‡ A Process means a distinct manufacturing operation or stage. ‡ Each unit receives the same or similar amounts of direct materials costs. and manufacturing overhead. direct labor costs. ‡ Unit costs are computed by dividing total costs incurred by the number of units of output from the production process .

. or at the start of work in a subsequent department down the assembly line. ‡ Conversion Costs are added equally along the production process.Process-Costing Assumptions ‡ Direct Materials are added at the beginning of the production process.

2. 4. 5. 3. Summarize the flow of physical units of output Compute output in terms of equivalent units Compute cost per equivalent unit Summarize total costs to account for Assign total costs to units completed and to units in ending Work in Process .Five-Step Process-Costing Allocation 1.

Takes the quantity of each input in units completed and in unfinished units of work in process and 2. converts the quantity of input into the amount of completed output units that could be produced with that quantity of input Are calculated separately for each input (direct materials and conversion cost) .Equivalent units A derived amount of output units that: 1.

Weighted-Average Process-Costing Method ‡ Calculates cost per equivalent unit of all work done to date (regardless of the accounting period in which it was done) ‡ Weighted-average cost is the total of all costs in the Work-in-Process account divided by the total equivalent units of work done to date ‡ The beginning balance of the Work-in-Process account (work done in a prior period) is blended in with current period costs .

44.800.78.800.800.800.000.22.61.00 2.000.00 2.000.00 81.00 6.00 .00 1.80.000.000.00 3.98.00 Total 3.Process Costing for a process where there is opening WIP and Closing WIP(Weighted Average Cost) Processing Costing of Assembly Department Particulars Opening Work in Progress Started during the Period Completed during the period and transferred Closing Work in Progress Degree of Completion Material Conversion Cost Qty 225 275 400 100 100% 50% Incurred during the period 1.00 Costs incurred during the period Materials Other Conversion Cost Total Op Balance 1.61.63.

00 Total 2.800.00 1.800.44.800. of completed Units Percentage Completion Equivalent Units Material (%) Labour (%) Material Labour 100% 100% 400 400 100% 50% 100 50 500 450 Completed during the period and transferred Closing Work in Progress Equivalent No.000.02.00 500 756 Conversion Cost 2.22.00 450 544 = = 400*756 302400 100*756 75600 3. Completed of units Average Cost per unit 400 100 Total Cost Total no of Units Average Cost per unit Classification of Process Cost Transferred to Next Process Closing Work in Progess Materials 3.20.Solution Calculation of Equivalent No.800.44.78.000.00 .00 6.000.00 400*544 217600 50*544 27200 5.78.

Standard Costing and Process Costing ‡ Teams of design and process engineers. ‡ Standard costs replace actual costs in equivalent unit calculations . and management accountants work together to determine separate standard costs per equivalent unit on the basis of different technical processing specifications for each product. operations personnel.

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