Deck 20: Process Cost Accounting

Question 1

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

Answer 1

False

Question 2

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

Answer 2

True

Question 3

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.

Answer 3

False

Question 4

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

Question 5

The FIFO method does not use the beginning inventory costs in computing the cost per equivalent unit for the current period.

Question 6

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

Question 7

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

Question 8

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.

Question 9

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 10

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

Question 11

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

Question 12

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

Question 13

The FIFO method separates prior period costs from costs incurred during the current period.

Question 14

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

Question 15

A production department is an organizational unit that has the responsibility for at least partially processing a product.

Question 16

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

Question 17

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 18

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

Question 19

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 20

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

Question 21

Hybrid costing systems can only be applied to auto manufacturing.

Question 22

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

Question 23

In a process cost accounting system, the purchase of raw materials is debited to the Raw Materials Inventory.

Question 24

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

Question 25

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

Question 26

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

Question 27

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

Question 28

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

Question 29

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

Question 30

In a process cost accounting system, the entry to record cost of materials assigned to a production department requires a debit to the Raw Materials Inventory account and a credit to the Goods in Process Inventory account for that department.

Question 31

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

Question 32

In a process cost accounting system, the purchase of raw materials is credited to the Raw Materials Inventory.

Question 33

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

Question 34

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

Question 35

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 36

Process cost accounting systems consider overhead costs to include those costs that cannot be traced to a specific process.

Question 37

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

Question 38

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

Question 39

In a process cost accounting system, with the exception of the first department, each department receives output from the prior department as a partially processed product.

Question 40

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 41

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

Question 42

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 43

In a process cost accounting system, factory overhead costs can be allocated to production departments by using a predetermined overhead allocation rate.

Question 44

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 45

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 46

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

Question 47

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

Question 48

The following journal entry would be made to record the use of $6,100 of direct labor in a production department during the reporting period:

Question 49

If the predetermined overhead allocation rate is 85% of direct labor cost, and the Painting 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 50

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

Question 51

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

Question 52

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

Question 53

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

Question 54

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 55

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 56

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:

Question 57

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

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

A unique feature of process costing systems is the use of a single Goods in Process Inventory control account when more than one production department exists.

Question 60

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 using a process cost accounting system:

Question 61

A company uses a process cost accounting system. Its Assembly Department's beginning inventory consisted of 50,000 units, 3/4 complete with respect to direct labor and overhead. The department started and finished 127,500 units this period. The ending inventory consists of 40,000 units that are 1/4 complete with respect to direct labor and overhead. All direct materials are added at the beginning of the process. The department incurred direct labor costs of $24,000 and overhead costs of $32,000 for the period. Assuming the weighted average method, the direct labor cost per equivalent unit (rounded to the nearest cent) is:

A) $0.14.
B) $0.16.
C) $0.17.
D) $0.30.
E) $0.37.

Question 62

Equivalent units of production are equal to:

A) The number of units that could have been completed if all effort had been applied to units that were started and completed during a period.
B) The number of finished units actually produced during a period.
C) The number of units introduced into the process during a period.
D) The number of units still in process at the end of a period.
E) Physical units that were started and completed during a period.

Question 63

Hou Company applies factory overhead to its production departments on the basis of 90% of direct labor costs. In the Assembly Department, Hou had $125,000 of direct labor cost, and in the Finishing Department, Hou had $35,000 of direct labor cost. The entry to apply overhead to these production departments is:

A) Debit Factory Overhead - Assembly $112,500; debit Factory Overhead - Finishing $31,500; credit Goods in Process Inventory $144,000.
B) Debit Factory Overhead $144,000; credit Goods in Process Inventory - Assembly $112,500; credit Goods in Process - Finishing $31,500.
C) Debit Factory Overhead $144,000; credit Factory Payroll $144,000.
D) Debit Goods in Process Inventory - Assembly $112,500; debit Goods in Process Inventory - Finishing $31,500; credit Factory Overhead $144,000.
E) Debit Factory Payroll $144,000; credit Cash $144,000.

