1 / 10

Chapter 12

Chapter 12. Average Costing of Work in Process. Introduction. Normally, in continuous process industries, the producing departments: Carry forward inventories from one month to another These balances must be included when determining total costs and unit costs.

Download Presentation

Chapter 12

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript


  1. Chapter 12 Average Costing of Work in Process

  2. Introduction • Normally, in continuous process industries, the producing departments: • Carry forward inventories from one month to another • These balances must be included when determining total costs and unit costs

  3. Accounting for Beginning Work in Process • First in, first out costing • Partially processed units carried over from the previous month are costed separately from units in the current month • When finished, cost of beginning units will contain a mixture of last and current month’s cost • Units started in the current month will only have current month’s cost • Transfers are costed on the assumptions of that oldest units will move out first

  4. Accounting for Beginning Work in Process (cont’d) • Average costing • Combines the costs of carried-over and new production • Cost of beginning work in process inventory is added to cost incurred in the current month • Single cumulative total and unit cost if obtained • One unit cost figure is used for costing unit transferred out of the department

  5. Applying the Average Cost Method (cont’d) • Sample Cost data for beginning Work in Process (from Cost of Production Report) • Current month costs

  6. Applying the Average Cost Method (cont’d) • Production data

  7. Applying the Average Cost Method (cont’d) • Compute equivalent units

  8. Theory of Constraints (TOC) • A problem solving method that focuses on finding and solving core problems • Slowest process in a set of sequential steps is the one that will govern the rate of output • Constraints can take many forms such as: • Physical – limitations on machine, material, and labor • Company policies

  9. Combined Cost of Production Report • A single report is preferred by accountants over separate reports for each department • Simple to prepare • Permits quicker cross checking • Makes it simpler to trace transfer from department to department more easily

  10. Accounting for Sales and Cost of Goods Sold • Process cost System – goods manufactured are usually for stock and stored in the warehouse • Both cost and selling price are recorded in the sales journal Cost of Goods Sold dr. Finished Goods cr. Accounts receivable/ Cash dr. Sales cr.

More Related