 In this presentation we will take a look at multiple choice questions related to a process cost system thinking about test taking skills as we go. Support accounting instruction by clicking the link below giving you a free month membership to all of the content on our website broken out by category further broken out by course. Each course then organized in a logical reasonable fashion making it much more easy to find what you need then can be done on a YouTube page. We also include added resources such as Excel practice problems, PDF files and more like QuickBooks backup files when applicable. So once again click the link below for a free month membership to our website and all the content on it. First question a system of counting in which costs are measured per unit at the end of a period by combining costs per equivalent unit from different departments is a a gap generally accepted accounted principles cost accounting system be process costing system see job order cost accounting system D manufacturing cost accounting system and E work in process accounting system let's go through the new the process of elimination to narrow this down a system of accounting in which costs are measured per unit at the end of a period by combining costs per equivalent unit from different departments is a a gap generally accepted accounted principles cost accounting system it may well be right so that we might might have to say maybe and then be is a process costing system now here we happen to be in a unit what I mean we're concentrated all on process costing so we would think that you know process costs would be if that's one of the answers possibly one of the answers note that if you're talking about you know a very broad exam that you're taking or something like that then we might not be always concentrating solely on a process cost system and if we saw a description like this we might say hmm yeah that sounds like a process cost type of item so just notice the context you might be taking an exam in here that sounds reasonable like it might be the process cost system that might be the answer to it see job order costing accounting system now if we were in this context notice we're thinking more in the process costs side of course if we were if we were taking a very broad exam we might be comparing the process cost to a job cost and if we look at this description we would be thinking hmm this sounds more like a process cost system so the fact that it might be between these two often times when we're considering a manufacturing type of process and we see well one answers a process cost system and the others a job cost or job order cost accounting system then often we might say well it looks kind of like it's between those two and it looks like it's more of a of a process cost than a job cost and then D says manufacturing cost accounting system and again that might well be true you might look at that and say look at that seems kind of right I'm gonna keep that for now and then E says work in process accounting system so again you look all of these answers you might consider like to have some truth to it and this is kind of one of the tricky things about a multiple choice question we all we kind of have to say well what's the most correct answer here so let's go through this again and see what we're talking about a system of accounting in which costs are measured per unit at the end of a period by combining costs per equivalent unit and notice that's going to be one of the key components that differentiates the process cost and the job cost because we use those equivalent units unit from different departments the equivalent units to allocate the costs so in a job cost system we don't typically use those equivalent units we use them in a process cost so it sounds like a process cost system but you might say well a process cost system is is okay is a good system possibly under under gap generally accepted accounting principles so you might say well maybe you know both of these are true or maybe this is right this is might be true too but this one seems to be more specific than generally accepted accounting principles and you're probably not going to win an argument saying you know arguing that we should gap should be right too so I would think that B is more specific D says manufacturing cost accounting system and you might say well that you know that's true too I mean we're oftentimes we use a process cost system when we manufacture stuff but but this one seems a lot more specific because we're clearly using a process cost and not a job cost and so this one could be a process or a job cost so again you could argue this one's true and therefore you should get but probably not going to work and then he says work in process accounting system and again you can kind of argue that it's a working I mean you use work in process in the accounting system because but it's probably that's not what it's called really it's generally called a process cost accounting system in which we use one account which happens to be called work in process so note that B would probably be the best answer here a system of accounting in which costs are measured per unit at the end of a period by combining costs per equivalent unit from different departments is a B process costing system next question a company that applies process costing often has a high standardization and low production volume B custom orders and high production volume C repetitive production and custom products D repetitive production and low production volume and E like products and high production volume let's go through this again using the process of elimination a company that applies a process costing often has so when we think of process costing you usually want to compare this in your mind to process costing versus job costing what type of products would a process costing you make versus a job costing system and I would usually always think of this as stemming from the idea that if you use a job costing system we have more types of inventory that are going to be distinct or unique more unique or if that's a word unique in nature and therefore they're going to need to track that the cost per job specifically whereas a process costing all the inventory is the same and everything else kind of stems from that to me so I mean obviously if something's going to be more it's something is unique in nature then it's going to take more time to make it's going to be more expensive typically to make we're probably not going to make as many of them if things are all exactly the same in nature they're probably cheaper to make they're probably we could probably make more of them so it all stems from from that so all the characteristics of the inventory you can kind of relate to each other given those given given that so here we go a high standardization and low production volume so we're looking for things that apply to a process cost system so high standardization seems right because we're that's what we do in the process if we're making taffy for making candy for making some kind of thing we want a high volume and make it all standardized it's all the same and and then low production volume that doesn't seem right though I mean the whole point is that we want to standardize it so we can increase the production volume and make a lot of these things that are all exactly the same so notice that doesn't really follow so these two don't seem to go together and then B says custom orders and high production volume so notice custom orders right there means job cost system usually because if the custom order it's not going to be using a process cost system and you might say well what if they use a hybrid system yeah that's not what we're talking about here we're really talking about the extremes job cost versus process cost so a custom orders no high production levels yes you would think you'd have high production levels but you can't have high production levels if you're taking customized orders because you have to