©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster Summarize Total Costs (Step 4) Work in process beginning inventory: Materials$ 9,700 Conversion 10,000 Total beginning inventory$ 19,700 + Current costs: Materials $87,500 Conversion 72,000 = Costs to account for$179,200

©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster Assign Total Costs (Step 5) Good units completed and transferred out (31,000 units): Costs before adding normal spoilage: 31,000 × ($ $2.50) $161,200 Normal spoilage: 620 × ($ $2.50) 3,224 Total$164,424

©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster Assign Total Costs (Step 5) Abnormal spoilage: 380 × ($ $2.50)$ 1,976 Work in process, ending (4,000 units): Direct materials (4,000 × $2.70)$10,800 Conversion (800 × $2.50) 2,000 Total$12,800

©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster Assign Total Costs (Step 5) Costs of units completed and transferred out (including normal spoilage)$164,424 Cost of abnormal spoilage 1,976 Costs in ending inventory 12,800 Total costs accounted for$179,200 The $1,976 cost of abnormal spoilage is assigned to the Loss from Abnormal Spoilage account.

©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster Learning Objective 4 Account for spoilage in process costing using the first-in, first-out (FIFO) method.

©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster Physical Units (Step 1) Work in process, beginning (November 1): 100% material, 60% conversion costs 1,000 Started during November35,000 36,000 Good units completed and transferred out: From beginning inventory 1,000 Started and completed30,000 31,000

©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster Physical Units (Step 1) Work in process, ending inventory: 100% material, 20% conversion costs4,000 Normal spoilage 620 Abnormal spoilage 380

©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster Compute Equivalent Units (Step 2) Materials Conversion Good units completed and transferred out: From beginning inventory Started and completed30,00030,000 Normal spoilage Abnormal spoilage Ending inventory 4, Equivalent units35,00032,200

©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster Compute Equivalent Unit Costs (Step 3) Materials Conversion Current costs$87,500$72,000 Divided by equivalent units 35,000 32,200 Cost per unit $2.50 $2.236* *$2.236 (rounded)

©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster Summarize Total Costs (Step 4) Work in process beginning inventory: Materials$ 9,700 Conversion 10,000 Total beginning inventory$ 19,700 + Current costs: Materials$ 87,500 Conversion 72,000 = Costs to account for:$179,200

©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster Assign Total Costs (Step 5) Good units completed and transferred out: From beginning inventory: Work in process$ 19, Conversion costs added in current period (400 × $2.236) Total$ 20, Started and completed: 30,000 × ($ $2.236)$142,080.00

©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster Assign Total Costs (Step 5) Costs before adding normal spoilage: ($20, $142,080.00)$162, Normal spoilage: 620 × ($ $2.236) 2, Total$165,610.72

©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster Assign Total Costs (Step 5) Abnormal spoilage: 380 × ($ $2.236)$1, Work in process, ending (4,000 units): Direct materials (4,000 × $2.50)$10,000 Conversion (800 × $2.236) 1,789 Total$11,789

©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster Assign Total Costs (Step 5) Costs of units completed and transferred out (including normal spoilage)$165, Cost of abnormal spoilage 1, Costs in ending inventory 11, Total costs accounted for$179, The $1, costs of abnormal spoilage are assigned to the Loss from Abnormal Spoilage account.

©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster Learning Objective 5 Account for spoilage in process costing using the standard-costing method.

©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster Standard-Costing: Spoilage The standard-costing method makes calculating equivalent unit costs unnecessary and so simplifies process costing.

©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster Journal Entries Assume that the completed units are transferred to Finished Goods. What are the journal entries? Finished GoodsXXX Work in ProcessXXX To transfer good units completed in November

©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster Journal Entries Loss from Abnormal SpoilageXXX Work in ProcessXXX To recognize abnormal spoilage detected in November

©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster End of Chapter 18