Systems Design:
Process Costing
Chapter Four
McGraw-Hill/Irwin
Copyright © 2006, The McGraw-Hill Companies, Inc.
Similarities Between Job-Order and Process
Costing
• Both systems assign material, labor and
overhead costs to products and they provide a
mechanism for computing unit product cost.
• Both systems use the same manufacturing
accounts, including Manufacturing Overhead,
Raw Materials, Work in Process, and Finished
Goods.
• The flow of costs through the manufacturing
accounts is basically the same in both systems.
McGraw-Hill/Irwin
Copyright © 2006, The McGraw-Hill Companies, Inc.
Differences Between Job-Order and Process
Costing
• Process costing is used when a single product is produced on
a continuing basis or for a long period of time. Job-order
costing is used when many different jobs are worked on each
period.
• Process costing systems accumulate costs by department.
Job-order costing systems accumulated costs by individual
jobs.
• Process costing systems use department production reports to
accumulate costs. Job-order costing systems use job cost
sheets to accumulate costs.
• Process costing systems compute unit costs by department.
Job-order costing systems compute unit costs by job.
McGraw-Hill/Irwin
Copyright © 2006, The McGraw-Hill Companies, Inc.
What is a Processing Department?
Any location in an organization where materials,
labor or overhead are added to the product.
The activities performed in a processing
department are performed uniformly on all
units of production. Furthermore, the output of
a processing department must be
homogeneous.
McGraw-Hill/Irwin
Copyright © 2006, The McGraw-Hill Companies, Inc.
Sequential vs. Parallel Processing
Sequential processing means that units
flow in a sequence from one
department to another.
Parallel processing is used when
after a point, some units go through
different processing departments
than others. For example, a
petroleum refinery separates crude
oil into products like gasoline, jet
fuel, and heating oil.
McGraw-Hill/Irwin
Copyright © 2006, The McGraw-Hill Companies, Inc.
Sequential Processing
Cotton prep.
department
Thread prod.
department
Packaging.
department
Parallel Processing
McGraw-Hill/Irwin
Copyright © 2006, The McGraw-Hill Companies, Inc.
Comparing Job-Order
and Process Costing
Direct
Materials
Direct Labor
Manufacturing
Overhead
McGraw-Hill/Irwin
Work in
Proces
s
Finished
Goods
Cost of
Goods
Sold
Copyright © 2006, The McGraw-Hill Companies, Inc.
Comparing Job-Order
and Process Costing
Costs are traced and
applied to individual
jobs in a job-order
cost system.
Direct
Materials
Direct Labor
Manufacturing
Overhead
McGraw-Hill/Irwin
Jobs
Finished
Goods
Cost of
Goods
Sold
Copyright © 2006, The McGraw-Hill Companies, Inc.
Comparing Job-Order
and Process Costing
Direct
Materials
Direct Labor
Manufacturing
Overhead
McGraw-Hill/Irwin
Costs are traced and
applied to departments
in a process cost
system.
Processing
Department
Finished
Goods
Cost of
Goods
Sold
Copyright © 2006, The McGraw-Hill Companies, Inc.
T-Account Views of Cost Flows
For purposes of this example,
assume there are two
processing departments –
Departments A and B.
We will use T-accounts.
McGraw-Hill/Irwin
Copyright © 2006, The McGraw-Hill Companies, Inc.
Mixing Department
Raw Materials
Arrive from
Warehouse
Packaging Department
Chewing gums
Completed and
Sent for
packaging
Packed chewing
Gums are ready
For sale
McGraw-Hill/Irwin
Copyright © 2006, The McGraw-Hill Companies, Inc.
Equivalent Units of Production
Equivalent units are the product of the number of
partially completed units and the percentage
completion of those units.
We need to calculate equivalent units because a
department usually has some partially completed units
in its beginning and ending inventory.
McGraw-Hill/Irwin
Copyright © 2006, The McGraw-Hill Companies, Inc.
