ACG 4361
CHAPTER 17 STUDY PROBES SOLUTION
Problem 1. Production data for the Mashing Department for November, Dignan's first month of operations follows:
Costs charged in November:
Materials $27,936 Labor 6,400 Overhead 15,032
During this first month of operations, 4,000 units were started into production. During November, 3,400 units were completed. The remaining units are 80% completed with respect to materials and 60% complete with respect to conversion costs.
How much is the total cost of the units completed under the weighted average method of process costing in the Mashing Department?
$43,860
First track the physical flow, then collect the costs to allocate separately for materials ($27,396) and for conversion costs ($6,400 + $15,032). Calculate the rate per
equivalent unit and then allocate the costs to units completed during the month. Note that the entire production report is presented though not required.
Total Materials Conversion Costs Totals Equivalent units Beginning inventory 0
Started during November 4,000
Units to account for 4,000
Completed & trans. out 3,400 100% 3,400 100% 3,400
Ending WIP 600 80% 480 60% 360
Units accounted for 4,000 3,880 3,760
Costs to be allocated
Beginning inventory $0 $0
Costs incurred $27,936 $21,432
Costs to account for $27,936 $21,432 $49,368
Costs to account for $27,936 $21,432
Equivalent units 3,880 3,760
Rate per equivalent unit $7.20 $5.70
Costs accounted for
Units transferred out $24,480 $19,380 $43,860
$7.20*3,400 $5.70*3,400
Units in ending WIP $3,456 $2,052 5,508
$7.20*480 $5.70*360
Costs accounted for $49,368
Problem 2. Dingo Company has three departments--assembly, checking, and
packaging, and it uses the weighted average method of process costing. The assembly department had 7,500 units in beginning inventory. Associated with these beginning units were $20,200 in direct materials and $25,000 in conversion costs. During the period, the department incurred $79,800 in direct materials and $151,800 in conversion costs and started 50,000 units. Ending inventory consisted of 2,000 units which were 60% complete with respect to conversion costs. Dingo adds materials when the units are 20% complete. Calculate the following for the assembly department for the month:
a. Calculate the equivalent units for materials and conversion costs.
b. Calculate the cost per equivalent unit for materials and conversion costs. c. Calculate the cost of units transferred out.
d. Calculate the cost of the ending work in process.
a. Physical Flow % Materials % Conversion
Beginning work in process 7,500
Units started 50,000
Units to account for 57,500
Units completed 55,500 100% 55,500 100% 55,500
Ending work in process 2,000 100% 2,000 60% 1,200
Units accounted for 57,500 A 57,500 A 56,700
b. Costs Materials Conversion Total
Beginning work in process $20,200 $25,000
Cost incurred during period 79,800 151,800
Costs to account for $100,000 $176,800 $276,800
Cost per unit
Costs to account for $100,000 $176,800
Equivalent units 57,500 56,700
Cost per equivalent unit B $1.7391 B $3.1182
c. Cost of units transferred out $96,520 $173.060
C $269,580
d. Cost of ending WIP $3,478 3,742 D 7,220
2,000*$1.7391 1,200*$3.1182
Costs accounted for $276,800
Problem 3 - Foretold Corporation has three departments in which it produces widgets--cutting, molding, and packaging. On November 1, Foretold Corporation’s packaging department had Work in Process inventory of 6,000 units that were 75% complete with respect to materials and 30% complete with respect to conversion costs. The cost of these units was $93,525 ($60,000 transferred in from previous departments, $26,775 in materials, and $6,750 in labor and overhead). During November, 125,000 units were transferred into packaging from molding. These units had accumulated costs in previous departments of $1,218,560. The packaging department incurred costs of $756,225 for materials and $488,010 for conversion costs in November, and transferred 130,000 units out of the department during the period. The units remaining in ending inventory are 20% complete with respect to conversion costs. One-half of the materials have been added during November. Foretold uses the weighted average method of process
costing.
a. How much is the cost per equivalent unit for transferred-in costs, material, and conversion costs in the packaging department in November?
b. How much is the cost of the units transferred out of the packaging department in November?
c. How much is reported on the balance sheet for WIP at November 30 for the packaging department?
