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Chapter 4ADMS 2510 Systems Design Process Costing Questions and Answers York University
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Chapter 4 Systems Design: Process Costing Garrison, Managerial Accounting, 12th Edition 125 True/False Questions 1. When materials are purchased in a process costing system, a work in process account is debited with the cost of the materials. Answer: False Level: Easy LO: 1 2. Any differenc...

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Chapter 4 Systems Design: Process Costing


True/False Questions

1. When materials are purchased in a process costing system, a work in process account
is debited with the cost of the materials.

Answer: False Level: Easy LO: 1

2. Any difference in the equivalent units calculated under the weighted-average and the
FIFO methods is due to the units in the ending work in process inventory.

Answer: False Level: Easy LO: 2,6 Appendix: 4

3. The equivalent units in beginning work in process inventory plus the equivalent units
for the work done during the period equals the units transferred out plus the equivalent
units in ending work in process inventory.

Answer: True Level: Hard LO: 2

4. There is no difference in the unit costs computed under the weighted-average and
FIFO methods of process costing if there are no beginning work in process
inventories.

Answer: True Level: Hard LO: 4,8 Appendix: 4

5. Under the weighted-average method of process costing, costs from the prior period are
averaged with those of the current period in computing unit costs.

Answer: True Level: Medium LO: 4

6. In a process costing production report, the “Cost to be accounted for” will be the same
whether the weighted-average or the FIFO method is used.

Answer: True Level: Medium LO: 5,9 Appendix: 4

7. Under the FIFO method of product costing, equivalent units of production consider
units in the beginning inventory as if they were started and completed during the
current period.

Answer: False Level: Medium LO: 6 Appendix: 4




Garrison, Managerial Accounting, 12th Edition 125

,Chapter 4 Systems Design: Process Costing


8. The production report of a company using the FIFO cost method likely would show
goods transferred from a department in two parts--one part consisting of units from the
beginning inventory completed and transferred, and the other part consisting of units
that were both started and completed during the month.

Answer: True Level: Medium LO: 7 Appendix: 4

9. In computing the cost per equivalent unit on the production report, costs in the
beginning work in process inventory are kept separate from current period costs when
the FIFO method is used.

Answer: True Level: Medium LO: 8 Appendix: 4

10. A major advantage of the FIFO method is that it allows managers to judge the
performance of the current period independently of the performance of the prior
period.

Answer: True Level: Medium LO: 9,10 Appendix: 4

11. Under a JIT inventory system, the differences between FIFO and weighted-average
costing methods are reduced.

Answer: True Level: Easy LO: 9,10 Appendix: 4

12. When the FIFO method is used to prepare a production report, costs to the next
department are accounted for in two separate blocks.

Answer: True Level: Easy LO: 9 Appendix: 4

13. Costs are accumulated by department in a process costing system.

Answer: True Level: Easy LO: 10

14. Operation costing is a hybrid system that employs certain aspects of both job-order
and process costing.

Answer: True Level: Easy LO: 10

15. Under job-order costing, costs are accumulated by department and are assigned
equally to all units passing through the department during the period.

Answer: False Level: Easy LO: 10



126 Garrison, Managerial Accounting, 12th Edition

,Chapter 4 Systems Design: Process Costing


Multiple Choice Questions

16. Which of the following journal entries would be used to record direct labor costs in a
company having two processing departments (Department A and Department B)?

A) Work in Process XXX
Salaries and Wages Payable XXX
B) Salaries and Wages Expense XXX
Salaries and Wages Payable XXX
C) Work in Process-Department A XXX
Work in Process-Department B XXX
Salaries and Wages Payable XXX
D) Salaries and Wages Payable XXX
Work in Process XXX

Answer: C Level: Medium LO: 1

17. Which of the following journal entries would be used to record application of
manufacturing overhead to work in process in a process costing system with two
processing departments, department A and department B?

A) Manufacturing Overhead XXX
Work in Process–Department A XXX
Work in Process–Department B XXX
B) Work in Process–Department A XXX
Work in Process–Department B XXX
Manufacturing Overhead XXX
C) Work in Process–Department B XXX
Work in Process–Department A XXX
Manufacturing Overhead XXX
D) Work in Process–Department A XXX
Work in Process–Department B XXX
Manufacturing Overhead XXX

Answer: B Level: Easy LO: 1

18. Costs in an operation costing system are accumulated by:
A) department.
B) by individual job.
C) by both job and departments.
D) by neither job nor department.

Answer: C Level: Easy LO: 1


Garrison, Managerial Accounting, 12th Edition 127

, Chapter 4 Systems Design: Process Costing


19. A process costing system was used for a department that began operations in January.
Approximately the same number of physical units, at the same degree of completion
were in work in process at the end of both January and February. Monthly conversion
costs are allocated between ending work in process and units completed. Compared to
the FIFO method, would the weighted-average method use the same or a greater
number of equivalent units to calculate the monthly allocations?

Equivalent units for weighted average compared to FIFO
January February
A) Same Same
B) Greater number Greater number
C) Greater number Same
D) Same Greater number

Answer: D Level: Hard LO: 2,6 Source: CPA, adapted Appendix: 4

20. The FIFO method provides a major advantage over the weighted-average method in
that:
A) the calculation of equivalent units is less complex under the FIFO method.
B) the FIFO method treats units in the beginning inventory as if they were started and
completed during the current period.
C) the FIFO method provides measurements of work done during the current period.
D) the weighted-average method ignores units in the beginning and ending work in
process inventories.

Answer: C Level: Medium LO: 2,6 Appendix: 4

21. The weighted-average method of process costing differs from the FIFO method of
process costing in that the weighted-average method:
A) can be used under any cost flow assumption.
B) does not require the use of predetermined overhead rates.
C) keeps costs in the beginning inventory separate from current period costs.
D) does not consider the degree of completion of units in the beginning work in
process inventory when computing equivalent units of production.

Answer: D Level: Medium LO: 2,6 Appendix: 4




128 Garrison, Managerial Accounting, 12th Edition

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