FIFO costing
Speccy-The Professor
problem_example-_t_account_flow.xlsxComp Problem Explained
| COMP PROBLEM 5 EXAMPLE Production Period: July | ||||||||||||||||
| FIFO PROCESS COSTING | ||||||||||||||||
| MIXING → MOLDING →PAINTING→PACKAGING→FINISHED GOODS→COGS | ||||||||||||||||
| WIP MIXING | WIP MOLDING | WIP PAINTING | ||||||||||||||
| A | A | → | A | A | → | A | A | → | ||||||||
| → | B+C | B | B | → | B + C | → | A mix | A mix | B | → | B + C | → | A mold | A mold | B | → |
| C | → | B mix | ½ Bmix | → | → | A mix | ¾A mix | → | ||||||||
| → | ½ B mix | |||||||||||||||
| C | ½ B | |||||||||||||||
| C | ¼ A mix | |||||||||||||||
| & | ½ B mix | |||||||||||||||
| WIP PACKAGING | FIN GOODS | COGS | ||||||||||||||
| A | A | → | A | A | → | → | A fngds | |||||||||
| B + C | → | A pt | A pt | B | → | B + C | → | A pkg | A pkg | B | → | → | A pkg | |||
| → | A mold | A mold | → | → | A pt | ¾A pt | → | → | ¾A pt | |||||||
| → | ¾A mix | ½A mix | → | → | A mold | |||||||||||
| → | ½A mix | |||||||||||||||
| C | ¼A mix | |||||||||||||||
| C | ¼A pt | |||||||||||||||
| & | A mold | |||||||||||||||
| & | ½A mix | |||||||||||||||
| Lets follow the A units from Mixing as those move through the departments this month. | ||||||||||||||||
| Those will the first ones to leave the mixing department and will be joined by the B mixing units as they move into the Molding department. | ||||||||||||||||
| When they move into the Molding department they are now considered the B+C units of the Molding department which already has its own A units! | ||||||||||||||||
| The A units of Molding will be the first to leave the Molding department followed by the A from the mixing and some of the B from mixing. | ||||||||||||||||
| These now become the B+C units entering the Painting department where they will join the A units that are already in the Painting Dept | ||||||||||||||||
| You will notice that as the products move through the various departments during the period, less and less of the mixing units are being | ||||||||||||||||
| completed in each department. That is because this is FIFO and each department will complete its own leftovers before | ||||||||||||||||
| the tranferred units will be worked on (B+C). I hope that this helps you see how a process line works and why it is very important to | ||||||||||||||||
| track each lot of product along with its costs as it moves from department to department. | ||||||||||||||||
MMK &D
