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CHAPTER17

PROCESSCOSTING
171 Industriesusingprocesscostingintheirmanufacturingareaincludechemicalprocessing,
oil refining, pharmaceuticals, plastics, brick and tile manufacturing, semiconductor chips,
beverages,andbreakfastcereals.
172 Process costing systems separate costs into cost categories according to the timing of
whencostsareintroducedintotheprocess.Often,onlytwocostclassifications,directmaterials
andconversioncosts,arenecessary.Directmaterialsare frequentlyaddedatonepointintime,
often the start or the end of the process, and all conversion costs are added at about the same
time,butinapatterndifferentfromdirectmaterialscosts.
173 Equivalentunitsisaderivedamountofoutputunitsthattakesthequantityofeachinput
(factorofproduction)inunitscompletedorinincompleteunitsinworkinprocess,andconverts
the quantity of input into the amount of completed output units that could be made with that
quantityofinput.Eachequivalentunitiscomprisedofthephysicalquantitiesofdirectmaterials
or conversion costs inputs necessary to produceoutputofone fully completed unit.Equivalent
unit measuresarenecessarysinceallphysicalunitsarenotcompletedtothesameextentatthe
sametime.
174 The accuracy of the estimates of completion depends on the care and skill of the
estimator and the nature of the process. Semiconductor chips may differ substantially in the
finishingnecessarytoobtainafinalproduct.Theamountofworknecessarytofinishaproduct
maynotalwaysbeeasytoascertaininadvance.
175 Thefivekeystepsinprocesscostingfollow:
Step1: Summarizetheflowofphysicalunitsofoutput.
Step2: Computeoutputintermsofequivalentunits.
Step3: Summarizetotalcoststoaccountfor.
Step4: Computecostperequivalentunit.
Step5: Assigntotalcoststounitscompletedandtounitsinendingworkinprocess.
176 Threeinventorymethodsassociatedwithprocesscostingare:
Weightedaverage.
Firstin,firstout.
Standardcosting.
177 The weightedaverage processcosting method calculates the equivalentunit cost of all
the work done to date (regardless of the accounting period in which it was done), assigns this
costtoequivalentunitscompletedandtransferredoutoftheprocess,andtoequivalentunitsin
endingworkinprocessinventory.

171

178 FIFO computations are distinctive because they assign the cost of the previous
accounting periods equivalent units in beginning workinprocess inventory to the first units
completedandtransferredoutoftheprocessandassignsthecostofequivalentunitsworkedon
duringthecurrentperiodfirsttocompletebeginning inventory,nexttostartandcompletenew
units,andfinallytounitsinendingworkinprocessinventory.Incontrast,theweightedaverage
method costs units completed and transferred out and in ending work in process at the same
averagecost.
179 FIFO should be called a modified or departmental FIFO method because the goods
transferredinduringagivenperiodusuallybearasingleaverageunitcost(ratherthanadistinct
FIFOcostforeachunittransferredin)asamatterofconvenience.
1710 A major advantage of FIFO is that managers can judge the performance in the current
periodindependentlyfromtheperformanceinthe precedingperiod.
1711 The journalentries inprocesscostingare basicallysimilartothose made in jobcosting
systems. The main difference is that, in process costing, there is often morethan one workin
processaccountoneforeachprocess.
1712 Standardcost procedures are particularly appropriate to processcosting systems where
therearevariouscombinationsofmaterialsandoperationsusedtomakeawidevarietyofsimilar
products as in thetextiles, paints, and ceramics industries. Standardcost procedures also avoid
theintricaciesinvolvedindetailedtrackingwithweightedaverageorFIFOmethodswhenthere
arefrequentpricevariationsovertime.
1713 There are two reasons why the accountant should distinguish between transferredin
costsandadditionaldirectmaterialscostsforaparticulardepartment:
(a) Alldirectmaterialsmaynotbeaddedatthebeginningofthedepartmentprocess.
(b)Thecontrolmethodsandresponsibilitiesmaybedifferentfortransferredinitemsand
materialsaddedinthedepartment.
1714 No. Transferredin costs or previous department costs are costs incurred in a previous
department that have been charged to a subsequent department. These costs may be costs
incurred in that previous department during this accounting period or a preceding accounting
period.
1715 Materialsareonlyonecostitem.Otheritems(oftenincludedinaconversioncostspool)
includelabor,energy,andmaintenance.Ifthecostsoftheseitemsvaryovertime,thisvariability
cancauseadifferenceincostofgoodssoldandinventoryamountswhentheweightedaverage
orFIFOmethodsareused.
A second factor is the amount of inventory on hand at the beginning or end of an
accountingperiod.Thesmallertheamountofproductionheldinbeginningorendinginventory
relativetothetotalnumberofunitstransferredout,thesmallertheeffectonoperating income,
costofgoodssold,orinventoryamountsfromtheuseofweightedaverageorFIFOmethods.

