Chapter 4

Product Costing
1
•A product costing system is a set of
 A product costing system is a set of procedures used to account for an
procedures used to account for
organizations product costs and provide timely and accurate unit cost an
information for pricing, cost planning and control, inventory valuation and
organizations product costs and provide timely
financial statement preparation

and accurate unit cost information for pricing,

cost planning and control, inventory valuation
and financial statement preparation
2
Types of cost accounting systems
There are three main types of cost accounting
systems for manufacturing operations:
 Job-order costing
 Process costing systems and
 operational cost systems
3
 A Job-Order Costing System
Is used in situations where many different
products are produced each period.
It is used by the company that make large, unique,
or special order products such as customized
publications, specially built cabinets, custom
printing business etc.
For example, Furniture factory, Garment factory

4
Cont.

 Under such a system, the costs of direct materials, direct

labor, and manufacturing overhead is traced to a specific

job order or a batch of products

5
 Process Costing System
Is used in situations where the company
produces many units of a single product for
long periods.
Examples: MOHA Soft Drinks, Hamaresa Edible
oil Share Company and so on.
All these industries produce essentially
homogeneous product that flows through the
production process on a continuous basis.
6
Cont.
 Under such a system the cost of direct materials, direct labor
and manufacturing overhead are first traced to processes,
departments, or work cells and then assigned to the products
manufactured by those processes, departments or work cells

7
 Operational Costing System:
This typical product costing system combines parts
of both job order costing and process costing to
create a hybrid system.
 An example of a company that would use an
operational cost system is an automobile
manufacturer.
 An automobile maker may use process costing to treat
the costs of manufacturing basic car and then use job
order costing to track the costs of customized features.
8
Differences between Job-Order and Process Costing System
Job-Order Costing System Process Costing System
1. Many different jobs are worked during 1. A single product is produced on a
each period, with each job having continuous basis for long periods of
different production requirements. time. All units of product are identical.
2. Costs are accumulated by identical job. 2. Costs are accumulated by department.
3. The job cost sheet is the key document 3. The department production report is the
controlling the accumulation of costs key document showing the
by a job. accumulation of costs by a department.
4. Unit costs are computed by department
4. Unit costs are computed by job on the on the department production report.
job cost sheet.

9
Accounting treatment and Cost Flow in Job Order Costing
The physical flow of production is the sequence of
operating activity that begins with the decision to
order direct materials and ends with finished
product being sold to customers.
The intervening steps may vary from firm to firm,
but they share a common trend.
The following may show the steps of the physical
flow of production.
10
1. Purchase Requisition
 Is a request sent internally within a company to obtain
purchased goods and services.
 After the form is duly filled, it will be sent to the purchasing
department. Sample purchase requisition form:
Sol Furniture Factory
Date January 5, 2018 Requisition no. 121
Purchase requisition form
Prepared by:
Quantity Description Date needed
1,000.00 board ft Lumber (eucalyptus) January 15, 2018
5 gallons Glue January 15, 2018
50 boxes Nails January 15, 2018

 No
11
journal entry is required when a purchase requisition is
2. Purchase Order: is a document that authorizes the supplier to ship the
specified merchandise ordered.
 A sample purchase order looks the following:
Sol Furniture Factory
Purchase order form
Date January 6, 2018 Purchase No. 496
Vendor
Gentle lumber processing
Harar, near to stadium
F.O.B point Ship Via Terms Delivery date Requisition
no.
Factory site Harar Transport 2/10, n/30 Jan. 15, 2018 121
PLC
Item no. Quantity Description Unit price Total
1. 1,000 board ft. Lumber (eucalyptus) 20 20,000.00
 No
12 journal entry is required when a purchase order is filled.
3. Receiving Report: when the ordered materials are
received, the receiving department prepares a receiving
report, which lists the description, and quantities of
goods received.
 The purchase of the material in the above example, for
instance, would be as follows:
Dr. Cr.
January 15, 2018 Direct Material 20,000
Account Payable 20,000

13
4. Production Order: a manufacturer can produce in response to a customer
order or just for stock.
 A sample production order is presented here below:
Sol Furniture Factory
Production Order
Date: January 19, 2018 Job No. 365

Manufactured for: Stock

Date needed: March 20, 2018
Quantity Model number Description
150 F. 4152 Coffee table
Authorized by: Name of manager in charge

