Fundamental-Accounting-Principles-(20)

ProcessCostingChapter20PowerPointEditor:BethKane,MBA,CPACopyright©2015McGraw-HillEducation.Allrightsreserved.NoreproductionordistributionwithoutthepriorwrittenconsentofMcGraw-HillEducation.20-C1:ProcessOperations2Usedforproductionofsmall,identical,low-costitems.Massproducedinautomatedcontinuousproductionprocess.Costscannotbedirectlytracedtoeachunitofproduct.ProcessOperationsC1320-A1:ComparingProcessandJobOrderCostingSystems4ComparingJobOrderandProcessOperationsJobOrderSystemsCustomordersHeterogeneousproductsLowproductionvolumeHighproductflexibilityLowtomediumstandardizationProcessSystemsRepetitiveoperationsHomogeneousproductsHighproductionvolumeLowproductflexibilityHighstandardizationA15ComparingJobOrderandProcessOperationsA16NEED-TO-KNOWCompletethefollowingtablewitheitherayesornoregardingtheattributesofjoborderandprocesscostingsystems.JobOrderProcessUsedirectmaterials,directlabor,andoverheadcostsYesYesUsejobcostsheetstoaccumulatecostsYesNoTypicallyuseseveralWorkinProcessInventoryaccountsNoYesYieldacostperunitofproductYesYesA1720-C2:EquivalentUnitsofProduction8EquivalentUnitsofProduction(EUP)C2EUPmustbecalculatedfortheWorkinProcessaccount.9EUPforMaterialsandConversionCostsC210WeightedAverageversusFIFOC2versusFIFOWeightedAverage1120-C3:ProcessCosting12ProcessCostingIllustrationGenXusesaweightedaveragecostflowsystemwiththefollowingfoursteps:Determinephysicalflowofunits.Computeequivalentunitsofproduction.Computecostperequivalentunit.Assignandreconcilecosts.C313OverviewofGenXCompany’sProcessOperationC314ProcessOperations–GenXC315Step1:DeterminePhysicalFlowofUnitsC316Step2:ComputeEquivalentUnitsofProductionC317NEED-TO-KNOWAdepartmentbeganthemonthwith8,000unitsinworkinprocessinventory.Theseunitswere100%completewithrespecttodirectmaterialsand40%completewithrespecttoconversion.Duringthemonth,thedepartmentstarted56,000unitsandcompleted58,000units.Endingworkinprocessinventoryincludes6,000units,100%completewithrespecttodirectmaterialsand70%completewithrespecttoconversion.Usetheweighted-averagemethodofprocesscostingto:1.Computethedepartment’sequivalentunitsofproductionforthemonthfordirectmaterials.64,0002.Computethedepartment’sequivalentunitsofproductionforthemonthforconversion.62,200BeginningUnits8,000Started56,000TotalUnits64,000Transferredout58,000EndingUnits6,000WorkinProcessInventory-UnitsUnitsinBeginningInventory8,000Unitscompletedandtransferredout58,000UnitsStarted56,000UnitsinEndingInventory6,000TotalUnitstoAccountFor64,000TotalUnitsAccountedFor64,000PhysicalUnitsMaterialsConversionMaterialsConversionTransferredout58,000100%100%58,00058,000EndingInventory6,000100%70%6,0004,200Totalunits64,00064,00062,200%CompletionEUPUnitsSchedule(PhysicalFlowReconciliation)C318Step3:ComputeCostperEquivalentUnitC319Step4:AssignandReconcileCostsC320NEED-TO-KNOWAdepartmentbeganthemonthwithconversioncostsof$65,000initsbeginningworkinprocessinventory.Duringthemonth,thedepartmentincurred$55,000ofconversioncosts.Equivalentunitsofproductionforconversionforthemonthwas15,000units.Thedepartmentcompletedandtransferred12,000unitstothenextdepartment.1.Computethedepartment’scostperequivalentunitforconversionforthemonth.2.Computethedepartment’sconversioncostofunitstransferredtothenextdepartmentforthemonth.EUPCostAllocatedConversionperEUPCostTransferredout12,000$8.00$96,000EndingInventory3,000$8.0024,000Totalunits15,000$120,000BeginningInventory65,000DLandOH55,000120,000Transferredout96,000EndingInventory24,000CostperEquivalentUnit$120,00015,000$8.00perequivalentunitofconversionTotalEUPWorkinProcessInventoryCumulativeCosts$8.00$96,000C321ProcessCostSummaryC322CostDataForGenXC32320-P1:AccountingforMaterialsCosts24AccountingforMaterialCostsP12520-P2:AccountingforLaborCosts26AccountingforLaborCostsP22720-P3:AccountingforFactoryOverhead28AccountingforFactoryOverheadP329NEED-TO-KNOWTowerMfg.estimatesitwillincur$200,000oftotaloverheadcostsduringtheyear.Towerallocatesoverheadbasedonmachinehours;itestimatesitwilluseatotalof10,000machinehoursduringtheyear.DuringFebruary,theassemblydepartmentofTowerMfg.uses375machinehours.Inaddition,TowerincurredactualoverheadcostsasfollowsduringFebruary:indirectmaterials,$1,800;indirectlabor,$5,700;depreciationonfactoryequipment,$8,000;factoryutilities,$500.1.Computethecompany’spredeterminedoverheadratefortheyear.=$20permachinehourMachineHoursUsedAssemblyDept.ActualOHIncurredOHAppliedtoProductionFactoryOverhead375hoursxPredeterminedOHratex$20perhour=OHApplied=$7,500OHapplied$200,000EstimatedActivityBase10,000machinehoursPredeterminedOverheadRate=EstimatedOverheadCosts$20permachinehourP330NEED-TO-KNOWTowerMfg.estimatesitwillincur$200,000oftotaloverheadcostsduringtheyear.Towerallocatesoverheadbasedonmachinehours;itestimatesitwilluseatotalof10,000machinehoursduringtheyear.DuringFebruary,theassemblydepartmentofTowerMfg.uses375machinehours.Inaddition,TowerincurredactualoverheadcostsasfollowsduringFebruary:indirectmaterials,$1,800;indirectlabor,$5,700;depreciationonfactoryequipment,$8,000;factoryutilities,$5