Answered: Describe how standard costs are used…

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter5: Process Costing

Section: Chapter Questions

Problem 8Q: What are equivalent units of production, and how are they used in process costing?

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Describe how standard costs are used for product costing.

Definition Definition System of assigning an estimated cost to the product (instead of the actual cost) so that the product cost can be determined well in advance and the pricing of the product can be done on time. Since the actual cost cannot be predicted at the initial stage of the production process, the estimated cost is recorded in the books. Any deviation of the estimated cost of the actual cost is adjusted in the books at the end of the period.

Expert Solution

Step 1

The standard costs are used for the product costing is based on the following explanation,

Step 2

Product cost:

Product costing is defined as the process of accumulating the costs or a production. This process involves assuming them to the completed products.

The product costs are added up with the work-in-process inventory.

The product costs is also accumulated under both the normal costing (D) and the actual costing or (C) standard costing systems.

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