Transferred in DM CC
Beginning WIP 6,000
Units started 125,000
Units to account for 131,000
Units started and
completed 130,000 100% 130,000 100% 130,00 0 100% 130,000 Ending WIP 1,000 100% 1,000 50% 50 0 20% 200
Units accounted for 131,000 131,000 130,500 130,200
Costs to be accounted
for
Beginning WIP $ 60,000 $ 26,775 $ 6,750
Added during period 1,218,560
756,22
Costs to be accounted for $1,278,560 $783,000 $494,760 $2,556,320
Cost per unit:
Costs incurred $1,278,560 $783,000 $494,76 0 EUP 131,000 130,50 0 130,200
Cost per unit A $ 9.76 $ 6.00 $ 3.80
Cost of units transferred out:
EUP 130,000 130,000 130,000
Cost per unit $9.76 $6.00 $3.80
Costs transferred out $ 1,268,800 $780,000 $494,000
B $2,542,80 0
Cost of ending WIP
EUP 1,000 500 200
Cost per unit $ 9.76 $ 6.00 $ 3.80
Cost transferred out $9,760 $ 3,000 $ 760 13,520
Costs accounted for $2,556,320 C
d. List the amounts that would be posted on the debit side of the WIP t-account for the packaging department during November.
$1,218,560 + $756,225 + $488,010
Problem 4 Jones, Inc. uses a weighted average process costing system. The company has three departments--washing, mixing, and chopping. During May, 4,200 units were transferred into the mixing department from the washing department at a cost of $31,790. Direct materials are added when the process is 40% complete. Additional information follows for the mixing department:
On May 1: Beginning inventories = 1,000 units, 45% complete Direct materials costs = $4,800
Conversion costs = $4,780 Transferred-in costs = $11,370
During May: Direct materials costs incurred = $22,825 Conversion costs incurred = $31,500
On May 31: Ending inventory = 950 units, 25% complete
A. In good form, summarize total physical and equivalent units for the mixing department for May.
Physical
Flow % Transf. in % Materials % Conversion
Units in beg.work in
process 1,000
Units started 4,200
Units to account for 5,200
Units completed 4,250 100% 4,250
100
% 4,250 100% 4,250
Units in ending WIP 950 100% 950 0% 0 25% 238
Units accounted for 5,200 5,200 4,250 4,488
*Transferred in units are treated as a separate DM as if the materials are added at the beginning of the process.
B. In good form, calculate ‘costs to account for’ and compute costs per equivalent unit for the mixing department for May.
Costs Transf. in Materials Conversion Total
Beginning work in process $11,370 $ 4,800 $ 4,780
Cost incurred during period 31,790 22,825 31,500
Costs to account for $ 43,160 $27,625 $36,280 $107,065
Cost per unit
Total costs $43,160 $27,625 $36,280
Total EUP 5,200 4,250 4,488
Cost per equivalent unit $8.30 $6.50 $8.0838 $22.8838
Problem 5 Sit-Down Company manufacturers a standard recliner in three departments--assembly, upholstery, and hardware. During February, the firm's assembly department started production of 75,000 chairs. During the month, the assembly department completed 80,000 chairs, and transferred them to the hardware department. The assembly department ended the month with 10,000 chairs in ending inventory. There were 15,000 chairs in beginning inventory in the assembly department. All direct materials costs are added at the beginning of the production cycle and
conversion costs are added uniformly throughout the production process. The FIFO method of process costing is used. In the assembly department, beginning work in process was 30% complete as to conversion costs, while ending work in process was 80% complete as to conversion costs. The following is provided for the assembly department during the month of February:
Beginning inventory:
Direct materials $24,000 Conversion costs $35,000
Manufacturing costs added during the accounting period: Direct materials $168,000
Conversion costs $278,000
A. Prepare a production cost report for the month of February for the assembly department. Units Materia ls Conver sion Beginning WIP 15,0 00 Units started 75,0 00 Units to be accounted for 90,0 00 Beginning WIP 15,0 00 0% - 70% 10,5 00 Started and completed 65,0 00 100% 65,0 00 100% 65,0 00 Ending WIP 10,0 00 100% 10,0 00 80% 8,0 00 Units accounted for 90,0 00 75,0 00 83,5 00 Costs to account for Beginning WIP $ 24,00 0 $ 35,0 00 $ 59,000 Added during period 168,0 00 278,0 00 Costs to account for $192,0 00 $313,0 00 $505,00 0
Cost per unit:
Costs added $168,0 00 $278, 000 EUP 75,0 00 83,5 00 Cost per EUP $ 2.240 0 $ 3.32934 Costs transferred
out: Beginning inventory $59,000
EUP 65,0 00 75,5 00 Cost per unit $2.240 00 $3.329 34 DM CC
$145,6 00 $251,3 65 396, 965 Costs transferred out 455, 965 Cost in ending WIP EUP 10,0 00 8,0 00 Cost per unit $2.240 00 $3.329 34 $ 22,4 00 $ 26,6 35 49, 035 Costs accounted for $505,00 0
Answer the following for the assembly department during February:
