chapter process costing - subud.files. · pdf file6-3 4. explain how process costing is...
TRANSCRIPT
6 -2
1. Describe the basic characteristics and cost
flows associated with process manufacturing.
2. Define equivalent units and explain their role
in process costing. Explain the differences
between the weighted average method and
the FIFO method of accounting for process
cost.
3. Prepare a departmental production report
using the weighted average method.
Objectives
After studying this
chapter, you should
be able to:
Continued
6 -3
4. Explain how process costing is affected by
nonuniform application of manufacturing
inputs and the existence of multiple
processing departments.
5. Appendix: Complete a departmental
production report using the FIFO method.
Objectives
6 -4
Finished
Goods Encapsulating
Healthblend
Nutritional
Supplements
Picking
Sequential
Processing
Bottling
6 -5
Finished
Goods
Process 2
Parallel Processing (hard disk drives for personal computers)
Process 1
Process 4 Process 3
Production and
assembly of
write-head and
disk drive
Testing of
write-head and
disk drive
Production of
circuit board
Testing of
circuit board
Assembly
6 -6
Bottling Dept.
Work in Process
Transferred-in
from
Encapsulating
Materials:
Bottles
Bottling
labor
Applied OH
Encapsulating Dept.
Work in Process
Transferred-in
from Picking
Materials:
Capsules
Encapsulating
labor
Applied OH
Flow of Manufacturing Costs Through the
Accounts of a Process-Costing Firm (Healthblend)
Picking Department
Work in Process
Materials:
Herbs
Vitamins
Minerals
Picking labor
Applied OH
6 -7
The mixture is transferred from
picking to Encapsulating.
The receiving report and the invoice are
used to record the receipt of the
merchandise and to control the payment.
Work in Process (Encapsulating) 2 200 00
Work in Process (Picking) 2 200 00
Healthblend
Nutritional
Supplements
Healthblend decides to produce
2,000 bottles of multivitamins.
The Picking Department costs are:
Direct materials $1,700
Direct labor 50
Applied overhead 450
6 -8
The cost is transferred from
Encapsulating to Bottling.
The receiving report and the invoice are
used to record the receipt of the
merchandise and to control the payment.
Work in Process (Bottling) 3 760 00
Work in Process (Encapsulating) 3 760 00
Healthblend
Nutritional
Supplements
The Encapsulating Department
costs are:
Direct materials $1,000
Direct labor 60
Applied overhead 500
$2,200 + $1,000
+ $60 + $500
6 -9
The cost is transferred to the
finished goods warehouse.
The receiving report and the invoice are
used to record the receipt of the
merchandise and to control the payment.
Finished Goods 5 460 00
Work in Process (Bottling) 5 460 00
Healthblend
Nutritional
Supplements
The Bottling Department costs are:
Direct materials $800
Direct labor 300
Applied overhead 600
$3,760 + $800 +
$300 + $600
6 -10
In process cost, costs are
summarized by department
for a period of time in a
production report.
A production report provides
information about the
physical units processed in a
department and the
manufacturing costs.
6 -11
Equivalent Units of Production
Equivalent units of output are the
complete units that could have been
produced given the total amount of
manufacturing effort expended for the
period under consideration.
