Howell Company uses the average cost method of process costing.Howell had 1,000 units in beginning work-in-process which were 75% complete.Costs associated with this inventory were $3,200.When calculating the cost per equivalent unit for the month of June,Howell's controller should:
A)Not consider the $3,200 as those costs were incurred in a prior period.
B)Calculate the cost to complete the 1,000 items in beginning work-in-process separately.
C)Include the $3,200 with the current month's cost to arrive at total cost for production to date.
D)Include the equivalent units to complete the beginning work-in-process inventory to arrive at the equivalent units for the period.

Question

Quizplus · Accepted Answer

DIn process costing, the costs from the beginning inventory are combined with the costs incurred in the current period to calculate the total costs. This total is then divided by the equivalent units to determine the cost per equivalent unit. Therefore, both the costs from the beginning inventory ($3,200) and the equivalent units needed to complete the beginning work-in-process inventory should be considered.

Howell Company Uses the Average Cost Method of Process Costing