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Unformatted text preview: ative over another. Sunk Cost: a cost already incurred that cannot be changed. Cost Flow Raw Materials Beginning Inventory
+ Purchases = Ending inventory Placed on assembly line (workinprocess) Put another way, beginning inventory + purchases is what is available to be used. These items are either used (workinprocess), or should still be on the shelf (ending inventory). In TAccount Form
Inventories Raw Materials Work In Process (WIP)* Finished Goods (F/G) Beg. Inv. l Beg. Inv. l Beg. Inv. l l direct matl l l to WIP dir. labor l to F/G = CGM CGM l CGS Purchases l overhead l l l End Inv. l End Inv. l End Inv. l * The total debits added to WIP during the period are called Total Manufacturing Costs. The total credits to WIP are called Cost of Goods Manufactured (CGM). The Beginning Inventory, F/G + CGM = Cost of Goods Available for Sale. Cost Flow Workinprocess (WIP) Beginning balance + Manufacturing Costs Cost of goods manufactured Ending balance Manufacturing costs equal: Direct materials added during the period Direct labor used during the period Manufacturing overhead for the period Cost Flow Finished Goods Beginning Finished Goods Inventory + Cost of Goods Manufactured (from WIP) Cost of Goods Available for Sale Ending Finished Goods Inventory Cost of Goods Sold Product Costing Systems There are two product costing systems: Job cost for unique or customized products Process cost for homogenous items Both allocate direct materials and direct labor to production Job cost problems focus on overhead allocation Process cost problems focus on assigning costs based on equivalent units to ending inventory and cost of goods manufactured. Job Cost System In a job cost system, overhead is allocated by applying (multiplying) a predetermined overhead rate by the cost driver actually used during the period. The predetermined overhead rate is the total estimated overhead (at the beginning of the period) divided by some cost driver. Because estimated rates are used, applied overhead will nearly always be different from actual overhead. This over/under applied overhead is cleared to cost of goods sold at the end of every period. Process Costing Once beginning inventory costs and manufacturing costs are subtotaled, the problem arises, how much of this subtotal go to ending inventory? Equivalent Units (EU): Total number of units that could have been produced if all efforts had been redirected to finishing a started unit before starting a new unit. Weighted Avg. EUs = # Units transferred out + (# units in end inventory * % complete) Fifo E.U.s = Wgtd Avg. E...
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This note was uploaded on 03/27/2012 for the course ACCT 2302 taught by Professor Shall during the Spring '08 term at Texas A&M University, Corpus Christi.
- Spring '08
- Managerial Accounting