The Process Costing: Expanded Concepts

7/25/2019 The Process Costing: Expanded Concepts

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explain the effect of beginning WIP

Inventory to the process cost system

prepare the cost of production report

with a weighted average method

prepare the cost of production reportwith a FIFO method


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Depend on methods

(average or FIFO)

Materials

XXX

Labor

YYY

FOHZZZ

Work In Process(Department A)

XXX

YYY

ZZZ

MMM

Work In Process

(Department B)MMM

XXX

YYY

ZZZ

OOO

Work In Process

(Department C)OOO

XXX

YYYZZZ

PPP

Finished Goods

PPP

Beginning WIP

Inventory

Output Unit

Equivalent Unit

Cost of Production

Effect


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Department A Department B

Units:Beginning units in process:

DM 100% completed; conv. cost 40% completed ..... 4.000DM 100% completed; conv. cost 20% completed ..... 6.000

Started in process during the period ............................. 40.000

Units transferred to Department B ................................. 35.000Units added to production ............................................... 5.000Transferred to finished goods inventory ....................... 44.000Ending units in process:


Costs:Portion of beginning WIP inv. transferred in ................. $ 0 $ 40.000Portion of beginning WIP inv. added by department:

Direct materials ............................................................ $ 14.000 $ 12.000Direct labor ............................................................. $ 6.560 $ 10.280

Factory overhead (applied) ......................................... $ 11.000 $ 4.600Total ...................................................................... 31.560 66.880

Costs:Added during the period: ...............................................

Direct materials ........................................................... $ 140.000 $ 80.000Direct labor ............................................................ $ 50.000 $ 70.000Factory overhead (applied) ........................................ $ 90.000 $ 40.000

Total .......................................................................... $ 280.000 $ 190.000


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STEP 1: QUANTITIESUnits to account for:

Beginning units in process ............................................... 4.000Unit started in process ...................................................... 40.000 44.000

Units accounted for:Units transferred to next department .............................. 35.000Ending units in process .................................................... 9.000 44.000

STEP 2: EQUIVALENT PRODUCTION

Direct Materials Conv. CostUnits completed and transferred to Departement B ........ 35.000 35.000Ending units in process (9.000 x 60%) .............................. 9.000 5.400Total equivalent units .......................................................... 44.000 40.400

100% 60%

Including beginning units in process, because beginning units in process are

treated as though they had been started and completed during the period.


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Total Cost Eq. Production Eq. Unit CostSTEP 3: COST TO ACCOUNT FORCost added by department:

Direct materialsWIP Inventory beginning ........... $ 14.000

Added during the period .............. $ 140.000Total ............................................ $ 154.000 44.000 $ 3,50

Direct laborWIP Inventory beginning ........... $ 6.560Added during the period .............. $ 50.000

Total ............................................ $ 56.560 40.400 $ 1,40Factory OverheadWIP Inventory beginning ........... $ 11.000Added during the period ............... $ 90.000

Total ............................................. $ 101.000 40.400 $ 2,50Total costs to account for .................... $ 311.560 $ 7,40

Begin WIP Inv + Cost Added

Equivalent Units


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STEP 4: COSTS ACCOUNTED FORTransferred to next department (35.000 x $7,40) ............ $ 259.000Work in process inventory ending:

Direct materials (9.000 x $3,50) ..................................... $ 31.500

Direct labor (9.000 x $1,40 x 60%) ................................. 7.500Factory overhead (9.000 x $1,40 x 60%) ....................... 13.000 52.560

Total cost accounted for .................................................... $ 311.560

No distincion is made between units completed from

beginning WIP inventory and those units completed from

current production.


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Beginning units in process .......................................... 6.000Units received from preceding department ............... 35.000

Unit added to production ............................................. 5.000 46.000Units accounted for:

Units transferred to finished goods ............................ 44.000Ending units in process ............................................... 2.000 46.000

STEP 2: EQUIVALENT PRODUCTION Direct Materials Conv. CostTransferred to finished goods ......................................... 44.000 44.000Ending units in process (2.000 x 30%) ........................... 2.000 600Total equivalent units ....................................................... 46.000 44.600Including beginning units in process, because beginning units in process are

treated as though they had been started and completed during the period.


