4-1

© 2015 McGraw-Hill Education Garrison, Noreen, Brewer, Cheng & Yuen 0

Process Costing

Chapter 9

© 2015 McGraw-Hill Education

Similarities Between Job-Order and Process

Costing

 Both systems assign material, labor and overhead costs

to products and they provide a mechanism for
computing unit product costs.
 Both systems use the same manufacturing accounts,
including Manufacturing Overhead, Raw Materials, Work
in Process, and Finished Goods.
 The flow of costs through the manufacturing accounts
is basically the same in both systems.

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Differences Between Job-Order and Process

Costing
 Process costing is used when a single product is
produced on a continuing basis or for a long period of
time. Job-order costing is used when many different jobs
having different production requirements are worked on
each period.
 Process costing systems accumulate costs by department
or process. Job-order costing systems accumulated costs
by individual jobs.
 Process costing systems compute unit costs by
department or process. Job-order costing systems
compute unit costs by job on the job cost sheet.
© 2015 McGraw-Hill Education Garrison, Noreen, Brewer, Cheng & Yuen 3

Quick Check 

Process costing is used for products

that are:
a. Different and produced continuously.
b. Similar and produced continuously.
c. Individual units produced to customer
specifications.
d. Purchased from vendors.

© 2015 McGraw-Hill Education Garrison, Noreen, Brewer, Cheng & Yuen 4

Processing Departments

Any unit in an organization where materials, labor

or overhead are added to the product.
The activities performed in a processing
department are performed uniformly on all
units of production. Furthermore, the output of
a processing department must be homogeneous.
Products in a process costing environment
typically flow in a sequence from one department
to another.

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Learning Objective 1

Record the flow of

materials, labor, and
overhead through a
process costing system.

© 2015 McGraw-Hill Education Garrison, Noreen, Brewer, Cheng & Yuen 6

Comparing Job-Order and Process Costing

Direct
Materials

Direct Labor Work in Finished

Process Goods

Manufacturing Cost of
Overhead Goods
Sold

© 2015 McGraw-Hill Education Garrison, Noreen, Brewer, Cheng & Yuen 7

Comparing Job-Order and Process Costing

Costs are traced and
applied to individual
Direct jobs in a job-order
Materials cost system.

Direct Labor Finished

Jobs Goods

Manufacturing Cost of
Overhead Goods
Sold

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Comparing Job-Order and Process Costing

Costs are traced and
applied to departments
Direct in a process cost
Materials system.

Processing Finished
Direct Labor
Department Goods

Manufacturing Cost of
Overhead Goods
Sold

© 2015 McGraw-Hill Education Garrison, Noreen, Brewer, Cheng & Yuen 9

T-Account and Journal Entry Views of

Process Cost Flows

For purposes of this example, assume

there are two processing departments –
Departments A and B.
We will use T-accounts and journal
entries.

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Process Cost Flows: The Flow of Raw

Materials (in T-account form)
Work in Process
Raw Materials Department A
•Direct •Direct
Materials Materials

Work in Process
Department B
•Direct
Materials

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Process Cost Flows: The Flow of Raw

Materials (in journal entry form)

GENERAL JOURNAL Page 4

Post.
Date Description Ref. Debit Credit
Work in Process - Department A XXXXX
Work in Process - Department B XXXXX
Raw Materials XXXXX
To record the use of direct material.

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Process Cost Flows: The Flow of Labor

Costs (in T-account form)
Salaries and Work in Process
Wages Payable Department A
•Direct
•Direct Materials
Labor •Direct
Labor

Work in Process
Department B
•Direct
Materials
•Direct
Labor

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Process Costing: The Flow of Labor Costs

(in journal entry form)

GENERAL JOURNAL Page 4

Post.
Date Description Ref. Debit Credit
Work in Process - Department A XXXXX
Work in Process - Department B XXXXX
Salaries and Wages Payable XXXXX
To record direct labor costs.

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Process Cost Flows: The Flow of Manufacturing

Overhead Costs (in T-account form)
Work in Process
Department A
Manufacturing •Direct
Overhead Materials
•Direct
•Actual •Overhead Labor
Overhead Applied to •Applied
Work in Overhead
Process
Work in Process
Department B
•Direct
Materials
•Direct
Labor
•Applied
Overhead

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Process Cost Flows: The Flow of Manufacturing

Overhead Costs (in journal entry form)

GENERAL JOURNAL Page 4

Post.
Date Description Ref. Debit Credit
Work in Process - Department A XXXXX
Work in Process - Department B XXXXX
Manufacturing Overhead XXXXX
To apply overhead to departments.

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Process Cost Flows: Transfers from

WIP-Dept. A to WIP-Dept. B (in T-account form)

Work in Process Work in Process

Department A Department B
•Direct Transferred •Direct
Materials to Dept. B Materials
•Direct •Direct
Labor Labor
•Applied •Applied
Overhead Overhead
•Transferred
from Dept. A

Department Department
A B

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Process Cost Flows: Transfers from WIP-Dept.

A to WIP-Dept. B (in journal entry form)

GENERAL JOURNAL Page 4

Post.
Date Description Ref. Debit Credit
Work in Process - Department B XXXXX
Work in Process - Department A XXXXX
To record the transfer of goods from
Department A to Department B.

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Process Cost Flows: Transfers from WIP-Dept.

B to Finished Goods (in T-account form)

Work in Process
Department B Finished Goods
•Direct •Cost of •Cost of
Materials Goods Goods
•Direct Manufactured Manufactured
Labor
•Applied
Overhead
•Transferred
from Dept. A

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Process Cost Flows: Transfers from WIP-Dept.

B to Finished Goods (in journal entry form)

GENERAL JOURNAL Page 4

Post.
Date Description Ref. Debit Credit
Finished Goods XXXXX
Work in Process - Department B XXXXX
To record the completion of goods
and their transfer from Department B
to finished goods inventory.

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Process Cost Flows: Transfers from Finished

Goods to COGS (in T-account form)
Work in Process
Department B Finished Goods
•Direct •Cost of •Cost of •Cost of
Materials Goods Goods Goods
•Direct Manufactured Manufactured Sold
Labor
•Applied
Overhead
•Transferred
from Dept. A Cost of Goods Sold

•Cost of
Goods
Sold

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Process Cost Flows: Transfers from Finished

Goods to COGS (in journal entry form)

GENERAL JOURNAL Page 4

Post.
Date Description Ref. Debit Credit
Cost of Goods Sold XXXXX
Finished Goods XXXXX
To record the transfer of finished
goods inventory to cost of goods
sold.

