CHAPTER 21
PROCESS COST ACCOUNTING
SUMMARY OF QUESTIONS BY STUDY OBJECTIVES AND BLOOM’S TAXONOMY
Item SO BT Item SO BT Item SO BT Item SO BT Item SO BT
True-False Statements
sg
1. 1 K 9. 4 K 17. 6 K 25. 7 K 33. 3 C
sg
2. 1 K 10. 4 K 18. 6 C 26. 8 K 34. 4 K
sg
3. 1 C 11. 4 K 19. 6 K 27. 8 K 35. 5 K
sg
4. 2 C 12. 5 C 20. 6 K 28. 8 K 36. 6 K
sg
5. 2 K 13. 5 K 21. 6 C 29. 9 K 37. 9 K
a
6. 2 K 14. 5 K 22. 6 K 30. 10 K
sg
7. 2 K 15. 5 K 23. 7 K 31. 1 K
sg
8. 4 C 16. 5 AP 24. 7 K 32. 2 K
Multiple Choice Questions
38. 1 C 59. 5 AP 80. 6 AP 101. 6 C 123. 9 C
39. 1 C 60. 5 AP 81. 6 AP 102. 6 AP 124. 9 C
40. 1 K 61. 5 K 82. 6 AP 103. 6 AP 125. 9 C
41. 1 K 62. 5 AP 83. 6 AP 104. 6 AP 126. 9 K
42. 1 K 63. 5 AP 84. 6 AP 105. 6 AP 127. 9 K
a
43. 2 C 64. 5 AP 85. 6 AP 106. 6 AP 128. 10 K
a
44. 2 K 65. 5 C 86. 6 AP 107. 6 AP 129. 10 K
st
45. 2 C 66. 5 AP 87. 6 AP 108. 6 AP 130. 1 K
sg
46. 2 K 67. 5 AP 88. 6 AP 110. 6 AP 131. 2 K
st
47. 2 K 68. 5 AP 89. 6 AP 111. 6 AP 132. 2 K
sg
48. 2 C 69. 5 AP 90. 6 C 112. 6 AP 133. 5 K
sg
49. 2 K 70. 5 AP 91. 6 C 113. 6 AP 134. 5 K
st
50. 4 C 71. 5 AP 92. 6 AP 114. 7 K 135. 5 K
sg
51. 4 C 72. 5 AP 93. 6 K 115. 7 K 136. 6 AP
st
52. 4 C 73. 5 AP 94. 6 AP 116. 7 K 137. 6 K
sg
53. 4 C 74. 5 AP 95. 6 AP 117. 8 C 138. 6 C
sg
54. 4 K 75. 5 AP 96. 6 AP 118. 8 C 139. 6 AP
st
55. 4 C 76. 6 AP 97. 6 AP 119. 8 K 140. 6 K
sg
56. 5 AP 77. 6 AP 98. 6 AP 120. 8 C 141. 7 K
sg
57. 5 AP 78. 6 AP 99. 6 AP 121. 8 C 142. 8 K
58. 5 AP 79. 6 AP 100. 6 AP 122. 9 C
Brief Exercises
143. 5 AP 145. 5 AP 147. 6 AP 149. 6 AP 151. 6 AP
144. 5 AP 146. 6 AP 148. 6 AP 150. 6 AP 152. 6 AP
sg
This question also appears in the Study Guide.
st
This question also appears in a self-test at the student companion website.
a
This topic is dealt with in an Appendix to the chapter.
