6. A process costing system: A. uses a separate Work in Process account for the

Question

6. A process costing system: A. uses a separate Work in Process account for the entire company. B. uses a single Work in Process account for each processing department. C. uses a separate Work in Process account for each type of product produced. D. does not use a Work in Process account in any form. 7. A company should use process costing, rather than job order costing, if A. production is only partially completed during the accounting period. B. the product is manufactured in batches only as orders are received. C. the product is composed of mass-produced homogeneous units. D. the product goes through several steps of production. 8. Equivalent units for a process costing system using the weighted-average method would be equal to: A. units started and completed during the period plus equivalent units in the B. units completed during the period less equivalent units in the beginning C. units completed during the period and transferred out. ending work in process inventory. inventory, plus equivalent units in the ending work in process inventory. units completed during the period plus equivalent units in the ending work in process inventory. D.

Explanation / Answer

Solution:

6)

A process costing system, as name suggest, is used to calculate the cost from processing of product.

A process costing system uses a single Work In Process Account for each PROCESSING Department.

Hence, the correct option is B.

7)

The correct option is C. the product is composed of mass-produced homogeneous units

A process costing is used to calculate the cost of mass produced homogeneous (similar or identical) units.

8)

The correct option is D. Units completed during the period plus equivalent units in the ending work in process inventory.

For this part we need to understand the treatment under weighted average costing in process costing.

Weighted Average (Average Cost) Method

Physical Units Count

Under this method the percentage completion done in the Beginning Inventory is ignored while calculating the equivalent completed units during the current period. Beginning Inventory Units are treated as fresh units introduced for production.

Total Equivalent Units are the sum of units completed during the period (since these units are 100% completed in all respects) plus the Equivalent Units in the ending work in process.

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