chapter 5 accounting

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For the current period, Jones started 15,000 units and completed 10,000 units, leaving 5,000 units in process 30 percent complete. How many equivalent units of production did Jones have for the period?

10,000 units + (5,000 units × 0.30) = 11,500 equivalent units

Characteristics of the weighted-average method

blends together units and costs from the prior and current periods. equivalent units of production for a department are the number of units transferred to the next department (or finished goods) plus the equivalent units in the department's ending work in process inventory

FIFO method

calculates unit costs based solely on the costs and outputs from the current period

weighted-average method

process costing calculates unit costs by combining costs and outputs from the current and prior periods.

Equivalent Units

product of the number of partially completed units and the percentage completion of those units need to be calculated because a department usually has some partially completed units in its beginning and ending inventories Equivalent units = Number of partially completed units x Percentage completion

Cost per equivalent unit

Cost of beginning Work in Process Inventory + Cost added during the period ------------- / (divided by) Equivalent units of production = Cost per equivalent unit

The Flow of Costs in a Processing Costing System

DM, DL, MO traced to the processing department Work in process - separate account for each department Transferred-in costs - process account to another department

Conversion Costs

Direct labor costs are often small in comparison to the other product costs in process cost systems. direct labor and manufacturing overhead are often combined into one classification of product cost called conversion costs

Calculating Equivalent Units: Examples Assume Department A has 500 units in its ending work in process inventory that are 60% complete with respect to processing in the department

These 500 partially complete units are equivalent to 300 fully complete units (500 × 60% = 300). Department A's ending work in process inventory would contain 300 equivalent units for the period.


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