CHAPTER 18(3): PROCESS COST SYSTEMS
1.
Process manufacturing usually reflects a manufacturer that produces small quantities of unique items.
a.
True
b.
False
2.
Process cost systems use job order cost cards to accumulate cost data.
a.
True
b.
False
3.
Both process and job order cost systems maintain perpetual inventory accounts with subsidiary ledgers.
a.
True
b.
False
4.
If the principal products of a manufacturing process are identical, a process cost system is more appropriate than a
job order cost system.
a.
True
b.
False
5.
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.
a.
True
b.
False
6.
Process manufacturers typically use large machines to process a continuous flow of raw materials into a
finished
state.
a.
True
b.
False
7.
In a process costing system, each process will have a work in process inventory account.
a.
True
b.
False
8.
Industries that typically use process cost systems include chemicals, oil, metals, food, paper, and pharmaceuticals.
a.
True
b.
False
9.
Equivalent units are the sum of direct materials used and direct labor incurred.
a.
True
b.
False
10.
Direct materials, direct labor, and factory overhead are assigned to each manufacturing process in a process
costing system.
a.
True
b.
False
11.
Custom-made goods would be accounted for using a process costing system.
a.
True
b.
False
12.
In a process costing system, a separate work in process inventory account is maintained for each customer’s job.
a.
True
b.
False
13.
In a process cost system, product costs are accumulated by processing department rather than by job.
a.
True
b.
False
14.
Conversion costs include materials, direct labor, and factory overhead.
a.
True
b.
False
15.
The direct materials costs and direct labor costs incurred by a production department are referred to as
conversion
costs.
a.
True
b.
False
16.
The direct labor costs and factory overhead costs incurred by a production department are referred to as
conversion costs.
a.
True
b.
False
17.
The first step in determining the cost of goods completed and ending inventory valuation using process costing is
to
calculate equivalent units of production.
a.
True
b.
False
18.
Conversion costs are usually incurred evenly throughout a process.
a.
True
b.
False
19.
Equivalent units of production are the number of units that could have been manufactured from start to finish
during
an accounting period.
a.
True
b.
False
20.
Both job order and process cost accounting use equivalent units of production to determine costs.
a.
True
b.
False
21.
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.
a.
True
b.
False
22.
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.
a.
True
b.
False
23.
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.
a.
True
b.
False
24.
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.
a.
True
b.
False
25.
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.
a.
True
b.
False
26.
If 10,000 units that 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.)
a.
True
b.
False
27.
If 10,000 units that 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.)
a.
True
b.
False
28.
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.
a.
True
b.
False
29.
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.
a.
True
b.
False
30.
The cost of production report reports the cost of the goods sold.
a.
True
b.
False
31.
The cost of production report reports the cost charged to production and the costs allocated to finished goods
and
work in process.
a.
True
b.
False
32.
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.
a.
True
b.
False
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.
a.
True
b.
False
34.
One of the primary uses of a cost of production report is to assist management in controlling production costs.
a.
True
b.
False
35.
In a process costing system, costs flow into finished goods inventory only from the work in process inventory of
the
last manufacturing process.
a.
True
b.
False
36.
Conversion costs are generally added evenly throughout the process.
a.
True
b.
False
37.
Equivalent units should be computed separately for direct materials and conversion costs.
a.
True
b.
False
38.
Costs are transferred, along with the units, from one work in process inventory account to the next in a
process
costing system.
a.
True
b.
False
39.
In a process costing system, the cost per equivalent unit is computed before computing equivalent units.
a.
True
b.
False
40.
Costs of ending work in process inventory are included in the cost per equivalent unit computation.
a.
True
b.
False
41.
Conversion and direct materials are generally both added at the end of the production process.
a.
True
b.
False
42.
Gilbert Corporation had 25,000 finished units and 8,000 units 35% complete. The equivalent units totaled 30,200.
a.
True
b.
False
43.
The last step in the preparation of a cost of production report is the calculation of equivalent units of production.
a.
True
b.
False
44.
Equivalent units of production are always the same as the total number of physical units finished during the period.
a.
True
b.
False
45.
Once equivalent units are calculated for materials, this number will also be used for direct labor and
factory
overhead.
a.
True
b.
False
46.
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.
a.
True
b.
False
47.
The FIFO method separates work done on beginning inventory in the previous period from work done on it in
the
current period.
a.
True
b.
False
48.
When a process cost accounting system records the purchase of materials, the Materials account is credited.
a.
True
b.
False
49.
In a process costing system, indirect materials are charged to Work in Process.
a.
True
b.
False
50.
The amount journalized showing the cost added to finished goods is taken from the cost of production report.
a.
True
b.
False
51.
A process cost accounting system records all actual factory overhead costs directly in the Work in
Process
account.
a.
True
b.
False
52.
The entry to transfer goods in process from Department X to Department Y includes a debit to Work in Process—
Department X.
a.
True
b.
False
53.
All costs of the processes in a process costing system ultimately pass through the Cost of Goods Sold account.
a.
True
b.
False
54.
Yield measures the ratio of the materials output quantity to the materials input quantity.
a.
True
b.
False
55.
In a just-in-time system, processing functions are combined into work centers, sometimes called departments.
a.
True
b.
False
56.
Companies recognizing the need to simultaneously produce products with high quality, low cost, and
instant
availability have adopted a just–in-time processing philosophy.
a.
True
b.
False
57.
The closer a company moves towards just–in-time processing, the differences in unit costs between average
costing
and FIFO will be reduced.
a.
True
b.
False
58.
Companies that use the average costing method for process costing have unit costs that include costs from
more
than one accounting period.
a.
True
b.
False
59.
If a company uses average costing instead of FIFO, it will still get the same unit costs.
a.
True
b.
False
60.
The FIFO method of process costing is simpler than the Average cost method.
a.
True
b.
False
61.
For which of the following businesses would a process cost system be appropriate?
a.
Boat repair service
b.
Shampoo manufacturer
c.
Dressmaker
d.
Custom furniture manufacturer
62.
Process and job order cost systems are similar in all of the following ways except
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
63.
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
64.
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.
finding the sum of all completed jobs
65.
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