CHAPTER 6
PROCESS COSTING
QUESTIONS 1. A company that produces homogeneous goods in mass quantities is likely to use a process costing system. The company can either have a single department or multiple departments. Job order costing and process costing are similar in that they are both methods of assigning costs to products. Also, the methods use similar product accounts (raw materials, work in process, finished goods, cost of goods sold) to capture the costs associated with production and use similar cost pools (direct material, direct labor, and overhead). Job order costing and process costing differ in the way in which costs are gathered. In a job order costing system, costs are accumulated by department and by job; in a process costing system, costs are accumulated by production departments for the products that flow through those departments. In process costing, production must be determined on the basis of equivalent units to properly allocate the costs associated with each cost component to the work that was completed during the period and to the work that is still in process at the end of the period. Equivalent units of production are unnecessary in job order costing.2. The only difference between weighted average and FIFO equivalent units of production is in the treatment of the work that was completed on beginning inventory in the prior period. Under weighted average, the work performed on beginning inventory in the prior period is combined with the work performed during the current period. Under FIFO, the work performed on beginning inventory during the prior period is held out separately and not commingled with the work performed during the current period.
The FIFO method more accurately portrays the actual physical flow of units through the manufacturing process because it is most likely that the units in beginning inventory will be the first units to be completed during the current period—thus a firstin, firstout flow.
3. An equivalent unit of production is an accounting computation that puts partially completed and wholly completed units on a comparable basis. Without use of equivalent units, partially completed and fully completed units would be combined as if they were homogeneous measures of output, resulting in meaningless data since fully and partially completed units are different outputs. 4. One EUP calculation is generally not sufficient because each component may be
at a different percentage of completion within a production department. However, if components are at the same percentage of completion, one EUP calculation can be made. For example, if OH is applied on the basis of direct labor, a single
“conversion” cost component calculation can be made. Or, if several direct materials are added at the beginning of the process, they may be combined as a single cost component. 5. The units started and completed in a period are calculated as the total units completed during the period minus the units that were in the beginning inventory. This figure can be used in both the weighted average and FIFO methods as shown in the chapter. There are, however, other methods of computing EUP in which the units started and completed are not shown separately. This calculation is necessary for the FIFO method because work in the prior period cannot be commingled with work performed in the current period. This calculation is not necessary for the weighted average method because work performed on the current period’s beginning inventory in the prior period need not be separated from work performed to complete the beginning inventory in the current period. 6. The term transferredout cost is the cost amount that is sent from WIP Inventory to either the next WIP department or to FG Inventory. Under the WA method, the units transferred are not distinguished by when they were begun (whether in the previous or the current period); thus, all transferred out units have the same perunit cost and only one computation is necessary. Under the FIFO method, the units that were in the beginning WIP Inventory are considered separately from those that were begun in the current period. Thus, the beginning WIP costs must attach to those specific units, which must then be completed at current period costs for direct material, direct labor, and overhead. After determination of the total cost to manufacture the beginning WIP Inventory units, the next computation reflects the units that were started and completed in the current period, which only includes current period costs. 7. Under either the weighted average or FIFO method, costs are assigned to ending inventory by multiplying the cost per EUP for each cost component times the EUP calculated for that component. The costs for these components are then totaled.
8. The only difference between process costing in a multidepartment environment and a single department environment is that there will be a cost component labeled “Transferred In.” The costs of previous departments must follow the flow of goods into successor departments to determine the full cost of production. 9. The cost per unit transferred out of the first department will always be equal to the cost per unit transferred in to the second department unless there is a change in the unit measurement in the second department. For example, the first department might use pounds of cereal, but the second department might measure units in 24oz. boxes of cereal. Thus, if the cost per pound of cereal transferred out were $2, the cereal cost per box transferred in would be ($2 per pound × 1.5 pounds) or $3. 10. A hybrid costing system is one in which process costing is used to
account for certain product costs and job order costing is used to account for other product costs. Hybrid costing is common in environments that have, for example, material costs that vary substantially from one production run to another (gold versus copper), but require all products to flow through the same physical conversion processes. In this example, the material would be accounted for on a job order basis and the conversion would be accounted for using process costing.
11. Under a standard costing system, the Raw Material, Work in Process, and Finished Goods Inventory accounts are accounted for at standard costs. Actual costs of each process or each department are also captured in a standard costing system, and variances can be computed as differences between the standard and actual amounts for each cost component. The variances provide information to management about the efficiency of operations because they reflect differences between expected (standard) and actual costs. 12. The “method of neglect” is used to treat the cost of normal spoilage in a process costing system. Under this method, the spoiled units are simply ignored in the cost of production report because it is assumed that there will always be a given level (or less) of spoilage and that such a level cannot be eliminated. By using the method, the good production absorbs the cost of the spoiled production. 13. Normal loss refers to an expected reduction in production quantity
based on the company’s production technology and production practices. Abnormal loss refers to a quantity of loss above the normal loss quantity. A normal loss creates an expected production cost, and using the “method of neglect,” that cost is inventoriable as part of the cost of good production. The method of neglect ignores the spoiled units in the EUP schedule and, as such, assigns costs to good units. The cost of spoiled units found at an inspection point will be assigned to all units that have passed the inspection point. The method of neglect raises the cost per equivalent unit because no costs are assigned to the spoiled units.
