Question

Understand process cost accounting. 

.1. Process cost systems are used to apply costs to similar products that are mass-produced in a continuous fashion 

2. A process cost system is used when each finished unit is indistinguishable from another. 

3. Companies that produce soft drinks, movies, and computer chips would all use process cost accounting 

4. In a proces cost system, costs are tracked by individual jobs. 

5. Job order costing and process costing track different manufacturing cost elements. 

6. Both job order conting and process costing account for direct materials, direct labor, and manufacturing overhead. 

7. Costs flow through the accounts in the same basic way for both job order costing and process costing 

8. In a process system, only one work in process account is used. 

9. In a process cost system, costs are summarized in a job cost sheet. 

10. In a process cost system, the unit cost is total manufacturing costs for the period divided by the equivalent units produced during the period. 

Instructions 

Identify each statement as true or false. If false, indicate how to correct the statement.

Answer 1

Ans 1) True

Ans 2) True

Ans 3) False. Product cost accounting is only effective for companies that produce indistinguishable products. Soft drinks, movies, and computer chips are completely different from one another. Using process cost accounting for these products would be inefficient.

Ans 4) False. in a process cost system ,cost are tracked as a whole

Ans 5) False. when we manufacture a product, it consists of several elements that make up the whole product.
For example, when producing a water bottle, the cost made up of several elements such as the bottle, the fluid, the labels and the cap,
Process costing only track cost for one single element. (such as the cost to produce only the bottle)

Ans 6) True

Ans 7) True

Ans 8) False. In a process cost system we would use several works. We need to distinguish the cost of producing each elements of the products separately as it would help management to identify product easily.

Ans 9) False. In process cost system cost are not summarised in job cost sheet as it consists of several different factors such as salaries and factory overhead that influences the production cost. Process cost system only want to know the cost for one single element of the product, It does not need other information

Ans 10) True