Theories (Process Costing)

1. Which cost accumulation procedure is most applicable in continuous mass-production manufacturing

environments?
a. standard b. actual c. process d. job order
2. Process costing is used in companies that
a. engage in road and bridge construction.
b. produce sailboats made to customer specification.
c. produce bricks for sale to the public.
d. construct houses accordng to customer plants.
3. A producer of ______ would not use a process costing system.
a. gasoline b. potato chips c. bank videotapes d. stained glass windows
4. A process costing system is used by a company that
a. produces heterogeneous products. b. produces items by special request of customers.
c. produces homogeneous products. d. accumulates costs by job.
5. Which is the best cost accumulation procedure to use for continuous mass production of like units?
a. actual b. standard c. job order d. process
6. Equivalent units of production are equal to the
a. units completed by a production department in the period.
b. number of units worked on during the period by a production department.
c. number of whole units that could have been completed if all work of the period had been used to
produce whole units.
d. identifiable units existing at the end of the period in a production department.
7. In a process costing system using the weighted average method, cost per equivalent unit for a given cost
component is found by dividing which of the following by EUP?
a. only current period cost
b. current period cost plus the cost of beginning inventory
c. current period cost less the cost of beginning inventory
d. current period cost plus the cost of ending inventory
8. The weighted average method is thought by some accountants to be inferior to the FIFO method because it
a. is more difficult to apply.
b. only considers the last units worked on.
c. ignores work performed in subsequent periods.
d. commingles costs of two periods.
9. The first step in determining the cost per EUP per cost component under the weighted
average method is to
a. add the beginning Work in Process Inventory cost to the current period's production cost.
b. divide the current period's production cost by the equivalent units.
c. subtract the beginning Work in Process Inventory cost from the current period's production cost.
d. divide the current period's production cost into the EUP.
10. The difference between EUP calculated using FIFO and EUP calculated using weighted average is the
equivalent units
a. started and completed during the period.
b. residing in beginning Work in Process Inventory.
c. residing in ending Work in Process Inventory.
d. uncompleted in Work in Process Inventory.
11. EUP calculations for standard process costing are the same as
a. the EUP calculations for weighted average process costing.
b. the EUP calculations for FIFO process costing.
c. LIFO inventory costing for merchandise.
d. the EUP calculations for LIFO process costing.
12. In a FIFO process costing system, which of the following are assumed to be completed first in the current
period?
a. units started this period c. units transferred out
b. units started last period d. units still in process
13. To compute equivalent units of production using the FIFO method of process costing, work for the current
period must be stated in units
a. complted during the period and units in ending inventory.
b. completed from beginning inventory, units tarted and completed during the period, and units
partially completed in ending inventory.
 c. started during the period and units transferred out during the period.
d. processed during the period and units completed during the period.
14. The FIFO method of process costing will produce the same cost of goods transfered out amount as the
weighted average method when
a. the goods produced are homogeneous
b. there is no beginning Work in Process Inventory
c. there is no ending Work in Process Inventory
d. beginning and ending Work in Process Iventories are each 50 percent complete
15. The primary difference between the FIFO and weighted average methods of process costing is
a. in the treatment of beginning Work in Process Inventory
b. in the treatment of current period production costs
c. in the treatment of spoiled units
d. none of the above
16. Material is added at the beginning of a process in a costing system. The beginning Work in Process
Inventory for the process was 30 percent complete as to conversion costs. Using the FIFO method of costing,
the number of equivalent units of material for the process during this period is equal to the
a. beginning inventory this period for the process.
b. units started and completed this period in the process.
c. units started this period in the process plus the beginning Work in Process Iventory.
d. units started and completed this period plus the units in ending Work in Process Inventory.
17. In a cost of production report using process costing, transferred-in costs are similar to the
a. cost of material added at the beginning of production.
b. conversion cost added during the period.
c. cost transferred out to the next department.
d. cost included in beginning inventory.