Abnormal spoilage cost is not expected, and thus, it is not inventoriable. Abnormal losses would more likely be preventable than normal losses because abnormal losses are less likely to be caused by factors that are inherent in the materials or production methods. For example, a known amount of material loss (waste) is to be expected if lower quality materials are utilized. However, any loss beyond the expected amount would likely be caused by other factors that are subject to management control, e.g., production errors.
EXERCISES 14. Each student will have a different answer. No solution provided. 15. a. 24,000 + 600,000 = 624,000 pounds b. & c. Beginning WIP Inventory 24,000 Started 600,000 To account for 624,000 Completed (608,000) Ending WIP Inventory 16,000 Units started and completed = 608,000 – 24,000 = 584,000 Units DM CC Beginning WIP Inventory 24,000 24,000 24,000 Started & completed 584,000 584,000 584,000 Ending WIP Inventory (65%) 16,000 16,000 10,400 EUP 624,000 624,000 618,400 16. a. & b. Beginning WIP
Inventory (30%) 70,000 Beginning WIP Inventory 70,000
Started 445,300 Started and completed 357,500 To account for 515,300 Ending WIP Inventory 87,800 Accounted for 515,300 Units DM CC Beginning WIP Inventory 70,000 70,000 70,000 Started & completed 357,500 357,500 357,500 Ending WIP Inventory (35%) 87,800 87,800 30,730 EUP 515,300 515,300 458,230 17. a. Units CC Beginning WIP Inventory (40%) 10,000 Started 350,000 Units to account for 360,000 Beginning WIP Inventory 10,000 10,000 Started and completed 334,000 334,000 Transferred out 344,000 Ending WIP Inventory (70%) 16,000 11,200 Units accounted for 360,000 355,200 b. Units CC Beginning WIP Inventory (30%) 40,000 Started 480,000 Units to account for 520,000 Beginning WIP Inventory 40,000 40,000 Started and completed 454,000 454,000
Transferred out 494,000 Ending WIP Inventory (80%) 26,000 20,800 Units accounted for 520,000 514,800 c. Units CC Beginning WIP Inventory (55%) 15,000 Started 405,000 Units to account for 420,000 Beginning WIP Inventory 15,000 15,000 Started and completed 400,800 400,800 Transferred out 415,800 Ending WIP Inventory (90%) 4,200 3,780 Units accounted for 420,000 419,580 d. Units CC Beginning WIP Inventory (35%) 10,800 Started 359,100 Units to account for 369,900 Beginning WIP Inventory 10,800 10,800 Started and completed 340,800 340,800 Transferred out 351,600 Ending WIP Inventory (45%) 18,300 8,235 Units accounted for 369,900 359,835 18. a. Work to be performed = 100% – 45% = 55% for conversion costs only b. & c. Beginning WIP Inventory 24,000 Started 600,000 Accountable for 624,000 Completed (608,000) Ending WIP Inventory 16,000 Units started and completed = 608,000 – 24,000 = 584,000 Units DM CC Beginning WIP Inventory (55%) 24,000 0 13,200 Started & completed 584,000 584,000 584,000 Ending WIP Inventory (65%) 16,000 16,000 10,400 EUP 624,000 600,000 607,600 19. a. & b. Beginning WIP
Inventory 70,000 Beginning WIP Inventory 70,000
Started 445,300 Started and completed 357,500
To account for 515,300 Ending WIP Inventory 87,800
Accounted for 515,300
Units DM CC
Started & completed 357,500 357,500 357,500 Ending WIP Inventory (35%) 87,800 87,800 30,730 EUP 515,300 445,300 437,230 20. a. Units CC Beginning WIP Inventory (40%) 10,000 Started 350,000 Units to account for 360,000 Beginning WIP Inventory (60%) 10,000 6,000 Started and completed 334,000 334,000 Transferred out 344,000 Ending WIP Inventory (70%) 16,000 11,200 Units accounted for 360,000 351,200 b. Units CC Beginning WIP Inventory (30%) 40,000 Started 480,000 Units to account for 520,000 Beginning WIP Inventory (70%) 40,000 28,000 Started and completed 454,000 454,000 Transferred out 494,000 Ending WIP Inventory (80%) 26,000 20,800 Units accounted for 520,000 502,800 c. Units CC Beginning WIP Inventory (55%) 15,000 Started 405,000 Units to account for 420,000 Beginning WIP Inventory (45%) 15,000 6,750 Started and completed 400,800 400,800 Transferred out 415,800 Ending WIP Inventory (90%) 4,200 3,780 Units accounted for 420,000 411,330 d. Units CC Beginning WIP Inventory (35%) 10,800 Started 359,100 Units to account for 369,900 Beginning WIP Inventory (65%) 10,800 7,020 Started and completed 340,800 340,800 Transferred out 351,600 Ending WIP Inventory (45%) 18,300 8,235 Units accounted for 369,900 356,055
21. a. Beginning WIP Inventory (100%; 60%; 75%) 15,000 Beginning WIP Inventory 15,000 Started 620,000 Started and completed 594,600 To account for 635,000 Ending WIP Inventory (100%; 35%; 60%) 25,400 Accounted for 635,000 Units DM DL OH Beginning WIP Inventory 15,000 15,000 15,000 15,000 Started & completed 594,600 594,600 594,600 594,600 Ending WIP Inventory 25,400 25,400 8,890 15,240 Equivalent units 635,000 635,000 618,490 624,840 b. Units DM DL OH Beginning WIP Inventory 15,000 0 6,000 3,750 Started & completed 594,600 594,600 594,600 594,600 Ending WIP Inventory 25,400 25,400 8,890 15,240 Equivalent units 635,000 620,000 609,490 613,590 c. Equivalent units (WA) 635,000 618,490 624,840 EUP in beginning WIP Inventory (15,000) (9,000) (11,250) Equivalent units (FIFO) 620,000 609,490 613,590 22. a. Beginning WIP Inventory 180,000 Tons started 3,400,000 Total tons to account for 3,580,000 b. Total tons to account for 3,580,000 Tons in ending WIP Inventory (165,000) Tons transferred out 3,415,000 Tons in beginning WIP Inventory (180,000) Tons started & completed (tons) 3,235,000 c. Material Conversion Beginning WIP Inventory 180,000 180,000 Started & completed 3,235,000 3,235,000 Ending WIP Inventory (100%, 40%) 165,000 66,000 WA EUP 3,580,000 3,481,000 d. Material Conversion Beginning WIP Inventory (0%, 35%) 0 63,000 Started & completed 3,235,000 3,235,000 Ending WIP Inventory (100%, 40%) 165,000 66,000 FIFO EUP 3,400,000 3,364,000 e. DM CC WA EUP 3,580,000 3,481,000
Equivalent units in BI (180,000) (117,000) FIFO EUP 3,400,000 3,364,000 23. a. Beginning Inventory 21,600 Units started 561,000 Units to account for 582,600 b. Units to account for 582,600 Units in BI (21,600) Units in EI (13,700) Units started & completed 547,300 c. DM DL OH BI 21,600 21,600 21,600 Started & completed 547,300 547,300 547,300 EI (75%, 25%, 10%) 10,275 3,425 1,370 EUP (WA) 579,175 572,325 570,270 d. DM DL OH BI (15%, 40%, 55%) 3,240 8,640 11,880 Started & completed 547,300 547,300 547,300 EI (75%, 25%, 10%) 10,275 3,425 1,370 EUP (FIFO) 560,815 559,365 560,550 e. DM DL OH EUP (WA) 579,175 572,325 570,270 Equivalent units in BI (18,360) (12,960) (9,720) EUP (FIFO) 560,815 559,365 560,550 24. a. DL cost = Conversion cost – OH cost = $189,648 – $85,200 = $104,448 b. DM DL Overhead Beginning WIP Inventory $ 26,232 $ 19,504 $ 20,640 Current period 158,688 104,448 85,200 Total costs $184,920 $123,952 $105,840 Divided by EUP ÷ 53,600 ÷ 48,800 ÷ 42,000 Cost per EUP $3.45 $2.54 $2.52 25. DM DL Overhead WA EUP 53,600 48,800 42,000 Beginning WIP EUP (7,200) (8,000) (7,920) FIFO EUP 46,400 40,800 34,080 Current period cost $158,688 $104,448 $85,200 Divided by EUP ÷ 46,400 ÷ 40,800 ÷ 34,080 Cost per EUP $3.42 $2.56 $2.50
26. a. DM DL OH Total
Beginning WIP $ 19,600 $ 6,320 $ 10,020 $ 35,940 Current period 54,000 34,720 84,480 173,200
