Question 1

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:

Accepted Answer

The allocation of overhead to the Finishing Department's products would be 250% of $20,000, which is $50,000. The entry to record this allocation would be a debit to Finished Goods Inventory and a credit to Manufacturing Overhead.

Question 2

Which of the following products is least likely to be produced in a process operation?
A) Smartphones
B) Slacks for casual wear
C) Baseball caps
D) Calculators
E) Custom cabinets

Accepted Answer

Custom cabinets are typically not produced in a process operation as they require specific customization and attention to detail. The other options can be mass produced in a standardized process.

Question 3

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.

Accepted Answer

This statement is true based on the principles of process costing. Equivalent units are used to account for partially completed units in process costing, and in order to calculate them, direct materials and direct labor must be added to the beginning inventory. In this case, 8,000 equivalent units of direct materials and 20,000 equivalent units of direct labor would be added to the 40,000 physical units that were partially completed.

Question 4

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.

Accepted Answer

Equivalent units of production for direct materials and direct labor are calculated separately based on the stage of completion for each. It is possible for the equivalent units of production to differ for different inputs, depending on the production process.

Question 5

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.

Accepted Answer

This section accurately describes what is included in the process cost summary. It provides information on the equivalent units of production, as well as the direct materials and conversion costs per unit.

Question 6

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.

Accepted Answer

The answer of The process cost summary presents calculations of...

Question 7

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.

Accepted Answer

This is true as a process cost summary includes all costs incurred during the period as well as any costs carried over from the beginning inventory of the department's Work in Process account.

Question 8

Which of the following products is most likely to be produced in a process operation?
A) Airplanes
B) Cereal
C) Bridges
D) Designer bridal gowns
E) Custom cabinets

Accepted Answer

Cereal production is typically a continuous flow process, making it a prime example of a process operation. Airplanes, bridges, designer bridal gowns, and custom cabinets all involve more customized and unique production processes, making them less likely to be produced in a process operation.

Question 9

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

Accepted Answer

A process costing system typically uses a predetermined overhead rate to allocate factory overhead costs to the Work in Process Inventory accounts, rather than recording them directly.

Question 10

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:

Accepted Answer

The entry would be made to allocate overhead and it would be based on the predetermined overhead allocation rate, which in this case is 245% of direct labor cost. Therefore, the entry would be based on multiplying the Baking Department's direct labor cost for the reporting period ($10,000) by the predetermined overhead allocation rate (245%), and recording the amount as overhead allocated to the products processed in this department.

Question 11

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.

Accepted Answer

The answer of Since the process cost summary describes the...

Question 12

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.

Accepted Answer

The number of equivalent units of production accounts for the percentage of completion of each unit in ending Work in Process inventory, so it should be equal to or less than the number of physical units.

Question 13

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

Accepted Answer

The cost of goods manufactured refers to the total cost of the products that have been completed during a specific period, and is calculated by adding together the costs of direct materials, direct labor, and manufacturing overhead, and subtracting the ending balance of Work in Process Inventory from the beginning balance. Once the goods are finished, they are transferred from Work in Process Inventory to Finished Goods Inventory, and the cost of these transferred units becomes the cost of goods sold when they are eventually sold to customers.

Question 14

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

Accepted Answer

In process costing, indirect materials are typically charged to a separate account called Manufacturing Overhead. This account is then allocated to the Work in Process Inventory based on a predetermined overhead rate.

Question 15

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.

Accepted Answer

The answer of If a department that applies process costing...

Question 16

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.

Accepted Answer

It is possible for a production department to have different quantities of finished units with respect to direct materials and direct labor, as the production process may require different amounts of each input. Therefore, it is possible for them to produce 1,000 equivalent finished units with respect to direct materials and 800 equivalent finished units with respect to direct labor.

Question 17

Which of the following characteristics does not usually apply to process operations?
A) Each unit of product is separately identifiable.
B) Partially completed products are transferred between processes.
C) Each process is a separate department.
D) A separate Work in Process Inventory is used for each process.
E) Costs are computed using equivalent units.

Accepted Answer

Process operations typically involve the production of products in a continuous flow or in large batches, where individual units are not separately identifiable. This contrasts with job costing systems, where each unit of product is distinct and separately identifiable.

Question 18

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

Accepted Answer

The transfer of completed units from one department to another is recorded with a journal entry debiting the receiving department's inventory account and crediting the sending department's inventory account. Therefore, the correct entry for this transaction would be a debit to the finished goods inventory account and a credit to the work-in-progress inventory account in the Finishing Department. Since we don't have information about the initial cost of the units or any other accounts that might be affected by this transfer, we cannot provide the exact journal entry.

Question 19

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

Accepted Answer

Equivalent units for materials, direct labor, and factory overhead may differ because they can be added at different stages of the production process.

Question 20

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:

Accepted Answer

The answer of If the predetermined overhead allocation rate is...

Quiz 3: Process Costing and Analysis