Equivalent Units – The Basic Idea
Two half completed products are
equivalent to one completed product.
+
=
1
So, 10,000 units 70% complete
are equivalent to 7,000 complete units.
McGraw-Hill/Irwin
Copyright © 2006, The McGraw-Hill Companies, Inc.
Quick Check 
For the current period, Jones 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
Jones have for the period?
a. 10,000
b. 11,500
c. 13,500
d. 15,000
McGraw-Hill/Irwin
Copyright © 2006, The McGraw-Hill Companies, Inc.
Quick Check 
For the current period, Jones 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
Jones have for the period?
a. 10,000
10,000 units + (5,000 units × 0.30)
b. 11,500
= 11,500 equivalent units
c. 13,500
d. 15,000
McGraw-Hill/Irwin
Copyright © 2006, The McGraw-Hill Companies, Inc.
Calculating Equivalent Units
Equivalent units can be calculated two
ways:
The First-In, First-Out Method – FIFO is
covered in the appendix to this chapter.
The Weighted-Average Method – This
method will be covered in the main portion of the
chapter.
McGraw-Hill/Irwin
Copyright © 2006, The McGraw-Hill Companies, Inc.
Equivalent Units of Production
Weighted-Average Method
The weighted-average method . . .
•Makes no distinction between work done in prior or
current periods.
•Blends together units and costs from prior and
current periods.
Cost per
equivalent
unit
McGraw-Hill/Irwin
=
Costs for the period
Equivalent units of production
for the period
Copyright © 2006, The McGraw-Hill Companies, Inc.
Process Costing and Direct Labor
Dollar Amount
Direct
Materials
Overhead
Direct
Labor
Direct labor costs
may be small
in comparison to
other product
costs in process
cost systems.
Type of Product Cost
McGraw-Hill/Irwin
Copyright © 2006, The McGraw-Hill Companies, Inc.
Process Costing and Direct Labor
Dollar Amount
Direct
Materials
Direct labor costs
may be small
Conversion
in comparison to
other product
costs in process
cost systems.
Type of Product Cost
Direct labor and manufacturing overhead may be
combined into one product cost called conversion.
McGraw-Hill/Irwin
Copyright © 2006, The McGraw-Hill Companies, Inc.
Weighted-Average Example
Smith Company reported the following activity in
Department A for the month of June:
Percent Completed
Units
Work in process, June 1
300
Units started into production in June
6,000
Units completed and transferred out
of Department A during June
5,400
Work in process, June 30
McGraw-Hill/Irwin
900
Materials Conversion
40%
20%
60%
30%
Copyright © 2006, The McGraw-Hill Companies, Inc.
Weighted-Average Example
The first step in calculating the equivalent units is
to identify the units completed and transferred
out of Department A in June (5,400 units)
Materials
Units completed and transferred
out of Department A in June
McGraw-Hill/Irwin
5,400
Conversion
5,400
Copyright © 2006, The McGraw-Hill Companies, Inc.
Weighted-Average Example
The second step is to identify the equivalent units of
production in ending work in process with respect to
materials for the month (540 units) and add this to the
5,400 units from step one.
Materials
Units completed and transferred
out of Department A in June
5,400
Conversion
5,400
Work in process, June 30:
900 units × 60%
Equivalent units of Production in
Department A during June
McGraw-Hill/Irwin
540
5,940
Copyright © 2006, The McGraw-Hill Companies, Inc.
Weighted-Average Example
The third step is to identify the equivalent units of
production in ending work in process with respect to
conversion for the month (270 units) and add this to the
5,400 units from step one.
Materials
Units completed and transferred
out of Department A in June
5,400
Conversion
5,400
Work in process, June 30:
900 units × 60%
540
270
900 units × 30%
Equivalent units of Production in
Department A during June
McGraw-Hill/Irwin
5,940
5,670
Copyright © 2006, The McGraw-Hill Companies, Inc.
