A costing system that computes the cost per equivalent unit for all production work completed up to a specific date is referred to as __________?
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Answer: A. weighted average method
Explanation
The weighted-average method computes the cost per equivalent unit by combining costs and work from both current and prior production periods. It averages out prior period beginning inventory costs with current period manufacturing additions. This provides a single blended unit cost figure for all work completed. Process costing systems must calculate equivalent units of production to value partially finished goods at period-end. The weighted-average method lumps together beginning work-in-process costs and current period costs without distinguishing their origin. This simplifies calculations compared to alternative inventory tracking methods.
Manufacturing firms using continuous flow production lines rely on the weighted-average method for routine monthly reporting. It provides a stable cost figure when input prices fluctuate moderately across periods. The FIFO method separates prior period beginning inventory from current period production costs. Net present value and gross production methods evaluate capital investments or total output rather than equivalent unit costing.
- Subject
- Accounting and Finance
- Category
- Accounting
- Topic
- —
- Difficulty
- medium
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