Question

True or False

Enter a T or an F in the blank to indicate whether the

statement is true or false.

___ 1. A utility such as a water company would

typically use a process costing system.

___ 2. Under process costing it is important to

identify the materials, labor, and overhead costs asso-

ciated with a particular customer’s order just as under

job-order costing.

___ 3. In a process costing system, the production

report replaces the job cost sheet.

___ 4. Costing is more difficult in a process cost-

ing system than in a job-order costing system.

___ 5. In a process costing system, a work in

process account is maintained for each processing de-

partment.

___ 6. Since costs are accumulated by department

in a process costing system, there is no need for a fi-

nished goods inventory account.

___ 7. In process costing, costs incurred in a de-

partment are not transferred to the next department.

___ 8. If beginning work in process inventory

contains 500 units that are 60% complete, then the in-

ventory contains 300 equivalent units.

Answer 1

1.True

Process costing is used widely by utilities like gas,electricity,water etc as their output is homogenous.

2.False

As the units can be distinguished from each other,thus there would be no need of identification of costs by customer order.

3.True

Under process costing system a production report for each department is prepared in place of job cost sheet.

4.False

Costing is comparatively easier under process costing as labor and material costs need not be traced to individual jobs.Process costing is simpler and less expensive than job order costing,job order costing is more complex and detailed.

5.True

A work in process inventory account is maintained under process costing system for each of its department

6.False

A finished goods inventory account is required under process costing system for unsold finished units just as under job order costing system.

7.False

As there is movement of units from one department to another,all the costs that has been incurred to that particular point would be forwarded with the units

8.True

60%*500=300 equivalent units