WHITE CELLS ARE ADJUSTABLE Kristoffer Burnett - Certified Management Accountant, 2009-2011

Process Costing Example

Item: Item1 Beginning Balance $ 7,126 24,674 43,921 $ 75,722 1,221 151,579 124.14 Monthly Expenses $ 29,393 60,964 37,823 $ 128,180 Cost Ending Transfers Balance $ (29,775) $ 6,745 (95,165) 20,249 (151,579) 25,330 $ (151,579) $ 52,324

Department A Department B Department C Totals Total completed units Total cost transferred to FG Average cost per unit

$70,000

Departmental Expense Breakdown

$70

$60,000

$60

$50,000

$50

Overhead
$40,000 $40

Direct Labor
$30,000 $30

Direct Material Per Unit Costs Added

$20,000

$20

$10,000

$10

$0 Department A Department B Department C

$0

WHITE CELLS ARE ADJUSTABLE Kristoffer Burnett - Certified Management Accountant, 2009-2011 Process Costing Example Beginning WIP Units Item Item1 Item2 Item3 Item4 Item5 1 Beginning WIP Dept A 345 418 572 292 754

Beginning WIP Dept B 354 403 835 370 1,082

Beginning WIP Dept C 428 383 616 417 1,107

Ending WIP Units Item Item1 Item2 Item3 Item4 Item5 Ending WIP Dept A 525 328 556 389 1,074 Ending WIP Dept B 448 385 682 305 1,040 Ending WIP Dept C 356 365 659 394 811

Units Started In Production

2

Item Item1 Item2 Item3 Item4 Item5

Dept A 1,423 1,118 2,160 818 2,416

Direct Material Cost Per Unit Item Item1 Item2 Item3 Item4 Item5 Dept A 7.67 13.18 25.16 23.44 14.06 Dept B 10.22 27.68 9.32 25.12 8.08 Dept C 7.67 90.94 12.11 35.17 7.78

Direct Labor Cost Per Unit Item Item1 Item2 Item3 Item4 Item5 Dept A 5.66 6.87 10.99 9.19 5.84 Dept B 19.39 10.08 12.82 20.81 9.18 Dept C 15.35 5.95 12.82 18.39 12.79

Overhead Cost Per Unit Item Item1 Item2 Item3 Item4 Item5 Dept A 7.33 4.75 15.36 9.28 11.13 Dept B 19.43 15.08 12.59 5.25 10.90 Dept C 9.90 8.10 2.76 25.82 0.68

Notes: 1 WIP = Work in process. Finished goods that have been started but not yet completed. 2 Units Started In Production need only be entered for the first department. All of the subsequent departments will be calculated based on beginning and ending WIP.

WHITE CELLS ARE ADJUSTABLE Kristoffer Burnett - Certified Management Accountant, 2009-2011

Process Costing Example

Item: Unit Reconciliation Beginning work in process (WIP) Started in production Total units into production Transferred to department B WIP percentage complete Ending WIP Total units reconciled 345 1,423 1,768 1,243 525 1,768 Item1

Direct Materials Direct Labor Factory Overhead 1,243 1,243 1,243 60% 50% 50% 315 263 263 1,558 1,506 1,506

These are the completed units transferred to the next stage in production For simplicity's sake overhead expenses are allocated by direct labor hours Ending WIP * WIP percentage complete Total units reconciled must equal Total units into production

Cost Per Equivalent Unit Beginning work in progress Department A expenses Total costs to be allocated Equivalent units Cost per equivalent unit $ $ 7,126 29,393 36,520 Direct Materials 2,645 10,912 13,557 1,558 8.70 Direct Labor 1,951 8,048 10,000 1,506 6.64 Factory Overhead 2,530 The costs associated with those units in beginning WIP. 10,433 The total costs incurred this period for those units started in production 12,963 1,506 Total units reconciled from above 8.61 Total cost to be allocated/ Equivalent units

23.95

Cost Allocation Transferred to department B Ending WIP material Ending WIP conversion Total ending work in process Total cost allocation Total Cost $ 29,775 2,741 4,004 6,745 36,520 Direct Materials 1,243 315

Equivalent Units Direct Labor Factory Overhead 1,243 1,243 The number of units and dollar value of inventory transferred to the next department The quantity and total cost for those units in ending WIP 263 " The total value of ending WIP Transferred to department B + Total ending work in process. Must equal Total costs to be allocated

263

Notes: 1 There are two primary methods used in process costing. The weighted-average method, which is used in this example, and the first-in-first-out (FIFO) method.

