{"id":923,"date":"2021-04-01T00:32:20","date_gmt":"2021-04-01T00:32:20","guid":{"rendered":"https:\/\/courses.lumenlearning.com\/wm-managerialaccounting\/?post_type=chapter&#038;p=923"},"modified":"2021-06-02T16:30:56","modified_gmt":"2021-06-02T16:30:56","slug":"production-cost-report-first-department-weighted-average","status":"publish","type":"chapter","link":"https:\/\/courses.lumenlearning.com\/suny-clinton-managerialaccounting\/chapter\/production-cost-report-first-department-weighted-average\/","title":{"raw":"Production Cost report - First Department - Weighted Average","rendered":"Production Cost report &#8211; First Department &#8211; Weighted Average"},"content":{"raw":"<div class=\"textbox learning-objectives\">\r\n<h3>Learning Outcomes<\/h3>\r\n<ul>\r\n \t<li>Prepare a production cost report for the first stage of a multi-step process using the weighted-average method<\/li>\r\n<\/ul>\r\n<\/div>\r\n<img class=\"alignright wp-image-1715 size-thumbnail\" src=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images\/wp-content\/uploads\/sites\/5469\/2021\/04\/14231819\/nathan-dumlao-m-dhIU1gJHM-unsplash-150x150.jpg\" alt=\"pie crust\" width=\"150\" height=\"150\" \/>\r\n\r\nThere are two basic methods used to allocate costs in process costing: weighted average and First-in, First-out (FIFO).\r\n\r\nFor now, we\u2019ll focus on the weighted average method which assumes that products and therefore costs, flow through the process like paint or beverages. Later, once you are comfortable with the basic idea of the process costing production report, we\u2019ll take a look at the FIFO method which is based on the assumption that the work-in-process sitting in the department at the end of the month is finished at the beginning of the next month before anything else is started.\r\n<h2>Allocating Costs to Products in the First Department of a Multi-Step Process<\/h2>\r\nWhat we are looking at here is a multi-step process, such as creating food products. In our Dad\u2019s Perfect Pie (crusts) example, the 3 steps to get from raw materials (flour and butter) to a finished product probably look like this, and so these would be our cost accounting departments as well:\r\n\r\n<img class=\"aligncenter wp-image-1710 size-full\" src=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images\/wp-content\/uploads\/sites\/5469\/2021\/01\/14230431\/Screen-Shot-2021-05-14-at-3.59.59-PM.png\" alt=\"A graphic showing the progression from left to right from the Mixing Department to the Baking Department to the Packaging Department to Finished Goods. Under each department is shown the formula Direct Materials + Direct Labor + Factory Overhead (for that department) = Work in Process (for that department). Under Finished Goods, it states Total cost of the batch includes work in process costs from all three departments.\" width=\"953\" height=\"275\" \/>\r\n\r\nLet\u2019s assume a ton of flour and \u00be ton of butter comes into the Mixing Department on Jan 3rd. A ton of flour makes 3,000 pie crusts. It is mixed up, rolled out, and cut into shape by machine, so there are minimal direct labor costs and some indirect factory overhead costs (such as depreciation, rent, insurance, indirect labor) added to the direct materials costs.\r\n\r\nHere is how the production schedule looked:\r\n<ul>\r\n \t<li style=\"font-weight: 400;\" aria-level=\"1\">Jan 6: 500 pounds of flour and 375 pounds of butter turned into 750 pie crusts (uncooked) and transferred to Baking on Jan 14<\/li>\r\n \t<li style=\"font-weight: 400;\" aria-level=\"1\">Jan 15: 500 pounds of flour and 375 pounds of butter turned into 750 pie crusts (uncooked) and transferred to Baking on Jan 20<\/li>\r\n \t<li style=\"font-weight: 400;\" aria-level=\"1\">Jan 21: 500 pounds of flour and 375 pounds of butter turned into 750 pie crusts (uncooked) and transferred to Baking on Jan 27<\/li>\r\n \t<li style=\"font-weight: 400;\" aria-level=\"1\">Jan 28: 500 pounds of flour and 375 pounds of butter dumped into the mixing process - 60% mixed as of Jan 31<\/li>\r\n<\/ul>\r\nIn our accounting records, we shouldn\u2019t transfer all of the direct material costs into baking. Instead, we should leave those unmixed raw materials in the Mixing Department work in process and only transfer out the costs attributed to the product transferred out.\r\n\r\nHere are the costs for the mixing department for January:\r\n<p style=\"padding-left: 30px;\">Direct materials:<\/p>\r\n<p style=\"padding-left: 60px;\">1 ton flour at $0.60 per pound = $1,200<\/p>\r\n<p style=\"padding-left: 60px;\">\u00be ton butter at $1.20 per pound = $1,800<\/p>\r\n<p style=\"padding-left: 90px;\">Total Direct Materials = $3,000<\/p>\r\n<p style=\"padding-left: 30px;\">Conversion costs:<\/p>\r\n<p style=\"padding-left: 60px;\">90 hours direct Labor at $20\/hr = $1,800<\/p>\r\n<p style=\"padding-left: 60px;\">3,600 machine hours at $0.40\/DMH = $1,440<\/p>\r\n<p style=\"padding-left: 90px;\">Total Conversion costs: $3,240<\/p>\r\n<p style=\"padding-left: 90px;\">Total costs that need to be allocated = $6,240<\/p>\r\nIf we just divided $6,240 by 3,000 crusts we would get $2.08 per crust, but recall that 750 of those shells are not done yet, so they should not get a full allocation of the conversion costs.\r\n\r\nWe completed and transferred out 3 batches of 750 crusts. That\u2019s 2,250 shells transferred to baking, but once again, we can\u2019t take total costs of $6,240 and allocate that cost over only the completed shells, because $750 of that $6,240 is direct materials in work-in-process, and some of the indirect costs should stay in the mixing department work-in-process as well.\r\n\r\nThis is where equivalent units come in.\r\n\r\nA unit that is 60% done is the equivalent of 6\/10 of a completed unit. So, the 750 pie crusts in process on Jan 31 would be, for conversion cost purposes, the equivalent of 450 completed units. For direct materials cost purposes, those units are 100% complete because all of the direct materials are added at the very beginning of the process.