Question 1

Which of the following five types of products is least likely to be produced in a process manufacturing system?

Accepted Answer

The answer of Which of the following five types of...

Question 2

Which of the following is not one of the four steps in accounting for production activity in a period?

Accepted Answer

The answer of Which of the following is not one...

Question 3

A department had 12,500 units which were 20% complete in beginning Goods in Process Inventory. During the current period 60,000 units were transferred in. Ending Goods in Process Inventory was 15,000 units which were 70% complete. Assume this company uses the Weighted Average method of process costing and direct material is added uniformly throughout the process. What are the equivalent units produced with respect to direct material?

Accepted Answer

The equivalent units for direct materials under the Weighted Average method are calculated by adding the units completed and transferred out to the equivalent units in ending inventory. Here, 60,000 units were transferred in, and the ending inventory is 15,000 units at 70% completion. Therefore, the equivalent units for direct materials are 60,000 + (15,000 * 70%) = 60,000 + 10,500 = 70,500. However, since the question asks for equivalent units produced, we consider only the units transferred in and the completion of ending inventory, which gives us 68,000 equivalent units.

Question 4

An expression of the activity of a process as the number of units that would have been processed during a period if all effort had been applied to units that were started and finished during the period, is called:

Accepted Answer

Equivalent units of production is the expression of the activity of a process as the number of units that would have been processed if all effort had been applied to units that were started and finished during the period.

Question 5

Equivalent units of production are equal to:

Accepted Answer

Equivalent units of production refers to the concept of calculating the number of units that could have been completed if all effort had been applied to units that were started and completed during that period. It takes into account the units that were partially completed and therefore requires an estimation of the degree of completion for those units. Therefore, option A is the best choice among the given options.

Question 6

The purchase of raw materials on account in a process costing system is recorded with a:

Accepted Answer

When raw materials are purchased on account in a process costing system, the transaction is recorded with a debit to Raw Materials Inventory and a credit to Accounts Payable. This is because the company is receiving the raw materials but has not yet paid for them, so they increase their inventory of raw materials on the balance sheet while also establishing a liability to pay the supplier in the future. Option A is incorrect because purchases are made on account, so there is no cash exchange. Option B is incorrect because the credit should be to Accounts Payable, not Cash. Option D is incorrect because the debit should be to Raw Materials Inventory, not Accounts Payable. Option E is incorrect because the raw materials are not yet incorporated into the production process, so they should not be recorded in Goods in Process Inventory.

Question 7

Refer to the following table of cost information:

-The following journal entry would be made to record the transfer of completed goods from Shoving to the finished goods inventory for this period:

Accepted Answer

The answer of  Refer to the following table of...

Question 8

Which of the following journal entries correctly records the current month's activity where $60,000 of direct material and $17,000 of indirect materials were used in the production process?

Accepted Answer

The answer of Which of the following journal entries correctly...

Question 9

Which of the following journal entries correctly records the current month's activity where $250,000 of raw material was purchased for cash, and $150,000 of direct material and $60,000 of indirect materials were used in the production process?

Accepted Answer

Choice B correctly records the purchase of raw materials for cash with a debit to Raw Materials and a credit to Cash. It also correctly records the usage of direct and indirect materials in the production process with a debit to Work in Process for the total amount of materials used ($150,000 + $60,000 = $210,000), a credit to Raw Materials for the total amount of direct and indirect materials used ($150,000 + $60,000 = $210,000), and a corresponding credit to Manufacturing Overhead for the indirect materials used. Choices A, C, D, and E contain errors such as recording the raw material purchase as a credit or not properly accounting for the usage of indirect materials.

Question 10

Direct material costs are recorded:

Accepted Answer

Direct material costs are recorded directly to a Goods in Process account because they are a direct cost of producing the goods.

Question 11

Which of the following journal entries correctly records the current month's activity where $125,000 of raw material was purchased for cash, and $75,000 of direct material and $30,000 of indirect materials were used in the production process?

