[PPT]Chapter 1 - New York University Stern School of...
Transcript of [PPT]Chapter 1 - New York University Stern School of...
4-2
Process Costing
How are unitcosts used?
To helpset prices
To evaluateproducts
To evaluateproductionefficiency
To determinebalance sheet
inventory
4-3
Job costingCosts accumulated by
the job.Work in process has a
job cost record for each job.
Many unique, high cost jobs.
Jobs built to customer order.
Process costing Costs accumulated by
department or process. Work in process has a
production report for each batch of products.
A few identical, low cost products.
Units continuously produced for inventory in automated process.
Comparing Job Costingand Process Costing
4-4
Work in process contains individual
jobs in a job cost system.
Direct Materials
FinishedGoods
Cost of GoodsSold
Direct Labor
ManufacturingOverhead
Work inProcess
Comparing Job Costingand Process Costing
4-5
FinishedGoods
Cost of GoodsSold
Products
Work in process contains homogenous products in a process
cost system.
Direct Labor& Overhead
(Conversion)
Direct Materials
Comparing Job Costingand Process Costing
4-6
Same overhead assignment method:predetermined rate times actual activity
Comparing Job Costingand Process Costing
Same Inventory accounts: raw materials, work in process, and finished goods
Same objective: determine
the cost of products
4-7
No beginning or endingWork in Process Inventory
Common when a company issuccessful at just-in-time production
Assigning Costs to Products – All Units Fully Completed
Cost perunit = Manufacturing costs for a period
Units produced for the period
4-8
Assigning Costs to Products – Some Units Not Fully Completed
Same objective: determine the cost of products
Same Inventory accounts: raw materials, work in process, and finished goods
Same overhead assignment method:predetermined rate times actual activity
No beginning Work in Process Inventory
Ending Work in Process Inventory consistsof units started during the period, butincomplete at the end of the period.
We must now deal with the conceptof equivalent units.
4-9
Assigning Costs to Products – Some Units Not Fully Completed
Same objective: determine the cost of products
Same Inventory accounts: raw materials, work in process, and finished goods
Same overhead assignment method:predetermined rate times actual activity
Equivalent units is a concept expressing partially complete units as a smaller number
of fully complete units.
Cost perequivalent
unit
= Manufacturing costs for a periodEquivalent units for the period
We must now deal with the conceptof equivalent units.
4-10
Raw Materials•Purchases •Direct
Materials
•OtherOverhead
Manufacturing Overhead
•Direct Materials
Process Cost Flows
Work in Process Department B
Work in Process Department A
•Indirect Materials
•Indirect Materials
Actual Applied
•DirectMaterials
4-11
Wages Payable•Direct
Materials
•Direct Materials
Process Cost Flows
Work in Process Department B
Work in Process Department A
•Direct Labor •Direct
Labor
•Direct Labor
•IndirectLabor
•OtherOverhead
Manufacturing Overhead
•IndirectMaterials
Actual Applied
•IndirectLabor
4-12
Wages Payable•Direct
Materials
•Direct Materials
Process Cost Flows
Work in Process Department B
Work in Process Department A
•Direct Labor •Direct
Labor
•Direct Labor
•IndirectLabor
•OverheadApplied to
Work inProcess
•AppliedOverhead
•AppliedOverhead
•OtherOverhead
Manufacturing Overhead
Actual Applied
•IndirectMaterials•Indirect
Labor
4-13
Process Cost Flows
Work in Process Department B
Work in ProcessDepartment A
•Direct Materials
•Direct Labor
•AppliedOverhead
•Direct Materials
•Direct Labor
•AppliedOverhead
Transferred to Dept. B
•Transferred from Dept. A
4-14
Finished Goods
Cost of Goods Sold
Process Cost Flows Work in Process Department B
•Cost of Goods
Manufactured
•Cost of Goods
Manufactured
•Direct Materials
•Direct Labor
•AppliedOverhead
•Transferred from Dept. A
•Cost of GoodsSold
•Cost of GoodsSold
4-15
Production Report
ProductionReport
Shows the flowof units and coststhrough work inprocess
Becomes thejob cost sheetin processcosting
Helps managerscontrol theirdepartments
Provides costinformation for
financial statements
4-16
Production Report
A computation ofcost per equivalent unit.
Section 1
Section 2
Section 3
Production Report A quantity schedule showing the flow of units and the computation of
equivalent units.
4-17
Production Report
Section 1
Section 2
Section 3
Production Report A reconciliation of cost flows for the period, including:
Total cost for units completed and transferred from the processing department.Total cost for partially completed units remaining in work in process.