B. How many of the units that were started during February were completed during February?
75,000 - 10,000 = 65,000
The 10,000 units in WIP are incomplete.
C. What were the equivalent units for conversion costs during February?
(15,000 � 0.7) + 65,000 + (10,000 � 0.8) = 83,500
D. What is the amount of direct materials cost assigned to ending work-in-process inventory at the end of February?
$168,000/75,000 = $2.24 � 10,000 = $22,400
E. What is the cost of the goods transferred out of the assembly department during February?
See above in yellow. $455,965
Problem 6 Aero Flyer company manufacturers replica plastic airplane and motorized vehicle models in three departments--assembly, motorizing, and finishing. During October, the firm's assembly department started production of 60,000 models. During the month, the assembly department completed 66,000 models, and transferred them to the motorizing department. The assembly department ended the month of October with 22,000 models in ending inventory. There were 28,000 models at October 1 in the assembly department. All direct materials costs are added when the units are 20% through the process, and conversion costs are added uniformly throughout the production process. The FIFO method of process costing is used by Aero. Beginning work in process was 25% complete as to conversion costs, while ending work in
process was 50% complete as to conversion costs for the assembly department. Costs for the assembly department for the month of October follow:
Beginning inventory:
Direct materials costs $39,200 Conversion costs $30,800
Manufacturing costs added during October: Direct materials costs $90,000 Conversion costs $280,000
Calculate the following for the month of October for the assembly department:
A. How many of the units that were started during October were completed during October?
60,000 - 22,000 = 38,000
B. What were the equivalent units for conversion costs during October?
70,000
C. What is the cost of the goods transferred out during October? $363,000
A partial production cost report is prepared to show the calculations of the solutions:
DM CC
Beginning WIP 28,000
Units started 60,000
Units to be accounted for 88,000
Beginning WIP 28,000 0% - 75% 21,000
Started and completed 38,000 100% 38,000 100% 38,000
Ending WIP 22,000 100% 22,000 50% 11,000
Units accounted for 88,000 60,000 70,000
Costs to be accounted for
Beginning WIP $ 39,200 $ 30,800 $70,000
Added during period 90,000 280,000
Costs to be accounted for $129,200 $310,800 $440,000
Costs per unit: Costs added $90,000 $280,000
EUP 60,000 70,000
Cost per unit $1.50 $4.00
Layer: $1.50*38000 = $4.00*(21,000+38000)
57,000 + 236,000 293,000 Costs transferred out $ 363,000
Problem 7 Pet Products Company uses an automated process to manufacture its pet products. For June, the company had the following activities in department 2:
Beginning work in process inventory 4,500 items, 1/4 complete
Units transferred in from dept. 1 15,000 units
Units completed 17,500 units
Ending work in process inventory 2,000 items, 3/4 complete
Cost of beginning work in process $5,250
Direct material costs, current $16,500
Conversion costs, current $23,945
Direct materials are placed into production at the beginning of the process and
conversion costs are incurred evenly throughout the process. Prepare the physical and equivalent units section of the production cost report using the FIFO method for
Department 2 for June.
