Question

If you are going to Refine your cost system you must

A identify the activities involved in a process and understanding how those activities consume resources

B Seek an easier and more cost effective way to calculate average costs

C classify as many costs as indirect costs as is feasible

D create as many cost pools as possible to capture all costs

If using the weighted-average method of process costing and you are calculating the cost per equivalent unit (step 4), you would include all the costs ________.

A that have entered work in process from the units started or transferred in during the current accounting period

B that have entered work in process during the current accounting period from the units started or transferred in minus the costs associated with ending inventory

C entering work in process from the units in beginning inventory plus the costs for the work completed during the current accounting period

D that have entered work in process during the current accounting period from the units started or transferred in plus the costs associated with ending inventory

Companies that use a process costing system are at a disadvantage over those that use job order costing because

A t requires the estimation of percentage of completion of work-in-process for calculating equivalent units.

B it is difficult to determine cost of goods sold when partial shipments are made before completion.

C time spent on tracking labor and materials is wasted.

D it is difficult to ensure that material and labor are accurately charged to each specific job.

Answer 1

1. If you are going to refine your cost system you must

• A: identify the activities involved in a process and understanding how those activities consume resources.
  • This is correct answer because you are improving your cost system and for that you have to understand the each process and activity of your manufacturing system.
• B: Seek an easier and more cost effective way to calculate average costs.
  • This is not a correct answer because the business owner will not do anything that is easier but not a good and effective thing.
• classify as many costs as indirect costs as is feasible
  • This is not a correct answer because this will result in higher indirect cost and cost allocation between products may not be correctly done.
• D: create as many cost pools as possible to capture all costs
  • This answer is not correct because the more cost pool you make you have to make more cost drivers and it would result in lengthy process in cost allocating. Cost pools should be reasonable as possible.

2. If using the weighted-average method of process costing and you are calculating the cost per equivalent unit (step 4), you would include all the costs ________

• A: that have entered work in process from the units started or transferred in during the current accounting period
  • This answer is not correct because, this does not include beginning inventory.
• B: that have entered work in process during the current accounting period from the units started or transferred in minus the costs associated with ending inventory
  • This answer is not correct because, this does not include beginning inventory.
• C: entering work in process from the units in beginning inventory plus the costs for the work completed during the current accounting period
  • This is a correct answer because, for calculating the cost per equivalent unit we add all costs from opening inventory + total transfer in cost during the period.
• D: that have entered work in process during the current accounting period from the units started or transferred in plus the costs associated with ending inventory
  • This answer is not correct because, this does not include beginning inventory.

3. Companies that use a process costing system are at a disadvantage over those that use job order costing because

• A: it requires the estimation of percentage of completion of work-in-process for calculating equivalent units.
  • This is not a correct answer because, the estimation of % of completion is required but it’s not a difficult task.
• B: it is difficult to determine cost of goods sold when partial shipments are made before completion.
  • This answer is correct because, while using the process costing system it is difficult to determine COGS when partial shipments are made before completion of process.
• C: time spent on tracking labour and materials is wasted.
  • This is not a correct answer because, time has not been wasted on tracking.
• D: it is difficult to ensure that material and labour are accurately charged to each specific job.
  • This is not a correct answer because, material & labour can be accurately charged to specific job.