Weighted-Average Example
Equivalent units of production always equals:
Units completed and transferred
+ Equivalent units remaining in work in process
Materials
Units completed and transferred
out of Department A in June
5,400
Conversion
5,400
Work in process, June 30:
900 units × 60%
540
270
900 units × 30%
Equivalent units of Production in
Department A during June
McGraw-Hill/Irwin
5,940
5,670
Copyright © 2006, The McGraw-Hill Companies, Inc.
Weighted-Average Example
Materials
Beginning
Work in Process
300 Units
40% Complete
6,000 Units Started
5,100 Units Started
and Completed
5,400 Units Completed
540 Equivalent Units
5,940 Equivalent units
of production
McGraw-Hill/Irwin
Ending
Work in Process
900 Units
60% Complete
900 × 60%
Copyright © 2006, The McGraw-Hill Companies, Inc.
Weighted-Average Example
Conversion
Beginning
Work in Process
300 Units
20% Complete
6,000 Units Started
5,100 Units Started
and Completed
5,400 Units Completed
270 Equivalent Units
5,670 Equivalent units
of production
McGraw-Hill/Irwin
Ending
Work in Process
900 Units
30% Complete
900 × 30%
Copyright © 2006, The McGraw-Hill Companies, Inc.
Production Report – Weighted-Average
Production Report
Section 1
Section 2
A quantity schedule
showing the flow of units
and the computation of
equivalent units.
A computation of
cost per equivalent unit.
Section 3
McGraw-Hill/Irwin
Copyright © 2006, The McGraw-Hill Companies, Inc.
Production Report
Production Report
Section 1
Section 2
Section 3
McGraw-Hill/Irwin
 Cost Reconciliation
section shows the
reconciliation of all cost
flows into and out of the
department during the
period.
Copyright © 2006, The McGraw-Hill Companies, Inc.
Production Report Example
Assume that Double Diamond Skis uses the
weighted-average method of process costing to
determine unit costs in it Shaping and Milling
Department.
McGraw-Hill/Irwin
Copyright © 2006, The McGraw-Hill Companies, Inc.
Production Report Example
Work in process, May 1: 200 units
Materials: 55% complete
Conversion: 30% complete
9,600
5,575
Production started during May
Production completed during May
5,000 units
4,800 units
Costs added to production in May
Materials cost
Conversion cost
$ 368,600
350,900
Work in process, May 31
Materials:
40% complete
Conversion: 25% complete
McGraw-Hill/Irwin
$
400 units
Copyright © 2006, The McGraw-Hill Companies, Inc.
Production Report Example
Step1: Prepare Quantity Schedule with Equivalent Units.
Units to be accounted for:
Work in process, May 1
Started into production
Total units
200
5,000
5,200
Equivalent units
Conversion
Materials
Units accounted for as follows:
Completed and transferred
Work in process, May 31
McGraw-Hill/Irwin
4,800
400
4,800
4,800
Copyright © 2006, The McGraw-Hill Companies, Inc.
Production Report Example
Step1: Prepare Quantity Schedule with Equivalent Units.
Units to be accounted for:
Work in process, May 1
Started into production
Total units
200
5,000
5,200
Equivalent units
Conversion
Materials
Units accounted for as follows:
Completed and transferred
Work in process, May 31
Materials 40% complete
4,800
400
4,800
160
5,200
McGraw-Hill/Irwin
4,800
4,960
Copyright © 2006, The McGraw-Hill Companies, Inc.
Production Report Example
Step1: Prepare Quantity Schedule with Equivalent Units.
Units to be accounted for:
Work in process, May 1
Started into production
Total units
200
5,000
5,200
Equivalent units
Conversion
Materials
Units accounted for as follows:
Completed and transferred
Work in process, May 31
Materials 40% complete
Conversion 25% complete
4,800
400
4,800
160
5,200
McGraw-Hill/Irwin
4,800
4,960
100
4,900
Copyright © 2006, The McGraw-Hill Companies, Inc.
