Question 1

Michael Paints has two processes-Coloring Department and Mixing Department. Michael sold 200 gallons of paint for $220,000 of which $150,000 was sold on account. The total cost of processing was $385,000 for 5,500 gallons of paint. What are the journal entries to record a sale if Michael follows a process costing system?

Accepted Answer

The answer of Michael Paints has two processes-Coloring Department and...

Question 2

Under a process costing system, inventory data for the balance sheet is provided by the:

Accepted Answer

Under a process costing system, inventory data for the balance sheet is provided by the production cost report, which shows the cost and quantity of the units transferred to Finished Goods Inventory and the cost and quantity of the units still in Work-in-Process Inventory. The Finished Goods account and the Cost of Goods Sold account are used for the cost of goods sold and the revenue from sales, respectively.

Question 3

In most organizations, managers are often rewarded based on how well they meet the budget.

Accepted Answer

Most organizations set budgets as a means of managing financial resources and achieving their goals. Managers are typically responsible for achieving results within the budget. Therefore, their performance is often evaluated based on their ability to meet or exceed budget targets. Rewards such as bonuses, promotions, or recognition may be tied to the achievement of budget goals.

Question 4

Production cost reports prepared using first-in, first-out (FIFO)method assumes that the first units started in the production process are the last units completed and sold.

Accepted Answer

The FIFO method assumes that the first units started in the production process are the first units completed and sold, not the last.

Question 5

Production cost reports prepared using the first-in, first-out (FIFO)method determines the cost of equivalent units of production by accounting for beginning inventory costs separately from current period costs.

Accepted Answer

The statement is true. FIFO method ensures that the costs associated with the units produced first are assigned to ending inventory and the costs associated with the units produced later are assigned to cost of goods sold. Beginning inventory costs are accounted for separately from current period costs.

Question 6

Production cost reports prepared using first-in, first-out (FIFO)method assumes that the first units started in the production process are the first units completed and sold.

Accepted Answer

FIFO assumes that the earliest units produced are sold first, so production cost reports prepared using this method assume that the first units started in the production process are the first units completed and sold.

Question 7

Production cost reports prepared using first-in, first-out (FIFO)method determines the average cost of equivalent units of production by combining beginning inventory costs with current period costs.

Accepted Answer

Production cost reports prepared using the FIFO method determines the cost of equivalent units of production using the costs of the oldest units of inventory first, not by combining beginning inventory costs with current period costs.

Question 8

A production cost report helps managers identify the unnecessary costs that can be reduced in the production process.

Accepted Answer

A production cost report provides a detailed breakdown of all costs associated with producing a product, enabling managers to identify inefficiencies and areas where costs can be reduced. This helps companies improve their profitability by minimizing unnecessary expenses.

Question 9

Under the first-in, first-out (FIFO)method, the current-period equivalent units of production for the units in beginning inventory is always 100%.

Accepted Answer

Under the FIFO method, the equivalent units for beginning inventory are calculated based on the work needed to complete those units, not always 100%.

Question 10

Nexus Inc. uses a process costing system. It prepares a production cost report for each processing department. How will the managers of Nexus use these production cost reports to prepare the balance sheet at the end of an accounting period?

Accepted Answer

The production cost reports for each processing department will provide the managers with the cost of goods manufactured in each department. This information can then be used to calculate the total cost of goods manufactured for the accounting period. The balance sheet requires the total amount of inventory at the end of the period, which is calculated as follows: beginning inventory + cost of goods manufactured - cost of goods sold = ending inventory. Therefore, the managers can use the production cost reports to determine the balance of inventory accounts. The other options are not relevant to the preparation of the balance sheet.

Question 11

A production cost report cannot be used for the pricing of products as it depicts only the ways to control product costs.

Accepted Answer

A production cost report can be used for pricing products as it provides detailed information on the costs involved in production, which is essential for setting appropriate prices.

Question 12

A production cost report aids in preparing an income statement by:

Accepted Answer

A production cost report provides data on the manufacturing costs incurred during the period, including direct materials, direct labor, and manufacturing overhead. This information is used to calculate the cost of goods sold for the period, which is a critical component of the income statement. The report does not provide data for period costs, inventory accounts, or revenues generated.

Question 13

A production cost report is a part of the financial statements available to the shareholders of a company.

Accepted Answer

A production cost report is an internal accounting document used by management to track the costs of production. It is not typically shared with shareholders as part of financial statements.

