Process Costing Learning Objectives Show
Chapter Outline 1. CHARACTERISTICS OF PROCESS MANUFACTURING
2. THE IMPACT OF WORK-IN-PROCESS INVENTORIES ON PROCESS COSTING
3. WEIGHTED AVERAGE COSTING
4. MULTIPLE INPUTS AND MULTIPLE DEPARTMENTS
5. APPENDIX: PRODUCTION REPORT—FIFO COSTING
What is FIFO method in process costing?FIFO stands for “First-In, First-Out”. It is a method used for cost flow assumption purposes in the cost of goods sold calculation. The FIFO method assumes that the oldest products in a company's inventory have been sold first. The costs paid for those oldest products are the ones used in the calculation.
How are equivalent units calculated in a process costing system?Process costing requires partially completed units in ending work-in-process inventory to be converted to the equivalent completed units (called equivalent units). Equivalent units. are calculated by multiplying the number of physical (or actual) units on hand by the percentage of completion of the units.
What is the number of equivalent units using the FIFO method quizlet?Equivalent units of production calculated using the FIFO method equals equivalent units of Beginning Work-in-Process plus units started and completed plus equivalent units of Ending Work-in-Process. (Note: 70,000 units started and completed = 150,000 units completed − 80,000 units in beginning Work-in-Process.)
What are equivalent units of production and how are they used in process costing?Definition of Equivalent Unit of Production
Basically the fully completed units and the partially completed units are expressed in terms of fully completed units. Equivalent units are used in the production cost reports for the producing departments of manufacturers using a process costing system.
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