Accounting II Chapter 18 Notes

7/30/2019 Accounting II Chapter 18 Notes

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Process Manufacturer: produces product that are indistinguishable from each other using a

continuous production process

Process Cost System: The accounting system used by Process Manufactures

Job Cost Systems: the accountings system used by producers who’s products are distinguishable

from one another and make “jobs” of product in batches

Examples:

Job Cost:

Movies Shoes Clothes

Each of these companies produces things that are different than the other things it creates. It

makes the products in batches.

Process Cost:

Oil/Gasoline Chocolate Soda Pop

Each of these companies produce a product continuously that looks taste and feels just like the

last product it produced.

In a process system, the work in process at the end of the period is determined by allocation cost

between completed and partially completed task.



Process Cost Systems Cost Flow

Materials

• Dbt Cost of Materials Purchased

• Credit Materials Used in assembly

Credit Materials Used in Packing

Work in Process- Assembly

• Dbt Materials, DL, Overhead Applied

• Credit Cost of Units Transferred to Packing

Work In Pricess- Testing

• Dbt Cost from Assembly, DL, Overhead Applied

• Credit Cost of Units Transfered to Packing

Work in process

Packing

• Debit Cost from Testing, materials, DL, OverheadApplied

• Credit Completed Goods

Finished Goods

• Debit Cost of Completed Goods

• Credit COGS

COGS

• Credit Cost of Units Sold



# of Units inbeginningInventory

(A)

# of Unitscompleted

(B)

# of Units inending

inventory

(C)

Unit to beassigned

cost

Cost of Production Report

• Step 1: Determine the Units to be assigned Cost

Step 2: Compute Equivalent Cost of Production

o Whole units are the number of units in production during a period weatherfinished or not

o Equivalent Units (for Materials) are determined by multiplying whole units by the

percent of materials added

o Equivalent Units (for Conversion) are determined by multiplying whole units by

the percent of conversion completed

For (A) Percent of conversion is the inverse of % of completion

Step 3: Determine the Cost Per Equivalent Unit

Direct Material Cost Per Equivalent Unit = Total Direct Materials for the Period

Total Equivalent Units for Direct Materials

Conversion Cost Per Equivalent Unit = Total Conversion Cost for the Period

Total Equivalent Units of Conversion Cost

Step 4: Allocate Cost to Units Transferred out and Partially Completed Units

o For materials and conversion each multiplies #of units X percentage ( fount in

step 2) X Equivalent unit cost.

A

B

B



C

Transferred Out = Started and Completed + Inventory in Process (when material is all given in

beginning)

Journal Entries

Material Requisition

WIP - Mixing…………………………………………………… $X,XXXWIP -Packaging………………………………………………… $X,XXX

FOH- Mixing……………………………………………………… $X,XXX

FOH-Packaging…………………………………………………. $X,XXX

Materials…………………………………………………….. $X,XXX

Direct Labor

WIP-Mixing…………………………………………………. $X,XXX

WIP- Packaging…………………………………………… $X,XXX

Wages Payable…………………………………………… $X,XXX

Equipment Depreciation

FOH- Mixing …………………………………………………. $X,XXX

FOH Packaging……………………………………………… $X,XXX

Accumulated Depreciation ……………………….…. $X,XXX

Applying FOH

WIP- Mixing…………………………………………………. $X,XXX

WIP Packaging…………………………………………….. $X,XXX FOH- Mixing………………………………………….….…. $X,XXX

FOH- Packaging …………………………………….……. $X,XXX

Transfer Cost from Mixing to Packaging

WIP- Packaging………………………………….………. $X,XXX

WIP- Mixing………………………………………………. $X,XXX



Transfer Goods out of Packaging to Finished Goods

FG……………………………………………………………. $X,XXX

WIP Packaging…………………………………………. $X,XXX

Selling GoodCOGS……………………………………..………………. $X,XXX

FG………………………………….………………………. $X,XXX

Materials+ WIP Every Department + Finished Goods = Total Inventory



Examples

18-1

a. Materials used by the blending department

WIP Blending $XX,XXX

Materials

Cocoa beans $XX,XXX

Sugar $XX,XXX

Dehydrated Milk $XX,XXX

b. Transfer from Blending to MoldingWIP Molding $XX,XXX

WIP Blending $XX,XXX

c. Transfer from Molding to Packing

WIP Packing $XX,XXX

WIP Molding $XX,XXX

d. Transfer of Box Chocolate to the Distribution Center

Finished Goods $XX,XXX

WIP Packing $XX,XXX

e. Sale of ChocolateCOGS $XX,XXX

Finished Goods $XX,XXX

18-5

Total Whole Units % Added Equivalent Units

Inventory in Process

Beginning

840 0

Started andCompleted

16760* 100% 16760

Transferred out 17600


at the End

940 100% 940

Total Units to be

Assigned Cost

18540 17700



Total Whole Units % Conversion Equivalent Units


Beginning

840 25% 210

Started and

Completed

16760* 100% 16760



at the End

940 25% 235

Total Units to be

Assigned Cost

18540 17205

18-6

Drawing Department ConversionTotal Whole Units % Conversion Equivalent Units


Beginning

5400 60% 3240

Started and

Completed

68600* 100% 68600



at the End

4100 55% 2255

Total Units to be

Assigned Cost

78100 74095

Drawing Department Materials

Total Whole Units % Material Added Equivalent Units


Beginning

5400 0 0

Started and

Completed

68600* 100% 68600


Inventory in Processat the End 4100 100% 4100

Total Units to be

Assigned Cost

78100 72700



Winding Department Conversion

Total Whole Units % Conversion Equivalent Units


Beginning

2200 30% 660

Started and

Completed

71000* 100% 71000



at the End

3000 15% 450

Total Units to be

Assigned Cost

76200 72110

Winding Department Materials

Total Whole Units % Material Added Equivalent Units


Beginning

2200 0 0

Started and

Completed

71000* 100% 71000



at the End

3000 100% 3000

Total Units to be

Assigned Cost

76200 74000

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Accounting II Chapter 18 Notes