Lecture 003 Process Costing - (with new audio)
Ok, today, we're gonna talk about process. Costing, and. Process. Costing, is used when a company, manufactures. The same product, day, in and day out ok, unlike. Certain, products, for example cabinets. Which. You have to build the customer, specifications, based on the size of a kitchen the, height of the ceiling, preferences. Etc. Gasoline. You make the same stuff day-in, day-out paint. Cornflakes. Nuts. And bolts and washers and, chemicals. And so, the. Means by which we determine. The cost of our product, how, much is in work and process ending, inventory how. Much gets transferred, to finish goods not, to mention unit cost in terms of evaluating. Efficiency, are we manufacturing. This, product as efficiently, as we did last month last year we, use a different method called, process, costing. Here's. An example of some companies that. Use process costing, they make the same product day, in day out ok. Alcoa. Aluminum makes. Aluminum, now it makes it in different sizes, and shapes but it, makes the same basic product it makes these great big ingots, or whatever they call them and then companies, cut them to size and, press them and roll them and do all that stuff, Pepsi. Makes that syrup, that they put in cans or bags, they send them off to McDonald's, and Burger King, and who knows where else and they. Add carbonation. And boom the, gasoline, you buy from Arco is the same whether it's in Santa Monica a Long Beach Glendora, whatever, so these, companies use what's called process, costing job. Order is when. The product differs. From project, to project think, of a movie ok. Golf. Courses, they're, all different ok. Homes obviously. Advertising. Campaigns. Wedding, invitations. Anything. Where the customer, says, I want it this way this size this shape this look etc, we're gonna use the job order system. Ok. Now one of the unique things about process, costing, is that. You can have more than one work-in-process department. In job order costing we. Take raw materials, we requisition. Them into production this, is where we add labor and manufacturing answering overhead and then, when it's finished the job's finished we transferred to finish goods inventory and, then when we sell it to cost a good salt the, only difference here is that you can have multiple work-in-process. Departments. Because they're doing different functions, okay, so here, they're, making ice cream there are the raw materials, they, mix it okay, there's labor the. Machines and the energy to turn the machine is your overhead then, it goes to packaging. And then, to finish good so here they have to work in process departments. You could have three four or five work in process departments. So that's what's unique about process, costing as compared. To job order costing it's. The multiple work in process departments, and that's the only from. An accounting standpoint the only journal entry that will be any different and we'll look at that towards the end of this lecture. Okay. One of the key concepts, in process. Costing is this, concept of equivalent units, we call them equivalent. Whole units, equivalent. Complete, units same thing so if I just say equivalent units, you know I'm referring, to equivalent. Whole, or complete, units let's take a look at this slide when. Materials flow through the production process at, a pace that's different, from labor and overhead then. Work in process at the end of the period will have a different, percentage, of materials. Labor. And overhead okay. So we might have work, in process that has 80 percent of its materials, that it needs for the completed product but, at. This point in the production process is a lot more labor and overhead say, 60 percent of labor and forty, or fifty percent of overhead that still needs to be added, to complete the product and that makes costing. The product difficult when you have different percentages. Of completion. Okay, for example I'm, making a great, big batch of pancake, mix then, what I would do is I dump all the pancake, batter the powdered stuff into the bowl at once so I have a hundred percent of my raw, materials, and now, I have, someone stirring, the pot and it's in a pot which is your equipment, which has to get depreciated, and you have to flame underneath where I'm adding water and that's your overhead, the utilities, and. Then. We're gonna stir the pot and heat the pot and that's going to be our labor and overhead and we incur that cost evenly. Throughout the period so, at the end of a period in fact let me go to the next slide here. We're gonna see that it's. Gonna be difficult to cost out this product I'm gonna return to this example in a moment just, want to review equivalent. Units so used to determine the cost of goods transferred. From. Whip work and process to finish goods or, from. Whip, Department, ADA whip Department, B.
