V Materials, Labors and Factory Overhead

are charged to m
m
~

V •he cost assigned to each unit is
determined by dividing the total cost
charged to the cost centers within
departments~
V •he primary requirement: all the
products manufactured must be the same
in terms of resources consumed~
V enerally materials, labors and factory
overhead charged to the producing
departments~
V One department can be a cost center or
one department can contains one or
more cost centers~
V gequential Product Flow
{ ’here a product goes trough same series of steps
V Parallel Product Flow
{ ’here certain portions of the work are done
simultaneously and then brought together in a final
process or proceses for completion and transfer to
Finished oods
V gelective Product Flow
{ ’here the products moves to different departments
within the plants, depending on what final product is
to be produced~
V Material Costs
’ P- A department Rp xxx
’ P- B department xxx
Material nventory Rp xxx
Labor Costs
’ P- A department Rp xxx
’ P- B department xxx
Payroll Rp xxx
FOH Costs
FOH Control Rp xxx
Accounts Payable Rp xxx
Acc~ Depreciation xxx
Prepaid nsurance xxx
Materials (indirect materials) xxx
Payroll (indirect labor) xxx
V Cost of production report is a worksheet
presenting the amount of costs accumulated
and assigned to production during a
specified period~
V t should show:
1) •otal and unit costs of work received from one or more
other departments;
2) •otal and unit cost of materials, labor and FOH added by
department;
3) •he cost of beginning and ending work in process
inventories; and
4) •he cost a suceeding department or to finished goods~
V An equivalent units (EU) is the amount of
a resource (such as materials, labor and
FOH) that is required to complete one
unit of the product~
V Example if 3 units in ending inventory
had 1/3 of the materials then the EU is:
3x1/3= 1 EU of materials~
 d

 

Units in ’ P, beginning inventory 100 180
Units started in Cutting Dept~
00
Units transferred to Assembly Dept~ 00
Units received from Cutting Dept~ 00
Units transferred to Finished oods 80
inventory
Units in ’ P, ending inventory 200 100

Percentage of Completion:
 
 d

 

aterials
0 100
Labors 20 70
FOH 40 70
V Cost Data:
d

 

’ P, beginning inventory: - 8,320
Materials 1,892 830
Labor 400 47
FOH 79
18
Cost added to process during the
current period:
Materials 13,
08 7,29

Labor ,000 9,210
FOH 7,904 11,02
 V n average costing, the cost of each EU contains a
portion of the cost in beginning inventory and a portion
of the cost added during the current period~

V•he average cost per EU for each element of cost is

determined by dividing the total cost for each cost
elements (the amount in beginning inventory plus the
amount added during the current period) by the
number of EU
d





   
EU transferred out 00 00 00
EU in ending inventory 120 40 80
•otal EU
20 40 80

Average cost per EU in Cutting department



   
Cost in beginning 1,892 400 79

nventory
Cost added during the 13,
08 ,000 7,904
current period
•otal cost to accounted for 1,00 ,400 8,700
Divided by total EU
20 40 80
Cost per EU 2 10 1
’ P-Assemby Department $ 2,000
’ P- Cutting Department $2,000*

 $2,000= 00 units(transferred out) x $0 (unit cost)

 g
  
m  



  

   



EU transferred out 80 80 80 80
EU in ending inventory 100 100 100 70
•otal EU
80
80
0
0
Average cost per EU in Cutting department
  

   



Cost in beginning nv~ 8,320 830 47 18

Cost added during the 2,000 7,29
9,210 11,02
current period
•otal cost to accounted 33,320 8,12
9,
8 11,70
Divided by total EU
80
80
0
049
Cost per EU 49 11,9 14,90 17,80
Finished oods nventory $4,317
’ P-Assembly Department $4,317

$4,317 =80 (transferred out) x $ 93~
 (Unit cost)

g
  
m  



V Under F FO, the cost of the first units
transferred out of the department are
deemed to come from beginning inventory
V f the units are not complete at the
beginning of the period, they must be
completed with the current period cost
before they can be transferred out~
V •he balance of the units to be accounted for,
contain only current period cost~
V EU in F FO is;
~ EU of current period cost added to
complete the units in beginning
inventory; plus
~ •he numbers of units started and
completed during the current
period; plus
~ EU in ending inventory