summarize total costs
compute cost for each equivalent unit
summarize flow of output
compute output in units
Answer is Wrong!
Answer is Right!
The correct answer is: B. compute cost for each equivalent unit.
In process costing, equivalent units are used to measure the work done during a period. They are calculated by multiplying the actual units produced by the percentage of work completed on those units. For example, if 100 units were started in production and 80 units were completed, the equivalent units would be 80 units.
The cost per equivalent unit is calculated by dividing the total costs incurred during the period by the equivalent units produced. This figure is then used to value the units in ending inventory and to cost the units transferred out of the process.
The other options are incorrect because:
- Option A is incorrect because the fourth step in process costing is to compute cost for each equivalent unit, not to summarize total costs.
- Option C is incorrect because the fourth step in process costing is to compute cost for each equivalent unit, not to summarize flow of output.
- Option D is incorrect because the fourth step in process costing is to compute cost for each equivalent unit, not to compute output in units.