Learning Objectives

1. Record the flow of materials, labor, and overhead

through a process costing system.
2. Compute the equivalent units of production using
the weighted average method.
3. Compute the cost per equivalent unit using the
weighted-average method.
Lecture 3 4. Assign costs to units using the weighted-average
method.
Process Costing 5. Prepare a cost reconciliation report.

Slide 2

4-4

Learning Objectives Similarities Between Job-Order and

6. (Appendix 4A) Compute the equivalent units of Process Costing
production using the FIFO method.
7. (Appendix 4A) Compute the cost per equivalent • Both systems assign material, labor, and overhead
unit using the FIFO method. costs to products and they provide a mechanism
8. (Appendix 4A) Assign costs to units using the FIFO
for computing unit product costs.
method. • Both systems use the same manufacturing
9. (Appendix 4A) Prepare a cost reconciliation report accounts, including Manufacturing Overhead, Raw
using the FIFO method. Materials, Work in Process, and Finished Goods.
• The flow of costs through the manufacturing
accounts is basically the same in both systems.

Slide 3
 4-5
Differences Between Job-Order and
Process Costing
Process costing:
1. Is used when a single product is produced on a
continuing basis or for a long period of time. Job-order
costing is used when many different jobs having
different production requirements are worked on each
period.
2. Systems accumulate costs by department. Job-order
costing systems accumulated costs by individual jobs.
3. Systems compute unit costs by department. Job-order
costing systems compute unit costs by job on the job
cost sheet.
4-7
Quick Check 
Process costing is used for products
that are:
a. Different and produced continuously.
b. Similar and produced continuously.
c. Individual units produced to customer
specifications.
d. Purchased from vendors.
4-6
Quick Check 
Process costing is used for products
that are:
a. Different and produced continuously.
b. Similar and produced continuously.
c. Individual units produced to customer
specifications.
d. Purchased from vendors.
4-8
Processing Departments
Any unit in an organization where materials, labor,
or overhead are added to the product.
The activities performed in a processing
department are performed uniformly on all
units of production. Furthermore, the output of
a processing department must be homogeneous.
Products in a process costing environment typically
flow in a sequence from one department to another.
 4-9 4-10

Processing Departments Learning Objective 1

Record the flow of

materials, labor, and
overhead through a
process costing system.

4-11 4-12

The Flow of Materials, Labor, and The Flow of Costs in a Job-Order

Overhead Costs Costing System
Costs are traced and
Direct
applied to individual
Materials
Direct jobs in a job-order
Materials cost system.
Work in Finished
Direct Labor
Process Goods
Finished
Direct Labor Jobs Goods
Manufacturing Cost of
Overhead Goods Manufacturing Cost of
Sold Overhead Goods
Sold
 4-13 4-14

The Flow of Costs in a Processing T-Account and Journal Entry Views of

Costing System Process Cost Flows
Costs are traced and
applied to departments For purposes of this example, assume there
Direct in a process cost
Materials system. are two processing departments –
Departments A and B.
Direct Labor
Processing Finished We will use T-accounts and journal entries.
Department Goods

Manufacturing Cost of
Overhead Goods
Sold

4-15 4-16

Process Cost Flows: The Flow of Raw Process Cost Flows: The Flow of Raw
Materials (in T-account form) Materials (in journal entry form)
Work in Process
Raw Materials Department A
•Direct •Direct Work in Process - Department A XXXXX
Materials Materials Work in Process - Department B XXXXX
Raw Materials XXXXX

Work in Process
Department B
•Direct
Materials
 4-17 4-18

Process Cost Flows: The Flow of Labor Process Costing: The Flow of Labor
Costs (in T-account form) Costs (in journal entry form)
Salaries and Work in Process
Wages Payable Department A
•Direct
•Direct Materials Work in Process - Department A XXXXX
Labor •Direct Work in Process - Department B XXXXX
Labor
Salaries and Wages Payable XXXXX

Work in Process
Department B
•Direct
Materials
•Direct
Labor

4-19 4-20

Process Cost Flows: The Flow of Manufacturing Process Cost Flows: The Flow of Manufacturing
Overhead Costs (in T-account form) Overhead Costs (in journal entry form)
Work in Process
Department A
Manufacturing •Direct
Overhead Materials Work in Process - Department A XXXXX
•Direct
•Actual •Overhead Labor Work in Process - Department B XXXXX
Overhead Applied to •Applied
Work in Overhead Manufacturing Overhead XXXXX
Process
Work in Process
Department B
•Direct
Materials
•Direct
Labor
•Applied
Overhead
 4-21 4-22

