Deck 16: Process Costing and Analysis

Question 1

The process cost summary is an important managerial accounting report produced by a process cost accounting system.

Answer 1

True

Question 2

Equivalent units of production refer to the number of units that would be completed if all effort during a period had been applied only to those units that were started and completed in a period.

Answer 2

True

Question 3

The FIFO method of process costing assigns costs to units assuming a first-in, first-out flow of product.

Answer 3

True

Question 4

The process cost summary presents calculations of the cost of units completed during the reporting period, but does not present any information about the ending goods in process inventory.

Question 5

The FIFO method of process costing has slightly different objectives from the weighted average method of process costing.

Question 6

A production department is an organizational unit of a factory that has the responsibility for at least partially manufacturing or producing a product or service.

Question 7

To determine unit cost under a process cost accounting system, equivalent units produced must be calculated if the company has goods in process inventories.

Question 8

A process cost summary includes the amounts of equivalent finished units of production for the period.

Question 9

A process cost summary shows the cost of a particular job manufactured in the reporting period.

Question 10

The FIFO method of process costing computes equivalent units of production in a slightly different manner than the computation used in the weighted average method of process costing.

Question 11

In a process manufacturing system, products pass through a series of sequential processes.

Question 12

A process cost summary for a production department accounts for all costs assigned to that department during the period plus costs that were in the department's Goods in Process Inventory account at the beginning of the period.

Question 13

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

Question 14

Equivalent units of production need to be determined only if a processing department adds materials and labor to its products at different rates.

Question 15

A process cost summary is an accounting report that describes the costs charged to a department, the equivalent units of production by the department, and how the costs were assigned to the output.

Question 16

The managers of process manufacturing systems focus on the series of processes needed to complete the production of products.

Question 17

In a process cost accounting system, a department's production should be measured in terms of equivalent units when its beginning or ending inventory includes goods in process.

Question 18

Process manufacturing usually reflects a manufacturer that produces large quantities of identical products.

Question 19

"Equivalent units of production" is an engineering term used to describe the process by which one company attempts to manufacture units of a product that are equivalent to the product manufactured by a competitor.

Question 20

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

Question 21

In process cost accounting, materials are always classified as indirect if they are not physically incorporated into the final product.

Question 22

Process cost accounting systems are used only by companies that manufacture physical products; meaning that companies and other organizations that provide services to their customers do not use process cost accounting.

Question 23

Direct costs in process cost accounting include only those costs that can be readily identified with particular product units.

Question 24

Process cost accounting systems are commonly used by companies that manufacture standardized products by passing them through a series of manufacturing steps.

Question 25

In process cost accounting, all labor that is applied exclusively in a single production department is considered to be direct labor.

Question 26

Process cost accounting systems are commonly used by companies that produce a large volume of standardized units on a continuous basis.

Question 27

The use of process costing is of little benefit to a service type of operation.

Question 28

A unique feature of process costing systems is the use of a single Goods in Process Inventory control account.

Question 29

Process costing is applied to operations with repetitive production and heterogeneous products.

Question 30

Companies that use a series of manufacturing processes to produce standardized products should use a process cost accounting system.

Question 31

Process cost accounting systems consider direct costs to include those costs that can be readily identified with a particular process.

Question 32

A manufacturing company may choose to use either a job order cost accounting system or a process cost accounting system, without considering the process it uses to produce its products.

Question 33

Accountants use the term "process cost accounting system" because these systems use a number of trained individuals and computers to process the collected cost information.

Question 34

Process cost accounting systems consider overhead costs to include those costs that cannot be readily identified with any specific process.

Question 35

The Weighted Average method of process costing computes the cost per equivalent unit based solely on the current period's EUPs and costs.

Question 36

Process and job order manufacturing operations both combine materials, labor, and overhead items in the process of producing products.

Question 37

Hybrid systems contain aspects of both process and job order operations.

Question 38

A company that uses a process cost accounting system maintains separate Goods in Process Inventory accounts for each of its manufacturing departments.

Question 39

In process cost accounting, the classification of materials as direct or indirect depends on whether they are clearly linked with a specific process.

Question 40

When defining direct costs and indirect costs in process costing, it is the process that is the cost object.

Question 41

If Department G uses $53,000 of direct labor and Department H uses $21,000 of direct labor, the following journal entry would be recorded by the process cost accounting system:

Question 42

If Department A uses $10,000 of direct materials and Department B uses $15,000 of direct materials, the following journal entry would be recorded by the process cost accounting system:

Question 43

Hybrid costing systems can only be applied to auto manufacturing.

Question 44

When a process cost accounting system assigns the cost of materials to a production department, the journal entry debits the Raw Materials Inventory account and credits the Goods in Process Inventory account for that department.

