Deck 5: Product Costing: Job and Process Operations

Question 1

The process of assigning cost to inventories as they are converted from raw material to finished goods is called product costing.

Answer 1

True

Question 2

In a manufacturing organization, manufacturing supplies costs are recorded as expenses as they are used.

Answer 2

False

Question 3

When goods are transferred from the factory to the finished goods warehouse, Work-In-Process is reduced and Cost of Goods Sold Expense is recorded.

Answer 3

False

Question 4

In financial accounting, the term period costs refers to all expired costs not related to the manufacturing function, and product costs refers to all costs incurred during the period related to the manufacturing function.

Question 5

All depreciation on factory assets is recorded as an expense of the period.

Question 6

One of the reasons for using a predetermined manufacturing overhead rate is that it smooths out seasonal costs over the entire accounting period.

Question 7

If costs are accurately estimated when establishing an annual predetermined overhead rate, there should never be an overapplied or underapplied overhead balance.

Question 8

A job costing system is a cost system designed to accumulate the manufacturing costs of producing unique jobs, such as building a house or a naval air craft carrier, but would not include producing a batch of several identical units of product, such as 100 chairs in a furniture factory.

Question 9

In a job costing system, costs are accumulated in a separate Work-in-Process account for each job.

Question 10

Process costing is best suited for production environments where identical units of product are produced on a continuous basis.

Question 11

In process costing, each accounting period is actually equivalent to a unique job in a job costing system.

Question 12

Variable costing is not accepted for external financial reporting.

Question 13

Fixed non-manufacturing costs are classified as period costs under variable costing, but not under absorption costing.

Question 14

Inventory values calculated using variable costing as opposed to absorption costing will generally be higher.

Question 15

Under variable costing, fixed manufacturing costs are classified a period expense.

Question 16

The ability to present an income statement in a contribution format is one of the primary advantages of the absorption costing approach.

Question 17

When production is less than sales volume, net income under absorption costing will be greater than net income using variable costing procedures.

Question 18

Variable assumes fixed overhead costs only expire when product is sold.

Question 19

Opponents of variable costing argue that in the long run all costs are variable.

Question 20

Which of the following inventories results in recording an expense when its asset account is reduced in the accounting system?

A) Raw materials
B) Work in process
C) Finished goods inventory
D) Both A and B

Question 21

Partially completed goods that are in the process of being converted into a finish product are defined as:

A) Work-in-process inventories
B) Conversion inventories
C) Raw materials inventories
D) Operational inventories

Question 22

Which of the following views of product costs is consistent with financial reporting requirements?

A) Product costs are all costs incurred in the process of manufacturing products, even if they are only indirectly related to the production process.
B) Product costs are all labor and materials costs that are incurred in the process of manufacturing products.
C) Product costs are all costs directly incurred in the manufacturing and selling of the product.
D) Product costs include all costs incurred throughout the value chain.

Question 23

Which of the following statements most accurately describes financial accounting's view of period costs?

A) Period costs are all costs incurred in the current financial reporting period.
B) Period costs are all direct costs incurred in the current financial reporting period.
C) Period costs are all non-manufacturing expenses incurred in the current financial reporting period.
D) Period costs are a component of fully absorbed costs.

Question 24

How is depreciation on the manufacturing building and equipment classified in financial reporting?

A) As an irrelevant cost because it has already been incurred
B) As a current expense
C) As part of the cost of the products produced
D) As a period cost

Question 25

When is the cost of manufacturing equipment recognized as an expense?

A) When equipment depreciation is recorded
B) When inventory processing is completed and finished goods are recorded
C) When finished goods inventory is sold
D) None of the above

Question 26

Which of the following costs are treated as part of the cost of product?

A) Wages of plant security guards
B) Insurance on the plant building and equipment
C) Depreciation on the kitchen sink in the plant cafeteria
D) All of the above are product costs

Question 27

Which of the following is not a period cost?

A) The president's salary
B) Sales commissions
C) Depreciation on the mainframe computer in the Information Systems Department
D) Subsidy of the plant cafeteria

Question 28

Which of the following is one of the three major components of product costs?