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Equivalent Units of Production

Equivalent units are the product of the number of
partially completed units and the percentage
completion of those units.

We need to calculate equivalent units because a

department usually has some partially completed units
in its beginning and ending inventory. These partially
completed units complicate the determination of a
department’s output for a given period and the unit cost
that should be assigned to that output.
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Equivalent Units – The Basic Idea

Two half completed products are

equivalent to one complete product.

+ = 1

So, 10,000 units 70% complete

are equivalent to 7,000 complete units.

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Quick Check 

For the current period, Jones started 15,000

units and completed 10,000 units, leaving 5,000
units in process 30 percent complete. How
many equivalent units of production did Jones
have for the period?
a. 10,000
b. 11,500
c. 13,500
d. 15,000

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Calculating Equivalent Units

Equivalent units can be calculated

two ways:
The First-In, First-Out Method – FIFO is
covered in the appendix to this chapter.

The Weighted-Average Method – This method

will be covered in the main portion of the chapter.

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Learning Objective 2

Compute the equivalent

units of production using
the weighted-average
method.

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Equivalent Units of Production

Weighted-Average Method

The weighted-average method . . .

1. Makes no distinction between work done in prior
or current periods.
2. Blends together units and costs from prior and
current periods.
3. Determines equivalent units of production for a
department by adding together the number of
units transferred out plus the equivalent units in
ending Work in Process Inventory.

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Treatment of Direct Labor

Direct
Materials
Direct labor costs
may be small
Dollar Amount

Manufacturing in comparison to
Overhead
other product
Direct costs in process
Labor cost systems.

Type of Product Cost

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Treatment of Direct Labor

Direct
Materials
Direct labor and
Conversion
manufacturing
Dollar Amount

Direct overhead may be

Labor
combined into
Direct Manufacturing one classification
Labor Overhead of product
cost called
conversion costs.
Type of Product Cost

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Weighted-Average – An Example

Smith Company reported the following activity in

the Assembly Department for the month of June:
Percent Completed
Units Materials Conversion
Work in process, June 1 300 40% 20%

Units started into production in June 6,000

Units completed and transferred out 5,400

of Department A during June

Work in process, June 30 900 60% 30%

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Weighted-Average – An Example
The first step in calculating the equivalent units is to
identify the units completed and transferred out of
Assembly Department in June (5,400 units)

Materials Conversion
Units completed and transferred
out of the Department in June 5,400 5,400

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Weighted-Average – An Example
The second step is to identify the equivalent units of
production in ending work in process with respect to
materials for the month (540 units) and adding this to the
5,400 units from step one.
Materials Conversion
Units completed and transferred
out of the Department in June 5,400 5,400
Work in process, June 30:
900 units × 60% 540

Equivalent units of Production in

the Department during June 5,940

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Weighted-Average – An Example
The third step is to identify the equivalent units of production in
ending work in process with respect to conversion for the month
(270 units) and adding this to the 5,400 units from step one.

Materials Conversion
Units completed and transferred
out of the Department in June 5,400 5,400
Work in process, June 30:
900 units × 60% 540
900 units × 30% 270
Equivalent units of Production in
the Department during June 5,940 5,670

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Weighted-Average – An Example
Equivalent units of production always equals:
Units completed and transferred
+ Equivalent units remaining in work in process

Materials Conversion
Units completed and transferred
out of the Department in June 5,400 5,400
Work in process, June 30:
900 units × 60% 540
900 units × 30% 270
Equivalent units of Production in
the Department during June 5,940 5,670

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Weighted-Average – An Example
Materials 6,000 Units Started

Beginning Ending
Work in Process 5,100 Units Started Work in Process
300 Units and Completed 900 Units
40% Complete 60% Complete

5,400 Units Completed

540 Equivalent Units 900 × 60%
5,940 Equivalent units
of production
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Weighted-Average – An Example
Conversion 6,000 Units Started

Beginning Ending
Work in Process 5,100 Units Started Work in Process
300 Units and Completed 900 Units
20% Complete 30% Complete

5,400 Units Completed

900 × 30%
270 Equivalent Units
5,670 Equivalent units
of production
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Learning Objective 3

Compute the cost per

equivalent unit using the
weighted-average method.

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Compute and Apply Costs

Beginning Work in Process Inventory: 400 units
Materials: 40% complete $ 6,119
Conversion: 20% complete $ 3,920

Production started during June 6,000 units

Production completed during June 5,400 units

Costs added to production in June

Materials cost $ 118,621
Conversion cost $ 81,130

Ending Work in Process Inventory: 900 units

Materials: 60% complete
Conversion: 30% complete

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Compute and Apply Costs

The formula for computing the cost per
equivalent unit is:
Cost of beginning
Cost per
Work in Process + Cost added during
equivalent =
Inventory the period
unit
Equivalent units of production

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Compute and Apply Costs

Here is a schedule with the cost and equivalent
unit information.

Total
Cost Materials Conversion
Cost to be accounted for:
Work in process, June 1 $ 10,039 $ 6,119 $ 3,920
Cost added in Assembly 199,751 118,621 81,130
Total cost $ 209,790 $ 124,740 $ 85,050

Equivalent units 5,940 5,670

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Compute and Apply Costs

Here is a schedule with the cost and equivalent
unit information.
$124,740 ÷ 5,940 units = $21.00 $85,050 ÷ 5,670 units = $15.00
Total
Cost Materials Conversion
Cost to be accounted for:
Work in process, June 1 $ 10,039 $ 6,119 $ 3,920
Cost added in Assembly 199,751 118,621 81,130
Total cost $ 209,790 $ 124,740 $ 85,050

Equivalent units 5,940 5,670

Cost per equivalent unit $ 21.00 $ 15.00

Cost per equivalent unit = $21.00 + $15.00 = $36.00

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Learning Objective 4

Assign costs to units using

the weighted-average
method.

