Professional Documents
Culture Documents
CHAPTER 4
PowerPoint Authors:
Susan Coomer Galbreath, Ph.D., CPA
Jon A. Booker, Ph.D., CPA, CIA
Cynthia J. Rooney, Ph.D., CPA
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Quick Check 1
Process costing is used for products that are:
a. Different and produced continuously.
b. Similar and produced continuously.
c. Individual units produced to customer
specifications.
d. Purchased from vendors.
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Quick Check 1a
Process costing is used for products that are:
a. Different and produced continuously.
b. Similar and produced continuously.
c. Individual units produced to customer
specifications.
d. Purchased from vendors.
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Processing Departments
Any unit in an organization where materials, labor,
or overhead are added to the product.
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Learning Objective 1
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Direct
Materials
Manufacturing Cost of
Overhead Goods
Sold
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Manufacturing Cost of
Overhead Goods
Sold
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Manufacturing Cost of
Overhead Goods
Sold
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Work in Process
Department B
• Direct
Material
s
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Work in Process
Department B
• Direct
•Material
Direct
s
Labor
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The Flow of Manufacturing 4-16
•Material
Direct
Labor s
• Applied
Overhea
d use in the classroom. No reproduction or
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The Flow of Manufacturing 4-17
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Transfers from Work In Process-Dept. A 4-18
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Transfers from Work In Process-Dept. A 4-19
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Work in Process
Department B Finished Goods
• Direct • Cost of • Cost of
Materials Goods Goods
• Direct Manufactur Manufacture
Labor ed d
• Applied
Overhea
• Transferred
d
from Dept.
A
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Transfers from Finished Goods 4-22
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Transfers from Finished Goods to 4-23
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Key Concept #1: There are two methods for performing the
computations, the weighted-average method and the FIFO method.
The weighted-average method of process costing calculates unit
costs by combining costs and outputs from the current and prior
periods. The FIFO method of process costing, which will be covered
in Appendix 4A, calculates unit costs based solely on the costs and
outputs from the current period.
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Direct
Materials
Dollar Amount
Conversion
Direct Labor
Direct Manufacturing
Labor Overhead
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Quick Check 2
For the current period, Jones started 15,000
units and completed 10,000 units, leaving 5,000
units in process 30 percent complete. How
many equivalent units of production did Jones
have for the period?
a. 10,000
b. 11,500
c. 13,500
d. 15,000
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Quick Check 2a
For the current period, Jones started 15,000
units and completed 10,000 units, leaving 5,000
units in process 30 percent complete. How
many equivalent units of production did Jones
have for the period?
a. 10,000
10,000 units + (5,000 units × 0.30)
b. 11,500 = 11,500 equivalent units
c. 13,500
d. 15,000
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Learning Objective 2
Compute the
equivalent units of
production using the
weighted-average
method.
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Equivalent Units of
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Production – Part 1
Smith Company reported the following activity in the
Assembly Department for the month of June:
Percent Completed
Units Materials Conversion
Work in process, June 1 300 40% 20%
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Equivalent Units of
4-34
Production – Part 2
Begin by calculating the equivalent units completed and transferred
out of the Assembly Department in June (5,400 units).
Materials Conversion
Units completed and transferred
out of the Department in June 5,400 5,400
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Equivalent Units of
4-35
Production – Part 3
Next, identify the equivalent units of production in ending work in
process with respect to materials for the month (540 units) and adding
this to the 5,400 units from step one.
Materials Conversion
Units completed and transferred
out of the Department in June 5,400 5,400
Work in process, June 30:
900 units × 60% 540
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Equivalent Units of
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Production – Part 4
Finally, identify the equivalent units of production in ending work
in process with respect to conversion for the month (270
units) and adding this to the 5,400 units.
Materials Conversion
Units completed and transferred
out of the Department in June 5,400 5,400
Work in process, June 30:
900 units × 60% 540
900 units × 30% 270
Equivalent units of Production in
the Department during June 5,940 5,670
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Equivalent Units of
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Production – Part 5
Equivalent units of production always equals:
Units completed and transferred
+ Equivalent units remaining in work in process
Materials Conversion
Units completed and transferred
out of the Department in June 5,400 5,400
Work in process, June 30:
900 units × 60% 540
900 units × 30% 270
Equivalent units of Production in
the Department during June 5,940 5,670
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Equivalent Units of
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Production – Part 6
6,000 Units Started
Materials
Beginning Ending
Work in Process 5,100 Units Started Work in Process
300 Units and Completed 900 Units
40% Complete 60% Complete
Production – Part 7
6,000 Units Started
Conversion
Beginning Ending
Work in Process 5,100 Units Started Work in Process
300 Units and Completed 900 Units
20% Complete 30% Complete
Learning Objective 3
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Step 2: Compute the Cost
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Step 2: Compute the Cost
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Step 2: Compute the Cost
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Total
Cost Materials Conversion
Cost to be accounted for:
Work in process, June 1 $ 10,039 $ 6,119 $ 3,920
Cost added in Assembly 199,751 118,621 81,130
Total cost $ 209,790 $ 124,740 $ 85,050
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Step 2: Compute the Cost
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Learning Objective 4
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Step 3: Assign Costs to Units
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– Part 1
Assembly Department
Cost of Ending WIP Inventory and Units Transferred Out
Materials Conversion Total
Ending WIP inventory:
Equivalent units 540 270
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Step 3: Assign Costs to Units
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– Part 2
Assembly Department
Cost of Ending WIP Inventory and Units Transferred Out
Materials Conversion Total
Ending WIP inventory:
Equivalent units 540 270
Cost per equivalent unit $ 21.00 $ 15.00
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Step 3: Assign Costs to Units
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– Part 3
Assembly Department
Cost of Ending WIP Inventory and Units Transferred Out
Materials Conversion Total
Ending WIP inventory:
Equivalent units 540 270
Cost per equivalent unit $ 21.00 $ 15.00
Cost of Ending WIP inventory $ 11,340 $ 4,050 $ 15,390
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Step 3: Assign Costs to Units
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– Part 4
Assembly Department
Cost of Ending WIP Inventory and Units Transferred Out
Materials Conversion Total
Ending WIP inventory:
Equivalent units 540 270
Cost per equivalent unit $ 21.00 $ 15.00
Cost of Ending WIP inventory $ 11,340 $ 4,050 $ 15,390
Units completed and transferred out:
Units transferred 5,400 5,400
Cost per equivalent unit $ 21.00 $ 15.00
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Step 3: Assign Costs to Units
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– Part 5
Assembly Department
Cost of Ending WIP Inventory and Units Transferred Out
Materials Conversion Total
Ending WIP inventory:
Equivalent units 540 270
Cost per equivalent unit $ 21.00 $ 15.00
Cost of Ending WIP inventory $ 11,340 $ 4,050 $ 15,390
Units completed and transferred out:
Units transferred 5,400 5,400
Cost per equivalent unit $ 21.00 $ 15.00
Cost of units transferred out $ 113,400 $ 81,000 $ 194,400
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Learning Objective 5
Prepare a cost
reconciliation report
using the weighted-
average method.
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Operation Costing
Operation
Operation costing
costing isis commonly
commonly used
used when
when batches
batches
of
of many
many different
different products
products pass
pass through
through the
the same
same
processing
processing department.
department.
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End of Chapter 4
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