WHITE CELLS ARE ADJUSTABLE Kristoffer Burnett - Certified Management Accountant, 2009-2011

Process Costing Example

Item: Unit Reconciliation Beginning work in process (WIP) Transferred from department A Total units into production Transferred to department C WIP percentage complete Ending WIP Total units reconciled 354 1,243 1,597 1,149 448 1,597 Item1

Direct Materials Direct Labor Factory Overhead 1,149 1,149 1,149 40% 60% 60% 179 269 269 1,328 1,418 1,418

These are the completed units transferred to the next stage in production For simplicity's sake overhead expenses are allocated by direct labor hours Ending WIP * WIP percentage complete Total units reconciled must equal Total units into production

Cost Per Equivalent Unit Beginning work in progress Department B expenses Transferred from department A Total costs to be allocated Equivalent units Cost per equivalent unit $ 24,674 60,964 29,775 $ 115,413 Direct Materials 6,334 12,708 10,816 29,858 1,328 22.48 Direct Labor 8,867 24,104 8,256 41,227 1,418 29.08 Factory Overhead 9,474 The costs associated with those units in beginning WIP. 24,151 The total costs incurred this period for those units started in production 10,703 The value of inventory transferred from the previous department 44,328 1,418 Total units reconciled from above 31.27 Total cost to be allocated/ Equivalent units

82.82

Cost Allocation Transferred to department C Ending WIP material Ending WIP conversion Total ending work in process Total cost allocation Total Cost $ 95,165 4,028 16,220 20,249 $ 115,413 Direct Materials 1,149 179

Equivalent Units Direct Labor Factory Overhead 1,149 1,149 The number of units and dollar value of inventory transferred to the next department The quantity and total cost for those units in ending WIP 269 " The total value of ending WIP Transferred to department C + Total ending work in process. Must equal Total costs to be allocated

269

Notes: 1 There are two primary methods used in process costing. The weighted-average method, which is used in this example, and the first-in-first-out (FIFO) method.

WHITE CELLS ARE ADJUSTABLE Kristoffer Burnett - Certified Management Accountant, 2009-2011

Process Costing Example

Item: Unit Reconciliation Beginning work in process (WIP) Transferred from Dept B Total units into production Transferred to finished goods WIP percentage complete Ending WIP Total units reconciled 428 1,149 1,577 1,221 356 1,577 Item1

Direct Materials Direct Labor Factory Overhead 1,221 1,221 1,221 80% 50% 50% 285 178 178 1,506 1,399 1,399

These are the completed units transferred to the next stage in production For simplicity's sake overhead expenses are allocated by direct labor hours Ending WIP * respective WIP percentage complete Total units reconciled must equal Total units into production

Cost Per Equivalent Unit Beginning work in progress Department C expenses Transferred from department B Total costs to be allocated Equivalent units Cost per equivalent unit $ 43,921 37,823 95,165 $ 176,909 Direct Materials 10,940 8,811 25,830 45,580 1,506 30.27 Direct Labor 17,291 17,639 33,411 68,342 1,399 48.85 Factory Overhead 15,690 The costs associated with those units in beginning WIP. 11,373 The total costs incurred this period for those units started in production 35,924 The value of inventory transferred from the previous department 62,987 1,399 Total units reconciled from above 45.02 Total cost to be allocated/ Equivalent units

124.14

Cost Allocation Transferred to finished goods Ending WIP material Ending WIP conversion Total ending work in process Total cost allocation Total Cost $ 151,579 8,621 16,709 25,330 $ 176,909 Direct Materials 1,221 285

Equivalent Units Direct Labor Factory Overhead 1,221 1,221 The number of units and dollar value of inventory transferred to the next department The quantity and total cost for those units in ending WIP 178 " The total value of ending WIP Transferred to finished goods + Total ending work in process. Must equal Total costs to be allocated

178

Notes: 1 There are two primary methods used in process costing. The weighted-average method, which is used in this example, and the first-in-first-out (FIFO) method.