,21 - 2 Test Bank for Accounting Principles, Eighth Edition
SUMMARY OF QUESTIONS BY STUDY OBJECTIVES AND BLOOM’S TAXONOMY
Exercises
153. 4 AP 158. 5 AP 163. 5,6 AP 168. 6 AP 173. 7 AP
154. 4 AP 159. 5 AP 164. 5,6 AP 169. 6 AP
155. 4 AP 160. 5,6 AP 165. 5,6 AP 170. 7 AP
156. 4 AP 161. 5,6 AN 166. 5,6 AP 171. 7 AP
157. 4 AP 162. 5,6 AP 167. 6 AP 172. 7 AP
Completion Statements
a
174. 1 K 177. 4 K 180. 6 AP 183. 8 K 186. 10 K
175. 2 K 178. 5 K 181. 6 K 184. 9 K
176. 2 K 179. 6 K 182. 7 K 185. 9 K
SUMMARY OF STUDY OBJECTIVES BY QUESTION TYPE
Item Type Item Type Item Type Item Type Item Type Item Type Item Type
Study Objective 1
1. TF 3. TF 38. MC 40. MC 42. MC 174. C
2. TF 31. TF 39. MC 41. MC 130. MC
Study Objective 2
4. TF 7. TF 44. MC 47. MC 131. MC 176. C
5. TF 32. TF 45. MC 48. MC 132. MC
6. TF 43. MC 46. MC 49. MC 175. C
Study Objective 3
33. TF
Study Objective 4
8. TF 11. TF 51. MC 54. MC 153. Ex 156. Ex
9. TF 34. TF 52. MC 55. MC 154. Ex 157. Ex
10. TF 50. MC 53. MC 133. MC 155. Ex 177. C
Study Objective 5
12. TF 56. MC 62. MC 68. MC 74. MC 145. BE 163. Ex
13. TF 57. MC 63. MC 69. MC 75. MC 158. Ex 164. Ex
14. TF 58. MC 64. MC 70. MC 134. MC 159. Ex 165. Ex
15. TF 59. MC 65. MC 71. MC 135. MC 160. Ex 166. Ex
16. TF 60. MC 66. MC 72. MC 143. BE 161. Ex 178. C
35. TF 61. MC 67. MC 73. MC 144. BE 162. Ex
Study Objective 6
17. TF 79. MC 89. MC 99. MC 109. MC 146. BE 163. Ex
18. TF 80. MC 90. MC 100. MC 110. MC 147. BE 164. Ex
19. TF 81. MC 91. MC 101. MC 111. MC 148. BE 165. Ex
20. TF 82. MC 92. MC 102. MC 112. MC 149. BE 166. Ex
21. TF 83. MC 93. MC 103. MC 113. MC 150. BE 167. Ex
22. TF 84. MC 94. MC 104. MC 136. MC 151. BE 168. Ex
36. TF 85. MC 95. MC 105. MC 137. MC 152. BE 169. Ex
76. MC 86. MC 96. MC 106. MC 138. MC 160. Ex 179. C
77. MC 87. MC 97. MC 107. MC 139. MC 161. Ex 180. C
78. MC 88. MC 98. MC 108. MC 140. MC 162. Ex 181. C
, Process Cost Accounting 21 - 3
Study Objective 7
23. TF 25. TF 115. MC 141. MC 171. Ex 173. Ex
24. TF 114. MC 116. MC 170. Ex 172. Ex 182. C
Study Objective 8
26. TF 28. TF 118. MC 120. MC 142. MC
27. TF 117. MC 119. MC 121. MC 183. C
Study Objective 9
29. TF 122. MC 124. MC 126. MC 184. C
37. TF 123. MC 125. MC 127. MC 185. C
Study Objective a10
a a a
30. TF 128. MC 129. MC a186. C
Note: TF = True-False BE = Brief Exercise C = Completion
MC = Multiple Choice Ex = Exercise
The chapter also contains one set of ten Matching questions and four Short-Answer Essay
questions.
CHAPTER STUDY OBJECTIVES
1. Understand who uses process cost systems. Process cost systems are used by
companies that mass-produce similar products in a continuous fashion. Once production
begins, it continues until the finished product emerges. Each unit of finished product is
indistinguishable from every other unit.
2. Explain the similarities and differences between job order cost and process cost
systems. Job order cost systems are similar to process cost systems in three ways: (1)
Both systems track the same cost elements—direct materials, direct labor, and
manufacturing overhead. (2) Costs are accumulated in the same accounts—Raw Materials
Inventory, Factory Labor, and Manufacturing Overhead. (3) Accumulated costs are
assigned to the same accounts—Work in Process, Finished Goods Inventory, and Cost of
Goods Sold. However, the method of assigning costs differs significantly.
There are four main differences between the two cost systems: (1) A process cost system
uses separate accounts for each production process department or manufacturing process,
rather than only one work in process account used in a job order cost system. (2) In a
process cost system, costs are summarized in a production cost report for each department.
In a job cost system, costs are charged to individual jobs and summarized in a job cost
sheet. (3) Costs are totaled at the end of a time period in a process cost system, but at the
completion of a job in a job cost system. (4) In a process cost system, unit cost is calculated
as: Total manufacturing costs for the period ÷ Units produced during the period. In a job
cost system, unit cost is: Total cost per job ÷ Units produced.
3. Explain the flow of costs in a process cost system. Manufacturing costs for raw
materials, labor, and overhead are assigned to work in process accounts for various
departments or manufacturing processes. The costs of units completed are transferred from
one department to another as those units move through the manufacturing process. The
costs of completed work are transferred to Finished Goods Inventory. When inventory is
sold, costs are transferred to Cost of Goods Sold.
