Blueprint Problem: Process costing - equivalent units

Cost Flows

The selling price of a unit is closely tied to the cost to produce that unit. Therefore, a company must be able to determine the Selectqualityquantityunit costsCorrect 1 of Item 1 of its products for pricing as well as financial reporting purposes.

In an environment where the products are identical (or very similar), process costing can be used to assign costs as units pass through processes or production departments. Process costing is typically used by companies who produce a large number of products, such as textiles, food processing, lumber, and electronics. In these industries, many types of products can be produced, but the units in each production run are similar, or homogenous. These homogenous units flow through a continuous production stream where each unit receives SelectdifferentsimilarCorrect 2 of Item 1 amounts of products costs at each process.

The flowchart below illustrates that materials, labor and overhead can be added to any process. As the units flow from one process to the next, the product costs accumulated up to that point flow with the units. When the units are complete, the costs flow to SelectFinished Goods.Materials.Overhead.Correct 3 of Item 1 Therefore, each process can be considered an inventory account.

Click on each process for a description of the stage of production.

APPLY THE CONCEPTS: Determine the Costs for Work in Process and Finished Goods In a process cost system, the work in process at the end of the period is the sum of the costs remaining in each department account at the end of the period. In the Doghouse produces a wooden doghouse with a shingled roof. Assume that there are three stages of production at In the Doghouse. The company produces the doghouses in "batches", with one batch equaling ten units. The costs for a batch of ten units at each process are shown in the following table. Complete the table given below: Process Materials Labor Overhead $250 360 108 $200 420 126 $80 300 90 $718 $746 $ 470 Process Total Determine the following: Costs transferred from process B to process C: $ 276 (All production in processes A and B has been completed.) Costs transferred from process C to Finished Goods: $ 470o (All production in processes A, B and C has been completed.) Equivalent Units and Unit Costs Mhu do we need to know equivalent units? Recall that the unit cost can be determined by dividing