 No journal entries are required on the company’s books when the production order is
issued.
14
5. Material Requisition: to commence production, evidently the production
department needs direct materials.
 The material requisition form should contain specific description of the direct and
indirect materials required for production.
 A sample material requisition form is shown below:

Material requisition No. 906 Date: January 28, 2018

Job No. to be charged: 365
Quantity Description Unit cost Total cost Classification
500 board ft. Lumber 20 10,000.00 Direct
1 box Nail 22 22 Indirect
1 Gallon Glue 30 30 Indirect
10,052.00
sign Direct materials ------------10,000.00
Authorized signature Indirect materials ----------52.00

15
At the time the materials are issued from the storeroom, the following entry
is made:
Jan. 28, 2018 Work in process 10,000.00
Manufacturing overhead 52.00
Raw materials 10,052.00

Direct materials that are sent for manufacturing process are no more direct materials
since they are soon to be processed to become finished goods.

Thus, the cost is charged to work in process account, while indirect material costs are
charged to Manufacturing Overhead.

16
 Job Cost Sheet
 Right after the materials are received from store, a
job cost sheet will be prepared.
 The job cost sheet is used to accumulate the
manufacturing costs incurred in producing that
particular job.
 After being notified that the production order had
been issued, the Accounting Department prepares
a job cost sheet.
17
1. Job Time Ticket:
 The second cost category of manufacturing firms
is the direct labor employed.
 A job time ticket is used to record how much time
is spent on a particular job.
 When a particular job is started, the employee
fills the time the job is started on the job time
ticket, and fills the time he stopped when he left
the job.
18
Example:
Suppose analysis of the job time ticket showed direct
labor of $9,600.00 and indirect labor of $4,800.00, the
journal entry to record the cost of direct and indirect labor
looks like the following:
Jan. 28, 2018 Work in Process 9,600.00
Manufacturing Overhead 4,800.00
Wages Payable 14,400.00

19
2. Manufacturing Overhead: are costs other than direct material and direct
labor that are necessary to transform the raw materials into finished goods.
 The total overhead costs can’t be known exactly until the end
of the year.
 Thus, organizations should wait up to the end of the year if
they are to charge the actual amount and preparation of
interim financial statements is impossible which in turn affect
managerial decisions.
 A predetermined overhead rate is determined to allocate such
costs to individual jobs, which is found by dividing estimated
overhead cost to the estimated amount of allocation base.

20
Example: assume that the estimated overhead cost for the
coming year is Birr 80,000.00, and the direct labor hour is
estimated to be 4,000 hours, the predetermined overhead
rate can thus be calculated as follows:

If we assume that the direct labor hours spent on a

specific job are 90, the manufacturing overhead applied
will, therefore, be

21
 The entry to record the manufacturing overhead applied
is as follows:
March 18, 2018 Work in Process Br 1,800.00
MOH Applied Br 1,800.00

Although actual manufacturing overhead costs are not

assigned, they should be recorded as incurred.
Example: Assume that factory rent, utilities, and other
manufacturing costs totaled Birr 22,000.00.
March 20, 2018 Manufacturing Overhead 22,000.00
Accounts Payable (Rent, Utilities & Other) 22,000.00

22
 Finished Goods Inventory Ledger Card: when work in process is completed
and transferred to the finished good inventory warehouse.
Example: assume the total cost of goods produced is Birr 21,400, the following
journal entry is made:

March 20, 2018 Finished Goods 21,400

Work in Process 21,400

23
Example: Assume that the total units produced are 150,
and half of the units produced (75) are sold for Birr 180
each on with a 40% down payment. The entry to record the
sales is as follows:
Cost of Goods Sold: two records are maintained when
sale is made under the perpetual inventory system: one
for sales
April and the
10, 2018 Cashother for cost of goods
5,400.00sold.
Account Receivable 8,100.00
Sales 13,500.00

Thus,
 The cost of the 75 units that are sold =
24
The following entry is necessary to record the cost of goods sold

April 10, 2018 Cost of Goods Sold 10,700.00

Finished Goods 10,700.00

25
 Accounting of factory overhead in a job cost system
 Materials requisitions and labor time tickets make it
easy to identify direct materials and direct labor with a
specific job.
 Factory overhead on the other hand, includes a variety
of costs that cannot be linked to a particular job.
 Overhead costs are recorded as incurred. All the
overhead costs are debited to a single account – factory
overhead in the general ledger.

