Process costing

Normal process costing actual DL, actual DM, applied overhead

First separate into steps/processes/departments
o Proc 1
DM Requisition - $1000
DL Requisition - $1000
Overhead Requisition - $4000
Total - $6000
o Proc 2
Prior Value - $6000
DM Req - $1000
DL Req - $1000
Overhead - $2000
Total - $10,000
o Proc 3
PV - $10,000
DM - $500
DL - $2000
Overhead - $3000
Total - $15,500
o Finished Goods Inventory
PV - $15,500
If one thousand units manufactured, the products value is
o Proc 1 - $6/unit
o Proc 2 - $10/unit a $4 change
o Proc 3 - $15.50/unit a $5.50 change


Beginning Work in Process - 200 Units - 80% complete for DM, 60% conversion (average stage of
completion)
o DM - $160
o DL - $140
o Over - $480
o Total $780
o Prior Period Costs
Jan 1 1000 units started
o DM - $1000
o DL - $1000
o Over - $4000
o Total - $6000
o Current Period Costs
Jan 31 Work In Process 100 units - 30% Materials, 25% conversion
FIFO or LIFO
o FIFO This period only method (isolate the period of Jan 1 to Jan 31)
Calculating how much it costs to make a circuit board in this month
Cost of production report
How much we spent and how many units
How many units were completed this month? 1100 units
But you cant use that, because there were 200 units that were almost
done
Also, cant use units that were started but not finished


So, use Equivalent Units of Production or Equivalent Hold Units

Materials Beginning WiP (200 Units) * 20% = 40 Units
o Started and Completed = 900 Units
o Ending Work in Progress (100 Units) * 30% = 30 Units
EHU = 970 Units
Conversion BWIP (200) * 40% = 80 Units
o Started & Completed = 900 Units
o Ending WIP (100 units) * 25% = 25 Units
EHU = 1005 Units
COMS Current Period
o Materials Costs = Current Period Costs/EHU = $1000/970 Units
= $1.0309/unit
o Labor Costs = $1000/1005 = $.9950/unit
o Overhead = $4000/1005 = 3.9801/Unit
o Total = $6.006/Unit
Cost of units transferred out
o Of 1200 worked on, 1100 were sent over
200 of the 1100 were different period
On Jan 1, 200 units WIP worth $780
Costs to complete BWIP
DM = 200 * $1.0309 * 20% = $41.236
DL = 200 * $.995 * 40% = $79.6
Overhead = 200 * 3.9801 * 40% = $318.408
Total = $439.244
Completed
900 * 6.006 = $5405.4
Ending WIP
DM = 100 * 1.0309 * 30% = $30.927
DL = 100 * .995 * 25% = $24.875
Over = 100 * 3.9801 * 25% = $99.5025
Total = $155.3045
Total Costs = $6779.9485 = $6780