THE COSTS
PROCESS COST SYSTEMS

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    PROCESS COSTING FLOW



    Process Costing Flow


    5 STEPS TO ACHIEVE A PROCESS COSTING

                               1.- Summarize the physical flow of the units to produce
                               2.- Calculate production in terms of equivalent units
                               3.- Calculate equivalent unit costs
                               4.- Summarize total costs to account for
                               5.- Assign total costs to the units already completed and to units in ending work in process inventory (WIP).

    PROCESS COSTING EXAMPLE

                         Step 1. Physical units

    PRODUCTION FLOW
    Work in process, Beggining Inventory
    0 units
    Units started in the current period
    35.000 units
    Total Units
    35.000 units

    Completed and transferred units in the current period
    30.000 units
    Work in process,
    Ending Inventory
    5.000 units
    Total Units
    35.000 units

                         Step 2. Equivalent units

    Production Flow
    Direct Materials
    Progress %
    Conversion Costs
    Progress %
    Completed and transferred units
    30,000
    100%
    30,000
    100%
    Work in Process, Ending Inventory
    5,000
    100%
    1,000
    20%
    Equivalent
    units

    35,000

    31,000


                         Step 3. Equivalent unit cost

    TOTAL PRODUCTION COSTS: $146,050

    Direct Materials
    Conversion Costs

    $84,050
    $62,000
    Equivalent Units
    35,000
    31,000
    Cost per equivalent unit
    $2.4014
    $2.0000

                         Step 4 and 5.  SUMMARIZE AND ASSIGN TOTAL COSTS

    TOTAL PRODUCTION COSTS: $146,050
    ASSIGNATION
    Completed and transferred units
    30,000 X $4.4014
     $132,043
    Work in process, Ending Inventory
    5,000 units

    Direct Materials
    5,000 X 2.4014
    $12,007
    Conversion costs
    1,000 X 2.0000
    $2,000
    Total

    $146,050







    ACCOUNTING FORUM

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