\r\n<div align=\"left\">\r\n<table class=\"fin-table acctstatement fw\">\r\n<tbody>\r\n<tr>\r\n<th scope=\"col\"><\/th>\r\n<th class=\"r\" scope=\"col\">Equivalent Units - used to allocate<\/th>\r\n<th scope=\"col\"><\/th>\r\n<th scope=\"col\"><\/th>\r\n<\/tr>\r\n<\/tbody>\r\n<tbody>\r\n<tr>\r\n<td class=\"r\"><span class=\"u-sr-only\">Date<\/span><\/td>\r\n<td class=\"r\">Direct Materials<\/td>\r\n<td class=\"r\">Direct Labor and Overhead<\/td>\r\n<td class=\"r\">Single LineStatus<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>3-Jan<\/td>\r\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span>\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 750<\/td>\r\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span>\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 750<\/td>\r\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span>completed and transferred to baking<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>15-Jan<\/td>\r\n<td class=\"r\">\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 750<\/td>\r\n<td class=\"r\">\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 750<\/td>\r\n<td class=\"r\">completed and transferred to baking<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>21-Jan<\/td>\r\n<td class=\"r\">\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 750<\/td>\r\n<td class=\"r\">\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 750<\/td>\r\n<td class=\"r\">completed and transferred to baking<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>28-Jan<\/td>\r\n<td class=\"r\">\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 750<\/td>\r\n<td class=\"r\">\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 450<\/td>\r\n<td class=\"r\">mixing department work-in-process<\/td>\r\n<\/tr>\r\n<tr>\r\n<td><\/td>\r\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>3,000<span class=\"u-sr-only\">Double line<\/span><\/td>\r\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>2,700<span class=\"u-sr-only\">Double line<\/span><\/td>\r\n<td><\/td>\r\n<\/tr>\r\n<\/tbody>\r\n<\/table>\r\n<\/div>\r\n&nbsp;\r\n\r\nAgain, the 750 units in work-in-process are 100% complete as to direct materials and 60% complete as to other costs, so the EUs are:\r\n\r\n750 * 1.00 = 750 equivalents units for direct materials allocation\r\n\r\n750 * 0.60 = 450 equivalent units for labor and other conversion costs allocation\r\n\r\nIn order to document our allocation of costs, we\u2019ll create a Department Production Cost Report in four steps:\r\n<h3>Step 1 - Calculate Units to Account For<\/h3>\r\nEstablish the total inventory in production by adding units started into production to beginning work in process (what was left only partially finished at the end of the prior month). For this example, we will assume that all pie shells in process were completed in December and the facility was shut down over the holiday break for the annual repairs, maintenance, and deep clean. So, the beginning inventory of zero plus the 3,000 pie shells worth of materials placed into production during the month gives us 3,000 total units to account for.\r\n<div align=\"left\">\r\n<table class=\"fin-table acctstatement fw\">\r\n<tbody>\r\n<tr>\r\n<th scope=\"col\">UNITS<\/th>\r\n<th class=\"r\" scope=\"col\">Physical Units<\/th>\r\n<\/tr>\r\n<\/tbody>\r\n<tbody>\r\n<tr>\r\n<td colspan=\"1\"><span class=\"u-sr-only\">Subcategory, <\/span><strong>Units to account for:<\/strong><\/td>\r\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span><\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Beginning work-in-process<\/td>\r\n<td class=\"r\">0<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Started in production<\/td>\r\n<td class=\"r\">3,000<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>Total units to account for<\/td>\r\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>3,000<span class=\"u-sr-only\">Double line<\/span><\/td>\r\n<\/tr>\r\n<\/tbody>\r\n<\/table>\r\n&nbsp;\r\n\r\n<\/div>\r\n<h3>Step 2 - Calculate Units Accounted For<\/h3>\r\nThe units are then broken down into two categories: direct materials and conversion costs. Units that have been transferred out are 100% complete, so the Equivalent Units and the actual physical units are the same. However, unfinished units (work-in-process) in this department have to be converted to Equivalent Units. In this case, since materials are all added at the beginning (which may not always be the case), the Equivalent Units for Direct Materials is 100% of the actual units, but the Equivalent Units for the Conversion Costs allocation are 60% of actual units or 450 EUs.\r\n<div align=\"left\">\r\n<table class=\"fin-table acctstatement fw\">\r\n<tbody>\r\n<tr>\r\n<th class=\"r\" scope=\"col\"><\/th>\r\n<th class=\"r\" scope=\"col\"><\/th>\r\n<th class=\"r\" scope=\"col\">Equivalent Units<\/th>\r\n<th class=\"r\" scope=\"col\"><\/th>\r\n<\/tr>\r\n<\/tbody>\r\n<tbody>\r\n<tr>\r\n<td><\/td>\r\n<td class=\"r\">Physical Units<\/td>\r\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span>Direct Materials<\/td>\r\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span>Conversion Costs<\/td>\r\n<\/tr>\r\n<tr>\r\n<td colspan=\"1\"><span class=\"u-sr-only\">Subcategory, <\/span><strong>Units accounted for:<\/strong><\/td>\r\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span><\/td>\r\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span><\/td>\r\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span><\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Completed and transferred out<\/td>\r\n<td class=\"r\">2,250<\/td>\r\n<td class=\"r\">2,250<\/td>\r\n<td class=\"r\">2,250<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Ending work-in-process<\/td>\r\n<td class=\"r\">750<\/td>\r\n<td class=\"r\">750<\/td>\r\n<td class=\"r\">450<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>Total units accounted for<\/td>\r\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>3,000<span class=\"u-sr-only\">Double line<\/span><\/td>\r\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>3,000<span class=\"u-sr-only\">Double line<\/span><\/td>\r\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>2,700<span class=\"u-sr-only\">Double line<\/span><\/td>\r\n<\/tr>\r\n<\/tbody>\r\n<\/table>\r\n&nbsp;\r\n\r\n<\/div>\r\nTotal Equivalent Units (also called Equivalent Units of Production or EUPs) is 3,000 for Direct Materials but only 2,700 for Conversion Costs.\r\n<h3>Step 3 - Divide Total Costs by Equivalent Units<\/h3>\r\nFrom the accounting records, we see that total direct materials transferred in to the mixing department was $3,000, and direct labor and manufacturing overhead totaled $3,240. We divided those amounts by the related Equivalent Units to come up with a cost per EU.