customize the order which means you can't do high production levels so it's not going to be BC says repetitive production and custom products repetitive production seems like it kind of would be it because that's what you do in a process cost system you just do the same thing over and over and over and then but so that doesn't so that seems okay but then a custom products again you don't do custom products that's why you do that that's why you have a repetitive production it's not you know a custom product wouldn't be repetitive so then D says repetitive production sounds good and then low production volume which doesn't seem right because you would try to have high production volume so I'll keep that one for now and then E says like products and high production volume so like products meaning they're all the same I guess like products and high production volume well that seems like a process cost system right there right they're all the same products and we produce a lot of them that seems like the way to go so I would say it would be E let's read it one thought one more time between D and E a company that applies process costing often has either D repetitive production and low production volume or like products and high production volume and between those two I would think that E would be the one that we want right it's it's gonna have similar products and the production volume will be high typically so final answer a company that applies process costing often has E like products and high production volume next question a part of a factory that partially manufactures a product is called a production department B unit department C making a making department D inventory department or E cost department so let's go through this again using the process of elimination a part of a factory that partially manufactures a product is called a production department what sounds familiar and that's what we're doing with producing stuff so I'll keep that for now B says units department eh it sounds like it could apply but I've never really heard of that unit department type of thing so I'm I don't think that's a thing I'm gonna cross it out it doesn't sound right to me see a production sound rings a bell to me it seems like that I've heard of that before in the reading so C says a making department again that doesn't even sound like a good name for something a making department I don't even so I saw it it could apply I mean you might call it that it sounds like a something you could call something but I doesn't ring a bell to me as something from the text so I'm gonna say that that sounds like a made-up term D says inventory department and maybe inventory department again it doesn't quite ring a bell to me but it sounds better than making department so I'll keep it for now and then he says cost department that kind of sounds familiar at least so cost department kind of sounds familiar so we'll keep it between a d and e go through it again a part of a factory that partially manufactures a product is called a either production department d inventory department or e cost department of those three that the a and e sound familiar to me d doesn't so I would cross that one out and then production department or cost department between those two the cost department often is where we might think of how to how to apply basically costs for budgeting a lot of times versus the production department is typically what we're talking about here so the product of these two the production department is the one we're typically considering we're using a process cost system and we're breaking those systems into departments typically where we produce partial completed items per production department typically so answer we're going to say is a a part of factory that partially manufactures a product is called a a production department next question a hybrid costing system would be used when a a manufacturer can standardize processes and comply with individual customer needs be large quantities of the same product are produced c the volume of production is low and costs are low d there's no standardization of inventory units or e all the products produced are totally different so let's go through it again using the process of elimination a hybrid costing system would be used when so what do we mean a hybrid costing system we kind of have a we need to have some idea what that is in our mind so we're we're typically thinking here a costing system the two costing systems we think about we're thinking about a manufacturing company costing systems job cost system process cost system hybrid then being some kind of combination some kind of hybriding of the two using components of both a job cost and a process cost so when would we use both the job costs and a process cost all right keeping that in mind we go through the answers a a manufacturer can standardize processes and comply with individual customer needs sounds like it could possibly be it we'll we'll go to the next one be large quantities of the same product are produced so if we have large quantities of the same product that sounds like a process cost system right where does the job cost factor in to that yeah i don't need you know i would just use a process because you would think we would just use a process cost so i'm going to say no and then sees the volume of production is low and the costs are low so if the volume that we make is low and the costs are low you would think that sounds like a job cost system i don't see any any process cost factor in there but i'll keep that for now just in case and then d says there is no standardization of inventory units so if there's no standardization of inventory at all then that's pretty much a job cost system we can't use a process cost system because we need to standardize the units to be able to use the process cost system so i don't think that's it e all the products produced are totally different so so notice that d and e are pretty much of the same so there's a d says there's no standardization of inventory and he says all the products are totally different whoa those are two ways to say the same thing so you you'd say they can't both be right so we'll cross them out and both of them don't have any factor of basically a process cost system so we'll keep it between a and c a hybrid costing system would be used when a a manufacturer can standardize processes and comply with individual customer needs or c the volume of production is low and the cost is low of those two a once again it's kind of like the longer answer which oftentimes sometimes means that they put in some qualification into the longer answer to make it more correct in all cases whereas you don't have to do that so sometimes a longer answer more detailed answer a more nuanced answer is correct just because they're trying to make sure that it covers all the places where it can possibly not be correct which you don't need to do with a wrong answer and then and then c doesn't seems like it only has one side right that the volume of production is low and the costs are low so if the volume is low then that's going to be a job cost and the costs are low and if the volume of production is low and the costs are low well the costs are low that might be a process cost so this c sounds kind of like it could be possible actually but a seems better because it says that manufacturers can standardize processes and comply with individual customer needs so we can standardize some processes and we we can comply with individual customer needs so that means you can imagine something where we might have some standardization in it and some customization so we standardize some process of it and we can have some customized so we can say we'll give you this this standard thing and then we'll put it together it possibly make it a different color or something for some customization part of it so final answer a a hybrid costing system would be used when a a manufacturer can standardize processes and comply with individual customer needs