Accounting 202 - Chapter 5.3

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Accounting Quizzes & Trivia

Process costing is very different from job costing. While one is the accumulation of dingle costs throughout the process the other is an accumulation of all cost involved for a process. Do you believe you can distinguish the two? Take up the quiz below and find out. All the best!


Questions and Answers
  • 1. 

    Direct labor costs plus manufacturing overhead costs equal:

    • A.

      Prime costs.

    • B.

      Operating costs.

    • C.

      Equivalent costs.

    • D.

      Conversion costs.

    Correct Answer
    D. Conversion costs.
    Explanation
    Conversion costs refer to the costs incurred in the process of converting raw materials into finished goods. This includes both direct labor costs, which are the wages and benefits paid to workers directly involved in the production process, and manufacturing overhead costs, which include indirect labor, utilities, and other expenses related to production. Therefore, the sum of direct labor costs and manufacturing overhead costs equals conversion costs.

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  • 2. 

    A system for assigning costsfor products made in a continuous processis:

    • A.

      Job costing

    • B.

      Process costing

    • C.

      Equivalent units costing

    • D.

      Conversion cost costing

    Correct Answer
    B. Process costing
    Explanation
    Process costing is the correct answer for this question. Process costing is a system used to assign costs to products that are made in a continuous process. This method is commonly used in industries such as chemical, food, and beverage manufacturing, where products go through multiple stages of production. In process costing, costs are allocated to each process or department, and then averaged out over the total number of units produced. This allows for a more accurate determination of the cost per unit and helps in analyzing the efficiency of the production process.

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  • 3. 

    In a process costing system, manufacturing costs are usually combined into two categories:

    • A.

      Direct materials and conversion costs.

    • B.

      Direct labor and conversion costs.

    • C.

      Manufacturing overhead and conversion costs.

    • D.

      Direct materials and direct labor.

    Correct Answer
    A. Direct materials and conversion costs.
    Explanation
    In a process costing system, manufacturing costs are typically divided into two main categories: direct materials and conversion costs. Direct materials refer to the raw materials that are directly used in the production process, while conversion costs include the cost of labor and other expenses incurred to convert the raw materials into finished products. This categorization allows for a more accurate calculation of the total manufacturing costs and helps in determining the cost per unit of production.

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  • 4. 

    The cost per equivalent unit is computed as

    • A.

      Total costs to account for divided by total equivalent units

    • B.

      Total equivalent units divided by total costs to account for

    • C.

      Costs in beginning WIP inventory divided by equivalent units in beginning WIP

    • D.

      Costs added to production during the month divided by equivalent units in ending WIP

    Correct Answer
    A. Total costs to account for divided by total equivalent units
    Explanation
    The cost per equivalent unit is calculated by dividing the total costs to account for by the total equivalent units. This calculation allows for determining the average cost per unit produced during a given period. By dividing the total costs by the total equivalent units, it provides a more accurate representation of the cost incurred for each unit produced, taking into account the costs associated with both the beginning and ending work-in-progress inventories.

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  • 5. 

    For which of the following do we prepare calculations for equivalent units?

    • A.

      Both direct labor and manufacturing overhead

    • B.

      Both direct labor and direct materials

    • C.

      Both direct materials and conversion costs

    • D.

      Neither direct materials nor conversion costs

    Correct Answer
    C. Both direct materials and conversion costs
    Explanation
    When preparing calculations for equivalent units, we consider both direct materials and conversion costs. Equivalent units are used to measure the amount of work done on partially completed units, and these calculations take into account the materials used as well as the costs incurred during the conversion process. Therefore, both direct materials and conversion costs are important factors in determining the equivalent units.

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  • 6. 

    A transfer of $24,000 from the assembly department to the packaging department would require the entry of a:

    • A.

      Debit to finished goods inventory

    • B.

      Debit to WIP inventory-assembly

    • C.

      Credit to raw materials inventory

    • D.

      Credit to WIP inventory-assembly

    Correct Answer
    D. Credit to WIP inventory-assembly
    Explanation
    A transfer of $24,000 from the assembly department to the packaging department indicates that the assembly department is transferring partially completed goods to the packaging department. This transfer reduces the work-in-progress (WIP) inventory in the assembly department, as the goods are no longer being worked on there. Therefore, a credit entry is made to the WIP inventory-assembly account to reflect the decrease in inventory.

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  • 7. 

    The entry to record actual manufacturing overhead costs incurred in a process department would include a:

    • A.

      Debit to manufacturing overhead

    • B.

      Debit to WIP inventory

    • C.

      Credit to manufacturing overhead

    • D.

      Credit WIP inventory

    Correct Answer
    A. Debit to manufacturing overhead
    Explanation
    The entry to record actual manufacturing overhead costs incurred in a process department would include a debit to manufacturing overhead. This is because manufacturing overhead represents the indirect costs incurred in the production process, such as rent, utilities, and depreciation. By debiting manufacturing overhead, we are increasing the balance in this account to reflect the actual costs incurred.

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  • 8. 

    The entry to record the use of direct materials in production would include a:

    • A.

      Debit to WIP inventory

    • B.

      Debit to raw materials inventory

    • C.

      Debit to finished goods inventory

    • D.

      Credit to finished goods inventory

    Correct Answer
    A. Debit to WIP inventory
    Explanation
    The entry to record the use of direct materials in production would include a debit to WIP inventory. This is because when direct materials are used in production, they are transferred from the raw materials inventory to the work-in-progress (WIP) inventory. The WIP inventory account represents the cost of partially completed goods and is increased when materials are added to the production process. Therefore, a debit entry is made to the WIP inventory to reflect the increase in the cost of materials used in production.

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