\r\n<div align=\"left\">\r\n<table class=\"fin-table acctstatement fw\">\r\n<tbody>\r\n<tr>\r\n<th class=\"r\" scope=\"col\"><\/th>\r\n<th class=\"r\" scope=\"col\">Direct Materials<\/th>\r\n<th class=\"r\" scope=\"col\">Conversion Costs<\/th>\r\n<th class=\"r\" scope=\"col\">Total Costs<\/th>\r\n<\/tr>\r\n<\/tbody>\r\n<tbody>\r\n<tr>\r\n<td colspan=\"4\"><span class=\"u-sr-only\">Subcategory, <\/span><strong>Costs to account for:<\/strong><\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Beginning work-in-process<\/td>\r\n<td class=\"r\">$ \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 -<\/td>\r\n<td class=\"r\">$\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 -<\/td>\r\n<td class=\"r\">$ \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 -<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Costs added during the period<\/td>\r\n<td class=\"r\">$ \u00a0 \u00a0 3,000<\/td>\r\n<td class=\"r\">$ \u00a0 3,240<\/td>\r\n<td class=\"r\">$\u00a0 6,240<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>Total costs to account for<\/td>\r\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span>$ \u00a0 \u00a0 3,000<\/td>\r\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span>$\u00a0 \u00a0 3,240<\/td>\r\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>$ \u00a0 6,240<span class=\"u-sr-only\">Double line<\/span><\/td>\r\n<\/tr>\r\n<tr>\r\n<td>Divided by: Total EUP<\/td>\r\n<td class=\"r\">\u00a0 \u00a0 3,000<\/td>\r\n<td class=\"r\">\u00a0 2,700<\/td>\r\n<td class=\"r\"><\/td>\r\n<\/tr>\r\n<tr>\r\n<td>Cost per equivalent unit<\/td>\r\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>$\u00a0 \u00a0 \u00a0 1.00<span class=\"u-sr-only\">Double line<\/span><\/td>\r\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>$\u00a0 \u00a0 1.20<span class=\"u-sr-only\">Double line<\/span><\/td>\r\n<td class=\"r\"><\/td>\r\n<\/tr>\r\n<\/tbody>\r\n<\/table>\r\n&nbsp;\r\n\r\n<\/div>\r\n<h3>Step 4 - Allocate Costs Based on Equivalent Units<\/h3>\r\nRefer back to step 2:\r\n<table class=\"fin-table acctstatement fw\">\r\n<tbody>\r\n<tr>\r\n<th class=\"r\" scope=\"col\"><\/th>\r\n<th class=\"r\" scope=\"col\"><\/th>\r\n<th class=\"r\" scope=\"col\">Equivalent Units<\/th>\r\n<th class=\"r\" scope=\"col\"><\/th>\r\n<\/tr>\r\n<\/tbody>\r\n<tbody>\r\n<tr>\r\n<td><\/td>\r\n<td class=\"r\">Physical Units<\/td>\r\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span>Direct Materials<\/td>\r\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span>Conversion Costs<\/td>\r\n<\/tr>\r\n<tr>\r\n<td colspan=\"1\"><span class=\"u-sr-only\">Subcategory, <\/span><strong>Units accounted for:<\/strong><\/td>\r\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span><\/td>\r\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span><\/td>\r\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span><\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Completed and transferred out<\/td>\r\n<td class=\"r\">2,250<\/td>\r\n<td class=\"r\">2,250<\/td>\r\n<td class=\"r\">2,250<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Ending work-in-process<\/td>\r\n<td class=\"r\">750<\/td>\r\n<td class=\"r\">750<\/td>\r\n<td class=\"r\">450<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>Total units accounted for<\/td>\r\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>3,000<span class=\"u-sr-only\">Double line<\/span><\/td>\r\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>3,000<span class=\"u-sr-only\">Double line<\/span><\/td>\r\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>2,700<span class=\"u-sr-only\">Double line<\/span><\/td>\r\n<\/tr>\r\n<\/tbody>\r\n<\/table>\r\n<div align=\"left\"><\/div>\r\n<div align=\"left\"><\/div>\r\nMultiply the cost per equivalent unit by the number of equivalent units for each category of units accounted for.\r\n<div align=\"left\">\r\n<table class=\"fin-table acctstatement fw\">\r\n<tbody>\r\n<tr>\r\n<th class=\"r\" scope=\"col\"><\/th>\r\n<th class=\"r\" scope=\"col\">Direct Materials<\/th>\r\n<th class=\"r\" scope=\"col\">Conversion Costs<\/th>\r\n<th class=\"r\" scope=\"col\">Total Costs<\/th>\r\n<\/tr>\r\n<\/tbody>\r\n<tbody>\r\n<tr>\r\n<td>Equivalent units completed and transferred out<\/td>\r\n<td class=\"r\">2,250<\/td>\r\n<td class=\"r\">2,250<\/td>\r\n<td><\/td>\r\n<\/tr>\r\n<tr>\r\n<td>Cost per equivalent unit<\/td>\r\n<td class=\"r\">$ \u00a0 \u00a0 \u00a0 \u00a0 1.00<\/td>\r\n<td class=\"r\">$ \u00a0 \u00a0 \u00a0 1.20<\/td>\r\n<td><\/td>\r\n<\/tr>\r\n<tr>\r\n<td>Cost allocated to completed units<\/td>\r\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>$ \u00a0 \u00a0 \u00a0 2,250<span class=\"u-sr-only\">Double line<\/span><\/td>\r\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>$ \u00a0 \u00a0 2,700<span class=\"u-sr-only\">Double line<\/span><\/td>\r\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>$ \u00a0 4,950<span class=\"u-sr-only\">Double line<\/span><\/td>\r\n<\/tr>\r\n<tr>\r\n<td><\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<\/tr>\r\n<tr>\r\n<td>Equivalent units not yet completed<\/td>\r\n<td class=\"r\">750<\/td>\r\n<td class=\"r\">450<\/td>\r\n<td class=\"r\"><\/td>\r\n<\/tr>\r\n<tr>\r\n<td>Cost per equivalent unit<\/td>\r\n<td class=\"r\">$ \u00a0 \u00a0 \u00a0 1.00<\/td>\r\n<td class=\"r\">$ \u00a0 \u00a0 \u00a0 1.20<\/td>\r\n<td><\/td>\r\n<\/tr>\r\n<tr>\r\n<td>Cost allocated to work-in-process<\/td>\r\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>$ \u00a0 \u00a0 \u00a0 750<span class=\"u-sr-only\">Double line<\/span><\/td>\r\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>$\u00a0 \u00a0 \u00a0 540<span class=\"u-sr-only\">Double line<\/span><\/td>\r\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>$ \u00a0 1,290<span class=\"u-sr-only\">Double line<\/span><\/td>\r\n<\/tr>\r\n<\/tbody>\r\n<\/table>\r\n&nbsp;\r\n\r\n<\/div>\r\n<h3>Complete the Production Report<\/h3>\r\n<div align=\"left\">\r\n<table class=\"fin-table acctstatement fw\"><caption>Dad's Perfect Pies\r\nProduction Cost Report - Mixing Department\r\nMonth Ended January 31<\/caption>\r\n<tbody>\r\n<tr>\r\n<th class=\"r\" scope=\"col\"><\/th>\r\n<th class=\"r\" scope=\"col\"><\/th>\r\n<th class=\"r\" scope=\"col\">Equivalent Units<\/th>\r\n<th class=\"r\" scope=\"col\"><\/th>\r\n<\/tr>\r\n<\/tbody>\r\n<tbody>\r\n<tr>\r\n<td><strong>UNITS<\/strong><\/td>\r\n<td class=\"r\">Physical Units<\/td>\r\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span>Direct Materials<\/td>\r\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span>Conversion Costs<\/td>\r\n<td><\/td>\r\n<\/tr>\r\n<tr>\r\n<td colspan=\"1\"><span class=\"u-sr-only\">Subcategory, <\/span><strong>Units to account for:<\/strong><\/td>\r\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span><\/td>\r\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span><\/td>\r\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span><\/td>\r\n<td><\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Beginning