We. Also use it to determine what's in our work in process inventory at, the end of the period since that's going to go on the balance sheet remember we have three, inventories. Raw materials, work in process and, finish goods we're. Going to determine the cost per unit produced and we, can use this data to evaluate, efficiency, are we, manufacturing. Efficiently. From this period to last period are our material. Costs increasing, or our labor costs increasing, it helps us to identify areas in, which our costs are increasing so we can understand. It better and perhaps, take corrective action, or if we can't fix it maybe we have to raise the price. Okay. So let's take a look at this example here, at the end of a period there, may be five hundred partially. Completed units of a product that is 70%, complete, in terms of materials, and 45%. Complete. In terms of labor and overhead now, let's think back for a moment in a previous, chapter we said. That, labor and overhead combined. Were what was called conversion. Costs because we're converting raw, materials, into, a finished product how do you convert steel. And glass and upholstery, and rubber into a finished process a finished. Product you take skilled labor and you take a lots of machines and, and you, put you drive it with energy and that's your overhead cost and you and you come up with a finished product so, 70%. Complete, from a material standpoint, 45. Percent complete from a conversion, standpoint. Labor plus overhead, together makes. It difficult to determine the value of ending work in process as, well, as well, what is the cost of this in terms, of a unit cost and what. Are we going to put on the balance sheet. Okay. Another example. Hundred. Bottles half, filled could. Be consolidated. To. Make, fifty. Complete. Or 100% full bottles pretty. Straightforward, concept so the second example now. I have a dog house that's comprised, of five, pieces, of wood, they're all the same piece that same, size piece of wood and there's no back or front you can pass through it simply basic shelter from, Sun or rain, okay. Now, each, piece, if there's five pieces each piece represents. 20%. Of the, dog house so, if there's two pieces I've connected, these, two pieces and. That. Means they're 40%. Complete so I have five, dog houses, 40%, complete if, I, were to break those pieces. Apart. Individually. I could, construct, two. Dog. Houses because look I've got ten pieces of wood I need five pieces to make one house so ten pieces I could have made two complete dog houses instead, I have five houses that, are forty percent complete. Okay. Five. Products. Forty percent complete, are the equivalent, to two. 100%. Complete products five times 0.4, gives you two that's how we calculate, it. All. Right. If. A batch of cookie, batter or we can go back to our pancake, example. Requires. 10, pounds, of mix to, be poured into a bowl at the beginning of the process and it. Requires five, hours of heating. Continuous. Stirring by, a person, then if the batch was. Started, at 3 p.m. on December, 31st and, the, workday, ends at 5 p.m., then. Think about what we have we would have 100%. Of the materials because we dumped everything, into the bag all at once, but. It would have 40%, of, Labor and. 40%. Of open now in our, example we're. Gonna make the following assumptions, and this is important, that, the materials, are all added. In the beginning of the period just think we're pouring the mix in at the beginning the period for many companies that's not the case ok, you could have 60%, materials, 30%. Labour or 80% labour you can have varying, percentages but we're gonna make two assumptions first, materials.
Enter. The production process at the beginning of the period we dump them in the bowl and. Labor. And overhead or conversion. Is incurred. Evenly. Throughout, the period we're gonna make those assumptions so. If, a. Batch, takes 5 hours and we've worked for 2 hours 2/5. We've, completed, 40%, of the labor 40%. Of the overhead okay. So, the completions, are different for materials, than they are for conversion, and that makes it difficult determining. Unit, cost that's sitting in ending inventory, as. Well as the value of ending inventory and so this is where we use this equivalent. Whole unit, concept. Ok. All. Right now there. Are two different, methods, we can use and, I'm, going to go over both methods, very. Important. You. Will know which, method you need to use for your class it'll, either be the weighted average method or, the FIFO, method that, will be communicated. To you you will need to know that, one method I'm going to go through both methods, but, you only need to know the method that you're being held accountable for weighted. Average or FIFO, not both. Okay. So we use these methods to determine ending, work in process inventory, and, the. Value of goods that being transferred, out of our department either. Into, the next work, in process department, or if we're the last work in process department, the, cost being transferred, the finish goods so, if we have to know what the complete cost of the product is when, it goes from whip A to B to C and then to finish goods okay. Notice, both, methods, will produce similar results when applied in a consistent fashion they're not exact but pretty darn close, okay. And again I will let you know which method you need to know. Okay. Here's our example. Let's. Let's follow, this closely all. Right we'll read through it we. Have in beginning, inventory we, have six thousand. Two hundred units. That, are 60%. Complete. From a conversion standpoint. And they're, 100%. Complete. From. A material standpoint because we already dumped everything, into. The bowl the mold whatever you want to call it okay. So sixty two hundred units, and if. It helps from a visual standpoint think of like a car that's partially manufactured. Okay. It, has all the materials but it's sixty percent complete, from a labor and overhead standpoint.
