Systems Design: Process Costing: Chapter Four

Systems Design:
Process Costing
Chapter Four
McGraw-Hill/Irwin Copyright © 2008, The McGraw-Hill Companies, Inc.

Similarities Between Job-Order and Process
4-2
Costing
•• Both
Both systems
systems assign material, labor and
overhead
overhead costs
costs to
to products
products and
and they
they provide
provide aa
mechanism
mechanism for
for computing
computing unit
unit product
product cost.
cost.
•• Both
Both systems
systems use the same manufacturing
accounts,
accounts, including
including Manufacturing
Manufacturing Overhead,
Overhead,
Raw
Raw Materials,
Materials, Work
Work in
in Process,
Process, and
and Finished
Finished
Goods.
Goods.
•• The
The flow
flow of
of costs
costs through
through the
the manufacturing
manufacturing
accounts
accounts is
is basically
basically the
the same
same in
in both
both systems.
systems.

Differences Between Job-Order and Process
4-3
Costing
•• Process
Process costing
costing is
is used
used when
when aa single
single product
product is
is
produced
produced onon aa continuing
continuing basis
basis or
or for
for aa long
long period
period of
of
time.
time. Job-order
Job-order costing
costing is
is used
used when
when manymany different
different
jobs
jobs are
are worked
worked onon each
each period.
period.
•• Process
Process costing
costing systems
systems accumulate
accumulate costs
costs by
by
department.
department. Job-order
Job-order costing
costing systems
systems accumulated
accumulated
costs
costs by
by individual
individual jobs.
jobs.
•• Process
Process costing
costing systems
systems compute
compute unit
unit costs
costs by
by
department.
department. Job-order
Job-order costing
costing systems
systems compute
compute unit
unit
costs
costs by
by job
job on
on the
the job
job cost
cost sheet.
sheet.

4-4
Quick Check 
Process costing is used for products that are:

a. Different and produced continuously.
b. Similar and produced continuously.
c. Individual units produced to customer
specifications.
d. Purchased from vendors.

4-5
Quick Check 
Process costing is used for products that are:

a. Different and produced continuously.
b. Similar and produced continuously.
c. Individual units produced to customer
specifications.
d. Purchased from vendors.

4-6
Processing Departments
Any unit in an organization where materials, labor

or overhead are added to the product.
The activities performed in a processing
department are performed uniformly on all
units of production. Furthermore, the output of
a processing department must be
homogeneous.

4-7
Learning Objective 1
Record the flow of

materials, labor, and
overhead through a
process cost system.

4-8
Comparing Job-Order
and Process Costing
Direct
Direct
Materials
Materials
Direct Work in Finished

Finished
Direct Labor
Labor Goods
Process Goods
Manufacturing
Manufacturing Cost
Cost of
of
Overhead
Overhead Goods
Goods
Sold
Sold
4-9
Comparing Job-Order
and Process Costing
Costs
Costs are
are traced
traced and
and
applied
applied to
to individual
individual
Direct
Direct jobs
jobs in
in aa job-order
job-order
Materials
Materials cost
cost system.
system.
Direct Finished
Finished
Direct Labor
Labor Jobs
Jobs Goods
Goods
Manufacturing
Manufacturing Cost
Cost of
of
Overhead
Overhead Goods
Goods
Sold
Sold
4-10
Comparing Job-Order
and Process Costing
Costs
Costs areare traced
traced and
and
applied
applied toto departments
departments
Direct
Direct in
in aa process
process cost
cost
Materials
Materials system.
system.
Direct Processing
Processing Finished
Finished
Direct Labor
Labor Goods
Department
Department Goods
Manufacturing
Manufacturing Cost
Cost of
of
Overhead
Overhead Goods
Goods
Sold
Sold
4-11
T-Account and Journal Entry Views of Cost Flows
For purposes of this example,

assume there are two
processing departments –
Departments A and B.
We will use T-accounts and
journal entries.