work-in-process<\/td>\r\n<td class=\"r\">0<\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Started in production<\/td>\r\n<td class=\"r\">3,000<\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<\/tr>\r\n<tr>\r\n<td>Total units to account for<\/td>\r\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>3,000<span class=\"u-sr-only\">Double line<\/span><\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<\/tr>\r\n<tr>\r\n<td><\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<\/tr>\r\n<tr>\r\n<td colspan=\"5\"><span class=\"u-sr-only\">Subcategory, <\/span><strong>Units accounted for:<\/strong><\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Completed and transferred out<\/td>\r\n<td class=\"r\">2,250<\/td>\r\n<td class=\"r\">2,250<\/td>\r\n<td class=\"r\">2,250<\/td>\r\n<td><\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Ending work-in-process<\/td>\r\n<td class=\"r\">750<\/td>\r\n<td class=\"r\">750<\/td>\r\n<td class=\"r\">450<\/td>\r\n<td><\/td>\r\n<\/tr>\r\n<tr>\r\n<td>Total units accounted for<\/td>\r\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>3,000<span class=\"u-sr-only\">Double line<\/span><\/td>\r\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>3,000<span class=\"u-sr-only\">Double line<\/span><\/td>\r\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>2,700<span class=\"u-sr-only\">Double line<\/span><\/td>\r\n<td><\/td>\r\n<\/tr>\r\n<tr>\r\n<td><\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<\/tr>\r\n<tr>\r\n<td><strong>COSTS<\/strong><\/td>\r\n<td><\/td>\r\n<td class=\"r\">Direct Materials<\/td>\r\n<td class=\"r\">Conversion Costs<\/td>\r\n<td class=\"r\">Total Costs<\/td>\r\n<\/tr>\r\n<tr>\r\n<td colspan=\"5\"><span class=\"u-sr-only\">Subcategory, <\/span><strong>Costs to account for:<\/strong><\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Beginning work-in-process<\/td>\r\n<td><\/td>\r\n<td class=\"r\">$ \u00a0 \u00a0 \u00a0-<\/td>\r\n<td class=\"r\">$\u00a0 \u00a0 \u00a0 -<\/td>\r\n<td class=\"r\">$ \u00a0 \u00a0 \u00a0-<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Costs added during the period<\/td>\r\n<td><\/td>\r\n<td class=\"r\">$ \u00a0 3,000<\/td>\r\n<td class=\"r\">$ \u00a0 3,240<\/td>\r\n<td class=\"r\">$ 6,240<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>Total costs to account for<\/td>\r\n<td><\/td>\r\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span>$ \u00a0 3,000<\/td>\r\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span>$\u00a0 \u00a0 3,240<\/td>\r\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>$ 6,240<span class=\"u-sr-only\">Double line<\/span><\/td>\r\n<\/tr>\r\n<tr>\r\n<td>Divided by: Total EUP<\/td>\r\n<td><\/td>\r\n<td class=\"r\">\u00a0 3,000<\/td>\r\n<td class=\"r\">\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 2,700<\/td>\r\n<td><\/td>\r\n<\/tr>\r\n<tr>\r\n<td>Cost per equivalent unit<\/td>\r\n<td><\/td>\r\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>$ 1.00<span class=\"u-sr-only\">Double line<\/span><\/td>\r\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>$\u00a0 1.20<span class=\"u-sr-only\">Double line<\/span><\/td>\r\n<td><\/td>\r\n<\/tr>\r\n<tr>\r\n<td><\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<\/tr>\r\n<tr>\r\n<td colspan=\"5\"><span class=\"u-sr-only\">Subcategory, <\/span><strong>Costs accounted for:<\/strong><\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Completed and transferred out<\/td>\r\n<td><\/td>\r\n<td class=\"r\">$\u00a0 2,250<\/td>\r\n<td class=\"r\">$\u00a0 2,700<\/td>\r\n<td class=\"r\">$\u00a0 4,950<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Ending work-in-process<\/td>\r\n<td><\/td>\r\n<td class=\"r\">$ \u00a0 \u00a0 750<\/td>\r\n<td class=\"r\">$ \u00a0 \u00a0 540<\/td>\r\n<td class=\"r\">$\u00a0 1,290<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>Total costs accounted for<\/td>\r\n<td><\/td>\r\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>$\u00a0 3,000<span class=\"u-sr-only\">Double line<\/span><\/td>\r\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>$ \u00a0 3,240<span class=\"u-sr-only\">Double line<\/span><\/td>\r\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>$\u00a0 6,240<span class=\"u-sr-only\">Double line<\/span><\/td>\r\n<\/tr>\r\n<\/tbody>\r\n<\/table>\r\n&nbsp;\r\n\r\n<\/div>\r\nIn summary, (1) identify total units for the department, (2) calculate equivalent units for both completed items (transferred out) and uncompleted (work-in-process), (3) divide total costs by total equivalent units to get an allocation rate, (4) multiply the rate from step 3 by the equivalent units in order to allocate total costs to completed items and work-in process.\r\n\r\nBefore we look at the next department in line, check your understanding of how to allocate process costs to the first department using a weighted average method.\r\n<div class=\"textbox tryit\">\r\n<h3>Practice Question<\/h3>\r\n[ohm_question hide_question_numbers=1]219050[\/ohm_question]\r\n\r\n<\/div>","rendered":"<div class=\"textbox learning-objectives\">\n<h3>Learning Outcomes<\/h3>\n<ul>\n<li>Prepare a production cost report for the first stage of a multi-step process using the weighted-average method<\/li>\n<\/ul>\n<\/div>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"alignright wp-image-1715 size-thumbnail\" src=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images\/wp-content\/uploads\/sites\/5469\/2021\/04\/14231819\/nathan-dumlao-m-dhIU1gJHM-unsplash-150x150.jpg\" alt=\"pie crust\" width=\"150\" height=\"150\" \/><\/p>\n<p>There are two basic methods used to allocate costs in process costing: weighted average and First-in, First-out (FIFO).<\/p>\n<p>For now, we\u2019ll focus on the weighted average method which assumes that products and therefore costs, flow through the process like paint or beverages. Later, once you are comfortable with the basic idea of the process costing production report, we\u2019ll take a look at the FIFO method which is based on the assumption that the work-in-process sitting in the department at the end of the month is finished at the beginning of the next month before anything else is started.