1. 17 - 1 ©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster Key T-Account: FIFO Work in Process Inventory, Assembly Beg. Inv. 7,550Transferred Materials84,050to Finishing Conversion62,000139,625 Balance13,975

2. 17 - 2 ©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster Comparison of Weighted- Average and FIFO Methods Weighted Average FIFO Difference Costs of units completed and transferred out$139,500$139,625+$125 Work in process, ending 14,100 13,975–$125 Total costs accounted for$153,600$153,600 0

3. 17 - 3 ©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster Learning Objective 7 Incorporate standard costs into a process-costing system.

4. 17 - 4 ©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster Standard-Costing Method of Process-Costing Example Process-costing systems using standard costs usually accumulate actual costs incurred separately from the inventory accounts. Assume that actual materials cost is $84,050 and standard materials cost is $84,250 What are the journal entries in the Assembly Department?

5. 17 - 5 ©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster Standard-Costing Method of Process-Costing Example Direct Materials Control84,050 Accounts Payable Control84,050 Work in Process84,250 Direct Material Variances 200 Direct Materials Control84,050 To record direct materials purchased and used in production during the period and variances

6. 17 - 6 ©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster Learning Objective 8 Apply process-costing methods to cases with transferred-in costs.

7. 17 - 7 ©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster Transferred-In Costs Weighted-Average Example Finishing Department beginning WIP inventory: 4,000 units (60% materials) (25% conversion) Ending work in process inventory: 2,000 units (100% materials) (40%) conversion) 31,000 units transferred-in from Assembly.

8. 17 - 8 ©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster Physical Units (Step 1) Beginning inventory 4,000 Units started in process31,000 35,000 Units completed and transferred to finished goods33,000 Ending inventory 2,000 35,000

9. 17 - 9 ©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster Compute Equivalent Units (Step 2) Equivalent units for transferred-in costs: Transferred to finished goods33,000 Ending inventory 2,000 35,000 Inventory is 100% complete for the work performed in the Assembly Department.

10. 17 - 10 ©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster Compute Equivalent Units (Step 2) Equivalent units for direct materials costs: Transferred to finished goods33,000 Ending inventory (100%) 2,000 35,000

11. 17 - 11 ©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster Compute Equivalent Units (Step 2) Equivalent units for conversion costs (ending inventory 2,000): Transferred to finished goods33,000 Ending inventory (40%) 800 33,800

12. 17 - 12 ©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster Compute Equivalent Unit Costs (Step 3) Assume the following costs in the Finishing Department: Work in process beginning inventory from: Assembly Department$30,200 Direct materials 9,400 Conversion costs 8,000 Total cost in beginning inventory$47,600

13. 17 - 13 ©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster Compute Equivalent Unit Costs (Step 3) Current costs in Finishing Department are as follows: Costs received from the Assembly Department$139,500 Direct materials 9,780 Conversion 42,640 Total$191,920

14. 17 - 14 ©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster Compute Equivalent Unit Costs (Step 3) (Transferred-in costs $30,200 + Costs transferred in from the Assembly Department $139,500) ÷ 35,000 units$4.85 (Direct materials $9,400 + $9,780) ÷ 35,000 units$0.55 (Conversion costs $8,000 + $42,640) ÷ 33,800 units$1.50 Total unit cost$6.90

15. 17 - 15 ©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster Summarize and Assign Total Costs (Steps 4 and 5) Total costs in beginning inventory$ 47,600 Current costs in Finishing Department 191,920 $239,520 Costs to account for: $47,600 + $ 191,920 =$239,520

16. 17 - 16 ©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster Summarize and Assign Total Costs (Steps 4 and 5) Costs in work in process ending inventory: Transferred-in costs: 2,000 × $4.85$ 9,700 Direct materials: 2,000 × $0.55 1,100 Conversion: 2,000 × 40% × $1.50 1,200 Total cost in ending inventory$12,000

17. 17 - 17 ©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster Summarize and Assign Total Costs (Steps 4 and 5) Costs to account for:$239,520 Costs transferred to finished goods inventory: 33,000 × $6.90$227,700 Costs in ending work in process inventory: $12,000 – $180 rounding error 11,820 Total$239,520