Transferred in Materials Conversion Costs
Beginning WIP 4,500
Units started 15,000
Units to account for 19,500
Beginning WIP 4,500 0% - 0% - 75% 3,375
Started and completed 13,000 100% 13,000 100% 13,000 100% 13,000
Ending WIP 2,000 100% 2,000 100% 2,000 75% 1,500
Units accounted for 19,500 15,000 15,000 17,875
Under FIFO, the ending WIP units have ‘begun,’ so 100% of the effort is assumed to be performed during June. The beginning units were started during a previous month, so no additional materials have been added during June. The EUP are 0% for DM because 100% of the materials are assumed to be added for the units in the previous period (May)--the period during which they were started.
Problem 8 Taco Ranch uses a process cost system. Production begins in the Crafting Department where materials are added at the beginning of the process and conversion
costs are incurred uniformly throughout the process. On November 1, the beginning work in process inventory consisted of 5,000 units which were 60% complete and had a cost of $190,000, $100,000 of which were materials costs. During November, the
following occurred in the crafting department:
Materials added in November $225,000
Conversion costs incurred in November $45,000
Units completed and transferred out in November 20,000
Units in ending work in process November 30 (20% complete) 12,500
A. Prepare a production cost report using weighted average cost flow for the crafting department for November. Answer the following questions.
1. What are the equivalent units of production for materials and conversion costs in the crafting department for the month of November?
2. What are the costs assigned to the ending work in process inventory on November 30?
3. What are the costs assigned to units completed and transferred out during November?
Weighted Average Direct materials Conversion Costs
Beginning WIP 5,000
Started 27,500
Units to account for 32,500
Comp. & TO 20,000 100% 20,000 100% 20,000 Ending WIP 12,500 100% 12,500 20% 2,500 Units accounted for 32,500 32,500 22,500
Costs to be accounted for:
Beginning inventory $100,000 $90,000
Added 225,000 45,000
Costs to be accounted for $325,000 $135,000 $460,000
Cost per EUP:
Costs to be accounted for $325,000 $135,000
EUP 32,500 22,500
Per unit cost A1 $10.00 A1 $6.00
Costs accounted for:
Completed and transferred out: 20,000*$10 20000*$6
$200,000 + $120,000 A3 $320,000
Ending work in process: 12500*$10 2500*$6
$125,000 + $15,000 A2 140,000
Costs accounted for $460,000
B. Prepare a production cost report using a FIFO cost flow for the crafting department for November.
FIFO Direct materials Conversion Costs
Beginning inventory 5,000
Started 27,500
Units to account for 32,500
Beginning WIP 5,000 0% - 40% 2,000
Comp. & TO 15,000 100% 15,000 100% 15,000
Ending WIP 12,500 100% 12,500 20% 2,500
Units accounted for 32,500 27,500 19,500
Costs to be accounted for:
Beginning inventory $ 100,000 $90,000
Added 225,000 45,000
Costs to account for $325,000 $135,000 $460,000
Cost per EUP:
Costs added $225,000 $ 45,000
EUP 27,500 19,500
Per unit cost $8.181818 $2.307692
Costs accounted for:
Completed and transferred out:
Beg. WIP $190,000
Costs added 15,000*$8.1818181 17000*$2.307892
$122,727 $39,231 161,958
Completed & transferred out $351,958
Ending work in process: 12500*$8.1818181 2500*$2.307892
$102,273 $5,769 108,042
Costs accounted for *$460,000
C. Draw a Work in Process t-account for the Crafting Department and post the respective amounts to it during November under the FIFO method.
WIP - Crafting 190,000 225,000 45,000 351,958 108,042
Problem 9. North Face makes 3 flavors of coffee-Macadamia nut, French vanilla, and Columbian. All flavors go through the same assembly line but they differ as to the materials used. All models utilize all processes. North Face uses operation costing and allocates conversion costs using one cost pool based on the number of pounds
processed. The following information is provided:
Macadamia Nut
French
Vanilla Columbian Total
Materials $16,200 $10,500 $17,920 $44,620
Pounds processed 3,600 2,800 5,600 12,000
Direct labor costs $13,000
Overhead costs: Cleaning 11,000 Roasting 14,000 Flavoring 13,400 Packaging 12,800 Total $51,200
How much is the cost per unit of each pound of French Vanilla coffee?
