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Chapter:

50+ Process Costing Solved MCQs

in Cost and Works Accounting 2

These multiple-choice questions (MCQs) are designed to enhance your knowledge and understanding in the following areas: Bachelor of Commerce (B Com) .

Chapters

Chapter: Process Costing
1.

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

A. A share of the process cost according to the stage of completion of the losses.
B. A nil value with no other monetary adjustment under any circumstances.
C. A full share of process cost on the same as good output.
D. A nil share of process costs which have been reduced by the scrap value of the normal loss.
Answer» D. A nil 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:

A. Opening W.I.P. (400 units) (60% complete)
B. Closing W.I.P. (600 units) (20% complete)
C. Unit started 1,000
D. Unit finished 800
Answer» A. Opening W.I.P. (400 units) (60% complete)
3.

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

A. When actual losses are greater than the normal loss level.
B. When costs are reduced through increased machine speed
C. When actual losses are less than the normal level.
D. When the process output is greater than planned.
Answer» D. When the process output is greater than planned.
4.

Where process scrap is recycled for use in conjunction with new material as well as being so externally, which of. the following is most likely to be the value at which is debited to the process?

A. At the same price as it sold externally.
B. At the cost of normal losses.
C. At the cost attached to abnormal losses.
D. Nil value.
Answer» B. At the cost of normal losses.
5.

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

A. Quantities schedule.
B. Emulgent production schedule.
C. Cost of account for schedule.
D. Cost of Accounted for schedule.
Answer» A. Quantities schedule.
6.

An equivalent unit of material or conversion cost is equal to

A. The amount of material conversion cost necessary to complete one unit of production.
B. A unit of work-in-process inventory.
C. The amount of material or conversion cost necessary to start a unit of production into work in process inventory.
D. Fifty percent of material or conversion cost of a unit to finished goods inventory
Answer» A. The amount of material conversion cost necessary to complete one unit of production.
7.

Which of the following manufacturers would most likely not use a process-cost accounting system?

A. A producer of computer monitors.
B. A paint manufacturer.
C. A producer of frozen orange juice
D. A builder of customized yachts
Answer» D. A builder of customized yachts
8.

If beginning work in process equivalent units are 2500 units, work done in current period equivalent units are 3800 units and ending work in process equivalent units are 5000, then complete equivalent units in current period are

A. 1500 units
B. 1300 units
C. 1500 units
D. 1800 units
Answer» B. 1300 units
9.

First step in process costing system is to

A. compute cost for each equivalent unit
B. summarize total costs
C. compute output in units
D. summarize flow of output
Answer» D. summarize flow of output
10.

If total incurred cost in a production process are ₹30000 and number of output units are 5000 units, then units cost will be

A. ₹26
B. ₹6
C. ₹60
D. ₹16
Answer» B. ₹6
11.

If cost incurred for work in process inventory is ₹350000 and total equivalent units completed till date are 3500, then weighted average cost will be

A. ₹1,200
B. ₹1,000
C. ₹100
D. ₹10
Answer» C. ₹100
12.

In Process industries there is a flow of ……………. from one operation to the next operation.

A. Material
B. Labour
C. Overhead
D. Expenses
Answer» A. Material
13.

Make or But Decisions are involved before and after different……………….

A. Service.
B. Contract.
C. Processes.
D. Indirect Cost.
Answer» C. Processes.
14.

In process costing each process is treated as a separate………………

A. Cost Centre
B. Cost Unit
C. Cost Structure
D. Cost Industry
Answer» A. Cost Centre
15.

…………… are produced from the same basic raw materials.

A. Joint Product.
B. By Product
C. Main Product
D. Final Product
Answer» A. Joint Product.
16.

Husk produced in the process of Rice milling, is an example of ………………

A. Joint Product.
B. By Product
C. Main Product
D. Final Product
Answer» A. Joint Product.
17.

Joint Cost are ………………to individual joint products.

A. Non-Traceable
B. Separate
C. Traceable
D. Combined
Answer» A. Non-Traceable
18.

Subsequent cost are…………to individual product.

A. Non-Traceable
B. Separate
C. Traceable
D. Combined
Answer» C. Traceable
19.

Skimmed milk and Butter are the example of……………..

A. Joint Product.
B. By Product
C. Main Product
D. Final Product
Answer» A. Joint Product.
20.

Post separation costs are attributable to each ……. products.

A. Joint Product.
B. By Product
C. Main Product
D. Final Product.
Answer» A. Joint Product.
21.

Process costing provides a system of costing where the following characteristics occur. Identify which of the following are correct:

A. Output is continually produced from the manufacturing process. Materials might be added in full at the start of a process or might be added gradually throughout the process.
B. There might be losses in the process. Process costing provides a method of measuring and costing incomplete WIP.
C. When more than one product is output, they might be called joint products or a by-product, depending upon the relative value of the products. Process costing offers methods of costing each of the different products.
D. All of the above are correct
Answer» D. All of the above are correct
22.

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

A. True
B. False
C. none
D. none
Answer» A. True
23.

Examples of manufacturing where process costing is used include:

A. Chemicals manufacture, Petroleum refining, the manufacture of liquids
B. The continuous processing of high volumes of low-cost food items such as tins of peas or beans, or bottles of tomato ketchup.
C. Both A&B
D. None
Answer» C. Both A&B
24.

The task that sits at the heart of process costing is always to allocate the costs collected on the debit side of the account to the possible outputs (good output, closing WIP and lost units) on the credit side.

