Managerial Accounting John Wild 7th Edition- Test Bank

 

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Sample Test

Managerial Accounting, 7e(Wild)

Chapter 3  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.

 

Answer:  TRUE

Difficulty: 1 Easy

Topic:  Process Operations

Learning Objective:  03-C1 Explain process operations and the way they differ from job order operations.

Bloom’s:  Remember

AACSB/Accessibility:  Communication / Keyboard Navigation

AICPA:  BB Industry; FN Decision Making

 

2) Manufacturers that utilize process operations produce large quantities of identical products.

 

Answer:  TRUE

Difficulty: 1 Easy

Topic:  Process Operations

Learning Objective:  03-C1 Explain process operations and the way they differ from job order operations.

Bloom’s:  Remember

AACSB/Accessibility:  Communication / Keyboard Navigation

AICPA:  BB Industry; FN Decision Making

 

3) In a process costing system costs are only measured upon completion of each job.

 

Answer:  FALSE

Difficulty: 1 Easy

Topic:  Comparing Process and Job Order Costing Systems

Learning Objective:  03-A1 Compare process costing and job order costing.

Bloom’s:  Remember

AACSB/Accessibility:  Communication / Keyboard Navigation

AICPA:  BB Industry; FN Measurement

 

4) The cost object in a process costing system is the specific job.

 

Answer:  FALSE

Difficulty: 1 Easy

Topic:  Comparing Process and Job Order Costing Systems

Learning Objective:  03-A1 Compare process costing and job order costing.

Bloom’s:  Remember

AACSB/Accessibility:  Communication / Keyboard Navigation

AICPA:  BB Industry; FN Measurement

 

5) Equivalent units of production is the number of units that could have been started and completed given the costs incurred during the period.

 

Answer:  TRUE

Difficulty: 2 Medium

Topic:  Equivalent Units of Production

Learning Objective:  03-C2 Define and compute equivalent units and explain their use in process costing.

Bloom’s:  Understand

AACSB/Accessibility:  Communication / Keyboard Navigation

AICPA:  BB Industry; FN Measurement

 

6) In a process costing system, companies typically end each period with only Finished Goods Inventory.

 

Answer:  FALSE

Difficulty: 1 Easy

Topic:  Equivalent Units of Production

Learning Objective:  03-C2 Define and compute equivalent units and explain their use in process costing.

Bloom’s:  Remember

AACSB/Accessibility:  Communication / Keyboard Navigation

AICPA:  BB Industry; FN Measurement

 

7) Equivalent units of production are always the same as the total number of physical units finished during the period.

 

Answer:  FALSE

Difficulty: 1 Easy

Topic:  Equivalent Units of Production

Learning Objective:  03-C2 Define and compute equivalent units and explain their use in process costing.

Bloom’s:  Remember

AACSB/Accessibility:  Communication / Keyboard Navigation

AICPA:  BB Industry; FN Measurement

 

8) Equivalent units of production for direct materials and direct labor are always the same.

 

Answer:  FALSE

Difficulty: 2 Medium

Topic:  Equivalent Units of Production

Learning Objective:  03-C2 Define and compute equivalent units and explain their use in process costing.

Bloom’s:  Understand

AACSB/Accessibility:  Communication / Keyboard Navigation

AICPA:  BB Industry; FN Decision Making

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.

 

Answer:  FALSE

Difficulty: 1 Easy

Topic:  Equivalent Units of Production

Learning Objective:  03-C2 Define and compute equivalent units and explain their use in process costing.

Bloom’s:  Remember

AACSB/Accessibility:  Communication / Keyboard Navigation

AICPA:  BB Industry; FN Decision Making

 

10) Conversion cost per equivalent unit is the combined costs of direct materials and factory overhead.

 

Answer:  FALSE

Difficulty: 1 Easy

Topic:  Equivalent Units of Production

Learning Objective:  03-C2 Define and compute equivalent units and explain their use in process costing.

Bloom’s:  Remember

AACSB/Accessibility:  Communication / Keyboard Navigation

AICPA:  BB Industry; FN Measurement

 

11) Conversion cost per equivalent unit is the combined costs of direct labor and factory overhead.

 

Answer:  TRUE

Difficulty: 1 Easy

Topic:  Equivalent Units of Production

Learning Objective:  03-C2 Define and compute equivalent units and explain their use in process costing.

Bloom’s:  Remember

AACSB/Accessibility:  Communication / Keyboard Navigation

AICPA:  BB Industry; FN Measurement

 

 

 

12) The process cost summary is an important managerial accounting report prepared for each process or production department.

 

Answer:  TRUE

Difficulty: 1 Easy

Topic:  Process Costing Illustration

Learning Objective:  03-C3 Describe accounting for production activity and preparation of a process cost summary using weighted average.

Bloom’s:  Remember

AACSB/Accessibility:  Communication / Keyboard Navigation

AICPA:  BB Industry; FN Reporting

 

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.

 

Answer:  TRUE

Difficulty: 1 Easy

Topic:  Process Costing Illustration

Learning Objective:  03-C3 Describe accounting for production activity and preparation of a process cost summary using weighted average.

Bloom’s:  Remember

AACSB/Accessibility:  Communication / Keyboard Navigation

AICPA:  BB Industry; FN Reporting

 

14) A process cost summary usually does not include the number of equivalent units of production for the period.

 

Answer:  FALSE

Difficulty: 1 Easy

Topic:  Process Costing Illustration

Learning Objective:  03-C3 Describe accounting for production activity and preparation of a process cost summary using weighted average.

Bloom’s:  Remember

AACSB/Accessibility:  Communication / Keyboard Navigation

AICPA:  BB Industry; FN Reporting

 

 

 

15) A process cost summary shows the cost of a particular job manufactured in the reporting period.

