18.4 Case 3: process costing with some beginning and some ending WIP inventor

Question 1

what is case 3 of processing cost

Answer 1

process costing with some beginning and some ending work in process inventory

Question 2

2 key mehods for case 3

Answer 2

1. weighted average method
2. FIFO

Question 3

calculates the cost per equivalent unit of all work done to date and assigns this cost to equivalent units completed and transferred out of the process and to equivalent units in ending work in process inventory

Answer 3

weighted average process costing method

Question 4

________ uses the same 5 step method from Case 2

Answer 4

weighted average process costing method

Question 5

two way equation part of step 2: compute output in terms of equivalent units

Answer 5

equivalent units in beginning work in process + equivalent units of work done in current period =
equivalent units completed and transferred out in current period + equivalent units in ending work in process

Question 6

a distinctive feathre of the FIFO process costing method is that work done on the beginning inventory before the current period is

Answer 6

kept seperate from work done in the current period

Question 7

when comparing the weighted average and FIFO method which has higher ending inventory

Answer 7

weighted average method

Question 8

when completed units are sold, the ______ method in our example leads to lower cost of goods sold and therefore higher operating income

Answer 8

weighted average method

Question 9

FIFO assumes 2 things

Answer 9

1. all the higher cost units from previous period in beginning work in process are the first to be completed and transferred out of the process
2. the ending work in process consists of only the lower cost current period units

Question 10

Weighted average method smooths out the cost per equivalent unit by assuming 2 things

Answer 10

1. more of the lower cost units from the current period are completed and transferred out and
2. some of the higher cost units from beginning inventory are placed in ending work in process

Question 11

_____ provides managers with information about costs per unit in the current and previous periods

Answer 11

FIFO

Question 12

_____ method merges unit costs from different accounting periods, obscuring period to period comparisons

Answer 12

weighted average method

Question 13

in a period of falling prices the higher COGS under the _____ method will lead to lower operating income and lower tax payments, saving the company cash and increasing the companys value

Answer 13

FIFO

Question 14

in a period of rising prices the _______ method will deccrease taxes because more of the higher costs of the current period will be included in COGS, lowering operating income

Answer 14

weighted average method