Question 1

Which of the following companies would most likely use a process costing system?

Accepted Answer

Miller Brewing Company, as a producer of manufactured goods (beer), would most likely use a process costing system to allocate the costs of materials, labor, and overhead to their production process.

Question 2

Which method of costing is used to record all manufacturing costs directly in Cost of Goods Sold,and if any inventories occur at the end of the accounting period,the appropriate costs are transferred back to the inventory accounts?

Accepted Answer

Backflush costing is the only method among the options that records all manufacturing costs directly in Cost of Goods Sold and transfers the appropriate costs back to inventory accounts only if inventories still exist at the end of the accounting period. This method is commonly used in just-in-time (JIT) environments where there is minimal inventory on hand. Put-back costing, traditional costing, and reverse costing do not fit the description given.

Question 3

Which of the following costs is not part of manufacturing overhead?

Accepted Answer

Manufacturing overhead costs are indirect costs that cannot be traced back to a specific product, such as depreciation of factory equipment, salaries for production supervisors, and electricity for the factory. Health insurance for sales staff is not an overhead cost, as sales staff is not part of the production process.

Question 4

Different types of companies use different types of cost systems.An effective cost system must have all of the following characteristics except:

Accepted Answer

A cost system must have benefits that exceed its costs in order for it to be effective. If the costs of the cost system exceed its benefits, then it would not make sense to use the cost system. Therefore, option D is incorrect. The other options are all characteristics that an effective cost system should have. Option A states that the benefits of the cost system should exceed its costs, which is correct. Option B states that different costs should be recorded for different purposes, which is also correct as different types of costs are useful for different decisions. Option C states that the cost system should have a decision focus, which is also correct as the cost system should provide useful information for decision making.

Question 5

Companies concerned about quality production do not treat waste or spoiled goods as a normal cost of production and remove all waste and spoilage costs from the product cost.Some companies have found that waste or spoilage costs range from

Accepted Answer

The answer of Companies concerned about quality production do not...

Question 6

Accounting in a JIT environment charges all costs directly to Cost of Goods Sold and charges them to Inventory accounts when needed using which of the following costing methods?

Accepted Answer

Backflush costing is a method used in JIT environments where costs are not assigned to specific products until production is completed. Instead, all costs are charged directly to Cost of Goods Sold, and then at the end of the production process, the system "flushes" the costs back into the appropriate inventory accounts based on the quantities produced. This method is efficient and eliminates the need for tracking costs on individual products.

Question 7

What method of production eliminates the need for inventories because no production takes place until the firm knows that it will sell the item?

Accepted Answer

Just-in-time is a method of production where the production process does not begin until an order has been received. Therefore, there is no need to keep inventories on hand because production only takes place when the firm knows that it will sell the item. This allows for a more efficient use of resources and reduces the risk of holding onto excess inventory.

Question 8

Using the following information,calculate equivalent units of production for XYZ Company using the FIFO method:
Beginning Inventory: 50,000 units,70% complete
Units started & completed: 100,000 units
Units in ending inventory: 25,000 units,40% complete

Accepted Answer

The answer of Using the following information,calculate equivalent units of...

Question 9

What can be said of the relationship between total manufacturing costs and the cost of goods manufactured when work-in-process inventories decrease during the period? (Assume no change in per unit costs. )

Accepted Answer

When work-in-process inventories decrease during the period, it means that the production process has been completed and goods have been manufactured. Therefore, the cost of goods manufactured for the period will be greater than the total manufacturing costs incurred during that period.

Question 10

Which of the following is true regarding waste and spoilage?

Accepted Answer

Normal waste is included in the cost of goods manufactured, abnormal waste is expensed, and companies focused on quality may remove waste costs from product costs.

Question 11

Using the following information,calculate equivalent units of production for Jetton Manufacturing using the FIFO method:
Beginning Inventory: 30,000 units,40% complete
Units started & completed: 75,000 units
Units in ending inventory: 20,000 units,70% complete

Accepted Answer

The answer of Using the following information,calculate equivalent units of...

Question 12

Which of the following accounts does not appear on the balance sheet?

Accepted Answer

Cost of Goods Sold is an expense account that appears on the income statement, not on the balance sheet. Raw Materials Inventory, Work in Process Inventory, and Finished Goods Inventory are all inventory accounts that appear on the balance sheet.

Question 13

Which statement is true concerning just-in-time inventory systems?

Accepted Answer

Just-in-time systems keep inventory to a minimum by carefully planning and coordinating with suppliers to ensure that materials and products are delivered exactly when needed. This helps to reduce inventory costs and improve efficiency. Option A is incorrect because just-in-time systems aim to minimize defective units by improving processes and quality control rather than dealing only with defective units. Option B is incorrect because just-in-time systems may involve working with a few key suppliers rather than many. Option D is incorrect because just-in-time systems can work for both small and large companies, although larger companies may face more challenges in coordinating with multiple suppliers and managing a larger volume of materials and products.

Question 14

Which of the following represents a reason management would use JIT methods?

Accepted Answer

JIT (Just-in-Time) methods are used to provide finished goods just in time for sale, reducing excess inventory and associated costs. This method is used to improve efficiency and effectiveness in the production process.

Question 15

Which of the following statements is true?

Accepted Answer

JIT (Just-in-Time) approach requires workers to immediately correct a process making defective units instead of hiding it or waiting for inspection later. This helps in reducing waste and improves the process efficiency.

Question 16

Just-in-time (JIT)methods

Accepted Answer

JIT methods involve starting production only when an order is received (A), ordering raw materials only when needed (B), and ending production as soon as the order is filled (C). Therefore, all of the answers are correct (D).

Question 17

Which is not correct for just-in-time (JIT)methods?

Accepted Answer

This statement is not correct as JIT relies on high-quality materials from few reliable suppliers to ensure consistency in production and reduce waste. The use of cheap, low-quality materials can lead to defects and production delays, which goes against the principles of JIT.

Question 18

Which costing system uses equivalent units in the computation of costs?

Accepted Answer

Process costing uses equivalent units to compute costs because it deals with the production of homogeneous products over a continuous period of time, making it necessary to determine the equivalent number of complete units produced. Job costing, on the other hand, is used to calculate costs for customized or unique products, and doesn't typically rely on equivalent units. Therefore, the correct answer is B, which is process costing.

Question 19

Which of the following isnot a component of just-in-time (JIT)production methods?

Accepted Answer

Workers and supervisors hiding defective units in inventory goes against the principles of JIT, which emphasize the need for identifying and addressing production issues immediately to prevent waste and inefficiency.

Question 20

Which of the following companies would most likely use a job costing system?

Accepted Answer

Universal Studios (movies) would most likely use a job costing system because each movie project is unique and costs can be directly traced to each project, unlike the continuous, standardized production processes of companies like Pillsbury, Heinz, and Budweiser.

Quiz 2: Measuring Product Costs