ACCT 102

Management
Accounting

Topic 6: Job-Order Costing Cost Flows &

Process Costing
 Lesson Plan – Where are we now?
Week Topic Chapters
1-7 Costs Chapter 1: Cost Concepts
Chapter 5: CVP Analysis and Cost Behaviour (App A)
Chapter 6: Variable and Absorption Costing
Chapter 2 and 3: Job Costing
Chapter 4: Process Costing
Chapter 7: Activity-based Costing
9-10 Budget Chapter 8: Master Budget
Chapter 9: Flexible Budget
Chapter 10: Costing and Variance Analysis
11-13 Performance Chapter 12: Balanced Scorecard
Analysis Chapter 13: Differential Analysis
Chapter 11: Transfer Pricing

2
 Objectives
• LO3-1: Understand the flow of costs in a job-order
costing system and prepare appropriate journal
entries to record costs.
• LO3-2: Use T-accounts to show the flow of costs in a job
order costing system.
• LO4-2: Compute the equivalent units of production
using the weighted-average method.
• LO4-3: Compute the cost per equivalent unit using
weighted-average method.
• LO4-4: Assign costs to units using the weighted-average
method.
• LO4-5: Prepare a cost reconciliation report.
3
Job-Order Costing: Document Flow

A
A sales
sales order
order isis the
the AA production
production
basis
basis of
of issuing
issuing aa order
order initiates
initiates
production
production order.
order. work
work on
on aa job.
job.

4
Job-Order Costing: Document Flow

Materials
used may be Direct Job Cost
either direct or materials Sheets
indirect.
Materials
Requisition

Manufacturing
Indirect Overhead
materials Account
5
Job-Order Costing: Document Flow
An
employee’s
time may be either Direct Job Cost
Labor Sheets
direct or
indirect.
Employee Time
Ticket

Manufacturing
Indirect
Overhead
Labor
Account
6
Job-Order Costing: Document Flow

Materials Indirect
Requisition Material POHR
rate used
to apply
Other Manufacturing
overhead Job Cost
Actual OH Overhead
Sheets
Charges Account

Employee Indirect
Time Ticket Labor
7
Job-Order Costing: The Flow of Costs
The transactions (in T-
account and journal
entry form) that capture
the flow of costs in a
job-order costing
system are illustrated on
the following slides.

8
The Purchase and Issue of Raw Materials

Raw Materials Work in Process

Material  Direct (Job Cost Sheet)
Purchases Materials Direct
 Indirect
Materials
Materials

Mfg. Overhead
Actual Applied
 Indirect

Materials

9
 Cost Flows - Material Purchases

Raw material purchases are recorded in an inventory account.

GENERAL JOURNAL
Post.
Date Description Ref. Debit Credit
Raw Materials XXXXX
Accounts Payable XXXXX

10
 Cost Flows - Material Usage

Direct materials issued to a job increase Work in Process and

decrease Raw Materials. Indirect materials used are charged to
Manufacturing Overhead and also decrease Raw Materials.

GENERAL JOURNAL
Post.
Date Description Ref. Debit Credit
Work in Process XXXXX
Manufacturing Overhead XXXXX
Raw Materials XXXXX

11
The Recording of Labour Costs
Salaries and Work in Process
Wages Payable (Job Cost Sheet)

Direct 
Direct
Labor

Indirect Materials

Direct
Labor Labor

Mfg. Overhead
Actual Applied

Indirect
Materials

Indirect
Labor 12
 The Recording of Labour Costs

The cost of direct labor incurred increases Work in Process

and the cost of indirect labor increases Manufacturing
Overhead.

GENERAL JOURNAL
Post.
Date Description Ref. Debit Credit
Work in Process XXXXX
Manufacturing Overhead XXXXX
Salaries and Wages Payable XXXXX

13
Recording Actual Manufacturing Overhead

Salaries and Work in Process

Wages Payable (Job Cost Sheet)

Direct 
Direct
Labor

Indirect Materials

Direct
Labor Labor
Mfg. Overhead
Actual Applied

Indirect
Materials

Indirect
Labor

Other
Overhead 14
Recording Actual Manufacturing Overhead

In addition to indirect materials and indirect labor, other

manufacturing overhead costs are charged to the
Manufacturing Overhead account as they are incurred.

