Systems Design: Process Costing

Chapter 4

© 2010 The McGraw-Hill Companies, Inc.

 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.

McGraw-Hill/Irwin Slide 2
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. Job-order costing systems
accumulated costs by individual jobs.
 Process costing systems compute unit costs by
department. Job-order costing systems compute
unit costs by job on the job cost sheet.

McGraw-Hill/Irwin Slide 3
Cost flows in process costing

McGraw-Hill/Irwin Slide 4
 Flow of material, labor and overhead costs

McGraw-Hill/Irwin Slide 5
 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.

McGraw-Hill/Irwin Slide 6
 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.

McGraw-Hill/Irwin Slide 7
 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.

McGraw-Hill/Irwin Slide 8
 Learning Objective 1

Record the flow of

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

McGraw-Hill/Irwin Slide 9
 Comparing Job-Order and Process Costing
Direct
Materials

Work in Finished
Direct Labor
Process Goods

Manufacturing Cost of
Overhead Goods
Sold

McGraw-Hill/Irwin Slide 10
 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
Jobs Goods

Manufacturing Cost of
Overhead Goods
Sold

McGraw-Hill/Irwin Slide 11
 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

McGraw-Hill/Irwin Slide 12
 Process Costing Computations

• In process costing, each department

needs to calculate two numbers for
financial reporting purposes—the cost of
its ending work in process inventory and
the cost of its completed units that were
transferred to the next stage of the
production process.
• The key to deriving these two numbers is
calculating unit costs within each
department.
McGraw-Hill/Irwin Slide 13
 Process Costing Computations
Key Concept #1: There are two methods for
performing the computations, the weighted-
average method and the FIFO method.
The weighted-average method of process
costing calculates unit costs by combining
costs and outputs from the current and prior
periods.
The FIFO method of process costing, which
will be covered in Appendix 4A, calculates
unit costs based solely on the costs and
outputs from the current period.

McGraw-Hill/Irwin Slide 14
 Process Costing Computations
Key Concept #2: Conversion Costs
Direct labor costs are often small in
comparison to the other product costs in
process cost systems.

McGraw-Hill/Irwin Slide 15
 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

McGraw-Hill/Irwin Slide 16
 Treatment of Direct Labor

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

McGraw-Hill/Irwin Slide 17
 Process Costing Computations
Key Concept #3: Equivalent Units
a)Equivalent units  Defined as the product of the number
of partially completed units and the percentage completion
of those units.
b)Equivalent units need to be calculated because a
department usually has some partially completed units in
its beginning and ending inventories. 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.

McGraw-Hill/Irwin Slide 18
 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.
McGraw-Hill/Irwin Slide 19
 Equivalent Units – The Basic Idea

Two half completed products are

equivalent to one complete product.

+ = 1

So,
So, 10,000
10,000 units
units 70%
70% complete
complete
are
are equivalent
equivalent to
to 7,000
7,000 complete
complete units.
units.

McGraw-Hill/Irwin Slide 20
 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

McGraw-Hill/Irwin Slide 21
 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
10,000 units + (5,000 units × 0.30)
b. 11,500 = 11,500 equivalent units
c. 13,500
d. 15,000

McGraw-Hill/Irwin Slide 22
 Calculating Equivalent Units

Equivalent
Equivalent units
units can
can be
be calculated
calculated
two
two ways:
ways:
The
The First-In,
First-In, First-Out
First-Out Method
Method –– FIFO
FIFO is
is
covered
covered in
in the
the appendix
appendix to
to this
this chapter.
chapter.
The
The Weighted-Average
Weighted-Average Method
Method –– This
This method
method
will
will be
be covered
covered in
in the
the main
main portion
portion of
of the
the chapter.
chapter.

McGraw-Hill/Irwin Slide 23
 Learning Objective 2

Compute the equivalent

units of production using
the weighted-average
method.

McGraw-Hill/Irwin Slide 24
 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.

McGraw-Hill/Irwin Slide 25
 Step 1: Compute the Equivalent Units of
Production – Part 1

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%

McGraw-Hill/Irwin Slide 26
 Step 1: Compute the Equivalent Units of
Production – Part 2
Begin by calculating the equivalent units completed and
transferred out of the Assembly Department in June (5,400
units).

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

McGraw-Hill/Irwin Slide 27
 Step 1: Compute the Equivalent Units of
Production – Part 3
Next, 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

McGraw-Hill/Irwin Slide 28
 Step 1: Compute the Equivalent Units of
Production – Part 4
Finally, 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.