Now. In. Addition to that we started. From scratch. Fifty-seven, thousand, five hundred units, this, period. Okay. And if you think about a production. Line the, sixty, two hundred units, here are going to get finished first first-in, first-out right and then we started, an additional. Fifty seven thousand, five hundred units, at, the. End of this period, let's just say the year we. Had on the, assembly, line work in process five, thousand. Units that, were forty-five, percent complete. From. A conversion standpoint. Okay. So we need these numbers here we're doing FIFO, right now first we will get FIFO then, we'll look at weighted average now, the. Beginning units. The 6200. Units, there. Was eighteen. Thousand, six hundred dollars, in materials. Nine. Thousand, and conversion, for a total, of twenty. Seven thousand. Six hundred. Costs. That were sitting in beginning work, in process, this. Period, we had to finish those units plus, we started, an additional, fifty seven thousand, five hundred units, this, period, we added, a hundred, and seventy three thousand, and material and, eighty-three. Thousand five hundred in conversion, labor, and overhead okay. So, we had, twenty, seven thousand, six hundred in beginning. Work, in process we. Added. Another two hundred fifty-six, thousand, in total for, a total of two, hundred eighty. Four thousand. One, hundred dollars, okay and, this is the total cost, total. Costs. To. Be. Accounted. For, okay. These are all the costs we're dealing with and now, this, 284. Is going to end up in one of, two places. Most. Of these costs, will be transferred. Out. To. The, next. Department. And, some. Of them will still be sitting in ending. Work. In process. Inventory. Okay. That's the only two places they could be they're either transferred. Out or. We're. Gonna complete, them next, period, okay. So. We. Have to do what's called a cost, reconciliation. And that is, we have to say okay of this 284 100 which is comprised, of, 27. 6 and. 256. 5 where, did they go how much was transferred, out how much is still sitting and ending work in process. Okay. Again we're looking first, at FIFO. Okay. First we have to determine how. Many units, were. Started, and completed. Okay. Now let's go back we had 60, 200, units, in beginning work in process they were started, last period. I'm. Gonna go back to the previous slide this. Period, we. Started, 50 75. But. At the end of this period we had 5,000. Units that were not, yet, finished. Therefore. We. Began with 62 200 units those have to be completed first we.
Started, An additional, 50, 7,500, units, so there was a total, of sixty. Three thousand, seven hundred units, in work. And process beginning. Whip plus, units. Started. Now. If. We. Had a total, of sixty three thousand, seven hundred units, that went through work in process and our. Ending, inventory was, five thousand. Ending, whip by definition is not yet finished then, we must have completed. Fifty. Eight thousand, seven hundred bees. Were finished. But. What, we're looking for is, this bottom line here units. That were both started. And, completed. This. Period, we. Know that, we started fifty seven five okay. We. Completed a total of fifty eight seven, okay. So. We, could do the long route which shows you everything, or we can simply say started, fifty seven five if we. Had ending inventory of five thousand, than fifty seven five minus, ending whip of five we, started. And completed, fifty. Two thousand, five hundred units this period went, from zero to a hundred percent complete. Okay. And we're gonna see the next slide we're gonna see why we need this number for FIFO. Okay. The. Next thing we have to do is we have to determine, equivalent. Units, and we separate. Materials. From, conversion. We. Need these three numbers beginning. Work and process. Started. And completed that was the previous slide go back and look at that and then. Ending, work in process and, notice, I will, give you percentage. Of completion for, both beginning, and ending. Work in process I have to give you those numbers, let's. Take a look at the data and then, I'm going to explain what these numbers mean. Okay. Now. The. Assumption, we made is that all materials, were added at the beginning of the period therefore. I have. Six thousand, two hundred units. In work. And process that have all the materials, but there's sixty percent complete, from a conversion standpoint. Therefore. This period. This month I have to finish, units. Notice. Materials to zero that's because we've already added, everything last period all we got to do is keep, stirring, for a few more hours so. 6200. Units that. Are 60%. Complete I got to do the remaining, 40% this. Period. 6,200, units times 0.4. Gives. You two thousand. Four, hundred and eighty, equivalent. Whole, units, that, we added this period the, amount of time and energy that, it took to complete, those. 