18. In a process costing system, the journal entry to record the transfer of goods from Department 82 to
Finished. Goods Inventory is a
a. debit Work in Process Inventory #2, credit Finished Goods Inventory.
b. debit Finished Goods Inventory, credit Work in Process Inventory #1.
c. debit Finished Goods Inventory, credit Work in Process Inventory #2.
19. Transferred-in cost represents the cost from
a. the last department only. c. all prior departments.
b. the last production cycle. d. the current period only.
20. Which of the following is (are) the same between the weighted average and FIFO meth ods of calculating
EUPs?
Units to EUP Total cost to
account for calculation account for
a. no yes no
b. yes yes yes
c. yes no no
d. yes no yes
21. Process costing techniques should be used in assigning costs to products
a. if a product is manufactured on the basis of each order received.
b. when production is only partially completed during the accounting period.
c. if a productionn is composed of mass-produced homogeneous units.
d. whenever standard-costing techniques should not be used.
22. Averaging the total cost of completed beginning work-in-process inventory and units started and completed
over all units transferred out is known as
a. strict FIFO b. modified FIFO c. weighted average costing d. normal
costing
23. A process costing system.
a. cannot use standard costs.
b. restates Work in Process Inventory in terms of completed units.
c. accumulates costs by job rather than by department.
d. assigns direct labor and manufacturing overhead costs separately to units of production.
24. A process costing system does which of the following?
Calculates EUPs Assigns costs to inventories
a. no no
b. no yes
c. yes yes
 d. yes yes
25. A process costing system
Calculates average cost per whole unit Determines total units to account for
a. yes yes
b. no no
c. yes no
d. no yes
26. A hybrid costing system combines characteristics of
a. job order and standard costing systems.
b. job order and process costing systems.
c. process and standard costing system.
d. job order and normal costing systems.
27. When standard costs are used in process costing
a. variances can be measured during the production period.
b. total costs rather than current production and current costs are used.
c. process costing calculations are made simpler.
d. the weighted average method of calculating EUPs makes computing trans-ferred-out costs easier.
28. Which of the following is subtracted from weighted average EUP to derive FIFO EUP?
a. beginning WIP EUP completed in current period
b. beginning WIP EUP produced in prior period
c. ending WIP EUP not completed
d. ending WIP EUP completed
29. The cost of abnormal continuous losses is
a. considered a product cost.
b. absorbed by all units in ending inventory and transferred out on an equivalent unit basis.
c. written off as a loss on, on equivalent unit basis.
d. absorbed by all units past the inspection point.
30. Abnormal spoilage can be
Continuous Discrete
a. yes no
b. no no
c. yes yes
d. no yes
31. When the cost of los units must be assigned, and those same units must be ignored in an equivalent unit
schedule, these units are considered
a. normal and discrete c. abnormal and discrete
b. normal and continous. d. abnormal and continuous
32. A continuous loss
a. occurs unevenly throughout a process.
b. never occurs during the production process.
c. always occurs at the same place in a production process.
d.occurs evenly throughout the production process.
33. Which of the following would be considered a discrete loss in a production process?
a. adding the correct ingredients to make a bottle of ketchup
b. putting the appropriate components together for a stereo
c. adding the wrong components when asembling a stereo
d. putting the appropriate pleces for a bike in the box
34. The method of neglect handles spoilage that is
a. discrete and abnormal c. continuous and abnormal
b. discrete and normal d. continuous and normal
35. The cost of normal discrete losses is
a. absorbed by all units past the inspection point on an equivalent unit basis.
b. absorbed by all units in ending inventory.
c. considered a period cost.
d. written off as a loss on an equivalent unit basis.
36. The cost of abnormal continuous losses is
a. considered a product cost.
b. absorbed by all units in ending inventory and transferred out on an equivalent unit basis.
c. written off as a loss on an equivalent unit basis.
d. absorbed by all units past the inspection point.
