Q.1 Process costing is most suitable for which type of industry?
Construction
Oil refining
Furniture making
Shipbuilding
Explanation - Process costing is used where production is continuous and products are homogeneous, such as in oil refining.
Correct answer is: Oil refining
Q.2 Which of the following best describes process costing?
Costs are collected for each individual job
Costs are assigned to each process or department
Costs are only collected at the end of the year
Costs are based on customer order
Explanation - Process costing accumulates costs for each process or department instead of specific jobs.
Correct answer is: Costs are assigned to each process or department
Q.3 What is the primary objective of process costing?
To measure departmental efficiency
To determine cost per unit
To allocate marketing expenses
To forecast demand
Explanation - Process costing helps calculate the average cost per unit produced in continuous processes.
Correct answer is: To determine cost per unit
Q.4 In process costing, normal loss is:
Unavoidable and expected
Always abnormal
Fully recoverable
Not considered in costing
Explanation - Normal loss is inherent in the process and is considered unavoidable.
Correct answer is: Unavoidable and expected
Q.5 Abnormal loss in process costing refers to:
Expected losses
Loss beyond normal limits
No loss at all
Recoverable scrap
Explanation - Abnormal loss occurs when actual loss exceeds the expected normal loss.
Correct answer is: Loss beyond normal limits
Q.6 Equivalent units in process costing represent:
Units started but not completed
Units fully completed
Partially completed units expressed in terms of finished goods
Only scrap units
Explanation - Equivalent units are a measure of work done on incomplete units in terms of fully completed units.
Correct answer is: Partially completed units expressed in terms of finished goods
Q.7 Which of the following is NOT a characteristic of process costing?
Continuous production
Homogeneous products
Costs per job are calculated separately
Standardized products
Explanation - Cost per job applies to job costing, not process costing.
Correct answer is: Costs per job are calculated separately
Q.8 In process costing, joint products are:
By-products of no value
Two or more products of significant value arising from the same process
Scrap materials
Finished goods only
Explanation - Joint products are simultaneously produced items of significant value in a process.
Correct answer is: Two or more products of significant value arising from the same process
Q.9 By-products in process costing are:
Always equal in value to joint products
Minor products of relatively less value
Scrap with no resale value
The main product of the process
Explanation - By-products are incidental and less valuable compared to joint products.
Correct answer is: Minor products of relatively less value
Q.10 Process accounts in process costing show:
Only material costs
Only labor costs
All costs accumulated for a process
Only overhead costs
Explanation - Process accounts capture material, labor, and overhead costs incurred in a process.
Correct answer is: All costs accumulated for a process
Q.11 Which statement about process costing is correct?
It is used when products are unique
It is suitable for industries like chemicals and cement
It is only used in service industries
It excludes overhead costs
Explanation - Process costing is ideal for mass production of uniform products like chemicals, cement, and textiles.
Correct answer is: It is suitable for industries like chemicals and cement
Q.12 Scrap value from normal loss is:
Credited to abnormal loss account
Credited to process account
Debited to profit and loss account
Ignored
Explanation - Any scrap value from normal loss reduces the cost of the process.
Correct answer is: Credited to process account
Q.13 In process costing, abnormal gain occurs when:
Actual output is less than expected output
Expected output is more than actual output
Actual output exceeds expected output
Normal loss increases
Explanation - Abnormal gain arises when actual losses are lower than expected, resulting in higher output.
Correct answer is: Actual output exceeds expected output
Q.14 Which method is often used in process costing for valuation of work-in-progress?
First In First Out (FIFO)
Weighted Average
LIFO
Specific identification
Explanation - Weighted Average and FIFO methods are most commonly applied in process costing for WIP valuation.
Correct answer is: Weighted Average
Q.15 Process losses are accounted for:
Only at year-end
In each process account
Ignored in costing
Transferred to financial accounts directly
Explanation - Losses (normal or abnormal) are recognized within each process account.
Correct answer is: In each process account
Q.16 In industries like paper production, which costing method is applied?
Job costing
Batch costing
Process costing
Contract costing
Explanation - Paper production is continuous and homogeneous, making process costing most suitable.
Correct answer is: Process costing
Q.17 The cost of abnormal loss is:
Transferred to profit and loss account
Added to normal cost
Ignored completely
Distributed over good units
Explanation - Abnormal losses are not included in cost of production and are charged to profit and loss.
Correct answer is: Transferred to profit and loss account
Q.18 In process costing, what is transferred to the next process?
Only abnormal losses
All completed units along with costs
Only material costs
Overheads only
Explanation - The cost of completed output is transferred to the next process for further processing.
Correct answer is: All completed units along with costs
Q.19 Apportionment of joint costs in process costing is usually based on:
Sales value
Production hours
Overhead absorption rate
Random allocation
Explanation - Joint costs are often apportioned based on relative sales value of products.
Correct answer is: Sales value
Q.20 Work-in-progress in process costing is expressed in terms of:
Finished units
Equivalent units
Normal loss units
Abnormal gain
Explanation - Partially completed units are converted into equivalent finished units for costing.
Correct answer is: Equivalent units
Q.21 Process accounts are prepared:
For each process or department
For each job separately
Only for abnormal losses
At the end of the year only
Explanation - A separate process account is maintained for each stage of production.
Correct answer is: For each process or department
Q.22 The main difference between job costing and process costing is:
Process costing excludes material costs
Job costing collects costs per job, process costing per process
Job costing is for continuous production
Process costing is for unique jobs
Explanation - Job costing focuses on individual jobs, whereas process costing focuses on continuous processes.
Correct answer is: Job costing collects costs per job, process costing per process
Q.23 Which of the following industries is least likely to use process costing?
Cement
Chemicals
Pharmaceuticals
Tailor-made furniture
Explanation - Furniture is unique and custom-made, hence job costing is used.
Correct answer is: Tailor-made furniture
Q.24 Cost per unit in process costing is calculated as:
Total cost / Total equivalent units
Total cost / Total abnormal loss
Total material cost / Units produced
Overhead / Labor hours
Explanation - Unit cost is computed by dividing total process cost by equivalent units.
Correct answer is: Total cost / Total equivalent units
Q.25 Normal loss is valued at:
Full cost per unit
Realizable scrap value
Zero
Market price of finished goods
Explanation - Normal loss is valued at its scrap value, reducing the overall process cost.
Correct answer is: Realizable scrap value