Cost Accounting Systems’ Course

Dr. Adel Taha Fayed

Professor of Cost & Managerial Accounting
The Former Vice Dean for Postgraduates &
Research – Faculty of Commerce – Benha Univ.
Member of (AAA)
 Processes Costing System
Cost Accounting Systems:
Mainly, there are two cost accounting systems
that are used through factories.
These two systems are:
• process costing system &
• job order costing system (either for short or
long term or run) & we will concentrate on the
short term one.
* For process costing we may apply either WA
method or FIFO method.
* Under each method, we have to prepare each
of:
1- The equivalent units of production report,
2- The average cost per unit report,
3- The process cost sheet or (report) &
4- The process ledger account.
Examples for clarification regarding process costing system:
Ex. (1):
In a certain factory which has two processes (A) &
(B) and just beginning its activity, the following
data were available relating to process (A)
during the month of Jan. 2017, and you are
required to prepare each of:
1- The equivalent units of production report,
2- The average cost per unit report,
3- Process (A) cost sheet (report) &
4- Process (A) ledger account.
* The factory began producing 5000 units in
process (A)
* The completed units that are transferred to
process (B) amounted 3000 units
* The completion rate for the units
representing WIP at end was 100% for mat.,
70% for wages & 60% for manufacturing
overhead cost.
* Actual costs incurred during Jan. for process
(A) were; $ 172500, 88000 & 63000 for the
three items of costs respectively.
 Equivalent Units of Production Report
Details Physical D. D. Wages Manufacturing
Flow Materials overheads

Completed & transferred 3000 3000 3000 3000

units
WIP at end 2000 2000 1400 1200

Equivalent production units 5000 5000 4400 4200

Average Cost / Unit Report

Details D. Materials D. Wages Manufacturing
overheads

Total costs 172500 88000 63000

/ Equivalent production units 5000 4400 4200
Average cost / unit 34.5 20 15
 Process (A) Cost Sheet
Details Physical Equivalent Average Total costs
flow units cost /unit
Items of costs: 5000
D. Mat. costs 5000 34.5 172500
D. labour costs 4400 20 88000
Man. Overhead costs 4200 15 63000
Gross Totals 5000 323500
Comp. units trans. To process (B) 3000
D. Mat. costs 3000 34.5 103500
D. labour costs 3000 20 60000
Man. Overhead costs 3000 15 45000
Total 3000 208500
WIP at end 2000
D. Mat. costs 2000 34.5 69000
D. labor costs 1400 20 28000
Man. Overhead costs 1200 15 18000
Totals 2000 115000
Gross Totals 5000 323500
 Dr. Process (A) Ledger alc. Cr.
Mat. cont. a/c. 172500 Process (B) a/c. 208500
Wages cont. a/c. 88000
Man. Overhead 63000 Bal. at end 115000
Cont. a/c.
323500 323500
Ex. (2)
Referring to ex. (1), the following data relate to
process (B), and you are required to fulfill the
same requirements for process (B):
* The completed units that are transferred to
stores amounted 2400 units.
* The completion rates for the remaining units
were 50% & 40% for wages and overhead costs
respectively.
* Actual costs for the two mentioned items
amounted $ 55350 & 26400 respectively.
 Equivalent Units of Production Report
Details Physical Cost D. Manufacturing
Flow Rec. Wages overheads

Completed & transferred to 2400 2400 2400 2400

stores
WIP at end 600 600 300 240

Equivalent production units 3000 3000 2700 2640

Average Cost / Unit Report

Details Cost Rec. D. Wages Manufacturing
overheads

Total costs 208500 55350 26400

/ Equivalent production units 3000 2700 2640
Average cost / unit 69.5 20.5 10
 Process (B) Cost Sheet
Details Physical Equivalent Average Total costs
flow units cost /unit
Items of costs: 3000
Received from process (A) 3000 69.5 208500
D. labour costs 2700 20.5 55350
Man. Overhead costs 2640 10 26400
Gross Totals 290250
Comp. units trans. To Stores 2400
D. Mat. Costs 2400 69.5 166800
D. labour costs 2400 20.5 49200
Man. Overhead costs 2400 10 24000
Total 240000
WIP at end 600
D. Mat. Costs 600 69.5 41700
D. labour costs 300 20.5 6150
Man. Overhead costs 240 10 2400
Totals 50250
Gross Totals 3000 290250
 Dr. Process (B) Ledger alc. Cr.
Process (A) a/c. 208500 Finished Products Cont. 240000
a/c.
Wages cont. a/c. 55350