18. 17 - 18 ©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster T-Account Finishing Department Work in Process Inventory, Finishing Beg. Inv. 47,600Transferred to Transferred-in139,500Finished Goods Materials 9,780 227,700 Conversion 42,640 Balance 11,820

19. 17 - 19 ©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster Transferred-In Costs FIFO Method The physical units (Step 1) is the same as in weighted-average. Beginning inventory 4,000 Units started in process31,000 35,000 Units transferred to finished goods33,000 Ending inventory 2,000 35,000

20. 17 - 20 ©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster Compute Equivalent Units FIFO (Step 2) Equivalent units for transferred-in costs: From beginning work in process0 Started and completed29,000 Work in process, ending (100%) 2,000 Total equivalent units31,000

21. 17 - 21 ©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster Compute Equivalent Units FIFO (Step 2) Equivalent units for transferred-in costs: Transferred to finished goods33,000 Ending work in process inventory 2,000 Total35,000 Beg. work in process inventory – 4,000 Equivalent units31,000 Inventories are 100% complete for the work performed in the Assembly Department.

22. 17 - 22 ©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster Compute Equivalent Units FIFO (Step 2) Equivalent units for materials costs: From beginning work in process 1,600 Started and completed29,000 Work in process, ending (100%) 2,000 Total equivalent units32,600

23. 17 - 23 ©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster Compute Equivalent Units FIFO (Step 2) Equivalent units for material costs (beginning inventory 4,000): Transferred to finished goods33,000 Ending inventory (100%) 2,000 Total35,000 Beginning inventory (60%)–2,400 Equivalent units32,600

24. 17 - 24 ©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster Compute Equivalent Units FIFO (Step 2) Equivalent units for conversion costs: From beginning work in process 3,000 Started and completed29,000 Work in process, ending (40%) 800 Total equivalent units32,800

25. 17 - 25 ©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster Compute Equivalent Units FIFO (Step 2) Equivalent units for conversion costs (beginning inventory 4,000, ending inventory 2,000): Transferred to finished goods33,000 Ending inventory (40%) 800 Total33,800 Beginning inventory (25%)–1,000 Equivalent units32,800

26. 17 - 26 ©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster Compute Equivalent Unit Costs FIFO (Step 3) Cost per equivalent unit: Transferred-in: $139,590 ÷ 31,000$4.50 Direct materials: $9,780 ÷ 32,600 0.30 Conversion: $42,640 ÷ 32,800 1.30 Total unit cost$6.10

27. 17 - 27 ©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster Summarize and Assign Total Costs FIFO (Steps 4 and 5) Current costs in Finishing Department:$192,010 Work in process beginning inventory: 47,600 Costs to account for: (same as weighted-average) $239,610

28. 17 - 28 ©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster Summarize and Assign Total Costs FIFO (Steps 4 and 5) Work in process ending inventory: Transferred-in: 2,000 × $4.50$ 9,000 Direct materials: 2,000 × $0.30 600 Conversion: 800 × $1.30 1,040 Total$10,640

29. 17 - 29 ©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster Summarize and Assign Total Costs FIFO (Steps 4 and 5) Costs transferred out: From beginning inventory:$47,600 Direct materials added: 4,000 × 40% × $0.30 480 Conversion costs added: 4,000 × 75% × $1.30 3,900 Total$51,980

30. 17 - 30 ©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster Summarize and Assign Total Costs FIFO (Steps 4 and 5) Total costs transferred out: From beginning inventory$ 51,980 From current production: 29,000 × $6.10 176,900 Total$228,880

31. 17 - 31 ©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster Summarize and Assign Total Costs FIFO (Steps 4 and 5) Total costs accounted for: Transferred to finished goods: $176,900 + $51,980$228,880 Work in process ending inventory 10,640 Rounding error 90 Total$239,610

32. 17 - 32 ©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster Summarize and Assign Total Costs FIFO (Steps 4 and 5) Costs to account for$239,610 Work in process ending inventory – 10,640 Transferred to finished goods$228,970

33. 17 - 33 ©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster End of Chapter 17