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:
DM 100% completed; conv. cost 60% completed ..... 9.000DM 100% completed; conv. cost 30% completed ..... 2.000
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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STEP 1: QUANTITIESUnits to account for:
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
Materials Inventory $ 80.000Payroll Payables $ 70.000
FOH Applide $ 40.000To transfer cost of completed goods:
Finished Goods Inv. $ 497.200WIP Inventory Dep B $ 497.200
Work In Process(Department A)
$ 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:
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:
DM 100% completed; conv. cost 60% completed ..... 9.000DM 100% completed; conv. cost 30% completed ..... 2.000
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 35.000Beginning 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
Work in process inventory
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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STEP 1: QUANTITIESUnits to account for:
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
Work in process inventory
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
Materials Inventory $ 140.000Payroll Payables $ 50.000
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
Materials Inventory $ 80.000Payroll Payables $ 70.000
FOH Applide $ 40.000To transfer cost of completed goods:
Finished Goods Inv. $ 498.905,95WIP Inventory Dep B $498.905,95
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
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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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