37. Normal spoilage units resulfing from a continuous process
a. are extended to the EUP schedule.
b. result in a higher unit cost for the good units produced.
c. result in a loss being incurred.
d. cause estimated overhead to Increase.
38. When the cost of lost units must be assigned, and those same units must be included in an equivalent unit
schedule, these units are considered
a. normal and discrete c. abnormal and discrete
b. normal and continous d. abnormal and continuous
39. Which of the following accounts is credited when abnormal spoilage is written off in an actualk cost system?
a. Miscellaneous Revenue c. Finished Goods
b. Loss from Spoilage d. Work in Process
40. The cost of abnormal discrete units must be assigned to
Good units Lost units Good units Lost units
a. yes yes c. yes no
b. no no d. no yes
41. Which of the following stotements is tolse? The cost of rework on defective units if
a. abnormal, should be assigned to a loss account.
b. normal and if actual costs are seed, should be assigned to material, labor and overhead costs of the
good production.
c. normal and it standard costs are used, should be considerd when developing the overhead application
rate.
d. abnormal, should be prorated among Work In Process. Finished Goods; used Cost of Goods Sold
42. If normal spoilage is detected at an inspection point within the process (rather than at the end), the cost of
that spoilage should be
a. included with the cost of the units sold during the period.
b. included with the cost of the units completed in that department during the period.
c. allocated to ending work in process units and units transferred out based on their relative values.
d. allocated to the good units that have passed the inspection point
43. Tyler Co. has a production process in which the inspection point is at 85 percent of conver-sion. The
beginning inventory for July was 35 percent complete and ending inventory was 80 percent complete. Normal
spoilage costs would be assigned to which of the following groups of units, using FIFO costing?
Beginning Inventory Ending Inventory Units Started & Completed
a. no yes yes
b. yes yes yes
c. no no yes
d. yes no no
44. Which of the following is not a question that needs to be answered with regard to quality control?
a. what happens to the spalled units?
b. what is the actual cost of spoildge?
c. How can spollage be controlled?
d. Why does spoilage happen?
45. Normal spoilage units resulting from a continuous process
a. are extended to the CUP schedule.
b. result in a higher unit cost for the good units produced.
c. result in a loss being incurred.
d. cause estimated overhead to increase.
46. The addition of material in a successor department that causes an increase in volume is called
a. accretion b. reworked units c. complex procedure d. Undetected spoilage
47. which of the following statements related to job order costing and process costing are true?
a. Under both costing methods, manufacturing overhead costs are included in the computation of unit
product costs.
b. Under both costing methods, the joural entry to record the completion of production will involve
crediting a work in process account.
c. Under both costing methods, the journal entry to record the cost of goods sold will involve crediting
the finished goods account.
d. All of the above are true.
48. The comple tion of goods is recorded as a decrease in the work in process inventory account when using:
Job-order costing Process costing Job costing Process costing
a. Yes no c. No Yes
 b. Yes yes d. No No
49. In process costing. a separate work in process account is kept for each:
a. individual order c. processing department
b. equivalent unit d. cost category (i.e.. materials, conversion cost)
50. The weighted-average method of process costing differs from the FIFO method of process costing in that the
weighted-average method:
a. does not consider the degree of completion of beginning work in process inventory when computing
equivalent units of production.
b. considers ending work in process inventory to be fully complete.
c. will always yield a higher cost per equivalent unit,
d. All of the above.
51. which of the following are needed to compute equivalent units for conversion costs under the weighted-
average method of process costing?
Percentage completion of Percentage completion of
beginning work in process ending work in process
a. yes yes
b. no yes
c. yes no
d. no no
52. Malcolm Company uses a weighted-average process costing system. All materials at Malcolm are added at
the beginning of the production process. The equivalent units for materials at Malcolm would be the sum of:
a. units in ending work in process and the units started.
b. units in beginning work in process and the units started.
c. units in ending work in process and the units started and completed.
d. units in beginning work in process and the units started and completed.
