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T2 – Topic Focus: Process Costing

TRUE-FALSE STATEMENTS

  1. Companies that mass produce similar products or employ a continuous production process typically use a process costing system.

LO1 – True

LO: 1, Bloom: K, Unit: TF02-1, Difficulty: Easy, Min: 1, AACSB: Analytic, AICPA FN: Reporting, AICPA PC: Communication, IMA: Cost Management

  1. Companies that mass produce similar products or employ a continuous production process typically use a job order system.

LO1 – False – Companies that mass producesimilar products or employ a continuous production process typically use a process costing system.

LO: 1, Bloom: K, Unit: TF02-1, Difficulty: Easy, Min: 1, AACSB: Analytic, AICPA FN: Reporting, AICPA PC: Communication, IMA: Cost Management

  1. In a process costing system, all product costs for the period are accumulated and divided evenly over all units produced during the period.

LO1 – True

LO: 1, Bloom: K, Unit: TF02-1, Difficulty:Moderate, Min: 1, AACSB: Analytic, AICPA FN: Measurement, AICPA PC: Problem Solving and Decision Making, IMA: Cost Management

  1. In a job order costing system, all product costs for the period are accumulated and divided evenly over all units produced during the period.

LO1 – False - In a process costing system, all product costs for the period are accumulated and divided evenly over all units produced during the period.

LO: 1, Bloom: K, Unit: TF02-1, Difficulty: Moderate, Min: 1, AACSB: Analytic, AICPA FN: Measurement, AICPA PC: Problem Solving and Decision Making, IMA: Cost Management

  1. The soft drink bottler Dr. Pepper is an example of a company that would use a process costing system.

LO1 – True

LO: 1, Bloom: C, Unit: TF02-1, Difficulty: Moderate, Min: 1, AACSB: Analytic, AICPA FN: Reporting, AICPA PC: Problem Solving and Decision Making, IMA: Cost Management

  1. The accounting firm PriceWaterhouseCoopers is an example of a company that would use a process costing system.

LO1 – False - The accounting firm PriceWaterhouseCoopers is an example of a company that would use a job order costing system.

LO: 1, Bloom: C, Unit: TF02-1, Difficulty: Moderate, Min: 1, AACSB: Analytic, AICPA FN: Reporting, AICPA PC: Problem Solving and Decision Making, IMA: Cost Management

  1. Costs incurred in a process costing system include direct material, direct labor and overhead.

LO1 – True

LO: 1, Bloom: K, Unit: TF02-1, Difficulty: Easy, Min: 1, AACSB: Analytic, AICPA FN: Measurement, AICPA PC: Problem Solving and Decision Making, IMA: Cost Management

  1. The costs incurred in a process costing system, direct material, direct labor and overhead, are the same as the costs incurred in a job order costing system.

LO1 – True

LO: 1, Bloom: C, Unit: TF02-1, Difficulty: Moderate, Min: 1, AACSB: Analytic, AICPA FN: Measurement, AICPA PC: Problem Solving and Decision Making, IMA: Cost Management

  1. The inventories used in a process costing system include work-in-process and finished goods, but not raw materials.

LO1 – False – The inventories used in a process costing system include raw materials, work-in-process and finished goods.

LO: 1, Bloom: K, Unit: TF02-1, Difficulty: Easy, Min: 1, AACSB: Analytic, AICPA FN: Reporting, AICPA PC: Communication, IMA: Cost Management

  1. The inventories used in a process costing system are the same as those used in a job order costing system.

LO1 – True

LO: 1, Bloom: C, Unit: TF02-1, Difficulty: Easy, Min: 1, AACSB: Analytic, AICPA FN: Reporting, AICPA PC: Communication, IMA: Cost Management

  1. Both process costing systems and job order costing systems accumulate costs on a job cost sheet.

LO1 – False – In a job order costing system, the costs of each job are accumulated on a job cost sheet. In process costing, by contrast, the costs are accumulated by department.

LO: 1, Bloom: K, Unit: TF02-1, Difficulty: Easy, Min: 1, AACSB: Analytic, AICPA FN: Measurement, AICPA PC: Problem Solving and Decision Making, IMA: Cost Management

  1. In a job order costing system, the costs of each job are accumulated on a job cost sheet, while in process costing, the costs are accumulated by department.

LO1 – True

LO: 1, Bloom: K, Unit: TF02-1, Difficulty: Easy, Min: 1, AACSB: Analytic, AICPA FN: Measurement, AICPA PC: Problem Solving and Decision Making, IMA: Cost Management

  1. In process costing, all materials are added at the beginning of the production process, then labor and overhead is added during the production process.

LO1 – False – Direct materials may be added at different points of the department’s production process.

