Question 1

In which of the following ways is normal spoilage accounted for?
A) Expensed in the period in which it occurred
B) Included as part of the unit cost of output
C) Written off to cost of goods sold
D) Included in inventory valuation until year-end and then written off

Accepted Answer

Normal spoilage is accounted for by including it as part of the unit cost of output. This is because normal spoilage is an expected and unavoidable part of the production process, and it affects the cost of producing each unit. It is not expensed in the period in which it occurred, written off to cost of goods sold, or included in inventory valuation until year-end and then written off, as these methods do not accurately reflect the true cost of production.

Question 2

South River Chemicals Pty Ltd manufactures a product called Zybek.Direct materials are added at the beginning of the process and conversion activity occurs uniformly throughout the process.The following data pertain to the month of May.Using the weighted average method of process costing,calculate the equivalent units of direct materials and conversion costs for the month of May. 
A) DM 75 000;CC 69 400
B) DM 75 000;CC 60 400
C) DM 60 000;CC 60 400
D) DM 68 000;CC 69 400

Accepted Answer

The answer of South River Chemicals Pty Ltd manufactures a...

Question 3

Which of the following firms are more likely to use operational costing techniques?
i.Oil refineries
ii.Food processors
iii.Large scale clothing manufacturers
iv.Tourist operators
A) i and ii
B) ii and iii
C) i and iii
D) ii and iv

Accepted Answer

Food processors and large scale clothing manufacturers are more likely to use operational costing techniques as they have complex production processes with multiple inputs and outputs. Oil refineries may also use operational costing techniques due to the complexity of their production processes, while tourist operators generally have simpler operations and may use other costing techniques such as job costing.

Question 4

Operation costing is appropriate for products with the following characteristics.i.Repetitive mass production
Ii)Individual products
Iii)Large batches with repetitive processes
Iv)Some unique features,some common features
A) i and iii
B) i and iv
C) ii and iii
D) iii and iv

Accepted Answer

The answer of Operation costing is appropriate for products with...

Question 5

South River Chemicals Pty Ltd manufactures a product called Zybek.Direct materials are added at the end of the process and conversion activity occurs uniformly throughout the process.The following data pertain to the month of May.Using the FIFO method of process costing,calculate the equivalent units of direct materials and conversion activity for the month of May. 
A) DM 75 000;CC 69 400
B) DM 60 000;CC 60 400
C) DM 68 000;CC 69 400
D) None of the given answers

Accepted Answer

The answer of South River Chemicals Pty Ltd manufactures a...

Question 6

Healthy Flavour is a food processing company that makes a product called Health Nut soup in two processes-blending and condensing.The output of the blending department is transferred to the condensing department.All materials are added at the beginning of the blending process,and conversion activity occurs uniformly throughout both processes.The following data pertain to the month of April in the blending department.Using the FIFO method of process costing,calculate the equivalent units of direct materials for the month of April. 
A) 60 000
B) 58 000
C) 55 000
D) 50 000

Accepted Answer

The answer of Healthy Flavour is a food processing company...

Question 7

Which of the following statements about operation costing is true?
i.Conversion costs are accumulated by department
ii.Direct material costs are accumulated by batch.
iii.It is a hybrid product costing system.
A) i,ii and iii
B) ii and iii
C) i and iii
D) i and ii

Accepted Answer

Operation costing is indeed a hybrid product costing system that combines features of both job costing and process costing. In operation costing, conversion costs are accumulated by department (similar to process costing), and direct material costs are typically accumulated by batch (similar to job costing), making all three statements correct.

Question 8

The following data apply to Zilch Ltd in its mixing department for the month of April.All material is introduced at the start of the process and conversion occurs evenly through the process.Spoilage occurred at the mid point in the process.Using the weighted average method,what are the equivalent units for conversion?

A) 85 000
B) 75 000
C) 77 000
D) 82 000

Accepted Answer

The answer of The following data apply to Zilch Ltd...