6200 units we could have started, and completed 24, eighty units okay hit, pause if you need to think about that because once you get the concept this whole chapter, will make more sense. The. Amount of time labor and conversion, that we spent. Finishing. These 6,200 units the remaining 40 percent we, could have started, and completed two. Thousand, four hundred eighty units all the, materials, were added last period, that's why material, says zero we didn't have to add any more materials, this period now. Started. And completed, we figured that out in a previous slide, think. About it if we started, and completed them this month or this year they have 100. Percent of materials, 100. Percent of labor 100, cent of overhead. There, they. Have a hundred percent of everything. They need so. Fifty. Two thousand, five hundred units, have. Fifty. Two thousand five hundred units from a material, standpoint, and fifty, to five hundred units from a labor and overhead standpoint, there they were started and completed this period they have everything they need and it all happened, this month this year. Now. Ending. Inventory which. Is at December, 31st which is incomplete, we, added, all the, material, this, period, these, were the units that we started, towards the end of the year so, we dumped in all the material, so notice we added all 5,000. Units of. Material. But. Since they're only 45. Percent complete. From. A conversion standpoint. We. Have two thousand, two hundred and fifty, equivalent. Units from a conversion stand, so. To. Do, 45%. Of the work on. 5,000, units I could. Have started, and completed, 20. To 50 units from, a conversion standpoint, Pease again we. Had all materials, at the beginning of the period but we add labor and overhead, uniformly. Or evenly, throughout, the period this, is why we have to do this because we add costs. Unevenly. In the, production process and again in reality, you, might have three different percentages for materials for labor and overhead here, we're trying to simplify things a little bit by assuming materials. All get dumped in at the beginning and we incur labor, and overhead evenly. Add. Up those three numbers and that gives us, equivalent. Whole units, produced, this. Period. 0. Plus 52 5 plus 5 thousands, 57, 5 and look. At conversion, it's a different number why because, of that percentage, business. 24. 80 of conversion. Plus, 52 5 started, and completed plus, 2250. Of ending inventory are equivalent. Units are, fifty seven thousand two thirty which. Is a little bit different than our equivalent units for materials and this will commonly, happen where you have two different numbers if they're always the same number we wouldn't have to go through this process.
Okay. We, need this in order to determine cost per unit transferred, out as well. As for determining what's an ending, work in process inventory. Okay. Now. Now. That we have equivalent units we. Can calculate the cost per equivalent whole, unit for materials, as well. As for conversion, and they're two separate numbers. Very. Important, for FIFO, first-in first-out we use the cost that we added this period and to go back to a previous slide if you want to refresh your memory we, added a hundred and seventy three thousand, dollars worth of materials notice, we are excluding. The cost of that was incurred, last, period beginning WIPP we're only using costs, added this period one. Seventy three divided. By the number of units we equivalent. Units that we started and completed this period, 57. Five okay. So cost, divided. By equivalent, you, materials. This. Period costs, us $3.00, per equivalent unit. Conversion. We. Added, eighty three thousand, five hundred this period. Divided. By the equivalent units for conversion, of fifty-seven to thirty comes, to one dollar in about forty six cents now, let's, read the note here both, unit, costs three dollars and one dollar. And forty six cents are rounded. Numbers, and this is going to result in a rounding, difference when, we reconcile. This final, number up here when. We figure out what's here and here it's not going to equal to 84 one hundred only because, of rounding it's gonna be slightly off and it's important for you to be able to recognize a rounding, difference okay but because we're rounding these the real number might be 300 eight, one six four two whatever and that will give you a more precise number, we're simply rounding, we went out three decimal points in this case. Okay. So, now that we have, our cost. Per equivalent unit, since, we know that materials, were added at a different rate than conversion. So we had to come up with two different numbers we. Can now come. Up with our cost. Analysis. This shows where. All the costs, to 84 100 went, you were there transferred, out or they, went to ending, work in process. Okay.