, 21 - 4 Test Bank for Accounting Principles, Eighth Edition
4. Make the journal entries to assign manufacturing costs in a process cost system.
Entries to assign the costs of raw materials, labor, and overhead consist of a credit to Raw
Materials Inventory, Factory Labor, and Manufacturing Overhead, and a debit to Work in
Process for each department. Entries to record the cost of good transferred to another
department are a credit to Work in Process for the department whose work is finished and a
debit to the department to which the goods are transferred. The entry to record units
completed and transferred to the warehouse is a credit for the department whose work is
finished and a debit to Finished Goods Inventory. The entry to record the sale of goods is a
credit to Finished Goods Inventory and a debit to Cost of Goods Sold.
5. Compute equivalent units. Equivalent units of production measure work done during a
period, expressed in fully completed units. This concept is used to determine the cost per
unit of completed product. Equivalent units are the sum of the units completed and
transferred out plus equivalent units of ending work in process.
6. Explain the four steps necessary to prepare a production cost report. The four steps to
complete a production cost report are: (1) Compute the physical unit flow—that is, the total
units to be accounted for. (2) Compute the equivalent units of production. (3) Compute the
unit production costs, expressed in terms of equivalent units of production. (4) Prepare a
cost reconciliation schedule, which shows that the total costs accounted for equal the total
costs to be accounted for.
7. Prepare a production cost report. The production cost report contains both quantity and
cost data for a production department. There are four sections in the report: (1) number of
physical units, (2) equivalent units determination, (3) unit costs, and (4) cost reconciliation
schedule.
8. Explain just-in-time (JIT) processing. JIT is a manufacturing technique dedicated to
producing the right products at the right time as needed. One of the principal accounting
effects is that a Raw and In-Process Inventory account replaces both the raw materials and
work in process inventory accounts.
9. Explain activity-based costing (ABC). ABC is a method of product costing that focuses on
the activities performed to produce products. It assigns the cost of the activities to products
by using cost drivers that measure the activities performed. The primary objective of ABC is
accurate and meaningful product costs.
a
10. Apply activity-based costing to specific company data. In applying ABC, it is necessary
to compute the overhead rate for each activity by dividing total expected overhead by the
total expected usage of the cost driver. The overhead cost for each activity is then assigned
to products on the basis of each product’s use of the cost driver.
PROCESS COST ACCOUNTING
SUMMARY OF QUESTIONS BY STUDY OBJECTIVES AND BLOOM’S TAXONOMY
Item SO BT Item SO BT Item SO BT Item SO BT Item SO BT
True-False Statements
sg
1. 1 K 9. 4 K 17. 6 K 25. 7 K 33. 3 C
sg
2. 1 K 10. 4 K 18. 6 C 26. 8 K 34. 4 K
sg
3. 1 C 11. 4 K 19. 6 K 27. 8 K 35. 5 K
sg
4. 2 C 12. 5 C 20. 6 K 28. 8 K 36. 6 K
sg
5. 2 K 13. 5 K 21. 6 C 29. 9 K 37. 9 K
a
6. 2 K 14. 5 K 22. 6 K 30. 10 K
sg
7. 2 K 15. 5 K 23. 7 K 31. 1 K
sg
8. 4 C 16. 5 AP 24. 7 K 32. 2 K
Multiple Choice Questions
38. 1 C 59. 5 AP 80. 6 AP 101. 6 C 123. 9 C
39. 1 C 60. 5 AP 81. 6 AP 102. 6 AP 124. 9 C
40. 1 K 61. 5 K 82. 6 AP 103. 6 AP 125. 9 C
41. 1 K 62. 5 AP 83. 6 AP 104. 6 AP 126. 9 K
42. 1 K 63. 5 AP 84. 6 AP 105. 6 AP 127. 9 K
a
43. 2 C 64. 5 AP 85. 6 AP 106. 6 AP 128. 10 K
a
44. 2 K 65. 5 C 86. 6 AP 107. 6 AP 129. 10 K
st
45. 2 C 66. 5 AP 87. 6 AP 108. 6 AP 130. 1 K
sg
46. 2 K 67. 5 AP 88. 6 AP 110. 6 AP 131. 2 K
st
47. 2 K 68. 5 AP 89. 6 AP 111. 6 AP 132. 2 K
sg
48. 2 C 69. 5 AP 90. 6 C 112. 6 AP 133. 5 K
sg
49. 2 K 70. 5 AP 91. 6 C 113. 6 AP 134. 5 K
st
50. 4 C 71. 5 AP 92. 6 AP 114. 7 K 135. 5 K
sg
51. 4 C 72. 5 AP 93. 6 K 115. 7 K 136. 6 AP
st
52. 4 C 73. 5 AP 94. 6 AP 116. 7 K 137. 6 K
sg
53. 4 C 74. 5 AP 95. 6 AP 117. 8 C 138. 6 C
sg
54. 4 K 75. 5 AP 96. 6 AP 118. 8 C 139. 6 AP
st
55. 4 C 76. 6 AP 97. 6 AP 119. 8 K 140. 6 K
sg
56. 5 AP 77. 6 AP 98. 6 AP 120. 8 C 141. 7 K
sg
57. 5 AP 78. 6 AP 99. 6 AP 121. 8 C 142. 8 K
58. 5 AP 79. 6 AP 100. 6 AP 122. 9 C
Brief Exercises
143. 5 AP 145. 5 AP 147. 6 AP 149. 6 AP 151. 6 AP
144. 5 AP 146. 6 AP 148. 6 AP 150. 6 AP 152. 6 AP
sg
This question also appears in the Study Guide.