4-12
Process Cost Flows
(in T-account form)
Work in Process
Raw Materials Department A
•Direct •Direct
Materials Materials
Work in Process
Department B
•Direct
Materials

4-13
Process Cost Flows
(in journal entry form)
GENERAL JOURNAL Page 4

Post.
Date Description Ref. Debit Credit
Work in Process - Department A XXXXX
Work in Process - Department B XXXXX
Raw Materials XXXXX
To record the use of direct material.

4-14
Process Cost Flows
(in T-account form)
Work in Process
Department A
Wages Payable
•Direct
•Direct Materials
Labor •Direct
Labor
Work in Process
Department B
•Direct
Materials
•Direct
Labor

4-15
Process Costing

Post.
Salaries and Wages Payable XXXXX
To record direct labor costs.

4-16
Process Cost Flows
(in T-account form)
Work in Process
Department A
Manufacturing •Direct
Overhead Materials
•Direct
•Actual •Overhead Labor
Overhead Applied to •Applied
Work in Overhead
Process
Work in Process
Department B
•Direct
Materials
•Direct
Labor
•Applied
Overhead
4-17
Process Costing
(In journal entry form)

Post.
Manufacturing Overhead XXXXX
To apply overhead to departments.

4-18
Process Cost Flows
(in T-account form)
Work in Process Work in Process

Department A Department B
•Direct Transferred •Direct
Materials to Dept. B Materials
•Direct •Direct
Labor Labor
•Applied •Applied
Overhead Overhead
•Transferred
from Dept. A

4-19
Process Costing

Post.
To record the transfer of goods from
Department A to Department B.

4-20
Process Cost Flows
(in T-account form)
Work in Process
Department B Finished Goods
•Direct •Cost of •Cost of
Materials Goods Goods
•Direct Manufactured Manufactured
Labor
•Applied
Overhead
•Transferred
from Dept. A

4-21
Process Costing

Post.
Finished Goods XXXXX
To record the completion of goods
and their transfer from Department B
to finished goods inventory.

4-22
Process Cost Flows
Work in Process
Department B Finished Goods
•Direct •Cost of •Cost of •Cost of
Materials Goods Goods Goods
•Direct Manufactured Manufactured Sold
Labor
•Applied
Overhead
•Transferred
from Dept. A Cost of Goods Sold
•Cost of
Goods
Sold

4-23
Process Costing

Post.
Accounts Receivable XXXXX
Sales XXXXX
To record sales on account.
Cost of Goods Sold XXXXX

Finished Goods XXXXX
To record cost of goods sold.

4-24
Equivalent Units of Production
Equivalent units are the product of the number of

partially completed units and the percentage
completion of those units.
We need to calculate equivalent units because a

department usually has some partially completed units
in its beginning and ending inventory.
4-25
Equivalent Units – The Basic Idea
Two half completed products are

equivalent to one completed product.
+ = 1
So,
So, 10,000
10,000 units
units 70%
70% complete
complete
are
are equivalent
equivalent to
to 7,000
7,000 complete
complete units.
units.
4-26
Quick Check 
For
For the
the current
current period,
period, Jones
Jones started
started 15,000
15,000
units
units and
and completed
completed 10,000
10,000 units,
units, leaving
leaving
5,000
5,000 units
units in process 30 percent complete.
How
How many
many equivalent
equivalent units
units of
of production
production did
did
Jones
Jones have
have for
for the
the period?
period?
a.
a. 10,000
10,000
b.
b. 11,500
11,500
c.
c. 13,500
13,500
d.
d. 15,000
15,000
4-27
Quick Check 
For
For the
the current
current period,
period, Jones
Jones started
started 15,000
15,000
units
units and
and completed
completed 10,000
10,000 units,
units, leaving
leaving
5,000
5,000 units
units in process 30 percent complete.
How
How many
many equivalent
equivalent units
units of
of production
production did
did
Jones
Jones have
have for
for the
the period?
period?
a.
a. 10,000
10,000
10,000 units + (5,000 units × 0.30)
b.
b. 11,500
11,500 = 11,500 equivalent units
c.
c. 13,500
13,500
d.
d. 15,000
15,000
4-28
Calculating Equivalent Units
Equivalent
Equivalent units
units can
can be
be calculated
calculated two
two
ways:
ways:
The
 The First-In,
First-In, First-Out
First-Out Method
Method –– FIFO
FIFO is
is
covered
covered in
in the
the appendix
appendix to
to this
this chapter.
chapter.
The
 The Weighted-Average
Weighted-Average Method
Method –– This
This
method
method will
will be
be covered
covered in
in the
the main
main portion
portion of
of the
the
chapter.
chapter.