Total $ 73,600 $41,040 $ 94,500 $209,140 b. Total costs $ 73,600 $ 41,040 $ 94,500 $209,140 WA EUP ÷ 160,000 ÷ 152,000 ÷ 150,000 Cost per EUP $0.46 $0.27 $0.63 $1.36 c. Current costs $ 54,000 $ 34,720 $ 84,480 $173,200 FIFO EUP ÷ 120,000 ÷ 124,000 ÷ 132,000 Cost per EUP $0.45 $0.28 $0.64 $1.37 d. WA EUP 160,000 152,000 150,000 FIFO EUP 120,000 124,000 132,000 Beg. WIP EUP 40,000 28,000 18,000 Percent complete 100% 70% 45% 27. Units Units Beginning WIP
Inventory 9,800 Beginning WIP Inventory 9,800
Units started 81,500 Started & completed 76,900
Units to account for 91,300 Ending WIP Inventory 4,600
Accounted for 91,300
Other
Canisters Materials DL OH Beginning WIP Inventory 9,800 9,800 9,800 9,800 Started & completed 76,900 76,900 76,900 76,900 EI 4,600 1,840 920 460 EUP 91,300 88,540 87,620 87,160 Costs: Other
Canisters Materials DL OH Total
Beginning WIP $ 6,535 $ 6,174 $ 5,594 $ 1,070 $ 19,373 Current period 61,940 86,793 82,026 160,176 390,935 Total cost $68,475 $92,967 $87,620 $161,246 $410,308 Divided by EUP ÷ 91,300 ÷ 88,540 ÷ 87,620 ÷ 87,160 Cost per EUP $0.75 $1.05 $1.00 $1.85 $4.65 28. a. Units Beginning WIP Inventory 400 Units started 3,800 Units to account for 4,200 Beginning WIP Inventory 400 Units started & completed 3,500 Total units completed 3,900 Ending WIP Inventory 300 Units accounted for 4,200
Material Conversion
Beginning WIP Inventory 400 400
Units started & completed 3,500 3,500 Ending WIP Inventory 120 180
EUP 4,020 4,080
b. Material Conversion Total
Beginning WIP $ 4,349 $ 4,658 $ 9,007 Current costs 60,775 46,750 107,525 Total cost $65,124 $51,408 $116,532 Divided by EUP (WA) ÷ 4,020 ÷ 4,080 Cost per EUP $16.20 $12.60 $28.80 29. Units Units Beginning WIP
Inventory 9,800 Beginning WIPInventory 9,800
Units started 81,500 Started & completed 76,900 Units to account for 91,300 Ending WIP Inventory 4,600 Accounted for 91,300 Other Canisters Materials DL OH Beginning WIP Inventory 0 3,920 5,880 7,840 Started & completed 76,900 76,900 76,900 76,900 EI 4,600 1,840 920 460 EUP 81,500 82,660 83,700 85,200 Costs: Other
Canisters Materials DL OH Total
Current period $61,940 $86,793 $82,026 $160,176 $390,935 Divided by EUP ÷ 81,500 ÷ 82,660 ÷ 83,700 ÷ 85,200 Cost per EUP $0.76 $1.05 $0.98 $1.88 $4.67 30. a. Units Beginning WIP Inventory 400 Units started 3,800 Units to account for 4,200 Beginning WIP Inventory 400 Units started & completed 3,500 Total units completed 3,900 Ending WIP Inventory 300 Units accounted for 4,200 Material Conversion
Beginning WIP Inventory 120 60 Units started & completed 3,500 3,500 Ending WIP Inventory 120 180
EUP 3,740 3,740
b. Material Conversion Total
Current costs $60,775 $46,750 $107,525 Divided by EUP (FIFO) ÷ 3,740 ÷ 3,740 Cost per EUP $16.25 $12.50 $28.75 31. a. 390,000 × ($7.50 + $9.00 + $10.20) = 390,000 × $26.70 = $10,413,000 b. DM: $7.50 × (55,500 × 100%) $416,250 DL: $9.00 × (55,500 × 30%) 149,850 OH: $10.20 × (55,500 × 25%) 141,525 Total of ending inventory $707,625
c. Cost of goods transferred out $10,413,000 Ending WIP 707,625 Total cost to account for $11,120,625 32. a. BI cost $ 458,482.00 Cost to complete: DM (42,600 × 20% × $10.74) $ 91,504.80 DL (42,600 × 55% × $13.88) 325,208.40 OH (42,600 × 70% × $24.80) 739,536.00 1,156,249.20 Total cost of BI transferred $1,614,731.20 b. Goods started and completed = 1,570,000 – 42,600 = 1,527,400 Total FIFO cost per EUP = $10.74 + $13.88 + $24.80 = $49.42 Total cost of BI transferred $ 1,614,731.20 Cost of goods S&C (1,527,400 × $49.42) 75,484,108.00 Total cost of goods transferred $ 77,098,839.20 c. Cost of ending inventory: DM (28,400 × 35% × $10.74) $106,755.60 DL (28,400 × 15% × $13.88) 59,128.80 OH (28,400 × 25% × $24.80) 176,080.00 Total cost of EI $341,964.40 d. Total cost to account for Cost of goods transferred $77,098,839.20 Cost of ending inventory 341,964.40 Total cost to account for $77,440,080.60 33. a. Because direct material (other than packaging) is 100 percent complete at the start of production, the number of EUP shown for direct material is also the number of units in BI. Material (54,000 ÷ 54,000) = 100% Packaging (0 ÷ 54,000) = 0% Labor (16,200 ÷ 54,000) = 30% Overhead (18,900 ÷ 54,000) = 35% b. Beginning WIP Inventory: DM (other than packaging) $789,040 DL 91,862 Overhead 145,908 $1,026,810 Complete beginning WIP Inventory: Packaging (54,000 × 100% × $3.00) $162,000 DL (54,000 × 70% × $10.84) 409,752 Overhead (54,000 × 65% × $7.68) 269,568 841,320 Total cost to account for $1,868,130
c. # of units S&C = Units completed – Units in BI # of units S&C = 370,000 – 54,000 = 316,000 Cost of units S&C = 316,000 × ($29.50 + $3.00 + $10.84 + $7.68) = 316,000 × $51.02 = $16,122,320 d. DM (other than packaging) (12,000 × 100% × $29.50) $354,000 Labor (12,000 × 30% × $10.84) 39,024 Overhead (12,000 × 55% × $7.68) 50,688 Total $443,712 34. a. Beginning WIP 1,000 Started 8,400 Units to account for 9,400
Units Material Conversion
Beginning WIP 1,000 1,000 1,000
Started & completed 8,100 8,100 8,100
Ending WIP 300 240 210
Units accounted for 9,400 9,340 9,310
Total Material Conversion
Beginning WIP $ 5,006.30 $ 4,133.20 $ 873.10 Current period 86,354.00 62,928.00 23,426.00 Total costs $91,360.30 $67,061.20 $24,299.10 EUP ÷ 9,340 ÷ 9,310 Cost per EUP $9.79 $7.18 $2.61 b. Cost transferred out = 9,100 × $9.79 = $89,089 c. Ending WIP DM (240 × $7.18) $1,723.20 CC (210 × $2.61) 548.10 Total $2,271.30
d. Units Material Conversion
Complete BI (40%, 70%) 1,000 400 700
Started & completed 8,100 8,100 8,100 Ending WIP 300 240 210
Units accounted for 9,400 8,740 9,010
Total Material Conversion
Beginning WIP $ 5,006.30
Current Period 86,354.00 $62,928.00 $23,426.00
Total costs $91,360.30
EUP ÷ 8,740 ÷ 9,010
e. Transferred out: Costs in BI $5,006.30 Cost to complete BI DM (400 × $7.20) 2,880.00 CC (700 × $2.60) 1,820.00 $ 9,706.30 Started & completed (8,100 × $9.80) 79,380.00 Total cost transferred $89,086.30 f. Ending WIP DM (240 × $7.20) $1,728 CC (210 × $2.60) 546 Total $2,274 g. WIP Inventory 62,928 RM Inventory 62,928 WIP Inventory 13,070 Wages Payable (or Cash) 13,070 WIP Inventory 10,356 Factory Overhead Control 10,356 FG Inventory 89,089 WIP Inventory 89,089
35. a. Ending WIP Inventory EUP Cost per EUP Total Cost
Transferred in (4,000 × 100%) 4,000 $10 $40,000 Material (4,000 × 0%) 0 2 0 Conversion (4,000 × 80%) 3,200 6 19,200 Total cost $18 $59,200 b. Transferred out: 25,000 × ($10 + $2 + $6) = 25,000 × $18 = $450,000 c. Finished Goods Inventory 450,000 WIP Inventory––Casing Dept. 450,000 36. a. Beginning WIP
Inventory 5,000 Beginning WIP Inventory 5,000 Transferred in 80,000 Started & completed 74,000 Units to account for 85,000 Ending WIP Inventory 6,000 Units accounted for 85,000 Units Trans. In Material Conversion
Beginning WIP Inventory 5,000 5,000 5,000 5,000
Started & completed 74,000 74,000 74,000 74,000 Ending WIP Inventory 6,000 6,000 0 4,800
EUP (WA) 85,000 85,000 79,000 83,800
b. Costs Total Trans. In Material Conversion
Beginning WIP Inventory $ 8,643 $ 7,550 $ 0 $ 1,093 Current period 104,261 80,000 10,270 13,991 Total cost to account for $112,904 $87,550 $10,270 $15,084 Divided by EUP ÷ 85,000 ÷ 79,000 ÷ 83,800 Cost per EUP $1.34 $1.03 $0.13 $0.18 c. 79,000 × $1.34 = $105,860 d. Transferred in (6,000 × $1.03) $6,180 Conversion (4,800 × $0.18) 864 Total ending WIP cost $7,044 37. a. Beginning WIP Inventory 5,000 Beginning WIP Inventory 5,000 Transferred in 80,000 Started & completed 74,000 Units to account for 85,000 Ending WIP Inventory 6,000 Units accounted for 85,000 Units Tran. In Material Conversion
