Question 1

In a process costing system,the average costing method assumes that cost flows mirror the logical physical flow of production.

Accepted Answer

In a process costing system, the average costing method (or weighted-average method) combines costs of the current and prior periods without specifically assuming that costs follow the physical flow of products; it calculates an average cost for all units.

Question 2

It is necessary for managers to understand product and cost flow patterns,to use process costing.

Accepted Answer

Process costing requires managers to understand how products move through different stages of production, as well as how costs accumulate in each stage. This understanding is essential for accurately assigning costs to products and making informed decisions about pricing and production quantities.

Question 3

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

Accepted Answer

The average costing method combines the costs in beginning inventory with current period costs to determine an average cost per unit.

Question 4

Managers prepare process cost reports in the evaluating stage of the management process.

Accepted Answer

Managers prepare process cost reports in the controlling stage of the management process to track production costs, compare them with budgeted costs, and make adjustments as necessary.

Question 5

The number of equivalent units for direct materials cost using the FIFO costing procedure is the units in beginning work in process inventory minus units started during the period plus units completed during the period.

Accepted Answer

The number of equivalent units for direct materials cost using the FIFO costing procedure is the units completed during the period plus the equivalent units in ending work in process inventory.

Question 6

Process costing is a system of

Accepted Answer

Process costing is a method of determining the cost of a product through a particular production process. It is used in industries such as chemical, textile, and food processing, where products typically go through multiple stages of production. This method helps businesses make informed decisions about pricing, production, and profitability.

Question 7

The average costing method in process costing disregards the ending inventory assuming that direct material costs and conversion costs are pertaining to the immediate next period.

Accepted Answer

The average costing method in process costing takes into account the ending inventory and calculates the cost of goods sold and cost of goods transferred based on the average cost of production incurred during the period. It is the specific identification method that disregards the ending inventory and assumes all costs are related to the immediate next period.

Question 8

The type of product costing system used by a company is dictated by the

Accepted Answer

The type of product costing system used by a company is primarily dictated by the production process. Different production processes require different costing systems, and a company will need to choose a costing system that accurately reflects the costs associated with their specific production process. Factors such as the type of raw materials used, the labor required, and the complexity of the manufacturing process will all influence the choice of costing system. The other options listed (project manager, company president, plant supervisor) may have some input or influence on the decision-making process, but they are not the primary determinants of the costing system used.

Question 9

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

This statement is true. The total costs to be accounted for in a process costing system consist of direct materials and conversion costs incurred during the current period, as well as any costs included in the beginning Work in Process Inventory account. This is because process costing is used to track costs for large-scale, repetitive manufacturing processes, and it is important to account for all costs associated with a particular production process.

Question 10

Under the FIFO costing method,separate unit cost analyses are not used for each accounting period because costs of different periods are averaged.

Accepted Answer

Under the FIFO (First-In, First-Out) costing method, costs are not averaged; instead, the costs of the earliest goods purchased or produced are the first to be recognized in determining the cost of goods sold, keeping separate unit cost analyses for each accounting period.

Question 11

When the FIFO costing method is used in process costing,the number of units in beginning inventory is multiplied by 100 percent to determine the equivalent units.

Accepted Answer

In the FIFO costing method, only the work done in the current period is considered for calculating equivalent units, ignoring the work done on beginning inventory units in previous periods.

Question 12

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

Accepted Answer

Process costing is used for products that are composed of mass-produced homogeneous units, meaning that each unit is the same and the cost of each unit can be averaged across all units produced. This is in contrast to job order costing, which is used for products that are unique and produced to individual customer specifications. Therefore, if a company produces a product that is the same across all units, process costing is the best choice.

Question 13

The FIFO process costing method assumes that the items in ending work in process inventory were started and completed during the current period.

Accepted Answer

The FIFO process costing method assumes that the items in ending work in process inventory were started in a previous period and completed during the current period.

Question 14

In a process costing system,the equivalent units of production must be computed after determining the value of ending inventory.

Accepted Answer

The equivalent units of production must be computed before determining the value of ending inventory.

Question 15

To decide the cost of a product,managers use information about past and projected product costing and customer preferences.

Accepted Answer

Managers use past and projected product costing and customer preferences to decide the cost of a product.

Question 16

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 helps in determining the total cost incurred in a particular department during a period, which includes both direct and indirect costs. This information is then used to allocate the costs to the next department in the production process or to the Finished Goods Inventory account. Thus, the statement is true.

Question 17

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 18

When the average costing method is used in process costing,all costs incurred by a department or production process are divided by the equivalent units produced during the period to determine the average cost per unit produced.

Accepted Answer

The statement is true.

Question 19

Under the FIFO method,the equivalent units will always equal the actual units in beginning work in process inventory,plus the actual units started and completed during the current period,plus the actual units in ending work in process inventory during the current period.

Accepted Answer

Under the FIFO method, the equivalent units may not always equal the actual units because incomplete units from the ending work in process inventory are not considered equivalent units. Only complete units are considered equivalent units.

Question 20

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

Accepted Answer

This statement is true. The average costing method in a process costing system combines the costs in beginning inventory with current period costs to calculate the average cost of a product unit.

Quiz 17: Costing Systems: Process Costing

In a process costing system,the average costing method assumes that cost flows mirror the logical physical flow of production.

It is necessary for managers to understand product and cost flow patterns,to use process costing.

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

Managers prepare process cost reports in the evaluating stage of the management process.

The number of equivalent units for direct materials cost using the FIFO costing procedure is the units in beginning work in process inventory minus units started during the period plus units completed during the period.

Process costing is a system of

The average costing method in process costing disregards the ending inventory assuming that direct material costs and conversion costs are pertaining to the immediate next period.

The type of product costing system used by a company is dictated by the

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.

Under the FIFO costing method,separate unit cost analyses are not used for each accounting period because costs of different periods are averaged.

When the FIFO costing method is used in process costing,the number of units in beginning inventory is multiplied by 100 percent to determine the equivalent units.

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

The FIFO process costing method assumes that the items in ending work in process inventory were started and completed during the current period.

In a process costing system,the equivalent units of production must be computed after determining the value of ending inventory.

To decide the cost of a product,managers use information about past and projected product costing and customer preferences.

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.

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

When the average costing method is used in process costing,all costs incurred by a department or production process are divided by the equivalent units produced during the period to determine the average cost per unit produced.

Under the FIFO method,the equivalent units will always equal the actual units in beginning work in process inventory,plus the actual units started and completed during the current period,plus the actual units in ending work in process inventory during the current period.

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