The conversion costs MUST be allocated in one pool since this company is using operation costing.
Rate = ($13,000 + $51,200)/12,000 = $5.35 per pound
Direct materials $10,500/2,800 pds. $3.75
Total cost per pound $9.10
Problem 10. Surf Products manufactures two styles of board shorts. The standard style is made of microfiber. The quick dry style is made of polyester/spandex. All other
components of both brands are identical. During July, a total of 3,600 standard style shorts were manufactured with a materials cost of $7,920, and 1,600 pairs of quick dry were manufactured with a materials cost of $11,520. Conversion costs are allocated based on the number of pairs of board shorts produced. During July, $7,800 of factory overhead and $8,320 of direct labor were incurred in manufacturing the board shorts. Show the calculation of the cost of each pair of quick dry board shorts during the month of July using operation costing.
Conversion cost rate = ($7,800 + $8,320) / (3,600 + 1,600) = $3.10 per pair Unit cost = ($11,520/1,600) + $3.10 = $10.30 each
Note: Conversion costs must be in ONE cost pool for allocation purposes.
Problem 11. Chief Deli creates deli platters for catering services. The deli platter orders require the same assembly operations but different ingredients. The company uses operation costing and assigns conversion costs based on the pounds of meat used. The following information was available for May orders:
Order
324
Order 328 Total
Pounds of deli meats 1,120 480 1,600
Cost per pound of deli meat $4.80 $5.50
Direct labor hours 162
Labor cost per hour $15.00
Total production overhead costs $1,650
Show the calculation of the unit product cost of Order 328.
With operations costing, conversion costs are allocated to products and direct materials are traced.
Conversion costs rate:
Direct labor: 162*$15.00 $2,430
Overhead: 1,650
Total conversion costs to be allocated $4,080
Cost driver - pounds of deli meat 1,600
Order 328:
DM 480*$5.50 $2,640
DL & Overhead: $2.55*480 1,224
Total cost of order 328 $3,864
Note: Conversion costs must be in ONE cost pool for allocation purposes.
Multiple Choice
1. When using weighted average process costing
A. The costs attached to beginning work in process are kept separate from all other costs.
B. The current period costs will be added to the beginning work in process costs. C. Units in the ending inventory are not considered in making equivalent unit computations.
D. Transferred-in units are always the same percentage complete for materials and conversion costs as for conversion costs.
2. Which of the following statement (s) concerning conversion costs is correct? A. Estimating the degree of completion of direct materials in a partially completed unit is usually easier to calculate than estimating the degree of completion for
conversion costs.
B. Companies that produce homogeneous products incur no conversion costs. C. Estimates are not considered acceptable for GAAP purposes.
D. Both (b) and (c) are correct.
3. Under the weighted-average method, the stage of completion of beginning work in process
A. is relevant in determining the equivalent units.
B. must be combined with the work done during the current period in determining the equivalent units.
C. is irrelevant in determining the equivalent unit calculation. D. impacts the cost per equivalent unit.
4. Operation costing systems are used when the products have
A. used a standardized method of processing that is repeatedly performed. B. common characteristics and no individual characteristics.
C. individual characteristics and no common characteristics. D. been mass produced in a continuous production process.
E. some common characteristics and some individual characteristics. They are often referred to as hybrid systems.
5. Which of the following are considered alternative options when a company is selecting an option to operation costing?
A. Variable costing and throughput costing B. Absorption costing and variable costing C. Job costing and process costing
D. Process costing and throughput costing
Absorption costing, variable costing, and throughput costing are methods of determining which costs are considered to be product costs vs. period costs. Job costing, process costing, and operation costing differ in which costs are traced to products and which costs are allocated.
6. Additional materials are added in the second department of a four-department
production process. This addition does not increase the number of units being produced in the second department. This will
A. increase the equivalent units of production. B. increase the cost per unit.
C. decrease the value of the transferred-in costs. D. decrease the total costs to account for.
Costs added will increase, leading to an increase in the cost per unit.
