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chapter 20
Process Costing and
Activity-Based Costing
goals discussion
goals
achievement
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in the blanks
multiple
choice
problems
check list and key terms
Select the appropriate response.
To a great extent process costing systems operate in much the same manner as job costing systems.
A process costing system is best suited to a manufacturing operation which gives rise to:
uniquely produced inventory items or homogeneous mass produced items
In a process costing system, costs are accumulated on:
cost of production report or job cost sheets
An equivalent unit is a physical unit stated in terms of:
raw materials or finished output
Potentially, a company could have a huge number of equivalent units of production without completing any finished goods.
Direct materials, direct labor, and factory overhead are generally introduced at the same time throughout the production process.
In preparing a cost of production report, which step precedes the other?
computing the equivalent unit cost or cost assignment
In preparing a cost of production report, the analysis of physical units reveals the units to account for. This amount is identical to the equivalent units of materials and conversion costs.
On a cost of production report, the total cost accounted for in the cost assignment section should equal the beginning work in process plus the:
current production cost incurred or current conversion cost incurred
With the weighted-average method of process costing, the units finished during the period are assumed to be both started and completed during the period.
With a weighted-average method of process costing, the dollar value of beginning work in process is assumed to be related to:
materials and conversion or materials only
The ending work in process equivalent units are assumed to be the same for materials and conversion if a weighted-average process costing method is used.
To calculate the cost per equivalent unit for materials (for a company which introduces all materials at the beginning of production and uses the FIFO method) it is not necessary to know the dollar value of beginning work in process.
Within the ledger system for a company using process costing techniques, a credit to the Work in Process account for the final processing department would likely indicate:
transfers from a previous department or transfers to finished goods
With a FIFO process costing system, the presence of a beginning work in process inventory requires that the goods be studied to determine the work performed in prior periods.
With a FIFO process costing method, the beginning work in process inventory is treated as being separate and distinct from those units that are started and completed during the period.
Which of the following will likely more likely result in cost objects absorbing a portion of the non-factory costs?
ABC or traditional costing methods
Generally accepted accounting principles may preclude activity-based costing results because inventory can fail to absorb:
SG&A or all manufacturing costs
Which of the following techniques will likely result in more cost drivers being used to cost a single product?
conventional costing or activity-based costing
With activity-based costing, activities are considered to occur at various levels (e.g., unit-level, batch-level, etc.) and the levels are then combined prior to allocating costs.
Activity-based costing results in all costs being assigned to a cost object.