The Vogel Manufacturing Corporation uses the first-in, first -out mehtod of process costing.

The following date relate to the operations of Department A during the month of July ,2013. Production ( units) Beginning work-in process inventory( 100% complete as to direct materials; 60% complete as to conversion cost) Started in process Transferred to Department B Ending work in process inventory ( 100% complete as to direct materials ;60% complete as to conversion costs) Costs in Beginning inventory $ Direct materials 1680 Direct labor 1400 Factory overhead 1120 Total 4200

1500

5000 5500 1000

Costs added during the month $ Direct materials 10000 Direct labor 8500 Factory overhead 6800 25300

The vogel Manufacturing Corporation Cost of production Report, Department A , FIFO costing method for the month of July, 2013 Section 1 units accouted for :
Beginning units in process Units started in process

Quantities

1500 5000

6500

units accounted for :

5500 1000

6500

Section 2

Equivalent production Direct Conversion material costs 5500 1500 4000 1000 5000 5500 900 4600 600 5200

Computation

Units completed and transferred less:Beginning units in process add: Ending units in process Total equivalent units Section 3

(1500*60%) ( 1000*60%)

WIP

Costs to account for Total cost $ 1680 1400 1120

Equivalent Production

Equivalent unit cost $

Beginning Dt material Dt labor FOH Costs added during the period Direct material Direct labour Factory overhead Total costs accounted for

4200 10000 8500 6800 29500 5000 5200 5200 2 1.635 1.308 4.943

Section 4 Costs to account for Transferred to next department: From Beginning WIP
Direct material cost Direct labor ( 1500*1.635*40%) FOH ( 1500 *1.308*40 %) 4200 981 785

5966

From current production : Units started and completed (4000* $4.493) Total cost transferred to next department Value of ending WIP Direct material ( 1000*$2) Direct labor ( 1000*1.635*60%) FOH( 1000*1.308*60%) Less: rounding difference

19772 25738

2000 981 785

3766 29504 4 29500

The vogel Manufacturing Corporation Cost of production Report, Department A , weighted average costing method for the month of July, 2013 Section 1 units accouted for :
Beginning units in process Units started in process

Quantities

1500 5000

6500

units accounted for :

5500 1000

6500

Section 2

Equivalent production Direct Conversion material costs 5500 5500

Computation

Units completed and transferred

add: Ending units in process Total equivalent units Section 3

1000 6500

600 6100

( 1000*60%)

Costs to account for Total cost 1680 10000 11680 1400 8500

Equivalent Production

Equivalent unit cost

Direct materials: In Beginning WIP Added during the period Direct labor : In Beginning WIP Added during the period FOH In Beginning WIP Added during the period

6500

1.797

6100

1.623

1120 6800 7920 Total costs accounted for 29500 Section 4 Costs to account for Transferred to next department: (5500* 4.719)

6100

1299 4.719

25954

Value of ending WIP Direct material ( 1000*$1.797) Direct labor ( 1000*1.623*60%) FOH( 1000*1.299*60%) Less: rounding difference

1797 974 779

3550 29504 4 29500

Equivalent units : Rarely are all units placed in production during the month completed and sent to the next department by the end of the month. In most cases there will be beginning and ending inventories of work in process at different stages of completion each month. To allocate cost when inventories of partially finished goods exists, all units( beginning WIP and ending WIP) must be expressed in terms of completed units. This is done by means of a common denominator known as equivalent units of production or equivalent production . Two separate equivalent production computations are usually needed, one for direct materials and another for direct labor and factory overhead , known as conversion costs. There are two principal mehtods for costing WIP inventories: Weighted average costing and first in first out costing. There are minor differences in cost report format or procedure; the major difference relates to the way in which the WIP inventories are treated. Weighted Average costing The opening WIP inventory costs are merged with the costs of the new period and a new average cost is obtained. Thus, there is only one average cost for goods completed. Equivalent units under average costing may be computed as follows:
Units completed ( Transferred out plus still on hand) + ( Ending WIP * Degree of completion (%))

FIFO costing The opening WIP costs are separated from additional csots applied in the new period. Thus, there are two units costs for the period; (1) Opening WIP units completed and (2) units started and finished in the same period.
under FIFO, the beginning WIP is assumed to be completed and transferred first. The ending WIP inventory is assumed to be from the goods put into production during the period. Thus, ending WIP is calculated from current period unit costs accourding to degree of completion.

