CHAPTER 21 F
PROCESS COST ACCOUNTING F F
SUMMARY OF QUESTIONS BY STUDY OBJECTIVES AND BLOOM’S TAXONOMY
F F F F F F F F
Item SO BT Item SO BT Item SO BT Item SO BT Item SO BT
True-False Statements F
sg
1. 1 K 9. 4 K 17. 6 K 25. 7 K 33. 3 C
F F F F
sg F
2. 1 K 10. 4 K 18. 6 C 26. 8 K 34. 4 K
sg
3. 1 F
11. 4 F
19. 6 F
27. 8 F
35. 5 F
4. 2 C
F 12. 5 K
F 20. 6 K
F 28. 8 K
F
sg
36. 6 K
F
5. 2 C
F
13. 5 C
F
21. 6 K
F
29. 9 K
F
sg
37. 9 K
F
a
6. 2 K 14. 5 K 22. 6 C 30. 10 K K
F F F
sg F
7. 2 K 15. 5 K 23. 7 K 31. 1 K
sg
8. 4 F
16. 5 F
24. 7 F
32. 2 F
K K K K
C AP K K
Multiple Choice Questions F F
38. 1 C F 59. 5 AP 80. 6 AP 101. 6 C F 123. 9 C F
F F
39. 1 C F 60. 5 AP 81. 6 AP 102. 6 AP 124. 9 C F
F
40. 1 K F 61. 5 K 82. 6 F
103. 6 AP 125. 9 C F
F F
AP
41. 1 K F 62. 5 AP 83. 6 F 104. 6 F
126. 9 K F
42. 1 63. 5 84. 6 AP 105. 6 AP 127. 9
K F
F
F K F
43. 2 64. 5 AP 85. 6
F
106. 6 AP a
128. 10
C F F AP F
K F
44. 2 K 65. 5 AP 86. 6 F
107. 6 AP
a
129. 10 K
F
AP F
45. 2 C 66. 5 C F F
87. 6 F
108. 6 F st
130. 1 K
F
AP AP F
46. 2 K F 67. 5 AP 88. 6 F
110. 6 F
sg
131. 2 K F
47. 2 K 68. 5
F
89. 6 AP 111. 6 AP st
132. 2 K
F AP F
F F
sg
48. 2 C 69. 5 F
90. 6 AP 112. 6 AP 133. 5 K
F
AP F
sg
F
49. 2 K F 70. 5 F
91. 6 F
113. 6 AP 134. 5 K F
AP AP st
50. 4 C F 71. 5 92. 6 114. 7 F
135. 5 K F
F
C F F AP sg
51. 4 C F 72. 5 AP 93. 6 115. 7 F 136. 6 AP
F C F
AP st
52. 4 C F 73. 5 AP 94. 6 116. 7 137. 6 K F F
AP K sg
53. 4 C F 74. 5 F
95. 6 117. 8 F F
138. 6 C F
AP K F F
K sg
54. 4 K F 75. 5 F 96. 6 118. 8 F
139. 6 AP
AP AP K st
55. 4 C F 76. 6 F
97. 6 F 119. 8 F
140. 6 K
F F
56. 5 AP 77. 6 AP 98. 6 AP 120. 8 C F sg
141. 7 K F
F
57. 5
F
78. 6
F
99. 6 AP 121. 8 C F sg
142. 8 K
AP AP
58. 5 79. 6 F
100. 6
F
122. 9 K F
AP AP AP
F
F C F
AP AP C
F
F
AP C
AP
AP AP
Brief Exercises F
143. 5 AP 145. 5 AP 147. 6 AP 149. 6 AP 151. 6 AP
144. 5 F 146. 6 F 148. 6 F 150. 6 F 152. 6 F
AP AP AP AP AP
sg
F This question also appears in the Study Guide.
F F F F F F F
st
F This question also appears in a self-test at the student companion website.
F F F F F F F F F F F
a
F F This topic is dealt with in an Appendix to the chapter.
