Module 3: Process Costing

Question 1

Distribution:

Answer 1

Delivery of products or services to customers.

Question 2

Retailers:

Answer 2

Merchandising companies that sell products to the end customers.

Question 3

Process costing:

Answer 3

A system for assigning costs to a large number of identical units that typically pass through a series of uniform production steps. Costs are averaged over the units produced such as that each unit bears the same unit cost.

Question 4

Raw materials:

Answer 4

Both direct and indirect materials; materials used to manufacture a product.

Question 5

Depletion:

Answer 5

The process by which businesses spread the allocation of a natural resource´s cost over its usage.

Question 6

Use of cost per unit information:

Answer 6

1. Control Costs: The company can look for ways to cut costs in each process
2. Set Selling Prices: Setting a selling price to cover costs plus make a profit
3. Calculate Account Balances: Need to know account balances for WIP / Finished Goods Inventory and Cost of Goods Sold

Question 7

Operational strategy:

Answer 7

A plan that includes the goals and behaviors used to accomplish the company´s goals.

Question 8

Equivalent units:

Answer 8

Equivalent units represent the amount of work done during a period in terms of fully completed units.

Question 9

Conversion costs:

Answer 9

Direct labor and manufacturing overhead, both of which contribute to the work done on the units.

Question 10

What are the 2 process costing methods?

Answer 10

Weighted-average-method and FIFO Method