Question 1

Assume there was no beginning work in process inventory and the ending work in process inventory is 70% complete with respect to conversion costs. Under the weighted-average method, the number of equivalent units of production with respect to conversion costs would be:

Accepted Answer

Under the weighted-average method, the equivalent units of production for conversion costs include both the units completed during the period and the partially complete units in ending work in process inventory. Therefore, the equivalent units will be less than the units started during the period because some of the units are still in process and not yet completed.

Question 2

From the standpoint of cost control, the first-in, first-out method of process costing is superior to the weighted-average method.

Accepted Answer

FIFO assigns the earliest costs to the earliest units produced, which results in a more accurate matching of costs to revenues.

Question 3

The step-down method of service department cost allocation ignores interdepartmental services provided from one service department to another service department and allocates all service department costs directly to operating departments.

Accepted Answer

The step-down method does not ignore interdepartmental services, but rather allocates them based on a sequential distribution of costs, taking into account services rendered both within and between service departments.

Question 4

In both the direct and step-down methods of allocating service department costs, any amount of the allocation base that is attributable to the service department whose cost is being allocated is ignored.

Accepted Answer

In both methods, the allocation base is used to distribute the service department costs to the production departments. The portion of the allocation base that is attributable to the service department itself is eliminated, as it is not necessary to allocate costs to oneself.

Question 5

The order in which the costs of service departments are allocated will affect the amounts allocated to an operating department when the direct method is used.

Accepted Answer

The direct method allocates service department costs directly to operating departments without considering services rendered between service departments, so the order of allocation does not affect the amounts allocated to operating departments.

Question 6

In the cost reconciliation report under the first-in, first-out method, the costs accounted for equals the cost of units transferred out plus the costs added during the period.

Accepted Answer

In the cost reconciliation report under the FIFO method, the costs accounted for equals the cost of units transferred out plus the cost of ending work in process inventory, not the costs added during the period.

Question 7

The equivalent units in the ending work in process inventory will be different under the first-in, first-out and the weighted-average methods of process costing.

Accepted Answer

The answer of The equivalent units in the ending work...

Question 8

Which of the following journal entries would be used to record direct labor costs in a company having two processing departments (Department A and Department B)?

Accepted Answer

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

Question 9

The step-down method of cost allocation is more accurate than the direct method because the step-down method takes into account the services that service departments provide to each other.

Accepted Answer

The step-down method allocates costs to other departments based on the services they provide to each other, making it a more accurate cost allocation method compared to the direct method.

Question 10

When computing the cost per equivalent unit, the weighted-average method of process costing considers:

Accepted Answer

The weighted-average method of process costing includes both the costs incurred during the current period and the costs associated with the beginning work in process inventory to compute the cost per equivalent unit. This approach averages the costs over the units produced, without distinguishing between work done in the current and previous periods.

Question 11

Under the step-down method of cost allocation, the service department that provides the least amount of service to the other departments should be allocated first.

Accepted Answer

Under the step-down method of cost allocation, the service department that provides the most amount of service to the other departments should be allocated first to ensure accuracy in the allocation of costs.

Question 12

The cost per equivalent unit under the first-in, first-out method of process costing is equal to the cost added during the period divided by the equivalent units of production for the period.

Accepted Answer

This is correct. The FIFO method assumes that the earliest units worked on during the period are the first to be completed and transferred out, so the cost added during the period is divided by the equivalent units of production for the period to arrive at the cost per equivalent unit.

Question 13

In the cost reconciliation report under the first-in, first-out method, the costs accounted for equals the cost of beginning work in process inventory plus the costs added during the period.

Accepted Answer

In the cost reconciliation report under the first-in, first-out (FIFO) method, the costs accounted for include the cost of beginning work in process inventory plus the costs added during the period, but it specifically adjusts for the portion of the beginning inventory that was completed during the period, focusing only on the costs related to the work done in the current period.

Question 14

Malcolm Company uses a weighted-average process costing system. All materials at Malcolm are added at the beginning of the production process. The equivalent units for materials at Malcolm would be the sum of:

Accepted Answer

In a weighted-average process costing system, materials are added at the beginning of the production process. Therefore, the equivalent units for materials would be the sum of units in beginning work in process and the units started.

Question 15

Under the weighted-average method, the cost of units transferred out of a department is computed as follows for a cost category:

Accepted Answer

The weighted-average method calculates the cost per equivalent unit by dividing the total costs (beginning work in process inventory plus costs added during the period) by the equivalent units of production. The cost of units transferred out of a department is then calculated by multiplying the number of units transferred to the next department by the cost per equivalent unit. Therefore, the correct choice is B, which represents units transferred to the next department multiplied by the cost per equivalent unit.

Question 16

The step-down method ultimately results in less total cost being allocated to operating departments than the direct method.

Accepted Answer

The step-down method may result in more total cost being allocated to operating departments than the direct method because it takes into account the shared services provided by support departments.

Question 17

The cost per equivalent unit for conversion costs will always be the same under both the first-in, first-out and the weighted-average methods if there is no beginning work in process inventory.

Accepted Answer

When there is no beginning work in process inventory, the weighted-average method and the first-in, first-out method will result in the same cost per equivalent unit for conversion costs.

Question 18

The equivalent units of production for a department using the first-in, first-out process costing method is equal to the number of units completed plus the equivalent units in the ending inventory.

Accepted Answer

The equivalent units of production for a department using the first-in, first-out (FIFO) process costing method is equal to the number of units completed and transferred out plus the equivalent units of production for the ending work in process inventory, minus the equivalent units in the beginning inventory. This method only considers the work done during the current period.

Question 19

Under the first-in, first-out method of product costing, equivalent units of production consider units in the beginning inventory as if they were started and completed during the current period.

Accepted Answer

Under the FIFO method, units in the beginning inventory are considered first and their respective costs are transferred to the next stage of production before accounting for the current period's production. Therefore, they are not treated as if they were started and completed during the current period.

Question 20

In the cost reconciliation report under the first-in, first-out method, the costs to be accounted for equals the cost of ending work in process inventory plus the costs added during the period.

Accepted Answer

In the cost reconciliation report under the first-in, first-out (FIFO) method, the costs to be accounted for equal the cost of beginning work in process inventory plus the costs added during the period. The cost of ending work in process inventory is part of the costs accounted for, not added to the costs added during the period.

Quiz 4: Process Costing