HUMAN SERV 455 Chapter 3 Study Guide

Process costing systems are commonly used by companies that produce homogeneous items using a continuous production process. 2.t A company such as Proctor & Gamble that produces large quantities of identical items, such as shampoo and toothpaste, is likely to use a process costing system. 3.f In a process costing system, costs are transferred from the Work in Process inventory account directly to the Cost of Goods Sold account. 4.t In the manufacturing operations of a company using process costing, a product must typically pass through two or more departments. 5.f Material is generally added evenly throughout the production process. 6.f Materials and labor are often grouped together and called conversion costs. 7.f Transferred-in costs are the costs of the direct materials that are transferred into the company when materials are purchased from a supplier. 8.t In process costing, a transferred-in cost is handled in the same manner as a material cost added at the beginning of the process. 9.t In a process costing system, each department has a separate Work in Process account. 10f. A significant disadvantage of a process costing system is that it requires the use of actual overhead costs rather than predetermined overhead rates.