6 -12
Equivalent Units of Production
Units in beginning work in process ---
Units completed 1,000
Units in ending work in process
(25% complete) 600
Total manufacturing cost $11,500
Department A
6 -13
Equivalent Units of Production
Concept:
100 units completed = 100 equivalent units
200 units, 50% completed = 100 equivalent units
=
Continued
=
6 -14
Equivalent Units of Production
Example:
1,000 units completed, 600 units, 25% complete
1000 units completed = 1,000 equivalent units
600 units, EWIP, 25% completed = 150 equivalent units = 150 equivalent units
Total = 1,150 equivalent units
6 -15
Preparing a Production Report
1. Physical units flow analysis
2. Calculation of equivalent units
3. Computation of unit cost
4. Valuation of inventories (goods transferred
out and ending work in process)
5. Cost reconciliation
6 -16
Weighted Average Method
Healthblend
Nutritional
Supplements
Production:
Units in process, July 1, 75% complete 20,000
Units completed and transferred out 50,000
Units in process, July 31, 25% complete 10,000
Costs:
Work in process, July 1 $ 3,525
Cost added during July 10,125
6 -17
Weighted Average Method
Healthblend
Nutritional
Supplements
BWIP Cost July Cost
$3,525 $10,125
$13,650
Total Manufacturing Cost
6 -18
Weighted Average Method
Output for July
60,000 Total Physical Units
BWIP
Becomes 52,500
Equivalent Units
20,000
30,000
+ Units Started and Completed
EWIP, 25% Complete +
2,500
52,500
6 -19
Weighted Average Method
Cost Assignment:
Cost/Unit = $13.750 ÷ 52,500 + $0.26
Transferred Out ($0.26 x 50,000) $13,000
EWIP ($0.26 x 2,500) 650
Total Cost Assigned $13,650
6 -20
Step 1: Physical Flow Schedule
Units to account for:
Units in beginning work in process (75% complete) 20,000
Units started during the period 40,000
Total units to account for 60,000
Units accounted for:
Unit completed and transferred out:
Started and completed 30,000
From beginning work in process 20,000 50,000
Units in ending work in process (25%
complete) 10,000
Total units accounted for 60,000
6 -21
Step 2: Calculation of Equivalent Units
Units completed 50,000
Add: Units in ending work in process x Fraction
complete (10,000 x 25%) 2,500
Equivalent units of output 52,500
Weighted Average Method
Healthblend
Nutritional
Supplements
6 -23
Step 4: Valuation of Inventories
Cost of goods transferred to the encapsulating
department:
50,000 equivalent units x $0.26 $13,000
Ending inventory:
2,500 equivalent units x $0.26 650
Healthblend
Nutritional
Supplements
6 -24
Step 5: Cost Reconciliation
Healthblend
Nutritional
Supplements
Goods transferred out $13,000
Goods in ending work in process 650
Total costs accounted for $13,650
The
manufacturing
costs to
account for are
also $13,650.
6 -26 Healthblend Company
Picking Department
Production Report for July 2004
UNIT INFORMATION
Physical Flow
Units to account for: Units accounted for:
Units in beginning Units completed 50,000
work in process 20,000 Units in ending
Units started 40,000 work in process 10,000
Total units to Total units
account for 60,000 accounted for 60,000
Equivalent Units
Units completed 50,000
Units in ending
work in process 2,500
Total equivalent units 52,500
Continued
Weighted
average
6 -27
COST INFORMATION
Costs to account for:
Beginning work
in process $ 3,525
Incurred during
period 10,125
Total cost to
account for $13,650
Continued
Cost per equivalent unit $ 0.26
6 -28
Transferred Ending
Out WIP Total
Costs accounted for:
Goods transferred out ($0.26 x
50,000) $13,000 --- $13,000
Goods in ending work in
process ($0.26 x 2,500) --- $650 650
Total cost accounted for $13,000 $650 $13,650
6 -30
Healthblend
Nutritional
Supplements
Materials, 100%
complete; conversion
cost, 50% complete 100% complete as to
both materials and
conversion cost
60,000
equivalent units
of material and
conversion cost
transferred out
Equivalent Units
Picking Department
Beginning
WIP inventory
10,000 units
Started and
completed
50,000 units
6 -31
September
Healthblend
Nutritional
Supplements
Equivalent Units
Picking Department
Materials, 100% complete; conversion cost,
40% complete
60,000 60,000
Ending WIP
inventory
20,000 units
Conversion
Materials Costs
Beginning
WIP inventory
