Process Costing

Process costing is a method of costing used in what type of industries?

• Manufacturing

• Transportation

• Services

• Constructions

A process costing system is most appropriate when

• When a company uses job costing system
• When a company produces large quantities of identical products in a continuous flow.
• When a company has a simple production process
• When a company produces small quantities of unique products

A characteristic of products that are mass-produced in a continuous fashion is that

• They have high unit costs and are produced in small quantities
• They are standardized, have low unit costs, and are produced in large quantities.
• They are handcrafted with unique designs
• They are only available for a limited time

20,000 units in a process that are 70% complete are referred to as:

• 14,000 equivalent units
• 16,000 equivalent units
• 10,000 equivalent units
• 8,000 equivalent units

Conversion costs are the sum of:

• Selling and administrative costs
• Variable and fixed costs
• Direct materials and indirect labor costs
• Direct labor and manufacturing overhead costs

In a process cost system, the flow of cost is:

• Cost flows from Finished Goods inventory to Work in Process (WIP) inventory.
• Cost flows from Finished Goods inventory to Cost of Goods Sold.
• Cost flows from Work in Process (WIP) inventory to Finished Goods inventory.
• Cost flows from Cost of Goods Sold to Work in Process (WIP) inventory.

What are the effect of error in process costing?

• Increased accuracy in product costs
• The effects of error in process costing include inaccurate product costs, misallocation of resources, inefficiencies in production, and impact on decision-making, budgeting, and financial reporting.
• Efficient allocation of resources
• No impact on decision-making

A process cost system would be used for all of the following products except...

• high-end custom furniture
• mass-produced toys
• low-cost clothing
• handmade jewelry

FIFO assumes that units in beginning work in process are completed last.

• True
• False

Which of the following methods uses costs and work of beginning work in process?

• FIFO method

• LIFO method

• Weighted Average method

• Both FIFO and Weighted average method