PAMANTASAN NG LUNGSOD NG VALENZUELA

JUNIOR PHILIPPINE INSTITUTE OF ACCOUNTANTS

ATE-KUYA SYSTEM 2019: COST ACCOUNTING

PROCESS COSTING: AVERAGE METHOD and FIFO METHOD

AVERAGE COSTING
- Combines rather than separates completed units from beginning WIP and from new production
- All the completed units are given 100% EUP regardless of stage of completion of the beginning
WIP
-The Average unit cost = Cost of each category + cost incurred for that category in current month
/ WIP
-Both completed units and EIP are valued using same average cost

FIFO
-Beginning WIP is presented separately from units started in the current month.
-Units in process at the beginning are assumed to have been completed first
-Work done on the beginning WIP last month is kept separated from the work done during the
current month.
- 2 EUP for completed units are computed: (1) units in process beg (2) Units in process
- Cost incurred in the current month and units produced in the current month are used to compute
equivalent unit cost.

COMPREHENSIVE ILLUSTRATION #1
Computation of EUP Average of FIFO
Cutting Dept
Beg 5 000
Started in process 20 000
Transferred 18 000
WIP, End 7 000
Beg End
Materials 40% 80%
REQUIREMENT: Compute EUP using Average and FIFO Method assuming materials are
added at the beginning of the process.

COMPREHENSIVE ILLUSTRATION #2
The following are information related to the operation of LMN Company for the month of
August 2016
UNITS
WIP , Beg 40% Complete 1 000
Received from Dept 1 8 000
Completed and Transferred 8 200
WIP, end 20% Complete 800
COSTS -Beginning Inventory
From Department A 13 500
Materials 9 000
CC 5 036
COSTS incurred during the month
From Department A 81 000
Materials 72 000
CC 83 580
 PAMANTASAN NG LUNGSOD NG VALENZUELA
JUNIOR PHILIPPINE INSTITUTE OF ACCOUNTANTS
ATE-KUYA SYSTEM 2019: COST ACCOUNTING

Department adds all materials at the beginning of process.

Prepare cost of production report and journal entries for the following scenario
1. Using Average Method
2. Using FIFO Method

COMPREHENSIVE ILLUSTRATION #3
CUTTING Department reported the following:
Date Explanation DR. CR, Balance
Jan 31 Materials 77 280
Labor 95 616
FOH 156 632
Transferred to 264 480
Feb 28 Materials 69 944
Labor 82 416
FOH 133 886
Production report for the month is as follows:
Cutting Dept Assembly Packaging
Beg 3 760 970 2 720
Started in process 11 160 9 600 9 470
Transferred 9 600 9 470 6 470
WIP, End 3 760 1 100 5 820
Beg End Beg End Beg End
Materials 100% 100% 60% 55% 0% 0%
Labor 40% 45% 60% 55% 20% 20%
Overhead 55% 55% 60% 55% 15% 15%

ASSEMBLY Department reported the following:

Date Explanation DR. CR, Balance
Feb 28 Materials 23 128
Labor 70 638
FOH 74 735
PACKAGING Department reported the following:
Date Explanation DR. CR, Balance
Feb 28 Materials 2 560
Labor 20 480
FOH 16 885
Requirements: Using AVERAGE and FIFO METHOD
1. Compute the Equivalent Units of Production for each department.
2. Prepare a Cost of Production report for each department.
3. Prepare the Journal entry for each department.