Q: Which formula correctly calculates the cost per equivalent unit in process costing?

$$\frac{\text{Total costs}}{\text{Equivalent units}}$$

Q: In activity-based costing, which formula is used to assign overhead to products?

$$\text{Overhead assigned} = \text{Activity rate} \times \text{Activity usage}$$

Question 1

Which costing method is most appropriate for manufacturing environments with mass production of similar products and specific inputs?

Accepted Answer

Process costing

Question 2

A company produces paper cups in a continuous process. At the end of the month, there are 1,000 units in ending inventory, 80% complete. If 10,000 units were started and 9,000 units were completed, what are the equivalent units for conversion costs?

Accepted Answer

$$9,800$$

Question 3

Which formula correctly calculates the cost per equivalent unit in process costing?

Accepted Answer

$$\frac{	ext{Total costs}}{	ext{Equivalent units}}$$

Question 4

In activity-based costing (ABC), which of the following is NOT a typical cost driver?

Accepted Answer

Direct material cost

Question 5

A company uses activity-based costing. The cost pool for 'machine setups' is $$\12$$,000$ and there are 60 setups. What is the cost per setup?

Accepted Answer

$$\200$

Question 6

Which of the following best describes the purpose of equivalent units in process costing?

Accepted Answer

To allocate costs between completed and partially completed units

Question 7

A company has the following data for a process: Beginning inventory: 500 units (40% complete), Units started: 2,000, Ending inventory: 300 units (60% complete). Using the weighted average method, what are the equivalent units for conversion costs?

Accepted Answer

$$2,180$$

Question 8

Which of the following statements about activity-based costing (ABC) is TRUE?

Accepted Answer

ABC uses multiple cost drivers to allocate overhead more accurately.

Question 9

In process costing, what is the main difference between the weighted average and FIFO methods?

Accepted Answer

FIFO method includes only current period costs in equivalent unit calculations.

Question 10

A company has a cost pool for 'quality inspections' totaling $$\9$$,000$. If there are 300 inspections, what is the cost per inspection?

Accepted Answer

$$\30$

Question 11

Which of the following is a disadvantage of activity-based costing (ABC)?

Accepted Answer

It is more complex and costly to implement than traditional costing.

Question 12

A company manufactures two products, A and B. Product A requires 80 machine hours and Product B requires 20 machine hours. If overhead is allocated based on machine hours and total overhead is $$\10$$,000$, what is the overhead rate per machine hour?

Accepted Answer

$$\100$

Question 13

Which of the following is NOT a step in the process costing system?

Accepted Answer

Calculate net present value of future cash flows

Question 14

A company has 2,000 units in process, 60% complete for conversion costs. How many equivalent units for conversion costs are there?

Accepted Answer

$$1,200$$

Question 15

In activity-based costing, which formula is used to assign overhead to products?

Accepted Answer

$$	ext{Overhead assigned} = 	ext{Activity rate} 	imes 	ext{Activity usage}$$

Question 16

A company started 5,000 units during the month. Ending inventory is 1,000 units, 50% complete. How many equivalent units for materials are there if materials are added at the start?

Accepted Answer

$$5,000$$

Question 17

Which of the following best describes a cost driver in activity-based costing?

Accepted Answer

A factor that directly causes a change in the cost of an activity

Question 18

A company has the following costs for a process: Direct materials: $$\8$$,000$$, Conversion costs: $$\$$12,000$$, Equivalent units for materials: 4,000, Equivalent units for conversion: 3,000. What is the cost per equivalent unit for conversion?

Accepted Answer

$$\4$$,000$

Question 19

Which of the following is a key benefit of process costing?

Accepted Answer

It simplifies cost allocation for homogeneous products.

Question 20

A company uses activity-based costing and has the following data: Cost pool for 'packaging' is $$\6$$,000$, number of packages is 1,200. What is the activity rate for packaging?

Accepted Answer

$$\5$

Process Costing and Activity-Based Costing: Study Notes for Financial Accounting

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