44377018 product costing
TRANSCRIPT
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PRODUCTPRODUCTCOSTINGCOSTING
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JOIN KHALID AZIZ
ECONOMICS OF ICMAP, ICAP, MA-ECONOMICS, B.COM. FINANCIAL ACCOUNTING OF ICMAP STAGE 1,3,4 ICAP
MODULE B, B.COM, BBA, MBA & PIPFA.
COST ACCOUNTING OF ICMAP STAGE 2,3 ICAP MODULE
D, BBA, MBA & PIPFA.
CONTACT:
0322-3385752
0312-2302870 R-1173,ALNOOR SOCIETY, BLOCK 19,F.B.AREA,
KARACHI, PAKISTAN.
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JOIN KHALID AZIZ
o FRESH CLASSESo ICMAP STAGE 3
o FINANCIAL ACCOUNTING & COST
ACCOUNTING PERFORMANCEAPPRAISAL
o INDIVIDUAL & GROUPS
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JOIN KHALID AZIZ
FRESH CLASSES
ICMAP STAGE 1 & 2
FUNDAMENTALS OF FINANCIALACCOUNTING & COSTACCOUNTING
INDIVIDUAL & GROUPS
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JOIN KHALID AZIZ
FRESH CLASSES CA MODULE B & D
FINANCIAL ACCOUNTING & COSTACCOUNTING
INDIVIDUAL & GROUPS
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Comparison of JobComparison of Job--Order CostingOrder Costing
and Process Costingand Process CostingProcessCosting
ProcessCosting
Job-orderCosting
Used for production of small,identical, low cost items.
Mass produced in automatedcontinuous production process.
Costs cannot be directly traced toeach unit of product.
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ProcessCosting
ProcessCosting
Job-orderCosting
Typical process cost applications:
Petrochemical refinery
Paint manufacturer
Paper mill
Comparison of JobComparison of Job--Order CostingOrder Costing
and Process Costingand Process Costing
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Job-order costing
Costs accumulated by
thejob. Work in process has a
job-cost sheet for eachjob.
Many unique, high costjobs.
Jobs built to customerorder.
Process costing
Costs accumulated by
department orprocess. Work in process has a
production report foreach batch ofproducts.
A few identical, low costproducts.
Units continuouslyproduced for inventoryin automated process.
Comparison of JobComparison of Job--Order CostingOrder Costing
and Process Costingand Process Costing
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Direct Material
FinishedGoods
Cost ofGoodsSold
Direct Labor
ManufacturingOverhead
Jobs
The work-in-processaccount consists ofindividualjobs in a
job-ordercost system.
Differences Between JobDifferences Between Job--OrderOrder
and Process Costingand Process Costing
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Direct Material
FinishedGoods
Cost ofGoodsSold
Products
The work-in-processaccount consists of
individual products in a
process cost system.
Differences Between JobDifferences Between Job--OrderOrderand Process Costingand Process Costing
Direct Labor& Overhead
(Conversion)
When direct labor is a relatively small amountcompared to material and overhead, it is often
combined with overhead.
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Process Cost FlowsProcess Cost Flows
Direct material
Direct labor
Applied manufacturing transferred to and transferred to
overhead department B finished goods
Direct material
Direct labor
Applied manufacturing
overhead
during current period
Cost of goods sold
Cost of goods completed
in department A and Cost of goods completed
Finished Goods Inventory Cost of Goods Sold
Two Sequential Production DepartmentsWork-in-Process Inventory Work-in-Process Inventory
Production Department A Production Department B
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Equivalent Units: A Key ConceptEquivalent Units: A Key Concept
Costs are accumulated for a period of time forproducts in work-in-process inventory.
Products in work-in-process inventory at thebeginning and end of the period are onlypartially complete.
Equivalent units is a concept expressing
these partially completed products as asmaller number of fully completed products.
Costs are accumulated for a period of time forproducts in work-in-process inventory.
Products in work-in-process inventory at thebeginning and end of the period are onlypartially complete.
Equivalent units is a concept expressing
these partially completed products as asmaller number of fully completed products.
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Equivalent Units of ProductionEquivalent Units of Production
Equivalent units are partially completeand are part of work in process
inventory. Partially completedproducts are expressed in terms of a
smaller number of fully completedunits.
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Finished Goods
Cost of Goods Sold
Process Cost FlowsProcess Cost Flows
Work in ProcessDepartment B
Cost of
GoodsManufactured
Direct
MaterialsDirectLabor
AppliedOverhead
Transferred
from Dept. A
Cost ofGoodsSold
Cost of
GoodsSold
Cost of
GoodsManufactured
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Equivalent Units of ProductionEquivalent Units of Production
Two half completed products areequivalent to one completed product.