 

Answer:  FALSE

Difficulty: 1 Easy

Topic:  Process Costing Illustration

Learning Objective:  03-C3 Describe accounting for production activity and preparation of a process cost summary using weighted average.

Bloom’s:  Remember

AACSB/Accessibility:  Communication / Keyboard Navigation

AICPA:  BB Industry; FN Reporting

 

16) The FIFO method of computing equivalent units focuses on production activity in the current period only.

 

Answer:  TRUE

Difficulty: 1 Easy

Topic:  FIFO Method of Process Costing

Learning Objective:  03-C4 Appendix 20A-Describe accounting for production activity and preparation of a process cost summary using FIFO.

Bloom’s:  Remember

AACSB/Accessibility:  Communication / Keyboard Navigation

AICPA:  BB Industry; FN Measurement

 

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.

 

Answer:  TRUE

Difficulty: 2 Medium

Topic:  Equivalent Units of Production

Learning Objective:  03-C2 Define and compute equivalent units and explain their use in process costing.

Bloom’s:  Understand

AACSB/Accessibility:  Analytical Thinking / Keyboard Navigation

AICPA:  BB Industry; FN Measurement

 

 

 

18) The FIFO method of computing equivalent units includes the beginning inventory costs in computing the cost per equivalent unit for the current period.

 

Answer:  FALSE

Difficulty: 1 Easy

Topic:  FIFO Method of Process Costing

Learning Objective:  03-C4 Appendix 20A-Describe accounting for production activity and preparation of a process cost summary using FIFO.

Bloom’s:  Remember

AACSB/Accessibility:  Analytical Thinking / Keyboard Navigation

AICPA:  BB Industry; FN Measurement

 

19) The FIFO method of computing equivalent units excludes the beginning inventory costs in computing the cost per equivalent unit for the current period.

 

Answer:  TRUE

Difficulty: 1 Easy

Topic:  FIFO Method of Process Costing

Learning Objective:  03-C4 Appendix 20A-Describe accounting for production activity and preparation of a process cost summary using FIFO.

Bloom’s:  Remember

AACSB/Accessibility:  Analytical Thinking / Keyboard Navigation

AICPA:  BB Industry; FN Measurement

 

20) Process and job order manufacturing operations both combine materials, labor, and overhead items in the process of producing products.

 

Answer:  TRUE

Difficulty: 1 Easy

Topic:  Comparing Process and Job Order Costing Systems

Learning Objective:  03-A1 Compare process costing and job order costing.

Bloom’s:  Remember

AACSB/Accessibility:  Communication / Keyboard Navigation

AICPA:  BB Industry; FN Measurement

 

21) Process costing systems use separate Work in Process Inventory accounts for each process.

 

Answer:  TRUE

Difficulty: 1 Easy

Topic:  Comparing Process and Job Order Costing Systems

Learning Objective:  03-A1 Compare process costing and job order costing.

Bloom’s:  Remember

AACSB/Accessibility:  Communication / Keyboard Navigation

AICPA:  BB Industry; FN Decision Making

 

 

 

22) The term “process costing system” refers to the number of trained individuals and computers required to process the collected cost information.

 

Answer:  FALSE

Difficulty: 1 Easy

Topic:  Comparing Process and Job Order Costing Systems

Learning Objective:  03-A1 Compare process costing and job order costing.

Bloom’s:  Remember

AACSB/Accessibility:  Communication / Keyboard Navigation

AICPA:  BB Industry; FN Decision Making

 

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.

 

Answer:  FALSE

Difficulty: 1 Easy

Topic:  Comparing Process and Job Order Costing Systems

Learning Objective:  03-A1 Compare process costing and job order costing.

Bloom’s:  Remember

AACSB/Accessibility:  Communication / Keyboard Navigation

AICPA:  BB Industry; FN Decision Making

 

24) A production department is an organizational unit that has the responsibility for the complete processing of one particular product.

 

Answer:  FALSE

Difficulty: 1 Easy

Topic:  Process Operations

Learning Objective:  03-C1 Explain process operations and the way they differ from job order operations.

Bloom’s:  Remember

AACSB/Accessibility:  Communication / Keyboard Navigation

AICPA:  BB Industry; FN Decision Making

 

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.

 

Answer:  TRUE

Difficulty: 1 Easy

Topic:  Process Operations

Learning Objective:  03-C1 Explain process operations and the way they differ from job order operations.

Bloom’s:  Remember

AACSB/Accessibility:  Communication / Keyboard Navigation

AICPA:  BB Industry; FN Decision Making

 

26) In process costing the cost object is the process and in job order costing the cost object is a job.

 

Answer:  TRUE

Difficulty: 1 Easy

Topic:  Comparing Process and Job Order Costing Systems

Learning Objective:  03-A1 Compare process costing and job order costing.

Bloom’s:  Remember

AACSB/Accessibility:  Communication / Keyboard Navigation

AICPA:  BB Industry; FN Measurement

 

27) Process costing is applied to operations with customized products.

 

Answer:  FALSE

Difficulty: 1 Easy

Topic:  Process Operations

Learning Objective:  03-C1 Explain process operations and the way they differ from job order operations.

Bloom’s:  Remember

AACSB/Accessibility:  Communication / Keyboard Navigation

AICPA:  BB Industry; FN Decision Making

 

28) Process costing is applied to operations with repetitive production and noncustomized products.

 

Answer:  TRUE

Difficulty: 1 Easy

Topic:  Process Operations

Learning Objective:  03-C1 Explain process operations and the way they differ from job order operations.

Bloom’s:  Remember

AACSB/Accessibility:  Communication / Keyboard Navigation

AICPA:  BB Industry; FN Decision Making

 

29) In a process operation, all labor that is used exclusively by a single production department is considered direct labor.

 

Answer:  TRUE

Difficulty: 2 Medium

Topic:  Accounting for Labor Costs

Learning Objective:  03-P2 Record the flow of labor costs in process costing.