Equivalent units under average costing may be computed as follows:

Example : The following data relate to the activities of Department X during the month of May:
Beginning WIP ( 100% complete as to direct materials, 70% complete as to conv.costs) Goods started in process Units transferred to Dept Y Units completed on hand Ending WIP (100% complete as to direct materials, 60% complete as to conv.costs)

Units
8000 86000 80000 4000 10000

Equivalent production in Dept X for the month , using weighted average method, is computed as follows:

Direct Material % completion Units

Conversion Costs

EQ. PRD.UNITS% completion Units

Units completed and transferred to Dept Y Completed and on hand

100 100

80000 4000

80000 4000

100 100

80000 4000

Add:Ending WIP Equivalent production

100

10000

10000 94000

60

10000

Equivalent production in Dept X for the month , using FIFO method, is computed as follows:

Direct Material
% completion Units EQ. PRD.UNITS

Conversion Costs
% completion Units

Units completed and transferred to Dept Y add:Completed and on hand Less:Beginning WIP

100 100 100

80000 4000 8000

80000 4000 84000 8000 76000

100 100 70

80000 4000 8000

add:Ending WIP Equivalent production

100

10000

10000 86000

60

10000

ates to the way

EQ. PRD.UNITS

80000 4000

6000 90000

EQ. PRD.UNITS

80000 4000 84000 5600 78400

6000 84400

The following data are available for the Blutter Manufacturing company:
Beginning WIP ( 75% complete as to direct materials, 70% complete as to conv.costs) Goods started in process Units transferred out Units completed on hand Ending WIP (100% complete as to direct materials, 40% complete as to conv.costs)

Units
4000 46000 36000 8000 6000

Compute the equivalent units for the Blutter Manufacturing company using the weighted average costing , and FIFO method. Answer: WA FIFO Dt.mat 50000 47000 Con.cost 46400 43400

50000

50000

Problem 1 The Nan Corporation manufactures typewriters and uses a process cost systems to account for the costs. Produciton is done departments and the average costing method is used. The following information is available for you to prepare a cost of prod (a) for Department 1 and (b) for Department 2 Units Beginning units in process: Department 1 : 100% direct materials; 20% complete as to conversion costs Department 2 : 100% direct materials;70 % complete as to conversion costs Started in process during the period: Received from Department 1 Transferred to finished good Ending WIP: Department 1: 100% direct materials; 75% complete as to conversion costs Department 2: 100% direct materials;40% complete as to conversion costs Costs Beginning WIP From proceeding department Direct material Direct labor FOH

Problem 2 Recompute the problem 1 under FIFO costing.

answers

Problem 1 WA method Department 1 Equivalent production Costs accounted for ( section 3 ) : Direct material Direct labor FOH Dt mat conv.cost 51000 48750 Equivalent unit cost 4.078 2.154 1.908 8.14 Cost accounted for ( section 4): Cost transferred to Dept 2 Ending wIP : Direct material Direct labor FOH Less: rounding difference

Problem 1 FIFO method Department 1 Equivalent production Costs accounted for ( section 3 ) Direct material Direct labor FOH

341880 36702 14540 12879

Cost accounted for ( section 4): Cost transferred to Dept 2 From beg WIP :

64121 1 406000

From current production Closing WIP

Department 2 Equivalent production Costs accounted for ( section 3 ) : Direct material Direct labor FOH Dt mat conv.cost 50000 47000 Equivalent unit cost 7.992 3.57446 2.7234 14.28986 Cost accounted for ( section 4): Cost transferred to finished goods Ending wIP : Direct material Direct labor FOH Less: rounding difference Costs from preceding dept: WIP beginning Transferred in during period

Department 2 Equivalent production Costs accounted for ( section 3 )

643044 39960 7149 5447

52556 1 695600

Costs added by department: Direct material Direct labor FOH

Cost accounted for ( section 4)

From beg WIP :

From current production Closing WIP

Less: rounding difference

for the costs. Produciton is done in two e for you to prepare a cost of produciton report

Dept. 1

Dept.2

6000 8000

45000 42000 45000

9000 5000

Dept. 1 $ 0 8000 5000 3000 16000

Dept.2 $ 57720 0 18000 8000 83720

FIFO method Department 1 Equivalent production Costs accounted for ( section 3 ) : Direct material Direct labor Dt mat conv.cost 45000 47550 Equivalent unit cost 4.44444 2.10305 1.89274 8.44023 Cost accounted for ( section 4): Cost transferred to Dept 2 From beg WIP : Direct material Direct labor FOH From current production Closing WIP Direct material Direct labor FOH

16000 10095 9085

35180 303848 339028

40000 14916 12776

66972 406000

Department 2 Equivalent production Costs accounted for ( section 3 ) : Dt mat conv.cost 42000 41400 eq.units Costs from preceding dept: Units Total cost WIP beginning 8000 83720 Transferred in during period 42000 339028 50000 Costs added by department: Direct material Direct labor Equivalent unit cost

42000

8.0721

0 150000 120000

41400 41400

3.6232 2.8986

692748 Cost accounted for ( section 4)

14.5939

From beg WIP : Direct material Direct labor FOH From current production Closing WIP cost from preceding dept Direct labor FOH Less: rounding difference

83720 8696 6956

99372 539974 639346

40361 7246 5797

53404 2 692748