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21-5 PROCESS COST ACCOUNTING
For each process or department, we need to:
1 Summarize manufacturing costs (DM, DL, & Man. O/H)
2 Determine total manufacturing costs
3 Calculate unit product costs
How do we do these in a process cost accounting system?
Through a Production Cost report, of which the three major parts are:
Raw Material, Factory Labor and Cost of Manufacturing Overhead:
1 Calculate the physical units.
2 Calculate equivalent units of production.
3 Calculate unit costs of production.
Work In Process:
4 Assign costs to the units transferred and in process.
(These four steps appear on the production cost report.)
21-6 EQUIVALENT UNITS Weighted Average Method
In its simpliest terms, the concept of equivalent units is
just taking partially-completed units and combining
them into 100% completed units.
For example: Boeing manufactures airplanes and say
at the end of May, they have two partially-completed
1 airplane that is 90% complete
1 airplane that is 10% complete
Instead of having 2 partially-completed airplanes,
Boeing has one, 100% completed airplane. Again,
this is very simple example.
21-7 EQUIVALENT UNITS Weighted Average Method
Equivalent units of production
– the work done during the period on the physical units of
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This document was uploaded on 03/23/2014.
- Spring '14