Deck 6: Process Costing

Question 1

A hybrid costing system would be appropriate for a company that manufactures automobiles.

Answer 1

True

Question 2

A hybrid costing system would be appropriate for a company that manufactures several varieties of jam.

Answer 2

True

Question 3

A hybrid costing system would be appropriate for a company that manufactures cake flour.

Answer 3

False

Question 4

The numerator in the formula for equivalent units includes all beginning inventory costs when using the weighted average costing assumption.

Question 5

The weighted average method combines beginning inventory and current production to compute cost per unit of production.

Question 6

The FIFO method combines beginning inventory and current production to compute cost per unit of production.

Question 7

When a standard costing system is used with process costing, Work in Process inventory is recorded using standard costs.

Question 8

The numerator in the formula for equivalent units includes all beginning inventory costs when using the FIFO costing assumption.

Question 9

Process costing is most appropriate when manufacturing large batches of homogenous products.

Question 10

In a complex production environment, it is more difficult to compute a single EUP rate for conversion costs.

Question 11

The FIFO costing method assumes that units in beginning inventory are the first units transferred.

Question 12

The FIFO method separates beginning inventory and current production to compute cost per unit of production.

Question 13

Equivalent units are computed to assign costs to partially completed units.

Question 14

When a standard costing system is used with process costing, Work in Process inventory is recorded using actual costs.

Question 15

Calculations for standard process costing are identical to those for FIFO process costing.

Question 16

Calculations for standard process costing are identical to those for weighted average process costing.

Question 17

The weighted average method separates beginning inventory and current production to compute cost per unit of production.

Question 18

Conversion costs include all manufacturing costs other than direct materials.

Question 19

The weighted average costing method assumes that units in beginning inventory are the first units transferred.

Question 20

Standard costing is compatible with both FIFO and weighted average methods of costing.

Question 21

A continuous loss is assumed to occur at a specific point in the production process.

Question 22

Costs of normal shrinkage and normal continuous losses in a process costing environment are handled by the method of accretion.

Question 23

Discrete production losses are assumed to occur at the end of a process.

Question 24

The process costing system that computes equivalent units only on work done in the current period is known as a __________________________________________________.

Question 25

A discrete loss is assumed to occur at a specific point in the production process.

Question 26

Continuous production losses are assumed to occur at the end of a process.

Question 27

Using FIFO costing, equivalent units of production (EUP) can be determined by subtracting EUP's in Beginning work in process from weighted average EUP.

Question 28

Discrete production losses are assumed to occur throughout the process.

Question 29

Abnormal spoilage is always accounted for on an equivalent unit basis.

Question 30

Continuous production losses are assumed to occur uniformly throughout the process.

Question 31

The costing method that excludes beginning work in process inventory from the computation of equivalent units is the ________ method.

Question 32

Normal continuous losses are absorbed by all units in ending inventory and transferred out on a EUP basis.

Question 33

The number of completed units that could have been produced from the inputs applied is referred to as ______________________________.

Question 34

Abnormal continuous losses are absorbed by all units in ending inventory and transferred out on a EUP basis.

Question 35

Costs of normal shrinkage and normal continuous losses in a process costing environment are handled by the method of neglect.

Question 36

The costing method that includes beginning work-in-process inventory in the computation of equivalent units is the ________ method.

Question 37

Weighted average equivalent units of production (EUP) can be determined by adding EUP's in ending work in process to units transferred out.

Question 38

All manufacturing costs other than direct materials are referred to as _________________________.

Question 39

Two methods of accounting for cost flows in process costing are ______________________________ and ____________________.

Question 40

The process costing system that computes equivalent units on beginning work in process inventory as well as work done in the current period is known as a _________________________________________________________________.

Question 41

Which cost accumulation procedure is most applicable in continuous mass-production manufacturing environments?

A) standard
B) actual
C) process
D) job order

Question 42

A process costing system is used by a company that

A) produces heterogeneous products.
B) produces items by special request of customers.
C) produces homogeneous products.
D) accumulates costs by job.

