Professional Documents
Culture Documents
Chap 04 Notes
Chap 04 Notes
Chapter 4
Chapter Four
Direct
Materials
Manufacturing Cost of
Overhead Goods
Sold
McGraw-Hill/Irwin Copyright © 2006, The McGraw-Hill Companies, Inc.
Comparing Job-Order
and Process Costing
Manufacturing Cost of
Overhead Goods
Sold
McGraw-Hill/Irwin Copyright © 2006, The McGraw-Hill Companies, Inc.
Comparing Job-Order
and Process Costing
Manufacturing Cost of
Overhead Goods
Sold
McGraw-Hill/Irwin Copyright © 2006, The McGraw-Hill Companies, Inc.
T-Account and Journal Entry Views of Cost Flows
Work in Process
Raw Materials Department A
•Direct •Direct
Materials Materials
Work in Process
Department B
•Direct
Materials
Work in Process
Department A
Wages Payable
•Direct
•Direct Materials
Labor •Direct
Labor
Work in Process
Department B
•Direct
Materials
•Direct
Labor
Work in Process
Department A
Manufacturing •Direct
Overhead Materials
•Direct
•Actual •Overhead Labor
Overhead Applied to •Applied
Work in Overhead
Process
Work in Process
Department B
•Direct
Materials
•Direct
Labor
•Applied
Overhead
McGraw-Hill/Irwin Copyright © 2006, The McGraw-Hill Companies, Inc.
Process Costing
(In journal entry form)
Work in Process
Department B Finished Goods
•Direct •Cost of •Cost of
Materials Goods Goods
•Direct Manufactured Manufactured
Labor
•Applied
Overhead
•Transferred
from Dept. A
Work in Process
Department B Finished Goods
•Direct •Cost of •Cost of •Cost of
Materials Goods Goods Goods
•Direct Manufactured Manufactured Sold
Labor
•Applied
Overhead
•Transferred
from Dept. A Cost of Goods Sold
•Cost of
Goods
Sold
+ = 1
Direct
Materials Direct labor costs
may be small
in comparison to
Dollar Amount
Direct
Materials Direct labor costs
Conversion
may be small
in comparison to
Dollar Amount
other product
costs in process
cost systems.
Materials Conversion
Units completed and transferred
out of Department A in June 5,400 5,400
Materials Conversion
Units completed and transferred
out of Department A in June 5,400 5,400
Work in process, June 30:
900 units × 60% 540
900 units × 30% 270
Equivalent units of Production in
Department A during June 5,940 5,670
Beginning Ending
Work in Process 5,100 Units Started Work in Process
300 Units and Completed 900 Units
40% Complete 60% Complete
Beginning Ending
Work in Process 5,100 Units Started Work in Process
300 Units and Completed 900 Units
20% Complete 30% Complete
Production Report
A quantity schedule
showing the flow of units
Section 1 and the computation of
equivalent units.
A computation of
Section 2 cost per equivalent unit.
Section 3
Production Report
Section 1
Section 2
Cost Reconciliation
section shows the
reconciliation of all cost
Section 3 flows into and out of the
department during the
period.
McGraw-Hill/Irwin Copyright © 2006, The McGraw-Hill Companies, Inc.
Production Report Example
Equivalent units
Materials Conversion
Units accounted for as follows:
Completed and transferred 4,800 4,800 4,800
Work in process, May 31 400
Equivalent units
Materials Conversion
Units accounted for as follows:
Completed and transferred 4,800 4,800 4,800
Work in process, May 31 400
Materials 40% complete 160
5,200 4,960
Equivalent units
Materials Conversion
Units accounted for as follows:
Completed and transferred 4,800 4,800 4,800
Work in process, May 31 400
Materials 40% complete 160
Conversion 25% complete 100
5,200 4,960 4,900
Total
Cost Materials Conversion
Cost to be accounted for:
Work in process, May 1 $ 15,175 $ 9,600 $ 5,575
Costs added in the Shipping
and Milling Department 719,500 368,600 350,900
Total cost $ 734,675 $ 378,200 $ 356,475
Total
Cost Materials Conversion
Cost to be accounted for:
Work in process, May 1 $ 15,175 $ 9,600 $ 5,575
Costs added in the Shipping
and Milling Department 719,500 368,600 350,900
Total cost $ 734,675 $ 378,200 $ 356,475
Total
Cost Materials Conversion
Cost to be accounted for:
Work in process, May 1 $ 15,175 $ 9,600 $ 5,575
Costs added in the Shipping
and Milling Department 719,500 368,600 350,900
Total cost $ 734,675 $ 378,200 $ 356,475
Appendix 4A
Percent Completed
Units Materials Conversion
Work in process, June 1 300 40% 20%
Step 1:
1 Determine the number of units completed and
transferred out of Department A in June.