<\/p>\n<h2>Allocating Costs to Products in the First Department of a Multi-Step Process<\/h2>\n<p>What we are looking at here is a multi-step process, such as creating food products. In our Dad\u2019s Perfect Pie (crusts) example, the 3 steps to get from raw materials (flour and butter) to a finished product probably look like this, and so these would be our cost accounting departments as well:<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-1710 size-full\" src=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images\/wp-content\/uploads\/sites\/5469\/2021\/01\/14230431\/Screen-Shot-2021-05-14-at-3.59.59-PM.png\" alt=\"A graphic showing the progression from left to right from the Mixing Department to the Baking Department to the Packaging Department to Finished Goods. Under each department is shown the formula Direct Materials + Direct Labor + Factory Overhead (for that department) = Work in Process (for that department). Under Finished Goods, it states Total cost of the batch includes work in process costs from all three departments.\" width=\"953\" height=\"275\" \/><\/p>\n<p>Let\u2019s assume a ton of flour and \u00be ton of butter comes into the Mixing Department on Jan 3rd. A ton of flour makes 3,000 pie crusts. It is mixed up, rolled out, and cut into shape by machine, so there are minimal direct labor costs and some indirect factory overhead costs (such as depreciation, rent, insurance, indirect labor) added to the direct materials costs.<\/p>\n<p>Here is how the production schedule looked:<\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\">Jan 6: 500 pounds of flour and 375 pounds of butter turned into 750 pie crusts (uncooked) and transferred to Baking on Jan 14<\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\">Jan 15: 500 pounds of flour and 375 pounds of butter turned into 750 pie crusts (uncooked) and transferred to Baking on Jan 20<\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\">Jan 21: 500 pounds of flour and 375 pounds of butter turned into 750 pie crusts (uncooked) and transferred to Baking on Jan 27<\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\">Jan 28: 500 pounds of flour and 375 pounds of butter dumped into the mixing process &#8211; 60% mixed as of Jan 31<\/li>\n<\/ul>\n<p>In our accounting records, we shouldn\u2019t transfer all of the direct material costs into baking. Instead, we should leave those unmixed raw materials in the Mixing Department work in process and only transfer out the costs attributed to the product transferred out.<\/p>\n<p>Here are the costs for the mixing department for January:<\/p>\n<p style=\"padding-left: 30px;\">Direct materials:<\/p>\n<p style=\"padding-left: 60px;\">1 ton flour at $0.60 per pound = $1,200<\/p>\n<p style=\"padding-left: 60px;\">\u00be ton butter at $1.20 per pound = $1,800<\/p>\n<p style=\"padding-left: 90px;\">Total Direct Materials = $3,000<\/p>\n<p style=\"padding-left: 30px;\">Conversion costs:<\/p>\n<p style=\"padding-left: 60px;\">90 hours direct Labor at $20\/hr = $1,800<\/p>\n<p style=\"padding-left: 60px;\">3,600 machine hours at $0.40\/DMH = $1,440<\/p>\n<p style=\"padding-left: 90px;\">Total Conversion costs: $3,240<\/p>\n<p style=\"padding-left: 90px;\">Total costs that need to be allocated = $6,240<\/p>\n<p>If we just divided $6,240 by 3,000 crusts we would get $2.08 per crust, but recall that 750 of those shells are not done yet, so they should not get a full allocation of the conversion costs.<\/p>\n<p>We completed and transferred out 3 batches of 750 crusts. That\u2019s 2,250 shells transferred to baking, but once again, we can\u2019t take total costs of $6,240 and allocate that cost over only the completed shells, because $750 of that $6,240 is direct materials in work-in-process, and some of the indirect costs should stay in the mixing department work-in-process as well.<\/p>\n<p>This is where equivalent units come in.<\/p>\n<p>A unit that is 60% done is the equivalent of 6\/10 of a completed unit. So, the 750 pie crusts in process on Jan 31 would be, for conversion cost purposes, the equivalent of 450 completed units. For direct materials cost purposes, those units are 100% complete because all of the direct materials are added at the very beginning of the process.<\/p>\n<div style=\"text-align: left;\">\n<table class=\"fin-table acctstatement fw\">\n<tbody>\n<tr>\n<th scope=\"col\"><\/th>\n<th class=\"r\" scope=\"col\">Equivalent Units &#8211; used to allocate<\/th>\n<th scope=\"col\"><\/th>\n<th scope=\"col\"><\/th>\n<\/tr>\n<\/tbody>\n<tbody>\n<tr>\n<td class=\"r\"><span class=\"u-sr-only\">Date<\/span><\/td>\n<td class=\"r\">Direct Materials<\/td>\n<td class=\"r\">Direct Labor and Overhead<\/td>\n<td class=\"r\">Single LineStatus<\/td>\n<\/tr>\n<tr>\n<td>3-Jan<\/td>\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span>\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 750<\/td>\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span>\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 750<\/td>\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span>completed and transferred to baking<\/td>\n<\/tr>\n<tr>\n<td>15-Jan<\/td>\n<td class=\"r\">\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 750<\/td>\n<td class=\"r\">\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 750<\/td>\n<td class=\"r\">completed and transferred to baking<\/td>\n<\/tr>\n<tr>\n<td>21-Jan<\/td>\n<td class=\"r\">\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 750<\/td>\n<td class=\"r\">\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 750<\/td>\n<td class=\"r\">completed and transferred to baking<\/td>\n<\/tr>\n<tr>\n<td>28-Jan<\/td>\n<td class=\"r\">\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 750<\/td>\n<td class=\"r\">\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 450<\/td>\n<td class=\"r\">mixing department work-in-process<\/td>\n<\/tr>\n<tr>\n<td><\/td>\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>3,000<span class=\"u-sr-only\">Double line<\/span><\/td>\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>2,700<span class=\"u-sr-only\">Double line<\/span><\/td>\n<td><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/div>\n<p>&nbsp;<\/p>\n<p>Again, the 750 units in work-in-process are 100% complete as to direct materials and 60% complete as to other costs, so the EUs are:<\/p>\n<p>750 * 1.00 = 750 equivalents units for direct materials allocation<\/p>\n<p>750 * 0.60 = 450 equivalent units for labor and other conversion costs allocation<\/p>\n<p>In order to document our allocation of costs, we\u2019ll create a Department Production Cost Report in four steps:<\/p>\n<h3>Step 1 &#8211; Calculate Units to Account For<\/h3>\n<p>Establish the total inventory in production by adding units started into production to beginning work in process (what was left only partially finished at the end of the prior month). For this example, we will assume that all pie shells in process were completed in December and the facility was shut down over the holiday break for the annual repairs, maintenance, and deep clean. So, the beginning inventory of zero plus the 3,000 pie shells worth of materials placed into production during the month gives us 3,000 total units to account for.