26
Actual Costing and Normal Costing
 Actual costing means the aggregate of actual direct material costs, actual

direct labor cost and actual manufacturing overhead. The actual

manufacturing overhead can be known only at the end of the month or year.

 Therefore, under this method the managers cannot know the cost of job

before completion of the job.

 Managers want these costs for various ongoing uses, including choosing

which job to emphasize or de-emphasize, pricing jobs, managing costs and

preparing interim financial statements.

27
 Normal Costing
 A predetermined or budgeted indirect cost rate is calculated for each cost pool at the
beginning of a fiscal year and overhead costs are allocated to jobs as work in progresses.
 Normal costing is a costing method that traces direct costs to a cost object by using the
actual direct cost rate(s) times the actual quantity of the direct cost input(s) and
allocates indirect costs based on the budgeted indirect cost rate(s) times the actual
quantity of cost allocation base(s).
 Note that both actual costing and normal costing trace direct costs to jobs in the same
way. The only difference between actual costing and normal costing is that actual
costing uses an actual indirect cost rate(s), whereas normal costing uses a budgeted
indirect cost rate(s) to cost jobs.
28
Distinction between Actual costing and Normal costing
Items Actual costing Normal costing

Direct costs Actual direct cost rate(s) Actual direct cost rate(s)X
X Actual quantity of Actual quantity of direct cost
direct cost input(s) input(s)

Indirect costs Actual indirect- cost Budgeted indirect cost

rate(s)X Actual quantity rate(s)X Actual quantity of
of cost allocation bases cost allocation bases

29
Example
 XYZ Manufacturer uses a job-costing system with two direct cost categories
(direct materials and direct manufacturing Labor) and one manufacturing
overhead cost pool. XYZ allocates manufacturing overheard cost using direct
manufacturing Labor costs. Xyz provides the following information:
 Budget for Actual Results for
 Year 2006 Year 2006
 Direct material cost $ 375,000 $362,500
 Direct manufacturing labor cost 250,000 245,000
 Manufacturing overhead cost 437,500 465,500
30
Required
 Compute the actual and budgeted manufacturing overall rates for 2006.
 During June the job cost record for job No. 205 Contained the following
information:
 Direct materials used $ 10,000
 Direct manufacturing Labor costs 7,500
 Compute the cost of job No 205 using (a) actual costing and (b) Normal costing,
and (c) At the end of 2006, Compute the under- or over allocated manufacturing
overhead under normal costing why is there no under- or over-allocated
overhead under actual costing?
31
 Solution:
 (a)Computation of manufacturing overhead Rate for 2006
 Actual Budgeted
 Manufacturing over head $ 465,500 $437500
 Manufacturing Labor cost 245,000 250,000
 Manufacturing overhead $ 465,500x100 $437,500x100
rate 245,000 250,000

 = 190 % 175 %

32
 Computation of cost of job No 205 under actual costing
and normal costing
 Actual costing Normal costing
 Direct Materials used $ 10,000 $ 10,000
 Direct manufacturing 7,500 7,500
 Labor cost-
 Allocated manufacturing 14,250 13,125
 Overheads
 Actual= 7,500x1.9
 normal= 7,500x 1.75
 Total cost of job 31,750 30,625
33
Cont.
 Computation of under or over allocated manufacturing overhead
under normal costing at the end of 2006:
 Actual manufacturing overhead for the year 2006 = $ 465,500
 Budgeted or allocated manufacturing for the year 2006 = 437,500
 Under allocated manufacturing cost = 28,000

34
Multiple overhead cost pools
 The multiple overhead cost rate may be followed for multiple
overhead cost pools.
 Some overhead costs can be allocated to jobs based on labor cost or
labor hour basis if it is labor oriented job.
 On the other hand, machine hour rate may be used if the jobs are
undertaken automated machines.

35
Cont.
 To implement a normal costing system with multiple overhead
cost pools, it is required to determine the budgeted total
manufacturing labor hours and the budgeted total machine hours
and identity the associated budgeted indirect total cost for each
cost pool.
 It would then calculate two indirect cost rates, one based on direct
manufacturing labor hours and the other based on machine hours.