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Applying Costs

Assembly Department
Cost of Ending WIP Inventory and Units Transferred Out
Materials Conversion Total
Ending WIP inventory:
Equivalent units 540 270

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Applying Costs

Assembly Department
Cost of Ending WIP Inventory and Units Transferred Out
Materials Conversion Total
Ending WIP inventory:
Equivalent units 540 270
Cost per equivalent unit $ 21.00 $ 15.00

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Applying Costs

Assembly Department
Cost of Ending WIP Inventory and Units Transferred Out
Materials Conversion Total
Ending WIP inventory:
Equivalent units 540 270
Cost per equivalent unit $ 21.00 $ 15.00
Cost of Ending WIP inventory $ 11,340 $ 4,050 $ 15,390

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Computing the Cost of Units Transferred Out

Assembly Department
Cost of Ending WIP Inventory and Units Transferred Out
Materials Conversion Total
Ending WIP inventory:
Equivalent units 540 270
Cost per equivalent unit $ 21.00 $ 15.00
Cost of Ending WIP inventory $ 11,340 $ 4,050 $ 15,390
Units completed and transferred out:
Units transferred 5,400 5,400

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Computing the Cost of Units Transferred Out

Assembly Department
Cost of Ending WIP Inventory and Units Transferred Out
Materials Conversion Total
Ending WIP inventory:
Equivalent units 540 270
Cost per equivalent unit $ 21.00 $ 15.00
Cost of Ending WIP inventory $ 11,340 $ 4,050 $ 15,390
Units completed and transferred out:
Units transferred 5,400 5,400
Cost per equivalent unit $ 21.00 $ 15.00

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Computing the Cost of Units Transferred Out

Assembly Department
Cost of Ending WIP Inventory and Units Transferred Out
Materials Conversion Total
Ending WIP inventory:
Equivalent units 540 270
Cost per equivalent unit $ 21.00 $ 15.00
Cost of Ending WIP inventory $ 11,340 $ 4,050 $ 15,390
Units completed and transferred out:
Units transferred 5,400 5,400
Cost per equivalent unit $ 21.00 $ 15.00
Cost of units transferred out $ 113,400 $ 81,000 $ 194,400

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Learning Objective 5

Prepare a cost
reconciliation report.

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Reconciling Costs
Assembly Department
Cost Reconciliation
Costs to be accounted for:
Cost of beginning Work in Process Inventory $ 10,039
Costs added to production during the period 199,751
Total cost to be accounted for $ 209,790

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Reconciling Costs
Assembly Department
Cost Reconciliation
Costs to be accounted for:
Cost of beginning Work in Process Inventory $ 10,039
Costs added to production during the period 199,751
Total cost to be accounted for $ 209,790

Cost accounted for as follows:

Cost of ending Work in Process Inventory $ 15,390
Cost of units transferred out 194,400
Total cost accounted for $ 209,790

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Operation Costing

Operation cost is a hybrid of job-order and

process costing because it possesses attributes
of both approaches

Operation costing is
commonly used when
batches of many different
products pass through the
same processing
department.

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Supplementary Notes for the Weighted

Average Method
1. Summarize the physical WEIGHTED-AVERAGE METHOD PHYSICAL
flow of units (the Green UNITS %
area) BEGINNING WORK IN PROCESS (BWIP)

2. Compute equivalent units STARTED

of productions (the Blue TOTAL AVAILABLE or INPUTS
area) MATERIALS CONVERSION
EQUIVALENT UNIT
3. Summarize the total cost
COMPLETED (i.e. TRANSFERRED OUT)
incurred for the period
ENDING WORK IN PROCESS (EWIP)
and then compute the
cost per equivalent unit
TOTAL PRODUCED or OUTPUTS
(the Yellow area)
COSTS TOTAL
4. Calculate the values of BWIP
completed units and INCURRED DURING THE PERIOD
ending work in process TOTAL TOTAL COST
inventories (the Peach COST PER EQUIVALENT UNIT
area) VALUATION TOTAL

5. Check cost reconciliation VALUE OF GOODS TRANSFER OUT (i.e. COMPLETED)

(the Black cells: Total cost VALUE OF EWIP

= Total value) TOTAL VALUE

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To Summarize the Physical Flow of Units

For the weighted average
calculation, the percentages
of completion related to
BWIP with respect to material
and conversion are not used.

We ighte d-Ave rage me thod Physical Units

%
Beginning work in process (BWIP) 300
Started 6,000
Total available or Inputs 6,300

Completed (i.e. transferred out) 5,400 100%

Ending work in process (EWIP) 900 60%
30%
Total produced or Ouputs 6,300

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Compute the equivalent Units of Production

For the weighted average
calculation, the Inputs
information is not required for
the remaining calculation.

We ighted-Average method Physical Units

%
Beginning work in process (BWIP) 300
Started 6,000
Total available or Inputs 6,300
Materials Conversion
Equivalent Unit
Completed (i.e. transferred out) 5,400 100% 5,400 5,400
Ending work in process (EWIP) 900 60% 540 -
30% - 270
Total produced or Ouputs 6,300 5,940 5,670

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Summarize the Total Cost Incurred in the

Period

Weighted-Average method Physical Units

%
Beginning work in process (BWIP) 300
Started 6,000
Total available or Inputs 6,300
Materials Conversion
Equivalent Unit
Completed (i.e. transferred out) 5,400 100% 5,400 5,400
Ending work in process (EWIP) 900 60% 540 -
30% - 270
Total produced or Ouputs 6,300 5,940 5,670
Costs Total
BWIP $ 6,119 $ 3,920 $ 10,039
Incurred during the period $ 118,621 $ 81,130 $ 199,751
TOTAL $ 124,740 $ 85,050 $ 209,790

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Compute the Cost per Equivalent Unit

Weighted-Average method Physical Units
%
Beginning work in process (BWIP) 300
Started 6,000
Total available or Inputs 6,300
Materials Conversion
Equivalent Unit
Completed (i.e. transferred out) 5,400 100% 5,400 5,400
Ending work in process (EWIP) 900 60% 540 -
30% - 270
Total produced or Ouputs 6,300 5,940 5,670
Costs Total
BWIP $ 6,119 $ 3,920 $ 10,039
Incurred during the period $ 118,621 $ 81,130 $ 199,751
TOTAL $ 124,740 $ 85,050 $ 209,790
Cost per equivalent unit $ 21.00 $ 15.00 $ 36.00

$124,740 $85,050
 $21  $15
5,940 5,670
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Calculate The Values Of Completed Goods

And Ending WIP Inventories
Weighted-Average method Physical Units
%
Beginning work in process (BWIP) 300
Started 6,000
Total available or Inputs 6,300
Materials Conversion
Equivalent Unit
Completed (i.e. transferred out) 5,400 100% 5,400 5,400
Ending work in process (EWIP) 900 60% 540 -
30% - 270
Total produced or Ouputs 6,300 5,940 5,670
Costs Total
BWIP $ 6,119 $ 3,920 $ 10,039
Incurred during the period $ 118,621 $ 81,130 $ 199,751
TOTAL $ 124,740 $ 85,050 $ 209,790
Cost per equivalent unit $ 21.00 $ 15.00 $ 36.00
Valuation Total
Value of goods transferred out (i.e. completed) $ 113,400 $ 81,000 $ 194,400
Value of EWIP $ 11,340 $ 4,050 $ 15,390
© 2015 McGraw-Hill Education Garrison, Noreen, Brewer, Cheng & Yuen $ 209,790
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Check Cost Reconciliation

