Fifth edition Alnoor Bhimani Charles T. Horngren Srikant M. Datar Madhav V. Rajan Farah Ahamed



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Solutions to review questions

4.1
Industries using process costing in their manufacturing area include chemical processing, oil refining, pharmaceutical, plastics, brick and tile manufacturing, semiconductor chips, beverages and breakfast cereals.
4.2
Process-costing systems separate costs into cost categories according to the timing of when costs are introduced into the process. Often, only two cost classifications, direct materials and conversion costs, are necessary. Direct materials are frequently added atone point in time, often the start or the end of the process, and all conversion costs are added at about the same time, but in a pattern different from direct materials costs.
4.3
The accuracy of the estimates of completion depends on the care and skill of the estimator and the nature of the process. Aircraft blades may differ substantially in the finishing that is necessary to obtain a final product. The amount of work may not always be easy to ascertain in advance.
4.4
The weighted-average process-costing method assigns the average equivalent unit cost of all work done to date (regardless of when it was done) to equivalent units completed and transferred out, and to equivalent units in closing stock.
4.5
FIFO calculations are distinctive because they assign the cost of the earliest equivalent units available (starting with equivalent units in opening work-in-progress stock) to units completed and transferred out, and the cost of the most recent equivalent units worked on during the period to closing work-in-progress stock. In contrast, the weighted-average method costs units completed and transferred out and in closing work in progress at the same average cost.

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