F F F F F F F F F F
,21 - 2 Test Bank for Accounting Principles, Eighth Edition
SUMMARY OF QUESTIONS BY STUDY OBJECTIVES AND BLOOM’S TAXONOMY
F F F F F F F F
Exercises
153. 4 AP
F
158. 5 AP
F
163. 5,6 AP
F
168. 6 AP
F
173. 7 AP
154. 4 AP 159. 5 AP 164. 5,6 AP 169. 6 AP
155. 4 F
160. 5,6 F
165. 5,6 F
170. 7 F
156. 4 AP
F 161. 5,6 AP
F 166. 5,6 AP
F 171. 7 AP
F
157. 4 AP 162. 5,6 AN 167. 6 AP 172. 7 AP
AP AP AP AP
Completion Statements F
a
174. 1 K
F
177. 4 K
F
180. 6 AP 183. 8 K
F
186. 10 K
175. 2 K 178. 5 K 181. 6 K F 184. 9 K
176. 2 K 179. 6 K 182. 7 K 185. 9 K
SUMMARY OF STUDY OBJECTIVES BY QUESTION TYPE
F F F F F F
Item Type Item Type Item Type Item Type Item Type Item Type Item Type
Study Objective 1
F F
1. TF 3. TF 38. MC 40. MC 42. MC 174. C
2. TF 31. TF 39. MC 41. MC 130. MC
Study Objective 2
F F
4. TF 7. TF 44. MC 47. MC 131. MC 176. C
5. TF 32. TF 45. MC 48. MC 132. MC
6. TF 43. MC 46. MC 49. MC 175. C
Study Objective 3
F F
33. TF
Study Objective 4
F F
8. TF 11. TF 51. MC 54. MC 153. Ex 156. Ex
9. TF 34. TF 52. MC 55. MC 154. Ex 157. Ex
10. TF 50. MC 53. MC 133. MC 155. Ex 177. C
Study Objective 5
F F
12. TF 56. MC 62. MC 68. MC 74. MC 145. BE 163. Ex
13. TF 57. MC 63. MC 69. MC 75. MC 158. Ex 164. Ex
14. TF 58. MC 64. MC 70. MC 134. MC 159. Ex 165. Ex
15. TF 59. MC 65. MC 71. MC 135. MC 160. Ex 166. Ex
16. TF 60. MC 66. MC 72. MC 143. BE 161. Ex 178. C
35. TF 61. MC 67. MC 73. MC 144. BE 162. Ex
Study Objective 6
F F
17. TF 79. MC 89. MC 99. MC 109. MC 146. BE 163. Ex
18. TF 80. MC 90. MC 100. MC 110. MC 147. BE 164. Ex
19. TF 81. MC 91. MC 101. MC 111. MC 148. BE 165. Ex
20. TF 82. MC 92. MC 102. MC 112. MC 149. BE 166. Ex
21. TF 83. MC 93. MC 103. MC 113. MC 150. BE 167. Ex
22. TF 84. MC 94. MC 104. MC 136. MC 151. BE 168. Ex
36. TF 85. MC 95. MC 105. MC 137. MC 152. BE 169. Ex
76. MC 86. MC 96. MC 106. MC 138. MC 160. Ex 179. C
77. MC 87. MC 97. MC 107. MC 139. MC 161. Ex 180. C
78. MC 88. MC 98. MC 108. MC 140. MC 162. Ex 181. C
, Process Cost Accounting 21 - 3
Study Objective 7 F F
23. TF 25. TF 115. MC 141. MC 171. Ex 173. Ex
24. TF 114. MC 116. MC 170. Ex 172. Ex 182. C
Study Objective 8 F F
26. TF 28. TF 118. MC 120. MC 142. MC
27. TF 117. MC 119. MC 121. MC 183. C
Study Objective 9 F F
29. TF 122. MC 124. MC 126. MC 184. C
37. TF 123. MC 125. MC 127. MC 185. C
Study Objective a10 F F
a a a
30. TF 128. MC 129. MC a186. C
Note: F F TF = True-False
F BE = Brief Exercise
F F F C = F F
Completion
MC = Multiple Choice
F F Ex = Exercise
F F
The chapter also contains one set of ten Matching questions and four Short-Answer
F F F F F F F F F F F F F
Essay questions.