So. Here we go we've, seen these numbers before. Costs. That, we started with we still have to account for them because they're still sitting in the product, itself think, of a car that, started, out twenty percent complete now is 80 percent complete it has these costs that you began with and we added cost so this includes everything. Costs. That were in beginning work in process twenty seven six. Now. Look, at this next line costs. To, complete. Beginning. Work in process bi is beginning, inventory I should. Have put beginning work in process inventory, so. Notice we didn't have to add any, additional materials because we dumped them in all at once but we, had to incur, the remaining, 40% of, labor, and overhead, so. The, six thousand, two hundred units, in beginning. WIPP we have to do the remaining 40 percent which is the, same as the, equivalent of. 2480, units that we started complete this, period and our. Conversion. Cost per, equivalent unit, we figured out was a dollar and 46, cents rounded, that, gives us three thousand, 618 so. We had to finish, beginning. Work in process first just think of an assembly line had to finish these units these cars before, we could start any more new units. Now. Here's. The cost of units that were started, and completed. This, period from scratch from zero to 100% we. Simply take 50. 2,500, units started, and completed again, on a previous, slide. Multiply. It times 3 for materials, get. 157, 5 multiply. 52. 5 started, and completed times. The buck 46, for conversion, now, if you wanted to since these were all started, and completed this period you could simply add 3. Plus 146. And you could have said 50, to 500 units, started, in completed times for. 46. And that would give you the same number okay. So. All. The costs that we inherited, from last period sitting, in beginning WIPP plus, the, cost we had to incur to finish, those beginning, work-in-process units, plus. The. Cost of all, the units we both started, and completed this period. Equals. Cost of goods completed, and transferred, out, that's this number here. 265, 316, and again there'll be a rounding difference and if, we're. Whip department, a and now we're transferring, it to whip Department, B we. Would debit whip B inventory. Credit, hour Department whip a if, we, were the last work in process department, before finished, goods we, would debit finish, goods, credit.
Whip, C, whatever our department was okay, now. Ending. Inventory. Remember we assembly, line we saw some units at the end of the day December 31st that are not yet finished we, have to put this on the balance sheet as beginning. Inventory, excuse, me ending inventory. Okay. Now. Materials. Remember we had 5,000. Units that were 45%. Complete. In. Ending, whip we. Dumped, all the, material, into the bowl this period for those 5000, units so notice from, a material, standpoint, 5,000. Units an ending work in process they. Have everything so 5000 times 3. $15,000. Conversion. Costs, are 45%, complete. So 5,000. Units 5000, cars that, on average are 45% complete. Okay. Is the, equivalent, to 2,000, 250. Equivalent. Whole or completed, units at a. Conversion, cost, per, equivalent unit, of a buck 46, gives us 3000. 283. Okay. Ending, work in process materials. Plus, conversion, which is materials, plus labor plus overhead. 18,000. 283. So. If you were to add up to 65. 316. Plus. 18. 283. We. Would have accounted for these costs now again will be off by a couple of hundred bucks because, of rounding, okay. But you can tell when you have a rounding, difference because say, we're off by for. Example $400. If, you. Take 400, and you divide it by two hundred eighty four thousand, you can see this is a very small, number and that tells you this is a rounding, difference okay. So. That's what we do first. We calculate the. Number of units that were, started, and completed, okay. Then we figure, out equivalent. Units, then. We figured out cost. Per. Equivalent unit, and then, we assign costs to. The goods that were transferred, out and that, the goods that are still in ending, work in process inventory, and, we do what's called a cost reconciliation. Report which I'll show you at the very end of this presentation, okay. That, is first-in first-out okay. Now, we're gonna look at the. Weighted average, method. Okay. The. Weighted average, method is, actually. Easier. Than FIFO. Let's. Take a look. And this. Is the same data that we began with. 6200. Units in beginning, inventory, for, working process that are, 60%. Complete, from, a conversion standpoint. Okay. Note, the completion, percentage, depletion for beginning WIPP is gonna be ignored in, the. Weighted, average method, we. Started. Fifty-seven, thousand, five hundred units, this period and, we. Have five thousand, units in ending, work, in process that, are forty five percent complete. From a conversion standpoint, okay, now we assume that for, materials, in this example and I'll tell you on an example of the assumptions, we'll assume all the, materials, were. Added, in at the beginning of the process just think of pouring pancake. Mix into, the bowl it has all the materials then you put the water in and then you incur, conversion. Cost which is your labor direct. Labor and overhead costs, evenly. Throughout the period think of a big bowl that's your equipment, that's your factory the flame that's your utilities, and a direct labor person stirring, the mix okay.