Bloom’s:  Understand

AACSB/Accessibility:  Communication / Keyboard Navigation

AICPA:  BB Industry; FN Measurement

 

 

 

30) Process costing systems consider overhead costs to include those costs that cannot be tied to individual processes.

 

Answer:  TRUE

Difficulty: 2 Medium

Topic:  Process Costing Illustration

Learning Objective:  03-C3 Describe accounting for production activity and preparation of a process cost summary using weighted average.

Bloom’s:  Understand

AACSB/Accessibility:  Communication / Keyboard Navigation

AICPA:  BB Industry; FN Measurement

 

31) Companies that use a series of repetitive manufacturing processes to produce standardized products likely use a process costing system.

 

Answer:  TRUE

Difficulty: 1 Easy

Topic:  Process Operations

Learning Objective:  03-C1 Explain process operations and the way they differ from job order operations.

Bloom’s:  Remember

AACSB/Accessibility:  Communication / Keyboard Navigation

AICPA:  BB Industry; FN Decision Making

 

32) Process costing systems are used only by companies that manufacture physical products; companies that provide services do not use process costing.

 

Answer:  FALSE

Difficulty: 1 Easy

Topic:  Comparing Process and Job Order Costing Systems

Learning Objective:  03-A1 Compare process costing and job order costing.

Bloom’s:  Remember

AACSB/Accessibility:  Communication / Keyboard Navigation

AICPA:  BB Industry; FN Decision Making

 

33) Process costing systems are commonly used by companies that manufacture standardized products by passing them through a series of manufacturing steps.

 

Answer:  TRUE

Difficulty: 1 Easy

Topic:  Process Operations

Learning Objective:  03-C1 Explain process operations and the way they differ from job order operations.

Bloom’s:  Remember

AACSB/Accessibility:  Communication / Keyboard Navigation

AICPA:  BB Industry; FN Decision Making

34) The use of process costing is of little benefit to a service provider.

 

Answer:  FALSE

Difficulty: 1 Easy

Topic:  Accounting for Transfers

Learning Objective:  03-P4 Record the transfer of goods across departments, to Finished Goods Inventory, and to Cost of Goods Sold.

Bloom’s:  Remember

AACSB/Accessibility:  Communication / Keyboard Navigation

AICPA:  BB Industry; FN Decision Making

 

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.

 

Answer:  TRUE

Difficulty: 2 Medium

Topic:  Accounting for Materials Costs

Learning Objective:  03-P1 Record the flow of materials costs in process costing.

Bloom’s:  Understand

AACSB/Accessibility:  Communication / Keyboard Navigation

AICPA:  BB Industry; FN Decision Making

 

36) Conversion cost per equivalent unit is the combined cost of direct labor and factory overhead per equivalent unit.

 

Answer:  TRUE

Difficulty: 1 Easy

Topic:  Equivalent Units of Production

Learning Objective:  03-C2 Define and compute equivalent units and explain their use in process costing.

Bloom’s:  Remember

AACSB/Accessibility:  Communication / Keyboard Navigation

AICPA:  BB Industry; FN Measurement

 

37) Conversion cost per equivalent unit is the combined cost of direct materials, direct labor, and factory overhead per equivalent unit.

 

Answer:  FALSE

Difficulty: 1 Easy

Topic:  Equivalent Units of Production

Learning Objective:  03-C2 Define and compute equivalent units and explain their use in process costing.

Bloom’s:  Remember

AACSB/Accessibility:  Communication / Keyboard Navigation

AICPA:  BB Industry; FN Measurement

 

38) When direct labor and overhead enter the production process at different rates, it is appropriate to use a conversion cost per equivalent unit.

 

Answer:  FALSE

Difficulty: 1 Easy

Topic:  Equivalent Units of Production

Learning Objective:  03-C2 Define and compute equivalent units and explain their use in process costing.

Bloom’s:  Remember

AACSB/Accessibility:  Communication / Keyboard Navigation

AICPA:  BB Industry; FN Measurement

 

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.

 

Answer:  TRUE

Difficulty: 1 Easy

Topic:  Equivalent Units of Production

Learning Objective:  03-C2 Define and compute equivalent units and explain their use in process costing.

Bloom’s:  Remember

AACSB/Accessibility:  Communication / Keyboard Navigation

AICPA:  BB Industry; FN Measurement

 

40) In process costing, indirect materials are clearly linked with a specific production process or department.

 

Answer:  FALSE

Difficulty: 2 Medium

Topic:  Accounting for Materials Costs

Learning Objective:  03-P1 Record the flow of materials costs in process costing.

Bloom’s:  Understand

AACSB/Accessibility:  Communication / Keyboard Navigation

AICPA:  BB Industry; FN Decision Making

 

41) Hybrid systems contain features of both process and job order operations.

 

Answer:  TRUE

Difficulty: 1 Easy

Topic:  Hybrid Costing System

Learning Objective:  03-A2 Explain and illustrate a hybrid costing system.

Bloom’s:  Remember

AACSB/Accessibility:  Communication / Keyboard Navigation

AICPA:  BB Industry; FN Decision Making

 

 

 

42) Hybrid costing systems can only be applied to manufacturing.

 

Answer:  FALSE

Difficulty: 1 Easy

Topic:  Hybrid Costing System

Learning Objective:  03-A2 Explain and illustrate a hybrid costing system.

Bloom’s:  Remember

AACSB/Accessibility:  Communication / Keyboard Navigation

AICPA:  BB Industry; FN Decision Making

 

43) In a process costing system, the purchase of raw materials is credited to Raw Materials Inventory.

 

Answer:  FALSE

Difficulty: 1 Easy

Topic:  Accounting for Materials Costs

Learning Objective:  03-P1 Record the flow of materials costs in process costing.

