Question 1

Regardless of the cost approach used, in a process costing system, costs attached to units in beginning inventory are included in the computation of costs per equivalent unit.

Accepted Answer

The answer of Regardless of the cost approach used, in...

Question 2

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 during the current period is considered for calculating equivalent units, ignoring the work done on beginning inventory units before the current period.

Question 3

In a process costing system, each department's production costs are transferred to the next department and ultimately to the Finished Goods Inventory account.

Accepted Answer

In a process costing system, each department's production costs are transferred to the next department or to the next stage of production until the final product is completed. The total cost of production is then transferred to the Finished Goods Inventory account.

Question 4

Separate equivalent units of production usually are calculated for materials and conversion costs.

Accepted Answer

This is true. Equivalent units are calculated separately for materials and conversion costs because they are usually added to the product at different times in the production process. Calculating equivalent units separately allows for a more accurate allocation of costs to each stage of production.

Question 5

If 45,000 units of ending work in process inventory are 60 percent complete as to conversion costs, 27,000 equivalent units of conversion costs must be incurred to complete these units during the next period.

Accepted Answer

The equivalent units for the ending work in process inventory would be 45,000 units * 60% = 27,000 equivalent units, which means these units have already incurred 27,000 equivalent units of conversion costs, not that 27,000 more are needed to complete them.

Question 6

The amount of equivalent production units for direct materials is always the same as that for conversion costs.

Accepted Answer

The amount of equivalent production units for direct materials and conversion costs could be different depending on the specific accounting method used.

Question 7

The product unit cost is the sum of the cost elements added in all production department processes.

Accepted Answer

The unit cost includes all the direct and indirect costs incurred in the production department processes. By summing up all the cost elements, we can determine the total cost of producing one unit of an item in a manufacturing plant.

Question 8

In a process costing system, products flow in a LIFO manner, from department to department.

Accepted Answer

In a process costing system, products flow in a FIFO (first-in, first-out) manner, from department to department.

Question 9

In many instances, direct materials are added at the beginning of the process.

Accepted Answer

Direct materials are typically the first items added to a production process as they are inputs needed to create the final product.

Question 10

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

This statement is true because process costing requires a continuous flow of production. Therefore, any products that were partially completed at the beginning of the period are assumed to be finished first during the current period. This is because the production process is ongoing and there is no clear start or end to each individual product.

Question 11

The number of equivalent units produced for direct materials cost using the FIFO costing procedure is the sum of the units in beginning work in process inventory, units started and completed during the period, and the productive effort applied to ending work in process inventory.

Accepted Answer

Under the FIFO costing procedure, the number of equivalent units for direct materials cost is calculated based on the units started and completed during the period plus the equivalent units in the ending work in process inventory, without including the units in beginning work in process inventory since FIFO only considers the work done during the current period.

Question 12

Equivalent production is a measure of productive output of units for a period of time, expressed in terms of fully completed or equivalent whole units produced.

Accepted Answer

Equivalent production is indeed a measure of productive output expressed in terms of fully completed or equivalent whole units produced during a given period of time.

Question 13

Conversion costs are defined as the combined total of direct materials costs and direct labor costs incurred by a production department.

Accepted Answer

Conversion costs are defined as the combined total of direct labor costs and factory overhead (indirect costs) incurred by a production department.

Question 14

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

This statement accurately describes the process costing method.

Question 15

In a process costing system, all production costs are assigned to departments.

Accepted Answer

In a process costing system, production costs are assigned to departments or processes, rather than to individual products. This allows for the calculation of an average cost per unit produced by each department, which can then be used to determine the cost of goods sold and inventory value for the business as a whole.

Question 16

Under the FIFO cost flow assumption, 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) cost flow assumption, costs are not averaged; instead, the costs of the earliest goods purchased are the first to be recognized in determining cost of goods sold, keeping separate unit cost analyses for each period.

Question 17

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 18

When the FIFO cost flow assumption is used, 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 percent of ending work in process inventory completed during the current period.

Accepted Answer

The FIFO cost flow assumption focuses on the costs related to the units started and completed during the current period, separately from the beginning inventory. It does not imply that equivalent units will always equal the sum of beginning inventory units, units started and completed, plus a percentage of the ending work in process. Equivalent units under FIFO specifically relate to the work done during the current period, excluding work accounted for in the beginning inventory.

Question 19

The number of equivalent units of production may be larger than the number of completed units during the period.

Accepted Answer

Equivalent units of production take into account partially completed units, so it is possible for the number of equivalent units to be larger than the number of completed units during the period.

Question 20

Equivalent units are defined as the number of units completed and transferred out of work in process inventory during the current period.

Accepted Answer

Equivalent units are defined as the number of units that are partially completed and the work needed to complete them is considered as equivalent to a certain number of fully completed units. The units that are completed and transferred out of work in process inventory are not considered as equivalent units.

Quiz 3: Costing Systems- Process Costing