Deck 19: Costing Systems Process Costing

Question 1

The average costing method is a costing method in which the cost flow follows the logical product flow.

Answer 1

False

Question 2

Processes in a process costing system must incur the same amount of costs.

Answer 2

False

Question 3

A process costing system first accumulates the costs of direct materials,direct labor,and overhead for each process and then assigns those costs to the products produced during a particular period.

Answer 3

True

Question 4

The computations for costs to be transferred out of Work in Process Inventory are the same regardless of the number and size of the departments involved in the production process.

Question 5

Like job order costing systems,process costing systems are also only suited for companies that produce customized products.

Question 6

Process cost reports are prepared for each of the processes or work cells.

Question 7

To assign production costs to products manufactured,managers must trace all period costs to units produced and prepare process cost reports.

Question 8

A job order costing system is used by companies that manufacture large amounts of similar products or liquid products.

Question 9

In a process costing system,newest units in the production process are the first to be transferred to the next department.

Question 10

In a process costing system,all production costs are assigned to departments or processes.

Question 11

A company that manufactures potato chips would probably use a process costing system.

Question 12

The actual physical flow of production will depend on the cost allocation method,such as the FIFO costing method or the average costing method,chosen by the company.

Question 13

Regardless of the product costing system used,when the products are completed,they are transferred from work in process inventory to finished goods inventory.

Question 14

In a process costing system,total period costs incurred by a company are traced to individual processes.

Question 15

For a paint manufacturing company,the cost of producing each gallon of paint will likely differ.

Question 16

In a process costing system,each department's production costs are transferred to the next department and ultimately to the Finished Goods Inventory account.

Question 17

The product unit cost is the sum of the cost elements added in all production department processes.

Question 18

In order to use a process costing system,products produced should be homogenous in nature.

Question 19

Because process costing is normally associated with a continuous production flow,products that are in process at the beginning of the period are assumed to be the first products completed during the current period.

Question 20

A journal entry to transfer costs from the Work in Process account to Finished Goods Inventory account will include a debit to Finished Goods Inventory.

Question 21

It is not necessary to ascertain the portion of ending Work in Process Inventory applicable to direct materials costs versus conversion costs.

Question 22

Conversion costs are defined as the combined total of direct materials costs and direct labor costs incurred by a production department.

Question 23

Unit costs are determined by dividing the total costs of the period by the equivalent units.

Question 24

The number of equivalent units for direct materials is the same as the number for conversion costs.

Question 25

In a process costing system,regardless of the cost approach used,cost of beginning inventory is ignored while computing the cost per equivalent unit.

Question 26

Regardless of beginning inventory levels,beginning inventory is always ignored while computing the equivalent units of production.

Question 27

Direct materials are most likely added at the beginning of the process.

Question 28

Several Work in Process Inventory accounts are used in a process costing system.

Question 29

The basis used in computing equivalent unit cost under process costing system is made up of certain specific jobs worked on during the fiscal year.

Question 30

Once the products are completed,packaged,and ready for sale,their costs are transferred
to the Finished Goods Inventory account.

Question 31

The number of equivalent units of production will always be lesser than the number of completed units during the period.

Question 32

Total conversion costs for the period include direct materials,direct labor,and overhead.

Question 33

Separate equivalent units of production usually are calculated for materials and conversion costs.

Question 34

If 45,000 units of ending work in process inventory are 60 percent complete as to conversion costs,27,000 equivalent units of conversion costs must be incurred to complete these units during the next period.

Question 35

Equivalent production is a measure of productive output of units for a period of time,expressed in terms of fully completed or equivalent whole units produced.

Question 36

Equivalent units are defined as the number of units completed and sold during the current period.

Question 37

The average costing method matches cost flow with the physical flow of production.

Question 38

One of the steps in preparing the process cost report requires dividing current costs charged to the Work in Process Inventory account of each department or production process by equivalent units to calculate the cost per equivalent unit.

Question 39

Process costing information can inform managers about the specific units of products ordered by customers.

Question 40

It is difficult to track costs to individual products in a continuous flow manufacturing process.

Question 41

In a process cost report,accounting for physical units excludes the physical units in beginning inventory to arrive at "units to be accounted for."

Question 42

Under the FIFO method,the equivalent units will always equal the actual units in beginning work in process inventory,plus the actual units started and completed during the current period,plus the actual units in ending work in process inventory during the current period.

Question 43

Managers prepare process cost reports in the evaluating stage of the management process.

Question 44

The type of product costing system used by a company is dictated by the

A)project manager.
B)production process.
C)company president.
D)plant supervisor.

Question 45

The FIFO process costing method assumes that the items in ending work in process inventory were started and completed during the current period.

Question 46

Process costing is a system of

A)inventory management.
B)manufacturing.
C)product costing.
D)product placement.

Question 47

To decide the cost of a product,managers use information about past and projected product costing and customer preferences.

Question 48

The number of equivalent units for direct materials cost using the FIFO costing procedure is the units in beginning work in process inventory minus units started during the period plus units completed during the period.

Question 49

Under the FIFO costing method,separate unit cost analyses are not used for each accounting period because costs of different periods are averaged.

Question 50

Under the average costing method in a process costing system,the costs in beginning inventory are combined with current period costs to compute an average product unit cost.

Question 51

When the average costing method is used in process costing,all costs incurred by a department or production process are divided by the equivalent units produced during the period to determine the average cost per unit produced.

Question 52

In a process costing system,the equivalent units of production must be computed after determining the value of ending inventory.

Question 53

It is necessary for managers to understand product and cost flow patterns,to use process costing.

