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Preparation Material- MCQ, Fill in the Blanks, True or False and Match the
Following-Faculty Facilitator- Ms. Sheetal Thomas
F. Process-costing reports
G. Conversion costs
H. Allocation rate
I. Process Costing
J. Job shop
6. This report includes the following five steps: track the physical flow, compute equivalent
units, collect costs to allocate, calculate the rate per equivalent units, and allocate costs. (F)
7. An environment that involves continuous production. (E)
8. The process-costing systems that do not differentiate between costs from prior period and
costs incurred. (A)
9. Suitable for environments that involve mass product of similar products. (I)
10. Manufacturing costs incurred during a given month divided by equivalent units. (H)
11. The system that uses predetermined rates that comes from company standards. (C)
12. Suitable for environments that produce customized products in small amounts. (D)
13. The cost required to convert input materials into finished goods, usually includes labor and
overhead. (G)
14. The amount of output stated in terms of completed units. (B)
15. An environment that involves discrete production. (J)
16. Process costing systems:
A. Are suitable for firms that produce customized products in small amounts.
B. Use in-process units as the basis to allocate costs between ending WIP and COGM.
C. Use equivalent units to convert in-process units to equivalent completed units.
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b.process
c.actual
d.standard
31. Which of the following could not be used in job order costing?
a. standards
b. an average cost per unit for all jobs
c. normal costing
d. overhead allocation based on the job's direct labor hours
32. Which of the following are drawbacks to applying actual overhead to production?
a. A delay occurs in assigning costs to jobs or products.
b. Fluctuations in quantities produced during a period could cause varying per-unit
charges for fixed overhead.
c. Seasonality of overhead costs may cause distortions in job or product costs.
d. all answers are correct.
33. Job order costing and process costing have which of the following characteristics?
Job Order Costing
Process Costing
homogeneous products
heterogeneous products
and large quantities
and small quantities
homogeneous products
heterogeneous products
and small quantities
and large quantities
heterogeneous products homogeneous products
and large quantities
and small quantities
heterogeneous products homogeneous products
and small quantities
and large quantities
34. In a job order costing system, the amount of the entry that debits Finished Goods Inventory
and credits Work in Process Inventory is the sum of the costs charged to all jobs
a. started in process during the period.
b. in process during the period.
c. completed and sold during the period.
d. completed during the period.
35. The primary accounting document in a job order costing system is a(n)
a. bill of materials.
b. job order cost sheet.
c. employee time sheet.
d. materials requisition.
36. Production overhead does not include the costs of
a. factory depreciation and supplies.
b. factory employees' cafeteria departments.
c. production line labour.
d. the maintenance department for the factory.
37. Debits to Cost of Goods Sold typically represent the
a. transfer of completed items to Finished Goods Inventory.
b. costs of items sold.
c. selling price of items sold.
d. the cost of goods manufactured.
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38. After the completion of production, standard and actual costs are compared to determine
the ______ of the production process.
a. effectiveness
b. complexity
c. homogeneity
d. efficiency
39. A company producing which of the following would be most likely to use a time standard
for labor?
a. mattresses
b. picture frames
c. floral arrangements
d. stained-glass windows
40. A service organization would be most likely to use a predetermined overhead rate based on
a. machine hours.
b. standard material cost.
c. direct labor.
d. number of complaints.
41. Knowing specific job costs enables managers to effectively perform which of the
following tasks?
a. estimate costs of future jobs.
b. establish realistic job selling prices.
c. evaluate job performance.
d. all answers are correct.
42. A job order costing system is likely to provide better
(1) inventory valuations for financial statements.
(2) control over inventory.
(3) information about ability to accept additional production work.
(1)
(2)
yes
no
no
yes
no
yes
no
yes
(3)
no
yes
no
yes
43. A unit that is rejected at a quality control inspection point, but that can be reworked and
sold, is referred to as a
a. spoiled unit.
b. scrap unit.
c. abnormal unit.
d. defective unit.
44. In a job order costing system, the net cost of normal spoilage is equal to
a. estimated disposal value plus the cost of spoiled work.
b. the cost of spoiled work minus estimated spoilage cost.
c. the units of spoiled work times the predetermined overhead rate.
d. the cost of spoiled work minus the estimated disposal value.
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carried out by the service undertakings, the cost system used is obviously different from that
followed in manufacturing concerns.
The essential features of operating costs are as follows:
(1) The operating costs can be classified under three categories. For example in the case of
transport undertaking these three categories are as follows:
(a) Operating and running charges: It includes expenses of variable nature. For example
expenses on petrol, diesel, lubricating oil, and grease etc.
(b) Maintenance charges: These expenses are of semi-variable nature and include the cost of
tyres and tubes, repairs and maintenance, spares and accessories, overhaul, etc.
(c) Fixed or standing charges: These includes garage rent, insurance, road licence, depreciation,
interest on capital, salary of operating manager, etc.
(2) The cost unit used is composite like passenger-mile; Kilowatt-hour, etc.
It can be implemented in all firms of transport, airlines, bus-service, etc., and by all firms of
distribution undertakings.
50. Explain briefly the concept of flexible budget.
Solution
Flexible Budget: A flexible budget is defined as a budget which, by recognizing the
difference between fixed, semi-variable and variable cost is designed to change in relation to
the level of activity attained. In flexibility budgetary control system, a series of budgets are
prepared one for the each of a number of alternative production levels or volumes. Flexible
budgets represent the amount of expense that is reasonably necessary to achieve each level of
output specified. In other words, the allowances given under flexibility budgetary control
system serve as standards of what costs should be at each level of output.
51. List the eight functional budgets prepared by a business.
Solution:
The various commonly used Functional budgets are:
Sales Budget
Production Budget
Plant Utilisation Budget
Direct Material Usage Budget
Direct Material Purchase Budget
Direct Labour (Personnel) Budget
Factory Overhead Budget
Production Cost Budget.
52. Distinguish between Fixed and flexible budget.
Solution:
Difference between Fixed and Flexible Budgets
(iii) Abnormal gain: Sometimes, loss under a process is less than the anticipated normal figure.
In other words, the actual production exceeds the expected figures. Under such a situation the
difference between actual and expected loss or actual and expected production is known as
abnormal gain. So abnormal gain may be defined as unexpected gain in production under
normal conditions. Treatment in Cost Accounts: The process account under which abnormal
gain arises is debited with the abnormal gain and credited to Abnormal gain account which will
be closed by transferring to the Costing Profit and loss account. The cost of abnormal gain is
computed on the basis of normal production.
Illustration 1: Process Costing
From the following data, prepare process accounts indicating the cost of each process and the
total cost. The total units that pass through each process were 240 for the period.
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