<\/p>\n<div style=\"text-align: left;\">\n<table class=\"fin-table acctstatement fw\">\n<tbody>\n<tr>\n<th scope=\"col\">UNITS<\/th>\n<th class=\"r\" scope=\"col\">Physical Units<\/th>\n<\/tr>\n<\/tbody>\n<tbody>\n<tr>\n<td colspan=\"1\"><span class=\"u-sr-only\">Subcategory, <\/span><strong>Units to account for:<\/strong><\/td>\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span><\/td>\n<\/tr>\n<tr>\n<td>\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Beginning work-in-process<\/td>\n<td class=\"r\">0<\/td>\n<\/tr>\n<tr>\n<td>\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Started in production<\/td>\n<td class=\"r\">3,000<\/td>\n<\/tr>\n<tr>\n<td>Total units to account for<\/td>\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>3,000<span class=\"u-sr-only\">Double line<\/span><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p>&nbsp;<\/p>\n<\/div>\n<h3>Step 2 &#8211; Calculate Units Accounted For<\/h3>\n<p>The units are then broken down into two categories: direct materials and conversion costs. Units that have been transferred out are 100% complete, so the Equivalent Units and the actual physical units are the same. However, unfinished units (work-in-process) in this department have to be converted to Equivalent Units. In this case, since materials are all added at the beginning (which may not always be the case), the Equivalent Units for Direct Materials is 100% of the actual units, but the Equivalent Units for the Conversion Costs allocation are 60% of actual units or 450 EUs.<\/p>\n<div style=\"text-align: left;\">\n<table class=\"fin-table acctstatement fw\">\n<tbody>\n<tr>\n<th class=\"r\" scope=\"col\"><\/th>\n<th class=\"r\" scope=\"col\"><\/th>\n<th class=\"r\" scope=\"col\">Equivalent Units<\/th>\n<th class=\"r\" scope=\"col\"><\/th>\n<\/tr>\n<\/tbody>\n<tbody>\n<tr>\n<td><\/td>\n<td class=\"r\">Physical Units<\/td>\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span>Direct Materials<\/td>\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span>Conversion Costs<\/td>\n<\/tr>\n<tr>\n<td colspan=\"1\"><span class=\"u-sr-only\">Subcategory, <\/span><strong>Units accounted for:<\/strong><\/td>\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span><\/td>\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span><\/td>\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span><\/td>\n<\/tr>\n<tr>\n<td>\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Completed and transferred out<\/td>\n<td class=\"r\">2,250<\/td>\n<td class=\"r\">2,250<\/td>\n<td class=\"r\">2,250<\/td>\n<\/tr>\n<tr>\n<td>\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Ending work-in-process<\/td>\n<td class=\"r\">750<\/td>\n<td class=\"r\">750<\/td>\n<td class=\"r\">450<\/td>\n<\/tr>\n<tr>\n<td>Total units accounted for<\/td>\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>3,000<span class=\"u-sr-only\">Double line<\/span><\/td>\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>3,000<span class=\"u-sr-only\">Double line<\/span><\/td>\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>2,700<span class=\"u-sr-only\">Double line<\/span><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p>&nbsp;<\/p>\n<\/div>\n<p>Total Equivalent Units (also called Equivalent Units of Production or EUPs) is 3,000 for Direct Materials but only 2,700 for Conversion Costs.<\/p>\n<h3>Step 3 &#8211; Divide Total Costs by Equivalent Units<\/h3>\n<p>From the accounting records, we see that total direct materials transferred in to the mixing department was $3,000, and direct labor and manufacturing overhead totaled $3,240. We divided those amounts by the related Equivalent Units to come up with a cost per EU.<\/p>\n<div style=\"text-align: left;\">\n<table class=\"fin-table acctstatement fw\">\n<tbody>\n<tr>\n<th class=\"r\" scope=\"col\"><\/th>\n<th class=\"r\" scope=\"col\">Direct Materials<\/th>\n<th class=\"r\" scope=\"col\">Conversion Costs<\/th>\n<th class=\"r\" scope=\"col\">Total Costs<\/th>\n<\/tr>\n<\/tbody>\n<tbody>\n<tr>\n<td colspan=\"4\"><span class=\"u-sr-only\">Subcategory, <\/span><strong>Costs to account for:<\/strong><\/td>\n<\/tr>\n<tr>\n<td>\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Beginning work-in-process<\/td>\n<td class=\"r\">$ \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 &#8211;<\/td>\n<td class=\"r\">$\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 &#8211;<\/td>\n<td class=\"r\">$ \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 &#8211;<\/td>\n<\/tr>\n<tr>\n<td>\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Costs added during the period<\/td>\n<td class=\"r\">$ \u00a0 \u00a0 3,000<\/td>\n<td class=\"r\">$ \u00a0 3,240<\/td>\n<td class=\"r\">$\u00a0 6,240<\/td>\n<\/tr>\n<tr>\n<td>Total costs to account for<\/td>\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span>$ \u00a0 \u00a0 3,000<\/td>\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span>$\u00a0 \u00a0 3,240<\/td>\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>$ \u00a0 6,240<span class=\"u-sr-only\">Double line<\/span><\/td>\n<\/tr>\n<tr>\n<td>Divided by: Total EUP<\/td>\n<td class=\"r\">\u00a0 \u00a0 3,000<\/td>\n<td class=\"r\">\u00a0 2,700<\/td>\n<td class=\"r\"><\/td>\n<\/tr>\n<tr>\n<td>Cost per equivalent unit<\/td>\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>$\u00a0 \u00a0 \u00a0 1.00<span class=\"u-sr-only\">Double line<\/span><\/td>\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>$\u00a0 \u00a0 1.20<span class=\"u-sr-only\">Double line<\/span><\/td>\n<td class=\"r\"><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p>&nbsp;<\/p>\n<\/div>\n<h3>Step 4 &#8211; Allocate Costs Based on Equivalent Units<\/h3>\n<p>Refer back to step 2:<\/p>\n<table class=\"fin-table acctstatement fw\">\n<tbody>\n<tr>\n<th class=\"r\" scope=\"col\"><\/th>\n<th class=\"r\" scope=\"col\"><\/th>\n<th class=\"r\" scope=\"col\">Equivalent Units<\/th>\n<th class=\"r\" scope=\"col\"><\/th>\n<\/tr>\n<\/tbody>\n<tbody>\n<tr>\n<td><\/td>\n<td class=\"r\">Physical Units<\/td>\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span>Direct Materials<\/td>\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span>Conversion Costs<\/td>\n<\/tr>\n<tr>\n<td colspan=\"1\"><span class=\"u-sr-only\">Subcategory, <\/span><strong>Units accounted for:<\/strong><\/td>\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span><\/td>\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span><\/td>\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span><\/td>\n<\/tr>\n<tr>\n<td>\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Completed