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Units Total Cost Eq. Prod. Eq. Unit CostSTEP 3: COST TO ACCOUNT FORCosts from preceding department:

WIP inventory beginning ........... 6.000 $ 40.000Transferred in during period ........ 35.000 259.000

Units added to production ........... 5.000Adjusted units and unit cost .... 46.000 $ 299.000 46.000 $ 6,50

Costs added by department:Direct materials:

WIP inventory beginning ....... $ 12.000

Added during the period .......... $ 80.000Total ........................................ $ 92.000 46.000 $ 2,00Direct labor:

WIP inventory beginning ....... $ 10.280Added during the period .......... $ 70.000

Total ........................................ $ 80.280 44.600 $ 1,80


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Units Total Cost Eq. Prod. Eq. Unit CostSTEP 3: COST TO ACCOUNT FORCosts added by department:

Factory overhead:WIP inventory beginning ......................... $ 4.600

Added during the period ............................ $ 40.000Total .......................................................... $ 44.600 44.600 $ 1,00

Total costs to account for $ 515.880 $ 11,30STEP 4: COST ACCOUNTED FORTransferred to finished goods inv (44.000 x $11,30) ......................................... $ 497.200

Work in process inventory

ending:Costs from preceding department (2.000 x $6,50) ............. $ 13.000Direct materials (2.000 x $2,00) ............................................ 4.000Direct labor (2.000 x $1,80 x 30%) ....................................... 1.080Factory overhead (2.000 x $1,00 x 30%) .............................. 600 $ 18.680

Total cost accounted for ........................................................... $ 515.880


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Cost added by Department A:WIP Inventory Dep A $ 280.000

Materials Inventory $ 140.000Payroll Payables $ 50.000

FOH Applied $ 90.000To transfer cost of completed goods:

WIP Inventory Dep B $ 259.000WIP Inventory Dep A $ 259.000

Cost added by Department B:WIP Inventory Dep B $ 190.000


FOH Applide $ 40.000To transfer cost of completed goods:

Finished Goods Inv. $ 497.200WIP Inventory Dep B $ 497.200


$ 31.560

$ 280.000

$ 259.000

Work In Process(Department B)

$ 66.680

$ 280.000

$ 190.000

$ 497.200


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Department A Department B

Units:Beginning units in process:


Started in process during the period ............................. 40.000

Units transferred to Department B ................................. 35.000Units added to production ............................................... 5.000Transferred to finished goods inventory ....................... 44.000Ending units in process:


Costs:Portion of beginning WIP inv. transferred in ................. $ 0 $ 40.000Portion of beginning WIP inv. added by department:

Direct materials ............................................................ $ 14.000 $ 12.000Direct labor ............................................................. $ 6.560 $ 10.280

Factory overhead (applied) ......................................... $ 11.000 $ 4.600Total .......................................................................... 31.560 66.880

Costs:Added during the period: ...............................................

Direct materials ........................................................... $ 140.000 $ 80.000Direct labor ............................................................ $ 50.000 $ 70.000Factory overhead (applied) ........................................ $ 90.000 $ 40.000

Total .......................................................................... $ 280.000 $ 190.000


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Beginning units in process 4.000Unit started in process 40.000 44.000

Units accounted for:Units transferred to next department 35.000Ending units in process 9.000 44.000

STEP 2: EQUIVALENT PRODUCTION

Direct Materials Conv. CostUnits completed and transferred to Departement. B .... 35.000 35.000Beginning units in process ............................................. 4.000 4.000Units started and completed ........................................... 31.000 31.000Amt needed to complete beg. WIP inv (4.000 x 60%) ... 0 2.400Ending units in process (9.000 x 60%) ........................... 9.000 5.400Total equivalent units ....................................................... 40.000 38.800

It is excluded Only the production needed to complete

Beginning WIP Inv is included.


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Total Cost Eq. Production Eq. Unit CostSTEP 3: COST TO ACCOUNT FORWork in process inv beginning ......... $ 31.560Cost added during the period:

Direct materials ................................. $ 140.000 40.000 $ 3,50

Direct labor ........................................ $ 50.000 38.800 $ 1,29Factory overhead .............................. $ 90.000 38.800 $ 2,32

Total cost to account for ...................... $ 311.560 $ 7,11

Asumtion: The beginning WIP inventory

will be completed first. The beginning WIP Inv costs are separated

from the costs of unit started and completed

and do not enter into the computation of

equivalen unit costs for costs added during

the period

Cost added during the period

Equivalent Units


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STEP 4: COSTS ACCOUNTED FORTransferred to next department:

From beginning inventory:Inventory costs .................................................... $ 31.560

Direct labor (4.000 x $1,29 x 60%) ...................... $ 3.093Factory overhead (4.000 x $2,32 x 60%) ............ $ 5.567 $ 40.220

From current production:Units started and completed (31.000 x $7,11) ... $ 220.356

Total transferred .............................................. $ 260.576


ending:Direct materials (9.000 x $3,50) .............................. $ 31.500Direct labor (9.000 x $1,29 x 60%) ......................... $ 6.959Factory overhead (9.000 x $2.32 x 60%) ............... $ 12.526 $ 50.985

Total work in process inventory ending ........ $ 311.561Less rounding difference ........................................... $ 1Total cost accounted for ............................................. $ 311.560

Beginning inv units are the first to be

transferred. Thus, the costs

associated with these are separated.