Question 9

South River Chemicals Pty Ltd manufactures a product called Zybek.Direct materials are added at the beginning of the process and conversion activity occurs uniformly throughout the process.The following data pertains to the month of May.Using the weighted average method of process costing,calculate the equivalent units of direct materials and conversion costs for the month of May. 
A) DM 75 000;CC 69 400
B) DM 75 000;CC 60 400
C) DM 60 000;CC 60 400
D) DM 68 000;CC 69 400

Accepted Answer

The answer of South River Chemicals Pty Ltd manufactures a...

Question 10

In both job and process costing,the journal entry to record completed goods is as follows.
A) Debit work in process and credit manufacturing overhead.
B) Credit finished goods inventory and debit cost of goods sold.
C) Debit finished goods inventory and credit work in process.
D) Debit work in process inventory and credit finished goods inventory.

Accepted Answer

The correct journal entry to record completed goods in both job and process costing is to debit finished goods inventory and credit work in process, as this reflects the transfer of costs from work in process to finished goods.

Question 11

In both job and process costing,the journal entry to record cost of goods sold is as follows.
A) Debit finished goods inventory and credit cost of goods sold.
B) Debit finished goods inventory and credit work in process.
C) Debit cost of goods sold and credit work in process.
D) Debit cost of goods sold and credit finished goods inventory.

Accepted Answer

In both job and process costing, cost of goods sold represents the cost of finished goods that have been sold during the period. Therefore, the journal entry to record cost of goods sold is a decrease in finished goods inventory (debit) and an increase in cost of goods sold (credit). The correct option is D, which is Debit cost of goods sold and credit finished goods inventory.

Question 12

Operational costing is appropriate where:
i.there are different material inputs
ii.there are common material inputs
iii.processes are identical
iv.different combinations of specific processes apply to different products
A) i and ii
B) ii and iii
C) ii and iv
D) i and iv

Accepted Answer

The answer of Operational costing is appropriate where:
i.there are different...

Question 13

The technical term for costs moving between one department and the next in a multidepartment process is:
A) transferred costs.
B) transferred out costs.
C) transferred in costs.
D) prior costs.

Accepted Answer

Transferred in costs refer to costs that are moved from one department to another within a multidepartment process. Transferred costs and transferred out costs are not specific enough to indicate the direction of the cost movement. Prior costs do not relate to the movement of costs within a process.

Question 14

Abnormal spoilage costs assist management to:
A) control costs
B) control quality
C) hold supervisors responsible
D) All of the given answers

Accepted Answer

Abnormal spoilage costs help management in controlling costs by identifying areas that require improvement, controlling quality by understanding where the quality breakdown is occurring, and holding supervisors responsible by identifying inefficiencies in the production process. Therefore, all the given answers are correct.

Question 15

Which of the following statement/s is/are true?
A) Weighted average costs provide a better basis for cost control than FIFO costs.
B) Weighted average costs provide a better basis for performance evaluation than standard costs.
C) Cost per equivalent unit provides a measure of production efficiency.
D) Weighted average costs provide a better basis for cost control than FIFO costs AND cost per equivalent unit provides a measure of production efficiency.

Accepted Answer

Cost per equivalent unit provides a measure of production efficiency. Option A and D are incorrect as it is not necessarily true that weighted average costs provide a better basis for cost control than FIFO costs. Option B is incorrect as weighted average costs are not necessarily better than standard costs for performance evaluation.

Question 16

Healthy Flavour is a food processing company that makes a product called Health Nut soup in two processes-blending and condensing.The output of the blending department is transferred to the condensing department.All materials are added at the beginning of the blending process,and conversion activity occurs uniformly throughout both processes.The following data pertain to the month of April in the blending department.Using the FIFO method of process costing,calculate the cost per equivalent unit of conversion activity for the month of April. 
A) $0.5048
B) $0.4169
C) $0.4381
D) None of the given answers

Accepted Answer

The answer of Healthy Flavour is a food processing company...

