Chapter 8 final

Question 1

Process costing

Answer 1

(“continuous flow”) assumes that all units are homogenous and follow the same path through the production processes. (job costing - each job considered unique: accumulate costs per job.)

Question 2

Equivalent units

Answer 2

number of complete physical units to which units in inventories are equal in terms of work done to date; how “complete” are the inits in Work-in-Process inventory, what is the % of completion

Question 3

Assign Costs to Production using a 4 step process

Answer 3

Step 1 - determine “physical flow’ (use basic cost flow model)
Step 2 - calculate equivalent units of production: (1) materials (2) conversion costs
Step 3 - identify the product costs to account for
Step 4 - compute the costs per equivalent units of production (the allocate to WIP and F/G inventories)

Question 4

Equivalent units of production

Answer 4

number of physical units * % of completion

Question 5

Weighted-average process costing

Answer 5

combines the work and the costs for the two periods (the previous and current period) and computed a single cost, which makes it impossible to know how much it cost to make a product this period

Question 6

FIFO process costing

Answer 6

keeps the two periods separate

Question 7

FIFO method gives managers

Answer 7

better information about the work done in the current period

Question 8

Under FIFO,

Answer 8

inventory numbers are more likely to reflect reality than under weighted-average costing because the units in ending WIP are likely to have been produced in the current period