Weighted-Average method Physical Units
%
Beginning work in process (BWIP) 300
Started 6,000
Total available or Inputs 6,300
Materials Conversion
Equivalent Unit
Completed (i.e. transferred out) 5,400 100% 5,400 5,400
Ending work in process (EWIP) 900 60% 540 -
30% - 270
Total produced or Ouputs 6,300 5,940 5,670
Costs Total
BWIP $ 6,119 $ 3,920 $ 10,039
Incurred during the period $ 118,621 $ 81,130 $ 199,751
TOTAL $ 124,740 $ 85,050 $ 209,790
Cost per equivalent unit $ 21.00 $ 15.00 $ 36.00
Valuation Total
Value of goods transferred out (i.e. completed) $ 113,400 $ 81,000 $ 194,400
Value of EWIP $ 11,340 $ 4,050 $ 15,390
$ 209,790

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FIFO Method

Appendix 9A

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FIFO vs. Weighted-Average Method

The FIFO method (generally considered more

accurate than the weighted-average method)
differs from the weighted-average method in
two ways:

1. The computation of equivalent units.

2. The way in which the costs of beginning
inventory are treated.

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Learning Objective 6

Compute the equivalent

units of production using
the FIFO method.

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Equivalent Units – FIFO Method

Let’s revisit the Smith Company example. Here is
information concerning the Assembly Department
for the month of June.
Percent Completed
Units Materials Conversion
Work in process, June 1 300 40% 20%

Units started into production in June 6,000

Units completed and transferred out 5,400

of Department A during June

Work in process, June 30 900 60% 30%

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Equivalent Units – FIFO Method

Step 1: Determine equivalent units needed to complete
beginning Work in Process Inventory.

Materials Conversion
To complete beginning Work in Process:
Materials: 300 units × (100% - 40%) 180
Conversion: 300 units × (100% - 20%) 240

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Equivalent Units – FIFO Method

Step 2: Determine units started and completed during
the period.

Materials Conversion
To complete beginning Work in Process:
Materials: 300 units × (100% - 40%) 180
Conversion: 300 units × (100% - 20%) 240
Units started and completed during June 5,100 5,100

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Equivalent Units – FIFO Method

Step 3: Add the equivalent units in ending Work in
Process Inventory.

Materials Conversion
To complete beginning Work in Process:
Materials: 300 units × (100% - 40%) 180
Conversion: 300 units × (100% - 20%) 240
Units started and completed during June 5,100 5,100
Ending Work in Process
Materials: 900 units × 60% complete 540
Conversion: 900 units × 30% complete 270
Equivalent units of production 5,820 5,610

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FIFO Example
Materials 6,000 Units Started

Beginning Ending
Work in Process 5,100 Units Started Work in Process
300 Units and Completed 900 Units
40% Complete 60% Complete

300 × 60%
180 Equivalent Units
5,100 Units Completed 900 × 60%
540 Equivalent Units
5,820 Equivalent units
of production

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 4-24

FIFO Example
Conversion 6,000 Units Started

Beginning Ending
Work in Process 5,100 Units Started Work in Process
300 Units and Completed 900 Units
20% Complete 30% Complete

300 × 80%
240 Equivalent Units
5,100 Units Completed 900 × 30%
270 Equivalent Units
5,610 Equivalent units
of production

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69

Equivalent Units: Weighted-Average vs.

FIFO

As shown below, the equivalent units in beginning inventory are

subtracted from the equivalent units of production per the
weighted-average method to obtain the equivalent units of
production under the FIFO method.

Materials Conversion
Equivalent units - weighted-average method 5,940 5,670
Less equivalent units in beginning inventory:
300 units × 40% 120
300 units × 20% 60
Equivalent units - FIFO method 5,820 5,610

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70

Learning Objective 7

Compute the cost per

equivalent unit using the
FIFO method.

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 4-25

Cost per Equivalent Unit - FIFO

Let’s revisit the Smith Company Assembly Department
for the month of June to prepare our production report.
Beginning work in process: 400 units
Materials: 40% complete $ 6,119
Conversion: 20% complete $ 3,920

Production started during June 6,000 units

Production completed during June 5,400 units

Costs added to production in June

Materials cost $ 118,621
Conversion cost $ 81,130

Ending work in process 900 units

Materials: 60% complete
Conversion: 30% complete

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Cost per Equivalent Unit - FIFO

The formula for computing the cost per
equivalent unit under FIFO method is:

Cost per Cost added during the period

equivalent =
unit Equivalent units of production

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Cost per Equivalent Unit - FIFO

Total
Cost Materials Conversion

Cost added in June $ 199,751 $ 118,621 $ 81,130

Equivalent units 5,820 5,610
Cost per equivalent unit $ 20.3816 $ 14.4617

$118,600 ÷ 5,820 $81,130 ÷ 5,610

Total cost per equivalent unit = $20.3816 + $14.4617 = $34.8433

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 4-26

Learning Objective 8

Assign costs to units using

the FIFO method.

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Applying Costs - FIFO

Step 1: Record the equivalent units of production in ending Work
in Process Inventory.
Assembly Department
Cost of Ending WIP Inventory
Materials Conversion Total
Ending WIP inventory:
Equivalent units 540 270

900 units × 60% 900 units × 30%

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Applying Costs - FIFO

Step 2: Record the cost per equivalent unit.

Assembly Department
Cost of Ending WIP Inventory
Materials Conversion Total
Ending WIP inventory:
Equivalent units 540 270
Cost per equivalent unit $ 20.3816 $ 14.4617

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 4-27

Applying Costs - FIFO

Step 3: Compute the cost of ending Work in Process Inventory.

