Deck 17: Process Cost Systems

Question 1

Industries that typically use process cost systems include chemicals, oil, metals, food, paper, and pharmaceuticals.

Answer 1

True

Question 2

Process manufacturers typically use large machines to process a continuous flow of raw materials into a finished state.

Answer 2

True

Question 3

If the products of a manufacturing process are produced to customer specifications, a process cost system is more appropriate than a job order cost system.

Answer 3

False

Question 4

The direct materials costs and direct labor costs incurred by a production department are referred to as conversion costs.

Question 5

Equivalent units are the sum of direct materials used and direct labor incurred.

Question 6

Process manufacturing usually reflects a manufacturer that produces small quantities of unique items.

Question 7

In a process cost system, product costs are accumulated by processing department rather than by job.

Question 8

The first step in preparing a cost of production report is to compute equivalent units of production.

Question 9

In a process costing system, costs flow into finished goods inventory only from the work in process inventory of the last manufacturing process.

Question 10

In a process costing system, each process will have a work in process inventory account.

Question 11

The direct labor costs and factory overhead costs incurred by a production department are referred to as conversion costs.

Question 12

In a process costing system, costs are transferred from one work in process inventory account to the next as units are transferred from one processing department to another.

Question 13

Process cost systems use job order cost cards to accumulate cost data.

Question 14

Both process and job order cost systems maintain perpetual inventory accounts with subsidiary ledgers.

Question 15

Direct materials, direct labor, and factory overhead are assigned to each manufacturing process in a process costing system.

Question 16

If the principal products of a manufacturing process are identical, a process cost system is more appropriate than a job order cost system.

Question 17

One of the differences in accounting for a process costing system compared to a job order system is that the amounts used to transfer goods from one department to the next comes from the cost of production report instead of job cost cards.

Question 18

In a process costing system, a separate work in process inventory account is maintained for each customer's job.

Question 19

Custom-made goods would be accounted for using a process costing system.

Question 20

Conversion costs include materials, direct labor, and factory overhead.

Question 21

Both job order and process cost accounting use equivalent units of production to determine costs.

Question 22

The cost of production report reports the cost of goods sold.

Question 23

In a process costing system, the cost per equivalent unit is computed before computing equivalent units.

Question 24

If 30,000 units of materials enter production during the first year of operations, 25,000 of the units are finished, and 5,000 are 50% completed, the number of equivalent units of production would be 28,500.

Question 25

Conversion costs are usually incurred evenly throughout a process.

Question 26

The cost of production report summarizes (1) the units for which the department is accountable and the units to be assigned costs and (2) the costs charged to the department and the allocation of those costs.

Question 27

If 10,000 units that were 50% completed are in process at November 1, 90,000 units were completed during November, and 20,000 were 20% completed at November 30, the number of equivalent units of production for November was 90,000. (Assume no loss of units in production and that inventories are costed by the first-in, first-out method.)

Question 28

The cost of production report reports the cost charged to production and the costs allocated to finished goods and work in process.

Question 29

Equivalent units should be computed separately for direct materials and conversion costs.

Question 30

If 10,000 units that were 40% completed are in process at November 1, 80,000 units were completed during November, and 12,000 were 20% completed at November 30, the number of equivalent units of production for November was 75,600. (Assume no loss of units in production and that inventories are costed by the first-in, first-out method.)

Question 31

If the costs for direct materials, direct labor, and factory overhead were $60,000, $35,000, and $25,000, respectively, for 20,000 equivalent units of production, the conversion cost per equivalent unit was $6.

Question 32

Conversion and direct materials are generally both added at the end of the production process.

Question 33

If 16,000 units of materials enter production during the first year of operations, 12,000 of the units are finished, and 4,000 are 75% completed, the number of equivalent units of production would be 15,000.

Question 34

Conversion costs are seldom added evenly throughout the process.

Question 35

If the costs for direct materials, direct labor, and factory overhead were $522,200, $82,700, and $45,300, respectively, for 16,000 equivalent units of production, the conversion cost per equivalent unit was $8.00.

Question 36

Costs of ending work in process inventory are included in the cost per equivalent unit computation.

