answer

In continuous flow manufacturing, products are produced in large quantities and it is difficult to track costs for each individual product as they are all produced simultaneously. The focus is on maximizing efficiency and minimizing waste in the production process. As a result, costs are often allocated based on overall production costs rather than individual product costs.

Question 11

The types of computations for costs to be transferred out of Work in Process Inventory differ if the production process involves multiple departments rather than a single department.

Accepted Answer

The answer of The types of computations for costs to...

Question 12

Because process costing is normally associated with a continuous production flow, products that are in process at the beginning of the period are assumed to be the first products completed during the current period.

Accepted Answer

Process costing assumes a continuous production flow, where products that are in process at the beginning of the period are assumed to be the first products completed during the current period. This is because process costing calculates the cost of each process or department, and the cost of the products that move through it. Therefore, the products that were started earlier in the process will have more costs attributed to them, compared to those that were started later in the process.

Question 13

The most commonly used method to assign costs to products in process costing is the FIFO costing method.

Accepted Answer

FIFO (first-in, first-out) is the most commonly used costing method in process costing, where the cost of goods produced is calculated by adding the costs of the oldest units of inventory first, and then adding the cost of the newer units until the total cost of all products is calculated. This method assumes that the units produced first are also the units that are sold first.

Question 14

Unlike a job order costing system, a process costing system is not restricted to one Work in Process Inventory account.

Accepted Answer

In a process costing system, each department or process may have its own Work in Process Inventory account, whereas in a job order costing system, there is typically only one Work in Process Inventory account for the entire company.

Question 15

Regardless of the cost accounting system used, when the products are completed, they are transferred from work in process inventory to finished goods inventory.

Accepted Answer

This statement is true. When a product is completed, it is transferred from the work in process inventory to the finished goods inventory. This is the final step in the production process before the product is sold to customers.

Question 16

A process costing system is used by companies that manufacture large amounts of similar products or liquid products.

Accepted Answer

A process costing system is designed for manufacturing companies that produce large quantities of similar products, such as pharmaceuticals, food, chemicals or beverages. It is used when there is a continuous flow of identical units through the production process and it is necessary to allocate the total costs of each process to the units produced. In contrast, a job costing system is used for companies that produce unique, custom-made products or services.

Question 17

The FIFO approach to process costing assumes that items in beginning inventory were started and completed in the current period.

Accepted Answer

The FIFO approach to process costing assumes that items in beginning inventory were started in a previous period and completed in the current period.

Question 18

In a process costing system, each product is assigned the same amount of costs.

Accepted Answer

The answer of In a process costing system, each product...

Question 19

The cost of producing each gallon of paint differs.

Accepted Answer

The answer of The cost of producing each gallon of...

Question 20

Production processes that lend themselves to the use of process cost analysis usually have a FIFO product flow within the process.

Accepted Answer

Process cost analysis is best suited for production processes that have a consistent and continuous flow of products with standardized inputs, such as a FIFO (first-in, first-out) product flow. This allows for the calculation of average costs per unit and helps management make informed decisions about pricing, production levels, and inventory management. Therefore, a production process with a FIFO product flow is ideal for process cost analysis.

Quiz 21: Costing Systems Process Costing

A process costing system first accumulates the costs of direct materials, direct labor, and overhead for each process, department, or work cell and then assigns those costs to the products produced during a particular period.

In order to be classified as a process costing system, the product flow must represent a series of processes in which only one process has input into the next process.

In a process costing system, product costs are traced to individual products.

Managers track product and cost flows of the entire organization and prepare process cost reports to assign production costs to the products manufactured.

Only one Work in Process Inventory account is used with the process costing system.

The number of possible combinations of product flows and production processes is limitless.

The FIFO costing method is a costing method in which the cost flow follows the logical product flow.

Because process costing is normally associated with a continuous production flow, products that are in process at the beginning of the period are assumed to be the first products completed during the current period.

A company that manufactures potato chips would probably use a process costing system.

It is difficult to track costs to individual products in a continuous flow manufacturing process.

The types of computations for costs to be transferred out of Work in Process Inventory differ if the production process involves multiple departments rather than a single department.

Because process costing is normally associated with a continuous production flow, products that are in process at the beginning of the period are assumed to be the first products completed during the current period.

The most commonly used method to assign costs to products in process costing is the FIFO costing method.

Unlike a job order costing system, a process costing system is not restricted to one Work in Process Inventory account.

Regardless of the cost accounting system used, when the products are completed, they are transferred from work in process inventory to finished goods inventory.

A process costing system is used by companies that manufacture large amounts of similar products or liquid products.

The FIFO approach to process costing assumes that items in beginning inventory were started and completed in the current period.

In a process costing system, each product is assigned the same amount of costs.

The cost of producing each gallon of paint differs.

Production processes that lend themselves to the use of process cost analysis usually have a FIFO product flow within the process.