F
CHAPTER STUDY OBJECTIVES F F
1. Understand who uses process cost systems. Process! cost! systems! are! used! by! F F F F F F F F F F F F
companies! that! mass-produce! similar! products! in! a! continuous! fashion.! Once! production!
F F F F F F F F F F F
begins it! continues! until! the! finished! product! emerges.! Each! unit! of! finished! product! is!
F F F F F F F F F F F F F F
indistinguishable! from! every! other! unit. F F F F
2. Explain! the! similarities! and! differences! between! job! order! cost! and! process! cost!
F F F F F F F F F F F F
systems. ! Job! order! cost! systems! are! similar! to! process! cost! systems! in! three! ways:! (1)!
F F F F F F F F F F F F F F F
Both! systems! track! the! same! cost! elements—direct! materials direct! labor and!
F F F F F F F F F F F
manufacturing! overhead.! (2)! Costs! are! accumulated! in! the! same! accounts—Raw! F F F F F F F F F F
Materials! Inventory Factory! Labor and! Manufacturing! Overhead.! (3)! Accumulated! costs!
F F F F F F F F F F
are! assigned! to! the! same! accounts—Work! in! Process Finished! Goods! Inventory and!
F F F F F F F F F F F F
Cost! of! Goods! Sold.! However the! method! of! assigning! costs! differs! significantly.
F F F F F F F F F F F
There! are! four! main! differences! between! the! two! cost! systems:! (1)! A! process! cost!
F F F F F F F F F F F F F F
system! uses! separate! accounts! for! each! production! process! department! or! manufacturing!
F F F F F F F F F F F
process rather! than! only! one! work! in! process! account! used! in! a! job! order! cost! system.!
F F F F F F F F F F F F F F F F
(2)! In! a! process! cost! system costs! are! summarized! in! a! production! cost! report! for! each!
F F F F F F F F F F F F F F F F
department.! In! a! job! cost! system costs! are! charged! to! individual! jobs! and! summarized! in!
F F F F F F F F F F F F F F F
a! job! cost! sheet.! (3)! Costs! are! totaled! at! the! end! of! a! time! period! in! a! process! cost!
F F F F F F F F F F F F F F F F F F F
system but! at! the! completion! of! a! job! in! a! job! cost! system.! (4)! In! a! process! cost! system
F F F F F F F F F F F F F F F F F F F
unit! cost! is! calculated! as:! Total! manufacturing! costs! for! the! period! ÷! Units! produced!
F F F F F F F F F F F F F F
during! the! period.! In! a! job! cost! system unit! cost! is:! Total! cost! per! job! ÷! Units! produced.
F F F F F F F F F F F F F F F F F
3. Explain! the! flow! of! costs! in! a! process! cost! system.! Manufacturing! costs! for! raw!
F F F F F F F F F F F F F F
materials labor and! overhead! are! assigned! to! work! in! process! accounts! for! various!
F F F F F F F F F F F F F
departments! or! manufacturing! processes.! The! costs! of! units! completed! are! transferred!
F F F F F F F F F F F
from! one! department! to! another! as! those! units! move! through! the! manufacturing! process.!
F F F F F F F F F F F F F
The! costs! of! completed! work! are! transferred! to! Finished! Goods! Inventory.! When!
F F F F F F F F F F F F
inventory! is! sold costs! are! transferred! to! Cost! of! Goods! Sold.
F F F F F F F F F F
, 21 - 4 Test Bank for Accounting Principles, Eighth Edition
4. Make! the! journal! entries! to! assign! manufacturing! costs! in! a! process! cost! system.!
F F F F F F F F F F F F F
Entries! to! assign! the! costs! of! raw! materials labor and! overhead! consist! of! a! credit! to! Raw!
F F F F F F F F F F F F F F F F F
Materials! Inventory Factory! Labor and! Manufacturing! Overhead and! a! debit! to! Work! in!