Complete BI 5,000 0 5,000 3,500
Started & completed 74,000 74,000 74,000 74,000
Ending WIP Inventory 6,000 6,000 0 4,800
EUP (WA) 85,000 80,000 79,000 82,300
b. Costs Total Trans. In Material Conversion
Beginning WIP Inventory $ 8,643 Current period 104,261 $80,000 $10,270 $13,991 Total cost to account for $112,904 Divided by EUP ÷ 80,000 ÷ 79,000 ÷ 82,300 Cost per EUP $1.30 $1.00 $0.13 $0.17 c. Beginning WIP costs $8,643 Cost to complete: DM (5,000 $0.13) 650 CC (3,500 $0.17) 595 $ 9,888 Started and completed (74,000 $1.30) 96,200 Cost transferred out $106,088 d.Transferred in (6,000 $1.00) $6,000 Conversion (4,800 $0.17) 816 Total ending WIP cost $6,816
38. a. Fabrication: Beginning WIP
Inventory 5,000 Beginning WIP Inventory 5,000
Started 40,000 Started & completed 33,200
Units to account for 45,000 Ending WIP Inventory 6,800 Units accounted for 45,000
Units Material Conversion
Beginning WIP Inventory 5,000 5,000 5,000 Started & completed 33,200 33,200 33,200 Ending WIP Inventory 6,800 6,800 4,080 EUP (WA) 45,000 45,000 42,280 Units started in Assembly = Units transferred out of Fabrication = 5,000 + 33,200 = 38,200 Assembly: Beginning WIP
Inventory 2,000 Beginning WIP Inventory 2,000
Started 38,200 Started & completed 32,100
Units to account for 40,200 Ending WIP Inventory 6,100 Units accounted for 40,200 Units Trans. In Material Conversion
Beginning WIP Inventory 2,000 2,000 2,000 2,000
Started & completed 32,100 32,100 32,100 32,100 Ending WIP Inventory 6,100 6,100 0 915
EUP (WA) 40,200 40,200 34,100 35,015
b. Fabrication:
Units Material Conversion Beginning WIP Inventory 5,000 0 3,750 Started & completed 33,200 33,200 33,200 Ending WIP Inventory 6,800 6,800 4,080 EUP (FIFO) 45,000 40,000 41,030 Assembly:
Units Trans. In Material Conversion
Beginning WIP Inventory 2,000 0 2,000 1,300 Started & completed 32,100 32,100 32,100 32,100 Ending WIP Inventory 6,100 6,100 0 915 EUP (FIFO) 40,200 38,200 34,100 34,315 39. a. Beginning WIP Inventory 0 Started & completed 2,400 Started 2,500 Ending WIP Inventory 100 Total 2,500 Units accounted for 2,500
Material Labor Overhead Started and completed 2,400 2,400 2,400 Ending WIP Inventory 100 25 35 EUP 2,500 2,425 2,435 Cost of goods transferred out: Direct material: Dacron (250 × $10) $ 2,500 Denim (480 × $8) 3,840 Cotton (1,670 × $12) 20,040 $26,380 Direct labor (2,400 × $9) 21,600 Overhead (2,400 × $6) 14,400 Total $62,380 b. Cost of ending WIP Inventory: Direct material: Dacron (50 × $10) $500 Denim (20 × $8) 160 Cotton (30 × $12) 360 $1,020 Direct labor (25 × $9) 225 Overhead (35 × $6) 210 Total $1,455 40. a. Beginning WIP Inventory 0 Started & completed 105 Started 130 Ending WIP Inventory 25 Total 130 Units accounted for 130 Material Conversion Started and completed 105 105 Ending WIP Inventory 25 15 EUP 130 120 Cost of goods completed: Direct material: Glass (65 × $24) $1,560 Metal (12 × $15) 180 Natural (28 × $7) 196 $1,936 Conversion (105 × $23) 2,415 Total $4,351 b. Cost of ending WIP Inventory: Direct material:
Glass (5 × $24) $120 Metal (13 × $15) 195 Natural (7 × $7) 49 $364 Conversion (25 × 60% × $23) 345 Total $709 41. a. Beginning WIP Inventory 12,000 Started 310,000 Units to account for 322,000 Beginning WIP Inventory 12,000 Started & completed 302,000 Ending WIP Inventory 8,000 Units accounted for 322,000
Ingred. Packaging Conversion
Beginning WIP Inventory 0 12,000 3,600 Started and completed 302,000 302,000 302,000 Ending WIP Inventory 8,000 0 4,800 EUP 310,000 314,000 310,400 b. Standard cost of goods completed: 314,000 × $0.67 = $210,380 c. Cost of ending WIP Inventory: Ingredients (8,000 × $0.25) $2,000 Conversion (4,800 × $0.37) 1,776 Total $3,776 42. a. DM (180,000 × 100% × $0.10) $18,000 CC (180,000 × 45% × $0.11) 8,910 Total cost in BI $26,910 b. DM (144,000 × 100% × $0.10) $14,400 CC (144,000 × 65% × $0.11) 10,296 Total cost in EI $24,696 c. Beginning WIP Inventory 180,000 Started 1,300,000 Units to account for 1,480,000 Total units to account for 1,480,000 Ending WIP Inventory (144,000) Units transferred out 1,336,000 Cost transferred out = 1,336,000 × $0.21 = $280,560
d. Material Labor OH
To complete BI (units) 0 99,000 99,000 Started & completed 1,156,000 1,156,000 1,156,000 Ending inventory 144,000 93,600 93,600
Equivalent units (FIFO) 1,300,000 1,348,600 1,348,600 Multiply by unit cost × 0.10 × 0.02 × 0.09 Standard cost of period $ 130,000 $ 26,972 $ 121,374 Actual cost of period (184,000) (27,126) (118,500) Variance $ (54,000) U $ (154) U $ 2,874 F
e.Work in Process Inventory 130,000 Material Variance 54,000 Raw Material Inventory 184,000 Work in Process Inventory 26,972 Labor Variance 154 Wages Payable (or Cash) 27,126 Work in Process Inventory 121,374 Manufacturing Overhead 118,500 Overapplied Overhead 2,874
43. a & b. Units Material Conversion
Beginning inventory (60%; 70%) 16,000 Gallons started 360,000 Gallons to account for 376,000 Beginning inventory completed 16,000 6,400 4,800 Gallons started and completed 349,200 349,200 349,200 Total gallons transferred 365,200 Ending inventory (40%; 20%) 8,000 3,200 1,600 Normal spoilage* 2,800 0 0 Gallons accounted for (FIFO EUP) 376,000 358,800 355,600 *All spoilage is normal; the 2,800 gallons is less than 0.02 × 360,000. 44. Normal spoilage allowed = 120,000 pounds × 0.08 = 9,600 pounds Units Material Conversion
Beginning inventory 36,000 Pounds started 120,000 Pounds to account for 156,000 Beginning WIP Inventory 36,000 0 19,800 Started and completed 90,000 90,000 90,000 Ending WIP Inventory 21,600 21,600 3,240 Normal spoilage 8,400 0 0 Pounds accounted for (FIFO) 156,000 111,600 113,040 Total Material Conversion Beginning inventory cost $24,800
Current costs 72,972 $ 39,060 $ 33,912
Total costs $97,772
Cost per EUP $0.65 $0.35 $0.30 Cost Assignment Transferred out: Beginning WIP Inventory cost $24,800 Conversion cost to complete (19,800 × $0.30) 5,940 Total cost of beginning inventory $30,740 Started & completed (90,000 × $0.65) 58,500 $89,240 Ending WIP Inventory: Material (21,600 × $0.35) $ 7,560 Conversion (3,240 × $0.30) 972 8,532 Total cost accounted for $97,772 45. a. Units to account for = 20,000 + 120,000 = 140,000 units
b. Units to account for 140,000 Units completed (116,400) Units in ending WIP Inventory (16,000) Spoiled units 7,600 Normal loss = 120,000 × 0.03 = 3,600 units Abnormal loss = 7,600 – 3,600 = 4,000 units
c. Units Material Conversion
Beginning inventory 20,000 Units started 120,000 Units to account for 140,000 Transferred out 116,400 116,400 116,400 Ending inventory 16,000 16,000 3,200 Normal spoilage 3,600 0 0 Abnormal spoilage 4,000 4,000 4,000 Units accounted for 140,000 136,400 123,600
The normal spoilage is considered continuous because it is shrinkage.
d. Using the “method of neglect,” the cost of normal spoilage is automatically spread among all of the remaining units produced (including the abnormal spoilage).
e. Cost of abnormal spoilage is written off as a period cost (loss).
46. a. Units Material Conversion
Beginning inventory 40,000 Pounds started 425,000 Pounds to account for 465,000 BI completed 40,000 0 6,000 Started & completed* 405,000 405,000 405,000 Ending inventory 10,000 10,000 2,500 Normal spoilage 2,000 0 0 Abnormal spoilage 8,000 8,000 5,600 EUP (FIFO) 465,000 423,000 419,100 *Amount necessary to balance the calculation.