Step 2: Calculating the Costs Per Equivalent
Unit
To calculate the cost per equivalent
unit for the period:
Cost per
equivalent
unit
McGraw-Hill/Irwin
=
Costs for the period
Equivalent units of production
for the period
Copyright © 2006, The McGraw-Hill Companies, Inc.
Production Report Example
Step 2: Compute the cost per equivalent unit.
Total
Cost
Cost to be accounted for:
Work in process, May 1
Costs added in the Shipping
and Milling Department
Total cost
Equivalent units
$
15,175
Materials
Conversion
$
$
9,600
5,575
719,500
368,600
350,900
$ 734,675
$ 378,200
$ 356,475
4,960
4,900
Cost per equivalent unit
McGraw-Hill/Irwin
Copyright © 2006, The McGraw-Hill Companies, Inc.
Production Report Example
Step 2: Compute the cost per equivalent unit.
Total
Cost
Cost to be accounted for:
Work in process, May 1
Costs added in the Shipping
and Milling Department
Total cost
$
15,175
Materials
Conversion
$
$
5,575
719,500
368,600
350,900
$ 734,675
$ 378,200
$ 356,475
4,960
4,900
Equivalent units
Cost per equivalent unit
9,600
$
76.25
$378,200 ÷ 4,960 units = $76.25
McGraw-Hill/Irwin
Copyright © 2006, The McGraw-Hill Companies, Inc.
Production Report Example
Step 2: Compute the cost per equivalent unit.
Total
Cost
Cost to be accounted for:
Work in process, May 1
Costs added in the Shipping
and Milling Department
Total cost
Equivalent units
$
15,175
Materials
Conversion
$
$
9,600
5,575
719,500
368,600
350,900
$ 734,675
$ 378,200
$ 356,475
4,960
4,900
Cost per equivalent unit
$ 76.25
Total cost per equivalent unit = $76.25 + $72.75 = $149.00
$
72.75
$356,475 ÷ 4,900 units = $72.75
McGraw-Hill/Irwin
Copyright © 2006, The McGraw-Hill Companies, Inc.
Production Report Example
Step 3: Prepare a Cost Reconciliation
Total
Cost
Cost accounted for as follows:
Transferred out during May
Work in process, May 31:
Materials
Conversion
Equivalent Units
Materials Conversion
4,800
4,800
160
100
Total work in process, May 31
Total cost accounted for
McGraw-Hill/Irwin
Copyright © 2006, The McGraw-Hill Companies, Inc.
Production Report Example
Step 3: Prepare a Cost Reconciliation
4,800 units @ $149.00
Cost accounted for as follows:
Transferred out during May
Work in process, May 31:
Materials
Conversion
Total
Cost
$ 715,200
Equivalent Units
Materials Conversion
4,800
4,800
160
100
Total work in process, May 31
Total cost accounted for
McGraw-Hill/Irwin
Copyright © 2006, The McGraw-Hill Companies, Inc.
Production Report Example
Step 3: Prepare a Cost Reconciliation
160 units @ $76.25
Cost accounted for as follows:
Transferred out during May
Work in process, May 31:
Materials
Conversion
Total work in process, May 31
Total cost accounted for
McGraw-Hill/Irwin
Total
Cost
Equivalent Units
Materials
100
units @ Conversion
$72.75
$ 715,200
4,800
12,200
7,275
160
19,475
$ 734,675
4,800
100
All costs
accounted for
Copyright © 2006, The McGraw-Hill Companies, Inc.
Operation Costing
Operation costing is a hybrid of job-order
and process costing because it
possesses attributes of both approaches.
Job-order
Costing
Operation Costing
(Products produced in batches)
Material Costs charged
to batches as in
job-order costing.
McGraw-Hill/Irwin
Process
Costing
Conversion costs
assigned to batches
as in process costing.
Copyright © 2006, The McGraw-Hill Companies, Inc.
FIFO Method
Appendix 4A
McGraw-Hill/Irwin
Copyright © 2006, The McGraw-Hill Companies, Inc.
