Question 1

Conversion costs are usually incurred evenly throughout a process.

Accepted Answer

Conversion costs refer to the costs incurred in the process of converting raw materials into finished products. These costs typically include direct labor and overhead expenses, such as rent and utilities. Conversion costs are usually incurred evenly throughout the process as the transformation of raw materials to finished products occurs at a constant rate. Therefore, the answer is true.

Question 2

Custom-made goods would be accounted for using a process costing system.

Accepted Answer

Custom-made goods are unique and produced according to specific customer requirements, which makes them better suited for a job costing system. In contrast, process costing is best used for products that are identical or very similar, such as mass-produced goods.

Question 3

In a process cost system,product costs are accumulated by processing department rather than by job.

Accepted Answer

In a process cost system, the cost of each department is accumulated and assigned to the units that pass through that department. This is different from a job cost system, where costs are assigned to each specific job or project.

Question 4

Equivalent units of production are the number of units that could have been manufactured from start to finish during an accounting period.

Accepted Answer

Equivalent units of production represent the number of completed units in addition to the number of partially completed units during an accounting period. It takes into account the degree of completion of partially completed units and converts it into the equivalent number of completed units.

Question 5

Process manufacturing usually reflects a manufacturer that produces small quantities of unique items.

Accepted Answer

Process manufacturing is a type of manufacturing that typically produces large quantities of homogeneous items, with emphasis on the process of producing the item rather than the individual characteristics of each item. Examples of industries that use process manufacturing include chemicals, food and beverage, pharmaceuticals, and textiles.

Question 6

The direct materials costs and direct labor costs incurred by a production department are referred to as conversion costs.

Accepted Answer

Conversion costs consist of direct labor costs and manufacturing overhead costs, not direct materials costs. Direct materials are considered a separate component of product cost.

Question 7

In a process costing system,each process will have a work in process inventory account.

Accepted Answer

In a process costing system, each process will have its own work in process inventory account to track the costs associated with that process. This allows for accurate tracking of production costs and helps to ensure proper allocation of costs to the final product.

Question 8

Process cost systems use job order cost cards to accumulate cost data.

Accepted Answer

Process cost systems use process cost summaries rather than job order cost cards to accumulate cost data.

Question 9

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.

Accepted Answer

A job order cost system is more appropriate for products produced to customer specifications because it tracks costs for each individual job or batch, which can vary significantly based on the specifications.

Question 10

Equivalent units are the sum of direct materials used and direct labor incurred.

Accepted Answer

Equivalent units are the sum of completed units and units in process multiplied by the percentage of completion in terms of direct materials and direct labor.

Question 11

Direct materials,direct labor,and factory overhead are assigned to each manufacturing process in a process costing system.

Accepted Answer

In a process costing system, direct materials, direct labor, and factory overhead are assigned to each manufacturing process to calculate the cost of production.

Question 12

If the principal products of a manufacturing process are identical,a process cost system is more appropriate than a job order cost system.

Accepted Answer

In a process cost system, costs are accumulated by department or process, and the products are identical. Therefore, it is more appropriate when producing large quantities of identical products. Job order cost system, on the other hand, is suitable for unique or customized products, where costs are accumulated for each specific job or project.

Question 13

Both process and job order cost systems maintain perpetual inventory accounts with subsidiary ledgers.

Accepted Answer

Both process and job order cost systems maintain perpetual inventory accounts with subsidiary ledgers to track the cost of materials, labor, and overhead associated with each product or job.

Question 14

Industries that typically use process cost systems include chemicals,oil,metals,food,paper,and pharmaceuticals.

Accepted Answer

Process cost systems are commonly used by industries that produce large quantities of homogeneous products with a continuous production process, such as chemicals, oil, metals, food, paper, and pharmaceuticals. Therefore, the statement is true.

Question 15

The first step in determining the cost of goods completed and ending inventory valuation using process costing is to calculate equivalent units of production.

Accepted Answer

The answer of The first step in determining the cost...

Question 16

In a process costing system,a separate work in process inventory account is maintained for each customer's job.

Accepted Answer

In a process costing system, separate work in process inventory accounts are not maintained for each customer's job. Instead, a single work in process inventory account is maintained for each production department or process. The costs of all the jobs that pass through the same process or department are accumulated in this account.

Question 17

Conversion costs include materials,direct labor,and factory overhead.

Accepted Answer

Conversion costs include direct labor and factory overhead, but not materials. Materials are considered a separate component of manufacturing costs.

Question 18

The direct labor costs and factory overhead costs incurred by a production department are referred to as conversion costs.

Accepted Answer

Conversion costs are the combination of direct labor costs and factory overhead costs, and they are incurred during the process of converting raw materials into finished goods.

Question 19

Both job order and process cost accounting use equivalent units of production to determine costs.

Accepted Answer

Job order costing does not use equivalent units of production; this concept is primarily used in process costing to handle partially completed units.

Question 20

Process manufacturers typically use large machines to process a continuous flow of raw materials into a finished state.

Accepted Answer

This is true. Process manufacturers use large machines to continuously process raw materials into a finished state, such as with industries like chemicals, food and beverage, and pharmaceuticals.

Quiz 17: Process Cost Systems