Process Costing ExampleYear 1

• New firm this year; makes shirts with an Osprey emblem. The firm has a sewing department and a packing department.
• Firm produced 5,000 finished shirts this year and has another 10,000 that are done except for the emblem.
• The firm believes that these are 4/5 complete in terms of DM and 1/2 complete in terms of CC.
• This year the firm spent $39,000 on DM used and $80,000 on CC.
• A lot of times in firms of this type - MOH$ and DL$ are combined.
• Then if a unit is 1/2 done in terms of DL costs, it will also be 1/2 done in terms of MOH.

Sewing Department needs to determine:

1) Costs incurred 2) Amount of work done (in Equivalent Units) 3) Costs per Equivalent Unit for each input and 4) (the goal) Value of ending WIP and units completed

Required: compute costs per Equivalent Unit and assign costs to W.I.P. and units completed and transferred. Show the journal entries and the t-account for the W.I.P. account

dm= direct material

cc= conversion costs