Question 14

Nevada Manufacturing has two processing departments, Department I and Department II. During 2015, direct materials were assigned to the two production departments: $280,000 to Department I and $300,000 to Department II. During the period, $8,000 of indirect materials were used in production. Provide the journal entry to record this transaction.

Accepted Answer

The answer of Nevada Manufacturing has two processing departments, Department...

Question 15

A production cost report can help managers in identifying the most profitable products.

Accepted Answer

A production cost report provides information on the cost of producing each product, allowing managers to compare the costs with the revenue generated by each product. This information helps managers identify which products are the most profitable and adjust their production strategy accordingly.

Question 16

Jacob Company has four processing departments and follows a process costing system. It incurred $150,000 in machinery depreciation and $60,000 in indirect costs that were paid in cash. Provide the journal entry(ies)to record these transactions.

Accepted Answer

The answer of Jacob Company has four processing departments and...

Question 17

In a process costing system, costs can be controlled with the aid of a production cost report.

Accepted Answer

In a process costing system, a production cost report helps in controlling costs as it provides a detailed analysis of the costs incurred during the production process. The report includes information on the quantity and cost of inputs, the units produced, the cost per unit, and the total cost incurred during the period. This information can help managers in identifying areas where costs can be reduced, and in making decisions to improve the overall efficiency and profitability of the production process.

Question 18

Michael Paints has two processes-Coloring Department and Mixing Department. Michael sold 350 gallons on account at $110 per gallon. The total cost of processing was $385,000 for 5,500 gallons of paint. Throughout the year, Michael used a predetermined overhead allocation rate to allocate $75,000 and $65,000 of indirect costs to the Coloring Department and Mixing Department, respectively. The actual overhead cost incurred amounted to $150,000 at the end of the year. Record the necessary journal entries for the sale of goods and for adjustment of over/underallocated manufacturing overhead at the end of the year.

Accepted Answer

The answer of Michael Paints has two processes-Coloring Department and...

Question 19

Michael Paints has two processes-Coloring Department and Mixing Department. Michael sold 450 gallons on account at $110 per gallon. The total cost of processing was $385,000 for 5,500 gallons of paint. Throughout the year, Michael used a predetermined overhead allocation rate to allocate $80,000 and $90,000 of indirect costs to the Coloring Department and Mixing Department, respectively. The actual overhead costs incurred amounted to $150,000 at the end of the year. What are the journal entries to record the sale of goods and the adjustment for over/underallocated manufacturing overhead at the end of the year if Michael follows a process costing system?

Accepted Answer

The answer of Michael Paints has two processes-Coloring Department and...

Question 20

Under a process costing system, a production cost report helps managers in decision making.

Accepted Answer

The production cost report provides a summary of the costs incurred during a specific period of production and helps managers in making decisions related to pricing, inventory valuation, cost control, and product profitability analysis in a process costing system.

Quiz 20: Process Costing

Under a process costing system, inventory data for the balance sheet is provided by the:

In most organizations, managers are often rewarded based on how well they meet the budget.

Production cost reports prepared using first-in, first-out (FIFO)method assumes that the first units started in the production process are the last units completed and sold.

Production cost reports prepared using the first-in, first-out (FIFO)method determines the cost of equivalent units of production by accounting for beginning inventory costs separately from current period costs.

Production cost reports prepared using first-in, first-out (FIFO)method assumes that the first units started in the production process are the first units completed and sold.

Production cost reports prepared using first-in, first-out (FIFO)method determines the average cost of equivalent units of production by combining beginning inventory costs with current period costs.

A production cost report helps managers identify the unnecessary costs that can be reduced in the production process.

Under the first-in, first-out (FIFO)method, the current-period equivalent units of production for the units in beginning inventory is always 100%.

Nexus Inc. uses a process costing system. It prepares a production cost report for each processing department. How will the managers of Nexus use these production cost reports to prepare the balance sheet at the end of an accounting period?

A production cost report cannot be used for the pricing of products as it depicts only the ways to control product costs.

A production cost report aids in preparing an income statement by:

A production cost report is a part of the financial statements available to the shareholders of a company.

A production cost report can help managers in identifying the most profitable products.

Jacob Company has four processing departments and follows a process costing system. It incurred $150,000 in machinery depreciation and $60,000 in indirect costs that were paid in cash. Provide the journal entry(ies)to record these transactions.

In a process costing system, costs can be controlled with the aid of a production cost report.

Under a process costing system, a production cost report helps managers in decision making.