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Test chapter_17_ 30 January Winter 2021, questions and answers
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9/5/24, 12:34 Test chapter_17_ 30 January Winter 2021, questions andPM answers
EA
Cost Accounting: A Managerial Emphasis, 16e, Global Edition (Horngren)
Chapter 17 Process Costing
17.1 Objective 17.1
1)Which of the following is the costing system used for mass produced like or similar units of
products?
A) inventory-costing systems
B)job-costing systems
C) process-costing systems
D) weighted-average costing
systems Answer: C
Diff: 1
Objective: 1
AACSB: Analytical thinking
2)Which of the following companies is most likely to use process costing?
A) Crimpson Color, a company selling customized garments for niche customers
B)Effel & Associates, a consulting firm providing various audit and related services
C) Dental Bright Inc., a company manufacturing and selling toothpaste on a large scale
D) Grimpy Corp., a company manufacturing furniture for customers as per their
requirements Answer: C
Diff: 2
Objective: 1
AACSB: Analytical thinking
3)Process costing would most likely be used to assign costs to products produced by
which of these companies?
A) Jones Flour Mill
B)Riley Automobile Dealer
C) Big Time Yacht Corporation
D) Sullivan and Murphy Law Firm
LLC Answer: A
Diff: 2
Objective: 1
AACSB: Analytical thinking
4)Which of the following statements is true?
A) In a job-costing system, average production cost is calculated for all units produced.
B)In a process-costing system, each unit uses approximately the same amount of resources.
C) In a job-costing system, overheads are allocated to all units equally.
D) In a process-costing system, individual jobs use different quantities of
production resources. Answer: B
Diff: 2
Objective: 1
AACSB: Analytical thinking
1
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,9/5/24, 12:34 Test chapter_17_ 30 January Winter 2021, questions and
PM answers
EA
5)Which of the following most accurately describes the contrast between process and job
costing?
A) In process costing, they include all the factors of production but job costing includes
only materials and labor
B)job costing includes materials, labor and overhead while process costing only considers
conversion
costs
C) the main difference is the extent of averaging used to compute the unit costs
D) job costing measures the variable cost of identical jobs while process costing
measures the cost of identical products using average units costs of materials and
conversion costs, some of which are fixed costs
Answer: C
Diff: 3
Objective: 1
AACSB: Analytical thinking
6)Which if the following are not conversion costs?
A) the cost of direct laborers who assemble the parts of an automobile
B)the cost of tires on an automobile
C) the cost of depreciation on an automobile assembly plant
D) the cost of electricity to run the tools in the automobile
assembly plant Answer: B
Diff: 2
Objective: 1
AACSB: Analytical thinking
7)Which of the following statements best describes conversion costs?
A) Conversion costs are all manufacturing and nonmanufacturing costs.
B)Conversion costs are all manufacturing costs other than direct materials costs.
C) Conversion costs are all nonmanufacturing costs including marketing costs.
D) Conversion costs are all nonmanufacturing costs other than fixed selling and
distribution costs. Answer: B
Diff: 2
Objective: 1
AACSB: Analytical thinking
8)Job-costing systems separate costs into cost categories according to when costs are
introduced into the process of manufacture.
Answer: FALSE
Explanation: Process-costing systems separate costs into cost categories according to
when costs are introduced into the process of manufacture.
Diff: 2
Objective: 1
AACSB: Analytical thinking
9)The principal difference between process costing and job costing is that in job
costing an averaging process is used to compute the unit costs of products or
services.
Answer: FALSE
Explanation: The averaging process is used to calculate unit costs in process costing.
Diff: 2
Objective: 1
AACSB: Analytical thinking
2
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,9/5/24, 12:34 Test chapter_17_ 30 January Winter 2021, questions and
PM answers
EA
10) If manufacturing labor costs are added to the process at a different time
compared to other conversion costs, an additional cost category—direct manufacturing
labor costs—would be needed to assign these costs to products.
Answer: TRUE
Diff: 2
Objective: 1
AACSB: Analytical thinking
11) Estimating the degree of completion for the calculation of equivalent units
is usually easier for conversion costs than it is for direct materials.
Answer: FALSE
Explanation: Estimating the degree of completion is easier for the calculation of direct
materials since direct materials can be measured more easily than conversion costs.
Diff: 2
Objective: 1
AACSB: Analytical thinking
12) If two different direct materials—such as the circuit board and microphone—are
added to the process at different times, a company will need two different direct-
materials categories to assign direct materials cost.
Answer: TRUE
Diff: 2
Objective: 1
AACSB: Analytical thinking
13) Conversion costs include direct materials and direct labor but excludes all other
manufacturing and non-manufacturing costs.
Answer: FALSE
Explanation: Conversion costs are all manufacturing costs other than direct material costs,
including manufacturing labor, energy, plant depreciation, and so on.
Diff: 2
Objective: 1
AACSB: Analytical thinking
14) Job-costing and process-costing are mutually exclusive, hence a hybrid costing
system that combines elements of both job and process costing cannot be used.
Answer: FALSE
Explanation: Job-costing and process-costing are not mutually exclusive. Many companies
use a hybrid costing system combining elements of both job and process costing.
Diff: 3
Objective: 1
AACSB: Analytical thinking
3
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, 9/5/24, 12:34 Test chapter_17_ 30 January Winter 2021, questions and
PM answers
EA
15) There are basically two distinct methods of calculating product costs.
Required:
Compare and contrast the two methods.
Answer: In job costing the job or product is a distinctly identifiable product or service.
Each job requires (or can require) vastly different amounts of input. Job costing is usually
associated with products that are unique or heterogeneous. Thus, each job requires
different amounts of input, and they can require vastly different amount of costs to finish.
Job-costed products tend to be high cost per unit. Thus the costs of each (unique) job are
important for planning, pricing, and profitability.
In process costing, the jobs or products are similar (or homogeneous). Each job usually
requires the same inputs, and results in approximately the same costs per unit. The cost
of a product or service is obtained by assigning total costs to many identical or similar
units. We assume each unit receives the same amount of direct material costs, direct
manufacturing labor costs, and indirect manufacturing costs. Unit costs are then
computed by dividing total costs by the number of units.
The principal difference between process costing and job costing is the extent of
averaging used to compute unit costs. As noted above in job costing, individual jobs use
different quantities of production resources; whereas in process costing, we assume that
each job uses approximately the same amount of resources.
Diff: 2
Objective: 1
AACSB: Analytical thinking
16) Why do we need to accumulate and calculate unit costs in process costing
(and also job costing)? Answer: We need to accumulate unit costs to:
1. Budget (planning)
2. Price
3. Account for the costs
1. Budgeting — To operate a successful business, we should prepare budgets, review the
results, and make decisions as to how well our business is doing. Our business has
formulated plans for the future. The resources we need for the future (materials,
conversion costs, facilities, etc.) will depend on our estimate of the resources we need
to accomplish these goals. An important part of these estimates is the unit costs of the
products we plan to produce. These unit costs will tell us how many dollars we must
acquire to accomplish our plans.
2. Price — In order to be a profitable business, we must sell our product at a price in
excess of what it costs us to produce the product. Essential for the pricing decision is
the cost per unit. We will also learn whether we can sell a product at a profit.
3. Accounting — During the course of the accounting period, we will be accumulating
costs. At the end of the accounting period, we must allocate this pool of costs between
the units that were transferred out and the goods in ending inventory. Unit costs are
essential for this purpose.
Diff: 1
Objective: 1
AACSB: Analytical thinking
4
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