WIP - 2009-11-031MANUFACTURING...

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Unformatted text preview: 2009-11-031MANUFACTURING INVENTORIES2009-11-03Manufacturing Inventories Topic Slides2Accounting For Manufacturing ActivitiesThere are three different inventory accounts to account for when dealing with manufacturing activities. They are Raw Materials, Work-in-Process (WIP) and Finished Goods.2009-11-0322009-11-03Manufacturing Inventories Topic Slides3Raw MaterialsThe Raw Materials account is treated in the same way as the retail inventory accounts we have dealt with thus far. The only difference is that the plug number (formerly COGS) is now the cost of raw materials used (CORMU) and should be debited to the WIP account. 2009-11-03Manufacturing Inventories Topic Slides4Raw Materials (cont.)Valuation of Ending Inventory:Use one of the three cost methods: specific identification, weighted average cost or FIFO).2009-11-0332009-11-03Manufacturing Inventories Topic Slides5Work in ProcesscThe Work in Process (WIP) account includes all PRODUCTcosts, which fall under one of three categories (raw materials, direct labor or factory overhead). cAfter the ending balance in WIP is calculated, the cost of finished goods manufactured (COFGM) can be calculated. 2009-11-03Manufacturing Inventories Topic Slides62009-11-0342009-11-03Manufacturing Inventories Topic Slides7Plant LayoutTotal area5,000 sq. ft.Manufacturing4,000 sq. ft.Sales500 sq. ft.Offices500 sq. ft.2009-11-03Manufacturing Inventories Topic Slides8Valuing the Ending Balance in WIPcOne of the most difficult tasks involved in accounting for manufacturing activities is to value the ending balance in WIP.cThe formula to value the ending balance in WIP is always pRM + pDL + pFOH.cIt is difficult to assign all units a common value since they may be at different stages of completion....
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This note was uploaded on 11/09/2010 for the course BUSINESS 2257 taught by Professor Iandunn during the Fall '10 term at UWO.

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WIP - 2009-11-031MANUFACTURING...

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