LO: 1, Bloom: C, Unit: TF02-1, Difficulty: Moderate, Min: 1, AACSB: Analytic, AICPA FN: Measurement, AICPA PC: Problem Solving and Decision Making, IMA: Cost Management

  1. In process costing, direct materials may be added at different points of a department’s production process.

LO1 – True

LO: 1, Bloom: K, Unit: TF02-1, Difficulty: Easy, Min: 1, AACSB: Analytic, AICPA FN: Measurement, AICPA PC: Problem Solving and Decision Making, IMA: Cost Management

  1. The journal entries used to record cost flows in a process costing system are the same as those used to record cost flows in a job order costing system.

LO1 – True

LO: 1, Bloom: C, Unit: TF02-1, Difficulty: Moderate, Min: 1, AACSB: Analytic, AICPA FN: Measurement, AICPA PC: Problem Solving and Decision Making, IMA: Cost Management

  1. The journal entries used to record cost flows in a process costing system differ from those used to record cost flows in a job order costing system.

LO1 – False – The journal entries used to record cost flows in a process costing system are the same as those used to record cost flows in a job order costing system.

LO: 1, Bloom: C, Unit: TF02-1, Difficulty: Moderate, Min: 1, AACSB: Analytic, AICPA FN: Measurement, AICPA PC: Problem Solving and Decision Making, IMA: Cost Management

  1. Both the process costing and job order costing systems accumulate product costs throughout the production process and assign those costs to individual units of production.

LO1 – True

LO: 1, Bloom: C, Unit: TF02-1, Difficulty: Moderate, Min: 1, AACSB: Analytic, AICPA FN: Measurement, AICPA PC: Problem Solving and Decision Making, IMA: Cost Management

  1. Like process costing, job order costing makes no attempt to track an individual product’s costs, all the products have similar costs.

LO1 – False – Job order costing tracks individual product costs.

LO: 1, Bloom: C, Unit: TF02-1, Difficulty: Difficult, Min: 1, AACSB: Analytic, AICPA FN: Measurement, AICPA PC: Problem Solving and Decision Making, IMA: Cost Management

  1. When there is no work in process inventory at the end of a period, cost accumulation and reporting is extremely easy under process costing, as the product costs are simply added up and divided evenly among the products produced.

LO1 – True

LO: 1, Bloom: C, Unit: TF02-1, Difficulty: Moderate, Min: 1, AACSB: Analytic, AICPA FN: Measurement, AICPA PC: Problem Solving and Decision Making, IMA: Cost Management

  1. When work is in process at the end of an accounting period, cost accumulation and reporting is extremely easy under process costing, as the product costs are simply added up and divided evenly among the products produced.

LO1 – False - When work is in process at the end of an accounting period, cost accumulation and reporting is more complicated as cost must be assigned to the completed units and to the partially completed units that remain in work in process inventory.

LO: 1, Bloom: C, Unit: TF02-1, Difficulty: Difficult, Min: 1, AACSB: Analytic, AICPA FN: Measurement, AICPA PC: Problem Solving and Decision Making, IMA: Cost Management

  1. Equivalent units (EU) of production is based on the percentage of completion for work in process inventory at the end of the period.

LO3 – True

LO: 3, Bloom: K, Unit: TF02-3, Difficulty: Easy, Min: 1, AACSB: Analytic, AICPA FN: Measurement, AICPA PC: Problem Solving and Decision Making, IMA: Cost Management

  1. In a process costing system, labor and overhead costs are typically combined and referred to as conversion costs.

LO2 – True

LO: 2, Bloom: K, Unit: TF02-2, Difficulty: Easy, Min: 1, AACSB: Analytic, AICPA FN: Reporting, AICPA PC: Communication, IMA: Cost Management

  1. In a process costing system, labor and overhead costs are typically combined and referred to as equivalent costs.

LO2 – False – In a process costing system, labor and overhead costs are typically combined and referred to as conversion costs.

LO: 2, Bloom: K, Unit: TF02-2, Difficulty: Moderate, Min: 1, AACSB: Analytic, AICPA FN: Reporting, AICPA PC: Communication, IMA: Cost Management

  1. Equivalent units for direct materials and conversion costs should be added separately to total units completed to arrive at the total equivalent units for materials and the total equivalent units for conversion.

LO3 – True

LO: 3, Bloom: K, Unit: TF02-3, Difficulty: Moderate, Min: 1, AACSB: Analytic, AICPA FN: Measurement, AICPA PC: Problem Solving and Decision Making, IMA: Cost Management

  1. The objective of process costing is the same as job order costing: to assign all costs to specific jobs.

LO1 – False – The object for process costing is the same as job order costing: to develop a product unit cost to use in decision making and inventory valuation.