4-29
Compute the equivalent

units of production using
the weighted-average
method.

4-30
Equivalent Units of Production
Weighted-Average Method
The weighted-average method . . .

• Makes no distinction between work done in prior
or current periods.
• Blends together units and costs from prior and
current periods.
• Determines equivalent units of production for a
department by adding together the number of
units transferred out plus the equivalent units in
ending work in process inventory.

4-31
Treatment of Direct Labor
Direct
Materials Direct
Direct labor
labor costs
costs
may
may bebe small
small
in
in comparison
comparison to
Dollar Amount
to
Conversion other
other product
product
costs
costs in
in process
process
Direct cost
Labor cost systems.
systems.
Type of Product Cost

4-32
Treatment of Direct Labor
Direct
Materials Direct
Direct labor
labor costs
costs
Conversion
may
may bebe small
small
in
in comparison
comparison to
Dollar Amount
to
other
other product
product
costs
costs in
in process
process
cost
cost systems.
systems.
Type of Product Cost

Direct
Direct labor
labor and
and manufacturing
manufacturing overhead
overhead may
may be
be
combined
combined into
into one
one product
product cost
cost called
called conversion
conversion..
4-33
Weighted-Average Example
Double Diamond Skis reported the following activity in

Shaping and Milling Department for the month of May:
Percent Completed
Shaping and Milling Department Units Materials Conversion
Beginning work in process 200 55% 30%
Units started into production in May 5,000
Units completed during May and 4,800 100% 100%

transferred to the next department
Ending work in process 400 40% 25%

4-34
The first step in calculating the equivalent units is

to identify the units completed and transferred
out of the Department in May (4,800 units)
Materials Conversion
Units completed and transferred
to the next department 4,800 4,800

4-35
The second step is to identify the equivalent units of

production in ending work in process with respect to
materials for the month (160 units) and add this to the
4,800 units from step one.
Work in process, June 30:
400 units × 40% 160
Equivalent units of Production in

during the month of May 4,960

4-36
The third step is to identify the equivalent units of

production in ending work in process with respect to
conversion for the month (100 units) and add this to the
4,800 units from step one.
400 units × 40% 160
400 units × 25% 100
during the month of May 4,960 4,900

4-37
Equivalent
Equivalent units
units of
of production
production always
always equals:
equals:
Units
Units completed
completed and and transferred
transferred
++ Equivalent
Equivalent units
units remaining
remaining inin work
work in
in process
process
400 units × 40% 160
400 units × 25% 100
during the month of May 4,960 4,900

4-38
Materials 5,000 Units Started
Beginning Ending
Work in Process 4,800 Units Started Work in Process
200 Units and Completed 400 Units
55% Complete 40% Complete
4,800 Units Completed

160 Equivalent Units 400 × 40%
4,960 Equivalent units
of production
4-39
Conversion
Conversion 5,000 Units Started
Beginning Ending
4,800 Units Completed

400 × 25%
100 Equivalent Units
of production
4-40
Compute the cost per

equivalent unit using the
weighted-average method.

