Question

True or False

1. Job order costing is used by companies that make large or unique products.

2. In a job order costing system, product costs are traced to work cells or departments.

3. A process costing system is used by companies that manufacture large amounts of similar products or liquid products.

4. In a process costing system, product costs are traced to individual products.

5. A basic part of a job order costing system is the set of procedures and entries used to record the costs incurred for materials, labor, and manufacturing overhead.

6. Costs for individual jobs are maintained on job order cost cards when job order costing is in use.

7. When manufacturing overhead costs are applied, they increase the Work in Process Inventory account.

8. When the goods are sold, the Cost of Goods Sold account is increased, and the Finished Goods Inventory account is decreased for the selling price of the goods sold.

9. If applied overhead exceeds actual overhead, cost of goods sold must be reduced by the amount of the over charge in a job order costing system.

10. In order to be classified as a process costing system, the product flow must represent a series of processes in which only one process has input into the next process.

11. Because process costing is normally associated with a continuous production flow, products that are in process at the beginning of the period are assumed to be the first products completed during the current period.

12. In a process costing system, products flow in a LIFO manner, from department to department.

13. In a process costing system, all production costs are assigned to departments.

14. In a process costing system, each department’s production costs are transferred to the next department or to the Finished Goods Inventory account.

15. In process costing, all manufacturing costs incurred by a department or production process are divided by the equivalent units produced during the period to determine the average cost per unit produced.

16. When the FIFO cost flow assumption is used, the equivalent units will always equal the actual units in beginning work in process inventory, plus the actual units started and completed during the current period plus the percent of ending work in process inventory completed during the current period.

17. Total product costs for the period include direct materials, direct labor, and manufacturing overhead.

18. Equivalent units are defined as the number of units completed and transferred out of work in process inventory during the current period.

19. In many instances, direct materials are added at the beginning of the process.

20. Separate equivalent units of production usually are calculated for materials and conversion costs.

21. The number of equivalent units of production may be larger than the number of completed units during the period.

22. The FIFO process costing method assumes that the items in ending work in process inventory were started and completed during the current period.

23. Equivalent production is a measure of productive output of units for a period of time, expressed in terms of fully completed or equivalent whole units produced.

24. Conversion costs are defined as the combined total of direct materials costs and direct labor costs incurred by a production department.

25. If 45,000 units of ending work in process inventory are 60 percent complete as to conversion costs, 27,000 equivalent units of conversion costs must be incurred to complete these units during the next period.

26. Unit costs are determined by dividing the total costs of the period by the equivalent units.

27. One of the steps in preparing the process cost report requires   dividing current costs charged to the Work in Process Inventory account of each department or production process by equivalent units to calculate the cost per equivalent unit.

28. The basis used in computing unit cost for the process costing system is made up of certain specific jobs worked on during the fiscal year.

29. One reason for preparing a process cost report for a particular department is to determine the amount of costs to transfer to the next department or to the Finished Goods Inventory account at the end of the period.

Answer 1