The normal spoilage is treated under the method of neglect. b. Ending inventory:
Material (10,000 × $0.08) $ 800
Conversion (2,500 × $0.15) 375
Total cost $1,175
Material (8,000 × $0.08) $ 640 Conversion (5,600 × $0.15) 840 Total cost (treated as a loss) $1,480
PROBLEMS
47. a. Units Material Conversion
Beginning WIP Inventory 200,000 Units started 1,000,000 Units to account for 1,200,000 Beginning WIP Inventory 200,000 200,000 200,000 Started & completed 700,000 700,000 700,000 Ending WIP Inventory 300,000 300,000 210,000 Units accounted for 1,200,000 1,200,000 1,110,000 b. BI conversion cost = $671,875 × 1.6 = $1,075,000
Current period conversion cost = $3,976,250 × 1.6 = $6,362,000
Total Material Conversion
Cost in BI $ 2,275,000 $1,200,000 $1,075,000 Current cost 14,162,000 7,800,000 6,362,000 Total cost to account for $16,437,000 $9,000,000 $7,437,000 Divided by EUP ÷ 1,200,000 ÷ 1,110,000 Cost per EUP $14.20 $7.50 $6.70 c. Transferred out (900,000 × $14.20) $12,780,000 Ending inventory: Material (300,000 × $7.50) $2,250,000 Conversion (210,000 × $6.70) 1,407,000 3,657,000 Total cost accounted for $16,437,000
48. a. (1) Material Labor Overhead
BI units 100,000 100,000 100,000
Units started & completed 1,100,000 1,100,000 1,100,000 EI unit 400,000 240,000 240,000
EUP 1,600,000 1,440,000 1,440,000
(2) Total Material Labor Overhead
BI $ 1,115,500 $ 750,000 $ 215,000 $ 150,500 Current 12,628,500 5,650,000 4,105,000 2,873,500 Total $13,744,000 $6,400,000 $4,320,000 $3,024,000 Divided by EUP ÷ 1,600,000 ÷ 1,440,000 ÷ 1,440,000 Cost per EUP $9.10 $4.00 $3.00 $2.10 (3) Beginning FG Inventory $ 0 CGM (1,200,000 × $9.10) 10,920,000 Goods available for sale $10,920,000 Ending FG Inventory (124,000) CGS $10,796,000 b. Finished Goods Inventory 10,920,000 Work in Process Inventory 10,920,000
Cost of Goods Sold 10,796,000 Finished Goods Inventory 10,796,000 49. a. Gallons transferred out 242,000 Gallons in ending WIP 23,500 Total gallons to account for 265,500 Gallons in beginning WIP (36,000) Gallons started 229,500
b. Material Labor Overhead
Beginning WIP Inventory 36,000 36,000 36,000
Started & completed 206,000 206,000 206,000
Ending WIP Inventory 23,500 3,525 2,350
WA EUP 265,500 245,525 244,350
Material Labor Overhead
BI costs $ 183,510 $ 98,526 $ 78,273 Current costs 1,136,025 451,450 723,195 Total cost $1,319,535 $ 549,976 $801,468 EUP–FIFO ÷ 265,500 ÷ 245,525 ÷ 244,350 Cost per EUP $4.97 $2.24 $3.28 Total cost to account for = $1,319,535 + $549,976 + $801,468 = $2,670,979 Transferred out = 242,000 × ($4.97 + $2.24 + $3.28) = 242,000 × $10.49 = $2,538,580 c. DM (23,500 × $4.97) $116,795 DL (3,525 × $2.24) 7,896 OH (2,350 × $3.28) 7,708 Total EI $132,399 50. a. Delacroix Co. Cost of Production Report For the Month of March 2013 Production Data
Units Material Labor Overhead
Beginning Inventory 800 Units started 11,400 Units to account for 12,200 Beginning WIP Inventory 800 800 800 800 Started & completed 11,000 11,000 11,000 11,000 Ending WIP Inventory 400 280 360 320 Units accounted for 12,200 12,080 12,160 12,120 Cost Data
Total Material Labor Overhead
Current costs 505,422 259,012 58,200 188,210 Total cost to account for $526,560 $265,760 $66,880 $193,920 Divided by EUP ÷ 12,080 ÷ 12,160 ÷ 12,120 Cost per EUP $43.50 $22.00 $5.50 $16.00 Cost Assignment Transferred out (11,800 units × $43.50) $513,300 Ending Inventory: Material (280 × $22) $6,160 Labor (360 × $5.50) 1,980 Overhead (320 × $16) 5,120 13,260 Total cost accounted for $526,560 b. Raw Material Inventory XXX Accounts Payable (for RM purchases) XXX WIP Inventory 259,012 Raw Material Inventory 259,012 WIP Inventory 58,200 Wages Payable 58,200 WIP Inventory 188,210 Factory Overhead Control 188,210 Factory Overhead Control XXX Various accounts (for actual OH) XXX Finished Goods Inventory 513,300 WIP Inventory 513,300 Cost of Goods Sold (for the cost of sales) XXX Finished Goods Inventory XXX c. Raw Material Inventory WIP Inventory
Beg. XXX Issued 259,012 Beg. 21,138 CGM 513,300
Purch. XXX DM 259,012 DL 58,200 OH 188,210 End. XXX End. 13,260 Wages Payable FG Inventory DL 58,200 Beg. XXX CGS XXX CGM 513,300 End. XXX Factory Overhead Control Accounts Payable
Cost of Goods Sold CGS XXX
51. a. Units Material Conversion
Beginning WIP Inventory 20,000 Units started 321,600 Units to account for 341,600 Beginning WIP Inventory 20,000 0 12,000 Started & completed 305,600 305,600 305,600 Ending WIP Inventory 16,000 16,000 12,800 Units accounted for 341,600 321,600 330,400
b. Total Material Conversion
Beginning WIP cost $ 53,580 Current cost 1,055,808 $778,272 $277,536 Total cost to account for $1,109,388 Divided by EUP ÷ 321,600 ÷ 330,400 Cost per EUP $3.26 $2.42 $0.84 c. Beginning WIP Inventory $53,580 Complete WIP CC (12,000 × $0.84) 10,080 $ 63,660 Started & completed (305,600 × $3.26) 996,256 Cost transferred out $1,059,916 d. DM (16,000 × $2.42) $38,720 CC (12,800 × $0.84) 10,752 Total cost of ending WIP Inventory $49,472 52. a. Gallons transferred out 242,000 Gallons in ending WIP 23,500 Total gallons to account for 265,500 Gallons in beginning WIP (36,000) Gallons started 229,500
b. Material Labor Overhead
Beginning WIP Inventory 0 16,200 10,800
Started & completed 206,000 206,000 206,000
Ending WIP Inventory 23,500 3,525 2,350
EUP––FIFO 229,500 225,725 219,150
Current costs $1,136,025 $451,450 $723,195 EUP––FIFO ÷ 229,500 ÷ 225,725 ÷ 219,150 Cost per EUP $4.95 $2.00 $3.30 Beginning WIP ($183,510 + $98,526 + $78,273) $360,309 Complete beginning WIP Inventory DL (16,200 × $2.00) $32,400 CC (10,800 × $3.30) 35,640 68,040 Total cost of BI transferred $428,349 c. Total cost per EUP = $4.95 + $2.00 + $3.30 = $10.25 Total cost of BI transferred $ 428,349 Started & completed (206,000 × $10.25) 2,111,500 Total cost of goods completed $2,539,849 d.$2,539,849 ÷ 242,000 = $10.50 (rounded) e. DM (23,500 × $4.95) $116,325 DL (3,525 × $2.00) 7,050 OH (2,350 × $3.30) 7,755 Total EI $131,130 53. a. Delacroix Co. Cost of Production Report For the Month of March 2013
Production Data: Units Material Labor Overhead
Beginning inventory 800 Units started 11,400 Units to account for 12,200 Beginning WIP Inventory 800 440 280 480 Started & completed 11,000 11,000 11,000 11,000 Ending inventory 400 280 360 320 Units accounted for 12,200 11,720 11,640 11,800
Cost Data: Total Material Labor Overhead
Cost in BI $ 21,138 Current costs 505,422 $259,012 $58,200 $188,210 Total cost to account for $526,560 Divided by EUP ÷ 11,720 ÷ 11,640 ÷ 11,800 Cost per EUP $43.05 $22.10 $5.00 $15.95 Cost Assignment Transferred out: Beginning WIP Inventory $21,138 Cost to complete: Material (440 × $22.10) 9,724 Labor (280 × $5.00) 1,400
