Memorize the following formats.
All problems will give you all the information.
You need to know where to put it and how to do the calculations.

Use the same format as for regular process costing – add two more lines for spoilage

Equivalent Units Schedule (all quantity, no dollars)

Total for (1) above = (1) below

Follow the rules for computing equivalent units for spoilage:

Normal Spoilage – Continuous:
Always 0 for equivalent units

Normal Spoilage – Discrete:
Total units x % added at inspection point

Abnormal spoilage (continuous or discrete):
Total units x % added at inspection point.

Use 100% for equivalent units if continuous or inspection is at the end:

Calculate total production costs (same as before)

Calculate cost per equivalent unit (same as before):

Average Cost per Equivalent Unit =

Product cost $
Equivalent units

After you have memorized the things above, follow these steps in this order.

You are doing three things:
1&2) Calculate equivalent units for each product type you have info for
2&4) Compute cost per equivalent unit
5) Value work in process and finished goods at the end of the period
6) Value spoilage – add normal spoilage to finished goods and expense abnormal spoilage

1) Fill out the quantity column (1st column) in the equivalent unit schedule

Beginning inventory and started will be given – total and also put the total below.

Beginning inventory and total are the same numbers as above

Fill in the S/C and Ending WIP from info given (remember that completed/transferred means S/C + Beginning)

Plug to get the other quantity numbers after you write in what you know

Compute normal spoilage by doing exactly as the problem says
Total spoilage – normal spoilage = abnormal spoilage (can’t be negative)

2) Using the information given in the problem, fill out the equivalent unit columns

For W.A – beginning is always 100%, same number as total
For FIFO – beginning is the total x the % done this period only

Started/Completed is always 100%, same number as total

Ending – take the total x the % added so far this period

Spoilage – follow the rules noted above

3) Use the cost information given in the problem for each type of product cost

For W.A. – add the beginning $ + Added this period $ and get total $ to use
For FIFO – only use the $ added this period (ignore B.I $)

4) Calculate a cost per unit for each equivalent unit column: material, labor, O/H, Conv.

Costs $ / total equivalent units in the column = $ Cost per E.U

5) Use the cost per equivalent unit and value the WIP and FG

Value of inventory is always:
cost per EU x EUs in the row on the schedule

6) Value spoilage:

Normal spoilage EU x cost per unit for each & add them up
Add this cost to finished goods

Abnormal spoilage EU x cost per unit for each & add them up
Expense in the current period

Process Costing – Learn as You Practice – Problem 1. Weighted Average

Gemini, Inc. makes noodles and uses process costing. The company began the month with 10,000 EU of noodles in process that were 40% complete as to material and 25% complete as to conversion. During the month, 232,000 EU of noodles were started. At the end of the month, 6,000 EU noodles were still in process (80% complete as to material and 70% complete as to conversion). Total spoiled units were 12,000. Normal spoilage is 4% of units started. The process is considered continuous.

Cost information for the month is as follows:

A. Calculate equivalent units using weighted average
B. Calculate cost per equivalent unit for material and conversion using weighted average
C. Prepare a cost reconciliation report using weighted average

Process Costing – Learn as You Practice – Problem 2. FIFO

Gemini, Inc. makes noodles and uses process costing. The company began the month with 10,000 EU of noodles in process that were 40% complete as to material and 25% complete as to conversion. During the month, 232,000 EU of noodles were started. At the end of the month, 6,000 EU noodles were still in process (80% complete as to material and 70% complete as to conversion). Total spoiled units were 12,000. Normal spoilage is 4% of units started. Materials are added at the beginning of the process. Inspection occurs at 55% of conversion.

Cost information for the month is as follows:

A. Calculate equivalent units using the FIFO method
B. Calculate cost per equivalent unit for material and conversion using the FIFO method
C. Prepare a cost reconciliation report using the FIFO method