Question

Suzy Q Bakery makes donuts in two departments, baking and packaging. Labor and manufacturing overhead (conversion costs) are incurred uniformly through both processes. Materials are entered at the beginning of the baking process. The baking department had the following production and cost data for May 2018.

PRODUCTION DATA
Beginning work in process 4,000 dozen donuts

Started into production 21,000 dozen donuts

Ending work in process 5,000 dozen donuts (40% complete)

COST DATA

Beginning work in process inventory $22,000

(consisting of $8,000 materials and $14,000 conversion costs)

Costs added during May include:   

Materials: $82,000

Conversion Costs $118,000

Total Costs $222,000

Complete all 5 steps of process costing and show all calculations.

Answer 1

Steps in process costing with calculation is shown below :-

1 . Calculating the physical flow of units

Following is the statement showing physical flow of units :-

Flow of production	Physical flow of units
Units to account for :
Beginning work in process	4000
Started production during the period	21000
Total physical units to account for	25000
Units accounted for :
Completed and transferred out during the period	20000 (25000-5000)
Ending work in process	5000
Total physical units accounted for	25000

Step 2 . Computing equivalent units of production

Following is the statement showing equivalent units produced :-

		Equivalent units	equivalent units
Particulars	physical units	direct material	conversion cost
Units to account for :
Beginning work in process	4000
Started in production	21000
Total physical units to account for :	25000
Completed and transferred out	20000	20000 (20000x100%)	20000 (20000x100%)
Ending work in process	5000	5000 (5000x100%)	2000 (5000x40%)
Total physical units accounted for	25000
Total equivalent units		25000 units	22000 units

Step 3 . Summarize the total cost to account for

Following statement shows total cost :-

	Direct material	conversion cost	total
Beginning work in process , may 1	$8000	$14000	$22000
Cost added during may	$82000	$118000	$200000
Total cost to account for	$90000	$132000	$222000

Step 4. Computation of cost per equivalent unit which is equal to :- cost for the period / equivalent t units of production for the period

Following statement show cost per equivalent unit :-

	Direct material	conversion cost
Total cost to account for	$90000	$132000
Divide by total equivalent units	25000 units	22000 units
Cost per equivalent unit	$3.60	$6

Step 5 . Assignment of total cost to the units completed and the units in ending work in process

Statement showing assignment of cost :-

Particulars	Direct material	conversion cost	total cost
Cost per equivalent unit (a)	$3.60	$6
Completed and transferred out units (b)	25000	20000
Cost of completed and transferred out units (axb)	$90000	$120000	$210000
Ending work in process (c)	0	2000
Cost of ending work in process (axc)		$12000	$12000