Process Costing Basics
Which costing system is used by companies that manufacture identical units?
A. Job order costing
B. Process costing
C. Variable costing
D. Activity-based costing
B. Process costing
"To account for” includes which amounts?*
A. Only completed units
B. Beginning inventory plus units started
C. Only ending inventory
D. Sales minus expenses
B. Beginning inventory plus units started
What is one example of Overhead Expense?
A. Direct Labour
B. Electricity
C. COGS
D. Direct Materials
B. Electricity
True or False?
The formula of "Cost per EUP for Conversion Costs" is
Total Conversion Costs/Equivalent Units of Productionfor Conversion Costs
A. True
B. False
A. True
True or False? In a process costing system, costs are tracked by individual jobs rather than by processing departments?
A. True
B. False
A. False
Conversion costs are made up of which TWO costs?
A. Direct materials + shipping
B. Direct labor + manufacturing overhead
C. Sales + marketing
D. Rent + utilities
B. Direct labor + manufacturing overhead
True or False
Accounted for includes: still in process or completed and transferred out units.
True
What is Overhead Costs?
A. Costs that directly impact the production of the product
B. Costs that indirectly impact the production of the product
C. Costs that help the business
B. Costs that indirectly impact the production of the product
What is the formula for Cost per EUP for Direct Materials?
A. Total Direct Material Costs/Equivalent Units of Production for Direct Materials
B. Conversion Costs/Equivalent Units of Production for Conversion Cost
C. Direct Materials x 100%
D. Conversion x 100%
A. Total Direct Material Costs/Equivalent Units of Production for Direct Materials
True or False? Direct materials and conversion costs are the two primary categories of costs used in process costing?
A. True
B. False
A. True
True or False
Process Costing System separates Work-in-Process Inventory accounts for each process or department.
True
What is the main purpose of a production cost report?
A. To track employee attendance
B. To show calculations for the physical flow and cost flow of products
C. To measure customer satisfaction
D. To predict future sales
B. To show calculations for the physical flow and cost flow of products
What are conversion costs?
A. Costs that transform Raw materials into finished Goods
B. Costs that indirectly affect the production of the goods
C. Costs that converts an overhead expense into a manufacturing expense
A. Costs that transform Raw materials into finished Goods
What is the formula for Transferred costs?
A. Total Direct Material Costs/Equivalent Units of Production for Direct Materials
B. Total Transferred Costs/Equivalent Units of Production for Transferred-in cost
C. Units of beginning WIP x 100%
D. Total units completed and transferred out- units in beginning WIP inventory
B. Total Transferred Costs/Equivalent Units of Production for Transferred-in cost
True or False? EUP measures the work done during a period, expressed in fully completed units?
A. True
B. False
A. True
True or False
Process costing does a job sheet for each job.
False
How many steps are involved in preparing a production cost report?
A. Two
B. Three
C. Four
D. Five
C. Four
What is the difference between Overhead costs and Conversion costs?
A. Nothing
B. One directly affects the production of goods, while the other indirectly affects the production of goods
C. Overhead Costs requires overhead to function
B. One directly affects the production of goods, while the other indirectly affects the production of goods
What is the formula for total units to account for?
A. Units in the beginning WIP+ Units started in production during the period
B. Beginning WIP Costs + Costs added during the period
C. Units Completed and Transferred Out + Units in ending WIP
A. Units in the beginning WIP+ Units started in production during the period
True or False? Conversion Costs consists of direct labour plus manufactoring overhead.
A. True
B. False
A. True
Why do companies use process costing to determine the per-unit cost of a product?
A. To eliminate manufacturing overhead
B. To help control costs, set sales prices, and calculate inventory balances
C. To reduce employee wages
D. To avoid preparing financial statements
B. To help control costs, set sales prices, and calculate inventory balances
What is the correct order of preparing a production cost report?
A.Summarize the flow of physical units, Compute output in terms of equivalent units of production, Compute the cost per equivalent unit of production, Assign costs to units completed and units in process.
B.Assign costs to units completed and units in process, Compute output in terms of equivalent units of production, Compute the cost per equivalent unit of production, Summarize the flow of physical units.
C. Summarize the flow of physical units, Assign costs to units completed and units in process, Compute the cost per equivalent unit of production,Compute output in terms of equivalent units of production.
D. Summarize the flow of physical units, Compute output in terms of equivalent units of production, Assign costs to units completed and units in process, Compute the cost per equivalent unit of production.
A.Summarize the flow of physical units, Compute output in terms of equivalent units of production, Compute the cost per equivalent unit of production, Assign costs to units completed and units in process.
Is direct labour and manufacturing overhead included in conversion costs?
A. Yes
B. No
A. Yes
What is the formula for Units accounted for?
A. Units in the beginning WIP+ Units started in production during the period
B. Beginning WIP Costs + Costs added during the period
C. Units Completed and Transferred Out + Units in ending WIP
C. Units Completed and Transferred Out + Units in ending WIP
The first step in preparing a production cost report is calculating the cost per equivalent unit.
A. True
B. False
B. False