4-41
Compute and Apply Costs
Beginning
Beginning work
work in
in process:
process: 200
200 units
units
Materials:
Materials: 55%
55% complete
complete $$ 9,600
9,600
Conversion:
Conversion: 30%
30% complete
complete 5,575
5,575
Production
Production started
started during
during May
May 5,000
5,000 units
units
Production
Production completed
completed during
during May
May 4,800
4,800 units
units
Costs
Costs added
added to
to production
production in
in May
May
Materials
Materials cost
cost $$ 368,600
368,600
Conversion
Conversion cost
cost 350,900
350,900
Ending
Ending work
work in
in process
process 400
400 units
units
Materials:
Materials: 40%
40% complete
complete
Conversion:
Conversion: 25%
25% complete
complete

4-42
The formula for computing the cost per equivalent

unit is :
Cost of beginning
Cost per
work in process + Cost added during
equivalent =
inventory the period
unit Equivalent units of production

4-43
Here is a schedule with the cost and equivalent

unit information.
Total
Cost Materials Conversion
Cost to be accounted for:
Work in process, May 1 $ 15,175 $ 9,600 $ 5,575
Costs added in the Shipping
and Milling Department 719,500 368,600 350,900
Total cost $ 734,675 $ 378,200 $ 356,475
Equivalent units 4,960 4,900

Cost per equivalent unit

4-44
Here is a schedule with the cost and equivalent

unit information.
Total
Cost to be accounted for:
Work in process, May 1 $ 15,175 $ 9,600 $ 5,575
Costs added in the Shipping
and Milling Department 719,500 368,600 350,900
Total cost $ 734,675 $ 378,200 $ 356,475

Cost per equivalent unit $ 76.25 $ 72.75
Total cost per equivalent unit = $76.25 + $72.75 = $149.00
$356,475 ÷ 4,900
$378,200 unitsunits
÷ 4,960 = $72.75
= $76.25
4-45
Assign costs to units using

the weighted-average
method.

4-46
Applying Costs
Shaping and Milling Department

Cost of Ending Work in Process Inventory and the Units Transferred Out
Materials Conversion Total
Ending work in process inventory:
Equivalent units of production 160 100
Cost of ending work in process inventory $ 12,200 $ 7,275 $ 19,475
Units completed and transferred out:

Units transferred to the next department 4,800 4,800
Cost of units transferred out $ 366,000 $ 349,200 $ 715,200

4-47
Applying Costs



4-48
Applying Costs



4-49
Computing the Cost of Units Transferred Out



4-50



4-51



4-52
Reconciling Costs

Cost Reconciliation
Costs to be accounted for:
Cost of beginning work in process inventory $ 15,175
Costs added to production during the period 719,500
Total cost to be accounted for $ 734,675
Cost accounted for as follows:

Cost of ending work in process inventory $ 19,475
Cost of units transferred out 715,200
Total cost accounted for $ 734,675

4-53
Reconciling Costs

Cost Reconciliation


4-54
Operation Costing
Operation costing is a hybrid of job-order and

process costing because it possesses
attributes of both approaches
Operation
Operation costing
costing is
is
commonly
commonly usedused when
when
batches
batches of
of many
many
different
different products
products pass
pass
through
through the
the same
same
processing
processing department.
department.

FIFO Method
Appendix 4A

4-56
FIFO vs. Weighted-Average Method
The FIFO method (generally considered more

accurate that the weighted-average method)
differs from the weighted-average method in
two ways:
1. The computation of equivalent units.

2. The way in which the costs of beginning
inventory are treated in the cost
reconciliation report.

4-57
Compute the equivalent

units of production using
the FIFO method.

4-58
Equivalent Units – FIFO Method
Let’s revisit the Double Diamond Skis example.