Overhead (480 × $15.95) 7,656 $ 39,918 Started & completed (11,000 × $43.05) 473,550 Ending WIP Inventory: Material (280 × $22.10) $ 6,188 Labor (360 × $5.00) 1,800 Overhead (320 × $15.95) 5,104 13,092 Total cost accounted for $526,560 b.WA and FIFO process costing differ because of how the work performed in the prior period on beginning WIP Inventory is treated. WA includes such work in the determination of equivalent units of production, whereas FIFO does not. In addition, because WA includes the beginning inventory work in EUP, this method also includes the cost of beginning inventory in the determination of cost per EUP (whereas FIFO excludes it). These two items cause the cost per EUP to differ and, thus, the cost of the goods transferred out as well as the cost of ending inventory. 54. a. Phunky Phingers Cost of Production Report (WA Method) For the Month of November 2013 Production Data: Units Beginning WIP Inventory 12,000 Units started 90,000 Units to account for 102,000
Units Material Labor OH Beginning WIP Inventory 12,000 12,000 12,000 12,000
Started & completed 70,000 70,000 70,000 70,000
Ending WIP Inventory 20,000 20,000 8,000 16,000
Units accounted for 102,000 102,000 90,000 98,000
Cost Data:
Total Material Labor OH
Beginning WIP Inventory $ 19,564 $ 13,020 $ 1,908 $ 4,636 Current costs 206,616 90,000 45,792 70,824 Cost to account for $ 226,180 $103,020 $47,700 $75,460 Divided by EUP ÷ 102,000 ÷ 90,000 ÷ 98,000 Cost per EUP $2.31 $1.01 $0.53 $0.77 Cost Assignment: Transferred out (82,000 × $2.31) $189,420 Ending inventory: Material (20,000 × $1.01) $20,200 Direct labor (8,000 × $0.53) 4,240 Overhead (16,000 × $0.77) 12,320 36,760 Total cost accounted for $226,180 b. Phunky Phingers Cost of Production Report (FIFO Method)
For the Month of November 2013 Production Data: Units Beginning WIP Inventory 12,000 Units started 90,000 Units to account for 102,000
Units Material Labor Overhead
Beginning WIP Inventory 12,000 0 8,400 4,800
Started & completed 70,000 70,000 70,000 70,000 Ending WIP Inventory 20,000 20,000 8,000 16,000
Units accounted for 102,000 90,000 86,400 90,800
Cost Data:
Total Material Labor Overhead Beginning WIP Inventory $ 19,564 Current costs 206,616 $90,000 $45,792 $70,824 Cost to account for $226,180 Divided by EUP ÷ 90,000 ÷ 86,400 ÷ 90,800 Cost per EUP $2.31 $1.00 $0.53 $0.78 Cost Assignment: Transferred out: Beginning WIP Inventory $19,564 Complete beginning WIP DL (8,400 × $0.53) 4,452 OH (4,800 × $0.78) 3,744 $ 27,760 Started & completed (70,000 × $2.31) 161,700 Ending WIP Inventory: Material (20,000 × $1.00) $20,000 Direct labor (8,000 × $0.53) 4,240 Overhead (16,000 × $0.78) 12,480 36,720 Total cost accounted for $226,180 55. a. Springtime Paints Cost of Production Report For Month Ended May 31, XXXX Production data: Units Beginning WIP Inventory 4,000 Units started 21,000 Units to account for 25,000 DIRECT MATERIALS
Units Chemicals Cans Conversion
Inventory 4,000 4,000 4,000 4,000 Started & completed 16,000 16,000 16,000 16,000 Ending WIP Inventory 5,000 5,000 0 4,000
Units accounted for 25,000 25,000 20,000 24,000
Cost data: DIRECT MATERIALS
Total Chemicals Cans Conversion
Beginning inventory $ 51,900 $ 45,100 $ 0 $ 6,800 Current costs 281,900 228,900 7,000 46,000 Cost to account for $333,800 $274,000 $ 7,000 $52,800 Divided by EUP ÷ 25,000 ÷ 20,000 ÷ 24,000 Cost per equivalent unit $13.51 $10.96 $0.35 $2.20 Cost assignment: Transferred out ($13.51 × 20,000) $270,200 Ending WIP Chemicals (5,000 × $10.96) $54,800 Conversion (4,000 × $2.20) 8,800 63,600 Total cost accounted for $333,800 b. Springtime Paints Cost of Production Report For Month Ended May 31, XXXX Production data: Units Beginning WIP Inventory 4,000 Units started 21,000 Units to account for 25,000 DIRECT MATERIALS
Units Chemicals Cans Conversion Beginning WIP Inventory 4,000 4,000 3,000 Started & completed 16,000 16,000 16,000 16,000 Ending WIP Inventory 5,000 5,000 0 4,000 Units accounted for 25,000 21,000 20,000 23,000 Cost data: DIRECT MATERIALS
Total Chemicals Cans Conversion Beginning inventory $ 51,900
Current costs 281,900 $228,900 $ 7,000 $46,000 Cost to account for $333,800
Divided by EUP ÷ 21,000 ÷ 20,000 ÷ 23,000 Cost per equivalent unit $13.25 $10.90 $0.35 $2.00 Cost assignment: Transferred out Beginning WIP Inventory $ 51,900 Complete beginning WIP Cans (4,000 × $0.35) 1,400 Conversion (3,000 × $2.00) 6,000 Total cost of BI transferred $ 59,300 Started & completed (16,000 × $13.25) 212,000 $271,300 Ending WIP Inventory Chemicals (5,000 × $10.90) $ 54,500 Conversion (4,000 × $2.00) 8,000 62,500 Total cost accounted for $333,800 c. The WA calculations are easier to make, but this method tends to obscure current period costs because the cost per EUP includes both current costs and prior costs that were in beginning inventory. This method is most appropriate when conversion costs, inventory levels, and raw material prices are stable. The FIFO method is based on current period work only. This method is most appropriate when conversion costs, inventory levels, or raw material prices fluctuate. This method should also be appropriate when accuracy in current equivalent unit costs is important or when a standard cost system is used. (CMA adapted) 56. Octavia Corp. Curing Dept. Cost of Production Report For the Month Ended May 31, 2013 Production Data:
Units TI DM DL OH
Beginning WIP Inventory 8,000 Units started 40,000 Units to account for 48,000 Beginning WIP Inventory 8,000 8,000 8,000 8,000 8,000 Started & completed 36,000 36,000 36,000 36,000 36,000 Ending WIP Inventory 4,000 4,000 2,800 2,000 1,600 Units accounted for 48,000 48,000 46,800 46,000 45,600 Cost Data: Total TI DM DL OH Beginning WIP Inventory $ 278,872 $ 200,160 $ 42,504 $ 31,360 $ 4,848 Current costs 2,739,020 1,620,000 333,300 517,880 267,840
Cost to account for $3,017,892 $1,820,160 $375,804 $549,240 $272,688 Divided by EUP ÷ 48,000 ÷ 46,800 ÷ 46,000 ÷ 45,600 Cost per EUP $63,87 $37.92 $8.03 $11.94 $5.98 Cost Assignment: Transferred out (44,000 × $63.87) $2,810,280 Ending WIP Inventory: TI (4,000 × $37.92) $151,680 DM (2,800 × $8.03) 22,484 DL (2,000 × $11.94) 23,880 OH (1,600 × $5.98) 9,568 207,612 Total cost accounted for $3,017,892 (CMA adapted)
57. Octavia Corp. Curing Dept. Cost of Production Report For the Month Ended May 31, 2013 Production Data: Units TI DM DL OH Beginning WIP Inventory 8,000 Units started 40,000 Units to account for 48,000 Beginning WIP Inventory 8,000 0 1,600 4,800 5,600 Started & completed 36,000 36,000 36,000 36,000 36,000 Ending WIP Inventory 4,000 4,000 2,800 2,000 1,600 Units accounted for 40,000 40,400 42,800 43,200 Cost Data: Total TI DM DL OH Beginning WIP Inventory $ 278,872 Current costs 2,739,020 $1,620,000 $333,300 $517,880 $267,840 Cost to account for $3,017,892 Divided by EUP ÷ 40,000 ÷ 40,400 ÷ 42,800 ÷ 43,200 Cost per EUP $67.05 $40.50 $8.25 $12.10 $6.20 Cost Assignment: Transferred out: Beginning WIP Inventory $ 278,872 Complete beginning inventory: DM (1,600 × $8.25) $ 13,200 DL (4,800 × $12.10) 58,080 OH (5,600 × $6.20) 34,720 106,000 Started & completed (36,000 × $67.05) 2,413,800 Total cost of transferred out $2,798,672 Ending WIP Inventory: TI (4,000 × $40.50) $162,000 DM (2,800 × $8.25) 23,100 DL (2,000 × $12.10) 24,200 OH (1,600 × $6.20) 9,920 219,220 Total cost accounted for $3,017,892 (CMA adapted)
58. a. Always Christmas Cutting Dept. Cost of Production Report For the Month Ended October 31, 2013 Production Data: Units Beginning WIP Inventory 8,000 Units started 36,000 Units to account for 44,000
