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Accounting 212 Ch. 4 Notes

by: Erin Morris

Accounting 212 Ch. 4 Notes 212

Marketplace > Radford University > Accounting > 212 > Accounting 212 Ch 4 Notes
Erin Morris
Fundamentals of Managerial Accounting
Dr. Helen Roybark

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Fundamentals of Managerial Accounting
Dr. Helen Roybark
Class Notes
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This 4 page Class Notes was uploaded by Erin Morris on Thursday February 18, 2016. The Class Notes belongs to 212 at Radford University taught by Dr. Helen Roybark in Spring 2016. Since its upload, it has received 35 views. For similar materials see Fundamentals of Managerial Accounting in Accounting at Radford University.


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Date Created: 02/18/16
Chapter 4 Notes Process Costing The difference between Job Costing and Process Costing is that job costing is for unique jobs and process costing is for uniform things like paperclips or staples Also Process Costing is based on costs accumulating across departments Job is to unique as Process is to department For Process Costing by department remember that the output of one department is the input for the next department and so on and that the manager for each department is only responsible for hisher own department The equation to remember is 0 Beginning Inventory BI what comes in in Amount Available avail O Avail Ending Inventory E1 what goes out out 0 OR 0 BI In Avail EI Out Now that we have the basics let s check out equivalent units Equivalent Units is the number of complete units that could have come from the partially completed units Equivalent Units are calculated by multiplying the number of partially completed units by the percentage of completion because we use the weightedaverage method 0 The following example will be used throughout the notes 0 BI 15 In 24 which means Avail must equal 39 we have 8 units in E1 so 31 units must have gone Out 15 24 39 8 31 0 The units in El are only 50 complete therefore the equivalent units EUs in E1 is 4 0 If the EUs in E1 is 4 then the total completed units would be 35 because 31 complete units went Out and there was an equivalent of 4 completed units in E1 An extremely important thing to remember about equivalent units is that anything in BI that is incomplete we do NOT calculate equivalent units for We have to include the BI amount in the equation above but NEVER calculate equivalent units for BI when using the weightedaverage method which is what we are using So to repeat this VERY IMPORTANT NOTE if there are percentages with the BI we IGNORE them This bullet point is something that is a recap from a previous chapter but Prime Costs are Direct Materials DM and Direct Labor DL and Conversion Costs are DL and Overhead OH DM are the raw components and we need DL and OH to convert these DM to a finished product 0 The previous 2 points are important because you may be asked to compute the equivalent units for materials andor the equivalent units for conversion sooo you kinda need to know the difference between Materials and Conversion Costs 0 So given that last point here is an example 0 In the example above those 8 units were 50 completed let s pretend for a second that they are 50 completed in regards to materials and 50 completed in regards to conversion First we ll check out the Materials EUs which would be 8 x 5 31 35 Next we ll check out the Conversion EUs which would be 8 x 5 31 35 0 Now I m just gonna throw this out there normally the numbers are gonna be 00 higher and the percentages are gonna be different but they re all calculated the same so just know that you take the number of partially complete units and multiply it by the percentage given for what you are trying to find materials or conversion and then add that answer to the number of units that went Out and it ll give you the total number of completed units for each one materials or conversion that is 0 I hope all that made sense but just in case it didn t here are some problems from the book and how to do them 1 What is the total cost per equivalent unit using the weightedaverage method a We are given that the Total Cost overall is 3600 and the Number of Equivalent units is 30 b 3600 divided by 30 units 120 per equivalent unit 2 What is the cost of the units that are being transferred Out to the next department And how much cost is staying in E1 a We know that 26 units were completed and sent Out we know that 8 units are left in E1 and are 50 complete and that the cost per EU is 120 which we calculated in 1 b The cost of units that are being transferred Out is calculated by multiplying the number of completed units by the cost per EU which in this case would be 26 x 120 3120 c The cost of units staying