For costs added this period relating to units in

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For costs added this period relating to units in ending WIP , take the EU’s in Schedule 2 for each of DM, DL, and MO (based on the % complete), and multiply these quantities by the cost per EU for DM, DL, and MO. The total should agree (or at least be close) to the total from Schedule 3. Any small difference would be due to rounding. PROCESS COSTING PRODUCTION REPORTS FOR A SUBSEQUENT PROCESSING DEPARTMENT When the Production Report is for a processing department that is not the first department in the process, there is a separate cost category and unit category called Transferred-in Costs . This category is treated this same as the other categories (DM, DL, and MO) with a separate column in the EU calculations. Transferred in costs are always 100% complete when they are transferred in. Hense, when using the FIFO method, EU’s required to complete the transferred-in costs in WIM beginning will always be zero . Likewise, the WIP ending inventory for transferred in costs will always be 100%. In the third schedule, Costs to Account For , the second line becomes Cost Transferred in or Added this period with the transferred in- costs being in a separate Transferred-in column and the costs added this period being in the DM, DL, and MO columns. The transferred in costs and related EU’s become part of the cost per EU calculation. When preparing the Cost Reconciliation (Costs Accounted for as Follows Schedule) , one additional line and calculation under the WIP ending heading will be Transferred in costs , which will be equal to the number of transferred in EU’s in ending WIP from Schedule 2, times the cost per EU for transferred in costs (the others being the DM, DL, and MO components of ending WIP).
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ACCOUNTING FOR SHRINKAGE AND LOST UNITS Units in process can disappear due to evaporation, losses due to machine breakdowns, or rejected units. Such “missing units” can be regarded as normal or abnormal and can be charged to MO as just another overhead cost, or treated as a separate “abnormal” unusual loss, or absorbed by the cost of the good output . Normal losses are anything up to a stated allowable percentage which is stated as a % of good output completed and transferred out (e.g. 5% of good output).
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