Deck 20: Process Cost Accounting

Question 1

A process cost summary is an accounting report that describes the costs charged to each department,the equivalent units of production by each department,and determining the costs assigned to each department's output.

Answer 1

True

Question 2

The FIFO method of computing equivalent units focuses on production activity in the current period only.

Answer 2

True

Question 3

The process cost summary is an important managerial accounting report produced by a process costing system.

Answer 3

True

Question 4

A process cost summary shows the cost of a particular job manufactured in the reporting period.

Question 5

In a process costing system,companies typically end each period with only Finished Goods Inventory.

Question 6

Conversion cost per equivalent unit is the combined costs of direct materials and factory overhead.

Question 7

Equivalent units of production are always the same as the total number of physical units finished during the period.

Question 8

Manufacturers that utilize process operations produce large quantities of identical products.

Question 9

Equivalent units of production is an engineering term used to describe the process by which one company attempts to manufacture units of a product that are equivalent to the product manufactured by a competitor.

Question 10

Process and job order manufacturing operations both combine materials,labor,and overhead items in the process of producing products.

Question 11

Process costing systems are commonly used by companies that produce a large volume of standardized units on a continuous basis.

Question 12

A process cost summary usually does not include the number of equivalent units of production for the period.

Question 13

The FIFO method of computing equivalent units includes the beginning inventory costs in computing the cost per equivalent unit for the current period.

Question 14

The managers of process operations focus on the series of repetitive processes,or steps,resulting in a noncustomized product or service.

Question 15

A production department is an organizational unit that has the responsibility for the complete processing of one particular product.

Question 16

If a department that uses process costing starts the reporting period with 100,000 physical units that were 20% complete with respect to direct labor,the equivalent units of direct labor in Work in Process are 20,000.

Question 17

In a process costing system costs are measured upon completion of each job.

Question 18

The term "process costing system" is used in reference to the number of trained individuals and computers required to process the collected cost information.

Question 19

Equivalent units of production for direct materials and direct labor are usually the same.

Question 20

Equivalent units of production refer to the number of units that could have been started and completed given the costs incurred during the period.

Question 21

A materials consumption report is used instead of materials requisitions in companies where materials move continuously through the manufacturing process.

Question 22

Conversion cost per equivalent unit is the combined cost of direct labor and factory overhead per equivalent unit.

Question 23

In process costing,indirect materials are always classified as factory overhead,even if they are linked with a specific production process or department.

Question 24

Hybrid costing systems can only be applied to auto manufacturing.

Question 25

Process costing systems consider overhead costs to include those costs that cannot be traced to a specific process.

Question 26

Process costing systems are commonly used by companies that manufacture standardized products by passing them through a series of manufacturing steps.

Question 27

In a process costing system,the purchase of raw materials is debited to the Raw Materials Inventory.

Question 28

The use of process costing is of little benefit to a service type of operation.

Question 29

A unique feature of process costing systems is the use of a single Work in Process Inventory account regardless of the number of production departments that exist.

Question 30

In a process operation,all labor that is used exclusively by a single production department is considered to be direct labor.

Question 31

Hybrid systems contain features of both process and job order operations.

Question 32

In a process costing system,the entry to record cost of materials assigned to a production department requires a debit to the Raw Materials Inventory account and a credit to the Work in Process Inventory account for that department.

Question 33

Process costing systems are used only by companies that manufacture physical products;companies that provide services do not use process costing.

Question 34

In process costing,the classification of materials as direct or indirect depends on whether or not they are clearly linked with a specific process or department.

Question 35

In process costing,the cost object is the process and in job costing,the cost object is a job.

Question 36

Companies that use a series of repetitive manufacturing processes to produce standardized products should use a process costing system.

Question 37

Process costing is applied to operations with repetitive production and customized products.

Question 38

In a process costing system,with the exception of the first department,each department receives output from the prior department as a partially processed product.

Question 39

In a process costing system,the purchase of raw materials is credited to the Raw Materials Inventory.

Question 40

When direct labor and overhead enter the production process at different rates,it is appropriate to use a conversion cost per equivalent unit.

Question 41

In process costing,all indirect materials are charged directly to Work in Process Inventory.

Question 42

If a production department has 100 equivalent units of production with respect to direct materials in a given reporting period,the equivalent units of production with respect to direct labor also must be 100.

Question 43

One section of the process cost summary describes the equivalent units of production for the department during the reporting period and presents the calculations of the direct materials and conversion costs per equivalent unit.

Question 44

In a process costing system,factory labor costs incurred in a reporting period are presented on the income statement as Factory Labor Expense.

Question 45

If Department R uses $60,000 of direct materials and Department S uses $15,000 of direct materials,the following journal entry would be recorded by the process costing system

Question 46

The process cost summary presents calculations of the cost of units completed during the reporting period,but does not present any information about the ending Work in Process inventory.