Question 37

Equivalent units of production are the number of units that could have been manufactured from start to finish during an accounting period.

Question 38

In applying the first-in, first-out method of costing inventories, if 8,000 units which were 30% completed are in process at June 1, 28,000 units were completed during June, and 4,000 units were 80% completed at June 30, the number of equivalent units of production for June was 28,600.

Question 39

In applying the first-in, first-out method of costing inventories, if 8,000 units which were 30% completed are in process at June 1, 28,000 units were completed during June, and 4,000 units were 75% completed at June 30, the number of equivalent units of production for June was 33,400.

Question 40

If the costs for direct materials, direct labor, and factory overhead were $277,300, $52,600, and $61,000, respectively, for 14,000 equivalent units of production, the total conversion cost was $390,900.

Question 41

The FIFO method separates work done on beginning inventory in the previous period from work done on it in the current period.

Question 42

One of the primary uses of a cost of production report is to assist management in controlling production costs.

Question 43

The amount journalized showing the cost added to finished goods is taken from the cost of production report.

Question 44

The last step in the preparation of a cost of production report is the computation of equivalent units of production.

Question 45

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

Question 46

When a process cost accounting system records the purchase of materials, the materials account is credited.

Question 47

The FIFO method of process costing is simpler than the weighted average method.

Question 48

Companies that use the weighted average method for process costing have unit costs that include costs from more than one accounting period.

Question 49

The cost of production report is often used by managers for analyzing the change in the conversion and direct materials cost per equivalent unit between periods.

Question 50

Gilbert Corporation had 25,000 finished units and 8,000 units 35% complete. The equivalent units totaled 30,200.

Question 51

Computing the yield of a process will identify the level of materials losses from waste.

Question 52

If a department that applies FIFO 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 conversion, it must add 12,500 equivalent units of direct materials and 20,000 equivalent units to direct labor to complete them.

Question 53

In a process costing system, indirect materials are charged to Work in Process.

Question 54

If a company uses the weighted average method instead of FIFO, it will still get the same unit costs.

Question 55

For which of the following businesses would a process cost system be appropriate?

A)boat repair service
B)shampoo manufacturer
C)dressmaker
D)custom furniture manufacturer

Question 56

Yield measures the ratio of the materials output quantity to the materials input quantity.

Question 57

All costs of the processes in a process costing system ultimately pass through the cost of goods sold account.

Question 58

The journal entry to transfer goods in process from Department X to Department Y includes a debit to Work in Process-Department X.

Question 59

A process cost accounting system records all actual factory overhead costs directly in the work in process account.

Question 60

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

Question 61

All of the following are characteristics of a process cost system except

A)the system may use several work in process inventory accounts
B)manufacturing costs are grouped by department rather than by jobs
C)the system accumulates costs per job
D)it uses a perpetual inventory system for materials, work in process, and finished goods

Question 62

In the manufacture of 10,000 units of a product, direct materials cost incurred was $165,000, direct labor cost incurred was $105,000, and applied factory overhead was $53,000. The total conversion cost is

A)$218,000
B)$158,000
C)$323,000
D)$53,000

Question 63

Department M had 2,000 units 40% completed in process at the beginning of June, 12,000 units completed during June, and 1,200 units 25% completed at the end of June. The number of equivalent units of production for conversion costs for June if the first-in, first-out method is used to cost inventories is

A)11,500 units
B)11,200 units
C)15,200 units
D)10,000 units

Question 64

Department M had 600 units 60% completed in process at the beginning of June, 6,000 units completed during June, and 700 units 30% completed at the end of June. Using the first-in, first-out method of inventory costing, the number of equivalent units of production for conversion costs for the period is

A)7,300 units
B)5,640 units
C)6,700 units
D)5,850 units

Question 65

The two categories of cost comprising conversion costs are

A)direct labor and indirect labor
B)direct labor and factory overhead
C)factory overhead and direct materials
D)direct labor and direct materials

Question 66

If a company uses a process costing system to account for the costs in its five production departments, how many work in process accounts will it use?