Man. Overhead Cont. 26400 Bal. at end 50250

a/c.
290250 290250
Ex. (3):
In a certain factory which has two processes (A) & (B) and just beginning its
activity, the following data were available during the month of Jan. 2017, and
you are required to prepare the needed reports, sheet & ledger a/c for each
process.
* The factory began producing 8000 units in process (A)
* The completed units that are transferred to process (B) amounted 5000 units
* The completion rate for the units representing WIP at end was 100% for mat.,
50% for wages & 40% for manufacturing overhead cost.
• Actual costs incurred during Jan. for process (A) were; $ 120000, 65000 &
74400 for the three items of costs respectively.
Regarding Process (B):
* The completed units that are transferred to stores amounted 4000 units.
* The completion rates for the remaining units were 70% & 60% for wages and
overhead costs respectively.
* Actual costs for the two mentioned items amounted $ 42300 &
27600respectively.
 Equivalent Units of Production Report for (A)
Details Physical D. D. Manufacturing
Flow Materials Wages overheads

Completed & transferred 5000 5000 5000 5000

units
WIP at end 3000 3000 1500 1200

Equivalent production units 8000 8000 6500 6200

Average Cost / Unit Report for (A)

Details D. Materials D. Wages Manufacturing
overheads

Total costs 120000 65000 74400

/ Equivalent production units 8000 6500 6200
Average cost / unit 15 10 12
 Process (A) Cost Sheet
Details Physical Equivalent Average Total costs
flow units cost /unit
Items of costs: 8000
D. Mat. costs 8000 15 120000
D. labour costs 6500 10 65000
Man. Overhead costs 6200 12 74400
Gross Totals 8000 259400
Comp. units trans. To process (B) 5000
D. Mat. costs 5000 15 75000
D. labour costs 5000 10 50000
Man. Overhead costs 5000 12 60000
Total 185000
WIP at end 3000
D. Mat. costs 3000 15 45000
D. labour costs 1500 10 15000
Man. Overhead costs 1200 12 14400
Totals 74400
Gross Totals 8000 259400
 Dr. Process (A) Ledger alc. Cr.
Mat. cont. a/c. 120000 Process (B) a/c. 185000
Wages cont. a/c. 65000
Man. Overhead 74400 Bal. at end 74400
Cont. a/c.
259400 259400
 Equivalent Units of Production Report for (B)
Details Physical Cost D. Manufacturing
Flow Rec. Wages overheads

Completed & transferred to 4000 4000 4000 4000

stores
WIP at end 1000 1000 700 600

Equivalent production units 5000 5000 4700 4600

Average Cost / Unit Report for (B)

Details Cost Rec. D. Wages Manufacturing
overheads

Total costs 185000 42300 27600

/ Equivalent production units 5000 4700 4600
Average cost / unit 37 9 6
 Process (B) Cost Sheet
Details Physical Equivalent Average Total costs
flow units cost /unit
Items of costs: 5000
Received from process (A) 5000 37 185000
D. labour costs 4700 9 42300
Man. Overhead costs 4600 6 27600
Gross Totals 5000 254900
Comp. units trans. To Stores 4000
D. Mat. Costs 4000 37 148000
D. labour costs 4000 9 36000
Man. Overhead costs 4000 6 24000
Total 208000
WIP at end 1000
D. Mat. Costs 1000 37 37000
D. labour costs 700 9 6300
Man. Overhead costs 600 6 3600
Totals 46900
Gross Totals 5000 254900
 Dr. Process (B) Ledger alc. Cr.
Process (A) a/c. 185000 Finished Products Cont. a/c. 208000