Units Material Conversion Beginning WIP Inventory 8,000 8,000 8,000 Started & completed 32,400 32,400 32,400 Ending WIP Inventory 3,600 3,600 2,520 Units accounted for 44,000 44,000 42,920 Cost Data:
Total Material Conversion Beginning WIP Inventory $ 373,000 $ 293,000 $ 80,000 Current costs 2,672,440 1,379,000 1,293,440 Total cost to account for $3,045,440 $1,672,000 $1,373,440 Divided by EUP ÷ 44,000 ÷ 42,920 Cost per EUP $70 $38 $32 Cost Assignment: Transferred out (40,400 × $70) $2,828,000 Ending inventory: Material (3,600 × $38) $136,800 Conversion (2,520 × $32) 80,640 217,440 Total cost accounted for $3,045,440 b. Always Christmas Boxing Dept. Cost of Production Report For the Month Ended October 31, 2013
Production Data: Units Trans. In Material Conversion Beginning WIP Inventory 2,500 Units started 40,400 Units to account for 42,900 Beginning WIP Inventory 2,500 2,500 2,500 2,500
Started & completed 39,200 39,200 39,200 39,200 Ending WIP Inventory 1,200 1,200 0 840
Cost Data:
Total Trans. In Material Conversion Cost in BI $ 173,413 $ 166,420 $ 0 $ 6,993 Current costs 3,457,760 2,828,000 383,640 246,120 Total to acct. for $3,631,173 $2,994,420 $383,640 $253,113 Divided by EUP ÷ 42,900 ÷ 41,700 ÷ 42,540 Cost per EUP $84.95 $69.80 $9.20 $5.95 Cost Assignment: Transferred out (41,700 × $84.95) $3,542,415 Ending inventory: Transferred in (1,200 × $69.80) $83,760 Conversion (840 × $5.95) 4,998 88,758 Total cost accounted for $3,631,173 59. a. Striping Dept.: Beginning inventory $ 20,000 Current costs: DM 90,000 DL 80,000 OH ($80,000 × 0.8) 64,000 Total $254,000 Less ending inventory (17,000) Costs transferred to Adhesion $237,000 b. Adhesion Dept.: (let CC = conversion costs) BI + TI + DM + CC – TO = EI $70,000 + $237,000 + $22,600 + CC – $480,000 = $20,600 CC – $150,400 = $20,600 CC = $171,000 DL + OH = CC DL + 0.8DL = CC 1.8DL = $171,000 DL = $95,000 OH = $95,000 × 0.80 = $76,000 c. CGM is equal to the cost of goods transferred into FG Inventory ($880,000). OH = 0.8DL $90,000 = 0.8DL DL = $112,500 BI + TI + DM + DL + OH – CGM = $40,000 $150,000 + $480,000 + DM + $112,500 + $90,000 – $880,000 = $40,000 DM – $47,500 = $40,000 DM = $87,500 d.WIP Inventory—Adhesion 237,000 WIP Inventory—Striping 237,000 WIP Inventory—Packaging 480,000 WIP Inventory—Adhesion 480,000
Finished Goods Inventory 880,000
WIP Inventory—Packaging 880,000
Cost of Goods Sold 720,000
Finished Goods Inventory 720,000
60. a. Cutting Department:
Units Material Conversion
Beginning WIP Inventory 1,300 Units started 4,800 Units to account for 6,100 Beginning WIP Inventory 1,300 260 325 Started & completed 3,700 3,700 3,700 Ending WIP Inventory 1,100 440 220 EUP 6,100 4,400 4,245 Coating Department:
Units Trans. In Material Conversion Beginning WIP Inventory 900 Units started 5,000 Units to account for 5,900 Beginning WIP Inventory 900 0 900 360 Started & completed 3,600 3,600 3,600 3,600 Ending WIP Inventory 1,400 1,400 0 560 EUP 5,900 5,000 4,500 4,520 b. Cutting Department:
Total Material Conversion Beginning WIP Inventory $16,065 Current costs 56,425 $35,200 $21,225 Total cost to account for $72,490 Divided by EUP ÷ 4,400 ÷ 4,245 Cost per EUP $13 $8 $5 c. Cost transferred out of Cutting (FIFO): Cost of BI $16,065 Cost to complete BI Material (260 × $8) $ 2,080 Conversion (325 × $5) 1,625 S&C (3,700 × $13) 48,100 51,805 Total cost of goods transferred $67,870 Ending WIP: DM (440 × $8) $ 3,520 CC (220 × $5) 1,100 4,620 Total $72,490
d. Coating Department:
Total Trans. In Material Conversion
Cost in BI $13,514 Current costs 84,120 $67,870 $4,950 $11,300 Total $97,634 Divided by EUP ÷ 5,000 ÷ 4,500 ÷ 4,520 Cost per EUP $17.17 $13.57* $1.10 $2.50 *Rounded e. Cost Assignment: Transferred out Beginning inventory cost $13,514 Cost to complete: Material (900 × $1.10) 990 Conversion (360 × $2.50) 900 $15,404 Units S&C (3,600 × $17.17) 61,812 Total cost transferred out $77,216 Ending inventory: Transferred in (1,400 × $13.57) $18,998 Conversion (560 × $2.50) 1,400 20,398 Cost accounted for (off due to rounding) $97,614
61. a. Extrusion Form Trim Finish
Units produced 16,000 11,000 5,000 2,000
Material costs $192,000 $ 44,000 $ 15,000 $12,000 Unit cost $ 12.00 $ 4.00 $ 3.00 $ 6.00 Conversion cost $392,000 $132,000 $ 69,000 $42,000 Unit cost $ 24.50 $ 12.00 $ 13.80 $ 21.00
Plastic Standard Deluxe Executive
Unit costs: Sheets Model Model Model
Extrusion material $ 12.00 $ 12.00 $ 12.00 $ 12.00 Form material –– 4.00 4.00 4.00 Trim material –– –– 3.00 3.00 Finish material –– –– –– 6.00 Extrusion conversion 24.50 24.50 24.50 24.50 Form conversion –– 12.00 12.00 12.00 Trim conversion –– –– 13.80 13.80 Finish conversion –– –– –– 21.00 Total unit cost $ 36.50 $ 52.50 $ 69.30 $ 96.30 Times units produced × 5,000 × 6,000 × 3,000 × 2,000 Total product cost $182,500 $315,000 $207,900 $192,600
b. EQUIVALENT UNITS
Material Conversion
Entering trim operation: % Qty. % Qty.
2,000 Deluxe units 100 2,000 100 2,000
1,000 Deluxe units 100 1,000 60 600
2,000 Executive units 100 2,000 100 2,000
Total equivalent units 5,000 4,600
Deluxe model WIP costs: Unit Cost Total Costs
Extrusion material $12.00 $12,000 Form material 4.00 4,000 Trim material (100%) 3.00 3,000 Extrusion conversion 24.50 24,500 Form conversion 12.00 12,000 Trim conversion (60%) 9.00* 9,000* Work in process costs $64.50 $64,500 *Conversion cost = ($30,000 + $39,000) ÷ 4,600 = $15 per equivalent unit. (CMA adapted) 62. a. Components in produced inventory:
DM Logos Streamers Handles Plain 60,000 W/logos & streamers 418,000 418,000 418,000 W/logos, streamers, & handles 25,000 25,000 25,000 25,000 W/streamers 15,200 15,200 W/streamers & handles 2,800 2,800 2,800 W/handles 5,000 5,000 Total components 526,000 443,000 461,000 32,800
Ending WIP Inventory (all 9,000 units had the direct material): Plain = 9,000 × 0.70 = 6,300 With logo = 9,000 × 0.25 = 2,250 With streamers = 9,000 × 0.05 = 450 Units BI 15,000 Started 520,000 Units to account for 535,000 Units DM Logos Streamers Handles BI 15,000 Started and completed 511,000 Completed 526,000 526,000 443,000 461,000 32,800 EI 9,000 9,000 2,250 450 0 Units accounted for 535,000 535,000 445,250 461,450 32,800
BI cost $ 17,285 $ 13,250 $ 4,035 $ 0 $ 0 Current period 888,274 468,250 298,735 119,977 1,312 Total DM cost $905,559 $481,500 $302,770 $119,977 $ 1,312 EUP ÷ 535,000 ÷ 445,250 ÷461,450 32,800 Material cost per EUP $0.90 $0 .68 $0.26 $0.04
Conversion Units EUP
BI 15,000 Started and completed 511,000 Completed 526,000 526,000 EI (95% complete) 9,000 8,550 Units accounted for 535,000 534,550 Conversion costs = $5,703 + $282,954 = $288,657 Conversion cost per EUP = $288,657 ÷ 534,550 = $0.54 Total cost to account for = $905,559 + $288,657 = $1,194,216 Cost of ending WIP towels: Plain towels DM (6,300 × $0.90) $5,670.00 CC (6,300 × 0.95 × $0.54) 3,231 .90 $ 8,901.90 Towels with logos DM [2,250 × ($0.90 + $0.68)] $3,555.00 CC (2,250 × 0.95 × $0.54) 1,154 .25 4,709.25 Towels with streamers DM [450 × ($0.90 + $0.26)] $ 522.00 CC (450 × 0.95 × $0.54) 230 .85 752 .85 Total cost of ending WIP Inventory $14,364 .00
b. Production Sales Ending Inv.