FIFO vs. Weighted-Average Method
The FIFO method (generally considered more
accurate that the weighted-average method)
differs from the weighted-average method in
two ways:
1. The computation of equivalent units.
2. The way in which the costs of beginning
inventory are treated in the cost
reconciliation report.
McGraw-Hill/Irwin
Copyright © 2006, The McGraw-Hill Companies, Inc.
Equivalent Units – FIFO Method
Let’s revisit the Smith Company example.
Assume the following activity is reported in
Department A for the month of June:
Percent Completed
Units
Work in process, June 1
300
Units started into production in June
6,000
Units completed and transferred out
of Department A during June
5,400
Work in process, June 30
McGraw-Hill/Irwin
900
Materials Conversion
40%
20%
60%
30%
Copyright © 2006, The McGraw-Hill Companies, Inc.
Equivalent Units – FIFO Method
Step 1: Determine the number of units completed and
transferred out of Department A in June.
Percent Completed
Units
Work in process, June 1
300
Units started into production in June
6,000
Units completed and transferred out
of Department A during June
5,400
Work in process, June 30
McGraw-Hill/Irwin
900
Materials Conversion
40%
20%
60%
30%
Copyright © 2006, The McGraw-Hill Companies, Inc.
Equivalent Units – FIFO Method
Step 2: Add the equivalent units of production in ending
work in process inventory (540 units for material and 270
units for conversion) to the units completed and transferred
our during June.
Materials
Units completed and transferred
out of Department A in June
5,400
Conversion
5,400
Work in process, June 30:
900 units × 60%
540
270
900 units × 30%
Equivalent units of Production in
Department A during June
McGraw-Hill/Irwin
5,940
5,670
Copyright © 2006, The McGraw-Hill Companies, Inc.
Equivalent Units – FIFO Method
Step 3: Subtract the equivalent units in beginning work in process
inventory (120 units for materials and 60 units for conversion) from the
sum of the units completed and transferred out and the equivalent
units in ending work in process inventory.
Materials
Equivalent units or Production in
Department A during June
5,940
Conversion
5,670
Equivalent units in beginning inventory
300 units × 40%
120
300 units × 20%
Equivalent units of Production in
Department A during June
McGraw-Hill/Irwin
60
5,820
5,610
Copyright © 2006, The McGraw-Hill Companies, Inc.
Equivalent Units – FIFO Method
Materials
Beginning
Work in Process
300 Units
40% Complete
6,000 Units Started
Ending
Work in Process
900 Units
60% Complete
5,400 Units Started
and Completed
Units completed and transferred out
Equivalent units in ending WIP inventory
Equivalent units in beginning WIP inventory
Equivalent units of production
McGraw-Hill/Irwin
Material
5,400
540
(120)
5,820
Copyright © 2006, The McGraw-Hill Companies, Inc.
Equivalent Units – FIFO Method
Conversion
Beginning
Work in Process
300 Units
20% Complete
6,000 Units Started
5,400 Units Started
and Completed
Units completed and transferred out
Equivalent units in ending WIP inventory
Equivalent units in beginning WIP inventory
Equivalent units of production
McGraw-Hill/Irwin
Ending
Work in Process
900 Units
30% Complete
Conversion
5,400
270
(60)
5,610
Copyright © 2006, The McGraw-Hill Companies, Inc.
Equivalent Units: Weighted Average vs. FIFO
As shown below, the equivalent units in beginning inventory are
subtracted from the equivalent units of production per the weightedaverage method to obtain the equivalent units of production under
the FIFO method.
Equivalent units - weighted average method
Less equivalent units in beginning inventory:
300 units × 40%
300 units × 20%
Equivalent units - FIFO method
McGraw-Hill/Irwin
Materials
5,940
Conversion
5,670
120
5,820
60
5,610
Copyright © 2006, The McGraw-Hill Companies, Inc.