172

1716 (25min.) Equivalentunits,zerobeginninginventory.


1.

Directmaterialscostperunit($750,00010,000)
Conversioncostperunit($798,00010,000)
AssemblyDepartmentcostperunit

$75.00
79.80
$154.80

2a. SolutionExhibit1716Acalculatestheequivalentunitsofdirectmaterialsandconversion
costsintheAssemblyDepartmentof Nihon,Inc.inFebruary2009.
SolutionExhibit1716Bcomputesequivalentunitcosts.
2b. Directmaterialscostperunit
Conversioncostperunit
AssemblyDepartmentcostperunit

$75
84
$159

3. ThedifferenceintheAssemblyDepartmentcostperunitcalculatedinrequirements1and
2 arises because the costs incurred in January and February are the same but fewer equivalent
unitsofworkaredoneinFebruaryrelativetoJanuary.InJanuary,all10,000unitsintroducedare
fullycompletedresultingin10,000equivalentunitsofworkdonewithrespecttodirectmaterials
and conversion costs. In February, of the 10,000 units introduced, 10,000 equivalent units of
workisdonewithrespecttodirectmaterialsbutonly9,500equivalentunitsofworkisdonewith
respecttoconversioncosts.TheAssemblyDepartmentcostperunitis,therefore,higher.
SOLUTIONEXHIBIT1716A
Steps1and2:SummarizeOutputinPhysicalUnitsandComputeOutputinEquivalentUnits
AssemblyDepartmentof Nihon,Inc.forFebruary2009.

FlowofProduction
Workinprocess,beginning(given)
Startedduringcurrentperiod(given)
Toaccountfor
Completedandtransferredout
duringcurrentperiod
Workinprocess,ending*(given)
1,000 100%1,000 50%
Accountedfor
Workdoneincurrentperiod

(Step1)
Physical
Units
0
10,000
10,000
9,000
1,000

(Step2)
EquivalentUnits
Direct
Conversion
Materials
Costs

9,000

9,000

1,000

500

10,000

9,500

10,000

*Degreeofcompletioninthisdepartment:directmaterials,100%conversioncosts,50%.

173

SOLUTIONEXHIBIT1716B
ComputeCostperEquivalentUnit,
AssemblyDepartmentof Nihon,Inc.forFebruary2009.

(Step3)CostsaddedduringFebruary
Dividebyequivalentunitsofworkdone
incurrentperiod(SolutionExhibit17l6A)
Costper equivalentunit

Total
Production
Costs
$1,548,000

Direct Conversion
Materials
Costs
$750,000
$798,000
10,000
$75

9,500
$84

1717 (20min.) Journalentries(continuationof1716).


1.

2.

3.