Plain 60,000 58,000 2,000 W/logos & streamers 418,000 417,500 500 W/logos, streamers, & handles 25,000 24,800 200 W/streamers 15,200 15,175 25 W/streamers & handles 2,800 2,730 70 W/handles 5,000 4,350 650 Plain 2,000 × ($0.90 + $0.54) $2,880.00 W/logos & streamers 500 × ($1.84 + $0.54) 1,190.00 W/logos, streamers, & handles 200 × ($1.88 + $0.54) 484.00 W/streamers 25 × ($1.16 + $0.54) 42.50 W/streamers & handles 70 × ($1.20 + $0.54) 121.80 W/handles 650 × ($0.94 + $0.54) 962 .00 Total cost of ending FG Inventory $5,680 .30
c. Plain 58,000 × ($0.90 + $0.54) $ 83,520.00 W/logos & streamers 417,500 × ($1.84 + $0.54) 993,650.00 W/logos, streamers, & handles 24,800 × ($1.88 + $0.54) 60,016.00 W/streamers 15,175 × ($1.16 + $0.54) 25,797.50 W/streamers & handles 2,730 × ($1.20 + $0.54) 4,750.20 W/handles 4,350 × ($0.94 + $0.54) 6,438 .00 $1,174,171 .70 Cost of ending WIP Inventory $ 14,364.00 Cost of ending FG Inventory 5,680.30 Cost of goods sold 1,174,171 .70 Total cost accounted for $1,194,216 .00 d. The conversion cost for all towels should not be the same amount. Each of the different addons creates additional costs for labor and overhead. As such, Randazzo should be dividing these costs into different cost pools and assigning them based on alternative bases. Activitybased costing would be useful in this company.
63. a. Units Material Conversion
Beginning inventory 10,000 Units started 180,000 Units to account for 190,000 Beginning inventory completed 10,000 0 3,000 Units started & completed 140,000 140,000 140,000 Units completed 150,000 Ending inventory 40,000 40,000 24,000 EUP 190,000 180,000 167,000 b. Donbrowski Co. Cost of Production Report For the Month of May 2013 Production Data:
Units Material Conversion
Beginning inventory 10,000 Units started 180,000 Units to account for 190,000 Beginning inventory completed 10,000 0 3,000 Units started & completed 140,000 140,000 140,000 Ending inventory 40,000 40,000 24,000 EUP 190,000 180,000 167,000 Cost Data (all at standard):
Total Material Conversion BI: DM (10,000 × $5.50) $ 55,000 $ 55,000
CC (7,000 × $12.50) 87,500 $ 87,500
DM (180,000 × $5.50) 990,000 990,000 CC (167,000 × $12.50) 2,087,500 2,087,500 Total cost to account for $3,220,000 $1,045,000 $2,175,000 Cost Assignment Transferred out (150,000 × $18) $2,700,000 Ending inventory: Material (40,000 × $5.50) $220,000 Conversion (24,000 × $12.50) 300,000 520,000 Total costs assigned $3,220,000 c. Total variance = Total actual cost – Total standard cost = $3,137,000 ‒ $3,077,500 = $59,500 unfavorable Material: Current actual cost $1,001,000 Standard cost (180,000 × $5.50) (990,000) Direct material variance $ 11,000 U Conversion: Current actual cost $ 2,136,000 Standard cost (167,000 × $12.50) (2,087,500) Conversion cost variance $ 48,500 U Cost of Goods Sold 59,500 Direct Material Variance 11,000 Conversion Cost Variance 48,500
64. a. Units Material Labor Overhead
BI 14,800 Units started 385,000 Units to account for 399,800 BI completed 14,800 0 8,880 4,440 Units S&C 380,700 380,700 380,700 380,700 Units completed 395,500 EI 4,300 4,300 2,580 3,655 EUP 399,800 385,000 392,160 388,795 b. Total BI cost: DM (14,800 × $8.25) $122,100 DL (5,920 × $1.60) 9,472 OH (10,360 × $4.90) 50,764 Total cost of BI $182,336 c. Cost transferred out = 395,500 × $14.75 = $5,833,625 Cost in EI:
DM (4,300 × $8.25) $35,475.00 DL (2,580 × $1.60) 4,128.00 OH (3,655 × $4.90) 17,909 .50 Total cost of BI $57,512 .50 d. Standard DM cost = 385,000 × $8.25 = $3,176,250.00 Standard DL cost = 392,160 × $1.60 = $627,456.00 Standard OH cost = 388,795 × $4.90 = $1,905,095.50 DM DL OH Current period costs $ 3,201,032.00 $ 625,510.00 $ 1,904,390.00 Standard costs (3,176,250.00) (627,456 .00) (1,905,095 .50) Variance $ 24,782.00 U $ 1,946.00 F $ 705.50 F 65. a. Beginning pounds 2,000 Started 250,000 Pounds to account for 252,000 Pounds transferred (238,200) Pounds in EI (6,000) Pounds of shrinkage 7,800 b. Normal shrinkage = 250,000 × 0.01 = 2,500 pounds For accounting purposes, normal shrinkage is simply ignored, which means its costs will be spread over all good units produced. c. Abnormal shrinkage = 7,800 – 2,500 = 5,300 pounds The cost of abnormal shrinkage is treated as a loss of the period.
d. Total Material Conversion
Beginning WIP Inventory 2,000 Started 250,000 Units to account for 252,000 Beginning WIP Inventory 2,000 2,000 2,000 Started & completed 236,200 236,200 236,200 Ending WIP Inventory 6,000 6,000 1,800 Normal loss 2,500 Abnormal loss 5,300 5,300 5,300 EUP (WA) 252,000 249,500 245,300
e. Total Material Conversion
Beginning WIP costs $ 1,957 $ 1,807 $ 150 Current costs 264,588 240,208 24,380 Total costs $266,545 $242,015 $ 24,530 Divide by EUP ÷ 249,500 ÷ 245,300 Cost per EUP $1.07 $0.97 $0.10 Transferred out (238,200 $1.07) $254,874
Ending inventory: Material (6,000 $0.97) $5,820 Conversion (1,800 $0.10) 180 6,000 Abnormal spoilage (5,300 $1.07) 5,671 Total cost accounted for $266,545 f. The easiest way to reduce shrinkage loss is to buy higher quality turkey at a higher input cost per pound. The higher quality would have a lower fat content and would shrink less. Because of the reduced shrinkage, conversion cost per pound of finished product might decline, and the company would probably be able to sell its product at a higher price. g. The approximate cost of April turkey was $1.13 per pound ($1,807 BI cost of turkey ÷ 1,600 EUP pounds in BI), while the average cost per pound in May was approximately $0.97 per pound. It is highly likely that buying the lower priced ground turkey was the cause of the abnormally high spoilage rate. The information on the cost differences between April and May is not clear when using weighted average process costing. 66. a. Gary’s Tools Grinding Department Cost of Production Report For the Month Ended August 31, 2013 Units Beginning WIP Inventory 1,000 Transferred in 50,800 Units to account for 51,800
Units Trans. In DM DL OH
Beg. WIP Inventory 1,000 1,000 1,000 1,000 1,000 Started & completed 48,000 48,000 48,000 48,000 48,000 Ending WIP Inventory 1,800 1,800 0 720 1,170 Normal spoilage 650 650 0 650 650 Abnormal spoilage 350 350 0 350 350 EUP (WA) 51,800 51,800 49,000 50,720 51,170 Total Trans. In DM DL OH Beg. WIP