53. In the computation of costs per equivalent unit, the weighted-average method of process costing considers:
a. costs incurred during the current period only.
b. costs incurred during the current period plus cost of ending work in process inventory.
c. costs incurred during the current period plus cost of beginning work in process inventory.
d. costs incurred during the current period less cost of beginning work in process inventory.
54. Which of the following are needed to compute the cost per equivalent unit for materials under the weighted-
average method of process costing?
Material cost assigned to beginning Material cost added to
production
work in process last period during the current period
a. yes yes
b. no yes
c. yes no
d. no no
55. Under which of the following conditions will the FIFO method of process costing result in the same amount
of cost being transferred to the next department as the weighted-average method?
a. When the beginning and ending inventories are each fifty percent complete.
b. When there is no beginning inventory.
c. When there is no ending inventory,
d. When units in the beginning inventory are all completed and transferred at the same time.
56. In order to compute equivalent units of production using the FIFO method of process costing. work for the
period must be broken down into parts:
a. completed during the period and units in ending inventory.
b. completed from beginning inventory, started and completed during the month, and units in ending
inventory.
c. started during the period and units transferred out during the period.
d. processed during the period and units completed during the period.
57. All of the following statements are correct when referring to process costing except:
a. process costing would be appropriate for a jeweler who makes custom jewelry to order.
b. a process costing system has the same basic purposes asa job-order costing system.
c. units produced are indistinguishable from each other.
d. are accumulated by department.
58. For which of the followng would it be best to use an operation costing system?
a. home remodeling c. cement used for roadways
b. automobile production d. trash bags used for yard waste
59.which of the following manufactures would most likely not use a process cost accounting system?
a. a producer computer monitors c. a producer of frozen orange juice
b. a pain manufacturer d. a builder of customized yachts
60. Process costing would be used in all of the following industries except:
a. petroleum refining c. wood pulp production
b. truck tire manufacturing d. automobile repair
61. Which of the following companies would likely use a process-costing system?
Custom Furniture Chemical Soft Drink Bottler
Manufacturer Producer
a. yes yes yes
b. yes yes no
c. no yes no
d. no yes yes
62. Which of the following statements regarding similarities between process costing and job-order costing are
true?
I. Both systems assign production costs to units of output.
II. Both systems require extensive knowledge of financial accounting.
III. The flow of costs through the manufacturing accounts is essentially the same.
a. I only c. II and III
b. I and III d. III only
63. Companies that use a process-cost accounting system would:
a. establish a separate Work-in-Process Inventory account for each manufacturing department.
b. establish a separate Finished-Goods Inventory account for each manufacturing deportment.
c. pass completed production directly to Cost of Goods Sold.
d. charge goods produced with actual overhead amounts rather than applied overhead amounts.
64. Which of the following statements is false?
a. In job-order costing, costs are accumulated by job order.
b. In process costing, costs are accumulated by department.
c. In process costing, the cost per unit in a department is found by spreading the period's manufacturing
costs over the próduction activity.
d. In process costing. the total cost of each unit is found by dividing the total factory costs by the
number of units completed.
65. In a process-costing system, manufacturing costs are accumulated by:
a. batch c. department
b. batch and time period d. department or process, and time period
66. Which of the following choices correcily shows how costs are accumulated in a process costing system?
By Batch By Time Period By Process or Department
a. yes yes yes
b. yes yes no
c. no yes no
d. no yes yes
67. Morrison, Inc.. which uses a process-cost accounting system, passes completed produc tion from
Department A to Department B for further manufacturing. The journal entry to record completed production in
Department A requires:
a. a debit to Work-in-Process Inventory and a credit to Finished-Goods Inventory.
b. a debit to Finished-Goods Inventory and a credit to Work-in-Process Inventory.
c. a debit to Finished-Goods Inventory and a credit to Work-in-Process Inventory: Department A.
d. a debit to Work-in-Process Inventory: Department R and a credit to Work-in-Process Inventory:
Department A.
