Deck 20: Process Cost Systems

Question 1

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

Answer 1

False

Question 2

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.

Answer 2

True

Question 3

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

Answer 3

False

Question 4

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

Question 5

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 6

Conversion costs are usually incurred evenly throughout a process.

Question 7

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

Question 8

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 9

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

Question 10

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

Question 11

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 12

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 13

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

Question 14

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

Question 15

If 10,000 units which 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 16

The first step in determining the cost of goods completed and ending inventory valuation using process costing is to calculate equivalent units of production.

Question 17

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.

Question 18

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

Question 19

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

Question 20

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

Question 21

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 22

If a company uses average costing instead of FIFO they will still get the same unit costs.

Question 23

The FIFO method of process costing is simpler than the Average cost method.

Question 24

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

Question 25

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

Question 26

In a just-in-time system, processing functions are combined into work centers, sometimes called departments.

Question 27

In applying the first-in, first-out method of costing inventories, if 8,000 units which are 30% completed are in process at June 1, 28,000 units are 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 28

If 10,000 units which 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 29

The closer a company moves towards Just in Time production, the differences in unit costs between average costing and FIFO will be reduced.

Question 30

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

Question 31

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

Question 32

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

Question 33

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 34

In applying the first-in, first-out method of costing inventories, if 8,000 units which are 30% completed are in process at June 1, 28,000 units are 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 35

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

Question 36

Companies recognizing the need to simultaneously produce products with high quality, low cost, and instant availability have adopted a just-in-time processing philosophy.

Question 37

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

Question 38

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

Question 39

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

Question 40

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

Question 41

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

Question 42

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

Question 43

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

Question 44

The last step in the accounting procedure for process costing is the calculation of equivalent units of production.

Question 45

Conversion costs are generally added evenly throughout the process.

Question 46

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

Question 47

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

Question 48

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

Question 49

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

Question 50

All costs of the processes in a process costing system ultimately pass through the Cost of Goods Sold account.

Question 51

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

Question 52

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

Question 53

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

Question 54

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

Question 55

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 56

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

Question 57

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

Question 58

Costs are transferred, along with the units, from one work in process inventory account to the next in a process costing system.

Question 59

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

Question 60

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

Question 61

The four steps necessary to determine the cost of goods completed and the ending inventory valuation in a process cost system are: 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 62

If Department H had 600 units, 60% completed, in process at the beginning of the period, 6,000 units were completed during the period, and 700 units were 30% completed at the end of the period, what was the number of equivalent units of production for conversion costs for the period, if the first-in, first-out method is used to cost inventories?

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

Question 63

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 64

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

A) An oil refinery
B) Yacht builder
C) Specialty furniture company
D) Custom electronics manufacturer

Question 65

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

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) The system emphasizes time periods rather than the time it takes to complete a job.

Question 66

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

A) Advertising costs
B) Raw lumber (direct materials)
C) Machine operator's wages (direct labor)
D) Sales salaries

Question 67

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

A) Auto repair service
B) Paint manufacturer
C) Specialty printer
D) Custom furniture manufacturer

Question 68

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 one-fifth completed at the end of the period, and the following manufacturing costs were debited to the departmental work in process account during the period: Assuming that all direct materials are placed in process at the beginning of production and that the first-in, first-out method of inventory costing is used, what is the total cost of 3,600 units of beginning inventory which were completed during the period (round unit cost calculations to four decimal places)?

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

Question 69

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

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

Question 70

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

A) office expenses
B) direct expenses
C) sales salaries expense
D) factory overhead

Question 71

Which of the following is NOT a way in which process and job order cost systems are similar?

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 72

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

A) A custom boat builder
B) A custom furniture manufacturer
C) A one of a kind jewelry creator
D) An oil refinery.

Question 73

Which of the following costs incurred by a paper manufacturer would NOT be included in the group of costs referred to as conversion costs?

A) Factory supervisor's salary
B) Machine operator's wages (direct labor)
C) Raw lumber (direct materials)
D) Factory maintenance personnel supplies

Question 74

If Department K had 2,000 units, 40% completed, in process at the beginning of the period, 12,000 units were completed during the period, and 1,200 units were 25% completed at the end of the period, what was the number of equivalent units of production for conversion costs for the period if the first-in, first-out method is used to cost inventories?

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

Question 75

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 76

In the manufacture of 15,000 units of a product, direct materials cost incurred was $165,000, direct labor cost incurred was $105,000, and applied factory overhead was $53,500. What is the total conversion cost?

A) $270,000
B) $158,500
C) $323,500
D) $53,500

Question 77

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) all of the above

Question 78

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 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 one-fifth completed at the end of the period, and the following manufacturing costs were debited to the departmental work in process account during the period: Assuming that all direct materials are placed in process at the beginning of production and that the first-in, first-out method of inventory costing is used, what is the total cost of the departmental work in process inventory at the end of the period (round unit cost calculations to four decimal places)?

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

Question 80

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

A) Manufacturing costs are grouped by departments.
B) The system may use several Work-in-Process accounts.
C) The system measures costs for each completed job.
D) The system allocates costs between completed and partially completed units within a department.