A number of terms are listed below:
Equivalent unit (EU)........... first-in, first-out (FIFO)
Weighted-average process-costing method... standard-costing method
REQUIRED
Select the terms from the above list to complete the following sentences. In process costing, the cost object is the entire production process. The method is used for mass-produced items that are identical. That is why a weighted average can be used to calculate the ratio of work in process to finished goods. A common denominator must be found because a physical unit 100% converted has cost more to produce than one that is only 50% converted and remains in work-in-process inventory. The benefits of the conversion process are unequally shared between the items in each type of inventory. The average conversion rate is calculated using a denominator called an _______________ ( ). There are three methods to assign conversion costs to finished goods and work in process. The choice of method should be made by the management team such that the method is economically plausible.
The method reflects the facts of the economic outcome of the production process in a specified time period. The three methods are ___________________ (____) method, the_______________________________________, and the _______________________.