Question 17

In both job and process costing,the journal entry to record predetermined overhead is as follows.
A) Debit work in process and credit raw materials inventory,salaries payable and manufacturing overhead.
B) Debit work in process and credit manufacturing overhead applied.
C) Debit manufacturing overhead and credit work in process and raw materials inventory.
D) Debit manufacturing overhead and credit work in process inventory.

Accepted Answer

The predetermined overhead rate is based on estimated manufacturing overhead costs and the estimated allocation base (e.g. direct labor hours or machine hours). Once the rate is calculated, it is applied to the actual allocation base incurred during the period to apply overhead costs to production. The journal entry to record this overhead application is to debit Work in Process (WIP) for the amount of overhead allocated to the production process and to credit Manufacturing Overhead Applied for the same amount. Therefore, the correct answer is to debit WIP and credit Manufacturing Overhead Applied.

Question 18

In which of the following ways is abnormal spoilage accounted for?
A) Expensed in the period in which it occurred
B) Included as part of the unit cost of output
C) Written off to cost of goods sold
D) Included in inventory valuation until year-end and then written off

Accepted Answer

Abnormal spoilage is considered an unusual or non-recurring loss that is not part of the normal production process. Therefore, it is expensed in the period in which it occurred, rather than being allocated to the cost of goods produced or sold. This treatment ensures that the costs associated with normal production are not inflated by the costs of inefficiencies or errors that are not expected to recur regularly.

Question 19

South River Chemicals Pty Ltd manufactures a product called Zybek.Direct materials are added at the end of the process and conversion activity occurs uniformly throughout the process.The following data pertain to the month of May.Using the weighted average method of process costing,calculate the equivalent units of direct materials and conversion costs for the month of May. 
A) DM 75 000;CC 69 400
B) DM 75 000;CC 60 400
C) DM 60 000;CC 60 400
D) DM 68 000;CC 69 400

Accepted Answer

The answer of South River Chemicals Pty Ltd manufactures a...

Question 20

Inventory valuation in operation costing requires:
A) direct materials and conversion costs being traced to processes
B) direct material and conversion costs being traced to batches
C) direct materials traced to batches and conversion costs traced to processes
D) direct materials traced to processes and conversion costs traced to batches

Accepted Answer

Operation costing is a hybrid costing system that combines elements of both job costing and process costing. In operation costing, direct materials costs are typically traced to specific batches of products, as these costs can vary significantly between batches. On the other hand, conversion costs (which include labor and overhead) are generally traced to processes, as these costs tend to be more consistent across different batches of products. This approach allows for more accurate and meaningful allocation of costs to products.

Quiz 5: Process Costing and Operation Costing

In which of the following ways is normal spoilage accounted for?

Which of the following firms are more likely to use operational costing techniques? i.Oil refineries ii.Food processors iii.Large scale clothing manufacturers iv.Tourist operators

Operation costing is appropriate for products with the following characteristics.i.Repetitive mass production Ii) Individual products Iii) Large batches with repetitive processes Iv) Some unique features,some common features

Which of the following statements about operation costing is true? i.Conversion costs are accumulated by department ii.Direct material costs are accumulated by batch. iii.It is a hybrid product costing system.

In both job and process costing,the journal entry to record completed goods is as follows.

In both job and process costing,the journal entry to record cost of goods sold is as follows.

Operational costing is appropriate where: i.there are different material inputs ii.there are common material inputs iii.processes are identical iv.different combinations of specific processes apply to different products

The technical term for costs moving between one department and the next in a multidepartment process is:

Abnormal spoilage costs assist management to:

Which of the following statement/s is/are true?

In both job and process costing,the journal entry to record predetermined overhead is as follows.

In which of the following ways is abnormal spoilage accounted for?

Inventory valuation in operation costing requires: