Which of the following is are the same between the weighted average and FIFO methods of calculating equivalent units of production EUPs )?
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What is Equivalent Units of Production?Equivalent units of production is a term applied to the work-in-process inventory at the end of an accounting period. It is the number of completed units of an item that a company could theoretically have produced, given the amount of direct materials, direct labor, and manufacturing overhead costs incurred during that period for the items not yet completed. In short, if 100 units are in process but you have only expended 40% of the processing costs on them, then you are considered to have 40 equivalent units of production. Equivalent units is a cost accounting concept that is used in process costing for cost calculations. It has no relevance from an operational perspective, nor is it useful for any other type of cost derivation other than process costing. Equivalent units of production are usually stated separately for direct materials and all other manufacturing expenses, because direct materials are typically added at the beginning of the production process, while all other costs are incurred as the materials gradually work their way through the production process. Thus, the equivalent units for direct materials are generally higher than for other manufacturing expenses. When assigning a cost to equivalent units of production, you typically assign either the weighted average cost of the beginning inventory plus new purchases to the direct materials, or the cost of the oldest inventory in stock (known as the first in, first out, or FIFO, method). The simpler of the two methods is the weighted average method. The FIFO method is more accurate, but the additional calculations do not represent a good cost-benefit trade off. Only consider using the FIFO method when costs vary substantially from period to period, so that management can see the trends in costs. Example of Equivalent Units of ProductionABC International has a manufacturing line that produces large amounts of green widgets. At the end of the most recent accounting period, ABC had 1,000 green widgets still under construction. The manufacturing process for a green widget requires that all materials be sent to the shop floor at the start of the process, and then a variety of processing steps are added before the widgets are considered complete. At the end of the period, ABC had incurred 35% of the labor and manufacturing overhead costs required to complete the 1,000 green widgets. Consequently, there were 1,000 equivalent units for materials and 350 equivalent units for direct labor and manufacturing overhead. =all prior departments.Which of the following is(are) the same between the weighted average and FIFO methods of calculating EUPs? Get answer to your question and much more Process costing techniques should be used in assigning costs to products Get answer to your question and much more Averaging the total cost of completed beginning work-in-process inventory and units started and completed over all units transferredout is known as Get answer to your question and much more A process costing system=restates Work in Process Inventory in terms of completed units. Get answer to your question and much more Get answer to your question and much more A hybrid costing system combines characteristics of=job order and process costing systems.When standard costs are used in process costing,= the weighted average method of calculating EUPs makes computing transferred-out costs easier. Get answer to your question and much more The cost of abnormal continuous losses is=written off as a loss on an equivalent unit basis.Abnormal spoilage can be Get answer to your question and much more When the cost of lost units must be assigned, and those same units must be included in an equivalent unit schedule, these units areconsidered= abnormal and continuous. Get answer to your question and much more Which of the following would be considered a discrete loss in a production process? Get answer to your question and much more The method of neglect handles spoilage that is=continuous and normal.The cost of normal discrete losses is=absorbed by all units past the inspection point on an equivalent unit basis.The cost of abnormal continuous losses is=written off as a loss on an equivalent unit basis.Normal spoilage units resulting from a continuous process=result in a higher unit cost for the good units produced.When the cost of lost units must be assigned, and those same units must be included in an equivalent unit schedule, these units areconsidered=abnormal and continuous. What is the difference between FIFO method and weighted average method while calculating equivalent units?The key difference between FIFO and weighted average is that FIFO is an inventory valuation method where the first purchased goods are sold first whereas weighted average method uses the average inventory levels to calculate inventory value.
What are the similarities and differences of the weighted average method and the first in first out method used in process costing?According to the Accounting for Management website, the main difference between the FIFO and weighted average method is in the treatment of beginning work-in-process or unfinished goods inventory. The weighted average method includes this inventory in computing process costs, while the FIFO method keeps it separate.
What is equivalent units of production equal to?Equivalent units describe how much work has been done on a certain number of physical items. To simply calculate equivalent units, you can multiply the number of physical items by the percentage of the work done on them. For two items that are 50% done, you would have one equivalent unit (2 x 50% = 1).
What is the number of equivalent units using the FIFO method?Equivalent units under FIFO method of process costing are the number of finished units that could have been prepared in a process during a period had there been no unfinished units, either in opening WIP or closing WIP.
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