Transfer pricing Georgina Chan is the chief financial officer of Colorado Pty Ltd, which has three interdependent divisions where, on ave

When units are transferred from one department to another, how are normal spoilage costs recorded?

In processes involving pipeline operations or assembly line operations, if the pipeline or assembly line is always full, then beginning and ending WIP inventories are always 50 per cent complete with regard to conversion costs. Explain.

A department within a processing operation has some finished units physically on hand. Should they be counted as completed units or as ending inventory in the department? Explain.

Suppose the percent completion of ending WIP is overestimated at the end of year 1. How does this measurement error affect the process costing results in year 1 and year 2?

Although process costing appears to use precise measurements, it requires several estimates. Discuss where judgement is needed in collecting information for process costing.

In a continuous processing situation (such as an oil refinery), the beginning and ending WIP inventories are frequently the same. How does this simplify determination of equivalent units completed?

‘We treat spoiled units as fully completed regardless of when the spoiled units are detected. This method makes unit costing much simpler.’ What is wrong with this approach?

Under what conditions could a process complete more units during the period than it started?

Under what conditions will weighted average and FIFO process costing consistently produce similar equivalent unit costs?

Explain the difference between the weighted average and FIFO methods for process costing. Explain why an entity might choose one method over the other.

Describe the differences between mass production and custom production of goods and services. Explain how these differences influence the costing method.

Cost of sales schedule Rebecca Ltd is a manufacturer of machines made to customer specifications. All production costs are accumulated by means of a job order costing system. The following information is available at the beginning of the month of October.       A review of the job order cost sheets revealed the composition of the work in process inventory on October 1 as follows:         Activity during the month of October was as follows:       On 31 October, inventories consisted of the following:       Required Prepare a detailed schedule showing the cost of goods manufactured for October.