Question 1

Hybrid- costing systems are blends of ideas from both job costing and process costing.

Accepted Answer

Hybrid costing systems incorporate elements from both job costing (which involves tracking costs for specific, individual projects) and process costing (which involves tracking costs for a standardized production process).

Question 2

Firms that use activity- based costing shift costs classified from overhead to direct costs.

Accepted Answer

Activity-based costing identifies and assigns costs to specific activities or processes, allowing for a more accurate allocation of costs to products or services. This results in some costs previously classified as overhead being shifted to direct costs.

Question 3

Equivalent units are computed to assign cost to partially completed units.

Accepted Answer

This statement is true. Equivalent units are used to calculate the cost of partially completed units in a process costing system.

Question 4

Organizations using JIT production systems always have no inventories.

Accepted Answer

While JIT production systems aim to minimize inventory levels, they do not eliminate them entirely as some level of safety stock may be necessary.

Question 5

Companies that use job- order costing normally have uniform production steps.

Accepted Answer

Job-order costing is used for custom-made products that go through unique production steps, rather than standardized production processes.

Question 6

Backflush costing has no WIP account

Accepted Answer

Backflush costing does not maintain a WIP account as it directly allocates raw material and other costs to finished goods based on the production process.

Question 7

Examples of potential factory overhead activity centers include receiving, testing, and packaging.

Accepted Answer

This is true as receiving, testing, and packaging are all activities that could be considered part of the factory overhead and would need to be allocated appropriately.

Question 8

Regardless of the nature of a company's production system, there will always be resources that are shared among different products.

Accepted Answer

Even if a company has a dedicated production line for a specific product, there will still be resources such as raw materials, equipment, and labor that are shared among different products in some way.

Question 9

The entry to record the sale of goods would include a debit to Cost of Goods Sold.

Accepted Answer

When goods are sold, they are taken out of inventory and their cost is transferred to Cost of Goods Sold. Therefore, the entry to record the sale of goods would include a debit to Cost of Goods Sold.

Question 10

The weighted- average method is the most popular inventory system.

Accepted Answer

The weighted-average method is commonly used in inventory management because it calculates the average cost of a group of similar items. This method is particularly useful for companies that have high inventory turnover rates and that sell products at different prices. However, there are several other inventory systems that are also used, such as the first-in, first-out (FIFO) method and the last-in, first-out (LIFO) method.

Question 11

The entry to record factory overhead incurred would include a credit to Factory Department Overhead Control.

Accepted Answer

The entry to record factory overhead incurred would typically include a debit to Factory Overhead or Factory Department Overhead Control to reflect the increase in overhead costs, not a credit.

Question 12

Entries on the left of the "T" account are always increases.

Accepted Answer

Entries on the left of the "T" account can be either increases or decreases depending on the type of account being used. For example, for asset accounts, increases are recorded on the left and decreases on the right, while for liability accounts, the opposite is true.

Question 13

Job- order costing can be used only in manufacturing environments.

Accepted Answer

Job-order costing can also be used in service industries, such as law firms, advertising agencies, and construction companies.

Question 14

Under weighted- average process costing, the unit costs used for applying costs to products are affected by the total costs incurred to date, regardless of whether those costs were incurred during or before the current period.

Accepted Answer

Weighted-average process costing method averages the costs incurred during the current period as well as any costs incurred in previous periods, therefore the total costs incurred to date affects the unit cost for applying costs to products.

Question 15

The chemical and glass industries normally use job costing.

Accepted Answer

The chemical and glass industries typically use process costing because their products go through a continuous process and are homogeneous, making it difficult to assign costs to individual jobs.

Question 16

Construction and printing industries normally use job- order costing.

Accepted Answer

Both construction and printing industries create unique products (such as a specific building or a customized brochure), and therefore, job-order costing is most appropriate. This method involves assigning direct and indirect costs to each job or project individually, allowing for accurate tracking of expenses and profitability.

Question 17

Actual overhead rates are used to apply factory overhead to products.

Accepted Answer

Predetermined overhead rates, not actual overhead rates, are typically used to apply factory overhead to products because actual overhead costs are not known in advance and can fluctuate, making it difficult to accurately assign them to products as they are produced.

Question 18

The degree of completion for conversion costs depends on what proportion of the total effort needed to complete one unit or one batch has been devoted to units still in process.

Accepted Answer

The degree of completion for conversion costs is based on the proportion of total conversion cost that has been applied to units still in process.

Question 19

Some backflush systems eliminate the finished- goods inventory accounts.

Accepted Answer

Backflush systems work backwards from the production process to eliminate the need for tracking finished goods inventory. Instead, the system calculates the amount of raw materials needed to produce a product based on the bill of materials, and these materials are automatically issued to production when the product is completed. This eliminates the need for separate accounting of finished goods inventory.

Question 20

Chemical and oil companies normally use process costing.

Accepted Answer

Process costing is commonly used in industries such as chemical and oil, where large quantities of homogeneous products are produced through a continuous process. This method involves the calculation of the average cost of each unit produced over a period of time, rather than the cost of each individual unit.

Quiz 14: Process-Costing Systems