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CHAPTER 5 PROCESS COSTING DISCUSSION QUESTIONS 1. In sequential processing, products pass through a series of processes, one after an- other (i.e., in a given sequence). In parallel processing, products pass through two or more different sequences at the same time, merging eventually at the final process. 2. Process costing collects costs by process (department) for a given period of time. Unit costs are computed by dividing these costs by the department’s output measured for the same period of time. Job-order costing col- lects costs by job. Unit costs are computed by dividing the job’s costs by the units pro- duced in the job. Process costing is typically used for industries where units are homo- geneous and mass-produced. Job-order costing is used for industries that produce heterogeneous products (often custom- made). 3. Equivalent units are the number of whole units that could have been produced, given the amount of materials, labor, and over- head used. Equivalent units are the meas- ure of a period’s output, a necessary input for the computation of unit costs in a pro- cess-costing system. 4. In calculating this period’s unit cost, the weighted average method treats prior-period output and costs carried over to the current period as belonging to the current period. The FIFO method excludes any costs and output carried over from this period’s unit cost computation. 5. If the per-unit cost of the prior period is the same as the per-unit cost of the current peri- od, there will be no difference between the results of the weighted average and FIFO methods. Additionally, if no beginning work- in-process inventory exists, both the FIFO and weighted average methods give the same results. 6. Separate equivalent units must be calcu- lated for materials and conversion costs. 7. Transferred-in units represent partially com- pleted units and are clearly a material for the receiving department. To complete the product (or further process it), additional materials and conversion costs are added by the receiving department. 8. The cost flows for process-costing and job- order costing systems are essentially the same. Process costing requires a work-in- process account for each process. Costs flow from one work-in-process account to another until the final process is reached. 9. The work-in-process account of the receiv- ing department is debited, and the work-in- process account of the transferring depart- ment is credited. The finished goods ac- count is debited, and the work-in-process account of the final department is credited upon completion of the product. 10. The first step is the preparation of a physical flow schedule. This schedule identifies the physical units that must be accounted for and provides an accounting. The second step is the equivalent unit schedule. This schedule computes the equivalent whole output for the period. The schedule’s com- putations rely on information from the phys- ical flow schedule. The next step is compu-
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