F F F F F F F F F F F F F
Process! for! each! department.! Entries! to! record! the! cost! of! good! transferred! to! another!
F F F F F F F F F F F F F F
department! are! a! credit! to! Work! in! Process! for! the! department! whose! work! is! finished!
F F F F F F F F F F F F F F F
and! a! debit! to! the! department! to! which! the! goods! are! transferred.! The! entry! to! record!
F F F F F F F F F F F F F F F F
units! completed! and! transferred! to! the! warehouse! is! a! credit! for! the! department! whose!
F F F F F F F F F F F F F F
work! is! finished! and! a! debit! to! Finished! Goods! Inventory.! The! entry! to! record! the! sale! of!
F F F F F F F F F F F F F F F F F
goods! is! a! credit! to! Finished! Goods! Inventory! and! a! debit! to! Cost! of! Goods! Sold.
F F F F F F F F F F F F F F F
5. Compute ! equivalent! units.! Equivalent! units! of! production! measure! work! done! during! a!
F F F F F F F F F F F F
period expressed! in! fully! completed! units.! This! concept! is! used! to! determine! the! cost! per!
F F F F F F F F F F F F F F F
unit! of! completed! product.! Equivalent! units! are! the! sum! of! the! units! completed! and!
F F F F F F F F F F F F F F
transferred! out! plus! equivalent! units! of! ending! work! in! process.
F F F F F F F F F
6. Explain! the! four! steps! necessary! to! prepare! a! production! cost! report.! The! four! steps!
F F F F F F F F F F F F F F
to! complete! a! production! cost! report! are:! (1)! Compute! the! physical! unit! flow—that! is the!
F F F F F F F F F F F F F F F
total! units! to! be! accounted! for.! (2)! Compute! the! equivalent! units! of! production.! (3)!
F F F F F F F F F F F F F F
Compute! the! unit! production! costs expressed! in! terms! of! equivalent! units! of! production.!
F F F F F F F F F F F F F
(4)! Prepare! a! cost! reconciliation! schedule which! shows! that! the! total! costs! accounted! for!
F F F F F F F F F F F F F F
equal! the! total! costs! to! be! accounted! for.
F F F F F F F
7. Prepare! a! production! cost! report.! The! production! cost! report! contains! both! quantity!
F F F F F F F F F F F F
and! cost! data! for! a! production! department.! There! are! four! sections! in! the! report:! (1)!
F F F F F F F F F F F F F F F
number! of! physical! units (2)! equivalent! units! determination (3)! unit! costs and! (4)! cost!
F F F F F F F F F F F F F F
reconciliation! schedule. F
8. Explain! just-in-time! (JIT)! processing.! JIT! is! a! manufacturing! technique! dedicated! to!
F F F F F F F F F F F
producing! the! right! products! at! the! right! time! as! needed.! One! of! the! principal! accounting!
F F F F F F F F F F F F F F F
effects! is! that! a! Raw! and! In-Process! Inventory! account! replaces! both! the! raw! materials!
F F F F F F F F F F F F F F
and! work! in! process! inventory! accounts.
F F F F F
9. Explain! activity-based! costing! (ABC).! ABC! is! a! method! of! product! costing! that! focuses!
F F F F F F F F F F F F F
on! the! activities! performed! to! produce! products.! It! assigns! the! cost! of! the! activities! to!
F F F F F F F F F F F F F F F
products! by! using! cost! drivers! that! measure! the! activities! performed.! The! primary!
F F F F F F F F F F F F
objective! of! ABC! is! accurate! and! meaningful! product! costs.
F F F F F F F F
a
10.! F Apply! activity-based! costing! to! specific! company! data.! In! applying! ABC it! is!
F F F F F F F F F F F F
necessary! to! compute! the! overhead! rate! for! each! activity! by! dividing! total! expected!
F F F F F F F F F F F F F
overhead! by! the! total! expected! usage! of! the! cost! driver.! The! overhead! cost! for! each!
F F F F F F F F F F F F F F F
activity! is! then! assigned! to! products! on! the! basis! of! each! product’s! use! of! the! cost! driver.
