Costs are averaged in service organizations that implement process-costing system with no beginning or ending work-in-process inventory.

Question

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In a process-costing system with no beginning or ending work-in-process inventory, costs are averaged across all units produced during the period. This is done because there is no way to accurately separate the costs of work that was started in the previous period from the costs of work that was started and completed in the current period. Therefore, all costs are treated as if they were incurred during the current period, and averaged across all units produced.

Costs Are Averaged in Service Organizations That Implement Process-Costing System