7. In a production cost report using FIFO process costing, transferred-in costs are most similar to
A. material added at the beginning of the process. B. conversion costs added during the process. C. costs transferred-out to the next process. D. costs included in beginning inventory.
8. The loan department of a financial corporation makes loans to businesses. The costs of processing these loans are often several thousand dollars. All loans are initially evaluated using the same financial analysis software, but some require outside services such as appraisals and legal services. Which is the most appropriate costing system for the loan department?
A. job-order costing B. process costing C. operation costing D. batch costing
9. In the manufacturing operations of a company using process costing, A. there will be multiple work in process accounts in the general ledger. B. direct material and direct labor are referred to as conversion costs.
C. transferred in costs occur only in the departments that have no direct labor costs. D. the process costing system can only be used until the point where the product enters the packaging department.
There is one WIP account for each process. Direct material and direct labor are prime costs.
10. When using weighted average process costing,
A. The costs attached to beginning work in process are kept separate from all other cost
B. The current period costs will be added to the beginning work in process costs C. Units in the ending inventory are not considered in making equivalent unit computations
D. Ending WIP units are always 100% complete for materials.
When inspection occurs at different points throughout production, spoiled units will be less than 100% complete.
11. Which of the following is the correct journal entry to transfer costs out of the Finishing Department, the last processing department?
A. Debit Work in Process Inventory – Finishing Department and credit Finished Goods Inventory
B. Debit Cost of Goods Sold and credit Finished Goods Inventory
C. Debit Cost of Goods Sold and credit Work in Process Inventory – Finishing Department
D. Debit Finished Goods Inventory and credit Work in Process Inventory – Finishing Department
12. In a process costing system, transferred in costs
A. Are costs that are part of beginning inventory completed during the previous period
B. Are costs for units that required no current period work C. Are the costs recorded in preceding departments D. Are the costs of the completed units
These costs must continue to be tracked as they are part of the cost of the products that are not yet finished.
13. A distinct feature of the FIFO process costing method is that the
A. work done on beginning inventory before the current period is blended with the work done during the current period in the calculation of equivalent units
B. work done on beginning inventory before the current period is kept separate from the work done during the current period in the calculation of equivalent units
C. work done on ending inventory is kept separate from the work done during the current period in the calculation of equivalent units and is not included in the equivalent units calculation
D. units in ending inventory are excluded from the cost per equivalent unit
14. On occasion, the FIFO and the weighted-average methods of process costing will result in the same dollar amount of costs being transferred to the next department. Which of the following scenarios would have that result?
A. when the beginning and ending inventories are equal in terms of physical units B. when the beginning and ending inventories are equal in terms of the percentage of completion for both direct materials, and conversion costs
D. when there is no beginning inventory
15. In the computation of the cost per equivalent unit, the FIFO method of process costing considers
A. all the costs entering work in process from the units in beginning inventory plus the costs for the work completed during the current accounting period. B. all the costs that have entered work in process during the current accounting
period.
C. all the costs that have entered work in process during the current accounting period from the units started or transferred in minus the costs associated with ending inventory.
D. all the costs that have entered work in process during the current accounting period plus the costs associated with beginning inventory.
16. Under the FIFO process costing method, the stage of completion of beginning work in process
a. is relevant in determining the equivalent units.
b. must be must be added to the work done during the current period in determining the equivalent units.
c. is irrelevant in determining the equivalent unit calculation. d. has no effect on the cost per equivalent unit.
True False Questions
1. The weighted-average method assumes all beginning units are completed during the previous month.
False.
2. Examples of industries that would use process costing include the pet food industry.
True.
3. The principal difference between process costing and job costing is that in job costing an averaging process is used to compute the unit costs of products or services.
False.
4. In weighted average process costing, equivalent units in beginning work in process plus units started during the current period equals equivalent units completed and transferred out in the current period minus equivalent units in ending work in process.
5. In the weighted average costing method, the costs of direct materials in beginning inventory are not included in the cost per unit calculation if direct materials are added at the start of the production process.