Assembly Department
Cost of Ending WIP Inventory
Materials Conversion Total
Ending WIP inventory:
Equivalent units 540 270
Cost per equivalent unit $ 20.3816 $ 14.4617
Cost of Ending WIP inventory $ 11,006 $ 3,905 $ 14,911

540 × $20.3816 270 × 14.4617

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Cost of Units Transferred Out

Step 1: Record the cost in beginning Work in Process Inventory.
Assembly Department
Cost of Units Transferred Out in June
Materials Conversion Total
Cost of Units Transferred Out:
Cost in beginning WIP inventory $ 6,119 $ 3,920 $ 10,039

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Cost of Units Transferred Out

Step 2: Compute the cost to complete the units in beginning
Work in Process Inventory.
Assembly Department
Cost of Units Transferred Out in June
Materials Conversion Total
Cost of Units Transferred Out:
Cost in beginning WIP inventory $ 6,119 $ 3,920 $ 10,039
Cost to complete beginning WIP
Equivalent units to complete 180 240
Cost per equivalent unit $ 20.3816 $ 14.4617
Cost to complete beginning WIP $ 3,668 $ 3,471 7,139

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 4-28

Cost of Units Transferred Out

Step 3: Compute the cost of units started and completed this
period.
Assembly Department
Cost of Units Transferred Out in June
Materials Conversion Total
Cost of Units Transferred Out:
Cost in beginning WIP inventory $ 6,119 $ 3,920 $ 10,039
Cost to complete beginning WIP
Equivalent units to complete 180 240
Cost per equivalent unit $ 20.3816 $ 14.4617
Cost to complete beginning WIP $ 3,668 $ 3,471 7,139
Cost of units started and completed:
Units started and completed 5,100 5,100
Cost per equivalent unit $ 20.3816 $ 14.4617
Cost of units started and completed $ 103,946 $ 73,755 177,701

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Cost of Units Transferred Out

Step 4: Compute the total cost of units transferred out.
Assembly Department
Cost of Units Transferred Out in June
Materials Conversion Total
Cost of Units Transferred Out:
Cost in beginning WIP inventory $ 6,119 $ 3,920 $ 10,039
Cost to complete beginning WIP
Equivalent units to complete 180 240
Cost per equivalent unit $ 20.3816 $ 14.4617
Cost to complete beginning WIP $ 3,668 $ 3,471 7,139
Cost of units started and completed:
Units started and completed 5,100 5,100
Cost per equivalent unit $ 20.3816 $ 14.4617
Cost of units started and completed $ 103,946 $ 73,755 177,701
Cost of Units Transferred Out $ 194,879

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82

Learning Objective 9

Prepare a cost
reconciliation report
using the FIFO method.

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 4-29

Reconciling Costs

Assembly Department
Cost Reconciliation for June
Costs to be accounted for:
Cost of beginning Work in Process Inventory $ 10,039
Costs added to production during the period 199,751
Total cost to be accounted for $ 209,790

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Reconciling Costs

Assembly Department
Cost Reconciliation for June
Costs to be accounted for:
Cost of beginning Work in Process Inventory $ 10,039
Costs added to production during the period 199,751
Total cost to be accounted for $ 209,790

Cost accounted for as follows:

Cost of ending Work in Process Inventory $ 14,911
Cost of units transferred out 194,879
Total cost accounted for $ 209,790

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A Comparison of Costing Methods

In a lean production environment, FIFO and
weighted-average methods yield similar
unit costs.
When considering cost control, FIFO is
superior to weighted-average because it
does not mix costs of the current period with
costs of the prior period.

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 4-30

Supplementary Notes for the FIFO Method

1. Summarize the physical FIRST IN FIRST OUT METHOD PHYSICAL UNITS % COMPLETED
IN THIS PERIOD
flow of units (the Green MATERIALS CONVERSION
area) EQUIVALENT UNIT
BWIP (PORTION TO BE COMPLETED)
2. Compute equivalent units
of productions (the Blue STARTED AND COMPLETED
area) ( i.e. Completed minus BWIP)
ENDING WORK IN PROCESS (EWIP)
3. Summarize the total cost
incurred for the period TOTAL PRODUCED or OUTPUTS
and then compute the COSTS TOTAL
cost per equivalent unit BWIP (IRRELEVANT FOR THE COST PER EQUIVALENT UNIT CALCULATION BUT IMPORT ANT FOR COST RECONCILIATION)
(the Yellow area) INCURRED DURING THE PERIOD
TOTAL COST
4. Calculate the values of COST PER EQUIVALENT UNIT
completed units and VALUATION TOTAL

ending work in process VALUE OF GOODS TRANSFER OUT (i.e. COMPLETED)

1. Total cost associated with BWIP
inventories (the Peach a) Cost brought forward from the previous period by BWIP
area) b) Cost incrred in the period to complete BWIP
2. Cost associated with units Started and Completed in the period
5. Check cost reconciliation TOTAL COMPLETED
(the Black cells: Total cost VALUE OF EWIP
= Total value) TOTAL VALUE

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Physical Flow of Units: FIFO

Completed – BWIP
= 5400 – 300
= 5100

% completed in
Weighted-Average method Physical Units FIFO method Physical Units
this period
Beginning work in process (BWIP) 300
Started 6,000
Total available or Inputs 6,300 BWIP (Portion to be completed) 300 60% = (1 - 40%)
80% = (1 - 20%)
Started and completed 5,100 100%
Completed (i.e. transferred out) 5,400 ( i.e. completed minus BWIP)
Ending work in process (EWIP) 900 Ending work in process (EWIP) 900 60%
30%
Total produced or Ouputs 6,300 Total produced or Outputs 6,300

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Compute the Equivalent Units of Production

% completed in
FIFO method Physical Units
this period
Materials Conversion
Equivalent Unit
BWIP (Portion to be completed) 300 60% = (1 - 40%) 180 -
80% = (1 - 20%) - 240
Started and completed 5,100 100% 5,100 5,100
( i.e. completed minus BWIP)
Ending work in process (EWIP) 900 60% 540 -
30% - 270
Total produced or Outputs 6,300 5,820 5,610

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 4-31

Summarize The Total Cost Incurred For The

Period and Compute the Cost Per Equivalent Unit
$118,621 $81,130
 $20.38  $14.46
5,820 5,610

% completed in
FIFO method Physical Units
this period
Materials Conversion
Equivalent Unit
BWIP (Portion to be completed) 300 60% = (1 - 40%) 180 -
80% = (1 - 20%) - 240
Started and completed 5,100 100% 5,100 5,100
( i.e. completed minus BWIP)
Ending work in process (EWIP) 900 60% 540 -
30% - 270
Total produced or Outputs 6,300 5,820 5,610
Costs
BWIP (Irrelevant for the cost per equivalent unit calculation but important for cost reconciliations)
Incurred during the period $ 118,621 $ 81,130