GENERAL JOURNAL
Post.
Date Description Ref. Debit Credit
Manufacturing Overhead XXXXX
Accounts Payable XXXXX
Property Taxes Payable XXXXX
Prepaid Insurance XXXXX
Accumulated Depreciation XXXXX

15
Applying Manufacturing Overhead
Salaries and Work in Process
Wages Payable (Job Cost Sheet)

Direct 
Direct
Labor

Indirect Materials

Direct
Labor Labor
Mfg. Overhead

Overhead
Actual Applied Applied

Indirect
If actual and applied
Materials  Overhead
manufacturing overhead

Indirect Applied to
are not equal, a year-end
Labor Work in adjustment is required.
Process 16
Applying Manufacturing Overhead

Work in Process is increased when Manufacturing

Overhead is applied to jobs.

GENERAL JOURNAL
Post.
Date Description Ref. Debit Credit
Work in Process XXXXX
Manufacturing Overhead XXXXX

17
 Accounting for Non-Manufacturing Cost

Nonmanufacturing costs are not assigned to individual jobs;

rather, they are expensed in the period incurred.

Examples:
1. Salary expense of employees who work in a marketing,
selling, or administrative capacity.
2. Advertising expenses are expensed in the period incurred

18
 Accounting for Non-Manufacturing Cost

Nonmanufacturing costs (period expenses) are

charged to expense as they are incurred.

GENERAL JOURNAL
Post.
Date Description Ref. Debit Credit
Salaries Expense XXXXX
Salaries Payable XXXXX

Advertising Expense XXXXX

Accounts Payable XXXXX

19
Transferring Completed Units

Work in Process Finished Goods

(Job Cost Sheet )
 Direct Cost of


Cost of

Goods
Materials
 Direct Goods Mfd.
Mfd.
Labor
 Overhead

Applied

20
 Transferring Completed Units

As jobs are completed, the Cost of Goods Manufactured is

transferred to Finished Goods from Work in Process.

GENERAL JOURNAL
Post.
Date Description Ref. Debit Credit
Finished Goods XXXXX
Work in Process XXXXX

21
 Transferring Units Sold

Work in Process Finished Goods

(Job Cost Sheet)
 Direct Cost of Cost of


Cost of

Goods Goods
Materials
 Direct Goods Mfd. Sold
Mfd.
Labor
 Overhead

Applied Cost of Goods Sold

Cost of
Goods
Sold
22
 Transferring Units Sold

When finished goods are sold, two entries are required:

(1) to record the sale, and (2) to record the Cost of Goods
Sold.

GENERAL JOURNAL
Post.
Date Description Ref. Debit Credit
Accounts Receivable XXXXX
Sales XXXXX

Cost of Goods Sold XXXXX

Finished Goods XXXXX

23
Disposition of Under/Overapplied OH

PearCo’s Cost PearCo’s

of Goods Sold Mfg. Overhead
Unadjusted Actual Overhead
Balance overhead applied
costs to jobs
$30,000
$650,000 $680,000
Adjusted $30,000 $30,000
Balance overapplied

24
 Objectives
• LO3-1: Understand the flow of costs in a job-order
costing system and prepare appropriate journal entries
to record costs.
• LO3-2: Use T-accounts to show the flow of costs in
a job order costing system.
• LO4-2: Compute the equivalent units of production
using the weighted-average method.
• LO4-3: Compute the cost per equivalent unit using
weighted-average method.
• LO4-4: Assign costs to units using the weighted-average
method.
• LO4-5: Prepare a cost reconciliation report.
25
 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.
26
 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.
27
 Wooclap Q1

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.

28
 Processing Departments
• A process or a department is where materials, labour
or overhead is added to a unit of the product.
• The activities performed in a processing department
are performed uniformly on all units of production.
• The output of a processing department is
homogeneous.
• Products in a process costing environment typically
flow in a sequence from one department to another.