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

McGraw-Hill/Irwin Slide 29
 Step 1: Compute the Equivalent Units of
Production – Part 5
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

McGraw-Hill/Irwin Slide 30
 Step 1: Compute the Equivalent Units of
Production – Part 6
6,000 Units Started
Materials

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
McGraw-Hill/Irwin Slide 31
 Step 1: Compute the Equivalent Units of
Production – Part 7
6,000 Units Started
Conversion

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
McGraw-Hill/Irwin Slide 32
 Learning Objective 3

Compute the cost

per equivalent unit
using the weighted-
average method.

McGraw-Hill/Irwin Slide 33
 Step 2: Compute the Cost per Equivalent
Unit – Part 1
Beginning Work in Process Inventory: 300 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

McGraw-Hill/Irwin Slide 34
 Step 2: Compute the Cost per Equivalent
Unit – Part 2
The formula for computing the cost per equivalent
unit is:

McGraw-Hill/Irwin Slide 35
 Step 2: Compute the Cost per Equivalent
Unit – Part 3
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

McGraw-Hill/Irwin Slide 36
 Step 2: Compute the Cost per Equivalent
Unit – Part 4
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

McGraw-Hill/Irwin Slide 37
 Learning Objective 4

Assign costs to units

using the weighted-
average method.

McGraw-Hill/Irwin Slide 38
 Step 3: Assign Costs to Units – Part 1

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

McGraw-Hill/Irwin Slide 39
 Step 3: Assign Costs to Units – Part 2

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

McGraw-Hill/Irwin Slide 40
 Step 3: Assign Costs to Units – Part 3

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

McGraw-Hill/Irwin Slide 41
 Step 3: Compute 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

McGraw-Hill/Irwin Slide 42
 Step 3: Assign Costs to Units – Part 4

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

McGraw-Hill/Irwin Slide 43
 Step 3: Assign Costs to Units – Part 5

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

McGraw-Hill/Irwin Slide 44
 Learning Objective 5

Prepare a cost
reconciliation report
using the weighted-
average method.

McGraw-Hill/Irwin Slide 45
 Step 4: Prepare a Cost Reconciliation Report –
Part 1
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

McGraw-Hill/Irwin Slide 46
 Step 4: Prepare a Cost Reconciliation
Report – Part 2
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

McGraw-Hill/Irwin Slide 47
 Operation Costing

Operation costing is a hybrid of job-order

and process costing because it possesses
attributes of both approaches.

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

McGraw-Hill/Irwin Slide 48
 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.

McGraw-Hill/Irwin Slide 49
FIFO Method

Appendix 4A

© 2010 The McGraw-Hill Companies, Inc.

 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.
1. The
The computation
computation of
of equivalent
equivalent units.
units.
2.
2. The
The way
way in
in which
which the
the costs
costs of
of beginning
beginning
inventory
inventory are
are treated.
treated.

McGraw-Hill/Irwin Slide 51
 The FIFO Method

The FIFO method is generally considered

more accurate than the weighted-average
method.
1. FIFO calculates unit costs using only the
costs and outputs from the current period.
2. We will organize our explanation using the
same four-step process that we used for the
weighted-average method.

McGraw-Hill/Irwin Slide 52
 Learning Objective 6

Compute the equivalent

units of production using
the FIFO method.

McGraw-Hill/Irwin Slide 53
 Step 1: Compute the Equivalent Units of
Production – FIFO Method – Part 1
Let’s revisit the Smith Company example from the Chapter 4 PowerPoint. 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%

McGraw-Hill/Irwin Slide 54
 Step 1: Compute the Equivalent Units of
Production – FIFO Method – Part 2

Materials Conversion
Equivalent units needed to complete beginning WIP inventory
Materials: 300 units × (100% - 40%) 180
Conversion: 300 units × (100% - 20%) 240

McGraw-Hill/Irwin Slide 55
 Step 1: Compute the Equivalent Units of
Production – FIFO Method – Part 3

Materials Conversion
Equivalent units needed to complete beginning WIP inventory
Materials: 300 units × (100% - 40%) 180
Conversion: 300 units × (100% - 20%) 240
Units started and completed during June 5,100 5,100

McGraw-Hill/Irwin Slide 56
 Step 1: Compute the Equivalent Units of
Production – FIFO Method – Part 4

Materials Conversion
Equivalent units needed to complete beginning WIP inventory
Materials: 300 units × (100% - 40%) 180
Conversion: 300 units × (100% - 20%) 240
Units started and completed during June 5,100 5,100
Equivalent units in ending WIP inventory
Materials: 900 units × 60% complete 540
Conversion: 900 units × 30% complete 270
Equivalent units of in ending WIP Inventory 5,820 5,610

McGraw-Hill/Irwin Slide 57
 Step 1: Compute the Equivalent Units of
Production – FIFO Method – Part 5

Materials
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
540 Equivalent Units 900 × 60%
5,820 Equivalent units
of production

McGraw-Hill/Irwin Slide 58
 Step 1: Compute the Equivalent Units of
Production – FIFO Method – Part 6