F F F F F F F F F F F F F F F F
PROCESS COST ACCOUNTING F F
SUMMARY OF QUESTIONS BY STUDY OBJECTIVES AND BLOOM’S TAXONOMY
F F F F F F F F
Item SO BT Item SO BT Item SO BT Item SO BT Item SO BT
True-False Statements F
sg
1. 1 K 9. 4 K 17. 6 K 25. 7 K 33. 3 C
F F F F
sg F
2. 1 K 10. 4 K 18. 6 C 26. 8 K 34. 4 K
sg
3. 1 F
11. 4 F
19. 6 F
27. 8 F
35. 5 F
4. 2 C
F 12. 5 K
F 20. 6 K
F 28. 8 K
F
sg
36. 6 K
F
5. 2 C
F
13. 5 C
F
21. 6 K
F
29. 9 K
F
sg
37. 9 K
F
a
6. 2 K 14. 5 K 22. 6 C 30. 10 K K
F F F
sg F
7. 2 K 15. 5 K 23. 7 K 31. 1 K
sg
8. 4 F
16. 5 F
24. 7 F
32. 2 F
K K K K
C AP K K
Multiple Choice Questions F F
38. 1 C F 59. 5 AP 80. 6 AP 101. 6 C F 123. 9 C F
F F
39. 1 C F 60. 5 AP 81. 6 AP 102. 6 AP 124. 9 C F
F
40. 1 K F 61. 5 K 82. 6 F
103. 6 AP 125. 9 C F
F F
AP
41. 1 K F 62. 5 AP 83. 6 F 104. 6 F
126. 9 K F
42. 1 63. 5 84. 6 AP 105. 6 AP 127. 9
K F
F
F K F
43. 2 64. 5 AP 85. 6
F
106. 6 AP a
128. 10
C F F AP F
K F
44. 2 K 65. 5 AP 86. 6 F
107. 6 AP
a
129. 10 K
F
AP F
45. 2 C 66. 5 C F F
87. 6 F
108. 6 F st
130. 1 K
F
AP AP F
46. 2 K F 67. 5 AP 88. 6 F
110. 6 F
sg
131. 2 K F
47. 2 K 68. 5
F
89. 6 AP 111. 6 AP st
132. 2 K
F AP F
F F
sg
48. 2 C 69. 5 F
90. 6 AP 112. 6 AP 133. 5 K
F
AP F
sg
F
49. 2 K F 70. 5 F
91. 6 F
113. 6 AP 134. 5 K F
AP AP st
50. 4 C F 71. 5 92. 6 114. 7 F
135. 5 K F
F
C F F AP sg
51. 4 C F 72. 5 AP 93. 6 115. 7 F 136. 6 AP
F C F
AP st
52. 4 C F 73. 5 AP 94. 6 116. 7 137. 6 K F F
AP K sg
53. 4 C F 74. 5 F
95. 6 117. 8 F F
138. 6 C F
AP K F F
K sg
54. 4 K F 75. 5 F 96. 6 118. 8 F
139. 6 AP
AP AP K st
55. 4 C F 76. 6 F
97. 6 F 119. 8 F
140. 6 K
F F
56. 5 AP 77. 6 AP 98. 6 AP 120. 8 C F sg
141. 7 K F
F
57. 5
F
78. 6
F
99. 6 AP 121. 8 C F sg
142. 8 K
AP AP
58. 5 79. 6 F
100. 6
F
122. 9 K F
AP AP AP
F
F C F
AP AP C
F
F
AP C
AP
AP AP
Brief Exercises F
143. 5 AP 145. 5 AP 147. 6 AP 149. 6 AP 151. 6 AP
144. 5 F 146. 6 F 148. 6 F 150. 6 F 152. 6 F
AP AP AP AP AP
sg
F This question also appears in the Study Guide.
F F F F F F F
st
F This question also appears in a self-test at the student companion website.
F F F F F F F F F F F
a
F F This topic is dealt with in an Appendix to the chapter.
