Equivalent Units
What is the basic idea of equivalent units of production?
2 half completed products are equal to 1 complete product
What is Process Costing?
A cost accounting method used by companies that produce large quantities of similar products through a continuous production process.
What is the Weighted Average formula for Process Costing?
Cost per Equivalent Unit=(Beginning Inventory Cost + Current Period Costs)/ Total Equivalent Units
What is Operating Cost?
the expenses a business incurs during its regular operations to generate revenue
How many students are in our class?
20
How do you calculate the equivalent production for units in progress at the end of a period?
multiply the number of partially completed units by their percentage of completion
Cost Per Equivalent Unit Formula
Cost per Equivalent Unit=Total Costs (Materials, Labor, Overhead)/Total Equivalent Units
What is the FIFO formula for Process Costing?
Cost per Equivalent Unit=Current Period Costs/ Equivalent Units of Production for Current Work Done
What does WIP mean?
Work in progress, partially completed products
What Chapter did we just review?
Chapter 5
What is the difference between physical units and equivalent units of production?
Physical units are the total number of units started or completed during the period, regardless of their stage of completion. Equivalent units adjust for the level of completion of partially finished units, representing them as if they were fully completed units. Equivalent units are used to allocate costs accurately.
Equivalent Units of Production (EUP) Formula
Equivalent Units=Units completed+(Ending WIP×%completion)
A company manufactures 15,000 identical chairs. The total production costs are:
Direct Materials: $45,000
Direct Labor: $30,000
Factory Overhead: $15,000
What is the cost per unit using process costing?
$6.00 per unit
What does transferred in costs mean?
Costs incurred in a previous department and transferred to the next department in a multi-stage production process.
What are our names?
Matt and Alex
If 200 units were started, 150 units were completed, and 50 units are 60% complete, how many equivalent units of production are there for conversion costs?
150 (completed) + 30 (in-progress) = 180 equivalent units
Total Cost Assigned Formula
Total Cost Assigned=(Completed Units×Cost per Equivalent Unit)+(WIP Units×Cost per Equivalent Unit×%completion)
A factory's Cutting Department provides the following data:
Beginning WIP: 3,000 units (50% complete)
Units Started: 10,000
Ending WIP: 2,000 units (40% complete)
How many equivalent units of production (EUP) should be calculated for materials and conversion costs?
11,800
What does Conversion Costs mean?
The costs needed to convert raw materials into finished goods
What other amazing class does Professor Song Teach?
Information Syestems
If 1,000 units were started, and 500 are completed and transferred out while 300 are 50% complete, what is the equivalent production for the period?
Total equivalent units for the period: 500 (completed) + 150 (in-progress) = 650 equivalent units.
What are the two methods of Process Costing?
Weighted Average and FIFO
A paint manufacturer incurs the following costs in its Mixing Department:
Beginning WIP: 2,500 gallons (30% complete)
Units Started: 7,500 gallons
Ending WIP: 2,000 gallons (60% complete)
Total Material Costs: $50,000
Total Conversion Costs: $30,000
Using the Weighted Average Method, determine:
Total equivalent units for materials and conversion
Cost per equivalent unit
Total EUP for Materials = 10,000
Total EUP for Conversion = 9,200
Cost per Equivalent Unit for Materials = $5.00
Cost per Equivalent Unit for Conversion = $3.26
What are Normal and Abnormal Losses?
Normal Loss: Expected wastage due to the production process (e.g., evaporation, breakage).
Abnormal Loss: Unexpected loss due to accidents or inefficiencies (e.g., machine failure).
HOW OLD IS GUSTAVO?