Key T-Account: FIFO
Work in Process Inventory, Assembly
Beg. Inv.
7,550
Transferred
Materials
84,050
to Finishing
Conversion 62,000
139,625
Balance
13,975
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster
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Comparison of WeightedAverage and FIFO Methods
Weighted
Average
Costs of units
completed and
transferred out
Work in process,
ending
Total costs
accounted for
FIFO Difference
$139,500 $139,625 +$125
14,100
13,975 –$125
$153,600 $153,600
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster
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Learning Objective 7
Incorporate standard costs
into a process-costing system.
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Standard-Costing Method
of Process-Costing Example
Process-costing systems using standard costs
usually accumulate actual costs incurred
separately from the inventory accounts.
Assume that actual materials cost is $84,050
and standard materials cost is $84,250
What are the journal entries in the
Assembly Department?
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster
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Standard-Costing Method
of Process-Costing Example
Direct Materials Control
84,050
Accounts Payable Control
84,050
Work in Process
84,250
Direct Material Variances
200
Direct Materials Control
84,050
To record direct materials purchased and used in
production during the period and variances
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster
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Learning Objective 8
Apply process-costing methods
to cases with transferred-in costs.
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Transferred-In Costs
Weighted-Average Example
Finishing Department beginning WIP inventory:
4,000 units (60% materials) (25% conversion)
Ending work in process inventory:
2,000 units (100% materials) (40%) conversion)
31,000 units transferred-in from Assembly.
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Physical Units (Step 1)
Beginning inventory
Units started in process
Units completed and transferred
to finished goods
Ending inventory
4,000
31,000
35,000
33,000
2,000
35,000
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster
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Compute Equivalent
Units (Step 2)
Equivalent units for transferred-in costs:
Transferred to finished goods
Ending inventory
33,000
2,000
35,000
Inventory is 100% complete for the work
performed in the Assembly Department.
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster
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Compute Equivalent
Units (Step 2)
Equivalent units for direct materials costs:
Transferred to finished goods
33,000
Ending inventory (100%)
2,000
35,000
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster
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Compute Equivalent
Units (Step 2)
Equivalent units for conversion costs
(ending inventory 2,000):
Transferred to finished goods 33,000
Ending inventory (40%)
800
33,800
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Compute Equivalent
Unit Costs (Step 3)
Assume the following costs in the
Finishing Department:
Work in process beginning inventory from:
Assembly Department
$30,200
Direct materials
9,400
Conversion costs
8,000
Total cost in beginning inventory $47,600
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster
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Compute Equivalent
Unit Costs (Step 3)
Current costs in Finishing Department
are as follows:
Costs received from the
Assembly Department
$139,500
Direct materials
9,780
Conversion
42,640
Total
$191,920
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster
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Compute Equivalent
Unit Costs (Step 3)
(Transferred-in costs $30,200 + Costs transferred
in from the Assembly Department $139,500)
÷ 35,000 units
$4.85
(Direct materials $9,400 + $9,780)
÷ 35,000 units
$0.55
(Conversion costs $8,000 + $42,640)
÷ 33,800 units
$1.50
Total unit cost
$6.90
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster
17 - 14
Summarize and Assign Total
Costs (Steps 4 and 5)
Total costs in beginning inventory
Current costs in Finishing Department
$ 47,600
191,920
$239,520
Costs to account for: $47,600 + $ 191,920 = $239,520
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster
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Summarize and Assign Total
Costs (Steps 4 and 5)
Costs in work in process ending inventory:
Transferred-in costs: 2,000 × $4.85 $ 9,700
Direct materials: 2,000 × $0.55
1,100
Conversion: 2,000 × 40% × $1.50
1,200
Total cost in ending inventory
$12,000
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster
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Summarize and Assign Total
Costs (Steps 4 and 5)
Costs to account for:
$239,520
Costs transferred to finished goods inventory:
33,000 × $6.90
$227,700
Costs in ending work in process inventory:
$12,000 – $180 rounding error
11,820
Total
$239,520
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster
17 - 17
T-Account Finishing Department
Work in Process Inventory, Finishing
Beg. Inv.
