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  • Avg Weitd+ Normal Loss

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    Naveed Ahmed
    29 vizualizări2 pagini
    The document discusses average costing methods for beginning work in process inventories. It provides an example calculation using data from the Clonex Corporation Terminal Department for the month of January. The 3 key points are: 1) When beginning WIP is merged with current period costs, the goal is to determine representative average costs. This is usually done through a simple averaging process. 2) The example shows the calculation of unit costs transferred out of the department based on beginning inventory, costs added, and equivalent units of production. 3) If additional materials increase units but some are lost, the cost is still absorbed within the department by increasing the unit cost, rather than calculating costs separately for lost units.

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    The document discusses average costing methods for beginning work in process inventories. It provides an example calculation using data from the Clonex Corporation Terminal Department for the month of January. The 3 key points are: 1) When beginning WIP is merged with current period costs, the goal is to determine representative average costs. This is usually done through a simple averaging process. 2) The example shows the calculation of unit costs transferred out of the department based on beginning inventory, costs added, and equivalent units of production. 3) If additional materials increase units but some are lost, the cost is still absorbed within the department by increasing the unit cost, rather than calculating costs separately for lost units.

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    Attribution Non-Commercial (BY-NC)
    Descărcați ca DOCX, PDF, TXT sau citiți online pe Scribd
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    29 vizualizări2 pagini

    Avg Weitd+ Normal Loss

    Încărcat de

    Naveed Ahmed
    The document discusses average costing methods for beginning work in process inventories. It provides an example calculation using data from the Clonex Corporation Terminal Department for the month of January. The 3 key points are: 1) When beginning WIP is merged with current period costs, the goal is to determine representative average costs. This is usually done through a simple averaging process. 2) The example shows the calculation of unit costs transferred out of the department based on beginning inventory, costs added, and equivalent units of production. 3) If additional materials increase units but some are lost, the cost is still absorbed within the department by increasing the unit cost, rather than calculating costs separately for lost units.

    Drepturi de autor:

    Attribution Non-Commercial (BY-NC)
    Descărcați ca DOCX, PDF, TXT sau citiți online pe Scribd
    Indicator pentru conținut neadecvat
    din 2

    Beginning Work in Process Inventories

    Average Costing Method:


    When beginning work in process inventory costs are merged with costs of the new period, the problem is essentially one of securing representative average costs. Ordinarily, the averaging process is quite simple.

    Example:
    The Clonex Corporation Terminal Department (3rd Dept.) Cost of Production Report For the Month of January, 19 Quantity Schedule: Units in process at beginning (1/3 labor and factory overhead) Units received from preceding department Units transferred to next department Units still in process (1/4 labor and FOH) Units lost in process Cost Charged To the Department: Cost from preceding department: Work in process - beginning inventory (3000 units) Transferred in during this period (38,000 units) Total Cost added by the department: Work in process - Beginning inventory: Labor Factory overhead Cost added during period: Labor Factory Overhead (FOH) Total cost added Adjusted units cost for additional units Total cost to be accounted for Cost Accounted for as Follows: Transferred to finished goods storeroom (36,000 $3.50) Work in process - ending inventory: Adjusted cost from preceding department(4,000 $1.726 +
    $0.043)

    3,000 38,000 ------36,000 4,000 1,000

    41,000 =====

    -------Total Cost $5,400 65,360 ------$70,760 ------$910 800 34,050 30,018 ------$65,778 ------$136,538 ======

    41,000 ===== unit Cost $1.80 1.720 -----$1.726 ------

    0.920 0.811 ----$1.731 0.043* -----$3.500 ====== $126,000

    $7,076

    Labor (4,000 1/2 $0.920) Factory Overhead (4,000 1/2 $0.811) Total cost accounted for

    1,840 1,622 ------

    10,538 -----$136,538 ======

    Additional Computations:
    Unit cost from preceding department: $70,760 / 41,000 = $1.726 Equivalent Production: Labor and factory overhead = 36,000 + 4,000 / 2 = 38,000 units Unit Costs: Labor = $910 + $34,050 = $34,960; $34,960 / 38,000 = $0.920 per unit Factory overhead = $800 + 30,018 = $30,818; $30,818/38,000 = 0.811 per unit *Adjustment for Additional Units Method No.1 - $70,760/40,000 =$1.769 - $1.726 = $0.043 Method No.2 - 1,000 units $1.726 = $1.728; $1.728/40,000 = $0.043 per unit

    When additional materials increase the number of units being processed, it is still possible to have lost units. However, should increase and lost units occur, no separate calculation is required for the lost units; only net units added are used. In the example above, 8,000 additional units resulted from added materials. It is quite possible, though, that the materials added should have yielded 10,000 units. The difference between the 8,000 units and the anticipated 10,000 units could be due to the loss of 2,000 units. I this is the case, the effect of the lost units is similar to that of units lost in the first department; that is, the cost is absorbed within the department as an increase in unit costs. However, if 10,000 additional units should have resulted, the effect of losing units can be determined as follows:

    1. Compute the unit cost of work done in preceding departments and the Terminal
    Department as if no loss had occurred. by the 2,000 lost units.

    2. Compute the loss by multiplying the unit cost obtained in the preceding computation

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