68. Greene, Inc., which uses a process-costing systems, transfers completed production from Department no. 1
to Department no. 2 for further work. Which of the following best describes the account that would be debited to
record this transfer?
a. Cost of Goods Transferred.
b. Finished-Goods Inventory: Department no. 1
c. Finished-Goods Inventory: Department no. 2
d. Work-in-Process Inventory: Department no. 2
69. Barnes, Inc., whch usea a process-costing system, completed production from Department no. 1 to
Department no. 2 for further work. Which of the following best describes the account that would be credited to
record this transfer?
a. Cost of Goods Transferred.
 b. Finished-Goods Inventory: Department no. 1
c. Finished-Goods Inventory: Department no. 2
d. Work-in-Process Inventory: Department no. 2
70. Which of the following data are needed to calculate total equivalent units under the weighted-average
method?
a. Work-to-date on ending work in process, units started during the period.
b. Units completed during the period, work-to-date on ending work in process.
c. Work to complete beginning work in process, work-to-date on ending work in process.
d. work to complete beginning work in process, units completed, work done on ending work in process.
71. The weighted-average process-costing method, the cost is based on:
a. only the current period's manufacturing costs.
b. only costs in the period's beginning work-in-process inventory.
c. a summation of the costs in the beginning work-in-process inventory plus costs incurred in the
current period.
d. only costs Incurred in previous accounting periods.
72. When computing the conversion cost per equivalent unit under the weighted-average method of process
costing, all of the following information would be needed except:
a. the number of units completed during the current accounting period.
b. the conversion work performed during the current period on the ending work-in-process inventory.
c. the conversion work performed during the current period on the beginning work-in-process
inventory.
d. the conversion cost in the beginning work-in-process inventory.
73. Which of the following are needed to calculate the total cost of the ending work-in-process inventory under
the weighted-average process-costing method?
Unit Cost Equivaient Units
a. yes yes
b. yes no
c. no yes
d. no no
74. Which of the following are needed under weighted-average process costing to calculate the cost of goods
compoleted during the period?
Unit Cost Equivalent Units
a. yes yes
b. yes no
c. no yes
d. no no

75. Equivalent-unit calculations are necessary to allocate manufacturing costs between:

a. units completed and ending work in process.
b. beginning work in process and units completed.
c. units sold and ending work in process.
d. cost of goods manufactured and beginning work in process.
e. cost of goods manufactured and cost of goods sold.
76. Which of the following is a key document in a typical process-costing system?
a. Departmental production report d. Sequential product report
b. Master schedule e. Materials requirement report
c. Production budget
77. Which of the following statements about operation costing is (are) true?
I. Conversion costs are accumulated by department.
II. Direct material costs are accumulated by batch.
III. Operation costing is a hybrid product-costing system.
a. I only c. I and III
b. I and II d. I, II, and III
78. Operation costing:
a. tends to parallel job-order costing with respect to the treatment of conversion cost.
b. tends to parallel process costing with respect to the treatment of conversion cost.
c. tends to parallel process costing with respect to the treatment of direct materials.
d. would likely be used by a manufacturing plant that produces one model of a single product.
79. Which of the following best describes the procedures used in operation costing to assign direct material and
conversion costs to production?
 Direct-Material Costs Conversion Costs
a. Similar to those in job costing Similar top those in job costing
b. Similar to those in job costing Similar to those in process costing
c. Similar to those in process costing Similar to those in job costing
d. Similar to those in process costing Similar to those in process costing
e. None of the above, as operation csoting is totally unlike both job costing and process costing
80. When determining the cost of a manufactured good under an operation-costing system, a company would:
a. trace direct-material cost and actual conversion cost to each product produced.
b. trace direct-material cost to each croduct produced and use a predeter mined application rate for
conversion cost.
c. trace actual conversion cost to each product produced and use a predeter mined application rate for
direct material.
d. use a predetermined application rate for both direct-material cost and conversion cost.
e. often switch to a job-costing system to simplify record keeping procedures.
