Revision 12 th mr yehia for accounting PDF

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ABC:  Activity rate = total estimated o.H cost / TOTAL activity  Total allocated O.H = activity rate x actual activity  product cost =DM+DL+OH allocated  Customer margin = sales – product cost …………………………………………………………………… traditional method 1- predetermined O.H rate =

𝑡𝑜𝑡𝑎𝑙 𝑒𝑠𝑡𝑖𝑚𝑎𝑡𝑒𝑑 𝑚𝑎𝑛𝑢𝑓𝑎𝑐𝑡𝑢𝑟𝑖𝑛𝑔

𝑂.𝐻 𝐶𝑜𝑠𝑡

𝑡𝑜𝑡𝑎𝑙 𝑒𝑠𝑡𝑖𝑚𝑎𝑡𝑒𝑑 𝑎𝑙𝑙𝑜𝑐𝑎𝑡𝑖𝑜𝑛 𝑏𝑎𝑠𝑒

2- MOH applied on order = POHR X actual allocation base used

 product cost =DM+DL+OH allocated

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True or false section: 1. The managers of process manufacturing systems focus on the series of processes needed to complete the production of products. Answer: True 2. In a process manufacturing system, products pass through a series of sequential processes. Answer: True. 3. Process manufacturing usually reflects a manufacturer that produces large quantities of identical products. Answer: True 4. A production department is an organizational unit of a factory that has the responsibility for at least partially manufacturing or producing a product or service. Answer: True 5. To determine unit cost under a process cost accounting system, equivalent units produced must be calculated if the company has goods in process inventories. Answer: True 6. Equivalent units of production refer to the number of units that would be completed if all effort during a period had been applied only to those units that were started and completed in a period. Answer: True 7. In a process cost accounting system, a department's production should be measured in terms of equivalent units when its beginning or ending inventory includes goods in process. Answer: True 8. Equivalent units of production are always the same as the total number of physical units finished during the period. Answer: False 9. Equivalent units of production need to be determined only if a processing department adds materials and labor to its products at different rates. Answer: False 10. "Equivalent units of production" is an engineering term used to describe the process by which one company attempts to manufacture units of a product that are equivalent to the product manufactured by a competitor. Answer: False 11. The last step in the four-step accounting procedure for process costing is the calculation of equivalent units of production. Answer: False 12. The process cost summary is an important managerial accounting report produced by a process cost accounting system. Answer: True

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13. A process cost summary is an accounting report that describes the costs charged to a department, the equivalent units of production by the department, and how the costs were assigned to the output. Answer: True 14. A process cost summary includes the amounts of equivalent finished units of production for the period. Answer: True 15. A process cost summary for a production department accounts for all costs assigned to that department during the period plus costs that were in the department's Goods in Process Inventory account at the beginning of the period. Answer: True 16. A process cost summary shows the cost of a particular job manufactured in the reporting period. Answer: False 17. The process cost summary presents calculations of the cost of units completed during the reporting period but does not present any information about the ending goods in process inventory. Answer: False 18. The weighted-average method of process costing computes the cost per equivalent unit based solely on the current period’s EUPs and costs. Answer: False 19. Process cost accounting systems are commonly used by companies that produce a large volume of standardized units on a continuous basis. Answer: True 20. A manufacturing company may choose to use either a job order cost accounting system or a process cost accounting system, without considering the manner in which it produces its products. Answer: False 21. Process and job order manufacturing operations both combine materials, labor, and overhead items in the process of producing products. Answer: True 25. Accountants use the term "process cost accounting system" because these systems use a number of trained individuals and computers to process the collected cost information. Answer: False 26. Process costing is applied to operations with repetitive production and heterogeneous products. Answer: False 27. A company that uses a process cost accounting system maintains separate Goods in Process Inventory accounts for each of its manufacturing departments. Answer: True 28. Companies that use a series of manufacturing processes to produce standardized products should use a process cost accounting system. Answer: True 29. When defining direct costs and indirect costs in process costing, the process is the cost object. Answer: True 30. Process cost accounting systems are used only by companies that manufacture physical products; companies and other organizations that provide services to their customers do not use process cost accounting. Answer: False 31. Process cost accounting systems are commonly used by companies that manufacture standardized products by passing them through a series of manufacturing steps. Answer: True

