17 18

Question 1

Examples of industries that would use process costing include the pharmaceutical and semiconductor industry.

Answer 1

True

Question 2

The principal difference between process costing and job costing is that in job costing an averaging process is used to compute the unit costs of products or services.

Answer 2

False

Question 3

Process-costing systems separate costs into cost categories according to the timing of when costs are introduced into the process.

Answer 3

True

Question 4

Estimating the degree of completion for the calculation of equivalent units is usually easier for conversion costs than it is for direct materials.

Answer 4

False

Question 5

Process costing would be most likely used by a firm that produces heterogeneous products.

Answer 5

False

Question 6

The last step in a process-costing system is to determine the equivalent units for the period.

Answer 6

False

Question 7

Equivalent units are calculated separately for each input.

Answer 7

True

Question 8

In a process-costing system, there is always a separate Work-in-Process account for each different process.

Answer 8

True

Question 9

Process-costing journal entries and job-costing journal entries are similar with respect to direct materials and conversion costs.

Answer 9

True

Question 10

The accounting (for a bakery) entry to record the transfer of rolls from the mixing department to the baking department is:

Work in Process-Mixing Department
	Work in Process-Baking Department

Answer 10

False

Question 11

The weighted-average process costing method does not distinguish between units started in the previous period but completed during the current period and units started and completed during the current period.

Answer 11

True

Question 12

Equivalent units in beginning work in process + equivalent units of work done in the current period equals equivalent units completed and transferred out in the current period minus equivalent units in ending work in process.

Answer 12

False

Question 13

In the weighted-average costing method, the costs of direct materials in beginning inventory are not included in the cost per unit calculation since direct materials are almost always added at the start of the production process.

Answer 13

False

Question 14

The weighted-average cost is the total of all costs entering the Work-in-Process account (whether they are from beginning work-in-process or from work started during the current period) divided by total equivalent units of work done to date.

Answer 14

True

Question 15

The equivalent units are not needed in a weighted-average system, because all costs are just averaged.

Answer 15

False

Question 16

The cost of units completed can differ materially between the weighted average and the FIFO methods of process costing.

Answer 16

True

Question 17

The first-in, first-out (FIFO) process costing method assigns the cost of the previous accounting period’s equivalent units in beginning work-in-process inventory to the first units completed and transferred out of the process

Answer 17

True

Question 18

A distinctive feature of the FIFO process costing method is that the work done on beginning inventory before the current period is averaged with work done in the current period.

Answer 18

False

Question 19

The FIFO process costing method merges the work and the costs of the beginning inventory with the work and the costs done during the current period.

Answer 19

False

Question 20

The first-in, first-out process-costing method assumes that units in beginning inventory are completed during the current accounting period.

Answer 20

True

Question 21

Process-costing FIFO is usually applied to both the units entering a department and the units leaving a department.

Answer 21

False

Question 22

Activity-based costing has more applicability in a process-costing system than in a job-costing environment.

Answer 22

False

Question 23

A major advantage of the weighted-average process costing is that it provides managers with information about changes in the costs per unit from one period to the next.

Answer 23

False

Question 24

Standard costing is extremely useful when unique, high cost products are produced, as compared to the production of multiple products.

Answer 24

False

Question 25

Under standard costing the cost per equivalent-unit calculation is more difficult than in either weighted average or FIFO.

Answer 25

False

Question 26

Standard costing is not possible in a firm that uses process costing

Answer 26

False

Question 27

Transferred-out costs are incurred in previous departments that are carried forward as the product's cost as it moves to a subsequent process in the production cycle.

Answer 27

True

Question 28

Each department is regarded as a distinct accounting entity when interdepartmental transfers are present in an organization.

Answer 28

True

Question 29

Hybrid costing systems are developed to cost products that are produced in a standardized environment, but which are often customized to meet the needs of some of its customers.

Answer 29

True

Question 30

An operation-costing system uses work orders that specify needed direct materials and step-by-step operations.

Answer 30

True

Question 31

Reducing defects helps to reduce costs, but it does not make the business more competitive.

Answer 31

False

Question 32

Reworked goods are unacceptable units of production usually not capable of being repaired or converted into a salable product.

Answer 32

False

Question 33

The value of scrap material can have either a high or low sales value relative to the product with which it is associated.

Answer 33

False

Question 34

Scrap and rework are considered to be the same thing by managerial accountants

Answer 34

False

Question 35

Normal spoilage adds to the cost of the job to which it is attributed in a job order costing system.

Answer 35

True

Question 36

When calculating normal spoilage rates, the base should be the actual units started in production.

Answer 36

False

Question 37

Abnormal spoilage is spoilage that should arise under efficient operating conditions.

Answer 37

False

Question 38

A company whose goal is zero defects would usually treat all spoilage as abnormal.

Answer 38

True

Question 39

Spoilage can be considered either normal or abnormal.

Answer 39

True

Question 40

Normal spoilage is spoilage that is not considered to be inherent in a production process.

Answer 40

False

Question 41

When determining the normal spoilage rate, it is calculated based on the number of good units competed, rather than using the number of units started.

Answer 41

True

Question 42

A company might consider all spoilage to be abnormal if it wants to pay serious attention to the problem.

Answer 42

True

Question 43

Counting spoiled units as part of output units in a process-costing system usually results in a higher cost per unit.

Answer 43

False

Question 44

Costs in beginning inventory are pooled with costs in the current period when determining the costs of good units under the weighted-average method of process costing.

Answer 44

True

Question 45

Under the weighted-average method, the costs of normal spoilage are added to the costs of their related good units. Hence, the cost per good unit completed and transferred out equals the total costs transferred out divided by the number of good units produced.

Answer 45

True

Question 46

The stage of the production cycle where products are examined to determine if they are acceptable is called the inspection point.

Answer 46

True

Question 47

Under the FIFO method, all spoilage costs are assumed to be related to the units completed during this period using the unit costs of the current period.

Answer 47

True

Question 48

When spoiled goods have a disposal value, the net cost of spoilage is computed by adding the disposal value to the costs of the spoiled goods accumulated to the inspection point.

Answer 48

False

Question 49

Normal spoilage costs are usually deducted from the costs of good units.

Answer 49

False

Question 50

Costs of abnormal spoilage are separately accounted for as losses of the period.

Answer 50

True

Question 51

Under standard costing, there is no need to calculate a cost per equivalent unit.

Answer 51

True

Question 52

In job costing, costs of abnormal spoilage are not considered as inventoriable costs and are therefore written off as costs of the period in which detection occurs

Answer 52

True

Question 53

In both job costing and process costing, normal spoilage attributable to a specific job is assigned to that job.

Answer 53

False

Question 54

When rework is normal and not attributable to any specific job, the costs of rework are charged to manufacturing overhead and spread through overhead allocation over all jobs.

Answer 54

True

Question 55

Abnormal spoilage costs are not considered inventoriable costs under a job-costing system.

Answer 55

True

Question 56

Scrap is usually divided between normal and abnormal scrap.

Answer 56

False

Question 57

If scrap is returned to the company's storeroom and inventoried, it should not have any value in the accounting records.

Answer 57

False

Question 58

Many companies track scrap only in nonfinancial terms (liters, for example) and record its sale as another revenue item.

Answer 58

True

Question 59

Costs are assigned to scrap only if it is normal scrap.

Answer 59

False

Question 60

Accounting for scrap is very similar to accounting for byproducts.

Answer 60

True

Question 61

All accounting systems must assume that the inspection point occurs when a process is 100% complete.

Answer 61

False