 Show 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. What are the five steps of process costing?5 Steps for Process Costing. Analyze inventory flow.. Convert in-process inventory to equivalent units.. Compute all applicable costs.. Calculate the cost per unit of finished and in-process inventory.. Allocate costs to units of finished and in-process inventory.. Which of the following is the second step of the 5 step process costing procedure?2. Convert inventory costs. The second step in calculating process costing is to convert any inventory that was considered as in-process at the end of the period to an amount of equal units.
Which of the following is the third step of the 5 step process costing procedure?3. Identify the Total Costs. The third step is to account for all the costs that are incurred during the whole production process. This is done by adding costs to each process to get an average individual cost per unit.
What is the flow of costs through a process costing system?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.
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Summarizing the flow of physical units is which step of the 5-step process costing procedure?
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