1. GLENCOE / McGraw-Hill

2. Process Cost Accounting
Change Chapter 9 to 30.

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

4. 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.
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5. 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:
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6. Departmental Data with Beginning Inventory
Laminating Finishing
Department Department
Beginning inventory costs
Beginning inventory quantities
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7. 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
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8. 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.
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9. 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 , Cost of goods transferred
out of laminating department
in July
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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 ,833.00
Cost of goods completed
in July and transferred out

10. 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

11. 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

12. College Accounting, Tenth Edition
Thank You
for using
College Accounting, Tenth Edition
Price • Haddock • Brock