chapter 3

Question 1

what are conversion costs?

Answer 1

they are a combination of direct labor and overhead

Question 2

what are the 6 processing steps needed for both processing methods?

Answer 2

1. Account for physical units
2. Calculate equivalent units
3. Determine costs to be accounted for
4. Calculate cost per equivalent unit
5. Assign cost/EU to the units completed and transferred, and to the units in ending inventory
6. Reconcile costs assigned with costs to be accounted for.

Question 3

(Average Method and FIFO) how to find units to be accounted for

Answer 3

beginning inventory + added units

Question 4

(Average Method and FIFO) how to find units completed and transferred out

Answer 4

units to be accounted for (beginning inventory + added units) - ending inventory

Question 5

(Average Method) calculate equivalent units

Answer 5

units completed and transferred out + ending units (they have to be complete if not multiply by the percentage of finished form total in ending)

Question 6

(Average Method) Account for costs

Answer 6

Costs in beginning inventory + costs added during the period

Question 7

(Average Method) Compute cost per equivalent unit ( you have to do it twice once for DM one for CC)

Answer 7

beginning and added costs / equivalent units

Question 8

(Average Method) Costs to be transferred out

Answer 8

Units completed & transferred out x cost per equivalent unit

Question 9

(Average Method) Costs in ending inventory

Answer 9

Units in ending inventory x cost per equivalent unit

Question 10

(Average Method) Total Costs Assigned

Answer 10

total cost to be transferred out + total cost in ending inventory

Question 11

(FIFO Method) units started and completed

Answer 11

units completed and transferred out( beg+add-end) - beginning inventory

Question 12

(FIFO Method) Calculate Equivalent Units beginning

Answer 12

if they are completed then you have no equivalent units, if not multiply by 100 minus the percent they give you

Question 13

(FIFO Method) Calculate Equivalent Units started and completed

Answer 13

calculate percent completed x units

Question 14

(FIFO Method) Calculate Equivalent Units ending inventory

Answer 14

calculate percent completed x units

Question 15

(FIFO Method) Account for costs

Answer 15

Costs in beginning inventory + costs added during the period

Question 16

(FIFO Method) Compute cost per equivalent unit

Answer 16

cost (we only use added costs) / equivalent units ( diff for DM and CC)

Question 17

(FIFO Method) Costs to be transferred out

Answer 17

Costs in beginning inventory + Costs to complete beginning inventory (EU x CPEU) + Costs of units started and completed (EU + CPEU)

Question 18

( FIFO Method) Costs in ending inventory

Answer 18

equivalent units x cost per equivalent unit

Question 19

(FIFO Method) Total Costs Assigned:

Answer 19

costs in ending inventory + costs to be transferred out