Chapter 5. Process Costing

When production is completed in the last processing department, units are transferred to the

finished goods account

When using process costing, how many materials can be added ____ processing department.

in any

Equivalent units formula

number of partially completed units x percentage completion

Conversion cost

Direct labor cost plus manufacturing overhead cost

Equivalent Units

The product of the number of partially units and their percentage of completion with respect to a particular cost. Equivalent units are the number of complete whole units that could be obtained from the materials and effort contained in partially units.

Equivalent units of production (weighted-average method)

The units transferred to the next department (or to finished goods) during the period plus the equivalent units in the department's ending work in process inventory.

What is a key difference between process and job-order costing?

Under process costing, it makes no sense to try and identify materials, labor and overhead costs with a particular custom order.

When using process costing, each processing department has a separate ______ account.

Work in process

The journal entry to record direct materials costs in processing Department #1 is debit

Work in process-Department #1 and credit Raw Materials

Characteristics of operation costing include:

costs are accumulated by department Products are processed in batches

Equivalent units of production under the weighted-average method equal ____.

equivalent units in the ending work in process plus units transferred out

Costs transferred in from Department A to Department B ___

will always be 100% complete with respect to Department A

Process Costing

A costing method used when essentially common products are produced on a continuous basis.

Operation costing

A hybrid costing system used when products have some common characteristics and some individual characteristics.

FIFO method

A process costing method that calculates unit cost based solely on the costs and outputs from the current period.

Weighted-average method

A process costing method that calculates unit costs by combining costs and outputs from the current and prior periods.

Processing department

An organizational unit where work is performed on a product and where materials, labor, or overhead costs are added to the product.

Costs per equivalent are used to value ____

Both units in ending inventory and units transferred to the next department