Question 1

In process cost accounting, materials are always classified as indirect if they are not physically incorporated into the final product.

Accepted Answer

In process cost accounting, materials are classified as direct if they are physically incorporated into the final product. Indirect materials refer to those that are not a significant part of the finished product and are consumed in manufacturing, but cannot be traced back to specific units of production.

Question 2

Process cost accounting systems are used only by companies that manufacture physical products; meaning that companies and other organizations that provide services to their customers do not use process cost accounting.

Accepted Answer

The statement is false. Process cost accounting systems can be used by companies that provide services as well, such as healthcare organizations, law firms, and construction companies. However, the system may need to be adapted to fit the specific nature of the service being provided.

Question 3

Direct costs in process cost accounting include only those costs that can be readily identified with particular product units.

Accepted Answer

The answer of Direct costs in process cost accounting include...

Question 4

Process cost accounting systems are commonly used by companies that manufacture standardized products by passing them through a series of manufacturing steps.

Accepted Answer

Process cost accounting systems are designed for manufacturing standardized products that go through a continuous production process, where costs are accumulated for each department or process.

Question 5

In process cost accounting, all labor that is applied exclusively in a single production department is considered to be direct labor.

Accepted Answer

In process cost accounting, labor that is applied exclusively in a single production department is considered to be direct labor, regardless of whether it is applied directly to a product or not. Indirect labor includes labor that is shared among multiple production departments or used to support the production process as a whole.

Question 6

Process cost accounting systems are commonly used by companies that produce a large volume of standardized units on a continuous basis.

Accepted Answer

Process cost accounting systems are designed for companies that have repetitive processes and produce a large volume of standardized units, such as in manufacturing or processing industries.

Question 7

The use of process costing is of little benefit to a service type of operation.

Accepted Answer

Process costing can be beneficial for service operations that have identifiable processes with inputs and outputs that can be measured and tracked. For example, a hospital may use process costing to determine the cost of providing a specific medical procedure.

Question 8

A unique feature of process costing systems is the use of a single Goods in Process Inventory control account.

Accepted Answer

The answer of A unique feature of process costing systems...

Question 9

Process costing is applied to operations with repetitive production and heterogeneous products.

Accepted Answer

Process costing is applied to operations with repetitive production and homogeneous products, not heterogeneous products.

Question 10

Companies that use a series of manufacturing processes to produce standardized products should use a process cost accounting system.

Accepted Answer

Process cost accounting is used when a company manufactures large quantities of identical products through a series of repetitive processes. This system allows the company to determine the cost of each product and allocate the cost of materials, labor, and overhead to the units produced. Therefore, companies that use a series of manufacturing processes to produce standardized products should use a process cost accounting system.

Question 11

Process cost accounting systems consider direct costs to include those costs that can be readily identified with a particular process.

Accepted Answer

Process cost accounting systems typically include direct costs that can be easily traced to a particular process or product, such as the cost of materials or direct labor. Indirect costs, such as manufacturing overhead, are allocated to processes based on a predetermined overhead rate.

Question 12

A manufacturing company may choose to use either a job order cost accounting system or a process cost accounting system, without considering the process it uses to produce its products.

Accepted Answer

A manufacturing company must consider its production process when choosing between a job order cost accounting system and a process cost accounting system, as each system is suited to different types of production.

Question 13

Accountants use the term "process cost accounting system" because these systems use a number of trained individuals and computers to process the collected cost information.

Accepted Answer

The answer of Accountants use the term "process cost accounting...

Question 14

Process cost accounting systems consider overhead costs to include those costs that cannot be readily identified with any specific process.

Accepted Answer

Process cost accounting systems allocate overhead costs based on a predetermined overhead rate, which includes indirect costs that cannot be traced to a specific process, such as rent, utilities, and depreciation of shared equipment.

Question 15

The Weighted Average method of process costing computes the cost per equivalent unit based solely on the current period's EUPs and costs.

Accepted Answer

The Weighted Average method considers both the current period's costs and the costs from the previous period's ending work in process inventory to compute the cost per equivalent unit.

Question 16

Process and job order manufacturing operations both combine materials, labor, and overhead items in the process of producing products.

Accepted Answer

Both process and job order manufacturing operations involve combining materials, labor, and overhead to produce products, though they differ in the way they organize production processes.

Question 17

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

Accepted Answer

Hybrid systems combine the features of both process and job order operations in order to improve efficiency and flexibility. They typically involve a combination of standardized, repetitive processes (like those found in process operations) as well as customized or unique elements (like those found in job order operations).

Question 18

A company that uses a process cost accounting system maintains separate Goods in Process Inventory accounts for each of its manufacturing departments.

Accepted Answer

In a process cost accounting system, separate Goods in Process Inventory accounts are maintained for each manufacturing department to track the cost of production in each department. This is because the production process may differ between departments, and thus the costs associated with each department's production needs to be tracked separately.

Question 19

In process cost accounting, the classification of materials as direct or indirect depends on whether they are clearly linked with a specific process.

Accepted Answer

The classification of materials as direct or indirect in process cost accounting depends on whether they are clearly linked with a specific process. Direct materials are those that can be easily traced to a particular process, while indirect materials are those that cannot be clearly linked to a specific process.

Question 20

When defining direct costs and indirect costs in process costing, it is the process that is the cost object.

Accepted Answer

Direct costs and indirect costs are assigned to the process being analyzed, making the process the cost object in process costing.

Quiz 16: Process Costing and Analysis