29
Comparing Job-Order and Process Costing

Direct
Materials

Direct Labor Work in Finished

Process Goods

Manufacturing Cost of
Overhead Goods
Sold

30
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
31
Comparing Job-Order and Process Costing

Costs are traced and

applied to departments
Direct in a process cost
Materials system.

Direct Labor Processing Finished

Department Goods

Manufacturing Cost of
Overhead Goods
Sold
32
 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.

33
Process Cost Flows: Flow of Raw Materials

Work in Process
Raw Materials Department A
• Direct • Direct
Materials Materials

34
Process Cost Flows: Flow of Labour

Salaries and Work in Process

Department A
Wages Payable
• Direct
• Direct Materials
Labor • Direct
Labor

35
Process Cost Flows: Flow of Manufacturing
OH
Work in Process
Department A
• Direct
Manufacturing Materials
Overhead • Direct
• Actual • Overhead Labor
Overhead Applied to • Applied
Work in Overhead
Process

36
Process Cost Flows: Transfers in WIPs

Work in Process Work in Process

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

Department Department
A B

37
Process Cost Flows: Flow of Raw Materials

Work in Process
Department B
Raw Materials
• Direct • Transferred
Materials from Dept. A
• Direct
Materials

38
Process Cost Flows: Flow of Direct Labour

Salaries and
Work in Process
Wages Payable Department B
• Direct • Transferred
Labour
from Dept. A
• Direct
Materials
• Direct
Labour

39
Process Cost Flows: Flow of Direct Labour

Salaries and
Work in Process
Wages Payable Department B
• Direct • Transferred
Labour
from Dept. A
• Direct
Materials
• Direct
Labour

40
Process Cost Flows: Flow of Manufacturing
OH

Manufacturing Work in Process

Overhead Department B

• Actual • Overhead • Transferred

Overhead Applied to from Dept. A
Work in • Direct
Process Materials
• Direct
Labour
• Applied
Overhead

41
Process Cost Flows: Transfers from WIP to FG

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

42
Process Cost Flows: Transfers from FG to
COGS
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

43
 Wooclap Q2

• In which account do you see the greatest

difference in accounting treatment between
job-order and process cost flows?
1. Raw Materials A/C
2. WIP A/C
3. Finished Goods A/C
4. COGS A/C

44
 Objectives
• LO3-1: Understand the flow of costs in a job-order
costing system and prepare appropriate journal entries
to record costs.
• LO3-2: Use T-accounts to show the flow of costs in a job
order costing system.
• LO4-2: Compute the equivalent units of
production using the weighted-average method.
• LO4-3: Compute the cost per equivalent unit using
weighted-average method.
• LO4-4: Assign costs to units using the weighted-average
method.
• LO4-5: Prepare a cost reconciliation report.
45
 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.
46
 Wooclap Q3
How many equivalent units of production is there for 10,000
units which are only 70% completed?
a. 10,000
b. 700
c. 7,000

47
 Wooclap Q4
How many equivalent units of production is there for 10 units
which are are 20% completed?
a. 10
b. 20
c. 2

48
 Wooclap Q5
For the current period, Jones started work on 15,000 units. He
completed 10,000 units, leaving 5,000 units-in-process 30%
complete. How many equivalent units of production are there
for the period?
a. 10,000
b. 11,500
c. 13,500
d. 15,000

49
 Calculating Equivalent Units

Equivalent units can be calculated two ways:

The Weighted-Average Method is covered in the
main portion of the chapter and is examined.
 The First-In, First-Out Method – FIFO is covered in
the appendix to this chapter and this is NOT
examined in ACCT 102

50
 Equivalent Units of Production – WA 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.
51
 Treatment of Direct Labour

Direct
Materials
Direct labour costs
are becoming small
Dollar Amount

Manufacturing in comparison to
Overhead
other product
Direct
Labor costs in process
cost systems (due
to automation)
Type of Product Cost
52
The Purchase and Issue of Raw Materials

Direct
Materials
Direct labor and
Conversion
manufacturing
Dollar Amount

Direct
Labor
overhead may be
combined into
Direct Manufacturing one classification
Labor Overhead of product
cost called
conversion costs.
Type of Product Cost
53
 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%