4-18
Equivalent Units of Production
Equivalent units are partially completepartially complete and are part of work in process inventory. Partially completed
products are expressed in terms of a smaller number of fully completed
units.
4-19
Equivalent Units of Production
+ =
Two half completed products are equivalent to one completed product.
So, 10,000 units 70 percent completeare equivalent to 7,000 complete units.
4-20
The weighted average method . . .Makes no distinction between work done in the prior
period and work done in the current period.Blends together units and costs in beginning
inventory with units and costs in the current period.
Assigning Costs UsingWeighted-Average Costing
4-21
Assigning Costs UsingWeighted-Average Costing
Now let’s examine the five-step process.
Beginning Inventory250 units
1,000 unitsstarted
EndingInventory150 units
1,250 units 1,100 unitscompleted
4-22
BeginningWork in Process
250 Units100% Complete
EndingWork in Process
150 Units100% Complete
1,000 Units Started
850 Units Startedand Completed
Weighted Average Example
Materials
1,100 Units Completed 150 Equivalent Units 150 × 100%1,250 Equivalent units of production
4-23
BeginningWork in Process250 Units
80% Complete
EndingWork in Process
150 Units33 1/3% Complete
1,000 Units Started
850 Units Startedand Completed
Weighted Average Example
Conversion
1,100 Units Completed 50 Equivalent Units
150 × .333%
1,150 Equivalent units of production
Work to Complete Process
20%250 Units
4-24
Costs Transferred infrom Prior DepartmentsMultiple departments in a process result
in units and costs that are transferred from a prior department to the current department.
These transferred-in costs are treated exactly like a direct material that is added at the beginning of a production process.
Let’s see an example.
4-25
Complete the five-step process for Ace CD Inc. to assign costs to units completed and to units left in process for June.
Costs Transferred infrom Prior Departments
Percentage CompleteFlow of units in June Units Materials Conversion Trans-inBeginning WIP inventory 20,000 100% 25% 100%Transferred-in during June 60,000Units completed 65,000 100% 100% 100%Ending WIP inventory 15,000 40% 60% 100%
Percentage CompleteFlow of units in June Units Materials Conversion Trans-inBeginning WIP inventory 20,000 100% 25% 100%Transferred-in during June 60,000 Units completed 65,000 100% 100% 100%Ending WIP inventory 15,000 40% 60% 100%
Total CostsFlow of costs in June Units Materials Conversion Trans-inCosts incurred in June 25,500$ 31,300$ 45,000$ Beginning WIP inventory 20,000 10,000 2,000 15,000 Transferred-in during June 60,000 Units completed 65,000 Ending WIP inventory 15,000
4-26
Costs Transferred infrom Prior Departments
Step 1 Step 2Physical Equivalent Units
Flow of Units in June Units Material Conversion Trans-inUnits to account for Beginning WIP inventory 20,000 Units transferred in during June 60,000 Total units to account for 80,000
Units accounted for Completed and transferred out 65,000 ? ? ? Ending WIP inventory 15,000 ? ? ? Total units accounted for 80,000 ? ? ?
4-27
Step 1 Step 2Physical Equivalent Units
Flow of Units in June Units Material Conversion Trans-inUnits to account for Beginning WIP inventory 20,000 Units transferred in during June 60,000 Total units to account for 80,000
Units accounted for Completed and transferred out 65,000 65,000 65,000 65,000 Ending WIP inventory 15,000 ? ? ? Total units accounted for 80,000 ? ? ?
Costs Transferred infrom Prior Departments
100% complete for material,conversion, and transferred-in units.
4-28
Step 1 Step 2Physical Equivalent Units
Flow of Units in June Units Material Conversion Trans-inUnits to account for Beginning WIP inventory 20,000 Units transferred in during June 60,000 Total units to account for 80,000
Units accounted for Completed and transferred out 65,000 65,000 65,000 65,000 Ending WIP inventory 15,000 6,000 9,000 15,000 Total units accounted for 80,000 71,000 74,000 80,000
Costs Transferred infrom Prior Departments
40% of 15,000 units 60% of 15,000 units
Transferred-in units are 100% complete
4-29
Costs Transferred infrom Prior Departments
Flow of Costs in June Material Conversion Trans-in TotalCosts to account for (Step 3) Costs in beginning WIP inventory 10,000$ 2,000$ 15,000$ 27,000$ Current period costs 25,500 31,300 45,000 101,800 Total costs to account for 35,500$ 33,300$ 60,000$ 128,800$
Costs per equivalent unit (Step 4) ? ? ? ?
Costs accounted for (Step 5) Costs assigned to units transferred ? ? ? ? Cost of ending WIP inventory ? ? ? ? Total costs accounted for ? ? ? ?