1. 18 - 1 ©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

2. 18 - 2 ©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 × ($2.70 + $2.50) $161,200 Normal spoilage: 620 × ($2.70 + $2.50) 3,224 Total$164,424

3. 18 - 3 ©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster Assign Total Costs (Step 5) Abnormal spoilage: 380 × ($2.70 + $2.50)$ 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

4. 18 - 4 ©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.

5. 18 - 5 ©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.

6. 18 - 6 ©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

7. 18 - 7 ©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

8. 18 - 8 ©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 0 400 Started and completed30,00030,000 Normal spoilage 620 620 Abnormal spoilage 380 380 Ending inventory 4,000 800 Equivalent units35,00032,200

9. 18 - 9 ©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)

10. 18 - 10 ©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

11. 18 - 11 ©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$ 19,700.00 Conversion costs added in current period (400 × $2.236) 894.40 Total$ 20,594.40 Started and completed: 30,000 × ($2.50 + $2.236)$142,080.00

12. 18 - 12 ©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster Assign Total Costs (Step 5) Costs before adding normal spoilage: ($20,594.40 + $142,080.00)$162,674.40 Normal spoilage: 620 × ($2.50 + $2.236) 2,936.32 Total$165,610.72

13. 18 - 13 ©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster Assign Total Costs (Step 5) Abnormal spoilage: 380 × ($2.50 + $2.236)$1,799.68 Work in process, ending (4,000 units): Direct materials (4,000 × $2.50)$10,000 Conversion (800 × $2.236) 1,789 Total$11,789

14. 18 - 14 ©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)$165,610.72 Cost of abnormal spoilage 1,799.68 Costs in ending inventory 11,789.00 Total costs accounted for$179,200.00 The $1,799.68 costs of abnormal spoilage are assigned to the Loss from Abnormal Spoilage account.

15. 18 - 15 ©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.

16. 18 - 16 ©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.

17. 18 - 17 ©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

18. 18 - 18 ©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

19. 18 - 19 ©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster End of Chapter 18