Conversion
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
270 Equivalent Units 900 × 30%
5,610 Equivalent units
of production

McGraw-Hill/Irwin Slide 59
 Comparing Equivalent Units:
Weighted-Average and FIFO Methods
The FIFO method removes the equivalent units that were already in
beginning inventory from the equivalent units as defined using the
weighted-average method. Thus, the FIFO method isolates the
equivalent units due to work performed during the current period. This
can be illustrated using the Smith Company example as follows:
1.The equivalent units of production for materials under the weighted-
average method (5,940 units) minus the equivalent units of material
already complete in beginning inventory (120 units) equals the equivalent
units of production under the FIFO method (5,820).
2.The equivalent units of production for conversion under the weighted-
average method (5,670 units) minus the equivalent units of conversion
already complete in beginning inventory (60 units) equals the equivalent
units of production under the FIFO method (5,610 units).

McGraw-Hill/Irwin Slide 60
 Learning Objective 7

Compute the cost per

equivalent unit using
the FIFO method.

McGraw-Hill/Irwin Slide 61
 Step 2: Compute the Cost per Equivalent Unit
(FIFO Method) – Part 1
Let’s revisit the Smith Company Assembly
Department for the month of June to prepare
our cost per equivalent unit.
Beginning work in process: 300 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

McGraw-Hill/Irwin Slide 62
 Step 2: Compute the Cost per Equivalent Unit
(FIFO Method) – Part 2

Or the equivalent units of production can also be

determined as follows:

McGraw-Hill/Irwin Slide 63
 Step 2: Compute the Cost per Equivalent Unit
(FIFO Method) – Part 3

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

$118,621 ÷ 5,820 $81,130 ÷ 5,610

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

McGraw-Hill/Irwin Slide 64
 Learning Objective 8

Assign costs to units

using the FIFO
method.

McGraw-Hill/Irwin Slide 65
 Step 3: Assign Costs to Units (FIFO Method) –
Part 1
Record the equivalent units of production in ending Work in
Process Inventory.
Assembly Department
Cost of Ending WIP Inventory
Materials Conversion Total

Equivalent Units in Ending WiP Inventory 540 270

900
900 units
units ×× 60%
60% 900
900 units
units ×× 30%
30%

McGraw-Hill/Irwin Slide 66
 Step 3: Assign Costs to Units (FIFO Method) –
Part 2

Record the cost per equivalent unit.

Assembly Department
Cost of Ending WIP Inventory
Materials Conversion Total

Equivalent Units in Ending WiP Inventory 540 270

Cost per equivalent unit $ 20.3816 $ 14.4617

McGraw-Hill/Irwin Slide 67
 Step 3: Assign Costs to Units (FIFO Method) –
Part 3

Compute the cost of ending Work in Process Inventory.

Assembly Department
Cost of Ending WIP Inventory
Materials Conversion Total

Equivalent Units in Ending WiP Inventory 540 270

Cost per equivalent unit $ 20.3816 $ 14.4617
Cost of Ending WIP inventory $ 11,006 $ 3,905 $ 14,911

540
540 ×× $20.3816
$20.3816 270
270 ×× 14.4617
14.4617

McGraw-Hill/Irwin Slide 68
 Computing the Cost of Units
Transferred Out – Part 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

McGraw-Hill/Irwin Slide 69
 Computing the Cost of Units
Transferred Out – Part 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 needed to complete 180 240
Cost per equivalent unit $ 20.3816 $ 14.4617
Cost to complete beginning WIP $ 3,669 $ 3,471 7,140

McGraw-Hill/Irwin Slide 70
 Computing the Cost of Units
Transferred Out – Part 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 needed to complete 180 240
Cost per equivalent unit $ 20.3816 $ 14.4617
Cost to complete beginning WIP $ 3,669 $ 3,471 7,140
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

McGraw-Hill/Irwin Slide 71
 Computing the Cost of Units
Transferred Out – Part 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 needed to complete 180 240
Cost per equivalent unit $ 20.3816 $ 14.4617
Cost to complete beginning WIP $ 3,669 $ 3,471 7,140
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 $ 194,880

McGraw-Hill/Irwin Slide 72
 Learning Objective 9

Prepare a cost
Prepare a cost
reconciliation report
reconciliation report
using the FIFO method.
using the FIFO
method.

McGraw-Hill/Irwin Slide 73
 Step 4: Prepare a Cost Reconciliation Report
(FIFO Method) – Part 1

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 194,880
Total cost accounted for* $ 209,791

McGraw-Hill/Irwin Slide 74
 Step 4: Prepare a Cost Reconciliation Report
(FIFO Method) – Part 2

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 194,880
Total cost accounted for* $ 209,791

* $1 rounding error.

McGraw-Hill/Irwin Slide 75