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Job order costing: costs are accumulated and assigned to discrete products and jobs. Process costing: cost are accumulated and averaged in departments and applied to batches/flow of products on equivalent units (assuming labor and overhead are uniformly applied).
WIP Inv. Production Department A Direct Material WIP Inv. Production Department B Finished Goods Inv. Cost of Goods Sold
Direct Labor
Manufacturing Overhead
Direct Labor and MOHA are applied uniformly throughout cookie making process.
Additional DM added at 40% complete to enhance taste and physical characteristics of cookie. Additional DM added at 80% complete for decoration.
Weighted Average Method of Process Costing Steps to Prepare Departmental Production Report
Step 1: Analysis of Physical Flow of Units (Physical units in beginning work in process) + (Physical units started) - (Physical units completed and transferred out) Physical units in ending work in process. Calculation of Equivalent Units (Eq. units of activity in units completed/transferred out) + (Eq. Units of activity in ending work in process) Total equivalent units of activity
Step 2:
Weighted Average Method of Process Costing Steps to Prepare Departmental Production Report
Step 3: Computation of Unit Costs Work in process + Costs incurred during March Total costs to account for
Total costs to account for = Cost per equivalent unit Equivalent Units
Step 4: Analysis of Total Costs Calculate cost of goods complete and transferred out of department. Calculate costs remaining in WIP and then the conversion.