What is Process Costing?

Process Costing is used when output is produced in a continuous process system, and it is difficult to separate individual units of output.

What are the transferred-in costs in the Process Costing system?

Transferred-in costs are the costs accumulated by the product at any given point in production. They are "transferred in" to the new business department that receives the partially finished product and is responsible for continuing the production process.

What are the principles of Process Costing?

Following are the fundamental principles of Process Costing: 1. Cost of materials, wages, and overhead expenses are collected for each process or operation in a period. 2. Adequate records regarding output and scrap of each process or operation during the period are kept.

What are the two methods used in Process Costing?

There are three kinds of Process Costing: weighted average, standard, and First-in First-out (FIFO). There is no Last-in, Last-out (LIFO) method of Process Costing, as the basic principle of Process Costing is that the first unit produced is the first unit used.

What is an example of Process Costing?

One example of Process Costing is the manufacture of automobiles. In this type of process, each step in the production process is tracked and assigned a specific cost. This helps to ensure that the final product is accurately priced.

Process Costing MCQ Quiz With Answers

This quiz, process costing multiple choice questions (MCQs), tests a student's knowledge of the fundamentals. Completing it will be helpful to prepare for exams and interviews.

The quiz contains 9 MCQs with 4 possible options for each MCQ. Students need to select the correct option to proceed to the next question.

You can complete the MCQs test for process costing below. If you find any questions difficult, you can learn more about process costing from the section on cost accounting.

1. The monetary value attributed to normal losses in a process should be:

A share of the process cost according to the stage of completion of the losses
A nill value with no other monetary adjustment under any circumstances
A full share of process cost on the same as good output
A nill share of process costs, which have been reduced by the scrap value of the normal loss

2. Details for the past month of a continuous process are:

Opening W.I.P. (400 units) (60{d0afdaa181725aacfbdd21d89d52cc83639c886bb7a9b98bc7effb44283185c0} complete)
Closing W.I.P. (600 units) (20{d0afdaa181725aacfbdd21d89d52cc83639c886bb7a9b98bc7effb44283185c0} complete)
Unit started 1,000
Unit finished 800

3. An abnormal gain in a process occurs in which of the following situations?

When actual losses are greater than the normal loss level
When costs are reduced through increased machine speed
When actual losses are less than the normal level
When the process output is greater than planned

4. When process scrap is recycled to be used with new material, which of the following is most likely to be the value at which it is debited to the process?

At the same price as it sold externally
At the cost of normal losses
At the cost attached to abnormal losses
Nil value

5. Which of the following is the best explanation of the relevance of equivalent production units in process costing?

A means of equalizing production charges into stock each period
The conversion of partly completed units into an equivalent number of completed units in order that costs may be shared equitably
The expression of losses in terms of an equivalent number of units of good production in order that their value may be calculated
A means by which the output achieved may be compared with the equivalent quantity budgeted for the period under review

6. Purchased materials are added in the second department of a three-department process. This order does not increase the number of units produced in the second department and would:

Not change the amount transferred to the next department
Decrease the total work in the process inventory
Increase the factory overhead portion of the ending work-in-process inventory
Increase total unit cost

7. The physical flow of units into and out of departments is shown on the:

Quantities schedule
Equivalent production schedule
Cost of account for schedule
Cost of accounted for schedule

8. Purchased materials are added in the second department of a three-department process. This increases the number of units produced in the second department and would always:

Change the direct labor cost percentage in the ending work-in-process inventory
Cause no change in the unit cost transferred from the first department
Increase total units costs
Decrease total ending work-in-process inventory

9. An equivalent unit of material or conversion cost is equal to:

The amount of material conversion cost necessary to complete one unit of production
A unit of work-in-process inventory
The amount of material or conversion cost necessary to start a unit of production into workthe -in-process inventory
50% of material or conversion cost of a unit to finished goods inventory (assuming a linear production pattern)