Assume the following activity is reported in
Shaping and Milling Department for May:
Percent Completed
Shaping and Milling Department Units Materials Conversion
Beginning work in process 200 55% 30%
Units started into production in May 5,000
Units completed during May and 4,800 100% 100%

transferred to the next department
Ending work in process 400 40% 25%

4-59
Step 1:
1 Determine equivalent units needed to complete
beginning inventory.
To complete beginning work in process:
Materials: 200 units × (100% - 55%) 90
Conversion: 200 units × (100% - 30%) 140
Units started and completed during May 4,600 4,600
Ending work in process
Materials: 400 units × 40% complete 160
Conversion: 400 units × 25% complete 100
Equivalent units of production 4,850 4,840

4-60
Step 2:
2 Determine units started and completed during
the period.
Materials: 200 units × (100% - 55%) 90

4-61
Step 3:
3 Add the equivalent units in ending work in
process inventory.
Materials: 200 units × (100% - 55%) 90

4-62
FIFO Example
Materials
Materials 5,000 Units Started
Beginning Ending
200 × 45%
90 Equivalent Units
4,600 Units Completed 400 × 40%
of production
4-63
FIFO Example
Conversion 5,000 Units Started
Beginning Ending
200 × 70%
4,600 Units Completed 400 × 25%
of production
4-64
Equivalent Units: Weighted Average vs. FIFO
As shown below, the equivalent units in beginning inventory are

subtracted from the equivalent units of production per the weighted-
average method to obtain the equivalent units of production under
the FIFO method.
Equivalent units - weighted average method 4,960 4,900
Less equivalent units in beginning inventory:
200 units × 55% 110
200 units × 30% 60
Equivalent units - FIFO method 4,850 4,840

4-65
Compute the cost per

equivalent unit using the
FIFO method.

4-66
Cost per Equivalent Unit - FIFO
Let’s revisit the Double Diamond Skis Shaping and Milling

Department for the Month of May to prepare our production report.
Beginning
Beginning work
work in
in process:
process: 200
200 units
units
Materials:
Materials: 55%
55% complete
complete $$ 9,600
9,600
Conversion:
Conversion: 30%
30% complete
complete 5,575
5,575
$15,
$15, 175
175
Production
Production started
started during
during May
May 5,000
5,000 units
units
Production
Production completed
completed during
during May
May 4,800
4,800 units
units
Costs
Costs added
added toto production
production in
in May
May
Materials
Materials cost
cost $$ 368,600
368,600
Conversion
Conversion cost
cost 350,900
350,900
Ending
Ending work
work inin process:
process: 400
400 units
units
Materials:
Materials: 40%
40% complete
complete
Conversion:
Conversion: 25%
25% complete
complete

4-67
The formula for computing the cost per equivalent

unit under FIFO method is as follows:
Cost per
Cost added during the period
equivalent =
Equivalent units of production
unit

4-68
Total
Costs added in the Shaping
and Milling Department $ 719,500 $ 368,600 $ 350,900
Total cost per equivalent unit = $76.00 + $72.50 = $148.50

4-69
Assign costs to units using

the FIFO method.

4-70
Applying Costs - FIFO
Step 1:
1 Record the equivalent units of production in ending work in
process inventory.

Cost of Ending Work in Porcess Inventory and the Units Transferred Out


4-71
Step 2:
2 Record the cost per equivalent unit.



4-72
Step 3:
3 Compute the cost of ending work in process inventory.



4-73
Cost of Units Transferred Out
Step 1:
1 Record the cost in beginning work in process inventory.

Units transferred out:
Cost in beginning work in process (WIP) $ 9,600 $ 5,575 $ 15,175
Cost to complete beginning WIP:
Equivalent units to complete 90 140
Cost to complete beginning WIP $ 6,840 $ 10,150 $ 16,990
Cost of units started and completed in May
Units started and completed in May 4,600 4,600
Cost of units started and completed in May $ 349,600 $ 333,500 $ 683,100
Cost of units transferred out $ 715,265

4-74
Step 2:
2 Compute the cost to complete the units in beginning
work in process inventory.

