product costing system - process costig

Question 1

process costing definition

Answer 1

accumulates the cost of each process then average

these costs across all units produced.

Question 2

two scenarios of process costing?

Answer 2

1) Process costing with zero beginning and ending WIP inventory;
2) Process costing with some beginning and ending WIP inventory

Question 3

Two main steps to calculate product costs

Answer 3

1. Accumulates total costs of the production processes

2. Calculate the average cost per unit by dividing total costs of the processes by the number of units produced

Question 4

When there are partially completed units on hand at the beginning or end of the period, product costs will relate to units that are:

Answer 4

• Units started in the previous period (beginning WIP) and completed in the current period;
• Units started and completed during the period;
• Units that are incomplete at the end of the period (ending WIP).

Question 5

Equivalent units definition

Answer 5

the number of whole units that could have been completed if all the work during the period had been used to produce whole units.

Question 6

Weighted average method to calculate product costs

Answer 6

averages the cost of opening WIP inventory with current production costs to determine the cost of completed production and closing WIP

Question 7

Weighted average method : Step one?

Answer 7

analyse physical flow of units
physical units in beginning WIP + physical units started - unit completed and transferred out = physical units in ending WIP

Question 8

Weighted average method : step 2?

Answer 8

calculate equivalent units

equivalent units completed and transferred out + equivalent units ending WIP = total equivalent units

Question 9

Weighted average method : step 3

Answer 9

calculate unit costs
The cost per equivalent unit for direct material is the total direct material costs divided by the total equivalent units for direct material;
The cost per equivalent unit for conversion cost is the total conversion cost divided by the total equivalent units for conversion

Question 10

Weighted average method : Step 4 analyse total costs?

Answer 10

i) cost of goods completed and transferred out;

ii) cost of ending WIP