F F F F F F F F F F
,21 - 2 Test Bank for Accounting Principles, Eighth Edition
SUMMARY OF QUESTIONS BY STUDY OBJECTIVES AND BLOOM’S TAXONOMY
F F F F F F F F
Exercises
153. 4 AP
F
158. 5 AP
F
163. 5,6 AP
F
168. 6 AP
F
173. 7 AP
154. 4 AP 159. 5 AP 164. 5,6 AP 169. 6 AP
155. 4 F
160. 5,6 F
165. 5,6 F
170. 7 F
156. 4 AP
F 161. 5,6 AP
F 166. 5,6 AP
F 171. 7 AP
F
157. 4 AP 162. 5,6 AN 167. 6 AP 172. 7 AP
AP AP AP AP
Completion Statements F
a
174. 1 K
F
177. 4 K
F
180. 6 AP 183. 8 K
F
186. 10 K
175. 2 K 178. 5 K 181. 6 K F 184. 9 K
176. 2 K 179. 6 K 182. 7 K 185. 9 K
SUMMARY OF STUDY OBJECTIVES BY QUESTION TYPE
F F F F F F
Item Type Item Type Item Type Item Type Item Type Item Type Item Type
Study Objective 1
F F
1. TF 3. TF 38. MC 40. MC 42. MC 174. C
2. TF 31. TF 39. MC 41. MC 130. MC
Study Objective 2
F F
4. TF 7. TF 44. MC 47. MC 131. MC 176. C
5. TF 32. TF 45. MC 48. MC 132. MC
6. TF 43. MC 46. MC 49. MC 175. C
Study Objective 3
F F
33. TF
Study Objective 4
F F
8. TF 11. TF 51. MC 54. MC 153. Ex 156. Ex
9. TF 34. TF 52. MC 55. MC 154. Ex 157. Ex
10. TF 50. MC 53. MC 133. MC 155. Ex 177. C
Study Objective 5
F F
12. TF 56. MC 62. MC 68. MC 74. MC 145. BE 163. Ex
13. TF 57. MC 63. MC 69. MC 75. MC 158. Ex 164. Ex
14. TF 58. MC 64. MC 70. MC 134. MC 159. Ex 165. Ex
15. TF 59. MC 65. MC 71. MC 135. MC 160. Ex 166. Ex
16. TF 60. MC 66. MC 72. MC 143. BE 161. Ex 178. C
35. TF 61. MC 67. MC 73. MC 144. BE 162. Ex
Study Objective 6
F F
17. TF 79. MC 89. MC 99. MC 109. MC 146. BE 163. Ex
18. TF 80. MC 90. MC 100. MC 110. MC 147. BE 164. Ex
19. TF 81. MC 91. MC 101. MC 111. MC 148. BE 165. Ex
20. TF 82. MC 92. MC 102. MC 112. MC 149. BE 166. Ex
21. TF 83. MC 93. MC 103. MC 113. MC 150. BE 167. Ex
22. TF 84. MC 94. MC 104. MC 136. MC 151. BE 168. Ex
36. TF 85. MC 95. MC 105. MC 137. MC 152. BE 169. Ex
76. MC 86. MC 96. MC 106. MC 138. MC 160. Ex 179. C
77. MC 87. MC 97. MC 107. MC 139. MC 161. Ex 180. C
78. MC 88. MC 98. MC 108. MC 140. MC 162. Ex 181. C
, Process Cost Accounting 21 - 3
Study Objective 7 F F
23. TF 25. TF 115. MC 141. MC 171. Ex 173. Ex
24. TF 114. MC 116. MC 170. Ex 172. Ex 182. C
Study Objective 8 F F
26. TF 28. TF 118. MC 120. MC 142. MC
27. TF 117. MC 119. MC 121. MC 183. C
Study Objective 9 F F
29. TF 122. MC 124. MC 126. MC 184. C
37. TF 123. MC 125. MC 127. MC 185. C
Study Objective a10 F F
a a a
30. TF 128. MC 129. MC a186. C
Note: F F TF = True-False
F BE = Brief Exercise
F F F C = F F
Completion
MC = Multiple Choice
F F Ex = Exercise
F F
The chapter also contains one set of ten Matching questions and four Short-Answer
F F F F F F F F F F F F F
Essay questions.