36
Cont.
 Indirect costs would be allocated to jobs using these indirect cost
rates and the direct manufacturing labor hours and machine hours
used by various jobs.
 The general ledger would contain manufacturing overhead control
and manufacturing overhead-allocated amounts for each cost pool.
 End of period adjustments for under or over allocated indirect costs
would then need be made separately for each cost pool.

37
Example
 The Lucas Incorporation uses a job – costing system. The plant has
a machining department and an assembly department. Its job
costing system has two direct cost categories (direct materials and
direct manufacturing labor) and two manufacturing overhead cost
pools (the machining department overhead, allocated using actual
machine hours, and the Assembly Department overhead, allocated
using actual direct manufacturing labor cost).

38
The 2002 budget for the plant is as follows:
 Machining Assembly
 Department Department
 Manufacturing overhead $ 900,000 $ 1,800,000
 Direct manufacturing labor

Cost $ 700,000 1,000,000

 Direct manufacturing labor

Hours 50,000 100,000

 Machine hours 25,000 100,000

39
Required:
A. Present an overview diagram of Lucas Incorporation’s job – costing system.
Compute the budgeted manufacturing overhead rate for each department
B. During March 2002, the job cost record for job No. 555 contained the
following.
 Machining Assembly
 Department Department
 Direct Materials used $22,500 $ 35,000
 Direct manufacturing 7,000 7,500
Labor costs
 Direct manufacturing

Labor – hours 500 750

 Machine hours 1,000 50
Compute
40 the total manufacturing overhead costs of job 555.
Solution:
 Job costing overview for determining
 a) Budgeted Manufacturing overhead rate:
 Machining Department:
 Over head rate= [$ 900,000  25,000)

= 36 per machine hour

 Assembly Department:
 Over head rate = [$ 1,800,000  1000,000)

=1.8 per machine hour

41
Computation of manufacturing overhead cost of job No. 555
and total job cost No 555:
 Total manufacturing cost of job No. 555:
 Machining department - = $ 36,000
 ($ 36per machine hour for 1000
 machine hours)
 Assembly department –
 (180% of direct manufacturing = $ 13,500
 labor cost of $ 7500)

 Total manufacturing overhead cost = $ 49,500
 of job No. 555


42
Total cost of job No. 555
 Machining Assembly Total
 Dept. Dept.
 Direct material cost $ 22,500 $ 35,000 $ 57,500
 Direct manufacturing labor 7,000 7,500 14,500
 Manufacturing overhead

Allocated 36,000 13,500 49,500

 Total job cost $65,500 $56,000 $121,50

43
 The Process costing methods
 A process costing System is most commonly used in
industries that produce essentially homogeneous
products on a continuous basis.
 Process costing system fits among others to: paint
manufacturers, oil refineries, sugar refineries, and salt
producers.

44
 Process Costing Methods
 The two methods of accounting for cost flows in process costing are
 Weighted average (WA) and
 First-in, first-out (FIFO)

 Use of these methods for costing a manufacturing firm’s production is

similar to their use by a retailer.

45 07:52 PM
─ The weighted average method computes a single average cost per unit of the
combined beginning WIP Inventory and current period production.
─ The first-in, first-out method separates beginning WIP Inventory and current
period production as well as their costs so that a current period cost per unit
can be calculated.
 The accounting of process costing can be analyzed by three different cases:
 Case 1: Process costing with zero beginning and ending work in process
 Case 2: Process costing with zero beginning work in process but some ending
work in process
 Case 3: Process costing with some beginning and some ending work in
process

46 07:52 PM
Case 1: Process costing with zero beginning and
ending work in process:
 This case is common for companies that successfully use just in time
production.
 Some companies schedule production so that they will have no inventory at
the end of a day because work in process could deteriorate or spoil.
 This case shows that in process costing system, unit costs can be averaged by
dividing total costs in a given accounting period by total units produced in
that period.
 This situation frequently occurs in service sector organization.

