M2 - Process Costing, Conceptual Q's and Formulas (Ch. 4) ***

Cost per Equivalent Unit (FIFO Method)

Cost added during the period / EU of production

Conversion Cost

DL + MOH

Equivalent Units of Production (Weighted Average Method)

EUP or EUoP = Units transferred to next department or to finished goods + EU in EWIP inventory = UCTO (100%, all of it) + UEWIP (but only the percentage that's completed in UEWIP). Not 100% sure about the formula, but on all the quiz questions, it's always been: EUoP = 100% UCTO + % Complete of UEWIP. I guess it makes sense because you're calculating for what's been produced and is DONE.

Equivalent Units of Production (FIFO Method) Formula 1

Equivalent units to complete BWIP + Units Started and Completed during the Period + EU in EWIP inventory EUCBWIP + USC + EUEWIP (Units in BWIP x Percentage incomplete BWIP) + USC + EUEWIP (Append. 4A) Robin: I'm totally unsure, but I think this may be the same as: %Incomplete BWIP + 100% US and C + %Complete EWIP

T/F: Under job-order costing, a WIP account is maintained for each department

FALSE

Equivalent Units

Number of partially completed units × Percentage completion

T/F: The weighted-average costing method blends costs from past and current periods

TRUE

T/F: Under job-order costing, a separate WIP account is NOT maintained for each department

TRUE

T/F: If there are never any ending inventories, the two methods will produce identical unit costs

True; without EI, no costs can be carried forward to the next period and the W-A method will base unit costs on just the current period's costs--just as in the FIFO method

UBWIP + USIPTI

UEWIP + UCTO

UBWIP + USIPTI

UEWIP + UCTO Units in beginning work in process inventory + Units started into production or transferred in = Units in ending work in process inventory + Units completed and transferred out. I think you need 100% of everything. 100% US + 100% UBWIP = 100% UCTO + 100% UEWIP.

Weighted-average Method

the __ __ [method] of process costing calculates unit costs by combining costs and outputs from the current and prior periods

Cost Per Equivalent Unit (Weighted-Average Method)

(Cost BWIP Inventory + Cost added during period) / EU of production =(C BWIP + C ADP) / EUoP =(C BWIP + C ADP) / (100% UCTO + %Complete UEWIP) (p 164)

Cost Per Equivalent Unit (Weighted-Average Method)

(Cost BWIP Inventory + Cost added during period) / EU of production (p 164)

4 Steps of Weighted-Average Method of Process Costing

1. Compute the equivalent unit of production (EUoP) 2. Compute the cost per equivalent unit (CPEU) 3. Step 3: Assign costs to units 4. Step 4: Prepare a cost reconciliation report

Job-Order Costing

1. Many different jobs are worked on during each period 2. Each job

How are the 2 ways that the FIFO method differs from the weighted-average method?

1. Under FIFO, the UTO (units transferred out) are divided into 2 parts: Part 1 are units from BWIP taht were completed and tranferred out. Part 2 are units that were both started and completed during the current period. / 2. Under FIFO< we also care about the amount of work expended on units in BWIP in the current period. Under FIFO< both BWIP AND EWIP inventories get converted to EUs. BWIP's EUs are the work down to complete the units (so the incomplete %),. For EWIP's EUs, the EUs represent the work done to bring the units to partial completion (so the completed %--this is the same as the W-A method).

Process Costing

A costing method to make homogenous (uniform) products. 1. A single product is produced either continously or for long periods of time. 2. All produced units identical 3. Costs accumulated by dept. 4. Unit costs are computed by department.

T/F: Operation costing is used in situations where products have only common characteristics (i.e. are homogenous)

False. Operation costing is used when products have some common characters and some individual characteristics. For example, even though you may have different kinds of shoes, shoes all have common characteristics in that, no matter the style, they all involve cutting and sewing that can be done on the same equipment and using the same basic procedures. The differences lie in the fabric, the style, etc. When products have some common characteristics but also need to be processed individually, operating costing may be used to determine product costs.

T/F: Under process costing, a WIP account is maintained for each department

TRUE

T/F: When using the weighted-average method, ignore the percentage completion for BWIP (e.g., 9,000 units of BWIP, $10,000, and 50% complete with respect to materials and 10% complete with respect to conversion, aka DM and OH, you'd ignore the 50% and 20%)

TRUE

T/F: You should ignore whether BWIP is partially complete with respect to materials and conversion when calculating for EUoP

TRUE

FIFO Method

The __ ___ method of process costing calculates unit costs based solely on costs and outputs from the current period

Equivalent Units of Production (FIFO Method) Formula 2

UTO + EU in EWIP - EU in BWIP EU EWIP + UTO - EU BWIP (Append. 4A)

Units in BWIP + Units started in production or transferred in

Units in EWIP + Units completed and transferred out

T/F: When using the weighted-average method, ignore the percentage completion for EWIP (e.g., 9,000 units of BWIP, $10,000, and 50% complete with respect to materials and 10% complete with respect to conversion, aka DM and OH, you'd ignore the 50% and 20%)

FALSE - Please look at the homework because the context/step you are in the problem affects whether you take 100% of EWIP, such as when calculationg US + USTI = UCTO + UEWIP, or only the percentage completed, such as when calculating EUoP = UCTO + UEWIP, where you use 100% UCTO but only the % complete for UEWIP.

T/F: The Weighted-Average method of process costing is more accurate than the FIFO method

False, the FIFO Method is generally considered more accurate and more complex. FIFO calculates costs using only costs and outputs from the current period, while the weighted-average method calculates unit costs and outputs from the current and prior periods.

Equivalent Units of Production (Weighted Average Method)

Units transferred to next department or to finished goods + EU in EWIP inventory