A) Research and development expenses
B) Manufacturing overhead
C) Marketing costs related to specific products
D) Selling, general and administrative expenses

Question 29

What is the purpose for using predetermined overhead rates?

A) Delays in product costing can be avoided
B) Variation in cost assignment due to seasonality can be prevented
C) Variation in cost assignment due to short-term variations in volume can be prevented
D) Use of predetermined overhead rates serves all the above purposes

Question 30

Which of the following is the most reasonable cost driver for direct material costs?

A) The quantity of direct materials used
B) Purchasing department activity
C) Direct labor hours
D) Square footage of the warehouse used to store raw materials

Question 31

A single product produced by a continuous manufacturing process is an example of:

A) Process management
B) Job Costing
C) Process manufacturing
D) Process reengineering

Question 32

When a job is completed in a job order costing system, the final cost of the job is determined by summing up:

A) The work-in-process inventory subsidiary ledgers
B) The statement of costs of goods manufactured
C) The finished goods activities report
D) The various costs on the job cost sheet

Question 33

Which of the following is an appropriate setting for job order production?

A) Products are produced in batches of identical units.
B) Products are produced in single units.
C) Neither A nor B are examples of job order production.
D) Both A and B are examples of job order production.

Question 34

Which of the following is not a record required for operating a job cost system?

A) Production orders
B) Job cost sheets
C) Equivalent units calculations
D) Materials requisition forms

Question 35

For which of the following products would job order costing be least likely to be used?

A) Residential building
B) Textbook printing
C) Mortgage loan processing
D) Newsprint paper Manufacturing

Question 36

For which of the following manufactured products would job costing be more appropriate than process costing?

A) Paint
B) Designer dresses sold to celebrities
C) Chemicals
D) Liquid soap

Question 37

Which of the following tasks does not pertain to job-costing?

A) Computing equivalent units
B) Computing predetermined overhead rates
C) Computing cost of goods sold
D) Computing ending work-in-process inventory

Question 38

The purpose of the statement of cost of goods manufactured is to:

A) Calculate the cost of goods transferred to finished goods inventory during the period.
B) Calculate cost of goods sold.
C) Calculate net income.
D) Both A and B

Question 39

Which of the following results in an increase in work-in-process inventory?

A) Purchasing raw materials
B) Using direct manufacturing labor hours
C) Finishing a job in process
D) Selling finished goods inventory

Question 40

When finished goods are sold, there is an increase in which of the following accounts?

A) Cost of Goods Sold
B) Cost of Goods Manufactured
C) Finished Goods Inventory
D) Work-in-Process

Question 41

Which of the following accounts increases when raw materials are used?

A) Finished Goods Inventory
B) Raw Materials Expense
C) Raw Materials Inventory
D) Work-in-Process Inventory

Question 42

London Corp. obtained the following information from the Raw Materials Inventory account and purchasing records for the second quarter of the current year:
The amount of Raw Materials used this period was:

A) $15,000
B) $10,000
C) $17,000
D) Some other amount

Question 43

Lorraine Corp. obtained the following information from its absorption costing accounting records:
The total Period Costs incurred this period equals:

A) $15,000
B) $20,000
C) $48,000
D) $10,000

Question 44

Marni Corp. obtained the following information from its accounting records:
The Cost of Goods Manufactured this period equals:

A) $11,000
B) $10,000
C) $6,000
D) $5,000

Question 45

Which of the following is not included in work-in-process inventory?

A) Direct materials costs
B) Applied manufacturing overhead
C) Direct manufacturing labor costs
D) Sales commissions

Question 46

The cost per equivalent unit for materials using the weighted average method is calculated as:

A) Total materials costs in process during the period divided by equivalent units in process for materials
B) Materials costs added during the period divided by equivalent units in process for materials
C) Total materials costs to account for divided by the number of equivalent units completed for materials
D) Materials costs added during the period divided by the number of equivalent units completed for materials

Question 47

The following information pertains to the Denise Company:
Materials are added at the beginning of the process. If equivalent units in process for conversion using the weighted average method were 20,000, ending work-in-process at Apri 30:

A) Was 15.0 percent complete
B) Was 31.7 percent complete
C) Was 25.0 percent complete
D) Was 32.5 percent complete

Question 48

Which of the following statements is not true regarding costing for services?

