Final answer:
The weighted-average method of process costing takes into account the costs incurred during the current period plus the cost of beginning work in process inventory. This method differs from calculations of average cost, which is total cost divided by output, and marginal cost, which is the cost of producing one extra unit.
Step-by-step explanation:
When computing the cost per equivalent unit using the weighted-average method of process costing, it is important to consider all the costs that are applicable to the units produced up to the calculation point. In particular, option c states that the costs considered include the costs incurred during the current period plus the cost of beginning work in process inventory. This means that both the costs that have been newly incurred in the current period and the costs that were already in the work in process at the start of the period are considered when calculating the weighted-average cost per unit.
Average cost and marginal cost are two different methods of calculating cost per unit. Average cost (AC) is the total cost (TC) divided by the quantity (Q) of output produced. Marginal cost (MC), on the other hand, is the additional cost of producing one extra unit of output, calculated as the change in total cost (∆TC) divided by the change in output (∆Q). Understanding these concepts is fundamental in process costing because it helps businesses determine pricing strategies and assess overall profitability. If a firm's average cost of production is lower than the market price, it stands to earn a profit. Conversely, if the average cost is higher, the firm may incur losses.