Question

True/False–Circle the best

TF 1. Multiple overhead rates may be applied to give more accurate product costs if departments consume resources differently.

TF 2.In a job-order cost sheet only the totals by cost component are recorded.

TF 3. In a process costing system, there is a separate Work-in-Process account for each process.

TF 4.Service firms cannot use a process costing approach because services are never homogeneous or repetitive.

TF 5. There is no difference in the unit costs computed under the weighted average and FIFO methods of process costing if there are no beginning work-in-process inventories.

TF6. Under the weighted average method, the equivalent units in the production report relate only to work done during the current period.

TF 7. In a process costing system, the costs of one processing department become the transferred-in costs of the next processing department.

TF 8. Theoretically speaking, the weighted average method in a process costing method provides a more realistic calculation of the costs incurred in a given period.

TF 9.The operation costing method assigns direct labor costs using the procedures of the process costing method

Answer 1

1. True

When resources are consumed differently multiple overhead rates gives better reflection of product cost compared to single overhead rate.

2. False

The cost is recorded at each material requisition slip for material cost; direct labor is recorded based on time sheet maintained and overheads are absorbed based on direct labor hours

3. True

A work in process account is maintained for each process and it is charged with direct material, direct labor and manufacturing overheads absorbed. It has beginning work in process and work completed and transferred is credited.

4. False

Service firms like business processing firms, legal processing firms which have common type of service work can use process costing for services performed

5. True

The difference between weighted average costing and FIFO method of costing in process costing is how opening work in process is treated. So if there is no work in process at beginning cost per equivalent unit is same

6. True.

In weighted average costing the equivalent units relate to units completed and transferred and the closing work in process during the period. The opening work in process units is not considered separately.

7. True

The output of one process is transferred out cost and it is transferred in cost for the next process. Only the output of last process is transferred to finished goods inventory

8. False

The weighted average period averages the opening WIP cost and the cost incurred during the period. Hence it does not give realistic calculation of cost incurred in a given period. FIFO method considers only cost of the given period

9. False

The direct labor cost is assigned based on the each operation performed. The cost is assigned at each operations level. This facilitates better control of costs compared to cost incurred at process level.