Chapter 4 Quiz

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(1) Which of the following statement (s) is/are true?
[pic]A)[pic]A manufacturer of paper would ordinarily use process costing rather than job-order costing. [pic]B)[pic]If a company uses a process costing system it accumulates costs by processing department rather than by job. [pic]C)[pic]The output of a processing department must be homogeneous in order to use process costing. [pic]D)[pic]All of the above are true statements.

Feedback:
The correct answer is D (Learning Objective 1):
A process costing system is used in situations where the company produces many units of a single product for long periods, such as the manufacture of paper (thus statements A and C are true). When a process costing system is in use, costs are accumulated by department and assigned uniformly to all units that pass through the department (thus statement B is also true).

(2) In a process costing system, the journal entry used to record the transfer of units from Department A, a processing department, to Department B, the next processing department, includes a debit to:

[pic]A)[pic]Work in Process Department A and a credit to Work in Process Department B. [pic]B)[pic]Work in Process Department B and a credit to Work in Process Department A. [pic]C)[pic]Work in Process Department B and a credit to Materials. [pic]D)[pic]Finished Goods and a credit to Work in Process Department B.

Feedback:
The correct answer is B (Learning Objective 1):
In a process costing system, the journal entry used to record the transfer of units from Department A, a processing department, to Department B, the next processing department, includes a debit to Work in Process Department B (to increase this department’s Work in Process account balance) and a credit to Work in Process Department A (to decrease this department’s Work in Process account balance).

(3) Goethe Company uses the weighted-average method in its process costing system. The following information was available...
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