You, Incur those costs, evenly. Throughout, the period. Now. Beginning. Work in process sixty. Two hundred units that are sixty percent complete, from, a conversion standpoint a dot that have a hundred percent of their materials, last. Period, we added, eighteen, thousand, six hundred of materials, nine, thousand, of labor over an overhead for a total of twenty, seven thousand, six hundred. This. Period, we. Added, one. Hundred and seventy three thousand, more, of materials, and we incurred an additional, eighty three thousand, five hundred of labor this, period we added, two. Hundred and fifty six thousand, five hundred dollars of additional costs. So. Our total, costs that we have to account for are. Twenty, seven thousand, six hundred, plus. Two fifty six five equals. Two hundred eighty four thousand, one hundred we. Have to figure, out where. Did these cost go they. Went one of two different places, most. Of it was. Finished, we completed the production, and trained furred out either into. The next work-in-process, Department, or the next finished goods or to, finish goods inventory and, then, some of it is still sitting, incomplete. In work and process at the end of this period, that'll, be ending, work in process inventory, which, we know goes on the balance sheet so we need to know these two numbers. Okay. So what, do we do with this, 280 4100 which again is your, total beginning, WIPP costs, materials. Labor and overhead plus, total costs added this period of 256. 5. Ok. Using. The weighted average method, we. Ignore, the, units, in beginning, inventory and this is easier than the FIFO, method, so. We. Completed, fifty, eight thousand. Seven hundred units. Obviously. If we completed them as far. As our department. Is concerned they've got a hundred percent of everything they're going to need before we push them out the door teeth, of the next work-in-process department, or to finish goods and. In. Our department, we have five thousand, units that, are still in ending inventory that, are forty-five percent complete, from, a conversion standpoint, you. Need that number so remember, you can ignore beginning, inventory the units and the. Percentage completion for weighted average you don't need those but you do need the, units and the, percentage of completion in ending. Work in process. Now. We have to calculate what we call equivalent.
Whole, Units, or equivalent, completed, units, if. We. Completed. Fifty, eight thousand. Seven hundred units, then. They have to by definition have. A hundred percent of materials, and a hundred percent of conversion, labor and overhead okay, so they got a hundred percent of everything they're going to need for, materials, and conversion. Ending. Work in process is. Going, to have a hundred percent of the material, since we dumped them all in at the beginning of the period but it, has 45. Percent, of labor. And overhead conversion. Costs, which. Is the equivalent, to, had. We instead. Of making. 5,000. Units 45, percent complete if we had started and completed, unit we would have been able to finish, 220, 250 units, 5000, times 0.45. Equivalent. Completed, units 2250. So, notice. Ewu. Equivalent. Whole, units. Or equivalent, completed units were simply equivalent, units is for. Materials, sixty. Three thousand, seven hundred and for, conversion, sixty thousand nine fifty they're different and that happens in process constant that's why we have to do this because, we incur, material, costs, at a, different, pace than, we incur labor and over it cost that makes costing. Difficult, when you do when that happens. Okay. Now. What. We do is the reason we call this weighted, average is we take all the costs, from beginning whip, plus. All the costs we added, this period and, we. Divide, them by the equivalent, units. Now. Remember, the, units that were completed here the 58 seven that, includes, the. Beginning whip which we had the finish first think think, in terms of an assembly line we finished those units first and then we started included a bunch of units and, then we started units at the end of this month that were not yet finished okay, just think of an assembly line so. Total. Cost and, you have to go back to the previous slide we. Had I want to say. 18600. In beginning. Whipped, materials, plus we added another one seventy, three this period total, of 196, for materials. Conversion. Costs, in beginning whip was nine thousand, dollars of labor and overhead and we added an additional, eighty three thousand, five hundred again it's in a previous slide for a total of 92 five. So. Our cost, per. Equivalent unit, for, materials, we take total, cost the beginning whip plus. What was that at this period divided. Up by my equivalent whole units