Process Cost Flows: Transfers from WIP- Process Cost Flows: Transfers from WIP-Dept.
Dept. A to WIP-Dept. B (in T-account form) A to WIP-Dept. B (in journal entry form)

Work in Process Work in Process

Department A Department B
Work in Process - Department B XXXXX
•Direct Transferred •Direct
Materials to Dept. B Materials Work in Process - Department A XXXXX
•Direct •Direct
Labor Labor
•Applied •Applied
Overhead Overhead
•Transferred
from Dept. A

Department Department
A B

4-23 4-24

Process Cost Flows: Transfers from WIP- Process Cost Flows: Transfers from WIP-Dept.
Dept. B to Finished Goods (in T-account form) B to Finished Goods (in journal entry form)
Work in Process
Department B Finished Goods Finished Goods XXXXX
•Direct •Cost of •Cost of
Materials Goods Goods Work in Process - Department B XXXXX
•Direct Manufactured Manufactured
Labor
•Applied
Overhead
•Transferred
from Dept. A
 4-25 4-26

Process Cost Flows: Transfers from Finished Process Cost Flows: Transfers from Finished
Goods to COGS (in T-account form) Goods to COGS (in journal entry form)
Work in Process
Department B Finished Goods
•Direct •Cost of •Cost of •Cost of Cost of Goods Sold XXXXX
Materials Goods Goods Goods
•Direct Manufactured Manufactured Sold
Finished Goods XXXXX
Labor
•Applied
Overhead
•Transferred
from Dept. A Cost of Goods Sold

•Cost of
Goods
Sold

4-27 4-28

Equivalent Units of Production Equivalent Units – The Basic Idea

Two half completed products are
Equivalent units are the
product of the number equivalent to one complete product.
of partially completed
units and the
percentage completion
of those units.
+ = 1

These partially completed units complicate the

determination of a department’s output for a given So, 10,000 units 70% complete
period and the unit cost that should be assigned to are equivalent to 7,000 complete units.
that output.
 4-29 4-30

Quick Check  Quick Check 

For the current period, Jones started 15,000 For the current period, Jones started 15,000
units and completed 10,000 units, leaving 5,000 units and completed 10,000 units, leaving 5,000
units in process 30 percent complete. How units in process 30 percent complete. How
many equivalent units of production did Jones many equivalent units of production did Jones
have for the period? have for the period?
a. 10,000 a. 10,000
10,000 units + (5,000 units × 0.30)
b. 11,500 b. 11,500 = 11,500 equivalent units
c. 13,500 c. 13,500
d. 15,000 d. 15,000

4-31 4-32

Calculating Equivalent Units Learning Objective 2

Equivalent units can be calculated
two ways:
Compute the equivalent
The First-In, First-Out Method – FIFO is units of production
covered in the appendix to this chapter. using the weighted-
average method.
The Weighted-Average Method – This method
will be covered in the main portion of the chapter.
 4-33 4-34

Equivalent Units of Production Treatment of Direct Labor

Weighted-Average Method
Direct
The weighted-average method . . . Materials
Direct labor costs
1. Makes no distinction between work done in prior may be small

Dollar Amount
Manufacturing in comparison to
or current periods. Overhead
other product
2. Blends together units and costs from prior and Direct costs in process
current periods. Labor cost systems.
3. Determines equivalent units of production for a
department by adding together the number of Type of Product Cost
units transferred out plus the equivalent units in
ending Work in Process Inventory.

4-35 4-36

Treatment of Direct Labor Weighted-Average – An Example

Direct Smith Company reported the following activity in
Materials the Assembly Department for the month of June:
Direct labor and
Conversion
manufacturing Percent Completed
Dollar Amount

Direct overhead may be Units Materials Conversion

Labor
combined into Work in process, June 1 300 40% 20%

Direct Manufacturing one classification Units started into production in June 6,000
Labor Overhead of product
cost called Units completed and transferred out 5,400
conversion costs. of Department A during June

Type of Product Cost Work in process, June 30 900 60% 30%

 4-37 4-38

Weighted-Average – An Example Weighted-Average – An Example

The first step in calculating the equivalent units is to identify The second step is to identify the equivalent units of production in
the units completed and transferred out of Assembly ending work in process with respect to materials for the month
Department in June (5,400 units) (540 units) and adding this to the 5,400 units from step one.

