ch06 - Chapter 6 Process Costing LEARNING OBJECTIVES...

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Chapter 6 Process Costing LEARNING OBJECTIVES Chapter 6 addresses the following questions: Q1 How are costs assigned to mass-produced products? Q2 What are equivalent units, and how do they relate to the production process? Q3 How is the weighted average method used in process costing? Q4 How is the FIFO method used in process costing? Q5 What alternative methods are used for mass production? Q6 How is process costing performed for multiple production departments? Q7 How are spoilage costs handled in process costing? Q8 What are the uses and limitations of process cost information? These learning questions (Q1 through Q8) are cross-referenced in the textbook to individual exercises and problems. COMPLEXITY SYMBOLS The textbook uses a coding system to identify the complexity of individual requirements in the exercises and problems. Questions Having a Single Correct Answer: No Symbol This question requires students to recall or apply knowledge as shown in the textbook. e This question requires students to extend knowledge beyond the applications shown in the textbook. Open-ended questions are coded according to the skills described in Steps for Better Thinking (Exhibit 1.10): Step 1 skills (Identifying) Step 2 skills (Exploring) Step 3 skills (Prioritizing) Step 4 skills (Envisioning)
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6-2 Cost Management QUESTIONS 6.1 Weighted average and FIFO process costing produce similar equivalent unit costs whenever the unit cost of production does not change or whenever there are no beginning or ending work-in-process inventories. In addition, the equivalent unit costs will be similar if the number of equivalent units produced during the period is large relative to inventories. 6.2 A process would complete more units during the period than it started when there are more units in beginning inventory than in ending inventory. 6.3 This approach would overstate the cost of spoiled units because partially complete units would be treated as if they had received 100% of direct materials and conversion costs, regardless of the amount actually allocated to those units. 6.4 If the beginning and ending inventories are the same from one period to the next, the number of units started is equal to the number of units completed and transferred out. This means that WIP inventory can be ignored when calculating equivalent units. However, if costs change from one period to the next, then the cost allocated to ending WIP will not be the same as the cost allocated to beginning WIP. 6.5 Judgment is needed to determine the percentage complete that is used in process costing calculations. Each unit or batch of units is complete to a different degree than other units or batches because the process is continuous. The percent complete is an average completion percentage that is estimated using judgment.
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This note was uploaded on 03/07/2011 for the course BUS 352 taught by Professor Ng during the Winter '10 term at Wilfred Laurier University .

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ch06 - Chapter 6 Process Costing LEARNING OBJECTIVES...

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