Question 47

In a process costing system,factory overhead costs can be allocated to production departments by using a predetermined overhead allocation rate.

Question 48

In the same time period,it is possible that a production department can produce 1,000 equivalent finished units with respect to direct materials and 1,200 equivalent finished units with respect to direct labor.

Question 49

In process costing,direct labor includes only the labor that is applied directly to individual units of product.

Question 50

Once equivalent units are calculated for materials,this number will also be used for direct labor and factory overhead.

Question 51

The following journal entry would be made to record the use of $6,100 of direct labor in a production department during the reporting period

Question 52

A process cost summary for a production department accounts for all costs assigned to that department during the period plus costs that were in the department's Work in Process Inventory account at the beginning of the period.

Question 53

If a department that applies process costing starts the reporting period with 50,000 physical units that were 25% complete with respect to direct materials and 40% complete with respect to direct labor,it must add 12,500 equivalent units of direct materials and 20,000 equivalent units of direct labor to complete them.

Question 54

If a department that applies process costing starts the reporting period with 40,000 physical units that were 80% complete with respect to direct materials and 50% complete with respect to direct labor,it must add 8,000 equivalent units of direct materials and 20,000 equivalent units of direct labor to complete them.

Question 55

If the indirect labor cost in August for clerical and maintenance that help production in all departments was $123,000,the following journal entry would be recorded in a process costing system

Question 56

In some circumstances,a process costing system can classify wages paid to maintenance workers as direct labor costs instead of factory overhead.

Question 57

The number of equivalent units of production assigned to ending Work in Process inventory should be equal to or less than the number of physical units in ending Work in Process inventory.

Question 58

A process costing system records all factory overhead costs directly in the Work in Process Inventory accounts.

Question 59

If Grayson Manufacturing incurred $17,400 for direct labor in the assembly department and $10,300 for direct labor in the painting department,the journal entry to record the labor used is

Question 60

In process costing there is never a balance remaining in Factory Overhead that needs to be closed at period end.

Question 61

The cost of units transferred from Work in Process Inventory to Finished Goods Inventory is called the cost of goods manufactured.

Question 62

Yamada Company applies factory overhead to its production departments on the basis of 90% of direct labor costs.In the Assembly Department,Yamada had $125,000 of direct labor cost,and in the Finishing Department,Yamada had $35,000 of direct labor cost.The entry to apply overhead to these production departments is:

A)Debit Factory Overhead-Assembly $112,500;debit Factory Overhead-Finishing $31,500;credit Work in Process Inventory $144,000.
B)Debit Factory Overhead $144,000;credit Work in Process Inventory-Assembly $112,500;credit Work in Process-Finishing $31,500.
C)Debit Factory Overhead $144,000;credit Factory Payroll $144,000.
D)Debit Work in Process Inventory-Assembly $112,500;debit Work in Process Inventory-Finishing $31,500;credit Factory Overhead $144,000.
E)Debit Factory Payroll $144,000;credit Cash $144,000.

Question 63

A production department's output for the most recent month consisted of 8,000 units completed and transferred to the next stage of production and 5,000 units in ending Work in Process inventory.The units in ending Work in Process inventory were 50% complete with respect to both direct materials and conversion costs.Calculate the equivalent units of production for the month,assuming the company uses the weighted average method.

A)6,500 units.
B)9,000 units.
C)13,000 units.
D)5,500 units.
E)10,500 units.

Question 64

A company's beginning Work in Process inventory consisted of 20,000 units that were 80% complete with respect to direct labor.A total of 90,000 were finished during the period and 25,000 remaining in Work in Process inventory were 40% complete with respect to direct labor at the end of the period.Using the weighted-average method,the equivalent units of production with regard to direct labor were:

A)46,000.
B)100,000.
C)76,000.
D)90,000.
E)116,000.

Question 65

A company's beginning Work in Process inventory consisted of 20,000 units that were 20% complete with respect to direct labor.These beginning units were completed and another 90,000 units were started during the current period.Of those started,60,000 were finished and the remaining 30,000 were 40% complete at the end of the period.Using the weighted-average method,the equivalent units of production with regard to direct labor were:

A)60,000.
B)74,000.
C)76,000.
D)92,000.
E)96,000.

Question 66

Which of the following is not one of the four steps in accounting for production activity and assigning costs during a period under a process cost system?

A)Determine over or underapplied overhead.
B)Determine the physical flow of units.
C)Compute the equivalent units of production.
D)Compute the cost per equivalent unit of production.
E)Assign and reconcile costs.

Question 67

Equivalent units of production are equal to:

A)The number of units that could have been started and completed given the costs incurred during the period.
B)The number of finished units actually produced during a period.
C)The number of units started into the process during a period.
D)The number of units still in process at the end of a period.
E)Physical units that were started and completed during a period.

