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Process Cost Accounting Change Chapter 9 to 30.

Work in Process Inventory Section Objective Compute equivalent production and prepare a cost of production report with a beginning work in process inventory.

Beginning Work in Process Inventory The company discussed in the previous section did not have any beginning work in process. However, beginning work in process inventories are a normal part of business operations. Page 1072

What is the average method of process costing? QUESTION: What is the average method of process costing? The average method of process costing combines the cost of beginning inventory for each cost element with the costs of the current period. ANSWER: Page 1073

Departmental Data with Beginning Inventory Laminating Finishing Department Department Beginning inventory costs Beginning inventory quantities Page 1072

Unit Costs Using the Average Method of Process Costing The beginning work in process inventory is shown on the cost of production report under the appropriate department. Unit costs are calculated by adding the beginning inventory to the current period costs for each cost element, then dividing by equivalent units. Unit Cost = (Beginning work in process inventory + Current period costs) ÷ Equivalent units Page 1072

Recording Cost Flows The ending work in process of one period becomes the beginning work in process of the following period. Journal entries are made as shown earlier in Section 1 to record the transfer of costs. Page 1076

Recording Transfer of Costs Transfer of goods from one department to another and to finished goods inventory: 20-- July 31 Work in Process—Finishing Department 39,390.00 Finished Goods Inventory 15,756.00 Work in Process—Laminating Department 55,146.00 Cost of goods transferred out of laminating department in July Page 1077 Record the costs of goods from work in process to finished goods inventory: 20-- July 31 Finished Goods Inventory 78,833.00 Work in Process—Finishing Department 78,833.00 Cost of goods completed in July and transferred out

Complete the following sentences: average method of process costing _________ work in process inventories are a normal part of business operations. Beginning The _______________________________ combines the cost of beginning inventory for each cost element with the costs of the current period. average method of process costing The cost of production report contains two primary sections: the ________ ________ and the _____________. Quantity Schedule Cost Schedule

R E V I W Complete the following sentences: The first step in calculating unit cost is to add ________________________________ and __________________. beginning work in process inventory current period costs The second step in calculating unit cost is to divide the sum of beginning work in process inventory and __________________ by ______________. current period costs equivalent units In a process cost system, the ending work in process of one period becomes the _______________________ of the following period. beginning work in process

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