LO: 1, Bloom: C, Unit: TF02-1, Difficulty: Moderate, Min: 1, AACSB: Analytic, AICPA FN: Measurement, AICPA PC: Problem Solving and Decision Making, IMA: Cost Management

MULTIPLE-CHOICE QUESTIONS

  1. Companies that mass-produce similar products or employ a continuous production process typically use which of the following costing systems?
  2. Job order
  3. Process
  4. Accumulation
  5. Variable

LO1 – B

LO: 1, Bloom: K, Unit: TF02-1, Difficulty: Easy, Min: 2, AACSB: Analytic, AICPA FN: Reporting, AICPA PC: Communication, IMA: Cost Management

  1. Companies that mass-produce similar products or employ a continuous production process typically use which of the following costing systems?
  2. Process
  3. Job order
  4. Either process or job order
  5. Neither process nor job order

LO1 –A

LO: 1, Bloom: K, Unit: TF02-1, Difficulty: Easy, Min: 2, AACSB: Analytic, AICPA FN: Reporting, AICPA PC: Communication, IMA: Cost Management

  1. The costing systems in which all product costs for the period are accumulated and divided evenly over all units produced during the period is referred to as
  2. Job order costing system
  3. Accumulation costing system
  4. Departmental costing system
  5. Process costing system

LO1 – D

LO: 1, Bloom: K, Unit: TF02-1, Difficulty: Easy, Min: 2, AACSB: Analytic, AICPA FN: Measurement, AICPA PC: Problem Solving and Decision Making, IMA: Cost Management

  1. Which of the following types of entities would probably use a process costing system?
  2. Construction
  3. Ship building
  4. Soft drink bottler
  5. CPA firm

LO1 – C

LO: 1, Bloom: C, Unit: TF02-1, Difficulty: Moderate, Min: 2, AACSB: Analytic, AICPA FN: Reporting, AICPA PC: Communication, IMA: Cost Management

  1. Which of the following types of entities would probably use a process costing system?
  2. Automobile repair shop
  3. Paint manufacturer
  4. Printing company
  5. Law firm

LO1 – B

LO: 1, Bloom: C, Unit: TF02-1, Difficulty: Moderate, Min: 2, AACSB: Analytic, AICPA FN: Reporting, AICPA PC: Communication, IMA: Cost Management

  1. Which of the following types of entities would probably use a process costing system?
  2. Oil refiner
  3. Construction company
  4. Airplane manufacturer
  5. CPA firm

LO1 – A

LO: 1, Bloom: C, Unit: TF02-1, Difficulty: Moderate, Min: 2, AACSB: Analytic, AICPA FN: Reporting, AICPA PC: Communication, IMA: Cost Management

  1. Which of the following costs are incurred in a process costing system?
  2. Direct material
  3. Direct labor
  4. Manufacturing overhead
  5. All of these answer choices are correct

LO1 – D

LO: 1, Bloom: C, Unit: TF02-1, Difficulty: Easy, Min: 2, AACSB: Analytic, AICPA FN: Reporting, AICPA PC: Communication, IMA: Cost Management

  1. Which of the following inventory accounts is not used in a process costing system?
  2. Work in process
  3. Finished goods
  4. Cost of goods sold
  5. All of these answer choices are used in a process costing system

LO1 – C

LO: 1, Bloom: C, Unit: TF02-1, Difficulty: Moderate, Min: 2, AACSB: Analytic, AICPA FN: Reporting, AICPA PC: Communication, IMA: Cost Management

  1. Which of the following inventory accounts is used in a process costing system?
  2. Raw materials
  3. Work in process
  4. Finished goods
  5. All of these answer choices are correct

LO1 – D

LO: 1, Bloom: C, Unit: TF02-1, Difficulty: Easy, Min: 2, AACSB: Analytic, AICPA FN: Reporting, AICPA PC: Communication, IMA: Cost Management

  1. In a job order costing system, the costs of each job are accumulated on a
  2. Job cost sheet.
  3. Departmental cost sheet.
  4. End-of-job accumulation sheet.
  5. None of these answer choices are correct.

LO1 – A

LO: 1, Bloom: K, Unit: TF02-1, Difficulty: Easy, Min: 2, AACSB: Analytic, AICPA FN: Measurement, AICPA PC: Problem Solving and Decision Making, IMA: Cost Management

  1. In a process costing system, when raw material is received in which of the following balance sheet accounts is it recorded?
  2. Raw materials inventory
  3. Work in process inventory
  4. Finished goods inventory
  5. Cost of goods sold

LO1 – A

LO: 1, Bloom: C, Unit: TF02-1, Difficulty: Moderate, Min: 2, AACSB: Analytic, AICPA FN: Measurement, AICPA PC: Problem Solving and Decision Making, IMA: Cost Management

  1. In a process costing system, when raw materials are moved into the mixing department, in which of the following balance sheet accounts is it recorded?
  2. Raw materials inventory – mixing
  3. Work in process inventory – mixing
  4. Finished goods inventory – mixing
  5. Cost of goods sold