Materials Conversion Materials Conversion

Units completed and transferred Units completed and transferred
out of the Department in June 5,400 5,400 out of the Department in June 5,400 5,400
Work in process, June 30:
900 units × 60% 540

Equivalent units of Production in

the Department during June 5,940

4-39 4-40

Weighted-Average – An Example Weighted-Average – An Example

The third step is to identify the equivalent units of production in Equivalent units of production always equals:
ending work in process with respect to conversion for the month Units completed and transferred
(270 units) and adding this to the 5,400 units from step one. + Equivalent units remaining in work in process
Materials Conversion Materials Conversion
Units completed and transferred Units completed and transferred
out of the Department in June 5,400 5,400 out of the Department in June 5,400 5,400
Work in process, June 30: Work in process, June 30:
900 units × 60% 540 900 units × 60% 540
900 units × 30% 270 900 units × 30% 270
Equivalent units of Production in Equivalent units of Production in
the Department during June 5,940 5,670 the Department during June 5,940 5,670
 4-41 4-42

Weighted-Average – An Example Weighted-Average – An Example

Materials 6,000 Units Started
Conversion 6,000 Units Started

Beginning Ending Beginning Ending

Work in Process 5,400 Units Started Work in Process Work in Process 5,400 Units Started Work in Process
300 Units and Completed 900 Units 300 Units and Completed 900 Units
40% Complete 60% Complete 20% Complete 30% Complete

5,400 Units Completed 5,400 Units Completed

900 × 60% 900 × 30%
540 Equivalent Units 270 Equivalent Units
5,940 Equivalent units 5,670 Equivalent units
of production of production

4-43 4-44

Learning Objective 3 Compute and Apply Costs

Beginning Work in Process Inventory: 300 units
Materials: 40% complete $ 6,119
Conversion: 20% complete $ 3,920
Compute the cost per Production started during June 6,000 units
equivalent unit using the Production completed during June 5,400 units

weighted-average Costs added to production in June

Materials cost $ 118,621
method. Conversion cost $ 81,130

Ending Work in Process Inventory: 900 units

Materials: 60% complete
Conversion: 30% complete
 4-45 4-46

Compute and Apply Costs Compute and Apply Costs

The formula for computing the cost per equivalent Here is a schedule with the cost and equivalent
unit is: unit information.

Cost of beginning Total

Cost per Cost Materials Conversion
Work in Process + Cost added during
equivalent =
Inventory the period Cost to be accounted for:
unit Work in process, June 1 $ 10,039 $ 6,119 $ 3,920
Equivalent units of production Cost added in Assembly 199,751 118,621 81,130
Total cost $ 209,790 $ 124,740 $ 85,050

Equivalent units 5,940 5,670

4-47 4-48

Compute and Apply Costs Learning Objective 4

Here is a schedule with the cost and equivalent
unit information.
$124,740 ÷ 5,940 units = $21.00 $85,050 ÷ 5,670 units = $15.00
Total
Assign costs to units
Cost Materials Conversion using the weighted-
Cost to be accounted for:
Work in process, June 1 $ 10,039 $ 6,119 $ 3,920
average method.
Cost added in Assembly 199,751 118,621 81,130
Total cost $ 209,790 $ 124,740 $ 85,050

Equivalent units 5,940 5,670

Cost per equivalent unit $ 21.00 $ 15.00

Cost per equivalent unit = $21.00 + $15.00 = $36.00

 4-49 4-50

Applying Costs Applying Costs

Assembly Department Assembly Department
Cost of Ending WIP Inventory and Units Transferred Out Cost of Ending WIP Inventory and Units Transferred Out
Materials Conversion Total Materials Conversion Total
Ending WIP inventory: Ending WIP inventory:
Equivalent units 540 270 Equivalent units 540 270
Cost per equivalent unit $ 21.00 $ 15.00

