Financial and Managerial Accounting, 8e (Wild)
Chapter 16 Process Costing and Analysis
1) The managers of process operations focus on the series of repetitive processes, or steps,
resulting in a noncustomized product or service.
2) Manufacturers that utilize process operations produce large quantities of identical products.
3) In a process costing system costs are only measured upon completion of each job.
4) The cost object in a process costing system is the specific job.
5) Equivalent units of production is the number of units that could have been started and
completed given the costs incurred during the period.
6) In a process costing system, companies typically end each period with only Finished Goods
Inventory.
7) Equivalent units of production are always the same as the total number of physical units
finished during the period.
8) Equivalent units of production for direct materials and direct labor are always the same.
9) 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.
10) Conversion cost per equivalent unit is the combined costs of direct materials and factory
overhead.
11) Conversion cost per equivalent unit is the combined costs of direct labor and factory
overhead.
12) The process cost summary is an important managerial accounting report prepared for each
process or production department.
13) A process cost summary is an accounting report that describes the costs charged to each
department, the equivalent units of production by each department, and determining the costs
assigned to each department’s output.
14) A process cost summary usually does not include the number of equivalent units of
production for the period.
15) A process cost summary shows the cost of a particular job manufactured in the reporting
period.
16) The FIFO method of computing equivalent units focuses on production activity in the current
period only.
17) 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, the equivalent units of direct labor
in beginning Work in Process are 20,000.
18) The FIFO method of computing equivalent units includes the beginning inventory costs in
computing the cost per equivalent unit for the current period.
19) The FIFO method of computing equivalent units excludes the beginning inventory costs in
computing the cost per equivalent unit for the current period.
20) Process and job order manufacturing operations both combine materials, labor, and overhead
items in the process of producing products.
21) Process costing systems use separate Work in Process Inventory accounts for each process.
22) The term “process costing system” refers to the number of trained individuals and computers
required to process the collected cost information.
23) Process costing typically uses only one Work in Process Inventory account, while job order
costing typically uses a separate Work in Process Inventory account for each department.
24) A production department is an organizational unit that has the responsibility for the complete
processing of one particular product.
25) In a process costing system, with the exception of the first department, each department
receives output from the prior department as a partially processed product.
26) In process costing the cost object is the process and in job order costing the cost object is a
job.
27) Process costing is applied to operations with customized products.
28) Process costing is applied to operations with repetitive production and noncustomized
products.
29) In a process operation, all labor that is used exclusively by a single production department is
considered direct labor.
30) Process costing systems consider overhead costs to include those costs that cannot be tied to
individual processes.
31) Companies that use a series of repetitive manufacturing processes to produce standardized
products likely use a process costing system.
32) Process costing systems are used only by companies that manufacture physical products;
companies that provide services do not use process costing.
33) Process costing systems are commonly used by companies that manufacture standardized
products by passing them through a series of manufacturing steps.
34) The use of process costing is of little benefit to a service provider.
35) In process costing, the classification of materials as direct or indirect depends on whether or
not they are clearly linked with a specific process or department.
36) Conversion cost per equivalent unit is the combined cost of direct labor and factory overhead
per equivalent unit.
37) Conversion cost per equivalent unit is the combined cost of direct materials, direct labor, and
factory overhead per equivalent unit.
38) When direct labor and overhead enter the production process at different rates, it is
appropriate to use a conversion cost per equivalent unit.
39) When direct labor and overhead enter the production process at the same rates, it is
appropriate to use a conversion cost per equivalent unit.
40) In process costing, indirect materials are clearly linked with a specific production process or
department.
41) Hybrid systems contain features of both process and job order operations.
42) Hybrid costing systems can only be applied to manufacturing.
43) In a process costing system, the purchase of raw materials is credited to Raw Materials
Inventory.
44) In a process costing system, the purchase of raw materials is debited to Raw Materials
Inventory.
45) In a process costing 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 Work in
Process Inventory account for that department.
46) In a process costing system, the entry to record cost of materials assigned to a production
department requires a debit to the Work in Process Inventory account for that department and a
credit to the Raw Materials Inventory account.
47) A materials consumption report is used instead of materials requisitions in companies where
materials move continuously through the manufacturing process.
48) If Department C uses $10,000 of direct materials and Department D uses $15,000 of direct
materials, the following journal entry would be recorded by the process costing system:
Work in Process Inventory, Department C
10,000
Work in Process Inventory, Department D
15,000
Raw Materials Inventory
25,000
49) Process costing systems use a single Work in Process Inventory account regardless of the
number of production departments that exist.
50) If Department R uses $60,000 of direct materials and Department S uses $15,000 of direct
materials, the following journal entry would be recorded by the process costing system:
Work in Process Inventory, Department R
60,000
Work in Process Inventory, Department S
15,000
Raw Materials Inventory
75,000
51) If Grayson Manufacturing incurred $17,400 for direct labor in the assembly department and
$10,300 for direct labor in the painting department, the journal entry to record the labor used is:
Work in Process Inventory, Assembly
$
17,400
Work in Process Inventory, Painting
$
10,300
Raw Materials Inventory
$
27,700
52) If the indirect labor cost in August for clerical and maintenance that help production in all
departments was $123,000, the following journal entry would be recorded in a process costing
system:
Factory Overhead
123,000
Factory Wages Payable
123,000
53) In process costing, direct labor includes only the labor that is applied directly to individual
units of product.
54) In some circumstances, a process costing system can classify wages paid to maintenance
workers as direct labor costs instead of factory overhead.
55) In a process costing system, factory labor costs incurred in a reporting period are presented
on the income statement as Factory Labor Expense.
56) 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:
Factory Overhead
6,100
Work in Process Inventory
6,100
57) If Department L uses $53,000 of direct labor and Department M uses $21,000 of direct labor,
the following journal entry would be recorded using a process costing system:
Work in Process Inventory, Department L
53,000
Work in Process Inventory, Department M
21,000
Factory Wages Payable
74,000
58) In a process costing system, factory overhead costs are allocated to production departments
by using a predetermined overhead allocation rate.
59) If indirect materials costing $37,500 that were not clearly linked with any specific production
process or department were used during a reporting period, the following journal entry would be
recorded in the process costing system:
Factory Overhead
37,500
Raw Materials Inventory
37,500
60) In process costing there is never a balance remaining in Factory Overhead that needs to be
closed at period end.
61) In process costing, all indirect materials are charged directly to Work in Process Inventory.
62) A process costing system records all factory overhead costs incurred directly in the Work in
Process Inventory accounts.
63) If the predetermined overhead allocation rate is 250% of direct labor cost and the Finishing
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:
Work in Process Inventory, Finishing Dept.
50,000
Factory Overhead
50,000
64) If the predetermined overhead allocation rate is 75% of direct labor cost, and the Assembly
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:
Factory Overhead
15,000
Work in Process Inventory, Assembly Dept.
15,000
65) If the predetermined overhead allocation rate is 245% of direct labor cost, and the Baking
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:
Work in Process Inventory, Baking Dept.
24,500
Factory Overhead
24,500
66) The number of equivalent units of production assigned to ending Work in Process inventory
should be equal to or less than the number of physical units in ending Work in Process inventory.
67) 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 800 equivalent finished units with
respect to direct labor.
68) 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 must also be 100.
69) Once equivalent units are calculated for materials, this number will also be used for direct
labor and factory overhead.