If a department that uses process costing starts the reporting period with 100,000 physical units that were 20% complete with respect to direct labor, it must add 80% direct labor in the current period to complete the units.

Question

Quizplus · Accepted Answer

This statement accurately reflects the concept of process costing, where costs are accumulated by department over a certain period of time and unit costs are calculated based on the total costs incurred and the total units produced. In this case, the department had 100,000 units that were partially complete with respect to direct labor, meaning that they had already incurred some direct labor costs but needed additional labor to be completed. To fully complete the units, the department would need to add 80% direct labor in the current period, as stated.

If a Department That Uses Process Costing Starts the Reporting