The Production Report - FIFO Method
Let’s revisit the Double Diamond Skis Shaping and Milling
Department for the Month of May to prepare our production report.
Work in process, May 1: 200 units
Materials: 55% complete
Conversion: 30% complete
Production started during May
Production completed during May
Costs added to production in May
Materials cost
Conversion cost
Work in process, May 31
Materials:
40% complete
Conversion: 25% complete
McGraw-Hill/Irwin
$ 9,600
5,575
$15, 175
5,000 units
4,800 units
$ 368,600
350,900
400 units
Copyright © 2006, The McGraw-Hill Companies, Inc.
The Production Report - FIFO Method
Step 1: Prepare the quantity schedule and compute
equivalent units.
Units to be accounted for:
Work in process, May 1
Started into production
Total units
Units accounted for as follows:
Beginning inventory:
Materials 200 units × 45%
Conversion 200 units × 70%
Units started and completed
Ending inventory:
Materials 400 units × 40%
Conversion 400 units × 25%
Total equivalent units
McGraw-Hill/Irwin
200
5,000
5,200
Equivalent units
Materials
Conversion
90
4,600
140
4,600
160
4,850
100
4,840
Copyright © 2006, The McGraw-Hill Companies, Inc.
The Production Report - FIFO Method
Step 2: Calculate the equivalent units of material and conversion
that were transferred from beginning work in process to the next
department.
Units to be accounted for:
Work in process, May 1
Started into production
Total units
Units accounted for as follows:
Beginning inventory:
Materials 200 units × 45%
Conversion 200 units × 70%
Units started and completed
Ending inventory:
Materials 400 units × 40%
Conversion 400 units × 25%
Total equivalent units
McGraw-Hill/Irwin
200
5,000
5,200
Equivalent units
Materials
Conversion
90
4,600
140
4,600
160
4,850
100
4,840
Copyright © 2006, The McGraw-Hill Companies, Inc.
The Production Report - FIFO Method
Step 3: Determine the number of units started and
completed during the period.
Units to be accounted for:
Work in process, May 1
Started into production
Total units
Units accounted for as follows:
Beginning inventory:
Materials 200 units × 45%
Conversion 200 units × 70%
Units started and completed
Ending inventory:
Materials 400 units × 40%
Conversion 400 units × 25%
Total equivalent units
McGraw-Hill/Irwin
200
5,000
5,200
Equivalent units
Materials
Conversion
90
4,600
140
4,600
160
4,850
100
4,840
Copyright © 2006, The McGraw-Hill Companies, Inc.
The Production Report - FIFO Method
Step 4: Calculate the equivalent units of material and
conversion that are in ending work in process inventory.
Units to be accounted for:
Work in process, May 1
Started into production
Total units
Units accounted for as follows:
Beginning inventory:
Materials 200 units × 45%
Conversion 200 units × 70%
Units started and completed
Ending inventory:
Materials 400 units × 40%
Conversion 400 units × 25%
Total equivalent units
McGraw-Hill/Irwin
200
5,000
5,200
Equivalent units
Materials
Conversion
90
4,600
140
4,600
160
4,850
100
4,840
Copyright © 2006, The McGraw-Hill Companies, Inc.
The Production Report - FIFO Method
Step 5: Calculate the total equivalent units for
materials and conversion.
Units to be accounted for:
Work in process, May 1
Started into production
Total units
Units accounted for as follows:
Beginning inventory:
Materials 200 units × 45%
Conversion 200 units × 70%
Units started and completed
Ending inventory:
Materials 400 units × 40%
Conversion 400 units × 25%
Total equivalent units
McGraw-Hill/Irwin
200
5,000
5,200
Equivalent units
Materials
Conversion
90
4,600
140
4,600
160
4,850
100
4,840
Copyright © 2006, The McGraw-Hill Companies, Inc.
