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OPENING WORK IN PROCESS INVENTORIES
The cost of production reports illustrated list closing work in process inventories. These inventories become opening inventories of the next period.
Several methods are used in accounting for these opening inventory costs. In this discussion, two methods are illustrated:
1. Average costing. Opening inventory costs are added to the costs of the new period.
2. First-in, first-out costing. Opening inventory costs are kept separate and the new costs necessary to complete the work in process inventory are computed.
Average Costing. When opening work in process inventory costs are merged with costs of the new period, the problem is essentially one of securing representative average unit costs. Ordinarily, the averaging process is quite simple.
The February cost reports of the three departments reviewed in the previous chapter are used to illustrate the treatment of opening work in process inventory and to show the relationship of costs from one period to the next. Closing inventories in January departmental cost reports become opening work in process inventories for the month of February.
The cost of production reports illustrated list closing work in process inventories. These inventories become opening inventories of the next period.
Several methods are used in accounting for these opening inventory costs. In this discussion, two methods are illustrated:
1. Average costing. Opening inventory costs are added to the costs of the new period.
2. First-in, first-out costing. Opening inventory costs are kept separate and the new costs necessary to complete the work in process inventory are computed.
Average Costing. When opening work in process inventory costs are merged with costs of the new period, the problem is essentially one of securing representative average unit costs. Ordinarily, the averaging process is quite simple.
The February cost reports of the three departments reviewed in the previous chapter are used to illustrate the treatment of opening work in process inventory and to show the relationship of costs from one period to the next. Closing inventories in January departmental cost reports become opening work in process inventories for the month of February.