81. The first processing department in a sequence of three production departments must account for which of the
following costs?
a. Direct material and transferred-in costs
b. Direct material costs only
c. Conversion and transferred-in costs
d. Direct material and conversion costs
82. The second processing department in a sequence of three production departments would typically account
for which of the following costs?
a. Direct material and transferred-in costs
b. Direct material costs only
c. Conversion and transferred-in costs
d. Direct material and conversion costs
83. Department no. 2 recelves goods from Department no. 1, adds material, completes the units, and transfers
the units to Department no. 3 for final processing. The cost of goods completed by Department no. 2 would
include charges for:
a. direct materials c. direct materials and conversion cost
b. conversion cost d. transterred-in costs, direct materials, and conversion cost

84. When should process costing techniques be used in assigning costs to products?
a. the product is manufactured on the basis of each order received.
b. When production is only partially completed during the accounting period.
c. If the product is composed of mass-produced homogeneous units.
d. Whenver standard costing techniques should not be used.
85. Which of the following is a characteristic of a process costing system?
a. Work-in-process inventory is restated in terms of completed units.
b. Costs are accumulated by order.
c. It is used by a company manufacturing custom machinery.
d. Standard costs are not applicable.
86. From the industries listed below, which one is most likely to use process costing for production costs?
a. Road builder c. Newspaper publisher
b. Electrical contractor d. Automobile repair shop
87. An equivalent unit of a material or conversion cost is equal to
a. The amount of material or conversion cost necessary to complete one unit of production.
b. A unit of work-in-process inventory
c. The amount of material or conversion cost necessary to start a unit of production in work-in-process.
d. Fifty percent of the material or conversion cost of a unit of finished goods inventory (assuming a
linear production pattern)
88. The percentage of completion of the beginning work-in-process inventory should be considered in the
computation of the equivalent units of production for which of the following methods of process costing?
FIFO Weighted Averdge
a. yes no
b. Yes yes
c. no yes
 d. no no
89. The units transferred in from the first department to the second department should be included in the
computation of the equivalent units for the second department under which of the following methods of process
costing?
FIFO Weighted Average
a. yes yes
b. yes no
c. no yes
d. no no
90. in a given process costing system. the equivalent units of production are computed using the weighted-
average method. With respect to conversion costs, the percentage of completion for the current period only is
included in the calculation of the
Beginning Work-in- Ending Work-in-
Process inventory Process Inventory
a. no no
b. no yes
c. yes no
d. yes yes
91. In a process costing system, how is the unit cost affected in a production cost report when materials are
added in a department subsequent to the first department and the added materials result in additional units?
a. The first departments unit cost is increased, which necessitates an adjustment of the transferrred-in
unit cost
b. The first depariment's unit cost is decreased, which necessitates an adjustment of the transferred-in
unit cost.
c. The first department's unit cost is increased, but it does not necessitate an adjustment of the
transferred-in unit cost.
d. The first department's unit cost is decreased, but it does not necessitate an adjustment of the
transfered-In unit cost.

MULTIPLE CHOICE THEORIES - ANSWERS

1. C 21. B 41. D 61. D 81. D

2. C 22. B 42. D 62. B 82. D
3. D 23. B 43. B 63. A 83. D
4. C 24. C 44. A 64. D 84. C
5. D 25. D 45. B 65. D 85. A
6. C 26. B 46. A 66. D 86. C
7. B 27. D 47. D 67. D 87. A
8. D 28. B 48. B 68. D 88. A
9. A 29. C 49. C 69. D 89. A
10. B 30. C 50. A 70. B 90. B
11. B 31. B 51. B 71. C 91. B
12. B 32. D 52. B 72. C
13. B 33. C 53. C 73. A
14. B 34. D 54. A 74. A
15. A 35. A 55. B 75. A
16. D 36. C 56. B 76. A
17. A 37. B 57. B 77. D
18. C 38. D 58. B 78. B
19. C 39. D 59. D 79. B
20. D 40. D 60. D 80. B