4-51 4-52

Computing the Cost of Units

Applying Costs
Transferred Out
Assembly Department Assembly Department
Cost of Ending WIP Inventory and Units Transferred Out Cost of Ending WIP Inventory and Units Transferred Out
Materials Conversion Total Materials Conversion Total
Ending WIP inventory: Ending WIP inventory:
Equivalent units 540 270 Equivalent units 540 270
Cost per equivalent unit $ 21.00 $ 15.00 Cost per equivalent unit $ 21.00 $ 15.00
Cost of Ending WIP inventory $ 11,340 $ 4,050 $ 15,390 Cost of Ending WIP inventory $ 11,340 $ 4,050 $ 15,390
Units completed and transferred out:
Units transferred 5,400 5,400
 4-53 4-54

Computing the Cost of Units Computing the Cost of Units

Transferred Out Transferred Out
Assembly Department Assembly Department
Cost of Ending WIP Inventory and Units Transferred Out Cost of Ending WIP Inventory and Units Transferred Out
Materials Conversion Total Materials Conversion Total
Ending WIP inventory: Ending WIP inventory:
Equivalent units 540 270 Equivalent units 540 270
Cost per equivalent unit $ 21.00 $ 15.00 Cost per equivalent unit $ 21.00 $ 15.00
Cost of Ending WIP inventory $ 11,340 $ 4,050 $ 15,390 Cost of Ending WIP inventory $ 11,340 $ 4,050 $ 15,390
Units completed and transferred out: Units completed and transferred out:
Units transferred 5,400 5,400 Units transferred 5,400 5,400
Cost per equivalent unit $ 21.00 $ 15.00 Cost per equivalent unit $ 21.00 $ 15.00
Cost of units transferred out $ 113,400 $ 81,000 $ 194,400

4-55 4-56

Learning Objective 5 Reconciling Costs

Assembly Department
Cost Reconciliation
Costs to be accounted for:
Prepare a cost Cost of beginning Work in Process Inventory $ 10,039
Costs added to production during the period 199,751
reconciliation report. Total cost to be accounted for $ 209,790
 4-57 4-58

Reconciling Costs Operation Costing

Assembly Department Operation cost is a hybrid of job-order and
Cost Reconciliation
Costs to be accounted for:
process costing because it possesses
Cost of beginning Work in Process Inventory $ 10,039 attributes of both approaches.
Costs added to production during the period 199,751
Total cost to be accounted for $ 209,790 Operation costing is
commonly used when
Cost accounted for as follows: batches of many
Cost of ending Work in Process Inventory $ 15,390
Cost of units transferred out 194,400
different products pass
Total cost accounted for $ 209,790 through the same
processing department.

4-59 4-60

Exercise 4.1 Exercise 4.2

Lindex Company uses a process costing system. The Billinstaff Industries uses the weighted-average method in
following data are available for one department for its process costing system. Data for the Assembly
October: Department for May appear below:

The department started 390,000 units into production

during the month and transferred 410,000 completed units
to the next department.
Required:
Compute the equivalent units of production for October,
assuming that the company uses the weighted-average
method of accounting for units and costs.
Required:
1. Compute the cost per equivalent unit for materials, for
labor, and for overhead.
2. Compute the total cost per equivalent whole unit.
 4-61 4-62

Exercise 4.3 Exercise 4.4

Data concerning a recent period’s activity in the Prep • Kalox, Inc., manufactures an antacid product
Department, the first processing department in a company that passes through two departments. Data for
that uses process costing, appear below:
May for the first department follow

A total of 1,300 units were completed and transferred to

the next processing department during the period.
Required:
Compute the cost of the units transferred to the next
department during the period and the cost of ending work
in process inventory.

4-63

Exercise 4.4
The beginning work in process inventory was 80%
complete with respect to materials and 75% complete with
respect to labor and overhead. The ending work in
process inventory was 60% complete with respect to
materials and 20% complete with respect to labor and
overhead. FIFO Method
Required: Appendix 4A
Assume that the company uses the weighted-average
method of accounting for units and costs.
1. Compute the equivalent units for May’s activity for the
first department.
2. Determine the costs per equivalent unit for May.

Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.
 4-65 4-66

FIFO vs. Weighted-Average Method Learning Objective 6

The FIFO method (generally considered more

accurate than the weighted-average method) differs Compute the equivalent
from the weighted-average method in two ways:
units of production
1. The computation of equivalent units. using the FIFO method.
2. The way in which the costs of beginning
inventory are treated.