Wages cont. a/c. 42300

Man. Overhead Cont. a/c. 27600 Bal. at end 46900

254900 254900
Ex. (4):
A certain factory has two processes (X) & (Y), about which
the following data are available regarding process (X) for
Dec. 2016:
* WIP at beg. 2000 units, its completion rate is 70% for
each of the conversion costs, & T. costs of WIP = $22500,
out of which 12000 for D. Mat., $7000 wages & the
remaining is for Manufacturing overheads).
• The new units produced 8000 units & units remained as
WIP at end amounted 1000 units with 50% completion
rate regarding wages & overheads.
• Costs during the period amounted $52000, 40500 &
24300 for Mat., Wages & overheads respectively.
Req., You are required to prepare the needed reports,
sheet & ledger a/c. using the WA method.
 Equivalent Units of Production Report
Details Physical D. D. Manufacturing
Flow Materials Wages overheads
Completed & transf. to (Y) 9000 9000 9000 9000
WIP at end 1000 1000 500 500

Equivalent production units 10000 10000 9500 9500

Average Cost / Unit Report

Details D. Materials D. Manufacturing

Wages overheads
Costs from beg. WIP 12000 7000 3500
Costs during the month 52000 40500 24300
Total costs 64000 47500 27800
/ Equivalent production units 10000 9500 9500
Average cost / unit 6.4 5 2.9263
 Process (B) Cost Sheet
Details Physical Equivalent Average Total costs
flow units cost /unit
Items of costs:
From beg. WIP 2000 22500
From this period 8000 116800
Gross Totals 10000 139300
Comp. units trans. To process (Y) 9000
D. Mat. costs 9000 6.4 57600
D. labour costs 9000 5 45000
Man. Overhead costs 9000 2.9263 26337
Total 128937
WIP at end 1000
D. Mat. costs 1000 6.4 6400
D. labour costs 500 5 2500
Man. Overhead costs 500 2.9263 1463
Totals 10363
Gross Totals 10000 139300
 Dr. Process (Y) Ledger alc. Cr.
Bal. of WIP 22500 Process (Y) a/c. 128937

Mat. cont. a/c. 52000

Wages cont. a/c. 40500
Man. Overhead Cont. a/c. 24300 Bal. at end 10363
139300 139300

Ex. (5):
Resolve the previous example; No. (4) using FIFO method.
 Equivalent Units of Production Report

Details Physical D. Materials D. Manufacturing

Flow Wages overheads
Completed & trans. from WIP 2000 0 600 600
Completed & transf. from 7000 7000 7000 7000
during
Total completed & transf. 9000 7000 7600 7600
WIP at end 1000 1000 500 500
Equivalent production units 10000 8000 8100 8100

Average Cost / Unit Report

Details D. Materials D. Wages Manufacturing
overheads

Costs during the month 52000 40500 24300

/ Equivalent production units 8000 8100 8100
Average cost / unit 6.5 5 3
 Process (B) Cost Sheet
Details Physical Equivalent Average cost Total costs
flow units /unit
Items of costs:
From beg. WIP 2000 22500
From this period 8000 116800
Gross Totals 10000 139300
Comp. units trans. To (Y) from WIP 2000 22500
D. Mat. costs 0 6.5 0
D. labour costs 600 5 3000
Man. Overhead costs 600 3 1800
Sup Total 27300
Comp. units trans. To (Y) from during 7000
D. Mat. costs 7000 6.5 45500
D. labour costs 7000 5 35000
Man. Overhead costs 7000 3 21000
Sub Total 101500
Total 9000 128500
WIP at end 1000
D. Mat. costs 1000 6.5 6500
D. labour costs 500 5 2500
Man. Overhead costs 500 3 1500
Totals 10500
Gross Totals 10000 139300
 Dr. Process (Y) Ledger alc. Cr.
WIP at beg. 22500 Process (Y) a/c. 128800
Mat. cont. a/c. 52000
Wages cont. a/c. 40500
Man. Overhead Cont. a/c. 24300 Bal. at end 10500
139399 139300
Ex. (6):
The following are available data regarding process (M) which received 5000
units from process (N) at Dec. 2016.
Process (M) has a beginning WIP balance of 1000 units, while the balance of
WIP at end is double the beginning one.
The following additional tabulated data are available, and you are required to
prepare the needed reports, sheet and ledger a/c. for process (M), supposing
that FIFO method is applied then resolve the exercise again supposing that
WA method is used:

Details Transf. in Material (x) is to Conv.

costs be added at 50% Costs
Costs during the period 30000 12000 21500
Costs of Beg. W. in Process 3000 2000 2500
Completion rates of Beg. WIP ? 60% 70%

Completion rates of End. WIP ? 40% 50%

(1) FIFO method Equivalent Units of Production Report
Details Physical Trans. In Mat. (x) Conv. Costs
Flow Costs added at 50%
Completed & trans. from WIP 1000 0 0 300
Completed & transf. from 3000 3000 3000 3000
during
Total completed & transf. 4000 3000 3000 3300
WIP at end 2000 2000 0 1000
Equivalent production units 6000 5000 3000 4300
Average Cost / Unit Report

Details Trans. In Mat. (x) added Conv.

Costs at 50% Costs

Costs during the month 30000 12000 21500

/ Equivalent production units 5000 3000 4300
Average cost / unit 6 4 5
 Process (B) Cost Sheet
Details Physical Equivalent Average cost Total costs
flow units /unit
Items of costs:
From beg. WIP 1000 7500
From this period 5000 63500
Gross Totals 6000 71000
Comp. units trans. To (Stores) from WIP 1000 7500
Transferred in costs 0 6 0
Mat. (x) Costs 0 4 0
Conv. costs 300 5 1500
Sup Total 9000
Comp. units trans. To (Stores) from during 3000
Transferred in costs 3000 6 18000
Mat. (x) Costs 3000 4 12000
Conv. costs 3000 5 15000
Sub Total 45000
Total 4000 54000
WIP at end 2000
Transferred in costs 2000 6 12000
Mat. (x) Costs 0 4 0
Conv. costs 1000 5 5000
Totals 17000
Gross Totals 71000
 Dr. Process (M) Ledger alc. Cr.
WIP at beg. 7500 Fin. Products Cont. a/c. 54000
Rec. Costs , Process 30000
(N) alc.
Mat. (x) Cont. alc. 12000
Conv. Costs 21500 Bal. at end 17000
71000 71000
(2) WA method Equivalent Units of Production Report
Details Physical Trans. In Mat. (x) Conv.
Flow Costs added at 50% Costs
Completed & transferred to 4000 4000 4000 4000
stores
WIP at end 2000 2000 0 1000

Equivalent production units 6000 6000 4000 5000

Average Cost / Unit Report

Details Trans. In Mat. (x) added Conv.
Costs at 50% Costs
Costs from beg. WIP 3000 2000 2500
Costs during the month 30000 12000 21500
Total costs 33000 14000 24000
/ Equivalent production units 6000 4000 5000
Average cost / unit 5.5 3.5 4.8
 Process (M) Cost Sheet
Details Physical Equivalent Average Total costs
flow units cost /unit
Items of costs:
From beg. WIP 1000 7500
From this period 5000 63500
Gross Totals 6000 71000
Comp. units trans. To (Stores) 4000
Transferred in costs 4000 5.5 22000
Mat. (x) Costs 4000 3.5 14000
Conv. costs 4000 4.8 19200
Total 55200
WIP at end 2000
Transferred in costs 2000 5.5 11000
Mat. (x) Costs 0 3.5 0
Conv. costs 1000 4.8 4800
Total 15800
Gross Totals 71000
 Dr. Process (M) Ledger alc. Cr.
WIP at beg. 7500 Fin. Products Cont. a/c. 55200

Rec. Costs , Process (N) alc. 30000

Mat. (x) Cont. alc. 12000

Conv. Costs 21500 Bal. at end 15800

71000 71000
(7) Wells Production Company employs a process cost system in the manufacturing of its
industrial chemicals. Three departments are involved in the process; Blending, Fabricating, and
Finishing. No units are lost in the Fabricating Department and you are required to prepare the
needed reports, sheet and the ledger a/c. for Fabricating Department once using WA method, then
using FIFO method through the following available data for January and operations in the
mentioned department:

January February

Beginning inventory……………………… 1,200 ?