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32. The use of process costing is of little benefit to a service type of operation. Answer: False 33. In process cost accounting, the classification of materials as direct or indirect depends on whether they are clearly linked with a specific process. Answer: True 34. In process cost accounting, materials are always classified as indirect if they are not physically incorporated into the final product. Answer: False 35- Direct costs in process cost accounting include only those costs that can be readily identified with particular product units. Answer: False 36. Process cost accounting systems consider direct costs to include those costs that can be readily identified with a particular process. Answer: True 37. Process cost accounting focuses on the process involved in mass-producing products that are very similar in nature. Ans: T, 38. Process cost systems are used to apply costs to a specific job, such as the manufacturing of a specialized machine. Ans: F 39. A company that produces motion pictures would likely use a process cost system. Ans: F 40. In a process cost system, costs are tracked through a series of connected manufacturing processes or departments, rather than by individual jobs. Ans: T 41 .In a process cost system, total costs are determined at the end of a month or year. Ans: T 42 .Separate work in process accounts are maintained for each production department or manufacturing process in a process cost system. Ans: T 43 In a process cost system, materials, labor and overhead are only added in the first production department. Ans: F 44.The assignment of the three manufacturing cost elements to Work in Process in a process cost system is the same as in a job order cost system. Ans: F 45 Fewer materials requisitions are generally required in a process cost system than in a job order cost system. Ans: T 46. In a process cost system, labor costs incurred maybe captured on time tickets. Ans: T 47-A primary driver of overhead costs in continuous manufacturing operations is machine time used. Ans: T 48.Equivalent units of production are used to determine the cost per unit of completed products. Ans: T 49 Equivalent units of production measure the work done during a period, expressed in fully completed units. Ans: T 50 Equivalent units of production is the sum of units completed and transferred out plus equivalent units of beginning work in process. Ans: F

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51.The weighted-average method of computing equivalent units is the most widely used method in practice. Ans: T, 52.There are no units in process at the beginning of the period, 1,500 units in process at the end of the period that are 40% complete, and 15,000 units transferred out during the period. Based on this information, there were 14,400 equivalent units of production during the period. Ans: F 53.The first step performed in preparing a production cost report is computing the equivalent units of production. Ans: F 54.Equivalent units of production must be calculated before the unit production costs can be computed. Ans: T 55.The physical units in a department are another name for the equivalent units of production. Ans: F 56.Unit material cost is computed by taking total material costs charged to the department for the period and dividing by the physical units in the process during the period. Ans: F 57.When equivalent units of production are different for materials and conversion costs, unit costs are computed for materials, conversion, and total manufacturing. Ans: T 58 The total manufacturing cost per unit is used in costing the units completed and transferred during the period. Ans: T 59.A production cost report is an internal document for management that shows production quantity and cost data for a particular job. Ans: F 60.Production cost reports provide a basis for evaluating the productivity of a department. Ans: T 61.Companies often use a combination of a process cost and a job order cost system, called operations costing. Ans: T 62

.Companies using the weighted-average method do not complete units left over from the previous

accounting periods, they start new units. Ans: F 63.In continuous process manufacturing, generally once the production begins, it continues until the finished product emerges. Ans: T 64.One similarity of process cost accounting with job order cost accounting is that both determine total manufacturing costs after each job. Ans: F 65The flow of costs in a process costing system requires that materials be added in one department, labor added in another department and manufacturing overhead in a third department. Ans: F 66.When finished goods are sold, the entry to record the cost of goods sold is a debit to Finished Goods Inventory and a credit to Cost of Goods Sold. Ans: F 67.When there is no beginning work in process and materials are entered at the beginning of the process, equivalent units of materials are the same as the units started into production. Ans: T

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68.In order to compute the physical unit flow, a company must first compute unit production costs. Ans: F 69. Departments are the cost objects when the plantwide overhead rate method is used. Answer: False 70. The plant-wide overhead rate is determined by using volume-related measures. Answer: True 71. The departmental overhead rate method uses a different overhead rate for each production department. Answer: True 72. The premise of ABC is that it takes activities to make products and provide services and these activities drive costs. Answer: True 73. Activities are the cost objects of the second stage of ABC. Answer: False 74. A cost pool is a collection of costs that are related to the same or similar activity. Answer: True 75. Activity-based costing first assigns costs to products and then uses these product costs to assign costs to manufacturing activities. Answer: False 76. Multiple cost pools are used when allocating overhead using the plantwide overhead rate method. Answer: False 77. Management’s pricing and cost decisions for a product are influenced by that product’s cost assignments .Answer: True 78. ABC is significantly less costly to implement and maintain than more traditional overhead costing systems. Answer: False

79. When using the plantwide overhead rate method, total budgeted overhead costs are combined into one overhead cost pool. Answer: True 80. Activity-based costing eliminates the need for overhead allocation rates. Answer: False 81. Activity-based costing often shifts overhead costs from large volume, standardized products to low-volume, specialty products that consume disproportionate resources. Answer: True 82 Traditional costing systems use multiple predetermined overhead rates. Ans: F 83.

Traditionally, overhead is allocated based on direct labor cost or direct labor hours. Ans: T

84.

Current trends in manufacturing include less direct labor and more overhead. Ans: T

85.

Activity-based costing allocates overhead to multiple cost pools and assigns the cost pools to products using cost drivers. Ans: T

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86.

A cost driver does not generally have a direct cause-effect relationship with the resources consumed. Ans: F

87.

The first step in activity-based costing is to assign overhead costs to products, using cost drivers. Ans: F

88.

To achieve accurate costing, a high degree of correlation must exist between the cost driver and the actual consumption of the activity cost pool. Ans: T

89.

When overhead is properly assigned in ABC, it will usually decrease the unit cost of high-volume products. Ans: T

90.