st
This question also appears in a self-test at the student companion website.
a
This topic is dealt with in an Appendix to the chapter.
,21 - 2 Test Bank for Accounting Principles, Eighth Edition
SUMMARY OF QUESTIONS BY STUDY OBJECTIVES AND BLOOM’S TAXONOMY
Exercises
153. 4 AP 158. 5 AP 163. 5,6 AP 168. 6 AP 173. 7 AP
154. 4 AP 159. 5 AP 164. 5,6 AP 169. 6 AP
155. 4 AP 160. 5,6 AP 165. 5,6 AP 170. 7 AP
156. 4 AP 161. 5,6 AN 166. 5,6 AP 171. 7 AP
157. 4 AP 162. 5,6 AP 167. 6 AP 172. 7 AP
Completion Statements
a
174. 1 K 177. 4 K 180. 6 AP 183. 8 K 186. 10 K
175. 2 K 178. 5 K 181. 6 K 184. 9 K
176. 2 K 179. 6 K 182. 7 K 185. 9 K
SUMMARY OF STUDY OBJECTIVES BY QUESTION TYPE
Item Type Item Type Item Type Item Type Item Type Item Type Item Type
Study Objective 1
1. TF 3. TF 38. MC 40. MC 42. MC 174. C
2. TF 31. TF 39. MC 41. MC 130. MC
Study Objective 2
4. TF 7. TF 44. MC 47. MC 131. MC 176. C
5. TF 32. TF 45. MC 48. MC 132. MC
6. TF 43. MC 46. MC 49. MC 175. C
Study Objective 3
33. TF
Study Objective 4
8. TF 11. TF 51. MC 54. MC 153. Ex 156. Ex
9. TF 34. TF 52. MC 55. MC 154. Ex 157. Ex
10. TF 50. MC 53. MC 133. MC 155. Ex 177. C
Study Objective 5
12. TF 56. MC 62. MC 68. MC 74. MC 145. BE 163. Ex
13. TF 57. MC 63. MC 69. MC 75. MC 158. Ex 164. Ex
14. TF 58. MC 64. MC 70. MC 134. MC 159. Ex 165. Ex
15. TF 59. MC 65. MC 71. MC 135. MC 160. Ex 166. Ex
16. TF 60. MC 66. MC 72. MC 143. BE 161. Ex 178. C
35. TF 61. MC 67. MC 73. MC 144. BE 162. Ex
Study Objective 6
17. TF 79. MC 89. MC 99. MC 109. MC 146. BE 163. Ex
18. TF 80. MC 90. MC 100. MC 110. MC 147. BE 164. Ex
19. TF 81. MC 91. MC 101. MC 111. MC 148. BE 165. Ex
20. TF 82. MC 92. MC 102. MC 112. MC 149. BE 166. Ex
21. TF 83. MC 93. MC 103. MC 113. MC 150. BE 167. Ex
22. TF 84. MC 94. MC 104. MC 136. MC 151. BE 168. Ex
36. TF 85. MC 95. MC 105. MC 137. MC 152. BE 169. Ex
76. MC 86. MC 96. MC 106. MC 138. MC 160. Ex 179. C
77. MC 87. MC 97. MC 107. MC 139. MC 161. Ex 180. C
78. MC 88. MC 98. MC 108. MC 140. MC 162. Ex 181. C
, Process Cost Accounting 21 - 3
Study Objective 7
23. TF 25. TF 115. MC 141. MC 171. Ex 173. Ex
24. TF 114. MC 116. MC 170. Ex 172. Ex 182. C
Study Objective 8
26. TF 28. TF 118. MC 120. MC 142. MC
27. TF 117. MC 119. MC 121. MC 183. C
Study Objective 9
29. TF 122. MC 124. MC 126. MC 184. C
37. TF 123. MC 125. MC 127. MC 185. C
Study Objective a10
a a a
30. TF 128. MC 129. MC a186. C
Note: TF = True-False BE = Brief Exercise C = Completion
MC = Multiple Choice Ex = Exercise
The chapter also contains one set of ten Matching questions and four Short-Answer Essay
questions.
