1.

What are the characteristics of a company that would be more likely to use process
costing than job order costing?
 The characteristics of a company that will most likely to use process costing instead of
job order costing is one that uses continuous processes to produce relatively
homogeneous/standardized products, accumulates costs for extended production runs
involving products that are indistinguishable from one another, produce bricks for sale to
the public, and requires less record keeping by aggregating costs.
2. How do the weighted average and first-in, first-out methods of process costing differ in their
treatment of beginning Work in Process Inventory units?
 The FIFO method prohibits the merging of previous period's work with current period's
work. The EUP schedule only displays the work done on the starting WIP inventory
within the current period. Additionally, the initial raw materials used in the process and
conversion expenses are not included. Additionally, the cost per unit of production is
calculated separately for starting inventory and ongoing production. In contrast, the
weighted average method combines beginning inventory and current production to
determine cost per unit of production by using the numbers in beginning WIP inventory
as well as the numbers begun and completed during the time.
3. What is an “equivalent unit of production,” and why is it a necessary concept to employ in a
process costing system?
 Calculating the equivalent units of production can help a company understand how much
work and money they have put into their manufacturing process since it describe how
much work has been done on a certain number of physical items. These concept are
useful for process costing which analyzed money flow within the manufacturing process,
to understand how much money, material and labor from partially completed products are
worth to a company.
4. Is one equivalent unit computation sufficient for all cost components? Explain your answer.
 One EUP calculation is typically insufficient because each component within a
production department may be at a different percentage of completion. But if all of the
components are at the same stage of completion, only one EUP computation is necessary.
One "conversion" cost component estimate, for instance, can be produced if OH is
applied based on direct labor. Alternatively, if a number of direct materials are added at
the start of the procedure, they could be consolidated into a single cost element.
5. What is meant by the phrase units started and completed? Why is this phrase more closely
associated with the first-in, first-out method of process costing than with the weighted average
method?
 The total number of finished units during the time less the number of units in the initial
inventory equals the number of units "started and completed" in the period. The weighted
average method does not require this computation because the beginning inventory for
 the current period in the preceding period did not need to be completed separately from
the beginning inventory for the current period. However, the FIFO method requires this
calculation due to the fact that work completed in one period cannot be mixed with work
completed in another.
6. What is meant by the term transferred-out cost? Why does the transferred-out cost under the
WA method include only one computation but the FIFO method includes multiple computations?
 The cost of the units that the department finishes during the period and transfers to other
departments or finished goods inventory is known as the "transferred out cost." Materials
and conversion expenses are included in the price. Because it only includes the total units
finished during this period, the transferred out costs with the WA method only require
one computation. Since FIFO includes total units finished from the start of the work in
progress + units begun and completed during this period, it involves numerous
computations.
7. How is the cost of ending inventory calculated in a process costing system?
 Ending Inventory under the process costing system is associated in costing of assignment.
We compute it by distributing it first to the DM, DL and OH and then multiplying each of
their number of units transferred and their assigned cost per EUP.
8. Which cost component can be found in a downstream department of a multi-department
production process that will not be present in the first upstream department? Discuss.
 The cost component that can be found in a downstream department but not in the first
upstream department would be costs related to new materials to be acquired by the
downstream department/ departments.
9. A company has two sequential processing departments. On the cost of production reports for
the departments, will the cost per unit transferred out of the first department always be equal
to the cost per unit transferred in to the second department? Explain.
 On the cost of production reports for the departments the cost per unit transferred out of
the first department will be equal to the cost per unit transferred in to the second
department but not always. Because, cost per unit of first department will be equivalent to
cost per unit of second department. It will not necessarily happen always until a
fluctuation arises in the measurement unit of the second department.
10. Why does standard costing make process costing more clerically and computationally
efficient?
 The managerial accounting tool known as standard costing is where the standards for
various cost components are established. This increases the computational and clerical
efficiency of the costing process. Additionally, it's because standard costing emphasizes
the monitoring and control of the current production operations. A rapid estimation of
future expenses is also provided by the conventional costing approach. It also serves as
an effective planning and control method. Additionally, management is able to identify
 areas of production inefficiency by getting timely information that compare actual with
standard costs. In that case, remedial action could be conducted before too many
inefficiencies develop.
11. What is a hybrid costing system? In what circumstances are hybrid costing systems
typically employed?
 A cost accounting system called a "hybrid costing system" combines elements of task
costing and process costing. The most frequent use of hybrid pricing is when a baseline
product is processed identically along with unique alterations over the baseline level of
processing. When a production facility handles groups of products in batches and charges
the cost of materials to those batches (as is the case in a job costing environment), as well
as gathering labor and overhead costs at the departmental or work center level and
allocating these costs at the individual unit level, a hybrid costing system is useful (as is
the case in a process costing environment).
12. (Appendix 2) What is meant by the “method of neglect”? How does the use of this
method affect cost of good production?
 The method of neglect simply excludes the spoiled units out of the schedule for
equivalent units. The method of neglect is used in a process costing context to handle the
costs of normal shrinkage and normal continuous losses. A smaller number of equivalent
units of production (EUP) are produced when spoilage is ignored, and when production
costs are divided by a smaller EUP, the cost per equivalent unit increases. As a result, the
cost of lost units is distributed proportionally among the good units that are transferred
and those that are still in the work in progress (WIP).
13. (Appendix 2) In a process costing system, how are normal and abnormal spoilage typically
treated? Why are normal and abnormal spoilage treated differently?
 Normal spoilage is absorbed included or as part of the product cost, but abnormal
spoilage costs are treated separately and is charged to expense as incurred. They are
treated differently because they are different from one another by how they are handled
by cost. Normal spoilage is the standard amount of waste or scrap that is caused by
production, and which is difficult to avoid. Abnormal spoilage exceeds the normal or
expected rate of spoilage.