Cost per equivalent unit $ 20.38 $ 14.46 90

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Calculate the Values of

Completed Goods and
FIFO method Physical Units Ending WIP inventories
% completed in
this period
Materials Conversion
Equivalent Unit
BWIP (Portion to be completed) 300 60% = (1 - 40%) 180 -
80% = (1 - 20%) - 240
Started and completed 5,100 100% 5,100 5,100
( i.e. completed minus BWIP)
Ending work in process (EWIP) 900 60% 540 -
30% - 270
Total produced or Outputs 6,300 5,820 5,610
Costs Total
BWIP (Irrelevant for the cost per equivalent unit calculation but import ant for cost reconciliations) $ 10,039
Incurred during the period $ 118,621 $ 81,130 $ 199,751
$ 209,790
Cost per equivalent unit $ 20.38 $ 14.46
Valuation Total
Value of goods transferred out (i.e. completed)
1. Total cost associated with BWIP
a) Cost brought forward from the previous period by BWIP $ 6,119 $ 3,920 $ 10,039
b) Cost incrred in the period to complete BWIP $ 3,669 $ 3,471 $ 7,139
2. Cost associated with units Started and Completed in the period $ 103,946 $ 73,755 $ 177,701
Total completed $ 113,734 $ 81,145 $ 194,879
Value of EWIP $ 11,006 $ 3,905 $ 14,911
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Check Cost Reconciliation

% completed in
FIFO method Physical Units
this period
Materials Conversion
Equivalent Unit
BWIP
BWIP (Portion to be completed) 300 60% = (1 - 40%) 180 - $ 6,119
80% = (1 - 20%) - 240 $ 3,920
Started and completed 5,100 100% 5,100 5,100 $10,039
( i.e. completed minus BWIP)
Ending work in process (EWIP) 900 60% 540 -
30% - 270
Total produced or Outputs 6,300 5,820 5,610
Costs Total
BWIP (Irrelevant for the cost per equivalent unit calculat ion but important for cost reconciliations) $ 10,039
Incurred during the period $ 118,621 $ 81,130 $ 199,751

Total Cost Accountable For $ 209,790

Cost per equivalent unit $ 20.38 $ 14.46
Valuation Total
Value of goods transferred out (i.e. completed)
1. Total cost associated with BWIP
a) Cost brought forward from the previous period by BWIP $ 6,119 $ 3,920 $ 10,039
b) Cost incrred in the period to complete BWIP $ 3,669 $ 3,471 $ 7,139
2. Cost associated with units Started and Completed in the period $ 103,946 $ 73,755 $ 177,701
Total completed $ 113,734 $ 81,145 $ 194,879
Value of EWIP $ 11,006 $ 3,905 $ 14,911
Total Inventory Value $ 209,790

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 4-32

Weighted Average vs FIFO

Physical Physical % completed
Weighted-Average method FIFO method
Units % Units in this period
Beginning work in process (BWIP) 300 Materials Conversion
Started 6,000 Equivalent Unit
Total available or Inputs 6,300 BWIP (Portion to be completed) 300 60% = (1 - 40%) 180 -
Materials Conversion 80% = (1 - 20%) - 240
Equivalent Unit Started and completed 5,100 100% 5,100 5,100
Completed (i.e. transferred out) 5,400 100% 5,400 5,400 ( i.e. completed minus BWIP)
Ending work in process (EWIP) 900 60% 540 - Ending work in process (EWIP) 900 60% 540 -
30% - 270 30% - 270
Total produced or Ouputs 6,300 5,940 5,670 Total produced or Outputs 6,300 5,820 5,610
Costs Total Costs Total
BWIP $ 6,119 $ 3,920 $ 10,039 BWIP (Irrelevant for t he cost per equivalent unit calculat ion but important for cost reconciliations) $ 10,039
Incurred during the period $ 118,621 $ 81,130 $ 199,751 Incurred during the period $ 118,621 $ 81,130 $ 199,751
TOTAL $ 124,740 $ 85,050 $ 209,790 $ 209,790
Cost per equivalent unit $ 21.00 $ 15.00 $ 36.00 Cost per equivalent unit $ 20.38 $ 14.46
Valuation Total Valuation Total
Value of goods transferred out (i.e. completed) $ 113,400 $ 81,000 $ 194,400 Value of goods transferred out (i.e. completed)
Value of EWIP $ 11,340 $ 4,050 $ 15,390 1. Total cost associated with BWIP
$ 209,790 a) Cost brought forward from the previous period by BWIP $ 6,119 $ 3,920 $ 10,039
b) Cost incrred in the period to complete BWIP $ 3,669 $ 3,471 $ 7,139
2. Cost associated with units Started and Completed in the period $ 103,946 $ 73,755 $ 177,701
Total completed $ 113,734 $ 81,145 $ 194,879
Value of EWIP $ 11,006 $ 3,905 $ 14,911
$ 209,790

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Summary of Weighted Average vs FIFO

Weighted Average FIFO
Physical flow calculation Calculate physical flow (in units):
BWIP + Units started = Units completed + EWIP
Equivalent Unit calculation All units are assumed to be pooled Emphasize percentage of input and
together without differentiating the work done in the period strictly on the
period of completing the work FIFO basis

Calculate the equivalent units based Calculate the equivalent units based on
on 1. Work done to complete the
1. Completed units remaining part of BWIP
2. EWIP 2. Units Started and Completed#
within the period
3. Work started on EWIP
Brought Forward Costs Add to the current period to Add to the cost of completed units as
calculate the average cost per all items are assumed completed
equivalent unit before starting new production
Cost incurred in the period Differentiate Material and Conversion costs
Cost per Equiv. Unit Costs b/f + Costs in the period Costs in the period .
(CEU) Equivalent unit produced Equivalent unit produced
Cost of completed Units Completed units Units started and completed x CEU
x +
CEU Completion of BWIP** Total costs
+ related to
Cost brought forward BWIP
Cost of EWIP Equivalent EWIP Units completed in the period x CEU
Final Checking Cost reconciliation:
Costs brought forward + incurred in the period = completed units + Ending WIP
#
Started and Completed = Completed Units – BWIP = Units Started in the period – EWIP

** Completion of BWIP:
Equivalent units of Raw Materials to complete BWIP x CEUraw materials + Equivalent units of Conversion to complete BWIP x CEUconversion

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Losses in Process Costing

Appendix 9B

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 4-33

Production Losses
 Losses in production can be classified into:
 Expected – Normal Losses
• In packaged/canned manufacturing – parts of vegetables purchased are
not suitable for consumption
 Expected – Normal Losses with scrap value
• In clothes/shirts manufacturing – part of the fabrics are in irregular
formats after trimming out the shape required, leaving some losses
which may be able to sell as scrap
 Unexpected – Abnormal Losses
• In packaged/canned manufacturing – the refrigerator broke down
without notice and food stored inside cannot be used – abnormal losses
 Unexpected – Abnormal Losses with scrap value
• In clothes/shirts manufacturing – a batch of shirts being rejected due to
wrong fabric being used could be sold to rejected clothing
merchandisers after removing the logos.
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Accounting for Normal Losses and Scrap

Value
 Normal Losses
 It is part of the production outputs
 It is treated as part of the normal production cost for the finished
items (i.e. is absorbed into all products and is included in
inventory valuation)

 Normal Losses with scrap value

 Scrap value is part of the expected income to offset the expense
therefore is net-off from the expenses.