Question 68

Since the process cost summary describes the activities of a production department for a specified reporting period,it does not present information about any costs incurred in prior periods.

Question 69

The combined costs of direct labor and factory overhead per equivalent unit used by many businesses with process operations is called:

A)Physical cost per equivalent unit
B)Overhead cost per equivalent unit
C)Combined cost per equivalent unit
D)Conversion cost per equivalent unit
E)Finished cost per equivalent unit

Question 70

Which of the following products is most likely to be produced in a process operations system?

A)Airplanes
B)Cereal
C)Bridges
D)Designer bridal gowns
E)Custom cabinets

Question 71

A key idea in process costing that refers to the number of units that could have been started and completed given the costs incurred during the period is known as:

A)Manufacturing overhead.
B)Units in process.
C)A job cost sheet.
D)Equivalent units of production.
E)Process cost summary.

Question 72

Using conversion cost per equivalent unit is appropriate for many business that use process costing because:

A)Direct materials and direct labor are usually entered into the production process at the same rate.
B)All manufacturing costs are entered into the production process in the same period.
C)Equivalent cost per unit is not sufficient measurement of production activity.
D)The weighted average method of calculating equivalent units requires it.
E)Direct labor and factory overhead enter the production process at the same rate.

Question 73

Which of the following products is least likely to be produced in a process operations system?

A)Compact disks
B)Slacks for casual wear
C)Baseball hats
D)Calculators
E)Custom cabinets

Question 74

Which of the following statements is most accurate?

A)In process costing,estimating the degree of completion of units is usually more accurate for conversion costs than for direct materials.
B)The FIFO method includes the cost of the beginning Work in Process inventory account in calculating cost per equivalent units.
C)The FIFO method computes equivalent units based only on production activity in the current period,ignoring the percentage of completion in beginning Work in Process inventory.
D)The FIFO method of calculating equivalent units of production merges the work and the costs of the beginning inventory with the work and the costs done during the current period.
E)It is not possible for there to be a significant difference between the cost of completed units between the weighted average and the FIFO methods.

Question 75

Which of the following characteristics applies to process costing but not to job order cost accounting?

A)Use of a predetermined overhead rate.
B)Identifiable units of production.
C)Equivalent units of production.
D)Determining cost of goods manufactured.
E)Use of a single Work in Process Inventory account.

Question 76

A company uses a process costing system.Its Assembly Department's beginning inventory consisted of 30,000 units,75% complete with respect to direct labor and overhead.The department completed and transferred out 127,500 units this period.The ending inventory consists of 20,000 units that are 25% complete with respect to direct labor and overhead.All direct materials are added at the beginning of the process.The department incurred direct labor costs of $24,000 and overhead costs of $32,000 for the period.Assuming the weighted average method,the direct labor cost per equivalent unit (rounded to the nearest cent)is:

A)$0.14.
B)$0.16.
C)$0.18.
D)$0.30.
E)$0.37.

Question 77

The Fabricating Department started the current month with a beginning Work in Process inventory of $10,000.During the month,it was assigned the following costs: direct materials,$76,000;direct labor,$24,000;and factory overhead,50% of direct labor cost.Also,inventory with a cost of $109,000 was transferred out of the department to the next phase in the process.The ending balance of the Work in Process Inventory account for the Fabricating Department is:

A)$13,000.
B)$56,000.
C)$59,000.
D)$110,000.
E)$165,000.

Question 78

A production department's output for the most recent month consisted of 10,000 units completed and transferred to the next stage of production and 10,000 units in ending Work in Process inventory.The units in ending Work in Process inventory were 50% complete with respect to both direct materials and conversion costs.There were 1,000 units in beginning Work in Process inventory,and they were 70% complete with respect to both direct materials and conversion costs.Calculate the equivalent units of production for the month,assuming the company uses the weighted average method.

A)10,000 units.
B)10,300 units.
C)15,000 units.
D)15,300 units.
E)10,700 units.

Question 79

Which of the following is the best explanation for why it is necessary to calculate equivalent units of production in a process costing environment?

A)In most manufacturing environments,it is not possible to conduct a physical count of units.
B)Companies often use a combination of a process costing and job order costing systems.
C)In most process costing systems,direct materials are added at the beginning of the process while conversion costs are added evenly throughout the manufacturing process.
D)All of the work to make a unit 100% complete and ready to move to the next stage of production or to finished goods inventory may not have been completed in a single time period.
E)In most cases,there is no difference between physical units and equivalent units of production.

Question 80

Which of the following characteristics does not usually apply to process operations systems?

A)Each unit of product is separately identifiable.
B)Partially completed products are transferred between processes.
C)Different managers are responsible for different processes.
D)The output of all processes except the final process is an input to the next process.
E)Costs are computed using equivalent units.