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Beginning units in process .................................... 6.000Units received from preceding department ............. 35.000Unit added to production ........................................... 5.000 46.000

Units accounted for:Units transferred to finished goods ......................... 44.000Ending units in process ............................................. 2.000 46.000

STEP 2: EQUIVALENT PRODUCTIONDirect Materials Conv. Cost

Units completed and transferred .................................. 44.000 44.000Beginning units in process ........................................... 6.000 6.000Units started and completed ......................................... 38.000 38.000Amount needed to complete beg WIP inv (6.000 x 80%) 0 4.800Ending units in process (2.000 x 30%) ......................... 2.000 600Total equivalent units ..................................................... 40.000 43.400

It is excluded Only the production needed to

complete Begin WIP inv is included.


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Units Total Cost Eq. Prod. Eq. Unit CostSTEP 3: COST TO ACCOUNT FORCosts from preceding department and prior period:

WIP inventory beginning ........... 6.000 $ 66.880Transferred in during period ........ 35.000 260.576 40.000 $ 6,51

Units added to production ........... 5.000Adjusted units and unit cost .... 40.000

Costs added by department:Direct materials ............................. $ 80.000 40.000 $ 2,00Direct labor ..................................... $ 70.000 43.400 $ 1,61

Factory overhead ........................... $ 40.000 43.400 $ 0,92Total costs to account for ................. $ 517.456 $ 11,04

The cost of beginning WIP inventory is

accounted for in total only and is isolated

from all other costs.

Cost added during the period

Equivalent Units


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STEP 4: COSTS ACCOUNTED FORTransferred to next finished goods inventory

From beginning inventory:Inventory costs ..................................................... $ 66.880

Direct labor (6.000 x $1,61 x 80%) ....................... $ 7.742Factory overhead (6.000 x $0,92 x 80%) ............. $ 4.424 $ 79.046

From current production:Units started and completed (38.000 x $11,04) ... $ 419.860

Total transferred ................................................ $ 498.906


ending:Cost from preceding department (2.000 x $6,51) ... $ 13.029Direct materials (2.000 x $2,00) ............................... $ 4.000Direct labor (2.000 x $1,61 x 30%) ........................... $ 968Factory overhead (2.000 x $0,92 x 30%) ................. $ 553 $ 18.550

Total cost accounted for .............................................. $ 517.456

Beginning inv units are the first to be

transferred. Thus, the costs

associated with these are separated.


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Cost added by Department A:WIP Inventory Dep A $ 280.000


FOH Applied $ 90.000To transfer cost of completed goods:

WIP Inventory Dep B $ 260.575,46WIP Inventory Dep A $260.575,46

Cost added by Department B:WIP Inventory Dep B $ 190.000


FOH Applide $ 40.000To transfer cost of completed goods:

Finished Goods Inv. $ 498.905,95WIP Inventory Dep B $498.905,95


$ 31.560

$ 280.000

$ 260.575,46

Work In Process(Department B)

$ 66.680

$ 260.575,46

$ 190.000

$ 498.905,95


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No distinction is made between

completed units from Beginning

WIP Inv and from the period.

Beginning WIP Inv units are

reported separately from the

period unit.

Same procedures for both methods

All units completed during period

are included 100% complete.

Only the prod needed to complete

Beginning WIP Inv is included.

Over-

view

Quan-tity

Equiv

Prod

Cost of Beginning WIP Inv is addedto cost which added during period.

Costs of Beginning WIP Inv areisolated and dont enter to compt.

Cost toAcct

for

Cost

Accted

for

There is only one total equivalent

unit cost.

There are two equivalent unit

costs, such as Begining WIP Inv and

Current Production.


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Work In Process

(Department A)

$ 31.560

$ 280.000

$ 260.575,46

Work In Process

(Department B)

$ 66.680

$ 260.575,46

$ 190.000

$ 498.905,95

Work In Process

(Department A)

$ 31.560

$ 280.000

$ 259.000

Work In Process

(Department B)

$ 66.680

$ 280.000

$ 190.000

$ 497.200

$1.575,46

($260.575,46 -

$259.000)

$1.705,95

($498.905,95 -

$497.200)


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The Process Costing: Expanded Concepts

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