LO1 – B

LO: 1, Bloom: C, Unit: TF02-1, Difficulty: Moderate, Min: 2, AACSB: Analytic, AICPA FN: Measurement, AICPA PC: Problem Solving and Decision Making, IMA: Cost Management

  1. Which of the following is a similarity between job order costing and process costing systems?
  2. Both accumulate product costs throughout the production process and assign those costs to individual units of production
  3. Both track individual product costs
  4. Both accumulate product costs in each production department during the period
  5. Both accumulate costs on a job cost sheet

LO1 – A

LO: 1, Bloom: C, Unit: TF02-1, Difficulty: Moderate, Min: 2, AACSB: Analytic, AICPA FN: Measurement, AICPA PC: Problem Solving and Decision Making, IMA: Cost Management

  1. Which of the following is a similarity between job order costing and process costing systems?
  2. Both mass-produce identical products
  3. Both accumulate direct materials, direct labor and manufacturing overhead costs
  4. Both accumulate product cost on a departmental production report
  5. None of these answer choices are similarities between job costing and process costing systems.

LO1 – B

LO: 1, Bloom: C, Unit: TF02-1, Difficulty: Moderate, Min: 2, AACSB: Analytic, AICPA FN: Measurement, AICPA PC: Problem Solving and Decision Making, IMA: Cost Management

  1. Which of the following is a similarity between job order costing and process costing systems?
  2. Both accumulate costs on a job cost sheet
  3. Both accumulate product costs in each production department during the period
  4. Both systems track cost flows from raw materials to work in process, from work in process to finished goods, and from finished goods to cost of goods sold
  5. Both produce many different types of products, often to customer specifications

LO1 – C

LO: 1, Bloom: C, Unit: TF02-1, Difficulty: Moderate, Min: 2, AACSB: Analytic, AICPA FN: Measurement, AICPA PC: Problem Solving and Decision Making, IMA: Cost Management

  1. Which of the following is a similarity between job order costing and process costing systems?
  2. Both accumulate product costs throughout the production process and assign those costs to individual units of production
  3. Both accumulate direct materials, direct labor, and manufacturing overhead costs
  4. Both track cost flows from raw materials to work in process, from work in process to finished goods, and from finished goods to cost of goods sold
  5. All of these answer choices are similarities between job costing and process costing systems

LO1 – D

LO: 1, Bloom: C, Unit: TF02-1, Difficulty: Moderate, Min: 2, AACSB: Analytic, AICPA FN: Measurement, AICPA PC: Problem Solving and Decision Making, IMA: Cost Management

  1. Which of the following is a difference between job order costing and process costing systems?
  2. Companies that use a process costing system mass-produce identical products while companies that use a job order costing system produce many different types of products.
  3. Companies that use a process costing system accumulate product costs throughout the production process while companies that use a job order costing system accumulate product cost only at the end of the production process.
  4. Companies that use a process costing system accumulate direct material and direct labor, but not manufacturing overhead while companies that use a job order costing systems accumulate direct material, direct labor and manufacturing overhead.
  5. All of these answer choices are differences between process costing and job order costing systems.

LO1 – A

LO: 1, Bloom: C, Unit: TF02-1, Difficulty: Difficult, Min: 2, AACSB: Analytic, AICPA FN: Measurement, AICPA PC: Problem Solving and Decision Making, IMA: Cost Management

  1. Which of the following is a difference between job order costing and process costing systems?
  2. Companies that use a process costing system accumulate product costs throughout the production process while companies that use a job order costing system accumulate product cost only at the end of the production process.
  3. Companies that use a process costing system accumulate product costs in each production department and allocate the costs evenly across all units produced in the department during the period while companies that use job order costing accumulate product costs by job and allocate those costs only to the units in that particular job.
  4. Companies that use a process costing system accumulate direct material and direct labor, but not manufacturing overhead while companies that use a job order costing systems accumulate direct material, direct labor and manufacturing overhead.
  5. All of these answer choices are differences between process costing and job order costing systems.

LO1 – B

LO: 1, Bloom: C, Unit: TF02-1, Difficulty: Difficult, Min: 2, AACSB: Analytic, AICPA FN: Measurement, AICPA PC: Problem Solving and Decision Making, IMA: Cost Management

  1. Which of the following is a difference between job order costing and process costing systems?
  2. Companies that use a process costing system accumulate product costs throughout the production process while companies that use a job order costing system accumulate product cost only at the end of the production process.
  3. Companies that use a process costing system accumulate direct material and direct labor, but not manufacturing overhead while companies that use a job order costing systems accumulate direct material, direct labor and manufacturing overhead.
  4. Companies that use a process costing system accumulate product costs on the departmental production report while companies that use a job order costing system accumulate product costs on the job cost sheet.
  5. All of these answer choices are differences between process costing and job order costing systems.

LO1 – C