Question 1

The journal entry; debit work in process and credit overhead control account records:

Accepted Answer

A)  actual overhead cost 
B)  use of indirect labour 
C)  allocated overhead 
D)  b and c

Question 2

FIFO assumes that the units in beginning work in process will be completed and transferred out first.

Accepted Answer

A) True 
 B)False

Question 3

Process costing makes assumptions about exactly when and how costs are incurred during the production process.

Accepted Answer

A) True 
 B)False

Question 4

The overhead control account records the actual overhead costs incurred and the overhead costs allocated.

Accepted Answer

A) True 
 B)False

Question 5

Signs that an organisation might have a high spoilage rate include higher than average warranty liabilities or a poor reputation for product quality.

Accepted Answer

A) True 
 B)False

Question 6

The correct order for the steps in preparing a process costing report are: I Summarise total costs to account for.
II Calculate the cost per equivalent unit
III Account for cost of units completed and cost of ending WIP
IV Summarise total physical and equivalent units

Accepted Answer

A)  I, II, III IV 
B)  IV, III, II, I 
C)  IV, I, II, III 
D)  I, IV, II, III

Question 7

Use the following estimates to calculate the overhead allocation rate for the production department. Use direct labour hour as the allocation base: $$\begin{array} { | l | l | } 
\hline & \text { Production Department } \
\hline \text { Overhead } & \$ 500000 \
\hline \text { Direct Labour Cost } & \$ 250000 \
\hline \text { Direct Labour Hours } & 12500 \
\hline
\end{array}$$

Accepted Answer

A)  $2 per direct labour dollar 
B)  $0.50 per direct labour dollar 
C)  $40 per direct labour hour 
D)  $0.025 per direct labour hour

Question 8

When using the weighted average method to calculate cost per equivalent unit, the cost is calculated as total costs / equivalent units for total work.

Accepted Answer

A) True 
 B)False

Question 9

Bright n Breezy Ltd employs a process costing system. Direct materials are added at the beginning of the process. Relevant information about July's activities follows: $\begin{array}{|c|l|}
\hline \text { 1. July } & \begin{array}{l}
\text { Beginning Inventory 1,500units (60\% complete) } \
\text { DM Cost } \$ 5,925 \
\text { CC Cost } \$ 4,095
\end{array} \
\hline \text { During July } & \begin{array}{l}
15,000 \text { units started } \
\text { DM added } \$ 150,000 \
\text { CC added } \$ 83,520
\end{array} \
\hline \text { 31 July } & \text { Ending Inventory 3,000 units }(40 \%) \
\hline
\end{array}$

Using the weighted average method, the cost of the ending work in process inventory for July was:

Accepted Answer

A)  $46,230 
B)  $18,540 
C)  $35,502 
D)  $28,350

Question 10

When overhead costs from many departments are pooled managers have incentives to control costs.

Accepted Answer

A) True 
 B)False

Question 11

There are normally three inventory accounts in a manufacturer's general ledger; raw materials, cost of sales and finished goods.

Accepted Answer

A) True 
 B)False

Question 12

Martin's Masterpieces Ltd makes mass produced acrylic paints. The dye mixing machines leave behind residue that can be recycled and used again in the next batch of production. The entry to record this in the ledger is:

Accepted Answer

A)  debit raw materials inventory; credit work in process inventory 
B)  debit raw materials inventory; credit overhead control 
C)  debit work in process inventory; credit raw materials inventory 
D)  debit work in process inventory; credit overhead control

Question 13

The statement concerning actual and normal costing that is true is:

Accepted Answer

A)  Information from normal costing is used for pricing purposes 
B)  Actual costing is carried out at the beginning of the accounting period 
C)  Under actual costing direct labour is traced to a job and under normal costing it is allocated 
D)  Over or under applied overhead does not exist in normal costing.

Question 14

Which of these is not an uncertainty in measuring job costs?

Accepted Answer

A)  Whether and how to trace direct costs 
B)  The choice of overhead cost pools 
C)  The choice of allocation bases 
D)  None of the above, i.e. all are uncertainties in measuring job costs

Question 15

Manufacturing job costing systems are least likely to use which of the following bases to allocate overhead:

Accepted Answer

A)  direct labour hours 
B)  number of departments 
C)  direct labour costs 
D)  machine hours

Question 16

Bright n Breezy Ltd employs a process costing system. Direct materials are added at the beginning of the process. Relevant information about July's activities follows: $\begin{array}{|c|l|}
\hline \text { 1. July } & \begin{array}{l}
\text { Beginning Inventory 1,500units (60\% complete) } \
\text { DM Cost } \$ 5,925 \
\text { CC Cost } \$ 4,095
\end{array} \
\hline \text { During July } & \begin{array}{l}
15,000 \text { units started } \
\text { DM added } \$ 150,000 \
\text { CC added } \$ 83,520
\end{array} \
\hline \text { 31 July } & \text { Ending Inventory 3,000 units }(40 \%) \
\hline
\end{array}$

Using the FIFO method, the cost of goods completed and transferred out during July was (choose the closest answer as answers will vary according to rounding):

Accepted Answer

A)  $196,257 
B)  $206,277 
C)  $213,277 
D)  $213,257

Question 17

The accounting method for assigning production costs to mass produced products is process costing.

Accepted Answer

A) True 
 B)False

Question 18

Prime costs are direct labour and direct material.

Accepted Answer

A) True 
 B)False

Question 19

Forthefunofit Ltd uses a process costing system. Direct materials are added at the beginning of the process. During January, Department A had a beginning inventory of 2,000 units, 50% complete for conversion costs. During the month 14,000 units were started and there were 1,000 units in ending inventory, 40% complete for conversion costs. Using weighted average process costing, the equivalent units for direct material for the month were:

Accepted Answer

A)  13,600 
B)  16,000 
C)  15,000 
D)  15,600

Question 20

Process costing environments are unlikely to have work in process inventories.

Accepted Answer

A) True 
 B)False

Exam 7: Job and Process Costing Systems

The journal entry; debit work in process and credit overhead control account records:

FIFO assumes that the units in beginning work in process will be completed and transferred out first.

Process costing makes assumptions about exactly when and how costs are incurred during the production process.

The overhead control account records the actual overhead costs incurred and the overhead costs allocated.

Signs that an organisation might have a high spoilage rate include higher than average warranty liabilities or a poor reputation for product quality.

The correct order for the steps in preparing a process costing report are: I Summarise total costs to account for. II Calculate the cost per equivalent unit III Account for cost of units completed and cost of ending WIP IV Summarise total physical and equivalent units

When using the weighted average method to calculate cost per equivalent unit, the cost is calculated as total costs / equivalent units for total work.

When overhead costs from many departments are pooled managers have incentives to control costs.

There are normally three inventory accounts in a manufacturer's general ledger; raw materials, cost of sales and finished goods.

Martin's Masterpieces Ltd makes mass produced acrylic paints. The dye mixing machines leave behind residue that can be recycled and used again in the next batch of production. The entry to record this in the ledger is:

The statement concerning actual and normal costing that is true is:

Which of these is not an uncertainty in measuring job costs?

Manufacturing job costing systems are least likely to use which of the following bases to allocate overhead:

The accounting method for assigning production costs to mass produced products is process costing.

Prime costs are direct labour and direct material.

Process costing environments are unlikely to have work in process inventories.