Stage of completion………………….. 3/5 material, &2/3
for conversion costs ?

Received from preceding department……. 3,000 2,500

Ending inventory…………………………. 800 900
Stage of completion………………….. 1/2 material, &1/4 1/3 material, &1/6
for conversion costs for conversion costs

Value of beginning inventory:

Costs from preceding department…… $4,110 ?
Material……………………………… 772 ?
Conversion costs…………………….. 744 $3225
Costs received from preceding department 2,820 ?
Current material cost…………………….. 4,928 3,910
Current conversion costs…………………. 840 1,128
(1) WA method Equivalent Units of Production Report
Details Physical Trans. In D. Mat. Conv.
Flow Costs Costs
Completed & transferred to 3400 3400 3400 3400
Finishing Dep.
WIP at end 800 800 400 200

Equivalent production units 4200 4200 3800 3600

Average Cost / Unit Report
Details Trans. In D. Mat. Conv.
Costs Costs
Costs from beg. WIP 4110 772 744
Costs during the month 2820 4928 840
Total costs 6930 5700 1584
/ Equivalent production units 4200 3800 3600
Average cost / unit 1.65 1.50 0.44
 Fabricating Dep. Cost Sheet
Details Physical Equivalent Average Total costs
flow units cost / unit
Items of costs:
From beg. WIP 1200 5626
From this period 3000 8588
Gross Totals 4200 14214
Comp. units trans. To (Finishing 3400
Dep.)
Transferred in costs 3400 1.65 5610
D. Mat. cost 3400 1.5 5100
Conv. costs 3400 0 .44 1496
Total 12206
WIP at end 800
Transferred in costs 800 1.65 1320
D. Mat. cost 400 1.5 600
Conv. costs 200 0 .44 88
Total 2008
Gross Totals 4200 14214
 Dr. Fabricating Dep. Ledger alc. Cr.
WIP at beg. 5626 Finishing Dep. a/c. 12206

Rec. Costs , Blending Dep. alc. 2820

Mat. Cont. alc. 4928

Conv. Costs 840 Bal. at end 2008

14214 14214
(2) FIFO method Equivalent Units of Production Report
Details Physical Trans. In D. Mat. Conv. Costs
Flow Costs
Completed & trans. from WIP 1200 0 480 400
Completed & transf. during 2200 2200 2200 2200
Total completed & transferred 3400 2200 2680 2600
WIP at end 800 800 400 200
Equivalent production units 4200 3000 3080 2800

Average Cost / Unit Report

Details Trans. In D. Mat. Conv.

Costs Costs

Costs during the month 2820 4928 840

/ Equivalent production units 3000 3080 2800
Average cost / unit 0.94 1.6 0.3
 Fabricating Dep. Cost Sheet
Details Physical Equivalent Average cost / Total costs
flow units unit
Items of costs:
From beg. WIP 1200 5626
From this period 3000 8588
Gross Totals 4200 14214
Comp. units trans. To (Finishing Dep.) from WIP 1200 5626
Transferred in costs 0 0.94 0
D. Mat. 480 1.6 768
Conv. costs 400 0.3 120
Sup Total 6514
Comp. units trans. To (Finishing Dep.) from this period 2200

Transferred in costs 2200 0.94 2068

D. Mat. 2200 1.6 3520
Conv. costs 2200 0.3 660
Sub Total 6248
Total 3400 12762
WIP at end 800
Transferred in costs 800 0.94 752
D. Mat. 400 1.6 640
Conv. costs 200 0.3 60
Totals 1452
Gross Totals 14214
 Dr. Fabricating Dep. Ledger alc. Cr.
WIP at beg. 5626 Fin. Products Cont. a/c. 12762
Rec. Costs , Blending 2820
Dep. alc.
Mat. Cont. alc. 4928
Conv. Costs 840 Bal. at end 1452
14214 14214
Thanks for good listening

Prof. A. T. Fayed