COST ACCOUNTING
PROCESS COSTING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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A means by which the output achieved may be compared with the equivalent quantity budgeted for the period under review.
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The expression of losses in terms of an equivalent number of units of good production in order that their value may be calculated.
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A means of equalising production charged into stock each period.
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The conversion partly completed units into an equivalent number of completed units in order that costs may be shared on an equitable basis.
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Detailed explanation-1: -Answer» B. The conversion partly completed units into an equivalent number of completed units in order that costs may be shared on an equitable basis.
Detailed explanation-2: -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.
Detailed explanation-3: -Equivalent units are notional whole units that are equivalent to the number of incomplete units adjusted for their stage of completion. For example, if there are 200 incomplete units in a process at the end of a period and they are 75% complete then this is equivalent to 150 (200 × 0.75) whole (complete) units.
Detailed explanation-4: -Answer: The equivalent units of production needed in a process costing system. It is so because the company is required to know the cost of each single unit of the product to decide the selling proce per unit.
Detailed explanation-5: -An equivalent unit of production is an expression of the amount of work done by a manufacturer on units of output that are partially completed at the end of an accounting period. Basically the fully completed units and the partially completed units are expressed in terms of fully completed units.