A) Generally, the use of process costing techniques for service organizations is easier than it is for manufacturing organizations because services generally cannot be inventoried.
B) Process costing for services is similar to job costing for batches in that an average cost for similar or identical services performed during a given time period.
C) The difficulty in many service situations is defining the appropriate cost objective.
D) In process costing, the amount of goods completed always increases finished goods inventory.

Question 49

Using the weighted average method, whenever units in process are produced to a different percentage of completion for materials and labor, this creates a condition where:

A) The number of equivalent units in process will invariably be different for materials and conversion costs.
B) The cost per equivalent unit for materials and conversion will be equal.
C) It is inappropriate to use the process costing method.
D) None of the above

Question 50

Process service costing measures the average cost of:

A) All services performed by the company in a given period
B) Identical or similar services performed by the company in a given period
C) Activities for activity based costing overhead rates
D) Services received from the company's vendors

Question 51

For which of the following manufactured products would process costing be more appropriate?

A) Modular homes
B) Luxury liners
C) Nylon fiber production
D) Special order printing

Question 52

For which of the following manufactured products would process costing be more appropriate?

A) Bridge construction
B) Crude oil refining
C) Custom-made jewelry
D) High rise buildings

Question 53

The following information is available:
Materials are added at the beginning of the process.
How many equivalent units in process for conversion were there in December using the weighted average method?

A) 18,000
B) 15,200
C) 17,600
D) 8,800

Question 54

Which of the following statements is true about the weighted average process costing method?

A) If all raw materials are added to production at the beginning of the process, the number of equivalent units in process will equal the total number of individual units worked on during the period.
B) The cost of the units in beginning work-in-process is accounted for separately from the units started in the current period.
C) The method is applicable to any situation where the cost of a specific job is needed.
D) All the above statements are true.

Question 55

Which of the following types of costs are classified as period costs under absorption costing, but not under variable costing?

A) All non-manufacturing costs
B) Only fixed non-manufacturing costs
C) The cost of purchasing long-lived assets for use in manufacturing
D) None of the above

Question 56

All of the following costs are included in inventory under absorption costing except:

A) Direct materials
B) Direct labor
C) Fixed manufacturing expenses
D) Variable selling expenses

Question 57

Under variable costing, which of the following costs are assigned to inventory?

A) Fixed manufacturing costs
B) Variable non-manufacturing costs
C) Variable manufacturing costs
D) None of the above

Question 58

Which of the following inventory valuation approaches treats nonmanufacturing costs as period costs?

A) Absorption
B) Variable
C) Both absorption and variable
D) None of the above

Question 59

Fixed manufacturing overhead is recorded initially as an asset (inventory) under ______________ costing but as an operating expense under ______________ costing.

A) Absorption; indirect
B) Variable; absorption
C) Absorption; variable
D) Variable; direct

Question 60

The following information pertains to Jack Corporation:
What is the value of the ending inventory using the variable costing method?

A) $150,000
B) $240,000
C) $200,000
D) $208,000

Question 61

The following information pertains to Hamilton Corporation:
What is the value of the ending inventory using the absorption costing method?

A) $240,000
B) $270,000
C) $290,000
D) $343,000

Question 62

Assuming sales prices and cost behavior remain unchanged, when absorption costing is used, overproducing creates all of the following situations except?