Bloom’s:  Remember

AACSB/Accessibility:  Analytical Thinking / Keyboard Navigation

AICPA:  BB Industry; FN Measurement

 

44) In a process costing system, the purchase of raw materials is debited to Raw Materials Inventory.

 

Answer:  TRUE

Difficulty: 1 Easy

Topic:  Accounting for Materials Costs

Learning Objective:  03-P1 Record the flow of materials costs in process costing.

Bloom’s:  Remember

AACSB/Accessibility:  Analytical Thinking / Keyboard Navigation

AICPA:  BB Industry; FN Measurement

 

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.

 

Answer:  FALSE

Difficulty: 2 Medium

Topic:  Accounting for Materials Costs

Learning Objective:  03-P1 Record the flow of materials costs in process costing.

Bloom’s:  Understand

AACSB/Accessibility:  Analytical Thinking / Keyboard Navigation

AICPA:  BB Industry; FN Measurement

 

 

 

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.

 

Answer:  TRUE

Difficulty: 2 Medium

Topic:  Accounting for Materials Costs

Learning Objective:  03-P1 Record the flow of materials costs in process costing.

Bloom’s:  Understand

AACSB/Accessibility:  Analytical Thinking / Keyboard Navigation

AICPA:  BB Industry; FN Measurement

 

47) A materials consumption report is used instead of materials requisitions in companies where materials move continuously through the manufacturing process.

 

Answer:  TRUE

Difficulty: 1 Easy

Topic:  Accounting for Transfers

Learning Objective:  03-P4 Record the transfer of goods across departments, to Finished Goods Inventory, and to Cost of Goods Sold.

Bloom’s:  Remember

AACSB/Accessibility:  Communication / Keyboard Navigation

AICPA:  BB Industry; FN Decision Making

 

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

 

 

 

Answer:  TRUE

Difficulty: 2 Medium

Topic:  Accounting for Materials Costs

Learning Objective:  03-P1 Record the flow of materials costs in process costing.

Bloom’s:  Understand

AACSB/Accessibility:  Analytical Thinking / Keyboard Navigation

AICPA:  BB Industry; FN Measurement

 

 

 

49) Process costing systems use a single Work in Process Inventory account regardless of the number of production departments that exist.

 

Answer:  FALSE

Difficulty: 2 Medium

Topic:  Comparing Process and Job Order Costing Systems

Learning Objective:  03-A1 Compare process costing and job order costing.

Bloom’s:  Understand

AACSB/Accessibility:  Analytical Thinking / Keyboard Navigation

AICPA:  BB Industry; FN Measurement

 

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

 

 

 

Answer:  TRUE

Difficulty: 2 Medium

Topic:  Accounting for Materials Costs

Learning Objective:  03-P1 Record the flow of materials costs in process costing.

Bloom’s:  Understand

AACSB/Accessibility:  Analytical Thinking / Keyboard Navigation

AICPA:  BB Industry; FN Measurement

 

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

 

 

 

Answer:  FALSE

Difficulty: 2 Medium

Topic:  Accounting for Labor Costs

Learning Objective:  03-P2 Record the flow of labor costs in process costing.

Bloom’s:  Understand

AACSB/Accessibility:  Analytical Thinking / Keyboard Navigation

AICPA:  BB Industry; FN Measurement

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

 

 

 

Answer:  TRUE

Difficulty: 2 Medium

Topic:  Accounting for Labor Costs

Learning Objective:  03-P2 Record the flow of labor costs in process costing.

Bloom’s:  Understand

AACSB/Accessibility:  Analytical Thinking / Keyboard Navigation

AICPA:  BB Industry; FN Measurement

 

53) In process costing, direct labor includes only the labor that is applied directly to individual units of product.

 

Answer:  FALSE

Difficulty: 2 Medium

Topic:  Accounting for Labor Costs

Learning Objective:  03-P2 Record the flow of labor costs in process costing.

Bloom’s:  Understand

AACSB/Accessibility:  Analytical Thinking / Keyboard Navigation

AICPA:  BB Industry; FN Measurement

 

54) In some circumstances, a process costing system can classify wages paid to maintenance workers as direct labor costs instead of factory overhead.

 

Answer:  TRUE

Difficulty: 2 Medium

Topic:  Accounting for Labor Costs

Learning Objective:  03-P2 Record the flow of labor costs in process costing.

Bloom’s:  Understand

AACSB/Accessibility:  Analytical Thinking / Keyboard Navigation

AICPA:  BB Industry; FN Measurement

 

 

 

 

55) In a process costing system, factory labor costs incurred in a reporting period are presented on the income statement as Factory Labor Expense.

 

Answer:  FALSE

Difficulty: 2 Medium

Topic:  Accounting for Labor Costs

Learning Objective:  03-P2 Record the flow of labor costs in process costing.

Bloom’s:  Understand

AACSB/Accessibility:  Analytical Thinking / Keyboard Navigation

AICPA:  BB Industry; FN Measurement

 

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

 

 

Answer:  FALSE

Difficulty: 2 Medium

Topic:  Accounting for Labor Costs

Learning Objective:  03-P2 Record the flow of labor costs in process costing.

Bloom’s:  Understand

AACSB/Accessibility:  Analytical Thinking / Keyboard Navigation

AICPA:  BB Industry; FN Measurement

 

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

 

 

Answer:  TRUE

Difficulty: 2 Medium

Topic:  Accounting for Labor Costs

Learning Objective:  03-P2 Record the flow of labor costs in process costing.

Bloom’s:  Understand

AACSB/Accessibility:  Analytical Thinking / Keyboard Navigation

AICPA:  BB Industry; FN Measurement

 

 

 

58) In a process costing system, factory overhead costs are allocated to production departments by using a predetermined overhead allocation rate.