and transferred out<\/td>\n<td class=\"r\">2,250<\/td>\n<td class=\"r\">2,250<\/td>\n<td class=\"r\">2,250<\/td>\n<\/tr>\n<tr>\n<td>\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Ending work-in-process<\/td>\n<td class=\"r\">750<\/td>\n<td class=\"r\">750<\/td>\n<td class=\"r\">450<\/td>\n<\/tr>\n<tr>\n<td>Total units accounted for<\/td>\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>3,000<span class=\"u-sr-only\">Double line<\/span><\/td>\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>3,000<span class=\"u-sr-only\">Double line<\/span><\/td>\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>2,700<span class=\"u-sr-only\">Double line<\/span><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<div style=\"text-align: left;\"><\/div>\n<div style=\"text-align: left;\"><\/div>\n<p>Multiply the cost per equivalent unit by the number of equivalent units for each category of units accounted for.<\/p>\n<div style=\"text-align: left;\">\n<table class=\"fin-table acctstatement fw\">\n<tbody>\n<tr>\n<th class=\"r\" scope=\"col\"><\/th>\n<th class=\"r\" scope=\"col\">Direct Materials<\/th>\n<th class=\"r\" scope=\"col\">Conversion Costs<\/th>\n<th class=\"r\" scope=\"col\">Total Costs<\/th>\n<\/tr>\n<\/tbody>\n<tbody>\n<tr>\n<td>Equivalent units completed and transferred out<\/td>\n<td class=\"r\">2,250<\/td>\n<td class=\"r\">2,250<\/td>\n<td><\/td>\n<\/tr>\n<tr>\n<td>Cost per equivalent unit<\/td>\n<td class=\"r\">$ \u00a0 \u00a0 \u00a0 \u00a0 1.00<\/td>\n<td class=\"r\">$ \u00a0 \u00a0 \u00a0 1.20<\/td>\n<td><\/td>\n<\/tr>\n<tr>\n<td>Cost allocated to completed units<\/td>\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>$ \u00a0 \u00a0 \u00a0 2,250<span class=\"u-sr-only\">Double line<\/span><\/td>\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>$ \u00a0 \u00a0 2,700<span class=\"u-sr-only\">Double line<\/span><\/td>\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>$ \u00a0 4,950<span class=\"u-sr-only\">Double line<\/span><\/td>\n<\/tr>\n<tr>\n<td><\/td>\n<td><\/td>\n<td><\/td>\n<td><\/td>\n<\/tr>\n<tr>\n<td>Equivalent units not yet completed<\/td>\n<td class=\"r\">750<\/td>\n<td class=\"r\">450<\/td>\n<td class=\"r\"><\/td>\n<\/tr>\n<tr>\n<td>Cost per equivalent unit<\/td>\n<td class=\"r\">$ \u00a0 \u00a0 \u00a0 1.00<\/td>\n<td class=\"r\">$ \u00a0 \u00a0 \u00a0 1.20<\/td>\n<td><\/td>\n<\/tr>\n<tr>\n<td>Cost allocated to work-in-process<\/td>\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>$ \u00a0 \u00a0 \u00a0 750<span class=\"u-sr-only\">Double line<\/span><\/td>\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>$\u00a0 \u00a0 \u00a0 540<span class=\"u-sr-only\">Double line<\/span><\/td>\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>$ \u00a0 1,290<span class=\"u-sr-only\">Double line<\/span><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p>&nbsp;<\/p>\n<\/div>\n<h3>Complete the Production Report<\/h3>\n<div style=\"text-align: left;\">\n<table class=\"fin-table acctstatement fw\">\n<caption>Dad&#8217;s Perfect Pies<br \/>\nProduction Cost Report &#8211; Mixing Department<br \/>\nMonth Ended January 31<\/caption>\n<tbody>\n<tr>\n<th class=\"r\" scope=\"col\"><\/th>\n<th class=\"r\" scope=\"col\"><\/th>\n<th class=\"r\" scope=\"col\">Equivalent Units<\/th>\n<th class=\"r\" scope=\"col\"><\/th>\n<\/tr>\n<\/tbody>\n<tbody>\n<tr>\n<td><strong>UNITS<\/strong><\/td>\n<td class=\"r\">Physical Units<\/td>\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span>Direct Materials<\/td>\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span>Conversion Costs<\/td>\n<td><\/td>\n<\/tr>\n<tr>\n<td colspan=\"1\"><span class=\"u-sr-only\">Subcategory, <\/span><strong>Units to account for:<\/strong><\/td>\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span><\/td>\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span><\/td>\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span><\/td>\n<td><\/td>\n<\/tr>\n<tr>\n<td>\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Beginning work-in-process<\/td>\n<td class=\"r\">0<\/td>\n<td><\/td>\n<td><\/td>\n<td><\/td>\n<\/tr>\n<tr>\n<td>\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Started in production<\/td>\n<td class=\"r\">3,000<\/td>\n<td><\/td>\n<td><\/td>\n<td><\/td>\n<\/tr>\n<tr>\n<td>Total units to account for<\/td>\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>3,000<span class=\"u-sr-only\">Double line<\/span><\/td>\n<td><\/td>\n<td><\/td>\n<td><\/td>\n<\/tr>\n<tr>\n<td><\/td>\n<td><\/td>\n<td><\/td>\n<td><\/td>\n<td><\/td>\n<\/tr>\n<tr>\n<td colspan=\"5\"><span class=\"u-sr-only\">Subcategory, <\/span><strong>Units accounted for:<\/strong><\/td>\n<\/tr>\n<tr>\n<td>\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Completed and transferred out<\/td>\n<td class=\"r\">2,250<\/td>\n<td class=\"r\">2,250<\/td>\n<td class=\"r\">2,250<\/td>\n<td><\/td>\n<\/tr>\n<tr>\n<td>\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Ending work-in-process<\/td>\n<td class=\"r\">750<\/td>\n<td class=\"r\">750<\/td>\n<td class=\"r\">450<\/td>\n<td><\/td>\n<\/tr>\n<tr>\n<td>Total units accounted for<\/td>\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>3,000<span class=\"u-sr-only\">Double line<\/span><\/td>\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>3,000<span class=\"u-sr-only\">Double line<\/span><\/td>\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>2,700<span class=\"u-sr-only\">Double line<\/span><\/td>\n<td><\/td>\n<\/tr>\n<tr>\n<td><\/td>\n<td><\/td>\n<td><\/td>\n<td><\/td>\n<td><\/td>\n<\/tr>\n<tr>\n<td><strong>COSTS<\/strong><\/td>\n<td><\/td>\n<td class=\"r\">Direct Materials<\/td>\n<td class=\"r\">Conversion Costs<\/td>\n<td class=\"r\">Total Costs<\/td>\n<\/tr>\n<tr>\n<td colspan=\"5\"><span class=\"u-sr-only\">Subcategory, <\/span><strong>Costs to account for:<\/strong><\/td>\n<\/tr>\n<tr>\n<td>\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Beginning work-in-process<\/td>\n<td><\/td>\n<td class=\"r\">$ \u00a0 \u00a0 \u00a0&#8211;<\/td>\n<td class=\"r\">$\u00a0 \u00a0 \u00a0 &#8211;<\/td>\n<td class=\"r\">$ \u00a0 \u00a0 \u00a0&#8211;<\/td>\n<\/tr>\n<tr>\n<td>\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Costs added during the period<\/td>\n<td><\/td>\n<td class=\"r\">$ \u00a0 3,000<\/td>\n<td class=\"r\">$ \u00a0 3,240<\/td>\n<td class=\"r\">$ 6,240<\/td>\n<\/tr>\n<tr>\n<td>Total costs to account for<\/td>\n<td><\/td>\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span>$ \u00a0 