Question 43

In a process costing system using the weighted average method, cost per equivalent unit for a given cost component is found by dividing which of the following by EUP?

A) only current period cost
B) current period cost plus the cost of beginning inventory
C) current period cost less the cost of beginning inventory
D) current period cost plus the cost of ending inventory

Question 44

A loss that occurs at a specific point in a production process is referred to as a ____________ loss.

Question 45

The difference between EUP calculated using FIFO and EUP calculated using weighted average is the equivalent units

A) started and completed during the period.
B) residing in beginning Work in Process Inventory.
C) residing in ending Work in Process Inventory.
D) uncompleted in Work in Process Inventory.

Question 46

A loss that occurs uniformly throughout a production process is referred to as a __________________ loss.

Question 47

A ____________________ costing system is appropriate where products manufactured have different direct materials but similar processing techniques.

Question 48

In a FIFO process costing system, which of the following are assumed to be completed first in the current period?

A) units started this period
B) units started last period
C) units transferred out
D) units still in process

Question 49

The FIFO method of process costing will produce the same cost of goods transferred out amount as the weighted average method when

A) the goods produced are homogeneous.
B) there is no beginning Work in Process Inventory.
C) there is no ending Work in Process Inventory.
D) beginning and ending Work in Process Inventories are each 50 percent complete.

Question 50

The weighted average method is thought by some accountants to be inferior to the FIFO method because it

A) is more difficult to apply.
B) only considers the last units worked on.
C) ignores work performed in subsequent periods.
D) commingles costs of two periods.

Question 51

To compute equivalent units of production using the FIFO method of process costing, work for the current period must be stated in units

A) completed during the period and units in ending inventory.
B) completed from beginning inventory, units started and completed during the period, and units partially completed in ending inventory.
C) started during the period and units transferred out during the period.
D) processed during the period and units completed during the period.

Question 52

Process costing is used in companies that

A) engage in road and bridge construction.
B) produce sailboats made to customer specifications.
C) produce bricks for sale to the public.
D) construct houses according to customer plans.

Question 53

Which is the best cost accumulation procedure to use for continuous mass production of like units?

A) actual
B) standard
C) job order
D) process

Question 54

The first step in determining the cost per EUP per cost component under the weighted average method is to

A) add the beginning Work in Process Inventory cost to the current period's production cost.
B) divide the current period's production cost by the equivalent units.
C) subtract the beginning Work in Process Inventory cost from the current period's production cost.
D) divide the current period's production cost into the EUP.

Question 55

The primary difference between the FIFO and weighted average methods of process costing is

A) in the treatment of beginning Work in Process Inventory.
B) in the treatment of current period production costs.
C) in the treatment of spoiled units.
D) none of the above.

Question 56

The ______________________________ report details all manufacturing quantities and costs, shows computation of EUP, and indicates cost assignments to goods manufactured.

Question 57

Costs of normal shrinkage and normal continuous losses in a process costing environment are handled by the method of ____________________.

Question 58

Equivalent units of production are equal to the

A) units completed by a production department in the period.
B) number of units worked on during the period by a production department.
C) number of whole units that could have been completed if all work of the period had been used to produce whole units.
D) identifiable units existing at the end of the period in a production department.

Question 59

A producer of ____ would not use a process costing system.

A) gasoline
B) potato chips
C) blank videotapes
D) stained glass windows

Question 60

EUP calculations for standard process costing are the same as

A) the EUP calculations for weighted average process costing.
B) the EUP calculations for FIFO process costing.
C) LIFO inventory costing for merchandise.
D) the EUP calculations for LIFO process costing.

Question 61

Which of the following is subtracted from weighted average EUP to derive FIFO EUP?

A) beginning WIP EUP completed in current period
B) beginning WIP EUP produced in prior period
C) ending WIP EUP not completed
D) ending WIP EUP completed

Question 62

Abnormal spoilage can be

A) yes no
B) no no
C) yes yes
D) no yes

Question 63

The cost of abnormal continuous losses is

A) considered a product cost.
B) absorbed by all units in ending inventory and transferred out on an equivalent unit basis.
C) written off as a loss on an equivalent unit basis.
D) absorbed by all units past the inspection point.