ABC leads to enhanced control over overhead costs. Ans: T

91.

ABC usually results in less appropriate management decisions. Ans: F

92.

ABC is generally more costly to implement than traditional costing. Ans: T

93.

ABC eliminates all arbitrary cost allocations. Ans: F

94.

ABC is particularly useful when product lines differ greatly in volume and manufacturing complexity. Ans: T

95.

ABC is particularly useful when overhead costs are an insignificant portion of total costs. Ans: F

96.

Activity-based management focuses on reducing costs and improving processes.

Ans: T 97.

The overall objective of installing ABC in service firms is no different than it is in a manufacturing company. Ans: T

98.

What sometimes makes implementation of activity-based costing difficult in service industries is that a smaller proportion of overhead costs are company-wide costs. Ans: F

99-The general approach to identifying activities, activity cost pools, and cost drivers is used by a service company in the same manner as a manufacturing company. Ans: T 100.Activity-based costing is a costing method that is designed to provide managers with product cost information for external financial reports ANS. T 101 .costs are accumulated by department in a process costing system ANS. T

102 activity based costing is a costing technique that uses a two stage allocation process and assigns costs to departments and then to products based upon their activity resources ANS. T 103 The basic difference between a first-stage cost allocation and a second-stage cost allocation is that: cost pools are not used in first-stage cost allocations ANS. F

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Multiple choice theoretical section: 1. Process costing is used to account for: A. large numbers of identical products that are produced in a continuous manufacturing environment. B. small numbers of products that are produced in batches. C. raw materials that are converted directly to finished goods. D. finished goods that are refined and processed further. E. large numbers of products that are produced in a non-repetitive process. 2. Which of the following manufacturers would most likely not use a process-cost accounting system? A. A producer of computer monitors B. A paint manufacturer. C. A producer of frozen orange juice. D. A builder of customized yachts. E. A lumber mill. 3. Process costing would be used in all of the following industries except: A. petroleum refining. B. chemicals. C. truck tire manufacturing. D. wood pulp production. E. automobile repair 4. Which of the following companies would likely use a process-costing system?

A. Choice A

B. Choice B

C. Choice C

D. Choice D

E. Choice E

5. Which of the following statements about similarities between process costing and joborder costing are true? I. Both systems assign production costs to units of output. II. Both systems require extensive knowledge of financial accounting. III. The flow of costs through the manufacturing accounts is essentially the same. A. I only. B. I and III. C. II and III. D. III only. E. I, II, and III.

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6. Companies that use a process-cost accounting system would: A. establish a separate Work-in-Process Inventory account for each manufacturing department. B. establish a separate Finished-Goods Inventory account for each manufacturing department. C. pass completed production directly to Cost of Goods Sold. D. charge goods produced with actual overhead amounts rather than applied overhead amounts. E. eliminate the need for the Finished-Goods Inventory account. 7. Which of the following statements is false? A. In job-order costing, costs are accumulated by job order. B. In process costing, costs are accumulated by department. C. In process costing, the cost per unit in a department is found by spreading the period's manufacturing costs over the production activity. D. In process costing, the total cost of each unit is found by dividing the total factory costs by the number of units completed. E. In job-order costing, the unit cost is found by dividing the job's total cost by the job's total units. 8. In a process-costing system, manufacturing costs are accumulated by: A. batch. B. batch and time period. C. department. D. department and time period. E. department or process, and time period. 9. Which of the following data are needed to calculate total equivalent units under the weighted-average method? A. Work-to-date on ending work in process, units started during the period. B. Units completed during the period, work-to-date on ending work in process. C. Work to complete beginning work in process, work-to-date on ending work in process. D. Work to complete beginning work in process, units completed, work done on ending work in process. E. Units completed, work to complete beginning work in process 10. Michael, Inc., uses a process-costing system. A newly hired accountant has identified the following procedures that must be performed by the close of business on Friday: 1—Calculation of equivalent units 2—Analysis of physical flows of units 3—Assignment of costs to completed units and units still in process 4—Calculation of unit costs Which of the following choices correctly expresses the proper order of the preceding tasks? A. 1, 2, 3, 4. B. 1, 2, 4, 3. C. 1, 4, 3, 2. D. 2, 1, 4, 3. E. 2, 1, 3, 4.

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11. When calculating unit costs under the weighted-average process-costing method, the unit cost is based on: A. only the current period's manufacturing costs. B. only costs in the period's beginning work-in-process inventory. C. a summation of the costs in the beginning work-in-process inventory plus costs incurred in the current period. D. only costs incurred in previous accounting periods. E. a summation of the costs in the beginning work-in-process inventory plus costs to be incurred in the upcoming period. 12. When computing the conversion cost per equivalent unit under the weighted-average method of process costing, all of the following information would be needed except: A. the number of units completed during the current accounting period. B. the conversion work performed during the current period on the ending work-in-process inventory. C. the conversion work performed during the current period on the beginning work-in-process inventory. D. the conversion cost in the beginning work-in-process inventory. E. the conversion cost incurred during the current accounting period. 13. Equivale...