in E1 is calculated by finding the number of EUs and multiplying that by the cost per EU which in this case would be 8 x 5 x 120 4 x 120 480 d If you want to check your work add your completed units and your EUs from b and c and you should get 30 which is the number of EUs in the first question then add your final answers from b and c and you should get 3600 which is the total from the first question not all questions overlap like this but we re using the same information for these first 2 The following information is used for the next 12 questions they all kind of go together BI 28000 BI 5000 lbs Materials 120000 In 37500 lbs DL 79500 Avail 42500 lbs OH 97000 El 8000 lbs Total 324500 Out 34500 lbs The B1 of 28000 is 16000 of materials cost and 12000 in conversion cost The 8000 lbs in E1 is 100 complete with respect to materials and 40 complete with respect to conversion 3 How many units were completed and transferred to finished goods during the period a This information is provided in the equation above the answer is the Out portion so the answer is 34500 lbs b The question is asking how many goods went Out so again it is important to remember the equation 4 Compute the EUs of production for materials a 100 of materials were used therefore the answer to this is the number of units available BI In in this case the answer is 42500 lbs 5 Compute the EUs of production for conversion a In this question we have to calculate the number of EUs taking into account that 8000 lbs of the Avail were only 40 complete and that the rest of the 42500 lbs is shown in the Out section and that these 34500 lbs are complete b First we find the EUs in E1 which would be 8000 X 4 3200 lbs c Then to get the total EUs of production for conversion we add the 3200 lbs of EUs in E1 to the completed units in the Out section which would be 3200 lbs 34500 lbs 37700 lbs 6 What is the amount of the cost of beginning work in process inventory plus the cost added during the period for materials a We know from the given information that the Beginning work in process for materials is 16000 and the materials cost added in the equation above is 120000 to get the answer simply add these 2 amounts b 16000 120000 136000 7 What is the amount of the cost of beginning work in process inventory plus the cost added during the period for conversion a This question is the same as 6 except that the amounts are for the conversion costs We know that the Beginning is 12000 and the 2 conversion costs that were added are DL and OH 79500 and 97000 respectively the answer is the sum of these 3 costs b 12000 79500 97000 188500 8 What is the cost per equivalent unit for materials a We calculated the total cost in 6 136000 and we know from 4 that there are 42500 EUs for materials so to get the cost per EU simply divide the total cost by the total EUs b 136000 divided by 42500 EUs 320 per unit 9 What is the cost per equivalent unit for conversion a We calculated the total cost in 7 188500 and we know from 5 that there are 37700 EUs for conversion to get cost per EU use method from 8 b 188500 divided by 37700 EUs 500 per unit 10 What is the cost of ending work in process inventory for materials a There are 8000 lbs in E1 because the materials are 100 complete this answer is simply multiplying the material cost per unit which we found in 8 to be 320 per unit by the number of units in E1 b 8000 lbs X 320 25600 11 What is the cost of ending work in process inventory for conversion a This is similar to 10 the difference is that the 8000 lbs in E1 are only 40 converted so we have to find the number of EUs before we can multiply them by the cost per unit we found for conversion in 9 b The number of EUs would be 8000 lbs X 4 3200 lbs c 3200 lbs X 500 16000 12 What is the cost of materials transferred to finished goods a We know from the information given that 34500 lbs were transferred Out so we just multiply that by the cost per unit for materials b 34500 lbs X 320 110400 13 What is the amount of conversion cost transferred to finished goods a Again we know that 34500 lbs were transferred Out so the only difference between this question and 12 is that we use the cost per unit for conversion instead of materials b 34500 lbs X 500 172500 14 What is the total cost to be accounted for What is the total cost accounted for a The total cost to be accounted for is pre and total cost accounted for is post they should be the exact same answer b To calculate the total just add what we got in 6 and 7 because they are the totals for material and conversion c 136000 188500 324500 0 Another way to get this is to add the totals from s 1013 because they are the totals for E1 and Out for both materials and conversion Either way it is simply the total cost of materials and conversion


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