Chapter 20 Process Costing
MULTIPLE CHOICE QUESTIONS
1) The managers of process operations focus on the series of repetitive processes, or steps, resulting in
a noncustomized product or service.
A) True
B) False
2) Manufacturers that utilize process operations produce large quantities of identical products.
A) True
B) False
3) In a process costing system costs are measured upon completion of each job.
A) True
B) False
4) The cost object in a process costing system is the specific job.
A) True
B) False
5) Equivalent units of production refer to the number of units that could have been started and
completed given the costs incurred during the period.
A) True
B) False
6) In a process costing system, companies typically end each period with only Finished Goods
Inventory.
A) True
B) False
7) Equivalent units of production are always the same as the total number of physical units finished
during the period.
A) True
B) False
8) Equivalent units of production for direct materials and direct labor are always the same.
A) True
B) False
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.
A) True
B) False
10) Conversion cost per equivalent unit is the combined costs of direct materials and factory overhead.
A) True
B) False
11) Conversion cost per equivalent unit is the combined costs of direct labor and factory overhead.
A) True
B) False
12) The process cost summary is an important managerial accounting report produced by a process
costing system.
A) True
B) False
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.
A) True
B) False
14) A process cost summary usually does not include the number of equivalent units of production for
the period.
A) True
B) False
15) A process cost summary shows the cost of a particular job manufactured in the reporting period.
A) True
B) False
16) The FIFO method of computing equivalent units focuses on production activity in the current
period only.
A) True
B) False
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.
A) True
B) False
18) The FIFO method of computing equivalent units includes the beginning inventory costs in
computing the cost per equivalent unit for the current period.
A) True
B) False
19) The FIFO method of computing equivalent units excludes the beginning inventory costs in
computing the cost per equivalent unit for the current period.
A) True
B) False
20) Process and job order manufacturing operations both combine materials, labor, and overhead items
in the process of producing products.
A) True
B) False
21) Process costing systems are commonly used by companies that produce a large volume of
standardized units on a continuous basis.
A) True
B) False
22) The term “process costing system” is used in reference to the number of trained individuals and
computers required to process the collected cost information.
A) True
B) False
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.
A) True
B) False
24) A production department is an organizational unit that has the responsibility for the complete
processing of one particular product.
A) True
B) False
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.
A) True
B) False
26) In process costing, the cost object is the process and in job costing, the cost object is a job.
A) True
B) False
27) Process costing is applied to operations with repetitive production and customized products.
A) True
B) False
28) Process costing is applied to operations with repetitive production and noncustomized products.
A) True
B) False
29) In a process operation, all labor that is used exclusively by a single production department is
considered to be direct labor.
A) True
B) False
30) Process costing systems consider overhead costs to include those costs that cannot be traced to a
specific process.
A) True
B) False
31) Companies that use a series of repetitive manufacturing processes to produce standardized products
should use a process costing system.
A) True
B) False
32) Process costing systems are used only by companies that manufacture physical products;
companies that provide services do not use process costing.
A) True
B) False
33) Process costing systems are commonly used by companies that manufacture standardized products
by passing them through a series of manufacturing steps.
A) True
B) False
34) The use of process costing is of little benefit to a service type of operation.
A) True
B) False
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.
A) True
B) False
36) Conversion cost per equivalent unit is the combined cost of direct labor and factory overhead per
equivalent unit.
A) True
B) False
37) Conversion cost per equivalent unit is the combined cost of direct materials, direct labor, and
factory overhead per equivalent unit.
A) True
B) False
38) When direct labor and overhead enter the production process at different rates, it is appropriate to
use a conversion cost per equivalent unit.
A) True
B) False
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.
A) True
B) False
40) In process costing, indirect materials are always classified as factory overhead, even if they are
linked with a specific production process or department.
A) True
B) False
41) Hybrid systems contain features of both process and job order operations.
A) True
B) False
42) Hybrid costing systems can only be applied to manufacturing.
A) True
B) False
43) In a process costing system, the purchase of raw materials is credited to the Raw Materials
Inventory.
A) True
B) False
44) In a process costing system, the purchase of raw materials is debited to the Raw Materials
Inventory.
A) True
B) False
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.
A) True
B) False
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.
A) True
B) False
47) A materials consumption report is used instead of materials requisitions in companies where
materials move continuously through the manufacturing process.
A) True
B) False
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 10,00
0
Work in Process Inventory, Department D 15,00
0
Raw Materials Inventory 25,00
0
A) True
B) False
49) A unique feature of process costing systems is the use of a single Work in Process Inventory
account regardless of the number of production departments that exist.
A) True
B) False
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 60,00
0
Work in Process Inventory, Department S 15,00
0
Raw Materials Inventory 75,00
0
A) True
B) False
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—Assembly $ 17,40
0
Work in Process—Painting $ 10,30
0
Raw Materials Inventory $ 27,70
0
A) True
B) False
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 123,00
0
Factory Payroll Payable 123,00
0
A) True
B) False
53) In process costing, direct labor includes only the labor that is applied directly to individual units of
product.
A) True
B) False