Chapter 6 - Cost Accumulation Systems

Question 1

Inventory from Manufactured Recap

Answer 1

COGS = Be FG + COGM - En FG

COGM = BE WIP + TMC - En WIP

TMC = DM + DL + MO

Step by Step BI Raw Material + P Raw Material - EI Raw Material = Raw Material Used + Direct Labor Cost + Manufacturing Overhead (fixed + variable under absorption/external reporting financial costing) = Total Manufacturing costs (TMC) + B WIP - E WIP = Cost of goods manufactured + BI finished goods - EI finished goods = COGS

Question 2

EUP STEPS

Answer 2

Steps: 1) Find each invidual contributor to EUP a. Beginning WIP b. Started and completed (transferred out – beginning, or units started – EWP) c. Ending work in process 2) Calculate EUP for each one based on criteria (FIFO or WAM) 3) Calculate: 1. (Begin WIP + added during month) / EUP IF WAM 2. (added during month)/EUP IF FIFO

Question 3

EUP Logic FIFO and WAM (3 situations)

Answer 3

3 situations

FIFO only considered work done in the current period

WAM considers that everything was started and completed in the period.

1) All material added in the beginning.
* ONLY FOR MATERIAL*

BEGIN WIP:

• WAM = 100% (weighted average of previous and this one)
• FIFO = 0 since everything was already added (1 - completion rate of previous period which is 100%, then zero)

Final WIP

• Always 100%.
  2) Material added evenly in the beginning (and conversion costs are also added evenly(
• FOR MATERIALS AND CONVERSION COSTS*

BEGIN WIP:

• WAM = 100%
• FIFO = 1 - completion rate

Final WIP

• WAM and FIFO = completion rate

3) Material added at a specific point of time.

BWIP:

Depends: if required completion higher than existing completion, everything will be added in the period.

EWIP:

Depends: if required completion higher than final completion, everything will be added in the next period.

Question 4

Life Cycle Cost (pricing)

Answer 4

Add amount for all types of expenses for all periods, divide by units sold planned to get to price. Then add markup if necessary.