 

Answer:  TRUE

Difficulty: 2 Medium

Topic:  Accounting for Factory Overhead

Learning Objective:  03-P3 Record the flow of factory overhead costs in process costing.

Bloom’s:  Understand

AACSB/Accessibility:  Analytical Thinking / Keyboard Navigation

AICPA:  BB Industry; FN Measurement

 

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

 

 

Answer:  TRUE

Difficulty: 2 Medium

Topic:  Accounting for Materials Costs

Learning Objective:  03-P1 Record the flow of materials costs in process costing.

Bloom’s:  Understand

AACSB/Accessibility:  Analytical Thinking / Keyboard Navigation

AICPA:  BB Industry; FN Measurement

 

60) In process costing there is never a balance remaining in Factory Overhead that needs to be closed at period end.

 

Answer:  FALSE

Difficulty: 2 Medium

Topic:  Accounting for Factory Overhead

Learning Objective:  03-P3 Record the flow of factory overhead costs in process costing.

Bloom’s:  Understand

AACSB/Accessibility:  Analytical Thinking / Keyboard Navigation

AICPA:  BB Industry; FN Measurement

 

 

 

61) In process costing, all indirect materials are charged directly to Work in Process Inventory.

 

Answer:  FALSE

Difficulty: 2 Medium

Topic:  Accounting for Materials Costs

Learning Objective:  03-P1 Record the flow of materials costs in process costing.

Bloom’s:  Understand

AACSB/Accessibility:  Analytical Thinking / Keyboard Navigation

AICPA:  BB Industry; FN Measurement

 

62) A process costing system records all factory overhead costs incurred directly in the Work in Process Inventory accounts.

 

Answer:  FALSE

Difficulty: 2 Medium

Topic:  Accounting for Factory Overhead

Learning Objective:  03-P3 Record the flow of factory overhead costs in process costing.

Bloom’s:  Understand

AACSB/Accessibility:  Analytical Thinking / Keyboard Navigation

AICPA:  BB Industry; FN Measurement

 

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

 

 

Answer:  TRUE

Difficulty: 2 Medium

Topic:  Accounting for Factory Overhead

Learning Objective:  03-P3 Record the flow of factory overhead costs in process costing.

Bloom’s:  Understand

AACSB/Accessibility:  Analytical Thinking / Keyboard Navigation

AICPA:  BB Industry; FN Measurement

 

 

 

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

 

 

Answer:  FALSE

Difficulty: 2 Medium

Topic:  Accounting for Factory Overhead

Learning Objective:  03-P3 Record the flow of factory overhead costs in process costing.

Bloom’s:  Understand

AACSB/Accessibility:  Analytical Thinking / Keyboard Navigation

AICPA:  BB Industry; FN Measurement

 

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

 

 

Answer:  TRUE

Difficulty: 2 Medium

Topic:  Accounting for Factory Overhead

Learning Objective:  03-P3 Record the flow of factory overhead costs in process costing.

Bloom’s:  Understand

AACSB/Accessibility:  Analytical Thinking / Keyboard Navigation

AICPA:  BB Industry; FN Measurement

 

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.

 

Answer:  TRUE

Difficulty: 2 Medium

Topic:  Equivalent Units of Production

Learning Objective:  03-C2 Define and compute equivalent units and explain their use in process costing.

Bloom’s:  Understand

AACSB/Accessibility:  Analytical Thinking / Keyboard Navigation

AICPA:  FN Measurement; BB Critical Thinking

 

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.

 

Answer:  TRUE

Difficulty: 2 Medium

Topic:  Equivalent Units of Production

Learning Objective:  03-C2 Define and compute equivalent units and explain their use in process costing.

Bloom’s:  Understand

AACSB/Accessibility:  Analytical Thinking / Keyboard Navigation

AICPA:  BB Industry; FN Measurement

 

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.

 

Answer:  FALSE

Difficulty: 2 Medium

Topic:  Equivalent Units of Production

Learning Objective:  03-C2 Define and compute equivalent units and explain their use in process costing.

Bloom’s:  Understand

AACSB/Accessibility:  Analytical Thinking / Keyboard Navigation

AICPA:  BB Industry; FN Measurement

 

69) Once equivalent units are calculated for materials, this number will also be used for direct labor and factory overhead.

 

Answer:  FALSE

Difficulty: 2 Medium

Topic:  Equivalent Units of Production

Learning Objective:  03-C2 Define and compute equivalent units and explain their use in process costing.

Bloom’s:  Understand

AACSB/Accessibility:  Analytical Thinking / Keyboard Navigation

AICPA:  BB Industry; FN Measurement

 

 

 

70) If a department that applies 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 direct labor, it must add 12,500 equivalent units of direct materials and 20,000 equivalent units of direct labor to complete them.

 

Answer:  FALSE

Difficulty: 2 Medium

Topic:  Equivalent Units of Production

Learning Objective:  03-C2 Define and compute equivalent units and explain their use in process costing.

Bloom’s:  Understand

AACSB/Accessibility:  Analytical Thinking / Keyboard Navigation

AICPA:  BB Industry; FN Measurement

 

71) If a department that applies process costing starts the reporting period with 40,000 physical units that were 80% complete with respect to direct materials and 50% complete with respect to direct labor, it must add 8,000 equivalent units of direct materials and 20,000 equivalent units of direct labor to complete them.

 

Answer:  TRUE

Difficulty: 2 Medium

Topic:  Equivalent Units of Production

Learning Objective:  03-C2 Define and compute equivalent units and explain their use in process costing.

Bloom’s:  Understand

AACSB/Accessibility:  Analytical Thinking / Keyboard Navigation

AICPA:  BB Industry; FN Measurement

 

72) One section of the process cost summary describes the equivalent units of production for the department during the reporting period and presents the calculations of the direct materials and conversion costs per equivalent unit.

