The Correct Order for the Steps in Preparing a Process

question 86

Multiple Choice

The correct order for the steps in preparing a process costing report are: I Summarise total costs to account for.
II Calculate the cost per equivalent unit
III Account for cost of units completed and cost of ending WIP
IV Summarise total physical and equivalent units

• A) I, II, III IV
• B) IV, III, II, I
• C) IV, I, II, III
• D) I, IV, II, III

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Definitions:

Equivalent Units

A concept in cost accounting used to allocate costs to partially completed goods, expressing the amount of work done in terms of fully completed units.

Work in Process Inventory

Stocks of unfinished goods in the production process at a specific point in time. These goods will be transformed into finished goods ready for sale.

Weighted-Average Method

An inventory costing method that assigns an average cost to each unit on hand, calculated by dividing total cost of goods available for sale by total units available.

Work in Process Inventory

An account on the balance sheet that represents the cost of raw materials, labor, and overhead for products that are in production but not yet complete.