4-67 4-68

Equivalent Units – FIFO Method Equivalent Units – FIFO Method

Let’s revisit the Smith Company example. Here is Step 1: Determine equivalent units needed to complete
information concerning the Assembly Department beginning Work in Process Inventory.
for the month of June.
Percent Completed Materials Conversion
Units Materials Conversion To complete beginning Work in Process:
Work in process, June 1 300 40% 20% Materials: 300 units × (100% - 40%) 180
Conversion: 300 units × (100% - 20%) 240
Units started into production in June 6,000

Units completed and transferred out 5,400

of Department A during June

Work in process, June 30 900 60% 30%

 4-69 4-70

Equivalent Units – FIFO Method Equivalent Units – FIFO Method

Step 2: Determine units started and completed during Step 3: Add the equivalent units in ending Work in
the period. Process Inventory.

Materials Conversion Materials Conversion

To complete beginning Work in Process: To complete beginning Work in Process:
Materials: 300 units × (100% - 40%) 180 Materials: 300 units × (100% - 40%) 180
Conversion: 300 units × (100% - 20%) 240 Conversion: 300 units × (100% - 20%) 240
Units started and completed during June 5,100 5,100 Units started and completed during June 5,100 5,100
Ending Work in Process
Materials: 900 units × 60% complete 540
Conversion: 900 units × 30% complete 270
Equivalent units of production 5,820 5,610

4-71 4-72

FIFO Example FIFO Example

Materials 6,000 Units Started Conversion 6,000 Units Started

Beginning Ending Beginning Ending

Work in Process 5,100 Units Started Work in Process Work in Process 5,100 Units Started Work in Process
300 Units and Completed 900 Units 300 Units and Completed 900 Units
40% Complete 60% Complete 20% Complete 30% Complete

300 × 300 ×
180 Equivalent Units 80%
240 Equivalent Units
60%
5,100 Units Completed 5,100 Units Completed
900 × 900 ×
540 Equivalent Units 60%
270 Equivalent Units 30%
5,820 Equivalent units 5,610 Equivalent units
of production of production
 4-73 4-74

Equivalent Units:
Learning Objective 7
Weighted-Average vs. FIFO
As shown below, the equivalent units in beginning inventory are
subtracted from the equivalent units of production per the
weighted-average method to obtain the equivalent units of Compute the cost per
production under the FIFO method.
equivalent unit using the
Equivalent units - weighted-average method
Materials
5,940
Conversion
5,670
FIFO method.
Less equivalent units in beginning inventory:
300 units × 40% 120
300 units × 20% 60
Equivalent units - FIFO method 5,820 5,610

4-75 4-76

Cost per Equivalent Unit - FIFO Cost per Equivalent Unit - FIFO
Let’s revisit the Smith Company Assembly Department The formula for computing the cost per
for the month of June to prepare our production report. equivalent unit under FIFO method is:
Beginning work in process: 400 units
Materials: 40% complete $ 6,119
Conversion: 20% complete $ 3,920 Cost per Cost added during the period
equivalent =
Production started during June 6,000 units
unit Equivalent units of production
Production completed during June 5,400 units

Costs added to production in June

Materials cost $ 118,621
Conversion cost $ 81,130

Ending work in process 900 units

Materials: 60% complete
Conversion: 30% complete
 4-77 4-78

Cost per Equivalent Unit - FIFO Learning Objective 8

Total
Cost Materials Conversion

Assign costs to units

Cost added in June $ 199,751 $ 118,621 $ 81,130
Equivalent units 5,820 5,610 using the FIFO method.
Cost per equivalent unit $ 20.3816 $ 14.4617

$118,621 ÷ 5,820 $81,130 ÷ 5,610

Total cost per equivalent unit = $20.3816 + $14.4617 = $34.8433

4-79 4-80

Applying Costs - FIFO Applying Costs - FIFO

Step 1: Record the equivalent units of production in ending Work
Step 2: Record the cost per equivalent unit.
in Process Inventory.
Assembly Department Assembly Department
Cost of Ending WIP Inventory Cost of Ending WIP Inventory
Materials Conversion Total Materials Conversion Total
Ending WIP inventory: Ending WIP inventory:
Equivalent units 540 270 Equivalent units 540 270
Cost per equivalent unit $ 20.3816 $ 14.4617

