Khalid Aziz---0322-3385752 Accounting of ICMAP,ICAP & Other Professionals 1 Process Costing.

Khalid Aziz---0322-3385752 Accounting of ICMAP,ICAP & Other Professionals 1

Process CostingProcess CostingProcess CostingProcess Costing


Objective 1Objective 1Objective 1Objective 1

Distinguish between process

costing and job order costing

3

Cost of GoodsSold

Manufacturing Wages

Materials Inventory

FinishedGoods

Manufacturing

Overhead

Job Order CostingJob Order CostingJob Order CostingJob Order Costing

Work in ProcessJob 90

Job 91Job 92

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Cost of GoodsSold

Manufacturing Wages

Materials Inventory

FinishedGoods

Process CostingProcess CostingProcess CostingProcess Costing

Work in Process,Mixing Dept

Work in Process,Molding Dept

Work in Process,Packaging Dept

Manufacturing

Overhead

5

Tracking Costs Tracking Costs

• Account for the goods completed and transferred out

• Account for the cost of incomplete units that remain as a department’s ending work in process inventory

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Key ConceptsKey ConceptsKey ConceptsKey Concepts

• Conversion costs– Costs incurred to convert raw materials into a

finished product– Direct labor plus manufacturing overhead

• Equivalent unit of production– Amount of work done during a period in terms

of fully complete units of output



Compute equivalent units

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Step 1: Summarize the flow of physical units

Units to account for Units accounted for

Blending Department

Beginning WIP

Units placed in production

+ Units completed

Units in Ending WIP

0 8,000 6,000 2,000+ +

+

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Start

Dyes added

100%complete

30%complete

2,000 units startedbut not finished

6,000 units completed and transferred out

Step 2: Compute output in terms of equivalent units

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• Equivalent units for direct materials:

8,000 units x 100% complete 8,000

• Equivalent units for conversion costs:

6,000 units x 100% complete 6,000

2,000 units x 30% complete 600

6,600



Use process costing to assign costs to units completed and to units in ending

work in process inventory

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Blending Department

Direct Materials

Conversion Costs

Beginning work in process $ 0 $ 0

Costs added during period

Divide by equivalent units

Cost per equivalent unit

Step 3: Compute the cost pre equivalent unit

$4,800

÷ 8,000

$0.45$0.60

$2,970

÷ 6,600

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Direct Materials

Conversion Costs

Total

Completed and transferred out (6,000)

Ending WIP (2,000)

Direct materials

Conversion costs

Total cost of ending WIP

Total costs accounted for

Step 4: Assign costs to units completed and to units in ending work in process inventory

6,000 x ($0.60 + 0.45) $6,300

2,000 x $0.60

600 x 0.45

$7,770

1,470

270

$1,200

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GENERAL JOURNALDATE DESCRIPTION REF DEBIT CREDIT

Work in process inventoryblending department 7,770

Materials inventory 4,800

Manufacturing wages 800

Manufacturing overhead 2,170

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Work in process inventorypackaging department 6,300

Work in process inventory blending department 6,300



Use the weighted-average method to assign costs to units completed and to

units in ending work in process inventory in a second department

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Units to account for Units accounted for

Bottling Department

Beginning WIP

Units placed in production

+ Units completed

Units in Ending WIP

8,000 160,000 154,000 14,000+ +

+

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Beg. Bal. 8,000

Transferred in 160,000

End Bal. 14,000

Work in process, bottling department (units)

154,000

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E20-23E20-23E20-23E20-23 Materialsadded

Start 100%complete

40%complete

Step 2: Compute output in terms of equivalent units

146,000 units started and completed

8,000 units in processand completed

70%complete

14,000 units started but not finished

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Equivalent units:

Transferred in costs

Completed and transferred out 154,000

Ending work in process 14,000

Total 168,000

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Equivalent units:

Direct materials

Completed and transferred out 154,000

Ending work in process -0-

Total 154,000

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Equivalent units for conversion costs:Completed and transferred out 154,000Ending WIP -14,000 x 70% 9,800 Total 163,800

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Step 3: Compute the cost per equivalent unit

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Costs to be Accounted For:

Trans in Dir. Mat.

Conv. Costs

Total

Beginning WIP $ 1,760 $ 0 $ 1,120 $ 2,880

Costs added 136,000 30,800 56,210 22,3010

Total costs $137,760 $30,800 $57,330

÷ equivalent unit 168,000 154,000 163,800

Cost/equiv unit $0.82 $0.20 $0.35

Total costs to account for $225,890

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Step 3: Compute the cost per equivalent unit

E20-23E20-23E20-23E20-23Trans in Dir.

Mat.Conv. Costs

Total

Completed & transferred out

154,000 x ($.82+$.20+$.35) $210,980

Ending WIP

Transferred in 14,000x.82 11,480

Direct materials 0 x .20 0

Conversion cost

9,800x.35 3,430

Total WIP 14,910

Total costs accounted for $225,890

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Work in process inventorybottling department 223,010

Work in process inventory department 1 136,000

Materials inventory 30,800

Manufacturing wages 33,726

Manufacturing overhead 22,484

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Finished goods inventory 210,980

Work in process inventory bottling department 210,980

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Khalid Aziz---0322-3385752 Accounting of ICMAP,ICAP & Other Professionals 1 Process Costing.

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Transcript of Khalid Aziz---0322-3385752 Accounting of ICMAP,ICAP & Other Professionals 1 Process Costing.