Question 64

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 65

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 66

Which of the following characteristics applies to process cost accounting but not to job order cost accounting?

A) Use of a predetermined overhead rate.
B) Identifiable lots of production.
C) Equivalent units of production.
D) Labor time ticket for each employee.
E) Use of a single Goods in Process Inventory account.

Question 67

The Machining Department started the current month with a beginning goods in process inventory of $10,000. During the month, it was assigned the following costs: direct materials, $76,000; direct labor, $24,000; and factory overhead, 50% of direct labor cost. Also, inventory with a cost of $109,000 was transferred out of the department to the next phase in the process. The ending balance of the Goods in Process Inventory account for the Machining Department is:

A) $13,000.
B) $56,000.
C) $59,000.
D) $110,000.
E) $165,000.

Question 68

Which of the following is the best explanation for why it is necessary to calculate equivalent units of production in a process costing environment?

A) In most manufacturing environments, it is not possible to conduct a physical count of units.
B) Companies often use a combination of a process costing and job order costing systems.
C) In most process costing systems, direct materials are added at the beginning of the process while conversion costs are added evenly throughout the manufacturing process.
D) All of the work to make a unit 100% complete and ready to move to the next stage of production or to finished goods inventory may not have been completed in a single time period.
E) In most cases, there is no difference between physical units and equivalent units of production.

Question 69

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 70

A measure of the productivity of a process with respect to its use of direct materials, direct labor, or overhead, and an expression of the activity of a process as the number of units that would have been processed during a period if all effort had been applied to units that were started and finished during the period, is called:

A) Manufacturing overhead.
B) Units in process.
C) A job cost sheet.
D) Equivalent units of production.
E) Process cost summary.

Question 71

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

Question 72

Which of the following characteristics does not usually apply to process manufacturing systems?

A) Each unit of product is separately identifiable.
B) Partially completed products are transferred between processes.
C) Different managers are responsible for different processes.
D) The output of all processes except the final process is an input to the next process.
E) All of these are characteristics of process manufacturing systems.

Question 73

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 74

The cost of units transferred from Goods in Process Inventory to Finished Goods Inventory is called the cost of goods manufactured.

Question 75

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 76

Which of the following statements is most accurate?

A) In process costing, estimating the degree of completion of units is usually more accurate for conversion costs than for direct materials.
B) The weighted average method uses the stage of completion of the current period's beginning goods in process inventory account in calculating equivalent units.
C) The weighted average method focuses on the total costs and total equivalent units completed to date; this is the major difference between the weighted average method and the FIFO method of calculating equivalent units of production.
D) The FIFO method of calculating equivalent units of production merges the work and the costs of the beginning inventory with the work and the costs done during the current period.
E) It is not possible for there to be a significant difference between the cost of completed units between the weighted average and the FIFO methods.

Question 77

Which of the following is not one of the four steps in accounting for production activity and assigning costs during a period under a process cost system?

A) Determine over or underapplied overhead.
B) Determine the physical flow of units.
C) Compute equivalent units of production.
D) Compute the cost per equivalent unit.
E) Assign and reconcile costs.

Question 78

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

Question 79

A production department's output for the most recent month consisted of 10,000 units completed and transferred to the next stage of production and 10,000 units in ending goods in process inventory. The units in ending goods in process inventory were 50% complete with respect to both direct materials and conversion costs. There were 1,000 units in beginning goods in process inventory, and they were 70% complete with respect to both direct materials and conversion costs. Calculate the equivalent units of production for the month, assuming the company uses the weighted average method.

A) 10,000 units.
B) 10,300 units.
C) 15,000 units.
D) 15,300 units.
E) 10,700 units.

Question 80

Which of the following products is least likely to be produced in a process manufacturing system?

A) Compact disks.
B) Slacks for casual wear.
C) Baseball hats.
D) Calculators.
E) Custom cabinets.