54
Summarising 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.

Weighted-Average method 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 55
 Wooclap Q6
The Assembly Department started the month with 59,000 units in its
beginning work in process inventory. An additional 274,000 units
were transferred in from the prior department during the month to
begin processing in the Assembly Department. There were 21,000
units in the ending work in process inventory of the Assembly
Department.
How many units were transferred to the next processing department
during the month?
A. 333,000
B. 236,000
C. 354,000
D. 312,000

56
 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

57
 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

58
 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

59
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

60
 Objectives
• LO3-1: Understand the flow of costs in a job-order
costing system and prepare appropriate journal entries
to record costs.
• LO3-2: Use T-accounts to show the flow of costs in a job
order costing system.
• LO4-2: Compute the equivalent units of production
using the weighted-average method.
• LO4-3: Compute the cost per equivalent unit
using weighted-average method.
• LO4-4: Assign costs to units using the weighted-average
method.
• LO4-5: Prepare a cost reconciliation report.
61
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

62
 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

63
 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

64
 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 = $36.00

65
 Objectives
• LO3-1: Understand the flow of costs in a job-order
costing system and prepare appropriate journal entries
to record costs.
• LO3-2: Use T-accounts to show the flow of costs in a job
order costing system.
• LO4-2: Compute the equivalent units of production
using the weighted-average method.
• LO4-3: Compute the cost per equivalent unit using
weighted-average method.
• LO4-4: Assign costs to units using the weighted-
average method.
• LO4-5: Prepare a cost reconciliation report.
66
 Applying Costs

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

67
 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

68
 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

69
Computing 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

70
Computing 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

71
Computing 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

72
 Objectives
• LO3-1: Understand the flow of costs in a job-order
costing system and prepare appropriate journal entries
to record costs.
• LO3-2: Use T-accounts to show the flow of costs in a job
order costing system.
• LO4-2: Compute the equivalent units of production
using the weighted-average method.
• LO4-3: Compute the cost per equivalent unit using
weighted-average method.
• LO4-4: Assign costs to units using the weighted-average
method.
• LO4-5: Prepare a cost reconciliation report.
73
 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

74
 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

75
 Supplementary Notes for WA 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)

VALUE OF EWIP
(the Black cells: Total cost
TOTAL VALUE
= Total value) 76
Summarising 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.

Weighted-Average method 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 77
Compute Equivalent Units of Production

For the weighted average

calculation, the Inputs
information is not required for
the remaining calculation.

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
78
Summarising Total Cost Incurred in 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 79
Computing 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 80
5,940 5,670
Calculating 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
$ 209,790 81
 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
82
 Operation Costing

Operation cost is a hybrid of job-order and

process costing because it possesses attributes
of both approaches

Operation
Operation costing
costing is
is
commonly
commonly used
used when
when batches
batches
of
of many
many different
different products
products
pass
pass through
through the
the same
same
processing
processing department.
department.
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 Operation Costing
 Operation cost is a hybrid of job-order and process costing
 Used when batches of many different products pass through the same
processing department

E.g.
E.g. All
All the
the canned
canned drinks
drinks require
require same
same amount
amount of
of labour
labour and
and
overhead.
overhead.
They
They differ
differ only
only in
in materials.
materials.
Batch
Batch 1:
1: Ordinary
Ordinary materials
materials
Batch
Batch 2:
2: Expensive
Expensive birds’
birds’ nest
nest
Material costs are traced to each batch (similar to job costing)
Labour and overhead are accumulated by depts and assigned to each
canned drink (similar to process costing)
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 Recap / Checklist

Type Questions
LO3-1 1) Can you write the JEs for the affected departments in the manufacturing process?
LO3-2 1) Do you know the similarities and differences between job costing and process costing?
LO4-2 1) Can you quickly compute the equivalent units of production using the WA method?
LO4-3 1) Can you quickly compute the cost per equivalent unit using the WA method?
LO4-4 1) Can you quickly assign costs to units using the WA method?
LO4-5 1) Can you quickly reconcile the costs using (1) beginning WIP, (2) ending WIP, (3) cost
added and (4) cost transferred?

*** Please master LO4-2 to LO4-5!

85