Product Costing: Job and Process Operations
LO1 Describe inventory requirements and measurement issues for service, merchandising, and manufacturing organisations
True False
Topic: Definition of Inventory Costing
1. The process of assigning cost to inventories as they are converted from raw material to finished goods is called Product costing.LO4 - Explain the operation of a job costing system.
Topic: Job Costing
8. A job costing system is a cost system designed to accumulate the manufacturing costs of producing unique jobs, such as building a house or a navel air craft carrier, but would not include producing a batch of several identical units of product, such as 100 chairs in a furniture factory.
Topic: Job Costing
9. In a job costing system, costs are accumulated in a separate Work-in-Process account for each job.
Topic: Manufacturing Inventories
2. In a manufacturing organization, manufacturing supplies costs are recorded as expenses as they are used.
LO2 - Explain the framework of inventory costing for financial reporting
Topic: Inventory Cost Flow
3. When goods are transferred from the factory to the finished goods warehouse, Work-In-Process is reduced and Cost of Goods Sold Expense is recorded.
Topic: Period versus Product Costs
4. In financial accounting, the term period costs refers to all expired costs not related to the manufacturing function, and product costs refers to all costs incurred during the period related to the manufacturing function.
Topic: Manufacturing Depreciation
5. All depreciation on factory assets is recorded as an expense of the period.
LO3 - Describe the production environment as it relates to product costing systems
Topic: Predetermined Overhead Assignment
6. One of the reasons for using a predetermined overhead rate is that it smoothes out seasonal costs over the entire accounting period.
Topic: Predetermined Overhead Assignment
7. If costs are accurately estimated when establishing an annual predetermined overhead rate, there should never be an overapplied or underapplied overhead balance.
LO4 - Explain the operation of a job costing system.
Topic: Job Costing
8. A job costing system is a cost system designed to accumulate the manufacturing costs of producing unique jobs, such as building a house or a navel air craft carrier, but would not include producing a batch of several identical units of product, such as 100 chairs in a furniture factory..
Topic: Job Costing
9. In a job costing system, costs are accumulated in a separate Work-in-Process account for each job.LO5 - Explain the operation of a process costing system.
Topic: Process Costing
10. Process costing is best suited for production environments where identical units of product are produced on a continuous basis.
Topic: Process Costing
11. In process costing, each accounting period is actually equivalent to a unique job in a job costing system.