In the Accounting for Costs in a Process Costing System

question 11

Multiple Choice

In the accounting for costs in a process costing system, which statement below is most correct as to when costs are added in processing departments?

• A)labour and overhead costs are added in each department as processing takes place but materials costs are only added in the last processing department when the final quantities of materials used have been determined.
• B)all material costs will be added in the first processing department and labour and overhead costs will be added in subsequent departments.
• C)material, labour and overhead costs may be added in any processing department.
• D)material and labour costs may be added in any department but overhead costs will only be added in the last processing department in which the processing of the product is completed.

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Definitions:

Normal Profit

The minimum level of profit needed for a company to remain competitive in the market, essentially covering the opportunity costs of the business owner.

Entrepreneurial Talent

The unique set of skills, creativity, and innovation that entrepreneurs bring to create and manage new ventures.

Explicit Costs

Explicit costs refer to the direct, out-of-pocket payments made by businesses for the resources they use, such as wages, rent, and materials.

Uninsurable Risk

An eventuality for which the frequency or magnitude of potential losses is unpredictable or unknowable. Insurance companies are not willing to sell insurance against such risks.