47
Example1: Compute the cost per unit from the following
details:
Physical units for April 2003:
 Work in process, beginning inventory (April 1) = 0 units
 Started during April = 500 units
 Completed and transferred out during April = 500 units
 Work in process, ending inventory (April 30) = 0 units

Total costs for April 2003:

 Direct materials costs added during January = Br 75,000
 Conversion costs added during April = 25,000
 Total costs Br 100,000
48
Solution:

 Items Total Cost Per unit cost

 Direct material cost Br 75,000 = Br150
 Conversion costs Br 25,000 = Br 50
 Cost per unit =Br 200

49
Case 2: Process costing with zero beginning but
some ending WIP
 In this case, the units started during the period may not be fully completed during
the period. In other words part of the units introduced may be completed and part
of the units introduced may not be fully completed i.e. partially completed.
 As far as units completed are concerned there is no difficulty in computing cost per
unit.
 On the other hand for partially completed units it is difficult to compute cost per
unit.
 For partially completed units we have to convert the partially converted units into
equivalent units.
 The
50 following steps are followed in this case. 2.
Steps :-
 Step- 1: Summarize the flow of physical units:
 For step 1, summarize the flow of physical units, using the basic cost-
flow model to help account for units:
 Beginning inventory + Transfers in – Transfers out = Ending
inventory.

51
Cont.
Step- 2: Computation of the equivalent number of units produced:
 This step focuses on how the output for the period should be measured.
 Step 2 requires us to understand the concept of equivalent units.
 Equivalent units are a derived amount of output units that takes the
quantity of each input (factor of production) in units completed or in work
in process and converts it into the amount of completed output units that
could be made with their quantity of input.
 When calculating equivalent units in this step, focus on quantities,
disregard dollar amounts until equivalent units are completed.
52
Cont.

Step 3: Computation of equivalent unit costs:

 Step 3 calculates equivalent unit costs by dividing direct materials and

conversion costs added during the period by the related quantity of

equivalent units of work done in given period.

53
Cont.

 Step 4: Summarize total costs to account for:

 This step summarizes total costs to account for.

 Because the beginning balance of the work in process inventory is zero,

total costs to account for consist of the costs added during the period.

54
Cont.
 Step 5: Assign total costs to units completed and to units in ending in
process:
 Under this step, costs are assigned to units completed and transferred
out and to units still in process at the end of the period.
 To do so, the equivalent output units for each input are multiplied by
the cost per equivalent unit calculated in step 3.

55
Example: 2
 XYZ Inc. furnisher the following data for August 2003, the department- assembly:
 Work in process, beginning inventory (August 1) = 0 units
 Started during August = 5000 units
 Completed and transferred = 3750 units
 Work in process, ending inventory (August 31) = 1250 units

 Direct material costs added during August = Br 125,000

 Conversion costs added during August = 71,250
 Total cost Br 196,250

 Degree of completion in this department:

 Direct materials 100%; conversions cost 80%. Compute the cost per unit of
completed and work in process ending inventory.
56
Solution:
 Step 1 and 2: Summarize output in physical units and computation of equivalent units:
 (Step 1) (Step 2)
 Flow of Production Physical Equivalent units
 Units Direct Conversation
 Material Costs
 Work in Process, beginning 0
 Started during current period 5000
 Total account for 5000
 Completed and transferred
out during current period 3750 3750 3750
 Work in process, ending 1250
1250 x 100%; 1250 x 80% 1250 1000
Accounted for 5000
 Work done in current period only 5000 4750
57
Cont.
 Step 3, 4 and 5: Computation of Equivalent unit costs summarize total
costs to account for, and Assign cost’s to units completed and to units in
ending work in process:
 Total Direct
Conversation
 Production cost Materials Costs
Step 3 Costs added Br 196250 Br 125,000 Br 71250
During August
 Divide by equivalent
units of work done  5000  4750
 Cost per equivalent units Br 25 Br 15

 Step
58 4: Total cost accounted for Br 196250
Cont.
 Step 5: Assignment of costs:
 Completed and transferred

out 3750 units Br 150,000 3750 x Br 25 + 3750 x Br15

 Work in process ending

(1250 units)
 Direct materials Br 31250 1250 x 25
 Conversion costs 15000 1000x15
 Total work in process 46250
 Total costs accounted for Br196250
59
 Journal entries:
 1. Work in process – Assembly Br 125,000

 Accounts Payable control 125,000

 (To record direct materials purchased and used in production during August 2003)

 2. Work in Process Assembly Br 71,250

 Various Accounts 71,250

 (To record Assembly department conversion costs for August 2003)