A) A buildup of inventory levels
B) Higher net income
C) Less fixed costs on the income statement
D) Less variable cost on the balance sheet

Question 63

E&J Auto Body Shop estimated overhead cost for the coming year will be $15,000 and 5,000 direct labor hours will be worked. The amount of overhead cost applied by E&J Auto Body Shop to one of its jobs if the jobs required 10 direct labors hours to complete, would be:

A) $150
B) $ 30
C) $ 50
D) $ 15

Question 64

Given is selected information from Nathaniel's Service Shop's June Income Statement and Statement of Cost of Goods Manufactured:
Nathaniel's Service Shop's finished goods inventory, on June 1, was:

A) 40,000
B) 30,000
C) 35,000
D) 20,000

Question 65

The beginning inventory consisted of 10,000 units, 30 percent complete and the ending inventory consisted of 8,000 units, 40 percent complete. There were 22,000 units started during the period.
Determine the equivalent units of conversion in process

A) 27,200 units
B) 20,800 units
C) 25,200 units
D) 17,800 units

Question 66

Below is selected information from Chipset's cost of production report:
The ending inventory of work-in-process is complete as to materials.
The cost of conversion in the ending inventory is:

A) $ 300,000
B) $ 333,000
C) $ 21,000
D) $ 12,000

Question 67

Kevin Jewelry Company sells its product for $70 per unit. Variable manufacturing costs per unit are $20, and fixed manufacturing costs at the normal operating level of 5,000 units are $35,000. Variable expenses are $8 per unit sold. Fixed administration expenses total $40,000. Kevin Jewelry Company had no beginning inventory in 2018. During 2018, the company produced 5,000 units and sold 2,000.
What would the net income be for Kevin Jewelry Company in 2018 using both variable costing and absorption costing?

A) Variable costing $9,000; absorption costing $30,000
B) Variable costing $30,000; absorption costing $30,000
C) Variable costing $21,000; absorption costing $9,000
D) Variable costing $30,000; absorption costing $9,000

Question 68

Indicate which of the following inventories are typically found in service, merchandising, and manufacturing organizations:
●Supplies Inventories
●Merchandise Inventories
●Raw Materials Inventories
●Work-in-Process Inventories
●Finished Goods Inventories

Question 69

Indicate whether each of the following costs, incurred by a manufacturer, are period or product costs.

Question 70

Sykora, Inc., which uses a predetermined overhead rate based on direct labor hours, estimated total overhead for the year to be $12,000,000 and total direct labor hours to be 320,000 hours. Calculate Sykora's predetermined overhead rate.
In April, Sykora incurred actual overhead costs of $1,050,000 and used 30,000 hours. How much was Sykora's over- or under-applied overhead for the month of April?

Question 71

Classify the following costs incurred in the manufacturing of cookie bars as either (a) Product Cost- Direct Materials, (b) Product Cost- Conversion, or (c) Period Cost.

Question 72

For each of the following independent manufacturing situations, indicate whether job-order or process costing is more appropriate and why.

Question 73

Glen Oak Corp obtained the following information from its absorption costing accounting records:
Calculate the total Period Costs incurred this period.

Question 74

NorthWest Corp. obtained the following information from its accounting records:
Calculate the Cost of Goods Manufactured for the period.

Question 75

Wrigley Corp. obtained the following information from the Raw Materials Inventory account and purchasing records for the first quarter of the current year:
Calculate the amount of Raw Materials used for this quarter.

Question 76

Beginning inventory in April consisted of 10,000 units (60 percent converted) and ending inventory consisted of 20,000 units (30 percent converted). In addition, 50,000 units were started during the period.
How many equivalent units for conversion costs were in process in April using the weighted average method?

Question 77

Justin Company had the following data for the current fiscal period:
Materials are added at the beginning of the process. Beginning work-in-process was 40 percent complete as to conversion. Ending work-in-process was 70 percent complete as to conversion.
Calculate the number of units completed and transferred out during the period?

Question 78

The following information is available for Rhonda, Inc. for the month of January:
Materials are added at the beginning of the process.
Calculate the cost per equivalent unit in process for conversion using the weighted average method.

Question 79

The Matthew Company has the following information for December of this year:
Overhead rate is 150 percent of direct labor costs. The Matthew Company uses a process costing system.
Calculate the total amount of cost added to Work-in-Process Inventory for December.

Question 80

The Matthew Company has the following information December of this year:
The overhead rate is 150 percent of direct labor costs. The Matthew Company uses a job costing system.
Prepare the journal entry to record the cost of goods completed and transferred to Finished Goods Inventory.