Summarize Total Costs (Step 4)
Work in process beginning inventory:
Materials
$ 9,700
Conversion
10,000
Total beginning inventory $ 19,700
+ Current costs:
Materials
Conversion
= Costs to account for
$87,500
72,000
$179,200
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster
18 - 1
Assign Total Costs (Step 5)
Good units completed and transferred out
(31,000 units):
Costs before adding normal spoilage:
31,000 × ($2.70 + $2.50)
Normal spoilage: 620 × ($2.70 + $2.50)
Total
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster
$161,200
3,224
$164,424
18 - 2
Assign Total Costs (Step 5)
Abnormal spoilage: 380 × ($2.70 + $2.50) $ 1,976
Work in process, ending (4,000 units):
Direct materials (4,000 × $2.70)
$10,800
Conversion (800 × $2.50)
2,000
Total
$12,800
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster
18 - 3
Assign Total Costs (Step 5)
Costs of units completed and transferred out
(including normal spoilage)
$164,424
Cost of abnormal spoilage
1,976
Costs in ending inventory
12,800
Total costs accounted for
$179,200
The $1,976 cost of abnormal spoilage
is assigned to the Loss from
Abnormal Spoilage account.
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster
18 - 4
Learning Objective 4
Account for spoilage in
process costing using
the first-in, first-out
(FIFO) method.
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster
18 - 5
Physical Units (Step 1)
Work in process, beginning (November 1):
100% material, 60% conversion costs
1,000
Started during November
35,000
36,000
Good units completed and transferred out:
From beginning inventory
1,000
Started and completed
30,000
31,000
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster
18 - 6
Physical Units (Step 1)
Work in process, ending inventory:
100% material, 20% conversion costs 4,000
Normal spoilage
620
Abnormal spoilage
380
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster
18 - 7
Compute Equivalent
Units (Step 2)
Good units completed
and transferred out:
From beginning inventory
Started and completed
Normal spoilage
Abnormal spoilage
Ending inventory
Equivalent units
Materials
Conversion
0
30,000
620
380
4,000
35,000
400
30,000
620
380
800
32,200
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster
18 - 8
Compute Equivalent
Unit Costs (Step 3)
Materials
Current costs
$87,500
Divided by equivalent units
35,000
Cost per unit
$2.50
*$2.236 (rounded)
Conversion
$72,000
32,200
$2.236*
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster
18 - 9
Summarize Total Costs (Step 4)
Work in process beginning inventory:
Materials
$ 9,700
Conversion
10,000
Total beginning inventory
$ 19,700
+ Current costs:
Materials
Conversion
= Costs to account for:
$ 87,500
72,000
$179,200
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster
18 - 10
Assign Total Costs (Step 5)
Good units completed and transferred out:
From beginning inventory:
Work in process
Conversion costs added in
current period (400 × $2.236)
Total
Started and completed:
30,000 × ($2.50 + $2.236)
$ 19,700.00
894.40
$ 20,594.40
$142,080.00
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster
18 - 11
Assign Total Costs (Step 5)
Costs before adding normal spoilage:
($20,594.40 + $142,080.00)
$162,674.40
Normal spoilage:
620 × ($2.50 + $2.236)
2,936.32
Total
$165,610.72
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster
18 - 12
Assign Total Costs (Step 5)
Abnormal spoilage:
380 × ($2.50 + $2.236)
$1,799.68
Work in process, ending (4,000 units):
Direct materials (4,000 × $2.50)
$10,000
Conversion (800 × $2.236)
1,789
Total
$11,789
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster
18 - 13
Assign Total Costs (Step 5)
Costs of units completed and transferred out
(including normal spoilage)
$165,610.72
Cost of abnormal spoilage
1,799.68
Costs in ending inventory
11,789.00
Total costs accounted for
$179,200.00
The $1,799.68 costs of abnormal spoilage are
assigned to the Loss from Abnormal Spoilage
account.
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster
18 - 14
Learning Objective 5
Account for spoilage in
process costing using the
standard-costing method.
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster
18 - 15
Standard-Costing: Spoilage
The standard-costing method makes
calculating equivalent unit costs
unnecessary and so simplifies
process costing.
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster
18 - 16
Journal Entries
Assume that the completed units are transferred
to Finished Goods.
What are the journal entries?
Finished Goods
XXX
Work in Process
XXX
To transfer good units completed in November
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster
18 - 17
Journal Entries
Loss from Abnormal Spoilage XXX
Work in Process
XXX
To recognize abnormal spoilage detected in
November
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster
18 - 18
End of Chapter 18
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster
18 - 19