ACCT 2102 1st Edition Lecture 15 Outline of Last Lecture I Conclusions Drawn from Lecture 13 Example II II Job Costing vs Process Costing III Frito Lay Example IV Equivalent Units Outline of Current Lecture V Equivalent Units Continued VI Example Current Lecture Process Costing Part II Chapter 5 V Equivalent Units Continued Pizza example continued from last lecture Say you have some friends over one night You order the following pizzas 1 pepperoni 1 sausage 1 cheese and 1 anchovy After the evening is over you discover you have the following left 1 3 of the pepperoni pizza 1 3 of the sausage pizza 1 3 of the cheese pizza The whole anchovy pizza no one wanted anchovies on their pizza How many wholly intact pizzas do you have 1 How many partial pizzas do you have 3 How many equivalent units EU of pizza do you have 2 What s the formula for determining equivalent units EU What does it mean Equivalent Units Number of partially complete physical units x Percentage of process completed o Equivalent Units Physical Units PU x Percent Complete EUs show what you have partially which could be complete What do we use the EU for To express the amount of work done during a period in terms of fully completed units of output These notes represent a detailed interpretation of the professor s lecture GradeBuddy is best used as a supplement to your own notes not as a substitute In process costing we calculate EUs separately for Direct Materials and Conversion Costs Why Conversion costs are incurred evenly throughout production DM are often added at a particular point in the process VI Example Department 1 Cutting and Frying The department started January with 35 000 units in process and started working on another 385 000 units during the month During January the department transferred out 400 000 units to the next department According to the plant supervisor the units in ending inventory were 60 of the way through the cutting and frying process on January 31 The department s only DM potatoes is added at the very beginning of the process Beginning WIP had a balance of 136 500 122 500 related to DM 14 000 related to conversion costs During the month we used 1 347 500 of DM incurred 25 000 of DL and allocated 290 600 of MOH STEP 1 Summarize the flow of physical units How many physical units did we work on during the month 420 000 Where did they come from 385 000 we began working on 35 000 already in WIP Where did they go Completed and Transferred Out C TO and Finished Goods Units in Beginning WIP Units completed during period Units in ending WIP 60 complete Total manufacturing costs for the period 122 500 related to DM 35 000 400 000 20 000 136 500 Units in Ending WIP calculated by Beginning Inventory Started Goods Ending Inventory Completed and Transferred Out 35 000 385 000 x 400 000 x 20 000 STEP 2 Compute output in terms of equivalent units 400 000 units completed 20 000 x 60 units in ending WIP with percent complete 412 000 units What is the EU for DM 20 000 x 60 12 000 units 400 000 x 100 400 000 units Total EU 412 000 What is the EU for Conversion 20 000 x 60 12 000 units 400 000 x 100 400 000 units Total EU 412 000 STEP 3 Calculate the cost per equivalent unit your textbook breaks this down into 2 separate steps How much did it cost to produce one finished unit in this department DM Conversion 122 500 14 000 Costs Added 1 347 500 315 600 Total Cost 1 470 000 Costs in Beg Inv Divided by Total EU Cost EU 329 600 412 000 412 000 3 57 0 80 1 799 600 4 37 unit 315 600 290 600 MOH 25 000 DL STEP 4 Assign costs to the units What is the Ending WIP balance How much cost is transferred to the next department 20 000 x 60 12 000 units in Ending WIP 12 000 units x 4 37 unit 52 440
View Full Document
Unlocking...