CONTINUOUS

Detection Lost @ start Lost @ during Lost @ end Lost - silent similar with CC
Added at M- M- M- M- M- M- M- M-
the Conditions start
to use end start end start end start end
  neglect method
  (0):
           
TO 1. No AL 100% 100%     100% 100% 100% 100%
2. No inspection
WIP, end 100% points 0%     100% 0% 100% 0%
N/A if inspec
WIP, beg is @ end100%
100%     100% 100% 100% 100%
NL 0% 0% 0% 0% 100% 100% 0% 0% SA: detected @beg
AL 0% 0% 100% 100% 100% 100% 100% 100% SA: detected @end
NL charged TO, end, prev dep't   TO only, no adj for NL   M - start
AL charged FOH   FOH   FOH       M - start

DISCRETE M @ beg
Detection 20% 40% 60% 80% M: usually 100 or 0
  M CC M CC M CC M CC CC: follow % completion
NL 100% 20% 100% 40% 100% 60% 100% 80%
AL 100% 20% 100% 40% 100% 60% 100% 80%
NL units
Multiply by EUP/units Absorbed by
Total cost of NL units
20% inspec 30% beg 60% end except TO, beg
Divide by absorbing units
or TO 30% beg 40% inspec 60% end all
30%NL
Adjustment for beg
units 60% end 90% inspec except end

FIFO AVE (silent assumption) Beg units

Transferred-out cost: Transferred-out cost: Started units
Beg cost of current dep’t TO (End units)
DM (incomplete beg units) NL (if any) Units completed or TO
CC (incomplete beg units) AL (if any) Multiply by spoilage rate
TO (TO – beg units x tot EUP/u cost) WIP, end Cost of NL
NL (if any) DM
AL (if any) CC
WIP, end: EUP involving WIP & FG
NL (if any)
DM (complete ending units) inventory
Tot cost accounted for (beg
CC (complete ending units) + this mos DM & CC)
NL (if any) Budgeted sales
(FG, beg)
Tot cost accounted for (beg + this mos DM & CC)
FG, end
Units completed or TO
Last Department for AVE
(WIP, beg)
From prev dep’t: (T-in x EUP/u cost from prev dep’t or TO cost from PD/ EUP TO)
WIP, end
From this dep’t: M
EUP
CC
Adjustments for NL units: (NL units x unit cost from prev dep’t / good units)
*sometimes FG is ignored
Total cost accounted for (beg + this mos DM & CC + prev dep’t)

Familiarize:
Inspection takes place as units are placed… spoiled due to non-detectible (M @ beg) = NL 100%; AL 100%
NL is absorbed by remaining good units = assumption: inspected @ start of production
NL is 0.5% or less of material placed into production = 0.005 x started during the mos
Total production cost / units produced = cost per unit Tot cost TO = AL + NL + (TO – Beg x EUP) + Beg cost + Inc beg M & CC
 Ave unit cost = Total JC % of JC to SV @ SO = Total JC
Total units produced Total SV @ SO

JC/weight factor = Total JC % of JC to NRV @ SO = Total JC

Total weight factor SP @ SO – (disposal + sep cost @ SO)

% of JC to est NRV @ SO = Total JC include as (-):

Final sale – cost beyond SO disposal/sep cost @
SO
Units,
separate cost if
Product SP SE MV Cost LCM end Amount
processed further
Main 100 5 95 78.5 78.5 478 37,528
By-prod 35 1.75 33.25 78.5 33.25 220 7,315
End inventory @ Lower Cost of Market         44,838

SP
Divide by SP (includes SP of by-prod) Sales value if processed further Total MV or SV
% of SP to SP (Add'l cost if proc further) (Add'l proc cost)
(Add'l margin if processed further) (Disposal cost)
Total production cost SV @ SO (Marketing, selling, admin exp)
Divide by total units produced NRV
Cost per unit

TREATMENT OF BY-PRODUCTS
No JC is allocated to by-product
Total JC = JC allocated to main
product
Sales (units sold x MV @ SO) Sales
JC is allocated to by-product
(Add’l proc cost) (Further proc cost)
(Selling and admin) (Marketing, admin,
JC Net revenue of by-product selling)
(Net revenue of by- (Operating profit)
product) *add’l cost or beyond the SO MV or Reversal cost of
JC allocated to MP point by-product

*By-product inventoried *By-product not inventoried

*recorded @ sale *rec when produced
Additional sales Deduction from COGS Other income Deduction from total manu cost
Sales: MP Sales of MP Sales of MP Sales of MP
By-product Less COGS: Less COGS: Less COGS:
Less COGS: DM DM DM
DM DL DL DL
DL FOH FOH FOH
FOH TMC TMC TMC
TMC (Inventory end) (Inventory end) (Revenue from by-product)
(Inventory end) COGS Gross profit or margin Net manufacturing cost
Gross profit or margin (Revenue from by-product) (Selling & admin) (Inventory end)
(Selling & admin) Gross profit or margin Net op income Gross profit or margin
Net income (Selling & admin) Revenue from by-prod (Selling & admin)
Net income Net income Net income
 Additional sales

Deduction from COGS

Other income
Deduction from total manu cost
Additional sales Deduction from COGS Other income Deduction from total
manu cost

Share in JC
Total manu cost Acquired and placed into production
Add’l proc cost (eg. Cost to process after SO
Divide by units produced DL & related cost
Total cost or COGS
Multiply by unsold inventory FOH
Divide by units produced
Inventory end JC to be allocated
Cost per unit

Familiarize:
separate cost if processed further ≠ sales value if processed further

Spending Variance (variance in exp) Idle Capacity Variance (variance in vol & act)

Actual FOH Budget allowed on actual hours:

Budget allowed on actual hours: Fixed Actual OH
Fixed Variable Applied OH
Variable Applied FOH + Under/ (-) Overapplied
Spending variance – (+) unfavorable (-) Idle capacity variance
favorable

 Direct Method P1 P2 S1 S2  Algebraic Method P1 P2 S1 S2

60 Budgeted FOH 400 600 80 120
Budgeted FOH 400 0 80 120 Alloc FOH:      
Alloc FOH:       Act 1 (eg. area) 46.939 28.163 -93.878 18,776
Act 1 (eg. area) 50 30 -80   Act 2 (eg. hrs) 55.51 69.388 13.878 -138.776
Act 2 (eg. hrs) 80 40   -120 Total FOH 502.449 697.551 0 0
67
Base 200 100    
Total FOH 530 0 0 0
10 FOH rate 2.51 6.98    
Base 200 0    
FOH rate 2.65 6.7     P1 = 80 + 10% (S2)
P2 = 120 + 20% (S1)   S1 S2 P1 P2
P
 Step Method P1 P2 S1 S2 1  
Budgeted FOH 400 600 80 120 P
Alloc FOH:       2  
S 20 50 30
Act 1 (eg. area) 50 30 -80  
1 % % %
Act 2 (eg. hrs) 80 40   -120
Total FOH 530 670 0 0
Base 200 100