So, 10,000 units 70 percent completeare equivalent to 7,000 complete units.
+ = 1
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For the current period, Jones started 15,000units and completed 10,000 units, leaving5,000 units in process 30 percent complete.
How many equivalent units of production didJones have for the period?
a. 10,000
b. 11,500c. 13,500
d. 15,000
Quick CheckQuick Check
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For the current period, Jones started 15,000units and completed 10,000 units, leaving5,000 units in process 30 percent complete.
How many equivalent units of production didJones have for the period?
a. 10,000
b. 11,500c. 13,500
d. 15,000
10,000 units + (5,000 units 0.30)= 11,500 equivalent units
Quick CheckQuick Check
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Calculating and Using EquivalentCalculating and Using EquivalentUnits of ProductionUnits of Production
To calculate the cost perequivalent unit for the period:
Cost perequivalent
unit
=Costs for the period
Equivalent units of productionfor the period
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Now assume that Jones incurred$27,600 in production costs for the11,500 equivalent units of production.
What was Jones cost per equivalent unitfor the period?
a. $1.84
b. $2.40
c. $2.76
d. $2.90
Quick CheckQuick Check
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Now assume that Jones incurred$27,600 in production costs for the11,500 equivalent units of production.
What was Jones cost per equivalent unitfor 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
Quick CheckQuick Check
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Equivalent Units of ProductionEquivalent Units of Production Weighted Average MethodWeighted Average Method
The weighted average method . . .
Makes no distinction between work done in prior
and current period. Blends together units and costs from priorperiod and current period.
Lets see how this works!
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MVP Sports Equipment Company makes baseball glovesin two departments, Cutting and Stitching.
MVP uses the weighted-average cost procedure.
Material is added at the beginning of the CuttingDepartment, and conversion is incurred uniformlythroughout the process.
Using the following information for the month of March,lets prepare a production report for the CuttingDepartment.
EXP 1: Production Report ExampleEXP 1: Production Report Example
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Work in process, March 1: 20,000 units CostMaterials: 100% complete. $ 50,000
Conversion: 10% complete. 7,200
Units started into production in March: 30,000 units
Units completed and transferred out in March: 40,000 units
Work in process, March 31: 10,000 units
Materials 100% complete.
Conversion 50% complete.
Costs incurred during March
Materials cost 90,000Conversion costs:
Direct labor $ 86,000
Applied manufacturing overhead 107,500
Total conversion costs 193,500
Total costs to account for $ 340,700
Production Report ExampleProduction Report Example
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Conversion uivalent Units
Physical Percentage irect
Units Complete Material Conversion
Work in process, March 1 2 ,
Units started during March ,
otal units to account for ,
Units completed and transferred , 1 % , ,Work in process, March 1 1 , % 1 , ,
otal units accounted for ,
otal e uivalent units , ,
Production Report ExampleProduction Report Example
Calculation ofEquivalent Units
50 of10,000 units
inning inventory % is not used in weighted-average method.
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1 2 1
11 1 1
Production Report ExampleProduction Report Example
Calculation ofEquivalent Units
100% of10,000 units, allmaterial added at beginning
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r
r v r T
r Pr r 1 2 2
rr r r 90 000 193 500 283 500
T r 1 0 000$ 200 700$ 340 700$
Eq v 50 000 45 000
r q v 2.80$ 4.46$ 7.26$
Computation of unit costs
Production Report ExampleProduction Report Example
$140,000 50,000 equivalent units
$200,700 45,000 equivalent units
$2.80 + $4.46
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Production Report ExampleProduction Report Example
Analysis of total costs
Cost of goods completed and transferred during March
40,000 units x $7.26 per equivalent unit 290,400$
Costs remaining in work-in-process on March 31
Direct Material:
10,000 equivalent units x $2.80 per equivalent unit 28,000$
Convserion:
5,000 equivalent units x $4.46 per equivalent unit 22,300
Total cost of March 31 work-in-process 50,300
Total costs accounted for 340,700$
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Production Report ExampleProduction Report Example
Analysis of total costs
Cost of goods completed and transferred during March
40,000 units x $7.26 per equivalent unit 290,400$
Costs remaining in work-in-process on March 31
Direct Material:
10,000 equivalent units x $2.80 per equivalent unit 28,000$
Convserion:
