Process Costing

Question 1

What is job costing?

Answer 1

Assigns each unit a cost as it assumes that each unit produced consumes a different level of resources

Question 2

What is process costing?

Answer 2

Assumes each unit is identical so takes the average cost of all units and applies to all.

Question 3

What is a normal loss?

Answer 3

Inherent to the production process hence why it is recorded in normal production

Question 4

What is an abnormal loss?

Answer 4

An unexpected cost in production due to an inefficiency in the production process, hence why it is reported as a period cost

Question 5

What are the complications in process costing?

Answer 5

Based on normal costs of production
Can be complicated by open and closing inventory, non-uniform cost application, and partially completed WIP (equivalent units calc needed)

Question 6

What does equivalent units calc give us?

Answer 6

It adjusts for partially completed work by estimating completion percentage