Week 3 Video Part 1

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School

Washington State University *

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Course

338

Subject

Accounting

Date

Nov 24, 2024

Type

pdf

Pages

Uploaded by AgentGalaxy781

Process Costing Used when homogeneous products are produced - Each unit has equal manufacturing cost - WIP is tracked by process/departments - Unit cost = department cost for period/output for period - Department production reports are key documents - Complications with Process Costing Ending WIP complicates unit cost Solution: Equivalent units: The full units that could have been completed given the materials/effort expended ○ - Non-uniform application of production costs Solution: Create multiple categories of cost based on when they are added e.g., DM, conversion costs, transferred in costs  ○ - Job Order Costing DM, DL, and applied OH are production costs we account for through jobs Each job has a job order cost sheet and we track these jobs' process in WIP, FG, and COGS ○ - Process Costing Model Still have DM, DL, and applied OH as the costs we're trying to account for but we do this through departments Cost goes through department A, when completed, the cost is transferred to department B which also has its own DM, DL, and applied OH going into it Once done in department B, we send all the accumulated costs from departments A and B to department C which also has its own DM, DL, and applied OH going to it Once done with the product, we transfer all the accumulated costs to FG Inventory □  ○ - Production Report Department X Unit information Physical flow of products ○ Period output in equivalent units ○ - Cost information Compute cost per equivalent unit ○ Value inventories ○ Reconciliation ○ Journal entry ○ - NOTE: each report is for a specific department and period - Accounting Options to prepare production report Weighted-average method - FIFO method - 2 differences between methods How output is computed via equivalent units (FIFO separates BWIP) ○ What costs are included (FIFO: only costs added during the period) (WA: blend of BWIP and current costs) ○ - Quiz Questions Which costing technique is more likely to be used when you mass produce a product? Process costing a. 1. Which two process-costing complications were discussed? Ending work in process a. 2. Guided Notes and Exam Prep Part 1 Saturday, November 4, 2023 10:56 PM Week 3 Page 1

Ending work in process a. Non-uniform application of production costs b. In the class we will prepare production reports using two different methods. What are they? Weighted average method a. FIFO method b. 3. What is the correct definition for equivalent units? The full units that could have been completed given the material and effort expended a. 4. Assume the FIFO method is being used and direct materials are added evenly throughout the period. Also assume that 1000 units are 30% complete with regard to DM at the beginning of the period (i.e., BWIP = 30% complete DM). What are the equivalent units of DMs transferred out from BWIP? Between 400 and 800 (700) a. Week 3 Page 2

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