10,000 units
Started and
completed
50,000 units
6 -32
September
Healthblend
Nutritional
Supplements
Equivalent Units
Picking Department
60,000 60,000
Ending WIP
inventory
20,000 units
20,000 8,000
Conversion
Materials Costs
Beginning
WIP inventory
10,000 units
Started and
completed
50,000 units
6 -33
September September
Healthblend
Nutritional
Supplements
Equivalent Units
Picking Department
Beginning
WIP inventory
10,000 units
60,000 60,000 Started and
completed
50,000 units
Ending WIP
inventory
20,000 units
20,000 8,000
80,000 68,000 Equivalent units
Conversion
Materials Costs
6 -34
Materials $1,600
Conversion
cost $200
September
Healthblend
Nutritional
Supplements
Beginning
WIP inventory
10,000 units
Started and
completed
50,000 units
Ending WIP
inventory
20,000 units
August October
Materials $12,000
Conversion
cost $3,200
Materials $13,600
EU 80,000
= Cost per EU $0.22
Conver. Cost $3,400
EU 68,000
= Cost per EU $0.05
6 -35 Healthblend Company
Picking Department
Production Report for September 2004
UNIT INFORMATION
Physical Flow
Units to be accounted for: Units accounted for:
Units in beginning Units completed 60,000
work in process 10,000 Units in ending
Units started 70,000 work in process 20,000
Total units to Total units
account for 80,000 accounted for 80,000
Continued
Weighted
average
6 -36
Equivalent Units
Materials Conversion Cost
Units completed 60,000 60,000
Units in ending work in
process 20,000 8,000
Total equivalent units 80,000 68,000
Continued
6 -37
COST INFORMATION
Conversion
Materials Cost Total
Costs to account for:
Beginning work in process $ 1,600 $ 200 $ 1,800
Incurred during the period 12,000 3,200 15,200
Total costs to account for $13,600 $3,400 $17,000
Cost per equivalent unit $ 0.17 $ 0.05 $ 0.22
Continued
6 -38
Transferred Ending
Out WIP Total
Costs accounted for:
Goods transferred out ($0.22 x
60,000) $13,200 --- $13,200
Goods in ending work in
process:
Materials ($0.17 x 20,000) --- $3,400 3,400
Conversion ($0.05 x 8,000) --- 400 400
Total cost accounted for $13,200 $3,800 $17,000
6 -39
Multiple Departments
Units to account for:
Units in beginning work in process 15,000
Units transferred in during September 60,000
Total units to account for 75,000
Units accounted for:
Units completed and transferred out:
Started and completed 55,000
From beginning work in process 15,000
Units in ending work in process 5,000
Total units accounted for 75,000
6 -40
Multiple Departments
Transferred in:
Units completed 70,000
Add: Units in ending work in
process X Fraction complete
(5,000 x 100%) 5,000
Equivalent units of output 75,000
Unit cost (transferred-in category) = ($13,200 ÷ $3,000/75,000)
= $16,200/75,000
= $0.216
6 -43
FIFO Method
Output for July
60,000 Total Physical Units
BWIP
Become 37,500
Equivalent Units
30,000
+ Units Started and Completed
EWIP, 25% complete +
2,500
37,500
5,000
6 -44
FIFO Method
Cost Assignment:
Unit Cost = $10,125 ÷ 37,500 = $0.27
Transferred Out:
From beginning work in process $ 3,525
Complete BWIP ($0.27 x 5,000) 1,350
Started and Completed in July
($0.27 x 30,000) 8,100
EWIP ($0.27 x 2,500) 675
Total Cost Assigned $13,640
6 -45 Healthblend Company
Picking Department
Production Report for July 2004
UNIT INFORMATION
Continued
Units accounted for:
Units in beginning
work in process 20,000
Units started during
the period 40,000
Total units to
account for 60,000
FIFO
6 -46
Physical Equivalent
Flow Units
Units accounted for:
Units started and completed 30,000 30,000
Units completed from beginning work
in process 20,000 5,000
Units in ending work in process 10,000 2,500
Total units accounted for 60,000 37,500
Continued
6 -47
COST INFORMATION
Costs to account for:
Beginning work
in process $ 3,525
Incurred during
period 10,125
Total cost to
account for $13,650
Continued
Cost per equivalent unit $ 0.27
6 -48
Transferred Ending
Out WIP Total
Costs accounted for:
Units in beginning work in process:
From prior period $ 3,525 --- $ 3,525
From current period
($0.27 x 5,000) 1,350 --- 1,350
Units started and completed
($0.27 x 30,000) 8,100 --- 8,100
Goods in ending work in process
($0.27 x 2,500) --- $675 675
Total cost accounted for $12,975 $675 $13,650