3,000<\/td>\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single Line<\/span>$\u00a0 \u00a0 3,240<\/td>\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>$ 6,240<span class=\"u-sr-only\">Double line<\/span><\/td>\n<\/tr>\n<tr>\n<td>Divided by: Total EUP<\/td>\n<td><\/td>\n<td class=\"r\">\u00a0 3,000<\/td>\n<td class=\"r\">\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 2,700<\/td>\n<td><\/td>\n<\/tr>\n<tr>\n<td>Cost per equivalent unit<\/td>\n<td><\/td>\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>$ 1.00<span class=\"u-sr-only\">Double line<\/span><\/td>\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>$\u00a0 1.20<span class=\"u-sr-only\">Double line<\/span><\/td>\n<td><\/td>\n<\/tr>\n<tr>\n<td><\/td>\n<td><\/td>\n<td><\/td>\n<td><\/td>\n<td><\/td>\n<\/tr>\n<tr>\n<td colspan=\"5\"><span class=\"u-sr-only\">Subcategory, <\/span><strong>Costs accounted for:<\/strong><\/td>\n<\/tr>\n<tr>\n<td>\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Completed and transferred out<\/td>\n<td><\/td>\n<td class=\"r\">$\u00a0 2,250<\/td>\n<td class=\"r\">$\u00a0 2,700<\/td>\n<td class=\"r\">$\u00a0 4,950<\/td>\n<\/tr>\n<tr>\n<td>\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Ending work-in-process<\/td>\n<td><\/td>\n<td class=\"r\">$ \u00a0 \u00a0 750<\/td>\n<td class=\"r\">$ \u00a0 \u00a0 540<\/td>\n<td class=\"r\">$\u00a0 1,290<\/td>\n<\/tr>\n<tr>\n<td>Total costs accounted for<\/td>\n<td><\/td>\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>$\u00a0 3,000<span class=\"u-sr-only\">Double line<\/span><\/td>\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>$ \u00a0 3,240<span class=\"u-sr-only\">Double line<\/span><\/td>\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single Line<\/span>$\u00a0 6,240<span class=\"u-sr-only\">Double line<\/span><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p>&nbsp;<\/p>\n<\/div>\n<p>In summary, (1) identify total units for the department, (2) calculate equivalent units for both completed items (transferred out) and uncompleted (work-in-process), (3) divide total costs by total equivalent units to get an allocation rate, (4) multiply the rate from step 3 by the equivalent units in order to allocate total costs to completed items and work-in process.<\/p>\n<p>Before we look at the next department in line, check your understanding of how to allocate process costs to the first department using a weighted average method.<\/p>\n<div class=\"textbox tryit\">\n<h3>Practice Question<\/h3>\n<p><iframe loading=\"lazy\" id=\"ohm219050\" class=\"resizable\" src=\"https:\/\/ohm.lumenlearning.com\/multiembedq.php?id=219050&theme=oea&iframe_resize_id=ohm219050\" width=\"100%\" height=\"150\"><\/iframe><\/p>\n<\/div>\n\n\t\t\t <section class=\"citations-section\" role=\"contentinfo\">\n\t\t\t <h3>Candela Citations<\/h3>\n\t\t\t\t\t <div>\n\t\t\t\t\t\t <div id=\"citation-list-923\">\n\t\t\t\t\t\t\t <div class=\"licensing\"><div class=\"license-attribution-dropdown-subheading\">CC licensed content, Original<\/div><ul class=\"citation-list\"><li>Production Report - First Department - Weighted Average. <strong>Authored by<\/strong>: Joseph Cooke. <strong>Provided by<\/strong>: Lumen Learning. <strong>License<\/strong>: <em><a target=\"_blank\" rel=\"license\" href=\"https:\/\/creativecommons.org\/licenses\/by\/4.0\/\">CC BY: Attribution<\/a><\/em><\/li><\/ul><div class=\"license-attribution-dropdown-subheading\">CC licensed content, Shared previously<\/div><ul class=\"citation-list\"><li>Pie crust. <strong>Provided by<\/strong>: Unsplash. <strong>Located at<\/strong>: <a target=\"_blank\" href=\"https:\/\/unsplash.com\/photos\/m-dhIU1gJHM\">https:\/\/unsplash.com\/photos\/m-dhIU1gJHM<\/a>. <strong>License<\/strong>: <em><a target=\"_blank\" rel=\"license\" href=\"https:\/\/creativecommons.org\/about\/cc0\">CC0: No Rights Reserved<\/a><\/em><\/li><\/ul><\/div>\n\t\t\t\t\t\t <\/div>\n\t\t\t\t\t <\/div>\n\t\t\t <\/section>","protected":false},"author":364389,"menu_order":7,"template":"","meta":{"_candela_citation":"[{\"type\":\"original\",\"description\":\"Production Report - First Department - Weighted Average\",\"author\":\"Joseph Cooke\",\"organization\":\"Lumen Learning\",\"url\":\"\",\"project\":\"\",\"license\":\"cc-by\",\"license_terms\":\"\"},{\"type\":\"cc\",\"description\":\"Pie crust\",\"author\":\"\",\"organization\":\"Unsplash\",\"url\":\"https:\/\/unsplash.com\/photos\/m-dhIU1gJHM\",\"project\":\"\",\"license\":\"cc0\",\"license_terms\":\"\"}]","CANDELA_OUTCOMES_GUID":"","pb_show_title":"on","pb_short_title":"","pb_subtitle":"","pb_authors":[],"pb_section_license":""},"chapter-type":[],"contributor":[],"license":[],"class_list":["post-923","chapter","type-chapter","status-publish","hentry"],"part":31,"_links":{"self":[{"href":"https:\/\/courses.lumenlearning.com\/suny-clinton-managerialaccounting\/wp-json\/pressbooks\/v2\/chapters\/923","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/courses.lumenlearning.com\/suny-clinton-managerialaccounting\/wp-json\/pressbooks\/v2\/chapters"}],"about":[{"href":"https:\/\/courses.lumenlearning.com\/suny-clinton-managerialaccounting\/wp-json\/wp\/v2\/types\/chapter"}],"author":[{"embeddable":true,"href":"https:\/\/courses.lumenlearning.com\/suny-clinton-managerialaccounting\/wp-json\/wp\/v2\/users\/364389"}],"version-history":[{"count":10,"href":"https:\/\/courses.lumenlearning.com\/suny-clinton-managerialaccounting\/wp-json\/pressbooks\/v2\/chapters\/923\/revisions"}],"predecessor-version":[{"id":1989,"href":"https:\/\/courses.lumenlearning.com\/suny-clinton-managerialaccounting\/wp-json\/pressbooks\/v2\/chapters\/923\/revisions\/1989"}],"part":[{"href":"https:\/\/courses.lumenlearning.com\/suny-clinton-managerialaccounting\/wp-json\/pressbooks\/v2\/parts\/31"}],"metadata":[{"href":"https:\/\/courses.lumenlearning.com\/suny-clinton-managerialaccounting\/wp-json\/pressbooks\/v2\/chapters\/923\/metadata\/"}],"wp:attachment":[{"href":"https:\/\/courses.lumenlearning.com\/suny-clinton-managerialaccounting\/wp-json\/wp\/v2\/media?parent=923"}],"wp:term":[{"taxonomy":"chapter-type","embeddable":true,"href":"https:\/\/courses.lumenlearning.com\/suny-clinton-managerialaccounting\/wp-json\/pressbooks\/v2\/chapter-type?post=923"},{"taxonomy":"contributor","embeddable":true,"href":"https:\/\/courses.lumenlearning.com\/suny-clinton-managerialaccounting\/wp-json\/wp\/v2\/contributor?post=923"},{"taxonomy":"license","embeddable":true,"href":"https:\/\/courses.lumenlearning.com\/suny-clinton-managerialaccounting\/wp-json\/wp\/v2\/license?post=923"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}