 

Answer:  TRUE

Difficulty: 1 Easy

Topic:  Process Costing Illustration

Learning Objective:  03-C3 Describe accounting for production activity and preparation of a process cost summary using weighted average.

Bloom’s:  Remember

AACSB/Accessibility:  Communication / Keyboard Navigation

AICPA:  BB Industry; FN Reporting

 

 

 

73) A process cost summary for a production department accounts for all costs assigned to that department during the period plus costs that were in the department’s Work in Process Inventory account at the beginning of the period.

 

Answer:  TRUE

Difficulty: 1 Easy

Topic:  Process Costing Illustration

Learning Objective:  03-C3 Describe accounting for production activity and preparation of a process cost summary using weighted average.

Bloom’s:  Remember

AACSB/Accessibility:  Communication / Keyboard Navigation

AICPA:  BB Industry; FN Reporting

 

74) The process cost summary presents calculations of the cost of units completed during the reporting period, but does not present any information about the ending Work in Process inventory.

 

Answer:  FALSE

Difficulty: 1 Easy

Topic:  Process Costing Illustration

Learning Objective:  03-C3 Describe accounting for production activity and preparation of a process cost summary using weighted average.

Bloom’s:  Remember

AACSB/Accessibility:  Communication / Keyboard Navigation

AICPA:  BB Industry; FN Reporting

 

75) Since the process cost summary describes the activities of a production department for a specified reporting period, it does not present information about any costs incurred in prior periods.

 

Answer:  FALSE

Difficulty: 1 Easy

Topic:  Process Costing Illustration

Learning Objective:  03-C3 Describe accounting for production activity and preparation of a process cost summary using weighted average.

Bloom’s:  Remember

AACSB/Accessibility:  Communication / Keyboard Navigation

AICPA:  BB Industry; FN Reporting

 

 

 

76) The cost of units transferred from Work in Process Inventory to Finished Goods Inventory is called the cost of goods manufactured.

 

Answer:  TRUE

Difficulty: 1 Easy

Topic:  Accounting for Transfers

Learning Objective:  03-P4 Record the transfer of goods across departments, to Finished Goods Inventory, and to Cost of Goods Sold.

Bloom’s:  Remember

AACSB/Accessibility:  Communication / Keyboard Navigation

AICPA:  BB Industry; FN Measurement

 

77) The Finishing Department transferred out completed units with a cost of $74,000. This transfer should be recorded with the following entry:

 

Finished Goods Inventory	74,000
Work in Process Inventory, Finishing Dept.			74,000

 

 

 

Answer:  TRUE

Difficulty: 2 Medium

Topic:  Accounting for Transfers

Learning Objective:  03-P4 Record the transfer of goods across departments, to Finished Goods Inventory, and to Cost of Goods Sold.

Bloom’s:  Understand

AACSB/Accessibility:  Analytical Thinking / Keyboard Navigation

AICPA:  BB Industry; FN Measurement

 

78) Which of the following products is least likely to be produced in a process operation?

1.   A) Smartphones

2.   B) Slacks for casual wear

3.   C) Baseball caps

4.   D) Calculators

5.   E) Custom cabinets

 

Answer:  E

Difficulty: 2 Medium

Topic:  Process Operations

Learning Objective:  03-C1 Explain process operations and the way they differ from job order operations.

Bloom’s:  Understand

AACSB/Accessibility:  Analytical Thinking / Keyboard Navigation

AICPA:  BB Industry; FN Decision Making

 

79) Which of the following products is most likely to be produced in a process operation?

1.   A) Airplanes

2.   B) Cereal

3.   C) Bridges

4.   D) Designer bridal gowns

5.   E) Custom cabinets

 

Answer:  B

Difficulty: 2 Medium

Topic:  Process Operations

Learning Objective:  03-C1 Explain process operations and the way they differ from job order operations.

Bloom’s:  Understand

AACSB/Accessibility:  Analytical Thinking / Keyboard Navigation

AICPA:  BB Industry; FN Decision Making

 

80) Which of the following characteristics does not usually apply to process operations?

1.   A) Each unit of product is separately identifiable.

2.   B) Partially completed products are transferred between processes.

3.   C) Each process is a separate department.

4.   D) A separate Work in Process Inventory is used for each process.

5.   E) Costs are computed using equivalent units.

 

Answer:  A

Difficulty: 2 Medium

Topic:  Process Operations; Comparing Process and Job Order Costing Systems; Equivalent Units of Production

Learning Objective:  03-C1 Explain process operations and the way they differ from job order operations.; 20-A1 Compare process costing and job order costing.; 20-C2 Define and compute equivalent units and explain their use in process costing.

Bloom’s:  Understand

AACSB/Accessibility:  Analytical Thinking / Keyboard Navigation

AICPA:  BB Industry; FN Decision Making

 

 

 

81) Yamada Company applies factory overhead to its production departments on the basis of 90% of direct labor costs. In the Assembly Department, Yamada had $125,000 of direct labor cost, and in the Finishing Department, Yamada had $35,000 of direct labor cost. The entry to apply overhead to these production departments is:

1.   A) Debit Factory Overhead—Assembly $112,500; debit Factory Overhead—Finishing $31,500; credit Work in Process Inventory $144,000.

2.   B) Debit Factory Overhead $144,000; credit Work in Process Inventory—Assembly $112,500; credit Work in Process—Finishing $31,500.

3.   C) Debit Factory Overhead $144,000; credit Factory Wages Payable $144,000.

4.   D) Debit Work in Process Inventory—Assembly $112,500; debit Work in Process Inventory—Finishing $31,500; credit Factory Overhead $144,000.

5.   E) Debit Factory Wages Payable $144,000; credit Cash $144,000.

 

Answer:  D

Difficulty: 3 Hard

Topic:  Accounting for Factory Overhead

Learning Objective:  03-P3 Record the flow of factory overhead costs in process costing.

