Process CostingProcess Costing
Chapter 17
Learning Objective 1
process-costing systems
are appropriate.
Illustrating Process Costing
Learning Objective 2
Five Steps in Process Costing
Step 1: Summarize the flow of physical units of
output.
Step 3: Compute equivalent unit costs.
Step 4: Summarize total costs to account for.
Step 5: Assign total costs to units completed and to
units in ending work in process inventory.
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Learning Objective 3
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Physical Units (Step 1)
To account for 35,000
Completed and transferred out
during current period 30,000
Accounted for 35,000
Compute Equivalent Units
Completed and
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Compute Equivalent Unit Costs
Total production costs are $146,050.
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Summarize and Assign Total
Step 4: Total costs to account for: $146,050
Step 5: Assign total costs:
Completed and transferred out
Direct materials 5,000 × $2.4014 12,007
Conversion costs 1,000 × $2.00 2,000
Total $146,050
Learning Objective 4
Journal Entries Example
departments – Assembly and Finishing.
Work in Process, Assembly 84,050
Accounts Payable Control 84,050
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Journal Entries Example
Work in Process, Assembly 62,000
Various accounts 62,000
What is the journal entry to transfer completed
goods from Assembly to Finishing?
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Journal Entries Example
To record cost of goods completed and transferred
from Assembly to Finishing during the period
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Flow of Costs Example
Learning Objective 5
Use the weighted-average
Physical Units (Step 1)
Work in process, beginning:
Units transferred out: 31,000
Units in ending inventory:
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Compute Equivalent Units (Step 2)
Materials Conversion
Ending inventory 5,000 1,000
Equivalent units 36,000 32,000
Compute Equivalent
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Summarize and Assign Total
Materials $ 2,350
Conversion 5,200
Materials $ 84,050
Conversion 62,000
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Summarize and Assign Total Costs (Steps 4 and 5)
This step distributes the department’s costs to units
transferred out: 31,000 units × $4.50 = $139,500
And to units in ending work in process inventory:
$12,000 + $2,100 = $14,100
Summarize and Assign Total Costs (Steps 4 and 5)
Costs transferred out:
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Journalizing: Weighted-Average
Assembly Department?
Accounts Payable Control 84,050
Work in Process, Assembly 62,000
Various accounts 62,000
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Journalizing: Weighted-Average
To record cost of goods completed and transferred
from Assembly to Finishing during the period
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Key T-Account:
Beg. Inv. 7,550 Transferred
Materials 84,050 to Finishing
Learning Objective 6
method of process costing.
Compute Equivalent
Materials Conversion
Ending inventory 5,000 1,000
the weighted-average method.
Compute Equivalent
36,000 32,000
Equivalent units 35,000 31,400
Compute Equivalent
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Summarize and Assign Total
Work in process beginning inventory: $ 7,550
Current costs:
Material 84,050
Conversion 62,000
Total $153,600
Summarize and Assign Total
Costs transferred out:
From current production:
30,000 × $4.375 131,250
Summarize and Assign Total
Materials: 5,000 × $2.40 $12,000
Summarize and Assign Total
Costs transferred out $139,590
$153,565
Costs transferred out $139,625
Key T-Account: FIFO
Beg. Inv. 7,550 Transferred
Materials 84,050 to Finishing
Comparison of Weighted-Average and FIFO Methods
Weighted
Work in process,
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Learning Objective 7
Incorporate standard costs
Standard-Costing Method
Assume that actual materials cost is $84,050
and standard materials cost is $84,250
What are the journal entries in the
Assembly Department?
Standard-Costing Method
production during the period and variances
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Learning Objective 8
Apply process-costing methods
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Transferred-In Costs
Weighted-Average Example
4,000 units (60% materials) (25% conversion)
Ending work in process inventory:
2,000 units (100% materials) (40%) conversion)
31,000 units transferred-in from Assembly.
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Physical Units (Step 1)
35,000
Compute Equivalent
Ending inventory 2,000
performed in the Assembly Department.
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Compute Equivalent
Transferred to finished goods 33,000
Ending inventory (100%) 2,000
Compute Equivalent
(ending inventory 2,000):
Ending inventory (40%) 800
Compute Equivalent
Finishing Department:
Assembly Department $30,200
Direct materials 9,400
Conversion costs 8,000
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Compute Equivalent
are as follows:
Compute Equivalent
in from the Assembly Department $139,500)
÷ 35,000 units $4.85
Summarize and Assign Total
Total costs in beginning inventory $ 47,600
Current costs in Finishing Department 191,920
$239,520
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Summarize and Assign Total
Costs in work in process ending inventory:
Transferred-in costs: 2,000 × $4.85 $ 9,700
Direct materials: 2,000 × $0.55 1,100
Conversion: 2,000 × 40% × $1.50 1,200
Total cost in ending inventory $12,000
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Summarize and Assign Total
Costs transferred to finished goods inventory:
33,000 × $6.90 $227,700
$12,000 – $180 rounding error 11,820
Total $239,520
T-Account Finishing Department
Transferred-in 139,500 Finished Goods
Transferred-In Costs
FIFO Method
as in weighted-average.
Beginning inventory 4,000
35,000
Ending inventory 2,000
Compute Equivalent Units
FIFO (Step 2)
From beginning work in process 0
Started and completed 29,000
Total equivalent units 31,000
Compute Equivalent Units
FIFO (Step 2)
Ending work in process inventory 2,000
Total 35,000
Equivalent units 31,000
performed in the Assembly Department.
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Compute Equivalent Units
FIFO (Step 2)
From beginning work in process 1,600
Started and completed 29,000
Total equivalent units 32,600
Compute Equivalent Units
FIFO (Step 2)
(beginning inventory 4,000):
Ending inventory (100%) 2,000
Compute Equivalent Units
FIFO (Step 2)
From beginning work in process 3,000
Started and completed 29,000
Total equivalent units 32,800
Compute Equivalent Units
FIFO (Step 2)
inventory 4,000, ending inventory 2,000):
Transferred to finished goods 33,000
Ending inventory (40%) 800
Compute Equivalent Unit Costs
Conversion: $42,640 ÷ 32,800 1.30
Total unit cost $6.10
Summarize and Assign Total
Costs to account for:(same as weighted-average) $239,610
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Summarize and Assign Total
Work in process ending inventory:
Transferred-in: 2,000 × $4.50 $ 9,000
Conversion: 800 × $1.30 1,040
Summarize and Assign Total
Costs transferred out:
Summarize and Assign Total
Total costs transferred out:
From beginning inventory $ 51,980
Total $228,880
Summarize and Assign Total
Total costs accounted for:
Transferred to finished goods:
Rounding error 90
Summarize and Assign Total
Costs to account for $239,610
Work in process ending inventory – 10,640
Transferred to finished goods $228,970
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End of Chapter 17