4-75
Step 3:
3 Compute the cost of units started and completed this
period.

4-76
Step 4:
4 Compute the total cost of units transferred out.


4-77
Reconciling Costs

Cost Reconciliation


4-78
Reconciling Costs

Cost Reconciliation


4-79
A Comparison of Costing Methods
In a lean production environment, FIFO and

weighted-average methods yield similar
unit costs.
When considering cost control, FIFO is superior

to weighted-average because it does not mix
costs of the current period with costs of the
prior period.

Service Department
Allocations
Appendix 4B

4-81
Operating Departments
An operating department carries out

the central purpose of the organization
The An
Accounting Assembly
Department Department
at your at General
University. Motors.

4-82
Service Departments
A service department does not directly

engage in operating activities.
The The Human

Accounting Resources
at Macys at Walgreens.

4-83
Interdepartmental Services
Service Operating
Costs of the service
department become
overhead costs to
the operating
department

4-84
Allocation Approaches
Direct

Method

Step-Down
Method
Reciprocal 
Method
4-85
Reciprocal Services
Service Service
Department 1 Department 2
When service
departments provide
services to each
other we call them
reciprocal services.

4-86
Allocate service
department costs to
operating departments
using the direct method.

4-87
Direct Method
Service Operating
Interactions Department Department
between service (Cafeteria) (Machining)
departments are
ignored and all
costs are
allocated directly
to operating Service Operating
departments. Department Department
(Custodial) (Assembly)

4-88
Direct Method
Service Department Allocation Base

Cafeteria Number of employees
Custodial Square feet occupied

4-89
Direct Method
How much of the Cafeteria and Custodial costs

should be allocated to each operating department
using the direct method of cost allocation?

4-90
Direct Method
20
$360,000 × = $144,000
20 + 30
Allocation base: Number of employees

4-91
Direct Method
30
$360,000 × = $216,000
20 + 30

4-92
Direct Method
25,000
$90,000 × = $30,000
25,000 + 50,000
Allocation base: Square feet occupied

4-93
Direct Method
50,000
$90,000 × = $60,000
25,000 + 50,000

4-94
To allocate service
department costs to
operating departments
using the step-down
method.

4-95
Step Method
Service Operating
Once a service (Cafeteria) (Machining)
department’s costs
are allocated,
other service
department costs
are not allocated
back to it.
Service Operating

4-96
Step Method
There are three key points to understand

regarding the step method:
 In both the direct and step methods, any amount of
the allocation base attributable to the service
department whose cost is being allocated is always
ignored.
 Any amount of the allocation base that is
attributable to a service department whose cost has
already been allocated is ignored.
 Each service department assigns its own costs to
operating departments plus the costs that have
been allocated to it from other service departments.
4-97
Step Method
We will use the same data used

in the direct method example.
Service Department Allocation Base

Cafeteria Number of employees
Custodial Square feet occupied

4-98
Step Method
Allocate
Allocate Cafeteria
Cafeteria costs
costs first
first since
since
itit provides
provides more
more service
service than
than Custodial.
Custodial.

4-99
Step Method
10
$360,000 × = $60,000
10 + 20 + 30

4-100
Step Method
20
$360,000 × = $120,000
10 + 20 + 30

4-101
Step Method
30
$360,000 × = $180,000
10 + 20 + 30

4-102
Step Method
New total = $90,000 original Custodial cost

plus $60,000 allocated from the Cafeteria.

4-103
Step Method
25,000
$150,000 × = $50,000
25,000 + 50,000

4-104
Step Method
50,000
$150,000 × = $100,000
25,000 + 50,000

4-105
Reciprocal Method
Service Operating
Interdepartmental (Cafeteria) (Machining)
services are given
full recognition
rather than partial
recognition as with
the step method. Service Operating
Because of its mathematical complexity,

the reciprocal method is rarely used.
4-106
Quick Check Data
for Direct and Step Methods
The direct method of allocation is used.

