Test 2

Question 1

Process costing (“continuous flow”)

Answer 1

assumes that all untis are homogeneous and follow the same path through the production processes. (job costing - each job is considered unique; accumulate costs on a per job basis.)

Question 2

In a continuous process industry

Answer 2

individual units are difficult to distinguish. A reasonable assumption is that all units in a large group cost the same (i.e., each “batch” has the same cost).

Question 3

Process costing =

Answer 3

direct materials + conversion costs (direct labor and manufacturing overhead)

Question 4

Equivalent units =

Answer 4

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

Question 5

Basic Cost Flow Model:

Answer 5

Beginning Balance + Transfers In = Transfers Out + ending Balance

Question 6

Assign Costs to Production using a 5-step process:

Answer 6

Step 1: determine physical flow
Step 2: calculate equivalent units of production