1. Lecture 15

2. Lecture Overview
Types of Costing Systems Used to Determine Product Costs
Differences Between Job-Order and Process Costing
Sequential Processing Departments
Parallel Processing Departments
Flow of Materials, Labor and Overhead Costs
Materials, Labor, and Overhead Cost Entries

3. Equivalent Units of Production
Equivalent units are partially complete and are part of work in process inventory. It is the concept of expressing partially completed products as a smaller number of fully completed units. + =
Two one-half completed products are equivalent to one completed product. So, 10,000 units 70% complete are equivalent to 7,000 complete units.

4. MCQs Test
For the current period, Matrix 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 Matrix have for the period?
a. 10,000
b. 11,500
c. 13,500
d. 15,000

5. MCQs Test
For the current period, Matrix 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 Matrix have for the period?
a. 10,000
b. 11,500
c. 13,500
d. 15,000
10,000 units + (5,000 units × .30) = 11,500 equivalent units

6. Equivalent Units of Production
To calculate the cost per equivalent unit for the period:
Cost per equivalent unit =
Costs for the period Equivalent units of production for the period

7. MCQs Test
Now assume that Matrix incurred $27,600 in production costs for the 11,500 equivalent units of production. What was Matrix’s cost per equivalent unit for the period?
a. $1.84
b. $2.40
c. $2.76
d. $2.90

8. MCQs Test
Now assume that Matrix incurred $27,600 in production costs for the 11,500 equivalent units of production. What was Matrix’s cost per equivalent unit for the period?
a. $1.84
b. $2.40
c. $2.76
d. $2.90
$27,600 ÷ 11,500 equivalent units
= $2.40 per equivalent unit

9. Weighted Average Method
Under the weighted-average method equivalent units will always be calculated as follows:

10. Weighted Average Method
Matrix, Inc. reported the following activity in Mixing Department for the month of June:

11. Weighted Average Method
Equivalent units are calculated as follows:

12. Weighted Average Method
Equivalent units are calculated as follows:

13. Weighted Average Method
Equivalent units of production always equals:
Units completed and transferred
+ Equivalent units remaining in work in process
Equivalent units are calculated as follows:

14. Weighted Average Method
Materials
6,000 Units Started
Beginning Work in Process 300 Units 40% Complete
Ending Work in Process 900 Units 60% Complete
5,100 Units Started and Completed
5,400 Units Completed
5,400 Units Completed
900 × 60%
540 Equivalent Units
5,940 Equivalent units of production

15. Weighted Average Method
Conversion
6,000 Units Started
Beginning Work in Process 300 Units 40% Complete
Ending Work in Process 900 Units 30% Complete
5,100 Units Started and Completed
5,400 Units Completed
900 × 30%
270 Equivalent Units
5,670 Equivalent units of production

16. Production Report Production Report Section 1 Section 2 Section 3
Quantity schedule with computation of equivalent units.
Section 1
A computation of cost per equivalent unit.
Section 2
A reconciliation of cost flows for the period.
Section 3

17. Production Report Example
Double Diamond Skis uses process costing to determine unit costs in its Shaping and Milling Department.
Double Diamond uses the weighted average cost procedure.
Using the following information for the month of May, let’s prepare a production report for Shaping and Milling.

18. Production Report Example
Work in process, May 1: units
Materials: 50% complete $ 3,000
Conversion: 30% complete ,000
Units started into production in May: 5,000
Units completed and transferred out in May: 4,800
Costs added to production in May
Materials cost $ 74,000
Conversion cost ,000
Work in process, May 31: units
Materials % complete.
Conversion 25% complete.
Cost

19. Production Report Example
Step: Quantity Schedule with Equivalent Units

20. Production Report Example
Step: Quantity Schedule with Equivalent Units

21. Production Report Example
Section: Compute cost per equivalent unit

22. Production Report Example
Section: Compute cost per equivalent unit
$77,000 ÷ 4,960 units = $ (rounded)

23. Production Report Example
Section: Compute cost per equivalent unit
$71,000 ÷ 4,900 units = $ (rounded)

24. Production Report Example
Section : Cost Reconciliation

25. Production Report Example
Section : Cost Reconciliation
4,800 $30.014

26. Production Report Example
Section : Cost Reconciliation
160 $15.524
100 $14.49
All costs accounted for

27. Lecture Overview Equivalent Units of Production MCQs Test
Weighted Average Method
Production Report
Production Report Example

28. End of Lecture 15