Question

correct answer

TRUE/FALSE. Write T' if the statement is true and 'F if the statement is false. 1) Unique or custom-made goods would be accounted for by using a process costing system. 1) 2) Conversion costs include direct labor and direct materials 2) 3) In a process costing system, the cost per equivalent unit is computed after computing equivalent units 3) 4) Assigning costs to units completed and to units in ending work in process inventory in a second department is a five step process. 4) 5) Transferred-in costs are incurred in a previous process and are carried forward as part of the product's cost when it moves to the next process. 5) 6) The cost per equivalent unit must be computed for direct materials, conversion and transferred in costs in a subsequent department. 7) 7) Equivalent units are the sum of direct materials used and direct labor incurred. 8) 8) In a process costing system, a separate work in process inventory account is maintained for each process. 9) Direct materials, direct labor, and manufacturing overhead are assigned to each manufacturing process in a process costing system. 9) 10) 10) The weighted-average process costing method may be used to assign costs to a second department.

Answer 1

Explanation to the above problem:

1) False, Unique or Custom-made goods would be accounted for by using a Job Costing System. A Process Costing System is used by companies that produce similar or identical units of product in batches employing a consistent process.

2) False, Conversion Cost represent the combination of direct labour costs and manufacturing overhead costs. In other words, Conversion Cost is the manufacturing or production costs necessary to convert raw materials into finished product.

3) True, In Process Costing System, cost incurred during production are charged to processes and averaged over the total units manufactured. Hence, Cost per equivalent unit is computed after computing equivalent units as it is based on unit costing.

4) True, There are five steps in the process costing method. First, analyze the cost-flow model of the relevant inventory account to determine how much inventory was there at the beginning of the period, how much was started during the period, how much as completed during the period, and how much is left as work-in-process at the end of the period. Thus, assigning cost to the units completed and to units in ending work in process inventory in the second department is a five step process.

5) True, In process costing system, cost incurred in the previous step is carried forward as the part of the products cost when it moves to the next process.

6) True

7) True

8) True, In process costing system, a separate account is opened for every process and on completion of the process the cost is transferred to the next process.

9) True

10) False