The total manufacturing costs incurred by a production department are accumulated in a departmental work-in-process inventory account in process costing, and the cost per unit is only calculated at the end of each period, using the equivalent units of the production method.
1. In process costing, we cannot simply assign the manufacturing cost to all units completed and in progress because the work-in-process units are incomplete. Therefore, the first step is to calculate the number of equivalent units based on the percentage completion of the work-in-process units:
1. Next we calculate the cost per equivalent unit as we will base out cost allocation on the cost per unit:
2. Now we can assign costs to the units transferred out and in ending work-in-process.
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