Chapter 17 - Process Costing

Question 1

Which of the following manufactured products would not use process costing?

a) 767 jet aircraft
b) 19-inch television sets
c) Custom built houses
d) (a) and (c) would not use process costing

Answer 1

d) (a) and (c) would not use process costing

Question 2

Process costing should be used to assign costs to products when:

a) the units produced are similar
b) the units produced are dissimilar
c) the calculation of unit costs requires the averaging of unit costs over all units produced.
d) either (a) or (c) are present

Answer 2

d) either (a) or (c) are present

Question 3

Which one of the following statements is true?

a) In a job-costing system, individual jobs use different quantities of production resources
b) In a process-costing system each unit uses approximately the same amount of resources.
c) An averaging process is used to calculate unit costs in a job-costing system.
d) Both (a) and (b) are true.

Answer 3

d) Both (a) and (b) are true.

Question 4

Conversion costs:

a) include all factors of production
b) include direct materials
c) in process costing are usually considered to be added evenly throughout the production process
d) include both (b) and (c)

Answer 4

c) in process costing are usually considered to be added evenly throughout the production process

Question 5

An example of a business which would have no beginning or ending inventory but could use process costing to compute unit costs would be:

a) a clothing manufacturer
b) a corporation whose sole business activity is processing the customer deposits of several banks
c) a manufacturer of custom houses
d) a manufacturer of large TV’s

Answer 5

b) a corporation whose sole business activity is processing the customer deposits of several banks

Question 6

Which of the following statement(s) concerning conversion costs is correct?

a) Estimated the degree of completion of direct materials in a partially completed unit is usually easier to calculate than estimating the degree of completion for conversion costs.
b) The calculation of equivalent units is relatively easy for the textile industry.
c) Estimates are usually not considered acceptable
d) Both (b) and (c) are correct

Answer 6

a) Estimated the degree of completion of direct materials in a partially completed unit is usually easier to calculate than estimating the degree of completion for conversion costs.

Question 7

The purpose of the equivalent-unit computation is:

a) to convert completed units into the amount of partially completed output units that could be made with that quantity of input
b) to assist the business in determining ending inventory
c) to convert partially completed units into the amount of completed output units that could be made with that quantity of input
d) both (b) and (c)

Answer 7

c) to convert partially completed units in the amount of completed output units that could be made with that quantity of input

Question 8

In a process-costing system, the calculation of equivalent units is used for:

a) calculating the dollar amount of ending inventory
b) calculating the dollar amount of the COGS for the accounting period
c) calculating the dollar cost of a particular job
d) both (a) and (b)

Answer 8

d) both (a) and (b)

Question 9

When a bakery transfers goods from the Baking Department to the Decorating Department, the accounting entry is:

a) Debit: WIP - Baking Department / Credit: WIP - Decorating Department
b) Debit: WIP - Decorating Department / Credit: Accounts Payable
c) Debit: WIP - Decorating Department / Credit: WIP - Baking Department
d) Debit: WIP - Baking Department / Credit: Accounts Payable

Answer 9

c) Debit: WIP - Decorating Department / Credit: WIP - Baking Department

Question 10

Costing systems that are used for the costing of like or similar units of products in mass production are called:

a) inventory-costing systems
b) job-costing systems
c) process-costing systems
d) weighted-average costing systems

Answer 10

c) process-costing systems