Percent Completed
Units Materials Conversion
Work in process, June 1 300 40% 20%
Step 3:
3 Subtract the equivalent units in beginning work in process
inventory (120 units for materials and 60 units for conversion) from the
sum of the units completed and transferred out and the equivalent
units in ending work in process inventory.
Materials Conversion
Equivalent units or Production in
Department A during June 5,940 5,670
Equivalent units in beginning inventory
300 units × 40% 120
300 units × 20% 60
Equivalent units of Production in
Department A during June 5,820 5,610
Beginning Ending
Work in Process 5,400 Units Started Work in Process
300 Units and Completed 900 Units
40% Complete 60% Complete
Material
Units completed and transferred out 5,400
Equivalent units in ending WIP inventory 540
Equivalent units in beginning WIP inventory (120)
Equivalent units of production 5,820
McGraw-Hill/Irwin Copyright © 2006, The McGraw-Hill Companies, Inc.
Equivalent Units – FIFO Method
Beginning Ending
Work in Process 5,400 Units Started Work in Process
300 Units and Completed 900 Units
20% Complete 30% Complete
Conversion
Units completed and transferred out 5,400
Equivalent units in ending WIP inventory 270
Equivalent units in beginning WIP inventory (60)
Equivalent units of production 5,610
Materials Conversion
Equivalent units - weighted average method 5,940 5,670
Less equivalent units in beginning inventory:
300 units × 40% 120
300 units × 20% 60
Equivalent units - FIFO method 5,820 5,610
Step 1:
1 Prepare the quantity schedule and compute
equivalent units.
Step 2:
2 Calculate the equivalent units of material and conversion
that were transferred from beginning work in process to the next
department.
Units to be accounted for:
Work in process, May 1 200
Started into production 5,000
Total units 5,200
Equivalent units
Units accounted for as follows: Materials Conversion
Beginning inventory:
Materials 200 units × 45% 90
Conversion 200 units × 70% 140
Units started and completed 4,600 4,600
Ending inventory:
Materials 400 units × 40% 160
Conversion 400 units × 25% 100
Total equivalent units 4,850 4,840
McGraw-Hill/Irwin Copyright © 2006, The McGraw-Hill Companies, Inc.
The Production Report - FIFO Method
Step 3:
3 Determine the number of units started and
completed during the period.
Step 4:
4 Calculate the equivalent units of material and
conversion that are in ending work in process inventory.
Step 5:
5 Calculate the total equivalent units for
materials and conversion.
Total
Cost Materials Conversion
Cost to be accounted for:
Work in process, May 1 $ 15,175
Costs added in the Shipping
and Milling Department 719,500 368,600 350,900
Total cost $ 734,675 $ 368,600 $ 350,900
Step 1:
1 Calculate the total cost from beginning
inventory transferred to the next department.
Total Equivalent Units
Cost Materials Conversion
Work in process, May 1: $ 15,175
Materials (90 × $76.00) 6,840 90
Conversion (140 × $72.50) 10,150 140
Total 32,165
Step 2:
2 Calculate the cost of units started and
completed during the period.
4,600 units × $148.50
Total Equivalent Units
Cost Materials Conversion
Work in process, May 1: $ 15,175
Materials (90 × $76.00) 6,840 90
Conversion (140 × $72.50) 10,150 140
Total 32,165
Step 3:
3 Calculate the costs in ending working in process
inventory and the sum of the cost accounted for.