Page 299 - DCOM202_COST_ACCOUNTING_I

Unit 14: Equivalent Production in Process Costing

Self Assessment Notes

State whether the following statements are true or false:
1. Costing for joint products implies the assignment of a portion of the joint cost to each of the
joint product.
2. Average Unit cost is the simplest method.
3. The basic problem in respect of joint products is that of apportioning the joint cost.

4. physical Unit method is a physical base such as raw materials weight, linear measure
volume.
5. By-products with relatively unimportant market value, are feasible nor practicable.
6. The income realised from the sale of by-products is increased by the selling costs incurred
on the sale and manufacturing costs.
7. The work-in-progress is inspected and an estimate is made of the degree of completion,
usually on a percentage basis.
8. The sale proceeds of by-products may be debited to the account of main product.
9. All income received from the sale of by-products may be considered as income and credited
to the Trading Account.
10. This method of apportioning joint costs to products on the basis of relative value is the
most popular and convenient method.
11. Under average method the average process cost is obtained by adding the opening work-
in-progress and the current cost and dividing the total by total equivalent units.
Fill in the blanks:
12. The …………………… are split in the ratio of selling price of individual products.

13. …………………… are relatively considered less important.
14. The sale proceeds of by-products may be …………………… to the account of main product
and thus it can be …………………… from the cost of production of main product.
15. If the market price be higher than cost, a process account will reveal ……………………

16. …………………… represents the production of a process in terms of completed units.
14.5 Summary

z z Costing for joint products implies the assignment of a portion of the joint cost to each of
the joint product.

z z Unless the joint costs are properly and reasonably apportioned to different joint products
produced, the cost of joint products will vary considerably and this will affect valuation of
inventory, pricing of products and profit or loss on sale of different products.

z z Equivalent production represents the production of a process in terms of completed units.
In other views, it means converting the uncompleted production into its equivalent of
completed units. In every process, an estimate is made of the percentage completion of any
work-in-progress. A production statement and a cost statement will then be prepared.

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