One department: no beginning inventory.
51,000 – 49,000 = 2000.
2000 x ½ = 1000.
= 50,000 units.
I. Costs for month
Direct material 400,000
Direct labor 240,000
Factory overheads 160,000
____________
$800,000
II. Total equivalent costs
Finished goods 49,000
Equivalent units 1000
(Work in Process) _________
50,000
III. Unit cost
Direct material 400,000/50,000 = $8.0
Direct labor 240,000/50,000 = $4.8
Factory overheads 160,000/50,000 = $3.2
________
$16
IV. Inventory costs
Finished goods 49,000 * 16 784,000
Direct material (2000 * ½ * $8.0) = 8,000
Direct labor (2000 * ½ * $4.8) = 4,800
Factory overheads (2000 * ½ * $3.2) = 3,200 16,000
___________
$800,000
Note: Closing WIP should be equal to costs for the month.
1
Ahmad Gilani Cost Accounting
One department: with beginning inventory.
Note: The closing WIP of the prior month becomes the beginning WIP of the current month.
I. Total cost
A. Beginning costs
Direct material 8000
Direct labor 4800
Factory overheads 3200
____________
$16,000
B. Costs for the month
Direct material 560,000
Direct labor 336,000
Factory overheads 224,000
____________
$1,120,000
Total costs = A + B
= $1,136,000
II. Total costs
Finished goods 69,000
Work in Process 6000 * 1/3 2000
_____
$71,000
III. Unit costs
Direct material [(8000 + 560,000)/71000)] = 8.0
Direct labor [(4800 + 336,000)/71000)] = 4.8
Factory overheads [(3200 + 224,000)/71000)] = 3.2
____________
$16
IV. Inventory costs
Finished goods 69,000*16 1,104,000
Direct material 2000 * 8 16,000
Direct labor 2000 * 4.8 9,600
Factory overheads 2000 * 3.2 6,400
_________
$1,136,000
2
Ahmad Gilani Cost Accounting
Multiple departments without beginning inventory.
A. Production summary for Mixing
I. Costs for the month
Direct material 160,000
Direct labor 86, 400
Factory overheads 73, 600
____________
$320,000
II. Units
Transferred to Blending 27,000
Equivalent units (10,000 * ½ ) 5000
____________
$32,000
III. Unit costs
Direct material 160,000/32,000 = 5
Direct labor 86, 400/32,000 = 2.7
Factory overheads 73, 600/32,000 = 2.3
_________________
$10
IV. Inventory
Direct material 5000 * 5 = 25,000
Direct labor 5000 * 2.7 = 13,500
Factory overheads 5000 * 2.3 = 11,500
_________________
$320,000
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Ahmad Gilani Cost Accounting
B. Production summary for Blending
I. Costs for the month
A. Cost of goods (rec. Mixing)
27,000 * 10
= 270,000.
B. Cost of production for the month – Blending
Direct material 12,000
Direct labor 30,000
Factory overheads 18,000
_________________
$60,000
Total costs acc.
270,000 + 60,000
330,000
II. Units Finished
Finished and transferred to Packaging 22,000
Equivalent units (5000 * 2/5) 2000
_________________
24,000 units
III. Unit costs for the month (Blending)
Direct material 12,000/24,000 = 0.5
Direct labor 30,000/24,000 = 1.25
Factory overheads 18,000/24,000 = 0.75
_________________
$2.50
IV. Inventory costs
Cost in Mixing 22,000 * 10 = 220,000
Cost in Blending 22,000 * 2.5 = 50,000
__________
$275,000
4
Ahmad Gilani Cost Accounting
WIP costs
Cost in Mixing 5,000 * 10 $50,000
Cost in Blending
Direct material 5000 * 2/5 * 0.50 = 1000
Direct labor 5000 * 2/5 * 1.25 = 2500
Factory overheads 5000 * 2/5 * 0.75 = 1500
_________________
$5,000
Total WIP $55,000
Total production costs for Blending $275,000 + $55,000.
$330,000
______________________________________________________________________________
C. Production summary for Packaging
I. Costs for the month
A. Cost of goods (rec. Blending)
$275,000
B. Cost of production for the month – Packaging
Direct material 31,500
Direct labor 23,100
Factory overheads 29,400
_________________
$84,000
Total costs acc.
275,000 + 84,000
$359,000
II. Units Finished
Finished and transferred to finished goods 20,000
Equivalent units (2000 * 1/2) 1000
_________________
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Ahmad Gilani Cost Accounting
21,000 units
III. Unit costs for the month (Packaging)
Direct material 31,000/21,000 = 1.50
Direct labor 23,000/21,000 = 1.10
Factory overheads 29,400/21,000 = 1.40
_________________
$4.00
IV. Inventory costs
Cost in Mixing 20,000 * 10 = 200,000
Cost in Blending 20,000 * 2.5 = 50,000
Cost in Packaging 20,000 * 4.0 = 80,000
_________________
$330,000
WIP costs
Cost in Mixing 2000 * 10 = 20,000
Cost in Blending 2000 * 2.5 = 5000
Cost in Packaging
Direct material 2000 * 1/2 * 1.50 = 1,500
Direct labor 2000 * 1/2 * 1.10 = 1,100
Factory overheads 2000 * 1/2 * 1.40 = 1,400
_________________
$4,000
Total WIP $29,000
Total accumulated production costs 330,000 + 29,000
$359,000
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Ahmad Gilani Cost Accounting