WorkinProcessAssembly
AccountsPayable
Torecord$750,000ofdirectmaterials
purchasedandusedinproductionduring
February2009
WorkinProcessAssembly
Variousaccounts
Torecord$798,000ofconversioncosts
forFebruary2009examplesincludeenergy,
manufacturingsupplies,allmanufacturing
labor,andplantdepreciation
WorkinProcessTesting
WorkinProcessAssembly
Torecord9,000unitscompletedand
transferredfromAssemblytoTesting
duringFebruary2009at
$159 9,000units=$1,431,000

750,000
750,000

798,000
798,000

1,431,000
1,431,000

PostingstotheWorkinProcessAssemblyaccountfollow.
WorkinProcessAssemblyDepartment
Beginninginventory,Feb.1
0 3.Transferredoutto
1.Directmaterials
750,000
WorkinProcessTesting
2.Conversioncosts
798,000
Endinginventory,Feb.28
117,000

174

1,431,000

1718 (25min.) Zerobeginninginventory,materialsintroducedinmiddleofprocess.


1.
Solution Exhibit 1718A shows equivalent units of work done in the current period of
ChemicalP,50,000ChemicalQ,35,000Conversioncosts,45,000.
2.
Solution Exhibit 1718B summarizes the total Mixing Department costs for July 2009,
calculatescostperequivalentunitofworkdoneinthecurrentperiodforChemicalP,Chemical
Q,andConversioncosts,andassignsthesecoststounitscompleted(andtransferredout)andto
unitsinendingworkinprocess.
SOLUTIONEXHIBIT1718A
Steps1and2:SummarizeOutputinPhysicalUnitsandComputeOutputinEquivalentUnits
MixingDepartmentofRoaryChemicalsforJuly2009.
(Step1)
Physical
FlowofProduction
Units
Workinprocess,beginning (given)
0
Startedduringcurrentperiod(given) 50,000
Toaccountfor
50,000
Completedandtransferredout
duringcurrentperiod
35,000
Workinprocess,ending* (given)
15,000
15,000 100%15,000 0%
15,000 662/3%
Accountedfor
50,000
Workdoneincurrentperiodonly

(Step2)
EquivalentUnits
ChemicalP

ChemicalQ

Conversion
Costs

35,000

35,000

35,000

15,000

10,000

50,000

35,000

45,000

*Degreeofcompletioninthisdepartment:ChemicalP,100%ChemicalQ,0%conversioncosts,662/3%.

175

SOLUTIONEXHIBIT1718B
Steps 3, 4, and 5: Summarize Total Coststo Account For, Compute Cost perEquivalent Unit,
andAssign Total Costs toUnitsCompletedandtoUnitsinEndingWorkinProcess
MixingDepartmentofRoaryChemicalsforJuly2009.
Total
Production
Costs
(Step3) CostsaddedduringJuly
Totalcoststoaccountfor

$455,000
$455,000

(Step4)Costsaddedincurrentperiod
Dividebyequivalentunitsofwork
doneincurrentperiod
(SolutionExhibit17l8A)
Costperequivalentunit
(Step5)Assignmentofcosts:
Completedandtransferredout
(35,000units)
Workinprocess,ending
(15,000units)
Totalcostsaccountedfor

ChemicalP

ChemicalQ

Conversion
Costs

$250,000
$250,000

$70,000
$70,000

$135,000
$135,000

$250,000

$70,000

$135,000

50,000
$
5

35,000
$
2

45,000
$
3

$350,000 (35,000* $5)+(35,000* $2)+(35,000* $3)


105,000
$455,000

(15,000 $5) + (0 $2) + (10,000 $3)


$250,000 +
$70,000 +
$135,000

*EquivalentunitscompletedandtransferredoutfromSolutionExhibit1718A,Step2.

Equivalentunitsinending workinprocessfromSolutionExhibit1718A,Step2.

1719 (15min.) Weightedaveragemethod,equivalentunits.