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Accounting for Abnormal Losses and Scrap

Value
 Abnormal Losses
 They are a part of the production outputs
 They are not part of the normal production cost, and therefore
are expensed off separately from the production costs (i.e.
cannot be used for inventory valuation)

 Abnormal Losses with scrap value

 Scrap value receivable is also not part of the normal production
income, and therefore is treated as other income.

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 4-34

An Example: Losses with Scrap Value

Let’s revisit the Smith Company Assembly Department for the month of June
with the additional losses information.
Beginning Work in Process Inventory: 400 units
Materials: 40% complete $ 6,119
Conversion: 20% complete $ 3,920
Production started during June 6,000 units
Production completed during June 5,400 units

Expected losses of 2% completed units cannot pass quality check. These rejected
items can normal be sold for $5 each as scrap.

In addition to the normal losses of 2%, 200 of the latest produced items were found
out of shape during the problem of the finishing touch from the machine.

Costs added to production in June

Materials cost $ 118,621
Conversion cost $ 81,130

Ending Work in Process Inventory: 900 units

Materials: 60% complete
Conversion: 30% complete

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99

Learning Objective 10

Understand the
treatment of losses in
process costing
weighted average

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Physical Flow of Units (the Weighted

Average Method)
• Normal and Abnormal Losses are parts of the outputs
• Completed quantity is most effectively calculated as a balancing figure
Physical
Weighted-Average method Units %
Beginning work in process (BWIP) 300
Started 6,000
Total available or Inputs 6,300

Completed (i.e. transferred out) 5,092 100%

Normal loss 2% of 5400 units 108 100%
Abnormal loss 200 units 200 100%
Ending work in process (EWIP) 900 60%
30%
Total produced or Ouputs 6,300

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 4-35

Compute the Equivalent Units of Production

Physical
Weighted-Average method Units %
Beginning work in process (BWIP) 300
Started 6,000
Total available or Inputs 6,300
Materials Conversion
Equivalent Unit
Completed (i.e. transferred out) 5,092 100% 5,092 5,092
Normal loss 2% of 5400 units 108 100% 108 108
Abnormal loss 200 units 200 100% 200 200
Ending work in process (EWIP) 900 60% 540
30% - 270
Total produced or Ouputs 6,300 5,940 5,670

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Summarize the Total Cost Incurred and

Compute the Cost Per Equivalent Unit
Scrap value receivable from Normal Losses normally is netting-off the cost as the
Physical
loss and the income
Weighted-Ave rage are
methodpart of theUnits
expected % process. In most cases, scrap value
isBeginning
off-setting
work inthe material
process (BWIP) cost because300 scrap is normal valuing the material. In
some
Started cases, conversion work may even 6,000 reduce the value of the scrap because
the conversionTotal may makeor itInputs
available difficult to salvage the scrap material.
6,300
Materials Conversion
Equivalent Unit
Completed (i.e. transferred out) 5,092 100% 5,092 5,092
Normal loss 2% of 5400 units 108 100% 108 108
Abnormal loss 200 units 200 100% 200 200
Ending work in process (EWIP) 900 60% 540
30% - 270
Total produced or Ouputs 6,300 5,940 5,670
Costs
BWIP $ 6,119 $ 3,920
Incurred during the period $ 118,621 $ 81,130
Less : Scrap value of the normal loss $ (540) $ -
Total costs added $ 124,200 $ 85,050
Cost per equivalent unit $124,200 $85,050
 $20.91 $ 20.91 $ 15.00
 $15.00
5,940 5,670
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Calculate the Values of Completed and

Ending WIP Inventories
Physical
Weighted-Ave rage me thod Units % Abnormal loss is not
Beginning work in process (BWIP) 300
a part of the
Started 6,000
inventory valuation
Total available or Inputs 6,300
Materials Conversion
Equivalent Unit
Completed (i.e. transferred out) 5,092 100% 5,092 5,092
Normal loss 2% of 5400 units 108 100% 108 108
Abnormal loss 200 units 200 100% 200 200
Ending work in process (EWIP) 900 60% 540 -
30% - 270
Total produced or Ouputs 6,300 5,940 5,670
Costs Total
BWIP $ 6,119 $ 3,920 $ 10,039
Incurred during the period $ 118,621 $ 81,130 $ 199,751
Less: Scrap value of the normal loss $ (540) $ - $ (540)
Total costs added $ 124,200 $ 85,050 $ 209,250
Cost per equivalent unit $ 20.91 $ 15.00 $ 35.91
Valuation Total
Value of goods transferred out (before normal loss value) $ 106,469 $ 76,380 $ 182,849
Normal loss $ 2,258 $ 1,620 $ 3,878
Value of goods transferred out (normal loss value included) $ 108,727 $ 78,000 $ 186,727
Value of EWIP $ 11,291 $ 4,050 $ 15,341
© 2015 McGraw-Hill Education Total value of inventory
Garrison, Noreen, Brewer, Cheng & Yuen $ 202,068 104

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Cost Reconciliation Abnormal loss is not

Weighted-Ave rage me thod
Physical a part of the
Units %
Beginning work in process (BWIP) 300 inventory valuation.
Started 6,000 It is treated as a part
Total available or Inputs 6,300 of the expense in
Materials Conversion COGS.
Equivalent Unit
Completed (i.e. trans ferred out) 5,092 100% 5,092 5,092
Normal loss 2% of 5400 units 108 100% 108 108
Abnormal loss 200 units 200 100% 200 200
Ending work in process (EWIP) 900 60% 540 -
30% - 270
Total produced or Ouputs 6,300 5,940 5,670
Costs Total
BWIP $ 6,119 $ 3,920 $ 10,039
Incurred during the period $ 118,621 $ 81,130 $ 199,751
Less : Scrap value of the normal los s $ (540) $ - $ (540)
Total costs added $ 124,200 $ 85,050 $ 209,250
Cost per equivalent unit $ 20.91 $ 15.00 $ 35.91
Valuation Total
Value of goods trans ferred out (before normal loss value) $ 106,469 $ 76,380 $ 182,849
Normal loss $ 2,258 $ 1,620 $ 3,878
Value of goods trans ferred out (normal loss value included) $ 108,727 $ 78,000 $ 186,727
Value of EWIP $ 11,291 $ 4,050 $ 15,341
Total value of inventory $ 202,068
Value of abnormal loss to be written off as incurred $ 4,182 $ 3,000 $ 7,182
© 2015 McGraw-Hill Education Garrison, Noreen,
Total inventory and abnomal loss Brewer, Cheng & Yuen $ 209,250 105

