Contract and Process Costing Quiz

Which of the following is a primary characteristic of contract costing?

• The cost is calculated for each department.

• Each contract is treated as a separate cost unit.

• It is used for mass production industries.

• Standard costing is applied.

Which of the following is usually included in the cost of a contract?

• Direct labor, direct materials, and overheads

• Only direct materials

• Indirect labor and fixed costs

• General administration expenses

How is the profit on incomplete contracts determined?

• By applying a standard profit margin

• By calculating the percentage of completion

• By comparing the expected and actual profits

• By dividing the total cost by the expected revenue

Which of the following accounts is used to accumulate costs on a contract?

• Work-in-progress account

• Contract account

• Finished goods account

• Overhead account

In contract costing, overhead costs are typically:

• Not applied to the contract

• Apportioned to each contract based on a predetermined rate

• Charged directly to the contract

• Ignored if immaterial

What is the purpose of a 'contract completion certificate'?

• To calculate the percentage of profit on the contract

• To confirm that the contract has been finished and is ready for final payment

• To determine the amount of overhead costs applied

• To establish the profit margins of the contract

Which of the following is NOT typically a feature of process costing?

• Continuous production

• Homogeneous products

• Multiple departments involved in production

• Large-scale production of customized goods

Which of the following is used to allocate costs in process costing?

• Cost per unit

• Direct labor cost only

• Standard costing rates

• Estimated overheads

In process costing, how is the cost of the work-in-progress determined?

• Based on direct labor only

• Based on material cost only

• Using a weighted average or FIFO method

• Based on finished goods inventory

Which of the following industries is most likely to use process costing?

• Shipbuilding

• Oil refining

• Custom furniture making

• Construction