Bloom’s:  Apply

AACSB/Accessibility:  Analytical Thinking / Keyboard Navigation

AICPA:  BB Industry; FN Measurement

 

82) Clarksen Company uses a process costing system. The company requisitioned $93,000 of materials for Department A and $67,000 of materials for Department D. The entry to record the use of the direct materials by these two departments is:

1.   A) Debit Raw Materials Inventory $160,000; credit Accounts Payable $160,000.

2.   B) Debit Work in Process Inventory—Dept. A $93,000; debit Work in Process Inventory—Dept. D $67,000; credit Raw Materials Inventory $160,000.

3.   C) Debit Factory overhead $160,000; credit Raw Materials Inventory $160,000.

4.   D) Debit Raw Materials Inventory—Dept. A $93,000; debit Raw Materials Inventory—Dept. D $67,000; credit Work in Process Inventory $160,000.

5.   E) Debit Work in Process Inventory—Dept. A $93,000; debit Work in Process Inventory—Dept. D $67,000; credit Accounts Payable $160,000.

 

Answer:  B

Difficulty: 2 Medium

Topic:  Accounting for Materials Costs

Learning Objective:  03-P1 Record the flow of materials costs in process costing.

Bloom’s:  Understand

AACSB/Accessibility:  Analytical Thinking / Keyboard Navigation

AICPA:  BB Industry; FN Measurement

 

 

 

83) Which of the following characteristics does not apply to job order cost accounting?

1.   A) Aims to compute the cost per unit of product.

2.   B) Identifiable units of production.

3.   C) Equivalent units of production.

4.   D) Use of job cost sheets.

5.   E) Use of a single Work in Process Inventory account.

 

Answer:  C

Difficulty: 2 Medium

Topic:  Comparing Process and Job Order Costing Systems; Equivalent Units of Production

Learning Objective:  03-A1 Compare process costing and job order costing.; 20-C2 Define and compute equivalent units and explain their use in process costing.

Bloom’s:  Understand

AACSB/Accessibility:  Analytical Thinking / Keyboard Navigation

AICPA:  BB Industry; FN Measurement

 

84) A key idea in process costing that refers to the number of units that could have been started and completed given the costs incurred during the period is known as:

1.   A) Manufacturing overhead.

2.   B) Units in process.

3.   C) A job cost sheet.

4.   D) Equivalent units of production.

5.   E) Process cost summary.

 

Answer:  D

Difficulty: 1 Easy

Topic:  Equivalent Units of Production

Learning Objective:  03-C2 Define and compute equivalent units and explain their use in process costing.

Bloom’s:  Remember

AACSB/Accessibility:  Communication / Keyboard Navigation

AICPA:  BB Industry; FN Measurement

 

 

 

85) Equivalent units of production are equal to:

1.   A) The number of units that could have been started and completed given the costs incurred during the period.

2.   B) The number of finished units actually produced during a period.

3.   C) The number of units started into the process during a period.

4.   D) The number of units still in process at the end of a period.

5.   E) Physical units that were started and completed during a period.

 

Answer:  A

Difficulty: 2 Medium

Topic:  Equivalent Units of Production

Learning Objective:  03-C2 Define and compute equivalent units and explain their use in process costing.

Bloom’s:  Understand

AACSB/Accessibility:  Communication / Keyboard Navigation

AICPA:  BB Industry; FN Measurement

 

86) Which of the following is the best explanation for why it is necessary to calculate equivalent units of production in a process costing environment?

1.   A) In most manufacturing environments, it is not possible to conduct a physical count of units.

2.   B) Companies often use a combination of a process costing and job order costing systems.

3.   C) In most process costing systems, direct materials are added at the beginning of the process while conversion costs are added evenly throughout the manufacturing process.

4.   D) All of the work to make a unit 100% complete and ready to move to the next stage of production or to finished goods inventory may not have been completed in a single time period.

5.   E) In most cases, there is no difference between physical units and equivalent units of production.

 

Answer:  D

Difficulty: 2 Medium

Topic:  Equivalent Units of Production

Learning Objective:  03-C2 Define and compute equivalent units and explain their use in process costing.

Bloom’s:  Understand

AACSB/Accessibility:  Analytical Thinking / Keyboard Navigation

AICPA:  BB Industry; FN Measurement

 

 

 

87) The combined costs of direct labor and factory overhead per equivalent unit used by many businesses with process operations is called:

1.   A) Physical cost per equivalent unit

2.   B) Overhead cost per equivalent unit

3.   C) Combined cost per equivalent unit

4.   D) Conversion cost per equivalent unit

5.   E) Finished cost per equivalent unit

 

Answer:  D

Difficulty: 1 Easy

Topic:  Equivalent Units of Production

Learning Objective:  03-C2 Define and compute equivalent units and explain their use in process costing.

Bloom’s:  Remember

AACSB/Accessibility:  Communication / Keyboard Navigation

AICPA:  BB Industry; FN Measurement

 

88) Using conversion cost per equivalent unit is appropriate for many businesses that use process costing because:

1.   A) Direct materials and direct labor are usually entered into the production process at the same rate.

2.   B) All manufacturing costs are entered into the production process in the same period.

3.   C) Equivalent cost per unit is not sufficient measurement of production activity.

4.   D) The weighted average method of calculating equivalent units requires it.

5.   E) Direct labor and factory overhead enter the production process at the same rate.

 

Answer:  E

Difficulty: 2 Medium

Topic:  Equivalent Units of Production

Learning Objective:  03-C2 Define and compute equivalent units and explain their use in process costing.

Bloom’s:  Understand

AACSB/Accessibility:  Analytical Thinking / Keyboard Navigation

AICPA:  BB Industry; FN Measurement

 

 

 

89) Which of the following is not one of the four steps in accounting for production activity and assigning costs during a period under a process cost system?