105

Understand the
treatment of losses in
process costing
FIFO

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Process Costing with Losses

Physical Flow of Units (the FIFO Method)

Physical % completed in
FIFO method Units this period

BWIP (Portion to be completed) 300 60% = (1 - 40%)

80% = (1 - 20%)
Started and completed (S&C) 4,792 100%
5,400 ( i.e. Completed - BWIP - Normal Loss - Abnormal Loss)
units Normal loss: (2% on 5,100 S&C + 2% on 300 BWIP) 108 100%
Abnormal loss 200 units 200 100%
Ending work in process (EWIP) 900 60%
30%
Total produced or Outputs 6,300

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 4-37

Compute the Equivalent Units of Production

Physical % completed in
FIFO method Units this period
Materials Conversion
Equivalent Unit
BWIP (Portion to be completed) 300 60% = (1 - 40%) 180 -
80% = (1 - 20%) - 240
Started and completed (S&C) 4,792 100% 4,792 4,792
( i.e. Completed - BWIP - Normal Loss - Abnormal Loss)

Normal loss: (2% on 5,100 S&C + 2% on 300 BWIP) 108 100% 108 108
Abnormal loss 200 units 200 100% 200 200
Ending work in process (EWIP) 900 60% 540 -
30% - 270
Total produced or Outputs 6,300 5,820 5,610

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Summarize the Total Cost Incurred and

Compute the Cost Per Equivalent Unit
Physical % completed in
FIFO me thod
Units this period
Materials Conversion
Equivalent Unit
BWIP (Portion to be completed) 300 60% = (1 - 40%) 180 -
80% = (1 - 20%) - 240
Started and completed (S&C) 4,792 100% 4,792 4,792
( i.e. Completed - BWIP - Normal Loss - Abnormal Loss)

Normal loss: (2% on 5,100 S&C + 2% on 300 BWIP) 108 100% 108 108
Abnormal loss 200 units 200 100% 200 200
Ending work in process (EWIP) 900 60% 540 -
30% - 270
Total produced or Outputs 6,300 5,820 5,610
Costs
BWIP (Irrelevant for the cost per equivalent unit calculat ion but import ant for cost reconciliations)
Incurred during the period $ 118,621 $ 81,130
Less Scrap value of the normal loss $ (540) $ -
Total costs added $ 118,081 $ 81,130
Cost per equivalent unit $ 20.29 $ 14.46

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Calculate the Values of Completed and

Ending WIP Inventories
Physical % completed in
FIFO method Units this period
Materials Conversion
Equivalent Unit
BWIP (Portion to be completed) 300 60% = (1 - 40%) 180 -
80% = (1 - 20%) - 240
Started and completed (S&C) 4,792 100% 4,792 4,792
( i.e. Completed - BWIP - Normal Loss - Abnormal Loss)

Normal loss: (2% on 5,100 S&C + 2% on 300 BWIP) 108 100% 108 108
Abnormal loss 200 units 200 100% 200 200
Ending work in process (EWIP) 900 60% 540 -
30% - 270
Total produced or Outputs 6,300 5,820 5,610
Costs Total
BWIP (Irrelevant for the cost per equivalent unit calculation but important for cost reconciliations) $ 10,039
Incurred during the period $ 118,621 $ 81,130 $ 199,751
Less Scrap value of the normal loss $ (540) $ - $ (540)
Total costs added $ 118,081 $ 81,130 $ 209,250
Cost per equivalent unit $ 20.29 $ 14.46 $ 34.75
Valuation Total
Value of goods transferred out (i.e. completed)
1. Total cost as sociated with BWIP
a) Cost brought forward from the previous period by BWIP $ 6,119 $ 3,920 $ 10,039
b) Cost incrred in the period to complete BWIP $ 3,652 $ 3,471 $ 7,123
2. Cost associated with units Started and Completed in the period $ 97,224 $ 69,300 $ 166,524
3. Cost associated with normal loss in the period $ 2,191 $ 1,562 $ 3,753
Total value of completed goods $ 109,186 $ 78,253 $ 187,439
Value of EWIP $ 10,956 $ 3,905 $ 14,861
Total value of inventory $ 202,300

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 4-38

Cost Reconciliation
Physical % completed in
FIFO method Units this period
Materials Conversion
Equivalent Unit
BWIP (Portion to be completed) 300 60% = (1 - 40%) 180 -
80% = (1 - 20%) - 240
Started and completed (S&C) 4,792 100% 4,792 4,792
( i.e. Completed - BWIP - Normal Loss - Abnormal Loss)

Normal loss: (2% on 5,100 S&C + 2% on 300 BWIP) 108 100% 108 108
Abnormal loss 200 units 200 100% 200 200
Ending work in process (EWIP) 900 60% 540 -
30% - 270
Total produced or Outputs 6,300 5,820 5,610
Costs Total
BWIP (Irrelevant for the cost per equivalent unit calculation but important for cost reconciliat ions) $ 10,039
Incurred during the period $ 118,621 $ 81,130 $ 199,751
Less Scrap value of the normal loss $ (540) $ - $ (540)
Total costs added $ 118,081 $ 81,130 $ 209,250
Cost per equivalent unit $ 20.29 $ 14.46 $ 34.75
Valuation Total
Value of goods transferred out (i.e. completed)
1. Total cost associated with BWIP
a) Cost brought forward from the previous period by BWIP $ 6,119 $ 3,920 $ 10,039
b) Cost incrred in the period to complete BWIP $ 3,652 $ 3,471 $ 7,123
2. Cost associated with units Started and Completed in the period $ 97,224 $ 69,300 $ 166,524
3. Cost associated with normal losses in the period $ 2,191 $ 1,562 $ 3,753
Total value of completed goods $ 109,186 $ 78,253 $ 187,439
Value of EWIP $ 10,956 $ 3,905 $ 14,861
Total value of inventory $ 202,300
Value of abnormal loss to be written off as incurred $ 4,058 $ 2,892 $ 6,950
$ 209,250

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End of Chapter 9

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