Chapter 17. Sequential Processing Departments T-Account Model of Process Costing Flows.
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Transcript of Chapter 17. Sequential Processing Departments T-Account Model of Process Costing Flows.
Process Costing and Direct Labor
Direct labor costsmay be small
in comparison toother product
costs in processcost systems.
Direct labor costsmay be small
in comparison toother product
costs in processcost systems.
DirectMaterials
Type of Product Cost
Do
llar
Am
ou
nt
DirectLabor
Mfg. Ovhd.
Process Costing and Direct Labor
Type of Product Cost
Do
llar
Am
ou
nt Conversion
Direct labor and manufacturing overhead isDirect labor and manufacturing overhead iscombined into one product cost called combined into one product cost called conversionconversion..
Direct labor and manufacturing overhead isDirect labor and manufacturing overhead iscombined into one product cost called combined into one product cost called conversionconversion..
DirectMaterials
Direct labor costsmay be small
in comparison toother product
costs in processcost systems.
Direct labor costsmay be small
in comparison toother product
costs in processcost systems.
Global Defense uses process costing to determine unit costs in its Assembly Department.
Upon completion, units are transferred to the Testing Department.
Direct materials are added at the beginning of the assembly process. Conversion costs are added evenly during assembly.
Global Defense uses process costing to determine unit costs in its Assembly Department.
Upon completion, units are transferred to the Testing Department.
Direct materials are added at the beginning of the assembly process. Conversion costs are added evenly during assembly.
Production Report Example
Process Diagram - Assembly
Conversion costs added evenly during process
Assembly Department
Transfer
Testing Department
Direct materials added at beginning of process
Work in process, January 1: 0 units Materials: $ 0Conversion: 0
Production started during January: 400 unitsProduction completed during January: 400 units
Costs added to production in JanuaryMaterials cost $ 32,000Conversion cost 24,000
Work in process, January 31 0 units
Manufacturing Costs in Ending Inventory: ?
Manufacturing Costs transferred out in January: ?
January 2009Assembly Department - No Beginning/No Ending Inventory
Work in process, February 1: 0 units Materials: $ 0Conversion: 0
Production started during February: 400 unitsProduction completed during February: 175 units
Costs added to production in FebruaryMaterials cost $ 32,000Conversion cost 18,600
Work in process, February 29 225 units Materials 100% complete
Conversion 60% complete
Manufacturing Costs in Ending Inventory: ?
Manufacturing Costs transferred out in February: ?
February 2009Assembly Department - No Beginning/Some Ending Inventory
Equivalent Units of Production
Equivalent units are partially complete and are part of work in process inventory.
Partially completed products are expressed in terms of a smaller number
of fully completed units.
Equivalent Units of ProductionTwo half completed products are
equivalent to one completed product.
So, 10,000 units 70 percent completeare equivalent to 7,000 complete units.
So, 10,000 units 70 percent completeare equivalent to 7,000 complete units.
+ = 1
For the current period, Jones started 15,000 units and completed 10,000 units, leaving 5,000 units in process that were 30 percent complete for conversion costs. How many equivalent units of production did Jones have for the period?
a. 10,000
b. 11,500
c. 13,500
d. 15,000
For the current period, Jones started 15,000 units and completed 10,000 units, leaving 5,000 units in process that were 30 percent complete for conversion costs. How many equivalent units of production did Jones have for the period?
a. 10,000
b. 11,500
c. 13,500
d. 15,000
Quick Check
Calculating and Using Equivalent Units of ProductionTo calculate the cost per
equivalent unit for the period:
Cost perequivalent
unit
=Costs for the period
Equivalent units of productionfor the period
Now assume that Jones incurred $27,600 in conversion costs for the 11,500 equivalent units of production. What was Jones’ conversion cost per equivalent unit for the period?
a. $1.84
b. $2.40
c. $2.76
d. $2.90
Now assume that Jones incurred $27,600 in conversion costs for the 11,500 equivalent units of production. What was Jones’ conversion cost per equivalent unit for the period?
a. $1.84
b. $2.40
c. $2.76
d. $2.90
Quick Check
Now assume that Jones incurred $27,600 in production costs for the 11,500 equivalent units of production. What was Jones’ cost per equivalent unit for the period?
a. $1.84
b. $2.40
c. $2.76
d. $2.90
Now assume that Jones incurred $27,600 in production costs for the 11,500 equivalent units of production. What was Jones’ cost per equivalent unit for the period?
a. $1.84
b. $2.40
c. $2.76
d. $2.90
$27,600 ÷ 11,500 equivalent units
= $2.40 per equivalent unit
$27,600 ÷ 11,500 equivalent units
= $2.40 per equivalent unit
Quick Check
Work in process, March 1: 225 units Materials: 100% complete $ 18,000Conversion: 60% complete 8,100
Production started during March: 275 unitsProduction completed during March: 400 units
Costs added to production in March:Materials cost $ 19,800Conversion cost 16,380
Work in process, March 31: 100 units Materials 100% complete
Conversion 50% complete
Manufacturing Costs in Ending Inventory: ?
Manufacturing Costs transferred out in March: ?
March 2009Assembly Department - Some Beginning/Some Ending Inventory
Transfer
Conversion costs added
evenly during process
Process Diagram - Testing
Direct materials added at the end of the
process
Finished Goods
Assembly Department
Testing Department
Work in process, March 1: 240 units Transferred-in 100% complete $ 33,600Materials: 0% complete 0Conversion: 62.5% complete 18,000
Transferred-in during March: 400 unitsProduction completed during March: 440 units
Costs added to production in March:Transferred-in cost $ 52,000Materials cost 13,200Conversion cost 48,600
Work in process, March 31: 200 units Transferred-in 100% complete
Materials 0% completeConversion 80% complete
Manufacturing Costs in Ending Inventory: ?
Manufacturing Costs transferred out in March: ?
March 2009Testing Department with Transferred-in Costs – W.A.Method
Work in process, March 1: 240 units Transferred-in 100% complete $ 33,600Materials: 0% complete 0Conversion: 62.5% complete 18,000
Transferred-in during March: 400 unitsProduction completed during March: 440 units
Costs added to production in March:Transferred-in cost $ 52,480Materials cost 13,200Conversion cost 48,600
Work in process, March 31: 200 units Transferred-in 100% complete
Materials 0% completeConversion 80% complete
Manufacturing Costs in Ending Inventory: ?
Manufacturing Costs transferred out in March: ?
March 2009Testing Department with Transferred-in Costs – FIFO Method