F
CHAPTER STUDY OBJECTIVES F F
1. Understand who uses process cost systems. Process! cost! systems! are! used! by! F F F F F F F F F F F F
companies! that! mass-produce! similar! products! in! a! continuous! fashion.! Once! production!
F F F F F F F F F F F
begins it! continues! until! the! finished! product! emerges.! Each! unit! of! finished! product! is!
F F F F F F F F F F F F F F
indistinguishable! from! every! other! unit. F F F F
2. Explain! the! similarities! and! differences! between! job! order! cost! and! process! cost!
F F F F F F F F F F F F
systems. ! Job! order! cost! systems! are! similar! to! process! cost! systems! in! three! ways:! (1)!
F F F F F F F F F F F F F F F
Both! systems! track! the! same! cost! elements—direct! materials direct! labor and!
F F F F F F F F F F F
manufacturing! overhead.! (2)! Costs! are! accumulated! in! the! same! accounts—Raw! F F F F F F F F F F
Materials! Inventory Factory! Labor and! Manufacturing! Overhead.! (3)! Accumulated! costs!
F F F F F F F F F F
are! assigned! to! the! same! accounts—Work! in! Process Finished! Goods! Inventory and!
F F F F F F F F F F F F
Cost! of! Goods! Sold.! However the! method! of! assigning! costs! differs! significantly.
F F F F F F F F F F F
There! are! four! main! differences! between! the! two! cost! systems:! (1)! A! process! cost!
F F F F F F F F F F F F F F
system! uses! separate! accounts! for! each! production! process! department! or! manufacturing!
F F F F F F F F F F F
process rather! than! only! one! work! in! process! account! used! in! a! job! order! cost! system.!
F F F F F F F F F F F F F F F F
(2)! In! a! process! cost! system costs! are! summarized! in! a! production! cost! report! for! each!
F F F F F F F F F F F F F F F F
department.! In! a! job! cost! system costs! are! charged! to! individual! jobs! and! summarized! in!
F F F F F F F F F F F F F F F
a! job! cost! sheet.! (3)! Costs! are! totaled! at! the! end! of! a! time! period! in! a! process! cost!
F F F F F F F F F F F F F F F F F F F
system but! at! the! completion! of! a! job! in! a! job! cost! system.! (4)! In! a! process! cost! system
F F F F F F F F F F F F F F F F F F F
unit! cost! is! calculated! as:! Total! manufacturing! costs! for! the! period! ÷! Units! produced!
F F F F F F F F F F F F F F
during! the! period.! In! a! job! cost! system unit! cost! is:! Total! cost! per! job! ÷! Units! produced.
F F F F F F F F F F F F F F F F F
3. Explain! the! flow! of! costs! in! a! process! cost! system.! Manufacturing! costs! for! raw!
F F F F F F F F F F F F F F
materials labor and! overhead! are! assigned! to! work! in! process! accounts! for! various!
F F F F F F F F F F F F F
departments! or! manufacturing! processes.! The! costs! of! units! completed! are! transferred!
F F F F F F F F F F F
from! one! department! to! another! as! those! units! move! through! the! manufacturing! process.!
F F F F F F F F F F F F F
The! costs! of! completed! work! are! transferred! to! Finished! Goods! Inventory.! When!
F F F F F F F F F F F F
inventory! is! sold costs! are! transferred! to! Cost! of! Goods! Sold.
F F F F F F F F F F
, 21 - 4 Test Bank for Accounting Principles, Eighth Edition
4. Make! the! journal! entries! to! assign! manufacturing! costs! in! a! process! cost! system.!
F F F F F F F F F F F F F
Entries! to! assign! the! costs! of! raw! materials labor and! overhead! consist! of! a! credit! to! Raw!
F F F F F F F F F F F F F F F F F
Materials! Inventory Factory! Labor and! Manufacturing! Overhead and! a! debit! to! Work! in!
F F F F F F F F F F F F F
Process! for! each! department.! Entries! to! record! the! cost! of! good! transferred! to! another!
