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    Chapter 10 Average and FIFO Costing

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    Jeana Segumalian
    The document discusses two methods for valuing inventory under process costing: FIFO and average costing. Under the FIFO method, costs are assigned assuming the first goods into production are the first out. The average costing method mixes beginning inventory costs with current period costs to calculate a weighted average unit cost. FIFO generally results in higher costs of completed units and lower ending WIP balances than average costing. Examples are provided to demonstrate the computation of unit costs, completed units, and ending inventory under each method.

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    Chapter 10 Average and FIFO Costing

    Uploaded by

    Jeana Segumalian
    798 views34 pages
    The document discusses two methods for valuing inventory under process costing: FIFO and average costing. Under the FIFO method, costs are assigned assuming the first goods into production are the first out. The average costing method mixes beginning inventory costs with current period costs to calculate a weighted average unit cost. FIFO generally results in higher costs of completed units and lower ending WIP balances than average costing. Examples are provided to demonstrate the computation of unit costs, completed units, and ending inventory under each method.

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    Average and FIFO

    Original Title

    3. Chapter 10 Average and FIFO Costing

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    The document discusses two methods for valuing inventory under process costing: FIFO and average costing. Under the FIFO method, costs are assigned assuming the first goods into production are the first out. The average costing method mixes beginning inventory costs with current period costs to calculate a weighted average unit cost. FIFO generally results in higher costs of completed units and lower ending WIP balances than average costing. Examples are provided to demonstrate the computation of unit costs, completed units, and ending inventory under each method.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    798 views34 pages

    Chapter 10 Average and FIFO Costing

    Uploaded by

    Jeana Segumalian
    The document discusses two methods for valuing inventory under process costing: FIFO and average costing. Under the FIFO method, costs are assigned assuming the first goods into production are the first out. The average costing method mixes beginning inventory costs with current period costs to calculate a weighted average unit cost. FIFO generally results in higher costs of completed units and lower ending WIP balances than average costing. Examples are provided to demonstrate the computation of unit costs, completed units, and ending inventory under each method.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    of 34

    AVERAGE AND FIFO

    costing
    John Michael Cedric N. Nalus
    Certified Poging Accountant
    Work in Process Inventory
    Beginning balance Completed &
    Transferred
    Cost from Preceding
    Department
    Current Period Cost

    Ending balance
    Beginning balance

    Units EU Costs
    Methods of costing under Process
    Costing

    1. FIFO Method
    2. Average Method
    Methods of costing under Process
    Costing

    FIFO Method
     There is a flow that the first placed
    into the process are presumed to be
    the first ones completed and those
    that are first completed are the ones
    transferred out.
    Methods of costing under Process
    Costing

    Average Method
     There is no assumed flow of
    manufacturing wherein it merges the
    initial WIP inventory costs and the
    costs incurred in the current month to
    have an average unit cost
    FIFO Method
    VS
    Average Method
    Computation of Equivalent Unit
    FIFO Average
    Work done for beginning Work done last month is
    WIP Inventory is remaining ignored, thus, beginning
    work needed to make the inventory units are mixed
    units complete (100% - with completed and WIP
    WDLM). EU for started end units. EU is normally
    and completed and WIP computed.
    end is normally computed.
    Problem 2 - FIFO
    Problem 2 - Average
    Computation of Unit Cost
    FIFO Average
    Current Period Costs Cost of Beg. WIP + Current
    Period Cost
    ÷ ÷
    EU of Current WD EU of Beg. WIP + EU of
    + Current WD
    +
    Unit cost from Prec. Dept. Unit cost from Prec. Dept.
    (CFPD from beg. WIP+CFPD
    *This excludes the cost and from Transferred in / Total
    units of Beginning WIP Units)
    Problem 4 - FIFO
    Problem 4 - FIFO
    Problem 4 - Average
    Problem 4 - Average
    Computation of Completed Units
    FIFO Average
    Cost of Beg. WIP
    + EU of Completed &
    Current Period Cost to Transferred
    complete Beg. WIP
    + X
    Cost of Started & Weighted Ave. Unit Cost
    Completed Units
    Computation of Ending WIP
    Inventory
    FIFO Average

    EU of Ending WIP EU of Ending WIP


    X X
    Unit Cost Weighted Ave.
    Unit Cost
    YOU DO NOTE!
    YOU DO NOTE!
    Cost of completed &
    transferred is greater in FIFO
    Method compared to Average
    Method
    YOU DO NOTE!
    Cost of WIP Inventory end is
    less in FIFO Method compared
    to Average Method
    Problem 5 - FIFO
    Problem 5 - FIFO
    Problem 5 - FIFO
    Problem 5 - Average
    Problem 5 - Average
    Problem 5 - Average
    Problem with Loss Units
     The rules for loss units will
    still be applied together with
    rules of either FIFO or
    Average Costing
    Problem 7 - FIFO
    Problem 7 - FIFO
    Problem 7 - FIFO
    Problem 7 - Average
    Problem 7 - Average
    Problem 7 - Average
    THANK YOU!

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