5,000 equivalent units x $4.46 per equivalent unit 22,300
Total cost of March 31 work-in-process 50,300
Total costs accounted for 340,700$
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Production Report ExampleProduction Report Example
Analysis of total costs
Cost of goods completed and transferred during March
40,000 units x $7.26 per equivalent unit 290,400$
Costs remaining in work-in-process on March 31
Direct Material:
10,000 equivalent units x $2.80 per equivalent unit 28,000$
Convserion:
5,000 equivalent units x $4.46 per equivalent unit 22,300
Total cost of March 31 work-in-process 50,300
Total costs accounted for 340,700$
All costsaccounted for
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Percentage of
Completion Equivalent Units
Physical with Respect to Direc t
Units Conversion Material Conversion
Work in process, March 1 20,000 10%
Units started during March 30,000
Total units to account for 50,000
Units completed and transferred 40,000 100% 40,000 40,000
Work in process, March 31 10,000 50% 10,000 5,000
Total units accounted for 50,000
Total equivalent units 50,000 45,000
Direct
Material Conversion Total
Work in Process, March 1 50,000$ 7,200$ 57,200$
Costs incurred during March 90,000 193,500 283,500
Total costs to account for 140,000$ 200,700$ 340,700$
Equivalent units 50,000 45,000
Cost per equivalent unit 2.80$ 4.46$ 7.26$
Cost of goods completed and transferred during March
40,000 units x $7.26 per equivalent unit 290,400$
Costs remaining in work-in-process on March 31
Direct Material:
10,000 equivalent units x $2.80 per equivalent unit 28,000$
Conversion:
5,000 equivalent units x $4.46 per equivalent unit 22,300
Total cost of March 31 work-in-process 50,300
Total costs accounted for 340,700$
MVP SPORTS EQUIPMENT COMPANY
Production Report: Cutting Department
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Double Diamond Skis uses process costing todetermine unit costs in its Shaping and MillingDepartment.
Double Diamond uses the weighted averagecost procedure.
Using the following information for the month ofMay, lets prepare a production report forShaping and Milling.
Double Diamond Skis uses process costing todetermine unit costs in its Shaping and MillingDepartment.
Double Diamond uses the weighted averagecost procedure.
Using the following information for the month ofMay, lets prepare a production report forShaping and Milling.
EXP 2: Production Report ExampleEXP 2: Production Report Example
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Work in process, May 1: 200 units
Materials: 55% complete. $ 9,600
Conversion: 30% complete. 5,575
Production started during May: 5,000 unitsProduction completed during May: 4,800 units
Costs added to production in May
Materials cost $ 368,600
Conversion cost 350,900
Work in process, May 31: 400 units
Materials 40% complete.
Conversion 25% complete.
Work in process, May 1: 200 units
Materials: 55% complete. $ 9,600
Conversion: 30% complete. 5,575
Production started during May: 5,000 unitsProduction completed during May: 4,800 units
Costs added to production in May
Materials cost $ 368,600
Conversion cost 350,900
Work in process, May 31: 400 units
Materials 40% complete.
Conversion 25% complete.
Production Report ExampleProduction Report Example
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Section 1: Quantity Schedule with Equivalent Units
Production Report ExampleProduction Report Example
b :
1
S 5
5
w :
31
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Production Report ExampleProduction Report Example
b :
1
S
w :
31
16
6
Section 1: Quantity Schedule with Equivalent Units
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Production Report ExampleProduction Report Example
b :
1
S
w :
31
1
1
Section 1: Quantity Schedule with Equivalent Units
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Section 2: Compute cost per equivalent unit
Production Report ExampleProduction Report Example
r r
b rW r r y 1 1 1
r 1 3 8 3
3 3 8 3
r
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r r
b rW r r y 1 1 1 9
r 19 3 3 9
3 3 3
9 9
r
Production Report ExampleProduction Report Example
Section 2: Compute cost per equivalent unit
3 9 = 2
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r r
b rW r r y 1 1 1 00
r 1 00 00 0 00
4 200 4
4 0 4 00
r 2 2
r = 2 2 = 14 00
Production Report ExampleProduction Report Example
4 4 00 = 2
Section 2: Compute cost per equivalent unit
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Manufacturingoverhead is
appliedto Work-in-
Process Inventoryusing a
predetermined
overhead rate
Actual costs of
manufacturing overheadare entered in Work-in-
Process Inventory
Actual Costing vs. Normal Costing
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JOIN KHALID AZIZ
ECONOMICS OF ICMAP, ICAP, MA-ECONOMICS, B.COM. FINANCIAL ACCOUNTING OF ICMAP STAGE 1,3,4 ICAP
MODULE B, B.COM, BBA, MBA & PIPFA.
COST ACCOUNTING OF ICMAP STAGE 2,3 ICAP MODULE
D, BBA, MBA & PIPFA.
CONTACT:
0322-3385752
0312-2302870 R-1173,ALNOOR SOCIETY, BLOCK 19,F.B.AREA,
KARACHI, PAKISTAN.