Question 45

If Department Q uses $60,000 of direct materials and Department T uses $15,000 of direct materials, the following journal entry would be recorded by the process cost accounting system:

Question 46

If the factory labor cost for a month was $123,000 (paid in cash), the following journal entry would be recorded by the process cost accounting system:

Question 47

The following journal entry would be made to record the use of direct materials in the reporting period covered by the information:

Question 48

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

Question 49

If the indirect materials cost for a reporting period was $37,500, the following journal entry would be recorded by the process cost accounting system:

Question 50

In a process costing system, factory labor costs incurred in a reporting period are presented on the income statement as Factory Labor Expense.

Question 51

If Department T uses $89,000 of direct labor and Department V uses $11,000 of direct labor, the following journal entry would be recorded by the process cost accounting system:

Question 52

In process cost accounting, direct labor includes only the labor that is applied directly to the products.

Question 53

When a process cost accounting system records the purchase of raw materials, the Raw Materials Inventory account is debited.

Question 54

If Department N incurred direct labor cost of $22,000 and Department O incurred direct labor cost of $43,000, the following journal entry would be recorded by the process cost accounting system:

Question 55

The following journal entry would be made to record the use of direct labor in the reporting period covered by the information:

Question 56

A materials consumption report is a source document that summarizes the materials used during a reporting period.

Question 57

In some circumstances, a process cost accounting system can classify wages paid to maintenance workers as direct labor costs instead of factory overhead.

Question 58

After all process cost accounting journal entries are recorded and posted for a reporting period, the Factory Payroll account should have a zero balance.

Question 59

Factory overhead costs can be allocated by a process cost accounting system to the output of production departments by using a predetermined overhead allocation rate.

Question 60

If Department J uses $40,000 of direct materials and Department K uses $70,000 of direct materials, the following journal entry would be recorded by the process cost accounting system:

Question 61

Refer to the following table of cost information:


-If the allocated overhead equaled the actual overhead, then total manufacturing costs incurred in both departments during the reporting period were $35,300.

Question 62

If the predetermined overhead allocation rate is 225% of direct labor cost, and the Mixing Department's direct labor cost for the reporting period is $10,000, the following entry would be made to record the allocation of overhead to the products processed in this department:

Question 63

Since the process cost summary describes the activities of a production department for a specified reporting period, it does not present information about any costs incurred in prior periods.

Question 64

A process cost accounting system records all factory overhead costs directly in the Goods in Process Inventory accounts.

Question 65

If a production department has 100 equivalent units of production with respect to direct materials in a given reporting period, the equivalent units of production with respect to direct labor also must be 100.

Question 66

Refer to the following table of cost information:


-The company uses the same predetermined overhead allocation rate (based on direct labor) for the Pickling and Canning Departments.

Question 67

Refer to the following table of cost information:


-If the predetermined overhead allocation rates were based on direct labor costs, the rates for the Pushing and Shoving Departments were 50% and 150%, respectively.

Question 68

One section of the process cost summary describes the equivalent units of production for the department during the reporting period and presents the calculations of the costs per equivalent unit.

Question 69

In process costing, indirect materials are charged directly to Goods in Process Inventory.

Question 70

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

Question 71

The number of equivalent units of production assigned to ending goods in process inventory should usually be equal to or less than the number of physical units in ending goods in process inventory.

Question 72

Refer to the following table of cost information:


-The following journal entry would be made to record the use of direct labor in the reporting period covered by the information:

Question 73

If a department that applies process costing starts the reporting period with 100,000 physical units that were 20% complete with respect to direct labor, it must add 80,000 equivalent units of labor to complete them.

Question 74

If the predetermined overhead allocation rate is 85% of direct labor cost, and the Polishing Department's direct labor cost for the reporting period is $20,000, the following entry would be made to record the allocation of overhead to the products processed in this department:

Question 75

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

Question 76

If the predetermined overhead allocation rate is 350% of direct labor cost and the Painting Department's direct labor cost for the reporting period is $20,000, the following entry would record the allocation of overhead to the products processed in this department:
$\begin{array}{l}\text { Goods in Process Inventory, Painting Dept } &70,000\\\text { Factory Overhead }&&70,000\end{array}$

Question 77

The Packing Department transferred out completed units with a cost of $74,000. This transfer should be recorded with the following entry:

Question 78

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

Question 79

In the same time period, it is possible that a production department can produce 1,000 equivalent finished units with respect to direct materials and 1,200 equivalent finished units with respect to direct labor.

Question 80

In process costing there is never a balance remaining in Factory Overhead that needs to be closed at period end.