Question 1

The production cost report for Department 2 shows that $452,000 was assigned to the 53,000 units transferred to Finished Goods Inventory.Cost of goods manufactured equals $452,000.

Accepted Answer

The production cost report assigns the cost of goods produced to the units transferred to finished goods inventory. Therefore, the cost of goods manufactured is equal to the cost assigned to the units transferred, which in this case is $452,000.

Question 2

The production cost report for Department 2 shows that $452,000 was assigned to the 57,000 units transferred to Finished Goods Inventory.Cost of goods sold equals $452,000.

Accepted Answer

Cost of goods manufactured equals $452,000.

Question 3

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

Accepted Answer

This is a common practice in many organizations where managers are incentivized to meet or exceed the budget set for their department.

Question 4

The production cost report for Department 2 shows that $453,000 was assigned to the 58,000 units transferred to Finished Goods Inventory.This cost assigned to Finished Goods Inventory is recorded with a debit to Work-in-Process-Department 2.

Accepted Answer

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Question 5

List five ways in which managers use a production cost report to make decisions for their companies.

Accepted Answer

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Question 6

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

Accepted Answer

The FIFO method only uses the costs of the current period to determine the average cost of equivalent units of production, without combining them with the costs of the beginning inventory.

Question 7

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

Accepted Answer

The FIFO method assumes that the oldest inventory (first in) is sold or transferred out first, so the production cost report would reflect the assumption that the first units started are the first ones completed and transferred out.

Question 8

A production cost report provides inventory and cost of goods sold data that are needed for the balance sheet.

Accepted Answer

A production cost report is used to track the costs of producing goods, including direct materials, direct labor, and overhead costs. This report is crucial for determining the cost of goods sold, as well as the value of inventory that remains on hand at the end of a reporting period. Therefore, it provides important data for the balance sheet.

Question 9

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

Accepted Answer

Production cost reports prepared using the FIFO method assume that the first units started in the production process are the first units completed and sold, not the last.

Question 10

Which of the following is an example of how managers use product cost reports to control costs?

Accepted Answer

Product cost reports can provide information on the cost of producing a product or service. By analyzing this data, managers can determine if investing in newer and more efficient equipment will reduce costs and increase profitability. This demonstrates how managers use product cost reports to control costs by making strategic decisions about investments in equipment. The other answer choices do not specifically relate to the use of product cost reports for cost control.

Question 11

A production cost report aids in preparing an income statement by providing data for ________.

Accepted Answer

A production cost report provides data on the cost of goods produced during the period, which is necessary for calculating the cost of goods sold in the income statement. It does not directly provide information on period costs incurred, various inventory accounts, or revenues generated during the period.

Question 12

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

Accepted Answer

A production cost report can be used to determine the total cost of production for a product, which can be used to inform pricing decisions.

Question 13

The production cost report for Department 1 shows that $160,000 was assigned to the 31,000 units transferred to Department 2.This transfer cost assigned to units transferred to Department 2 is recorded with a debit to Work-in-Process-Department 2.

Accepted Answer

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Question 14

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

Accepted Answer

A production cost report provides a breakdown of all the costs involved in the production process, allowing managers to analyze each cost category and identify areas where cost reductions can be made. By identifying these costs, managers can take the necessary steps to reduce them and improve the profitability of the production process.

Question 15

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

Accepted Answer

A production cost report provides information on the total costs incurred in the production process, including the cost of raw materials, labor, and overhead expenses. By analyzing this report, managers can determine the profitability of each product and make informed decisions on pricing, production volumes, and cost reduction measures. Therefore, a production cost report can help managers identify the most profitable products.

Question 16

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

Accepted Answer

This is the correct explanation of how production cost reports using the FIFO method work. Beginning inventory costs are accounted for separately from current period costs to determine the cost of equivalent units of production.

Question 17

When finished products are sold,Cost of Goods Sold is debited and Finished Goods Inventory is credited.

Accepted Answer

This statement is true. When finished products are sold, the cost of those goods is removed from the inventory account (Finished Goods Inventory) and recorded as an expense (Cost of Goods Sold) in the income statement. This is done to accurately reflect the cost of goods sold during a specific period.

Question 18

Which of the following is not a way in which managers use the production cost reports to make decisions for their companies?

Accepted Answer

Production cost reports primarily focus on analyzing and controlling product costs rather than period costs, which are more related to the time period in which they are incurred rather than directly to production.

Question 19

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 is used to track and control costs by showing the total costs incurred at each stage of the production process. This report helps managers to identify any inefficiencies or cost overruns and take corrective action. Therefore, costs can be controlled with the aid of a production cost report.

Question 20

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

Accepted Answer

Production cost reports for each processing department provide information on the cost of goods produced and the units of products completed during the period. This information is used to determine the balance of inventory accounts, which are reported on the balance sheet at the end of the accounting period. Therefore, the managers of Gatherer will use these reports to determine the value of inventory on the balance sheet.

Quiz 20: Process Costing