Question 54

A company should use process costing rather than job order costing if

A)production is only partially completed during the accounting period.
B)the product is produced in batches only as orders are received.
C)the product is composed of mass-produced homogeneous units.
D)the product goes through a single stage of production.

Question 55

Under the average costing method in a process costing system,the costs in beginning inventory are combined with current period costs to compute an average product unit cost.

Question 56

In a process costing system,the average costing method assumes that cost flows mirror the logical physical flow of production.

Question 57

When the FIFO costing method is used in process costing,the number of units in beginning inventory is multiplied by 100 percent to determine the equivalent units.

Question 58

The average costing method in process costing disregards the ending inventory assuming that direct material costs and conversion costs are pertaining to the immediate next period.

Question 59

In a process costing system,the amount of total costs to be accounted for is made up of direct materials and conversion costs incurred during the current period plus those costs included in the beginning Work in Process Inventory account.

Question 60

One reason for preparing a process cost report for a particular department is to determine the amount of costs to transfer to the next department or to the Finished Goods Inventory account at the end of the period.

Question 61

Which of the following items most likely would be manufactured using a process costing system?

A)Advertising services
B)Fruit juices
C)Construction of a shopping mall
D)Wedding gowns

Question 62

If a company uses a process costing system to account for costs in its three production departments,how many Work in Process accounts will it use?

A)5
B)3
C)1
D)4

Question 63

Process costing is applicable to production operations that

A)utilize several processes,departments,or work cells in a series.
B)do not assign overhead costs to operations.
C)produce products that are made to order.
D)produce unique products.

Question 64

During April,Department A started 400,000 units of product in a particular production process.The beginning work in process inventory was 40,000 units,and the ending inventory was 50,000 units.Direct materials are introduced at the start of processing,and beginning and ending inventories are considered to be 40 percent complete with respect to conversion costs.Department A uses the FIFO costing method. Units transferred out from Department A during April were

A)390,000.
B)400,000.
C)410,000.
D)490,000.

Question 65

The reason for combining direct labor and overhead costs together and calling them "conversion costs" is that

A)they both are direct costs of production.
B)the equivalent unit amount for direct materials will be the same as that for direct labor and overhead costs.
C)both these types of costs usually are incurred uniformly throughout the production process.
D)the costs for direct labor and overhead are not accounted for separately.

Question 66

Which of the following products probably would be produced by a company using a process costing system?

A)A house
B)A customized chocolate
C)Potato chips
D)A movie

Question 67

In a process costing system,some of the increases to Department C's Work in Process Inventory account would come from Department B's

A)Finished Goods Inventory account.
B)Materials Inventory account.
C)Cost of Goods Sold account.
D)Work in Process Inventory account.

Question 68

Which of the following cost flow assumptions most closely follows the logical product flow in a process costing environment?

A)Average
B)LIFO
C)FIFO
D)HIFO

Question 69

Which of the following is not included in conversion costs?

A)Indirect labor
B)Direct labor
C)Direct materials
D)Overhead

Question 70

Which of the following statements is true?

A)The Work in Process Inventory account is the focal point of process costing.
B)Labor costs are accounted for differently from overhead costs in a process costing system.
C)Equivalent units usually are computed for direct materials and overhead combined.
D)A process cost report should be prepared only if the average costing method is used.

Question 71

Which of the following entities probably would use a process costing system?

A)An oil refinery
B)A yacht builder
C)A custom furniture company
D)A website designer

Question 72

A process costing system accounts for product costs

A)for a specific period of time.
B)always in a single Work in Process Inventory account.
C)without regard to the process that created the cost.
D)for specific orders.

Question 73

During April,Department A started 400,000 units of product in a particular production process.The beginning work in process inventory was 40,000 units,and the ending inventory was 50,000 units.Direct materials are introduced at the start of processing,and beginning and ending inventories are considered to be 40 percent complete with respect to conversion costs.Department A uses the FIFO costing method. The number of units started and completed in Department A during April was

A)450,000.
B)350,000.
C)360,000.
D)160,000.

Question 74

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

A)A specific time period is used
B)Several Work in Process Inventory accounts are used
C)Product costs are grouped by processes,departments,or work cells
D)More suitable when customized products are manufactured

Question 75

Which of the following in a process costing system helps in verifying the cost of ending work in process inventory for a period?

A)Materials requisitions and labor time tickets
B)Cost recap included in the statement of production
C)Cost recap included in the process cost report
D)None of the these

Question 76

A measure of productive output of units for a period of time,expressed in terms of completed whole units,is the definition of

A)conversion costs..
B)ending work in process inventory.
C)equivalent units
D)units started and completed.

Question 77

Why are equivalent units of production used in process costing?

A)To determine the total of overhead costs
B)To determine the number of units in work in process and finished goods inventories
C)To determine the costs per unit and costs of inventories in each process
D)To determine the length of the process

Question 78

During April,Department A started 400,000 units of product in a particular production process.The beginning work in process inventory was 40,000 units,and the ending inventory was 50,000 units.Direct materials are introduced at the start of processing,and beginning and ending inventories are considered to be 40 percent complete with respect to conversion costs.Department A uses the FIFO costing method. The number of equivalent units produced in Department A with respect to conversion costs were

A)530,000.
B)394,000.
C)370,000.
D)354,000.

Question 79

Equivalent units of production usually are determined for

A)direct materials costs only.
B)direct materials and conversion costs.
C)direct and indirect materials only.
D)conversion costs only.

Question 80

Measures of equivalent production are necessary in process costing because

A)job order costing procedures cannot be applied.
B)unit costs are computed by departments or processes at fixed time intervals.
C)perpetual inventories are not employed in process plants.
D)production methods are more complex than in job order costing systems.