Lecture 11 - Introduction to Managerial Accounting UGBA102B...

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Introduction to Managerial AccountingUGBA102BLecture 11John Briginshaw
Contact DetailsProfessor: John BriginshawOffice: Room F502JOffice Hours: Mon 1000-1100, after class and by appointmentEmail: [email protected]
Lecture 11 AgendaChapter 4 and 4A: Process Costing recapChapter 4B: Allocation of Support Dept CostsGroup Work intro
Job vs. Process Costing: When to UseJob Order CostingMany different products, each having different requirementsThe jobis the cost objectProcess CostingA single, homogeneous product is produced on a continuous basis or a small number of products are produced, each for relatively long periods of timeThe departmentis the cost object
Units not finished - Equivalent Units Equivalent units concept: Two half completed units are equivalent toone complete unit.Also, units can have be complete in materials but not in conversion (DL + MOH) or vice versa.+=1
Equivalent unit (eu) calculations depend on the methodMethodWAMFIFOApplicable eq units of productionAll units completed + equivalent units in endinginventoryUnits based on work doneApplicable CostsCosts in beginninginventory + costs added to departmentCosts added to department
Example of Process CostingSetup, Smith Company exampleSmith reports the following for the Assembly Department for the month of JunePercent CompletedUnitsMaterialsConversionWork in process, June 130040%20%Cost of beginning inventory$6,119$3,920Units started into production in June6,000Costs added during June$118,621$81,130Units completed and transferred out5,400of Department A during JuneWork in process, June 3090060%30%
Calculation of Equivalent units under FIFO based on work doneMATERIALSThe beginning WIP was 40% complete so needs 60% to complete those 300 units 180 eq units5400 units were transferred out, of which 300 came from beginning inventory 5100 started and completedThe ending WIP (900 units) is 60% complete 540 eq unitsCONVERSIONThe beginning WIP was 20% complete so needs 80% to complete those 300 units 240 eq units5400 units were transferred out, of which 300 came from beginning inventory 5100 started and completed (same)The ending WIP (900 units) is 30% complete 270 eq unitsMust be done separately for each cost component

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