Cost per Equivalent Unit
Notice that the costs of beginning work in process
inventory of $15,175, is not broken down by
materials and conversion components
Total
Cost
Cost to be accounted for:
Work in process, May 1
Costs added in the Shipping
and Milling Department
Total cost
Equivalent units
Materials
Conversion
719,500
368,600
350,900
$ 734,675
$ 368,600
$ 350,900
4,960
4,900
$
15,175
Cost per equivalent unit
$ 74.31
Total cost per equivalent unit = $76.25 + $72.75 = $149.00
McGraw-Hill/Irwin
$
71.61
Copyright © 2006, The McGraw-Hill Companies, Inc.
Cost per Equivalent Unit
We divide the costs added in the Shipping and
Milling Department by the number of equivalent
unit for materials.
Total
Cost
Cost to be accounted for:
Work in process, May 1
Costs added in the Shipping
and Milling Department
Total cost
Equivalent units
Materials
Conversion
719,500
368,600
350,900
$ 734,675
$ 368,600
$ 350,900
4,850
4,900
$
15,175
Cost per equivalent unit
$ 76.00
Total cost per equivalent unit = $76.25 + $72.75 = $149.00
McGraw-Hill/Irwin
$
71.61
Copyright © 2006, The McGraw-Hill Companies, Inc.
Cost per Equivalent Unit
We follow the same procedure for conversion and
add the two equivalent unit costs to get the total cost
per equivalent unit.
Total
Cost
Cost to be accounted for:
Work in process, May 1
Costs added in the Shipping
and Milling Department
Total cost
Equivalent units
Materials
Conversion
719,500
368,600
350,900
$ 734,675
$ 368,600
$ 350,900
4,850
4,840
$
15,175
Cost per equivalent unit
$ 76.00
Total cost per equivalent unit = $76.00 + $72.50 = $148.50
McGraw-Hill/Irwin
$
72.50
Copyright © 2006, The McGraw-Hill Companies, Inc.
Cost Reconciliation
Step 1: Calculate the total cost from beginning
inventory transferred to the next department.
Work in process, May 1:
Materials (90 × $76.00)
Conversion (140 × $72.50)
Total
Started and completed in May
Work in process, May 31:
Materials (160 × $76.00)
Conversion (100 × $72.50)
Total
Total cost accounted for
McGraw-Hill/Irwin
Total
Cost
$ 15,175
6,840
10,150
32,165
Equivalent Units
Materials Conversion
90
140
683,100
4,600
12,160
7,250
19,410
$ 734,675
160
4,600
100
Copyright © 2006, The McGraw-Hill Companies, Inc.
Cost Reconciliation
Step 2: Calculate the cost of units started and
completed during the period.
4,600 units × $148.50
Work in process, May 1:
Materials (90 × $76.00)
Conversion (140 × $72.50)
Total
Started and completed in May
Work in process, May 31:
Materials (160 × $76.00)
Conversion (100 × $72.50)
Total
Total cost accounted for
McGraw-Hill/Irwin
Total
Cost
$ 15,175
6,840
10,150
32,165
Equivalent Units
Materials Conversion
90
140
683,100
4,600
12,160
7,250
19,410
$ 734,675
160
4,600
100
Copyright © 2006, The McGraw-Hill Companies, Inc.
Cost Reconciliation
Step 3: Calculate the costs in ending working in process
inventory and the sum of the cost accounted for.
Work in process, May 1:
Materials (90 × $76.00)
Conversion (140 × $72.50)
Total
Started and completed in May
Work in process, May 31:
Materials (160 × $76.00)
Conversion (100 × $72.50)
Total
Total cost accounted for
McGraw-Hill/Irwin
Total
Cost
$ 15,175
6,840
10,150
32,165
Equivalent Units
Materials Conversion
90
140
683,100
4,600
12,160
7,250
19,410
$ 734,675
160
4,600
100
All costs
accounted for
Copyright © 2006, The McGraw-Hill Companies, Inc.
End of Chapter 4
McGraw-Hill/Irwin
Copyright © 2006, The McGraw-Hill Companies, Inc.