Allocation bases:
Business school administration costs (ADMIN):
Number of employees
Business Administration computer services
(BACS): Number of personal computers
4-107
Quick Check 
How
How much
much cost
cost will
will be
be allocated
allocated from
from
Administration
Administration to
to Accounting?
Accounting?
a.
a. $$ 36,000
36,000
b.
b. $144,000
$144,000
c.
c. $180,000
$180,000
d.
d. $$ 27,000
27,000

4-108
Quick Check 
How
How much
much cost
cost will
will be
be allocated
allocated from
from
Administration
Administration to
to Accounting?
Accounting?
a.
a. $$ 36,000
36,000
b.
b. $144,000
$144,000
c.
c. $180,000
$180,000
d.
d. $$ 27,000
27,000
20
$180,000 × = $36,000
20 + 80
4-109
Quick Check 
How
How much
much total
total cost
cost will
will be
be allocated
allocated from
from
ADMIN
ADMIN andand BACS
BACS combined
combined to to the
the
Accounting
Accounting Department?
Department?
a.
a. $$ 52,500
52,500
b.
b. $135,000
$135,000
c.
c. $270,000
$270,000
d.
d. $$ 49,500
49,500

4-110
Quick Check 
How
How much
much total
total cost
cost will
will be
be allocated
allocated from
from
ADMIN
ADMIN andand BACS
BACS combined
combined to to the
the
Accounting
Department?
a.
a. $$ 52,500
52,500
b.
b. $135,000
$135,000
c.
c. $270,000
$270,000
d.
d. $$ 49,500
49,500
18
$90,000 × = $13,500
18 + 102
4-111
Quick Check Data
The step method of allocation is used.

Allocation bases:
Business school administration costs (ADMIN):
Number of employees
Business administration computer services
(BACS): Number of personal computers
4-112
Quick Check 
How
How much
much total
total cost
cost will
will be
be allocated
allocated from
from
ADMIN
ADMIN andand BACS
BACS combined
combined to to the
the
Accounting
Department?
a.
a. $35,250
$35,250
b.
b. $49,072
$49,072
c.
c. $18,000
$18,000
d.
d. $26,333
$26,333

4-113
Quick Check 
How
How much
much total
total cost
cost will
will be
be allocated
allocated from
from
ADMIN
ADMIN andand BACS
BACS combined
combined to to the
the
Accounting
Department?
a.
a. $35,250
$35,250
b.
b. $49,072
$49,072
c.
c. $18,000
$18,000
d.
d. $26,333
$26,333

4-114
End of Chapter 4

Systems Design: Process Costing: Chapter Four

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Systems Design:

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Process costing is used for products that are:

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Process costing is used for products that are:

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Any unit in an organization where materials, labor

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Record the flow of

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Direct Work in Finished

T-Account and Journal Entry Views of Cost Flows

For purposes of this example,

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GENERAL JOURNAL Page 4

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GENERAL JOURNAL Page 4

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GENERAL JOURNAL Page 4

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Work in Process Work in Process

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GENERAL JOURNAL Page 4

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GENERAL JOURNAL Page 4

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GENERAL JOURNAL Page 4

Cost of Goods Sold XXXXX

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Equivalent Units of Production

Equivalent units are the product of the number of

We need to calculate equivalent units because a

Equivalent Units – The Basic Idea

Two half completed products are

Calculating Equivalent Units

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Compute the equivalent

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The weighted-average method . . .

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Treatment of Direct Labor

Type of Product Cost

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Treatment of Direct Labor

Type of Product Cost

Double Diamond Skis reported the following activity in

Units started into production in May 5,000

Units completed during May and 4,800 100% 100%

Ending work in process 400 40% 25%

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The first step in calculating the equivalent units is

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The second step is to identify the equivalent units of

Equivalent units of Production in

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The third step is to identify the equivalent units of

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