1.   A) Determine over or underapplied overhead.

2.   B) Determine the physical flow of units.

3.   C) Compute the equivalent units of production.

4.   D) Compute the cost per equivalent unit of production.

5.   E) Assign and reconcile costs.

 

Answer:  A

Difficulty: 2 Medium

Topic:  Process Costing Illustration

Learning Objective:  03-C3 Describe accounting for production activity and preparation of a process cost summary using weighted average.

Bloom’s:  Understand

AACSB/Accessibility:  Analytical Thinking / Keyboard Navigation

AICPA:  BB Industry; FN Decision Making

 

90) Which of the following statements is most accurate?

1.   A) In process costing, estimating the degree of completion of units is usually more accurate for conversion costs than for direct materials.

2.   B) The FIFO method includes the cost of the beginning Work in Process inventory account in calculating cost per equivalent units.

3.   C) The FIFO method computes equivalent units based only on production activity in the current period, ignoring the percentage of completion in beginning Work in Process inventory.

4.   D) The FIFO method of calculating equivalent units of production merges the work and the costs of the beginning inventory with the work and the costs done during the current period.

5.   E) It is not possible for there to be a significant difference between the cost of completed units between the weighted average and the FIFO methods.

 

Answer:  C

Difficulty: 2 Medium

Topic:  Equivalent Units of Production; FIFO Method of Process Costing

Learning Objective:  03-C2 Define and compute equivalent units and explain their use in process costing.; 20-C4 Appendix 20A-Describe accounting for production activity and preparation of a process cost summary using FIFO.

Bloom’s:  Understand

AACSB/Accessibility:  Analytical Thinking / Keyboard Navigation

AICPA:  BB Industry; FN Measurement

 

 

 

91) A production department’s output for the most recent month consisted of 10,000 units completed and transferred to the next stage of production and 10,000 units in ending Work in Process inventory. The units in ending Work in Process inventory were 50% complete with respect to both direct materials and conversion costs. There were 1,000 units in beginning Work in Process inventory, and they were 70% complete with respect to both direct materials and conversion costs. Calculate the equivalent units of production for the month, assuming the company uses the weighted average method.

1.   A) 10,000 units.

2.   B) 10,300 units.

3.   C) 15,000 units.

4.   D) 15,300 units.

5.   E) 10,700 units.

 

Answer:  C

Explanation:

Units completed and transferred to next stage	10,000	units
Units in ending Work in Process inventory (10,000 × 50% complete)	5,000	units
	15,000	units

 

Difficulty: 3 Hard

Topic:  Process Costing Illustration

Learning Objective:  03-C3 Describe accounting for production activity and preparation of a process cost summary using weighted average.

Bloom’s:  Apply

AACSB/Accessibility:  Analytical Thinking / Keyboard Navigation

AICPA:  BB Industry; FN Measurement

 

 

 

92) A production department’s output for the most recent month consisted of 8,000 units completed and transferred to the next stage of production and 5,000 units in ending Work in Process inventory. The units in ending Work in Process inventory were 50% complete with respect to both direct materials and conversion costs. Calculate the equivalent units of production for the month, assuming the company uses the weighted average method.

1.   A) 6,500 units.

2.   B) 9,000 units.

3.   C) 13,000 units.

4.   D) 5,500 units.

5.   E) 10,500 units.

 

Answer:  E

Explanation:

Units completed and transferred to next stage	8,000	units
Units in ending Work in Process inventory (5,000 × 50% complete)	2,500	units
	10,500	units

 

Difficulty: 2 Medium

Topic:  Process Costing Illustration

Learning Objective:  03-C3 Describe accounting for production activity and preparation of a process cost summary using weighted average.

Bloom’s:  Understand

AACSB/Accessibility:  Analytical Thinking / Keyboard Navigation

AICPA:  BB Industry; FN Measurement

 

 

 

93) The Fabricating Department started the current month with a beginning Work in Process inventory of $10,000. During the month, it was assigned the following costs: direct materials, $76,000; direct labor, $24,000; and factory overhead, 50% of direct labor cost. Also, inventory with a cost of $109,000 was transferred out of the department to the next phase in the process. The ending balance of the Work in Process Inventory account for the Fabricating Department is:

1.   A) $13,000.

2.   B) $56,000.

3.   C) $59,000.

4.   D) $110,000.

5.   E) $165,000.

 

Answer:  A

Explanation:  $10,000 + $76,000 + $24,000 + $12,000 − $109,000 = $13,000

 

 

Work in Process Inventory
Beginning WIP	10,000
Direct Materials	76,000
Direct Labor	24,000
Applied Overhead	12,000
To Finished Goods			109,000
Ending WIP	13,000

 

Difficulty: 3 Hard

Topic:  Accounting for Transfers

Learning Objective:  03-P4 Record the transfer of goods across departments, to Finished Goods Inventory, and to Cost of Goods Sold.

Bloom’s:  Apply

AACSB/Accessibility:  Analytical Thinking / Keyboard Navigation

AICPA:  BB Industry; FN Measurement

 

 

 

94) A company uses a process costing system. Its Assembly Department’s beginning inventory consisted of 30,000 units, 75% complete with respect to direct labor and overhead. The department completed and transferred out 127,500 units this period. The ending inventory consists of 20,000 units that are 25% complete with respect to direct labor and overhead. All direct materials are added at the beginning of the process. The department incurred direct labor costs of $24,000 and overhead costs of $32,000 for the period. Assuming the weighted average method, the direct labor cost per equivalent unit (rounded to the nearest cent) is:

1.   A) $0.14.

2.   B) $0.16.

3.   C) $0.18.

4.   D) $0.30.

5.   E) $0.37.

 

Answer:  C

Explanation: