Chapter 4 Systems Design: Process Costing

Multiple Choice Questions

16. Which of the following statements related to job-order costing and process costing are
true?
A) Under both costing methods, manufacturing overhead costs are included in the
computation of unit product costs.
B) Under both costing methods, the journal entry to record the completion of
production will involve crediting a work in process account.
C) Under both costing methods, the journal entry to record the cost of goods sold
will involve crediting the finished goods account.
D) All of the above are true.

17. The completion of goods is recorded as a decrease in the work in process inventory
account when using:

Job-order costing Process costing

A) Yes No
B) Yes Yes
C) No Yes
D) No No

18. In process costing, a separate work in process account is kept for each:
A) individual order.
B) equivalent unit.
C) processing department.
D) cost category (i.e., materials, conversion cost).

19. The weighted-average method of process costing differs from the FIFO method of
process costing in that the weighted-average method:
A) does not consider the degree of completion of beginning work in process
inventory when computing equivalent units of production.
B) considers ending work in process inventory to be fully complete.
C) will always yield a higher cost per equivalent unit.
D) All of the above.

20. Which of the following are needed to compute equivalent units for conversion costs
under the weighted-average method of process costing?

Percentage completion of Percentage completion of

beginning work in process ending work in process
A) Yes Yes
B) No Yes
C) Yes No

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Chapter 4 Systems Design: Process Costing

D) No No
21. Malcolm Company uses a weighted-average process costing system. All materials at
Malcolm are added at the beginning of the production process. The equivalent units
for materials at Malcolm would be the sum of:
A) units in ending work in process and the units started.
B) units in beginning work in process and the units started.
C) units in ending work in process and the units started and completed.
D) units in beginning work in process and the units started and completed.

22. In the computation of costs per equivalent unit, the weighted-average method of
process costing considers:
A) costs incurred during the current period only.
B) costs incurred during the current period plus cost of ending work in process
inventory.
C) costs incurred during the current period plus cost of beginning work in process
inventory.
D) costs incurred during the current period less cost of beginning work in process
inventory.

23. Which of the following are needed to compute the cost per equivalent unit for
materials under the weighted-average method of process costing?

Material cost assigned to beginning Material cost added to production

work in process last period during the current period
A) Yes Yes
B) No Yes
C) Yes No
D) No No

24. Under which of the following conditions will the FIFO method of process costing
result in the same amount of cost being transferred to the next department as the
weighted-average method?
A) When the beginning and ending inventories are each fifty percent complete.
B) When there is no beginning inventory.
C) When there is no ending inventory.
D) When units in the beginning inventory are all completed and transferred at the
same time.

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Chapter 4 Systems Design: Process Costing

25. In order to compute equivalent units of production using the FIF0 method of process
costing, work for the period must be broken down into parts:
A) completed during the period and units in ending inventory.
B) completed from beginning inventory, started and completed during the month,
and units in ending inventory.
C) started during the period and units transferred out during the period.
D) processed during the period and units completed during the period.

26. Which of the following methods of allocating service departments take into account
all of the effects of interdepartmental services?

Direct Step-Down
A) Yes Yes
B) Yes No
C) No Yes
D) No No

27. All of the following statements are correct when referring to process costing except:
A) Process costing would be appropriate for a jeweler who makes custom jewelry
to order.
B) A process costing system has the same basic purposes as a job-order costing
system.
C) Units produced are indistinguishable from each other.
D) Costs are accumulated by department.

28. For which of the following would it be best to use an operation costing system?
A) home remodeling
B) automobile production
C) cement used for roadways
D) trash bags used for yard waste

Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition 4-9