A)6
B)5
C)4
D)2

Question 67

Process and job order cost systems are similar in all of the following ways except

A)both accumulate product costs-direct materials, direct labor, and factory overhead
B)both allocate product cost to units produced
C)both maintain perpetual inventories
D)both use job order cost cards

Question 68

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

A)custom home builder
B)custom helicopter manufacturer
C)graduation photographer
D)lumber mill

Question 69

The three categories of manufacturing costs comprising the total cost of work in process are direct labor, direct materials, and

A)selling expenses
B)direct expenses
C)accounting salaries expense
D)factory overhead

Question 70

Department G had 3,600 units 25% completed at the beginning of the period, 11,000 units were completed during the period; 3,000 units were 20% completed at the end of the period, and the following manufacturing costs debited to the departmental work in process account during the period:
Work in process, beginning of period
$40,000
Costs added during period:
Direct materials (10,400 units at $8)83,200
Direct labor
63,000
Factory overhead
25,000
All direct materials are placed in process at the beginning of production and the first-in, first-out method of inventory costing is used. The total cost of 3,600 units of beginning inventory which were completed during the period (round unit cost calculations to four decimal places) is

A)$62,206
B)$16,163
C)$40,000
D)$19,275

Question 71

The cost system best suited to industries that manufacture a large number of identical units of commodities on a continuous basis is

A)process
B)departmental
C)first-in, first-out
D)job order

Question 72

A process cost system would be appropriate for a

A)natural gas refinery
B)jet airplane builder
C)catering business
D)custom cabinet builder

Question 73

Department G had 3,600 units 25% completed at the beginning of the period, 11,000 units were completed during the period; 3,000 units were 20% completed at the end of the period, and the following manufacturing costs debited to the departmental work in process account during the period:
Work in process, beginning of period
$40,000
Costs added during period:
Direct materials (10,400 units at $8)83,200
Direct labor
63,000
Factory overhead
25,000
All direct materials are placed in process at the beginning of production and the first-in, first-out method of inventory costing is used. The total cost of the departmental work in process inventory at the end of the period (round unit cost calculations to four decimal places is

A)$16,163
B)$21,432
C)$35,670
D)$28,935

Question 74

In a process cost system, the amount of work in process inventory is valued by

A)finding the sum of all open job costs
B)allocating departmental costs between completed and partially completed units
C)multiplying units in ending inventory by the direct materials cost per unit
D)finding the sum of all completed jobs

Question 75

Which of the following is not a characteristic of a process cost system?

A)Manufacturing costs are grouped by departments or by process.
B)The system may use several work in process accounts.
C)The system measures costs for each completed job.
D)The system provides useful product cost information for decision making.

Question 76

The four steps necessary to complete a cost of production report in a process cost system are
1)allocate costs to units transferred out and partially completed units
2)determine the units to be assigned costs
3)determine the cost per equivalent unit
4)compute equivalent units of production
The correct ordering of the steps is

A)2, 4, 3, 1
B)4, 2, 3, 1
C)2, 3, 4, 1
D)2, 3, 1, 4

Question 77

In process cost accounting, the costs of direct materials and direct labor are charged directly to

A)service departments
B)processing departments
C)customer accounts receivable
D)job orders

Question 78

Which of the following costs incurred by a tool manufacturer would not be included in conversion costs?

A)factory supervisor's salary
B)machine operator's wages
C)raw steel
D)factory maintenance personnel supplies

Question 79

Department G had 3,600 units 25% completed at the beginning of the period, 11,000 units were completed during the period; 3,000 units were 20% completed at the end of the period, and the following manufacturing costs debited to the departmental work in process account during the period:
Work in process, beginning of period
$40,000
Costs added during period:
Direct materials (10,400 units at $8)83,200
Direct labor
63,000
Factory overhead
25,000
All direct materials are placed in process at the beginning of production and the first-in, first-out method of inventory costing is used. The total cost of the units started and completed during the period (round unit cost calculations to four decimal places) is

A)$211,200
B)$120,060
C)$190,275
D)$20,934

Question 80

Which of the following costs incurred by a paper manufacturer would be included in the group of costs referred to as conversion costs?

A)accounting department costs
B)raw lumber
C)assembly labor's wages
D)administrative salaries