A. The above statement is correct
B. The above statement is incorrect
C. none
D. none
Answer» A. The above statement is correct
25.

In process costing questions, you will need to:

A. Identify the losses and output
B. Calculate the cost of good output, losses and WIP
C. Use the costs you have calculated to assign values to the good output, losses and WIP
D. All of the above
Answer» D. All of the above
26.

It is possible to have abnormal loss and abnormal gain on the same process account in the same period.

A. False
B. True
C. none
D. none
Answer» A. False
27.

In a process costing system loss might be:

A. Normal
B. Abnormal
C. Both A&B
D. None
Answer» C. Both A&B
28.

Normal loss is usually expressed as a percentage of the input units of materials.

A. Correct
B. Incorrect
C. none
D. none
Answer» A. Correct
29.

Normal loss is ___________in the normal course of events. It is inherent in the physical and chemical reactions that take place in a process.

A. Avoidable
B. Unavoidable
C. none
D. none
Answer» B. Unavoidable
30.

The normal loss is something that is unavoidable in order to get the good output. The cost of the lost units is part of the cost of obtaining the good output.

A. True
B. False
C. none
D. none
Answer» A. True
31.

Normal loss comes with:

A. No recovery/scrape value
B. Recovery/scrape value
C. Either A or B
D. None
Answer» C. Either A or B
32.

If the normal loss has no scrap value it is given a nil value.

A. False
B. True
C. none
D. none
Answer» B. True
33.

If normal loss has a scrap value the company is able to recover some of the input costs to the process. The scrap value reduces the cost of the process.

A. The above statement is correct
B. The above statement is incorrect
C. none
D. none
Answer» A. The above statement is correct
34.

In some cases, a company might have to pay to dispose of losses in a process. The cost of disposal represents an additional cost to the process. To reflect this in the process account the normal loss is measured at zero but the expected costs of disposal are debited to the process account.

A. The above statement is incorrect
B. The above statement is correct
C. none
D. none
Answer» B. The above statement is correct
35.

The disposal cost of abnormal loss is included in the abnormal loss account and therefore in the transfer of the cost of abnormal loss to the statement of profit or loss.

A. True
B. False
C. none
D. none
Answer» A. True
36.

When actual loss exceeds normal loss, there is:

A. Abnormal loss
B. Abnormal gain
C. Extra loss
D. None
Answer» A. Abnormal loss
37.

The difference between total actual loss and normal loss is abnormal loss.

A. Incorrect
B. Correct
C. none
D. none
Answer» B. Correct
38.

If it is assumed that all losses in process occur at the end of the process, units of abnormal loss are costed in exactly the same way in the as units of finished output.

A. True
B. False
C. none
D. none
Answer» A. True
39.

The cost of abnormal loss is built into inventory.

A. False
B. True
C. none
D. none
Answer» A. False
40.

The cost of units of abnormal loss is treated as an _________ for the period, and charged as an ___________for the period

A. Product cost, inventory cost
B. Expense, expense in the income statement
C. Extra cost, suspense cost
D. None
Answer» B. Expense, expense in the income statement
41.

Abnormal loss comes with:

A. No recovery/scrape value
B. Recovery/scrape value
C. Either A or B
D. None
Answer» C. Either A or B
42.

When the abnormal has a scrape value the net cost of abnormal loss (cost of abnormal loss minus its scrap value) is then transferred as a cost to the cost accounting income statement at the end of the accounting period.

A. The above statement is correct
B. The above statement is incorrect
C. none
D. none
Answer» A. The above statement is correct
43.

When actual loss is less than the expected (normal) loss there is:

A. Extra ordinary loss
B. Abnormal loss
C. Abnormal gain
D. None
Answer» C. Abnormal gain
44.

Identify which of the following statement is correct.

A. Abnormal gain is a benefit rather than a cost. Whereas abnormal loss is written off as a cost at the end of the financial period.
B. Abnormal gain is an adjustment that increases the profit for the period.
C. Abnormal gain is recorded as a debit entry in the process account, because it is a benefit.
D. All of the above are correct
Answer» D. All of the above are correct
45.

When there is closing work in progress (WIP) the concept of _________ is used.

A. Equivalent units
B. Expected units
C. Fair allocated units
D. None
Answer» A. Equivalent units
46.

An equivalent unit means ‘equal to one finished unit of output’.

A. False
B. True
C. none
D. none
Answer» B. True
47.

When there is closing work in progress, costs are shared between finished units and inventory by calculating a cost per equivalent unit.

A. True
B. False
C. none
D. none
Answer» A. True
48.

When there is opening work in progress there are two types of cost on the debit side of the account. These are the costs that were incurred last period and brought forward as work in progress and the costs that were incurred in the current period.

A. The above statement is correct
B. The above statement is incorrect
C. none
D. none
Answer» A. The above statement is correct
49.

Are the costs of opening WIP, incurred in last period and brought forward as work in progress and the costs that were incurred in the current period, treated the same way?

A. Yes, treated together
B. Treated Separately
C. This question is addressed in the accounting policy adopted for opening work in progress.
D. None
Answer» C. This question is addressed in the accounting policy adopted for opening work in progress.
50.

Joint products are two or more products generated simultaneously, by a single manufacturing process using common input, and being substantially equal in value.

A. The above statement is correct
B. The above statement is incorrect
C. none
D. none
Answer» A. The above statement is correct

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