Discuss the steps used to prepare a production report under the FIFO and Weighted Average Cost...

Discuss the steps used to prepare a production report under the FIFO and Weighted Average Cost methods.

Expert Solution

FIFO

Preparing the quantity schedule: i.e. reconciling units in the beginning work in process, units added/started during the period, units transferred out and units in ending WIP.
Bringing forward the cost of ending WIP of last period as cost of beginning work in process of the current period.
Bringing forward the percentage of completion of the ending WIP of last period.
Finding the costs brought forward from previous department and cost added in the current department under different heads: direct materials and conversion costs.
Finding units started/added and completed during the current period.
Finding total equivalent units.
Finding cost per equivalent unit for each cost component.
Allocating the cost between units transferred out and ending WIP.

Weighted Average Cost methods.

Process costing under weighted-average method involves the following steps:

Preparing the quantity schedule: i.e. finding units in the beginning work in process for the period, units started or units transferred-in from prior departments, units transferred out to next department or units of finished goods, and units in closing work in process.
Bringing forward the cost of units in the beginning work in process from last period. The cost should be broken up into all its components: direct materials and conversion costs (=direct labor and manufacturing overheads).
Finding the costs added in the current department under different heads: direct materials, direct labor and manufacturing overheads.
Finding total cost to be accounted for under each head i.e. direct materials, direct labor and manufacturing overheads. This would involve adding the cost included in the opening work in process on account of direct materials, direct labor and manufacturing overheads to the corresponding amounts added during the period on account of the relevant cost component.
Finding total equivalent units.
Finding cost per equivalent unit for each cost component by dividing the total cost for the cost component by total equivalent units for the relevant cost component.
Allocating the cost between the units transferred out and units included in the closing work in process.

ekkarill92 answered 1 year ago

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