900 units × 60% 900 units × 30%

 4-81 4-82

Applying Costs - FIFO Cost of Units Transferred Out

Step 1: Record the cost in beginning Work in Process Inventory.
Step 3: Compute the cost of ending Work in Process Inventory.
Assembly Department
Assembly Department Cost of Units Transferred Out in June
Cost of Ending WIP Inventory Materials Conversion Total
Materials Conversion Total Cost of Units Transferred Out:
Ending WIP inventory: Cost in beginning WIP inventory $ 6,119 $ 3,920 $ 10,039
Equivalent units 540 270 Cost to complete beginning WIP
Cost per equivalent unit $ 20.3816 $ 14.4617 Equivalent units to complete 180 240
Cost of Ending WIP inventory $ 11,006 $ 3,905 $ 14,911 Cost per equivalent unit $ 20.3816 $ 14.4617
Cost to complete beginning WIP $ 3,669 $ 3,471 7,140
Cost of units started and completed:
540 × $20.3816 270 × 14.4617 Units started and completed 5,100 5,100
Cost per equivalent unit $ 20.3816 $ 14.4617
Cost of units started and completed $ 103,946 $ 73,755 177,701
Cost of Units Transferred Out $ 194,880

4-83 4-84

Cost of Units Transferred Out Cost of Units Transferred Out

Step 2: Compute the cost to complete the units in beginning Step 3: Compute the cost of units started and completed this
Work in Process Inventory. period.
Assembly Department Assembly Department
Cost of Units Transferred Out in June Cost of Units Transferred Out in June
Materials Conversion Total Materials Conversion Total
Cost of Units Transferred Out: Cost of Units Transferred Out:
Cost in beginning WIP inventory $ 6,119 $ 3,920 $ 10,039 Cost in beginning WIP inventory $ 6,119 $ 3,920 $ 10,039
Cost to complete beginning WIP Cost to complete beginning WIP
Equivalent units to complete 180 240 Equivalent units to complete 180 240
Cost per equivalent unit $ 20.3816 $ 14.4617 Cost per equivalent unit $ 20.3816 $ 14.4617
Cost to complete beginning WIP $ 3,669 $ 3,471 7,140 Cost to complete beginning WIP $ 3,669 $ 3,471 7,140
Cost of units started and completed: Cost of units started and completed:
Units started and completed 5,100 5,100 Units started and completed 5,100 5,100
Cost per equivalent unit $ 20.3816 $ 14.4617 Cost per equivalent unit $ 20.3816 $ 14.4617
Cost of units started and completed $ 103,946 $ 73,755 177,701 Cost of units started and completed $ 103,946 $ 73,755 177,701
Cost of Units Transferred Out $ 194,880 Cost of Units Transferred Out $ 194,880
 4-85 4-86

Cost of Units Transferred Out Learning Objective 9

Step 4: Compute the total cost of units transferred out.

Assembly Department
Prepare a cost
Cost of Units Transferred Out in June
Prepare a cost
Materials Conversion Total
reconciliation report
Cost of Units Transferred Out:
reconciliation report
Cost in beginning WIP inventory $ 6,119 $ 3,920 $ 10,039 using the FIFO method.
Cost to complete beginning WIP
Equivalent units to complete 180 240
using the FIFO method.
Cost per equivalent unit $ 20.3816 $ 14.4617
Cost to complete beginning WIP $ 3,669 $ 3,471 7,140
Cost of units started and completed:
Units started and completed 5,100 5,100
Cost per equivalent unit $ 20.3816 $ 14.4617
Cost of units started and completed $ 103,946 $ 73,755 177,701
Cost of Units Transferred Out $ 194,880

4-87 4-88

Reconciling Costs Reconciling Costs

Assembly Department Assembly Department
Cost Reconciliation for June Cost Reconciliation for June
Costs to be accounted for: Costs to be accounted for:
Cost of beginning Work in Process Inventory $ 10,039 Cost of beginning Work in Process Inventory $ 10,039
Costs added to production during the period 199,751 Costs added to production during the period 199,751
Total cost to be accounted for $ 209,790 Total cost to be accounted for $ 209,790

Cost accounted for as follows: Cost accounted for as follows:

Cost of ending Work in Process Inventory $ 14,911 Cost of ending Work in Process Inventory $ 14,911
Cost of units transferred out 194,880 Cost of units transferred out 194,880
Total cost accounted for* $ 209,791 Total cost accounted for* $ 209,791

* $1 rounding error.
 4-89

A Comparison of Costing Methods

In a lean production environment, FIFO and
weighted-average methods yield similar
unit costs.
When considering cost control, FIFO is
superior to weighted-average because it
does not mix costs of the current period with
costs of the prior period.