CHAPTER STUDY OBJECTIVES
1. Understand who uses process cost systems. Process cost systems are used by
companies that mass-produce similar products in a continuous fashion. Once production
begins, it continues until the finished product emerges. Each unit of finished product is
indistinguishable from every other unit.
2. Explain the similarities and differences between job order cost and process cost
systems. Job order cost systems are similar to process cost systems in three ways: (1)
Both systems track the same cost elements—direct materials, direct labor, and
manufacturing overhead. (2) Costs are accumulated in the same accounts—Raw Materials
Inventory, Factory Labor, and Manufacturing Overhead. (3) Accumulated costs are
assigned to the same accounts—Work in Process, Finished Goods Inventory, and Cost of
Goods Sold. However, the method of assigning costs differs significantly.
There are four main differences between the two cost systems: (1) A process cost system
uses separate accounts for each production process department or manufacturing process,
rather than only one work in process account used in a job order cost system. (2) In a
process cost system, costs are summarized in a production cost report for each department.
In a job cost system, costs are charged to individual jobs and summarized in a job cost
sheet. (3) Costs are totaled at the end of a time period in a process cost system, but at the
completion of a job in a job cost system. (4) In a process cost system, unit cost is calculated
as: Total manufacturing costs for the period ÷ Units produced during the period. In a job
cost system, unit cost is: Total cost per job ÷ Units produced.
3. Explain the flow of costs in a process cost system. Manufacturing costs for raw
materials, labor, and overhead are assigned to work in process accounts for various
departments or manufacturing processes. The costs of units completed are transferred from
one department to another as those units move through the manufacturing process. The
costs of completed work are transferred to Finished Goods Inventory. When inventory is
sold, costs are transferred to Cost of Goods Sold.
, 21 - 4 Test Bank for Accounting Principles, Eighth Edition
4. Make the journal entries to assign manufacturing costs in a process cost system.
Entries to assign the costs of raw materials, labor, and overhead consist of a credit to Raw
Materials Inventory, Factory Labor, and Manufacturing Overhead, and a debit to Work in
Process for each department. Entries to record the cost of good transferred to another
department are a credit to Work in Process for the department whose work is finished and a
debit to the department to which the goods are transferred. The entry to record units
completed and transferred to the warehouse is a credit for the department whose work is
finished and a debit to Finished Goods Inventory. The entry to record the sale of goods is a
credit to Finished Goods Inventory and a debit to Cost of Goods Sold.
5. Compute equivalent units. Equivalent units of production measure work done during a
period, expressed in fully completed units. This concept is used to determine the cost per
unit of completed product. Equivalent units are the sum of the units completed and
transferred out plus equivalent units of ending work in process.
6. Explain the four steps necessary to prepare a production cost report. The four steps to
complete a production cost report are: (1) Compute the physical unit flow—that is, the total
units to be accounted for. (2) Compute the equivalent units of production. (3) Compute the
unit production costs, expressed in terms of equivalent units of production. (4) Prepare a
cost reconciliation schedule, which shows that the total costs accounted for equal the total
costs to be accounted for.
7. Prepare a production cost report. The production cost report contains both quantity and
cost data for a production department. There are four sections in the report: (1) number of
physical units, (2) equivalent units determination, (3) unit costs, and (4) cost reconciliation
schedule.
8. Explain just-in-time (JIT) processing. JIT is a manufacturing technique dedicated to
producing the right products at the right time as needed. One of the principal accounting
effects is that a Raw and In-Process Inventory account replaces both the raw materials and
work in process inventory accounts.
9. Explain activity-based costing (ABC). ABC is a method of product costing that focuses on
the activities performed to produce products. It assigns the cost of the activities to products
by using cost drivers that measure the activities performed. The primary objective of ABC is
accurate and meaningful product costs.
a
10. Apply activity-based costing to specific company data. In applying ABC, it is necessary
to compute the overhead rate for each activity by dividing total expected overhead by the
total expected usage of the cost driver. The overhead cost for each activity is then assigned
to products on the basis of each product’s use of the cost driver.
