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EA 17-1 CHAPTER 17 PROCESS COSTING 17-1 Give three examples of industries that use process-costing systems. Industries using process costing in their manufacturing area include chemical processing, oil refining, pharmaceuticals, plastics, brick and tile manufacturing, semiconductor chips, beverages, and breakfast cereals. 17-2 In process costing, why are costs often divided into two main classifications? Process costing systems separate costs into cost categories according to the timing of when costs are introduced into the process. Often, only two cost classifications, direct materials and conversion costs, are necessary. Direct materials are frequently added at one point in time, often the start or the end of the process. All conversion costs are added at about the same time, but in a pattern different from direct materials costs.Conversion costs are often added throughout the process, which can of any length of time, lasting from seconds to several months. 17-3 Explain equivalent units. Why are equivalent-unit calculations necessary in process costing? Equivalent units is a derived amount of output units that takes the quantity of each input (factor of production) in units completed or in incomplete units in work in process, and converts the quantity of input into the amount of completed output units that could be made with that quantity of input. Each equivalent unit is comprised of the physical quantities of direct materials or conversion costs inputs necessary to produce output of one fully completed unit. Equivalent unit measures are necessary since all physical units are not completed to the same extent at the same time. 17-4 What problems might arise in estimating the degree of completion of semiconductor chips in a semiconductor plant? The accuracy of the estimates of completion depends on the care and skill of the estimator and the nature of the process. Semiconductor chips may differ substantially in the finishing necessary to obtain a final product. The amount of work necessary to finish a product may not always be easy to ascertain in advance. 17-5 Name the five steps in process costing when equivalent units are computed. The five key steps in process costing follow: Step 1: Summarize the flow of physical units of output. Step 2: Compute output in terms of equivalent units. Step 3: Summarize total costs to account for. Step 4: Compute cost per equivalent unit. Step 5: Assign total costs to units completed and to units in ending work in process. How do you calculate equivalent units under weightedEquivalent units = Number of physical units × Percentage of completion. For direct materials, 3,000 equivalent units = 5,000 physical units × 60 percent complete; for direct labor and overhead, 1,500 equivalent units = 5,000 physical units × 30 percent complete.
How do you find total equivalent units?To simply calculate equivalent units, you can multiply the number of physical items by the percentage of the work done on them. For two items that are 50% done, you would have one equivalent unit (2 x 50% = 1). When the items are completely finished, the number of equivalent units is equal to the physical items.
When calculating unit costs under the weighted2,1,4,3. When calculating unit costs under the weighted-average process-costing method, the unit cost is based on: C. a summation of the costs in the beginning work-in-process inventory plus costs incurred in the current period.
Which of the following is the best explanation for why it is necessary to calculate equivalent units of production in a process costing environment multiple choice?Option d is the correct answer
In a process costing system, the output of one process becomes the input for another process so to make a unit 100% complete and ready to move to the next stage, equivalent units of production need to be calculated.
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Which of the following data are needed to calculate total equivalent units under the weighted
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