Question 64

Process costing techniques should be used in assigning costs to products

A) if a product is manufactured on the basis of each order received.
B) when production is only partially completed during the accounting period.
C) if a product is composed of mass-produced homogeneous units.
D) whenever standard-costing techniques should not be used.

Question 65

A process costing system

A) yes yes
B) no no
C) yes no
D) no yes

Question 66

The method of neglect handles spoilage that is

A) discrete and abnormal.
B) discrete and normal.
C) continuous and abnormal.
D) continuous and normal.

Question 67

Which of the following would be considered a discrete loss in a production process?

A) adding the correct ingredients to make a bottle of ketchup
B) putting the appropriate components together for a stereo
C) adding the wrong components when assembling a stereo
D) putting the appropriate pieces for a bike in the box

Question 68

Material is added at the beginning of a process in a process costing system. The beginning Work in Process Inventory for the process was 30 percent complete as to conversion costs. Using the FIFO method of costing, the number of equivalent units of material for the process during this period is equal to the

A) beginning inventory this period for the process.
B) units started and completed this period in the process.
C) units started this period in the process plus the beginning Work in Process Inventory.
D) units started and completed this period plus the units in ending Work in Process Inventory.

Question 69

In a process costing system, the journal entry to record the transfer of goods from Department #2 to Finished Goods Inventory is a

A) debit Work in Process Inventory #2, credit Finished Goods Inventory.
B) debit Finished Goods Inventory, credit Work in Process Inventory #1.
C) debit Finished Goods Inventory, credit Work in Process Inventory #2.
D) debit Cost of Goods Sold, credit Work in Process Inventory #2.

Question 70

A process costing system

A) cannot use standard costs.
B) restates Work in Process Inventory in terms of completed units.
C) accumulates costs by job rather than by department.
D) assigns direct labor and manufacturing overhead costs separately to units of production.

Question 71

In a cost of production report using process costing, transferred-in costs are similar to the

A) cost of material added at the beginning of production.
B) conversion cost added during the period.
C) cost transferred out to the next department.
D) cost included in beginning inventory.

Question 72

A hybrid costing system combines characteristics of

A) job order and standard costing systems.
B) job order and process costing systems.
C) process and standard costing systems.
D) job order and normal costing systems.

Question 73

When the cost of lost units must be assigned, and those same units must be included in an equivalent unit schedule, these units are considered

A) normal and discrete.
B) normal and continuous.
C) abnormal and discrete.
D) abnormal and continuous.

Question 74

When standard costs are used in process costing,

A) variances can be measured during the production period.
B) total costs rather than current production and current costs are used.
C) process costing calculations are made simpler.
D) the weighted average method of calculating EUPs makes computing transferred-out costs easier.

Question 75

Which of the following is(are) the same between the weighted average and FIFO methods of calculating EUPs?

A) no yes no
B) yes yes yes
C) yes no no
D) yes no yes

Question 76

Transferred-in cost represents the cost from

A) the last department only.
B) the last production cycle.
C) all prior departments.
D) the current period only.

Question 77

Averaging the total cost of completed beginning work-in-process inventory and units started and completed over all units transferred out is known as

A) strict FIFO.
B) modified FIFO.
C) weighted average costing.
D) normal costing.

Question 78

A continuous loss

A) occurs unevenly throughout a process.
B) never occurs during the production process.
C) always occurs at the same place in a production process.
D) occurs evenly throughout the production process.

Question 79

The cost of normal discrete losses is

A) absorbed by all units past the inspection point on an equivalent unit basis.
B) absorbed by all units in ending inventory.
C) considered a period cost.
D) written off as a loss on an equivalent unit basis.

Question 80

A process costing system does which of the following?

A) no no
B) no yes
C) yes yes
D) yes no