Which of the following is not true of the weighted-average process costing method

When using the weighted-average method of process costing, the computation of the cost per equivalent unit include

Question 1 options:

costs incurred during the current period plus the cost of the ending work in process inventory.

costs incurred during the current period plus the cost of the beginning work in process inventory.

costs incurred during the current period plus all of the costs incurred in the prior period.

costs incurred during the current period only.

Question 2 (1 point)

Which of these companies would use job costing?

Question 2 options:

A dairy farm

A paint manufacturer

An oil refinery

A hospital

Question 3 (1 point)

An equivalent unit of conversion costs is equal to

Question 3 options:

an equivalent unit of material costs.

the amount of conversion costs necessary to start a unit into work in process.

the amount of conversion costs needed to produce one unit.

half of the conversion costs necessary to produce one unit.

Question 4 (1 point)

Tucker Manufacturing uses weighted-average process costing. All materials at Tucker are added at the beginning of the production process. The equivalent units for materials at Tucker would be

Question 4 options:

the units completed and transferred out plus the units in beginning work in process.

the units started and completed plus the units in ending work in process.

the units started plus the units in ending work in process.

the units started plus the units in beginning work in process.

Question 5 (1 point)

All of the following statements are correct except one. Which one is incorrect?

Question 5 options:

Process costing would be appropriate for a custom cabinetmaker.

Units produced are indistinguishable from each other in a process costing system.

Costs are accumulated by department when using process costing.

Process costing has the same basic purposes as job costing.

Question 6 (1 point)

Which of these companies would use process costing?

Question 6 options:

Cartier Communication Marketing, advertising firm in Quebec

McCain Foods, producer of sweet potato fries

Auld & Company Management Consultants, headquarters in Calgary

Amazon.com

Question 7 (1 point)

All of the following statements about process costing are true except for one. Which one is untrue?

Question 7 options:

Process costing is appropriate for those production processes where similar units are produced in a continuous flow.

Each process will have its own separate work in process inventory account.

Equivalent units for materials and equivalent units for conversion costs are the same.

Units in beginning work in process plus the units started into production should equal units in ending work in process plus units completed.

Question 8 (1 point)

The journal entry to record the transfer of units from Department A to the next processing department, Department B, includes a debit to

Question 8 options:

Work in Process Inventory for Dept. B and a credit to Raw Materials Inventory.

Work in Process Inventory for Dept. A and a credit to Work in Process Inventory for Dept. B.

Work in Process Inventory for Dept. B and a credit to Work in Process Inventory for Dept. A.

Finished Goods Inventory and a credit to work in process for Dept. A.

Question 9 (1 point)

 Which of the following statements describes Black Fly's process costing system?

Question 9 options:

The subsidiary work in process inventory accounts consist of separate records for each individual order, detailing the materials, labour, and overhead assigned to that order.

Costs flow through a sequence of work in process inventory accounts and then into finished goods inventory from the final work in process inventory account.

Process costing is used when there is mass production of similar products, where the costs associated with individual units of output cannot be differentiated from each other. In other words, the cost of each product produced is assumed to be the same as the cost of every other product. Under this concept, costs are accumulated over a fixed period of time, summarized, and then allocated to all of the units produced during that period of time on a consistent basis. When products are instead being manufactured on an individual basis, job costing is used to accumulate costs and assign the costs to products. When a production process contains some mass manufacturing and some customized elements, then a hybrid costing system is used.

Examples of the industries where this type of production occurs include oil refining, food production, and chemical processing. For example, how would you determine the precise cost required to create one gallon of aviation fuel, when thousands of gallons of the same fuel are gushing out of a refinery every hour? The cost accounting methodology used for this scenario is process costing.

Process costing is the only reasonable approach to determining product costs in many industries.   It uses most of the same journal entries found in a job costing environment, so there is no need to restructure the chart of accounts to any significant degree.  This makes it easy to switch over to a job costing system from a process costing one if the need arises, or to adopt a hybrid approach that uses portions of both systems.

Example of Process Cost Accounting

As a process costing example, ABC International produces purple widgets, which require processing through multiple production departments. The first department in the process is the casting department, where the widgets are initially created. During the month of March, the casting department incurs $50,000 of direct material costs and $120,000 of conversion costs (comprised of direct labor and factory overhead). The department processes 10,000 widgets during March, so this means that the per unit cost of the widgets passing through the casting department during that time period is $5.00 for direct materials and $12.00 for conversion costs. The widgets then move to the trimming department for further work, and these per-unit costs will be carried along with the widgets into that department, where additional costs will be added.

Types of Process Costing

There are three types of process costing, which are as follows:

1. Weighted average costs. This version assumes that all costs, whether from a preceding period or the current one, are lumped together and assigned to produced units. It is the simplest version to calculate.

2. Standard costs. This version is based on standard costs. Its calculation is similar to weighted average costing, but standard costs are assigned to production units, rather than actual costs; after total costs are accumulated based on standard costs, these totals are compared to actual accumulated costs, and the difference is charged to a variance account.

3. First-in first-out costing (FIFO). FIFO is a more complex calculation that creates layers of costs, one for any units of production that were started in the previous production period but not completed, and another layer for any production that is started in the current period.

There is no last in, first out (LIFO) costing method used in process costing, since the underlying assumption of process costing is that the first unit produced is, in fact, the first unit used, which is the FIFO concept.

Why have three different cost calculation methods for process costing, and why use one version instead of another?  The different calculations are required for different cost accounting needs.  The weighted average method is used in situations where there is no standard costing system, or where the fluctuations in costs from period to period are so slight that the management team has no need for the slight improvement in costing accuracy that can be obtained with the FIFO costing method.  Alternatively, process costing that is based on standard costs is required for costing systems that use standard costs.  It is also useful in situations where companies manufacture such a broad mix of products that they have difficulty accurately assigning actual costs to each type of product; under the other process costing methodologies, which both use actual costs, there is a strong chance that costs for different products will become mixed together.  Finally, FIFO costing is used when there are ongoing and significant changes in product costs from period to period – to such an extent that the management team needs to know the new costing levels so that it can re-price products appropriately, determine if there are internal costing problems requiring resolution, or perhaps to change manager performance-based compensation.  In general, the simplest costing approach is the weighted average method, with FIFO costing being the most difficult.

Cost Flow in Process Costing

The typical manner in which costs flow in process costing is that direct material costs are added at the beginning of the process, while all other costs (both direct labor and overhead) are gradually added over the  course of the production process. For example, in a food processing operation, the direct material (such as a cow) is added at the beginning of the operation, and then various rendering operations gradually convert the direct material into finished products (such as steaks).

What is the weighted average method of process costing?

Which of the following is not the function of process cost system?

Which of the following does not occur with processing costing?

Which of the following is considered the major benefit of the weighted average method?