 3. Work in process – Testing Br 150,000

 Work in process- Assembly 150,000

 (To record cost of goods completed and transferred from Assembly to testing August 2003)
60
 Case 3: With Both some Beginning and some ends WIP
 Calculate:
 I The cost of units completed and transferred out and
 II The cost of ending works in process by using five steps
 To assign costs to each of these categories, however, we need to choose an
inventory cost flow method.
 The process costing using two alternative inventory cost – flow methods the
weighted average method and the first in first out method.
 The different assumptions will produce different numbers for cost of units
completed and for ending work in process.
61
I. Weighted Average Method:
 The weighted average process- costing method calculates the equivalent
– unit cost of the work done to date (regardless of the period in which it
was done) and assigns this cost to equivalent units completed and
transferred out of the process and to equivalent units in ending work in
process inventory.
 The weighted average cost is the total of all costs entering the work in
process account (regardless of whether it is from beginning work in
process or from work started during the period) divided by total
equivalent units of work done to date.
62
Example: 3
 At the beginning of September 2003, XYZ Inc. had 1250 units partially assembled
units in the Assembly Department. During September 2003, XYZ Inc. placed another
4000 units into production. Data for the Assembly Department for Sept, 2003 are:

 Physical units for September, 2003

 Work in process, beginning inventory (Sep 1) 1250 units
 Direct Materials (100% complete)
 Conversion costs (80% Complete)
 Started during September 4000 units
 Completed and transferred out

during September 4250 units

 Work in process, ending inventory (Sep 30) 1000units
 Direct Materials (100% complete)

63 Conversion cost (60% complete)
Cont.
 Total Costs for Sep 2003
 Work in Process, beginning inventory
 Direct Materials (1250 equivalent unit x Br25 per unit 31,250
 Conversion cost (1000, equivalent units x Br15 per unit) 15,000
 46,250
 Direct materials costs added during September 100,000
 Conversion costs added during September. 72,300
 Total costs to account for 218,550
 Required:
 1 Compute equivalent units for direct materials and conversion costs.
 2 Also calculate the cost per equivalent unit for direct materials and
conversion costs, Summarized total cost to account for.
64
Solution: Weighted Average Cost Method
 Computation of equivalent units. (step 1, and 2)
 Step 1 Step 2
 Physical unit Equivalent units
 Flow of Production Direct Conversion
 Materials Costs
 Work in process beginning 1250
 Started during September 4000
 Total account for 5250
 Completed and transferred
out during current period 4250 4250 4250
 Work in process, ending * 1000
1000 x 100; 1000 x 60% 1000 600
 Accounted for 5250
 Work done to date 5250 4850
 * Degree of competition in this department, direct materials 100%, conversion costs 60%
65
2) Computation of cost of equivalent units and cost
assigned: (Step 3, 4, and 5)


 Total Direct
Conversion
 Production Materials Costs
 Costs
 (Step 3) Work in process
 beginning 46250 31250 15000
 Cost added to current
 period 172300 100000 72300
 Cost incurred to date 31250 87300
 Divide by equivalent units
 of work done to date  5250  4850
 Cost per equivalent unit of
 66 work done to date Br 25 Br 18
Cont.
 (Step 4) Total costs to account for 218550
 (Step 5) Assignment of costs:
 Completed and transferred 182750 (4250x25) + (4250x18)
 Out (4250 units)
 Work in Process ending (1000 units)
 Direct materials 25000 (1000 x 25)
 Conversion costs 10800 (600x18)
 Total work in process 35800
 Total costs accounted for Br 218550

67
II- FIRST IN FIRST OUT METHOD
 In contrast to the weighted- average method, the first in first out (FIFO)
process- costing method assigns the cost of the previous period’s
equivalent units in beginning work in process inventory to the first
units completed and transferred out of process, and assigns the cost of
equivalent units worked on during the current period first to complete
beginning inventory, then to start and complete new units, and finally
to units in ending work in process inventory.
 This method assumes that the earliest equivalent units in the work in
process – Assembly account are completed first.
68
Cont.
 A distinctive feature of the FIFO process – costing method is that work
done on beginning inventory before the current period is kept separate
from work done in the current period.
 Costs incurred in the current period and units produced in the current
period are used to calculate cost per equivalent unit of work done in the
current period.
 In contrast, equivalent unit and cost per equivalent unit calculations in
the weighted average method merge the units and costs in beginning
inventory with units and costs of work done in the current period.
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