 In this presentation we will take a look at multiple choice questions related to a process cost system practicing test taking skills as we go. 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we have a definition what are equivalent units of production equivalent units of production are the same as a the number of units that could have been started and completed for the costs incurred during the period so that sounds like it could possibly be it has a definition there notice it's a little bit longer as well sometimes when you have the longer type of description and some of the shorter type of descriptions that follow sometimes it could be that might be an answer or could be something to think about because often times the answer is trying to qualify any types of things that in a case would not be true whereas if you have an answer that's not true then you don't need any qualifications to make it further not true so in other words an answer that's true may need more qualifications in order to rule out any type of possibility where it could be a false answer whereas a false answer could be pretty short because it's false on its phase doesn't need to rule out any other kind of circumstance but in any case we'll go to be the number of finished units so equivalent units of productions are the same as the number of finished units yeah maybe I'll keep that one for now see the number of units started and E started and completed so equivalent units are the same as the number of units started and completed I mean if we don't know at all we might have to keep that one D says the number of units started so equivalent units are the same as the number of units started yeah probably not the one started equivalent units of production are the same as physical units that were sold so that units that we actually sold probably not equivalent units let's go through these again equivalent units of production are the same as a the number of units they could have been started and completed for the costs incurred during the period and notice that's really similar to see the number of units started and completed for the period so because those are similar I'm gonna try to narrow it down to a and c so either equivalent units are a the number of units that could have been started and completed for the cost incurred during the period or see the number of units started and completed the ones that were actually started and completed and since they're equivalent that's kind of assume that there's some type of estimate involved here so that and there's not really an estimate in C so I think it's going to be a for that reason so the answer is going to be a equivalent units of production are the same as a the number of units that could have been started and completed for the costs incurred during the period and remember that equivalent units is that kind of estimating type of number we're going to use in the process cost system we need to estimate them because we have some units that are not completed they're not completed units and so equivalent units are going to help us out to apply costs to the proper process through the use of this kind of estimating tool which is the equivalent units next question why is it necessary to calculate equivalent units of production a continuing units take too long accounting units take too long B to estimate actual units to estimate estimated units C all of the work to make a unit 100% complete may not have been completed in one time period or E to account for spoilage so let's go through this again using the process of elimination why is it necessary to calculate equivalent units of production a continuing counting units takes too long so it takes too long to count the unit so we're going to use equivalent units that doesn't sound quite right to me I think we would probably want to count the units in any case so equivalent I don't think it's going to eliminate you know the physical count if we need one B the estimate actual units to estimated units to estimate actual units to the estimated units and we could possibly be if we're going to have equivalent units we might think you know maybe we're trying to make some type of estimate of equivalent units so I'll keep that one for now C says all of the work to make a unit 100% complete may not have been completed in one time period so okay I'll keep that for now it's possible that seems true he says to account for spoilage so to account for spoilage and so I'm going to keep that for now and let's go through it again why is it necessary to calculate equivalent units of production so B says to estimate actual units to estimated units and notice B and E are kind of similar and then because he says to account for spoilage so notice that B and E if we were trying to estimate the actual the actual units to the estimated to the actual maybe we're doing that possibly to account for spoilage or possibly we're trying to see how we did in terms of production but that's more of a budgeting tool so actually it's not it's not B and it's not E because B is seems more like a budgeting tool here and what we're trying to do here really is allocate the costs we're allocating the costs to units that aren't exactly completed or finished so it's not like we're trying to estimate the units at the beginning and then see what happened at the end and see what the difference is to see how we did and possibly account for spoilage what we're doing instead is trying to figure out the equivalent units in order to allocate the costs to the proper process as we go through and so sees the correct answer a note again sees up the long kind of a longer answer again and that possibly could be an indication sometimes from Kate's from time to time on a multiple choice question if you see it has these qualification terms or it's more specific in some ways than the other answers it might be more specific because again it's trying to rule out those instances in which it would not be true so that it can be a true answer which again you don't really need to do that with answers that aren't correct because they're not correct I don't need to qualify anything to make it more not correct so just be a that could possibly turn up that way where you know a more specific answer more detailed answer new wants to answer could possibly be correct in some cases so final answer why is it necessary to calculate equivalent units of production see all of the work to make a unit 100 percent complete may not have been completed in one time period so that means that we have partially completed units and therefore we can't just count the unit it's partially completed in terms of inventory so if we're going to try to allocate costs we use the tool of equivalent units to help us to do that allocation