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Total MOH = P. Salary + P. Wages +
Equipment + P. Depreciation + Maintenance
COG Available for Sale = Merchandise
Inventory𝐵𝐵+ Purchase + Freight In
○ COG Sold = COGAS - MI𝐸𝐵
DM Available for Use = DM𝐵𝐵 + purchase of
direct material (incl Freight In)
○ DM Used = DM Available for Use DM𝐸𝐵
T. Manufacturing Costs= WIP𝐵𝐵 + DM + DL
+ MO
○ COGM = T. MC - WIP𝐸𝐵
COGAS = Finished Goods I.𝐵𝐵 + COGM
○ COGS = COGAS - FGI𝐸𝐵
Unit Costs = T. Operating Costs / T. Number
of Units
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Operating Income = (Revenue - COGS) - Expenses
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T. Current Assets = A/R + Cash + Inventory
Purchased Materials = Raw Materials I. & A/P
○ Raw Materials I. = WIP I. + MOH
○ Raw Materials I.𝐸𝐵 = (R.M.𝐵𝐵 +
Purchased) - R.M.I.
Wages Payable/Raw Material I. = WIP +
MOH
Bal. = Labor + Maintenance + Depreciation
T. Costs = DM + DL + MOH
Allocation Rate = T. OH Costs / T. Estimated
DL Hrs.
○ Allocated OH Costs = T. Actual DL
Hrs. * OH A.R.
Overallocation = >Actual, Underallocation =
<Actual
Allocation Rate = Estimated OH Costs /
Estimated Machine Hrs.
Depreciation + P. Taxes + P. Wages <,>
Allocated MOH
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WIP I. = Bal.𝐵𝐵 + DM + DL + Allocated MOH
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MOH = Accumulated P. Depreciation +
Prepaid Insurance + Property Tax Payable
Under/Over Allocated MOH = Dr. MOH - Cr.
MOH
Conversion Costs = DL + MOH
Equivalent Units of Production = Number of
Units in WIP𝐸𝐵 * Percentage Change
EUP DM = Completed/In-Process Units *
100% (OR $)
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Revenue - Expenses = Income
Costs / Units = $/unit
Merchandise𝐵𝐵 + Purchases = COGAS Merchandise𝐸𝐵 = COGS
Sales Revenue - COGS = Gross Profit Operating Expenses = Operating Income
DM + DL + MOH
○ Direct Costs = DM + DL
○ Indirect Costs = I.DM + I.DM +
Other MOH
DM𝐵𝐵 + Purchases = DM Available - DM𝐸𝐵
= DM Used
WIP𝐵𝐵 + DM + DL + MOH = Total
Manufacturing Costs - WIP𝐸𝐵 = COGM
FG (didn’t sell)𝐵𝐵 + COGM = COGAS - FG
𝐸𝐵 = COGS
Period Cost = selling expenses +
administrative expenses
Product Cost = DM used + DL incurred +
MOH incurred
Prime Costs = DM + DL
○ Total Manufacturing Costs = Prime
Costs + MOH
Conversion Costs = DL + MOH
○ Total Manufacturing Costs = DM +
Conversion Costs
DM Costs = (DM𝐵𝐵 + Purchased Material) DM𝐸𝐵
(DM + DL + MOH + WIP𝐵𝐵) - WIP𝐸𝐵 =
(COGAS + FG𝐵𝐵) - FG𝐸𝐵 = COGM
Predetermined Overhead Rate = Estimated
MOH Period / Estimated Allocation Rate
○ MOH / POHR
Number of Units * % Complete = Number of
EU
Weighted Average Costs/EU = (WIP Costs +
Current Period Costs) / (WIP EU + Current
Period EU)
Cost per EUP for DM=Total DM costs /equiv.
Units of production for DM
Cost per EUP for CC= Total CC/equiv. Units
of production for CC
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EUP Conversion Costs =
Completed/In-Process Units * % (OR $)
Transferred Finished Goods I. = (Production
Costs + WIP𝐵𝐵) - WIP𝐸𝐵
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Cost/Equivalent Unit = T. Cost / Equivalent Unit
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MOH = Cash + Accumulated Depreciation
COGS = Sales * %
Job Order Costing Journal Entries (Dr. = debit. Cr. = credit)
● Incurred and paid web site exp- Dr. Web exp, Cr. cash or accounts payable(on account)
● Acquisition of materials - Dr. Raw Materials, Cr. Cash or Accounts Payable
● Use of DM & IDM - Dr. WIP (direct materials) and Dr. MOH (indirect materials), Cr. Raw Materials
● Acquisition and use of direct and indirect labor - Dr. WIP (direct labor) & Dr. MOH (indirect labor), Cr.
Labor or wages payable
● Acquisition of MOH - Dr. MOH, Cr. utilities payable, prepaid insurance, accumulated depreciation, cash
● Allocation of MOH - POHR=Estimated MOH/Estimated allocation base (Machine Hours, DLH, DL$)
Applying MOH to WIP (POHR × Actual amount of allocation base used) - Dr. WIP, Cr. MOH
● Completion of jobs - Dr. FG, Cr. WIP
● Sale of jobs - Dr. COGS, Cr. FG AND/OR Dr. Accounts Rec./cash, Cr. Sales
● If MOH was under-allocated (actual MOH > allocated MOH) - Dr. COGS, Cr. MOH
● If MOH was over-allocated (actual MOH < allocated MOH) - Dr. MOH, Cr. COGS
● Cost of Goods Sold account increased​(debited) or decreased​(credited)
Process Costing Journal Entries
● Use of DM and conversion costs - Dr. Dept. 1, Cr. Materials Inventory & Cr. conversion costs (or Cr. Labor
and Cr. MOH separately).
● Transfer of units from one dept. to the next - Dr. WIP - Dept. 2 (or finished goods), Cr. WIP - dept. 1
Definitions:
Key Concepts:
● Job order costing: one work-in-process inventory account, job cost sheets, customized, low volume
● Process costing system: Production cost reports, cost accumulated by process,repetitive, high volume
Accumulate→Assign→Allocate→Adjust
● Types of firms: Service firms(have only period costs)/Merchandising Firms(Have product cost and period costs)/
Manufacturing firms(have product costs and period costs)
● Business trends: Shift toward service economy, global competition, time based competition: ERP,
e-commerce, JIT, Advances in technology, TQM (value chain)