PROCESS COST ACCOUNTING

The movement of completed items from manufacturing to finished goods inventories is shown by arrow line 9. According to the process cost summary, the cost of 100,000 completed Profane units is $24,200. This transfer is documented in the following entry.

Credit	Debit	Description
	24,200	Finished Goods Inventory
24,200		Goods in Process Inventory
		To record transfer of completed units.

The credit to Goods in Process Inventory decreases the asset balance to reflect the fact that 100,000 units are no longer being manufactured. These units' costs have been moved to Finished Goods Inventory, resulting in a $24,200 rise in this asset. After this item is submitted, the Goods in Process Inventory account still has a balance of $2,860, which is the amount computed in Step 4 before. The cost of products made is the cost of units shifted from Goods in Process Inventory to Finished Goods Inventory. indicates the activity for this period in the Goods in Process Inventory account The account's ending balance matches the cost attributed to the partially finished units in section.

Balance	Credit	Debit	Descriptions	Journal page No.	Date
4,620			balance		03/31
14,520		9,900	Direct materials usage		04/30
20,220		5,700	Direct labor costs incurred		04/30
27,060 2,680	24,200	6.840 0	Factory overhead applied Transfer completed product to warehouse		04/30 04/30

The sale of finished items is represented by arrow line 10. Assume GenX sold 106,000 pieces of Profane over this time period and had a starting inventory of completed products of 26,000 units at a cost of $6,292. Assume it also has an ending finished products inventory of 20,000 units at a cost of $4,840. Using this data, we can calculate its cost of goods sold for April, as shown below.

Beginning finished goods inventory + Cost of goods manufactured this period =  Cost of goods available for sale -  Ending finished goods inventory  = Cost of goods sold	$6,292 24,200 $30,492 4,840 $25,652

The summary entry to record cost of goods sold for this period follows.

Credit	Debit	Description
	25,652	Cost of Goods Sold
25,652		Finished Goods Inventory
		To record cost of goods sold for April.

The Finished Goods Inventory account now appears as shown

Balance	Credit	Debit	Descriptions	Journal page No.	Date
6,292			balance		03/31
30,492		24,200	Transfer in cost of goods manufactured		04/30
4,840	25,652		Cost of goods sold		04/30

Cost Flows Summary

The exhibit depicts GenX’s production cost flows in April. Each of these cost flows, as well as the entries used to record them, has been discussed. The movement of expenses through the accounts corresponds to the flow of manufacturing activities and goods.

Resources : fundamental accounting principles 20th edition (pdf) John J. Wild , Ken W. Shaw Barbara Chiappetta

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