cost accounting focuses on the process involved in mass-producing products that
are very similar in nature.
cost systems are used to apply costs to a specific job, such as the
manufacturing of a specialized machine.
3. A company that produces
motion pictures would likely use a process cost system.
a process cost system, costs are tracked through a series of connected
manufacturing processes or departments, rather than by individual jobs.
5. In a process cost system,
total costs are determined at the end of a month or year.
6. Separate work in process
accounts are maintained for each production department or manufacturing process
in a process cost system.
a process cost system, materials, labor and overhead are only added in the
first production department.
assignment of the three manufacturing cost elements to Work in Process in a
process cost system is the same as in a job order cost system.
materials requisitions are generally required in a process cost system than in
a job order cost system.
10. In a process cost system, all
labor costs incurred within a producing department are a cost of processing the
11. A primary driver of
overhead costs in continuous manufacturing operations is machine time used.
12. Equivalent units of
production are used to determine the cost per unit of completed products.
13. Equivalent units of
production measure the work done during a period, expressed in fully completed
14. Equivalent units of
production is the sum of units completed and transferred out plus equivalent
units of beginning work in process.
15. The weighted-average method
of computing equivalent units is the most widely used method in practice.
16. There are no units in
process at the beginning of the period, 1,000 units in process at the end of
the period that are 40% complete, and 10,000 units transferred out during the
period. Based on this information, there were 9,600 equivalent units of
production during the period.
17. The first step performed in
preparing a production cost report is computing the equivalent units of
18. Equivalent units of
production must be calculated before the unit production costs can be computed.
19. The physical units in a
department are another name for the equivalent units of production.
20. Unit material cost is
computed by taking total material costs charged to the department for the
period and dividing by the physical units in the process during the period.
21. When equivalent units of
production are different for materials and conversion costs, unit costs are
computed for materials, conversion, and total manufacturing.
22. The total manufacturing
cost per unit is used in costing the units completed and transferred during the
23. A production cost report is
an internal document for management that shows production quantity and cost
data for a particular job.
24. Production cost reports
provide a basis for evaluating the productivity of a department.
25. Companies often use a
combination of a process cost and a job order cost system, called operations
26. Large inventories of raw
materials must be maintained in a just-in-time system.
27. Just-in-time strives to
eliminate inventories by using a pull approach.
28. Rework costs typically
increase in just-in-time processing.
29. Activity-based costing
(ABC) can be used only with process cost systems.
a30. ABC eliminates arbitrary assignments of
31. In continuous process
manufacturing, generally once the production begins, it continues until the
finished product emerges.
32. One similarity of process
cost accounting with job order cost accounting is that both determine total
manufacturing costs after each job.
33. The flow of costs in a
process costing system requires that materials be added in one department,
labor added in another department and manufacturing overhead in a third
34. When finished goods are
sold, the entry to record the cost of goods sold is a debit to Finished Goods
Inventory and a credit to Cost of Goods Sold.
35. When there is no beginning
work in process and materials are entered at the beginning of the process,
equivalent units of materials are the same as the units started into
36. In order to compute the
physical unit flow, a company must first compute unit production costs.
37. In activity-based costing,
the focus is on the activities performed to produce specific products.
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