47,600 Transferred to
Transferred-in 139,500 Finished Goods
Materials
9,780 227,700
Conversion
42,640
Balance
11,820
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster
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Transferred-In Costs
FIFO Method
The physical units (Step 1) is the same
as in weighted-average.
Beginning inventory
4,000
Units started in process
31,000
35,000
Units transferred to finished goods 33,000
Ending inventory
2,000
35,000
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Compute Equivalent Units
FIFO (Step 2)
Equivalent units for transferred-in costs:
From beginning work in process
0
Started and completed
29,000
Work in process, ending (100%)
2,000
Total equivalent units
31,000
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster
17 - 20
Compute Equivalent Units
FIFO (Step 2)
Equivalent units for transferred-in costs:
Transferred to finished goods
33,000
Ending work in process inventory
2,000
Total
35,000
Beg. work in process inventory
– 4,000
Equivalent units
31,000
Inventories are 100% complete for the work
performed in the Assembly Department.
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Compute Equivalent Units
FIFO (Step 2)
Equivalent units for materials costs:
From beginning work in process
1,600
Started and completed
29,000
Work in process, ending (100%)
2,000
Total equivalent units
32,600
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Compute Equivalent Units
FIFO (Step 2)
Equivalent units for material costs
(beginning inventory 4,000):
Transferred to finished goods
33,000
Ending inventory (100%)
Total
Beginning inventory (60%)
2,000
35,000
–2,400
Equivalent units
32,600
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster
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Compute Equivalent Units
FIFO (Step 2)
Equivalent units for conversion costs:
From beginning work in process
3,000
Started and completed
29,000
Work in process, ending (40%)
800
Total equivalent units
32,800
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster
17 - 24
Compute Equivalent Units
FIFO (Step 2)
Equivalent units for conversion costs (beginning
inventory 4,000, ending inventory 2,000):
Transferred to finished goods
33,000
Ending inventory (40%)
Total
Beginning inventory (25%)
800
33,800
–1,000
Equivalent units
32,800
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster
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Compute Equivalent Unit Costs
FIFO (Step 3)
Cost per equivalent unit:
Transferred-in: $139,590 ÷ 31,000 $4.50
Direct materials: $9,780 ÷ 32,600
0.30
Conversion: $42,640 ÷ 32,800
1.30
Total unit cost
$6.10
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster
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Summarize and Assign Total
Costs FIFO (Steps 4 and 5)
Current costs in Finishing Department: $192,010
Work in process beginning inventory:
47,600
Costs to account for:(same as weighted-average) $239,610
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster
17 - 27
Summarize and Assign Total
Costs FIFO (Steps 4 and 5)
Work in process ending inventory:
Transferred-in: 2,000 × $4.50
$ 9,000
Direct materials: 2,000 × $0.30
Conversion: 800 × $1.30
Total
600
1,040
$10,640
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster
17 - 28
Summarize and Assign Total
Costs FIFO (Steps 4 and 5)
Costs transferred out:
From beginning inventory:
$47,600
Direct materials added:
4,000 × 40% × $0.30
480
Conversion costs added:
4,000 × 75% × $1.30
3,900
Total
$51,980
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster
17 - 29
Summarize and Assign Total
Costs FIFO (Steps 4 and 5)
Total costs transferred out:
From beginning inventory
$ 51,980
From current production: 29,000 × $6.10 176,900
Total
$228,880
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster
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Summarize and Assign Total
Costs FIFO (Steps 4 and 5)
Total costs accounted for:
Transferred to finished goods:
$176,900 + $51,980
$228,880
Work in process ending inventory 10,640
Rounding error
Total
90
$239,610
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster
17 - 31
Summarize and Assign Total
Costs FIFO (Steps 4 and 5)
Costs to account for
$239,610
Work in process ending inventory – 10,640
Transferred to finished goods
$228,970
©2003 Prentice Hall Business Publishing, Cost Accounting 11/e, Horngren/Datar/Foster
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End of Chapter 17
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