UNCW ACG 471 - Process Costing I (7 pages)

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Process Costing I



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Process Costing I

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Pages:
7
School:
University of North Carolina Wilmington
Course:
Acg 471 - Topics In Managerial Accounting
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What type of companies use Process Costing Process Costing Chapter 17 omit section on standard costs pp 609 612 Costing system used by companies that mass produce a homogeneous product Industry examples Paper Chemical Food processing Lumber Textiles Electronics Process Costing System Repetitive production process Large numbers of identical homogeneous products Continuous production Objective of Process Costing Track product costs Determine unit cost Pricing Control Decision making RM Inventory WIP Inventory WIP Inventory account for each process WIP Inventory Not a subsidiary account like in Job Costing Requisition Material by Process Charge time by process Overhead is either traced directly to process or applied WIP Inventory FG Inventory CGS 1 Accounts Work In Process Inventory Raw Materials Inventory Beginning balance Transferred In Costs Work in Process inventory for each process Transferred out to next process or to Finished Goods Inventory not a subsidiary Finished Goods Inventory Cost of Goods Sold Materials Labor Overhead Tracking transferred out costs Problem no stopping point Continuous production Difficult to determine total units produced Continuous production Example 1 Possibilities 9600 100 1920 20 96 00 Unit Costs Cost T O Cost of EI Unit cost of EI 9600 80 120 00 96 00 7680 9600 7680 1920 120 x 80 9600 9600 9600 0 20 Started 100 units in production End of period 20 units that are 80 complete Transferred out 80 units Total costs DM DL OH 9 600 Unit cost Total cost total units Total units Equivalent Units Unit Costs Cost T O Cost of EI Unit cost of EI 96 x 80 Example 1 The number of whole units that could have been produced during a time period if all effort had been expended to complete each unit started EX 100 unit that are 70 complete 70 eu 0 2 Work In Process Inventory Example 1 Unit Cost 9600 Determine equivalent units of production Unit cost total cost equivalent units 1600 What is the unit cost of goods transferred out What is the unit cost of goods still in inventory Equivalent units 80 20 x 80 80 16 96 Unit cost 9600 96 100 Transferred out 80 units x 100 8 000 Units Schedule Beginning Started End Inv Example 2 Beg DM DL OH Work In Process Inventory 1 800 3 280 5 000 0 units 600 units 200 units 0 units 600 units 200 units 40 Complete How many units were started and completed 600 200 400 How many units are in ending inventory 200 Calculate equivalent units 400 200x 4 400 80 480 10 080 Units Schedule Beginning Started End Inv 8000 40 Complete Example 2 Beg DM DL OH Work In Process Inventory 1 800 3 280 5 000 10 080 Started and completed Ending Inventory Actual Units x com plete 400 200 100 40 Calculate unit cost Calculate cost of goods transferred out EU 400 80 480 Beg DM DL OH Work In Process Inventory 1 800 3 280 5 000 8400 1 680 Calculate the cost of the ending inventory 3 Example 3 Work In Process Inventory 1 800 3 280 5 000 Beg DM DL OH 10 080 Units Schedule Beginning Started End Inv Work In Process Inventory Beg DM 40 Beg Conv 60 DM 200 900 Conversion Units Schedule 1 200 0 units 600 units 200 units Example 4 100 complete as to materials and 40 complete as to conversion Weighted Average vs FIFO Weighted Avg Treat beg Inv as if work was ALL done this period Add in Beg Inv Costs with Current Costs when computing unit cost FIFO Beginning Started End Inv 20 units 100 units 40 units Beg 100 c as to materials 60 c conversion End 100 c as to materials 40 c conversion Weighted Average Equivalent units Units transferred out all beginning units even though partially complete at the beg of the period units started and completed this period Units in Ending Inventory multiplied by percent complete Cost out beg Inv separate from work done this period Weighted Average Unit cost Beg Inv Costs Current Costs equivalent units Cost Transferred out unit cost x units transferred out Cost of Ending Inventory unit cost x units in end Inven x complete FIFO Equivalent units Units in Beg Inven x percent complete this period Units started and completed this period Units in Ending Inventory multiplied by percent complete 4 FIFO Unit cost Current Costs equivalent units Cost Transferred out Beg Inventory costs Plus cost to complete Beg Inv units Plus unit cost x units started and completed this period Cost of Ending Inventory unit cost x units in end Inven x complete Cost of Prod Report WgtAvg Company Name Period Sawyer CLASS EXAMPLE 31 Dec Units Materials Beg Inv Units End Inv Units Transferred to Finished Goods 20 40 80 Raw Materials Beginning Inventory Costs Costs Added 40 00 60 40 Conversion Raw Materials 200 00 Conversion 100 100 60 00 Conversion 900 00 CLASS EXAMPLE Production Report 31 Dec Percent Percent Complete Complete as to as to Materials Conversion Physical Units Work in Process Beginning Units started Total units to account for 20 100 120 100 60 Equivalent Units Direct Material Units completed and transferred Work in Process Ending Total units accounted for 80 40 120 100 100 100 40 Direct Material Cost Work in process beginning Costs added Total costs to account for Equivalent Units Cost per equivalent unit 40 200 240 120 2 00 Conversion 80 40 120 Conversion Cost 60 900 960 96 10 00 Cost of goods completed and transferred out units Number of Units transferred out x Total cost per equivalent Unit unit cost Total Cost 80 12 00 960 00 40 2 00 80 00 16 10 00 160 00 240 00 960 00 240 00 1 200 00 Costs remaining in ending WIP inventory Direct Material Number of equivalent units of material x cost per equivalent unit of material Conversion Number of equivalent units of conversion x cost per equivalent unit of conversion Total cost of ending WIP Inventory Check Cost of goods completed and transferred out Cot of Ending WIP Inventory Total costs accounted for 80 16 96 Total Cost 100 1 100 1 200 12 00 FIFO Company Name Period Sawyer Class Example 31 Dec Units Materials Beg Inv Units End Inv Units Transferred to Finished Goods 20 40 80 Raw Materials Beginning Inventory Costs Costs Added 40 00 60 40 Conversion Raw Materials 200 00 Conversion 100 100 60 00 Conversion 900 00 Class Example Production Report 31 Dec Physical Units Work in Process Beginning Units started Total units to account for Percent Complete Percent Complete as to Materials as to Conversion 20 100 120 100 60 Equivalent Units Direct Material Beg Inventory Units Started and Completed Ending Inventroy Total units accounted for 20 60 40 120 100 100 100 60 100 40 Direct Material Cost Costs added this period Total costs


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