Accepted Answer

Option B correctly records the purchase of raw material for cash and also the usage of direct and indirect materials in the production process. It follows the basic principle of accounting, where an increase in an asset account (Raw material) is debited, and a decrease in an asset account is credited. The usage of the direct and indirect material is debited in the manufacturing account and credited in the raw material account. Option A is incorrect as there is no credit entry to the raw material account, and option C is incorrect as it only records the usage of direct material. Option D is incorrect as it records the usage of indirect material and not direct material, and option E is incorrect as it records only the purchase of raw material and not the usage.

Question 12

Which of the following characteristics does not usually apply to process manufacturing systems?

Accepted Answer

In process manufacturing systems, the units of product are generally not separately identifiable due to the continuous and homogeneous nature of the production process.

Question 13

A hybrid costing system would be most appropriate when:

Accepted Answer

A hybrid costing system combines elements of job costing and process costing. This is most appropriate when a manufacturer is able to standardize processes, but at the same time is attempting to cater to individual customer needs. This allows for the tracking of costs related to specific jobs or batches of products, while also providing an overall view of production costs. Options B, C, D, and E do not describe situations where a hybrid costing system would be the most appropriate choice.

Question 14

Which of the following characteristics applies to process cost accounting and not to job order cost accounting?

Accepted Answer

The answer of Which of the following characteristics applies to...

Question 15

A system of accounting in which the costs of each process are accumulated separately and then assigned to the units of product that passed through the process is a:

Accepted Answer

A process cost accounting system is specifically designed for tracking the costs incurred during a production process where products are manufactured using a consistent process. The costs of each process are accumulated separately, and then assigned to the units of product that passed through the process. This is in contrast to a job order cost accounting system, which tracks the cost of each individual job or product. The other choices (A, C, D, E) are not specific enough to describe this type of accounting system.

Question 16

Direct labor and indirect labor are recorded, respectively, to:

Accepted Answer

Direct labor is recorded as part of Goods in Process because it is used directly in the manufacturing process of the product. Indirect labor, on the other hand, is recorded as part of Factory Overhead because it cannot be easily traced to a specific product or job. Therefore, choice D is the correct answer as it correctly states that direct labor is recorded to Goods in Process and indirect labor is recorded to Factory Overhead.

Question 17

A company that applies process costing is most frequently characterized by:

Accepted Answer

A company that applies process costing is most frequently characterized by homogeneous products and high production volume. This is because process costing is used to assign costs to each unit of output, which is ideal for companies that produce large quantities of the same product. The high volume of production ensures that the costs are spread over a large number of units, making the cost per unit lower. Additionally, the homogeneous products require a consistent production process, making it easier to apply process costing.

Question 18

A department had 12,500 units which were 20% complete in beginning Goods in Process Inventory. During the current period 60,000 units were transferred in. Ending Goods in Process Inventory was 15,000 units which were 70% complete. Assume this company uses the FIFO method of process costing and direct material is added uniformly throughout the process. What are the equivalent units produced with respect to direct material?

Accepted Answer

Equivalent units of production = (Beginning WIP units x % complete) + Units transferred in + (Ending WIP units x % complete)= (12,500 x 20%) + 60,000 + (15,000 x 70%)= 2,500 + 60,000 + 10,500= 65,500

Question 19

Which of the following is true when computing cost per equivalent unit in a FIFO process costing system?

Accepted Answer

In a FIFO process costing system, the cost per equivalent unit is computed by dividing the costs incurred in the current period by the equivalent units of production completed in the current period. This is because FIFO assumes that the costs incurred in the current period are used up or sold first, so only those costs should be used in computing the cost per unit.

Question 20

An organizational unit of a factory that has the responsibility for partially manufacturing or producing a product is called a:

Accepted Answer

The production department is responsible for manufacturing or partially producing a product. Service departments provide support to the production department and do not directly produce the product. "Primary department" and "control department" are not commonly used terms in factory organization. "Responsibility department" is not specific enough to indicate its function within the factory.

Quiz 16: Process Costing and Analysis