we, calculated, previously that. Gives us three dollars in one sense. Conversion. Costs, beginning whip plus what was added this period 92, five divided. By my equivalent, units for conversion, of sixty, thousand nine fifty gives, me a conversion, cost of a buck fifty, two per, unit and if, you wanted to compare this to the FIFO method you would see. The numbers are reasonably. Close not exact, okay, but if, the process remains the same you're going to get fairly consistent. Results, with either method okay, okay. Now that we have cost per equivalent unit. We. Can do our cost analysis, and again, we're, trying to figure out this, is all my cost beginning, web plus everything, that was added materials labor and overhead most. Of it was transferred, to the next department, whether that's whipped or finished. Goods and some. Of it's still sitting in our department is ending work in process inventory. So. What, was completed, and transferred. Out, fifty. Eight thousand, seven hundred units, at a. Materials, cost per equivalent unit of the three thousand one sense gives, us, 176. 687. From. A conversion standpoint, same, 58 thousand, seven hundred units, that were finished times. A buck fifty two gives us eighty nine 224, add those, two together, and. We get 265. Thousand, nine, eleven now. If we're. Sending it to the next work in process department. Think. Inventory, asset right, normal, debit balance, then to, transfer it into. The, next work in process Department I'm in a debit whip, Department. B and our, department, a I'm gonna credit, whip. Department, a these, are both inventory, accounts for work and process we're, sending an ad of ours and inventory. Which is an asset always gets credited when you reduce, it and adding. It to it B with, a debit if, we. Were the last work, in process department, on the assembly, line then, instead I would debit, finish, goods inventory and. I would credit whip, C, or D or whatever our department was okay. All. Right and then. What's. Remaining. In ending. Whip we know we have five thousand. Units that, have all the materials, in them and if, and the 5,000 units are 45. Percent, complete, from. A conversion standpoint.
And So, in a previous slide we figured, out that materials. Have everything so there's five thousand units one hundred percent of materials, times, 301, gives us fifteen thousand, fifty dollars in. Work-in-process, ending, inventory for, materials, and conversion. Remember. 5000, it's times, 0.45. The, percentage, completion, that's. 2250. Equivalent. Whole units from conversion standpoint, times, a dollar fifty two gives, us three thousand, 240 add. Those two numbers together fifteen, thousand fifty plus. 34 twenty equals, eighteen. 470, that's what goes on the balance sheet ending. Whip for our department add, those two numbers up to 65, nine eleven plus. Eighteen 470, gives, you two eighty four 381. Which, is this number here and they're. Different because of rounding again, we're, off by two hundred eighty one dollars if, you divide that by two 84, 100 you'll see it's a very small, very, small number that's a rounding, difference okay. And there, you have it so. Calculate. Equivalent units, calculate. Cost per, equivalent unit, for, materials, as well. As for conversion, and then. Based. On that we. Determine. How much was transferred, out to the next department and how, much is still sitting in ending whip. It's. The only journal, entry in, a process, costing, environment, that is unique and different is. Transferring. From whip a to b or whip B to C since you have multiple work in process departments, you don't have that for a job order system and we have one work in process department, here's that journal entry, to. Go from A to B a debit whip be credit. Whip a the, last whip Department, to. Transfer, out goes finish goods credit. Whip. Okay. Now. I'm not going to ask you to produce this thing in its entirety but here is the, cost of production report. And this, has all the steps you. Look, at the physical units you have to calculate, equivalent. Units and again, you do it separately for materials and overhead, then. Based. On all of our costs for materials and all, of our costs for conversion, we calculate, the equivalent whole. Units, for, materials and for conversion. Once we have those numbers we. Multiply, those costs per unit times, the number of units that we finished. This. Number here and last. We calculate, the number of units that are partially, completed, still. In ending work in process to, determine what. Our ending what value, is that goes on the balance sheet okay, this is an area where you're gonna need to practice so, do. Your practice, homework check, your answers and. That. Does it for process. Costing.