Basic Terms
The equivalent units for normal lost when the stage of inspection is made at the end of the process.
100%
In process costing, costs flow from one department to the next until they reach this account.
Finished Goods.
What is the formula to compute equivalent units for materials under weighted average?
Units completed + (Ending WIP × % complete for materials.
What do we call the total cost divided by equivalent units?
EUC
You are given total production costs and equivalent units—what do you compute next?
EUC
This is the term used for partially completed units at the end of a period.
Ending Work in Process
Direct materials are usually added at this point in the production process.
Beginning / start of the process.
If 500 units are 60% complete, how many equivalent units are there?
300 EUP
If total material cost is $10,000 and equivalent units are 2,000, what is the cost per unit?
5
A department started 6,000 units, completed 4,500, and had 1,500 units 60% complete for conversion. Compute the equivalent units for conversion using the weighted average method.
5,400
This costing method averages beginning inventory costs with current period costs.
Weighted Average Method.
When are conversion costs usually added?
Evenly throughout the process.
Which method includes beginning inventory in the computation of equivalent units?
FIFO
Use FIFO: Pets Company adds materials at the beginning of the process in Department C. Data concerning the materials used in March 2024 production are as follows:
Work-in-process at March 1………………..16,000
Started during March……………………………34,000
Completed and transferred to next department during March…..................................36,000
Normal and continuous spoilage incurred…………...................................4,000
Work-in-process at March 31……….......10,000
The equivalent units for the materials unit cost calculation is
30,000
Using FIFO: Beginning inventory = 1,000 units (100% DM, 40% CC); Started = 4,000; Ending = 800 units (100% DM, 50% CC); Costs: DM = $18,000, CC = $10,500. Compute the equivalent units for conversion costs only.
4,200 EUC
The document that summarizes costs for each process and department is called?
Cost of Production Report.
If 10,000 units are started and 7,000 are completed, how many units remain in process?
3,000
Which of the following accounts is credited when abnormal spoilage is recorded.
Work in process.
Why would a company use process costing instead of job order costing?
When products are mass-produced and identical
A company has:
- Beginning WIP: 2,000 units (100% materials, 50% conversion)
- Started: 6,000 units
- Ending WIP: 1,500 units (100% materials, 40% conversion)
- Completed: 6,500 units
Using FIFO, compute the equivalent units of conversion.
7,100 EUP
The cost of normal discrete losses is absorbed by.
Good units/ all units passed the inspection point.
If a cost is incurred in one department but applies to multiple departments, it is allocated based on this.
Cost driver/ allocation base.
There are 1,000 units BWIP and 4,000 units were received from the preceding department in the current period. During the period 3,500 units were transferred to the next department, 1,300 units remain in the ending inventory. All spoilage are expected by the management and were detected at the end of the process. Using WA method what is the EUP of Transferred-in cost.
5,000
Weighted-average method: Beginning WIP = 2,000 units (100% DM, 60% CC); Started = 6,000 units; Completed = 7,000 units; Ending WIP = 1,000 units (100% DM, 40% CC). Total costs: DM = $32,000, CC = $24,000. Compute:
What is the EUC for conversion.
3.24/unit
Using WA:
- Beginning WIP: 1,500 units (DM: 100%, CC: 60%)
- Started: 4,000 units
- Ending WIP: 1,000 units (DM: 100%, CC: 40%)
- Completed: 4,500 units
Costs: DM added = $30,000, CC added = $22,500
Compute total cost transferred out (COGM). Assume cost per equivalent unit: DM = $6, CC = $5.
$49,500