Chapter 4 Process Costing - Chapter 4 Process...

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Chapter 4 Process Costing - equivalent units of production are the number of units transferred to the next department or to finished goods + equivalent units in ending work in process o Number of partially completed units X percentage completion o Number of compete units that could have been obtained from materials and effort that went into partially complete units o Partially completed units are translated into an equivalent number of fully completed units when determining a department’s output. - WEIGHTED-AVERAGE METHOD— o Blends together units and costs from current period with units and costs from prior period o Costs to be account for = BEG WIP INV o Costs accounted for = ENDING WIP INV o Separate calculation is made for each cost category in each processing department o Equivalents units of production = units transferred to next department/finished goods + equivalent units in ending work in process inventory o Equivalent units completed = units transferred out for determining cost per unit o Cost per equivalent unit are used to value units in ending inventory and units that are transferred to next department o Does not take into account percentage competed of the beginning inventory o COST PER EQUIVALENT UNIT = (cost of beg WIP inv + cost added during period)/ equivalent units of production o EG: 3000 units transferred to next department, ending WIP 100 units, 40% complete for materials, 25% complete with conversion costs. Weighted-average method, what is equivalent units of production? = 3000 + (100x40%) = 3040 - FIFO method (best option) o Separate calculation is made for each cost category in each processing department o Using only costs incurred by processing department in current period o Cost of units transferred out = cost of beginning WIP inv + cost to complete units in beginning WIP inv + cost of units started and completed during period o DIFFERENT: 1) computation of equivalent units 2) way in which costs of beginning inventory are treated (more accurate and complex)
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