1. Calculate COGM and WIP ending inventory for the following scenarios #2 & #3 (part #1 is done) Scenario #1: First month (with NO beginning WIP inventory) Assume Materials are added at the beginning, Conversion is added evenly. Physical Units DM % WIP, Beginning Started and finished WIP, Ending 0 0% Conversion % 0% 1 100% 100% 1 100% 60% DM Conversion Beginning WIP (May 1) $0 $0 Cost added during May $100 $160 We started two units in May. Unit #1, we spent $50 material cost & $100 conversion cost and unit #1 is finished. Unit #2: we spent $50 material cost & $60 conversion cost (60% completed), it is our WIP ending inventory. WIP beginning $0 Unit #1: DM $50 $ ??? Unit #1: to Finished Goods Unit #1: CC $100 Unit #2: DM $50 Unit #2: CC $60 WIP ending Inventory: Unit #2 $??? Note: Process costing is used for mass production of identical units such as books and pens. To illustrate the concept, we will use small production volume in this exercise so that you can track material and conversion costs for each unit. But keep in mind, normally we don't track cost for each unit for process costing. Instead we focus on unit cost (=Total costs units of output). $150 Q1: use weighted-average method to calculate COGM (i.e., units completed to FG). $150 Q2: use weighted-average method to calculate the value of WIP ending inventory __$110 Q3: use FIFO method to calculate COGM (i.e., units completed to FG) Q4: use FIFO method to calculate the value of WIP ending inventory Q5: Do we have different results when we use WA versus FIFO? $110 When beginning WIP = 0, WA and FIFO give us the same results. Step 1: Units to be accounted for: Equivalent finished units Physical units Materials Costs Conversion Costs % EU % EU WIP, Beginning Started and finished 1 100% 1 100% 1 WIP, Ending 1 100% 1 60% 1 Step 2: Cost to be accounted for: Materials Costs Conversion Costs $0 $0 $100 $160 Prior period costs (related to WIP, Beginning) Current period costs Weighted-Average Total Costs (current & prior periods) Total Units (current & prior periods) Unit Cost (current & prior periods) Materials Conversion $100 $160 2 2 $50.00 $100.00 Materials Conversion Total Total transferred to finished goods WIP, Ending $50 $100 $150 $50 $60 $110 Total costs accounted for $260 FIFO Total Costs (current period only) Total Units (current period only) Unit Cost (current period only) Materials Conversion $100 $160 2 2 $50.00 $100.00 Units transferred out this period Materials Conversion Total Beginning inventory (prior period costs) $0 $0 $0 Cost to complete beginning inventory this period $0 $0 $0 Units started and finished $50 $100 $150 Total transferred to finished goods $150 WIP, Ending Materials Conversion Total $50 $60 $110 Total costs of units in ending WIP $110 Total costs accounted for $260