F F F F F F F F F F F F F F
department! are! a! credit! to! Work! in! Process! for! the! department! whose! work! is! finished!
F F F F F F F F F F F F F F F
and! a! debit! to! the! department! to! which! the! goods! are! transferred.! The! entry! to! record!
F F F F F F F F F F F F F F F F
units! completed! and! transferred! to! the! warehouse! is! a! credit! for! the! department! whose!
F F F F F F F F F F F F F F
work! is! finished! and! a! debit! to! Finished! Goods! Inventory.! The! entry! to! record! the! sale! of!
F F F F F F F F F F F F F F F F F
goods! is! a! credit! to! Finished! Goods! Inventory! and! a! debit! to! Cost! of! Goods! Sold.
F F F F F F F F F F F F F F F
5. Compute ! equivalent! units.! Equivalent! units! of! production! measure! work! done! during! a!
F F F F F F F F F F F F
period expressed! in! fully! completed! units.! This! concept! is! used! to! determine! the! cost! per!
F F F F F F F F F F F F F F F
unit! of! completed! product.! Equivalent! units! are! the! sum! of! the! units! completed! and!
F F F F F F F F F F F F F F
transferred! out! plus! equivalent! units! of! ending! work! in! process.
F F F F F F F F F
6. Explain! the! four! steps! necessary! to! prepare! a! production! cost! report.! The! four! steps!
F F F F F F F F F F F F F F
to! complete! a! production! cost! report! are:! (1)! Compute! the! physical! unit! flow—that! is the!
F F F F F F F F F F F F F F F
total! units! to! be! accounted! for.! (2)! Compute! the! equivalent! units! of! production.! (3)!
F F F F F F F F F F F F F F
Compute! the! unit! production! costs expressed! in! terms! of! equivalent! units! of! production.!
F F F F F F F F F F F F F
(4)! Prepare! a! cost! reconciliation! schedule which! shows! that! the! total! costs! accounted! for!
F F F F F F F F F F F F F F
equal! the! total! costs! to! be! accounted! for.
F F F F F F F
7. Prepare! a! production! cost! report.! The! production! cost! report! contains! both! quantity!
F F F F F F F F F F F F
and! cost! data! for! a! production! department.! There! are! four! sections! in! the! report:! (1)!
F F F F F F F F F F F F F F F
number! of! physical! units (2)! equivalent! units! determination (3)! unit! costs and! (4)! cost!
F F F F F F F F F F F F F F
reconciliation! schedule. F
8. Explain! just-in-time! (JIT)! processing.! JIT! is! a! manufacturing! technique! dedicated! to!
F F F F F F F F F F F
producing! the! right! products! at! the! right! time! as! needed.! One! of! the! principal! accounting!
F F F F F F F F F F F F F F F
effects! is! that! a! Raw! and! In-Process! Inventory! account! replaces! both! the! raw! materials!
F F F F F F F F F F F F F F
and! work! in! process! inventory! accounts.
F F F F F
9. Explain! activity-based! costing! (ABC).! ABC! is! a! method! of! product! costing! that! focuses!
F F F F F F F F F F F F F
on! the! activities! performed! to! produce! products.! It! assigns! the! cost! of! the! activities! to!
F F F F F F F F F F F F F F F
products! by! using! cost! drivers! that! measure! the! activities! performed.! The! primary!
F F F F F F F F F F F F
objective! of! ABC! is! accurate! and! meaningful! product! costs.
F F F F F F F F
a
10.! F Apply! activity-based! costing! to! specific! company! data.! In! applying! ABC it! is!
F F F F F F F F F F F F
necessary! to! compute! the! overhead! rate! for! each! activity! by! dividing! total! expected!
F F F F F F F F F F F F F
overhead! by! the! total! expected! usage! of! the! cost! driver.! The! overhead! cost! for! each!
F F F F F F F F F F F F F F F
activity! is! then! assigned! to! products! on! the! basis! of! each! product’s! use! of! the! cost! driver.
F F F F F F F F F F F F F F F F