Under the weightedaverage method, equivalent units are calculated as the equivalent units of
workdonetodate.SolutionExhibit1719showsequivalentunitsofworkdonetodateforthe
AssemblyDivisionof FentonWatches,Inc.,fordirectmaterialsandconversioncosts.
SOLUTIONEXHIBIT1719
Steps1and2:SummarizeOutputinPhysicalUnitsandComputeOutputinEquivalentUnits
WeightedAverageMethodofProcessCosting,AssemblyDivisionofFentonWatches,Inc.,for
May2009.
(Step2)
(Step1)
EquivalentUnits
Physical
Direct Conversion
FlowofProduction
Units
Materials
Costs
Workinprocessbeginning(given)
80
Startedduringcurrentperiod(given)
500
Toaccountfor
580
Completedandtransferredoutduringcurrentperiod 460
460
460
Workinprocess,ending*(120 60%120 30%)
120
72
36
Accountedfor
580
______
Workdonetodate
532
496
*Degreeofcompletioninthisdepartment:directmaterials,60%conversioncosts,30%.

176

1720 (20min.) Weightedaveragemethod,assigningcosts(continuationof1719).


SolutionExhibit1720summarizestotalcoststoaccountfor,calculatescostperequivalentunit
of work done to date in the Assembly Division of Fenton Watches, Inc., and assigns costs to
unitscompletedandtounitsinendingworkinprocessinventory.
SOLUTIONEXHIBIT1720
Steps 3, 4, and 5: Summarize Total Coststo Account For, Compute Cost perEquivalent Unit,
andAssign Total Costs toUnitsCompletedandtoUnitsinEndingWorkinProcess
WeightedAverageMethodofProcessCosting,AssemblyDivisionofFentonWatches,Inc.,for
May2009.
Total
Production
Costs
$ 584,400
4,612,000
$5,196,400

(Step3) Workinprocess,beginning(given)
Costsaddedincurrentperiod(given)
Totalcoststoaccountfor
(Step4) Costsincurredtodate
Dividebyequivalentunitsofworkdonetodate
(SolutionExhibit1719)
Costperequivalentunitofworkdonetodate
(Step5) Assignmentof costs:
Completedandtransferredout(460 units)
Workinprocess,ending(120 units)
Totalcostsaccountedfor
*

$4,586,200
610,200
$5,196,400

Direct
Materials
$ 493,360
3,220,000
$3,713,360

Conversion
Costs
$91,040
1,392,000
$1,483,040

$3,713,360

$1,483,040

177

496
2,990

(460* $6,980) +(460* $2,990)


(72 $6,980) + (36 $2,990)
$3,713,360 + $1,483,040

EquivalentunitscompletedandtransferredoutfromSolutionExhibit1719,Step2.
Equivalentunitsinworkinprocess,endingfromSolutionExhibit1719,Step2.

532
6,980

1721 (15min.) FIFOmethod,equivalentunits.


UndertheFIFOmethod,equivalentunitsarecalculatedastheequivalentunitsofworkdonein
the current period only. Solution Exhibit 1721 shows equivalent units of work done in May
2009 in the Assembly Division of Fenton Watches, Inc., for direct materials and conversion
costs.
SOLUTIONEXHIBIT1721
Steps1and2:SummarizeOutputinPhysicalUnitsandComputeOutputinEquivalentUnits
FIFOMethodofProcessCosting,AssemblyDivisionof FentonWatches,Inc.,forMay2009.

FlowofProduction
Workinprocess,beginning(given)
Startedduringcurrentperiod(given)
Toaccountfor
Completedandtransferredoutduringcurrent
period:
Frombeginningworkinprocess
80 (100% -90%)80 (100% -40%)
Startedandcompleted
380 100%,380 100%
Workinprocess,ending* (given)
120 60%120 30%
Accountedfor
Workdoneincurrentperiodonly

(Step1)
Physical
Units
80
500
580

(Step2)
EquivalentUnits
Direct
Conversion
Materials
Costs
(workdonebeforecurrentperiod)

80
8

48

380

380

72

36

460

464

380

120
___
580

Degreeofcompletioninthisdepartment:directmaterials,90%conversioncosts,40%.
460 physicalunitscompletedandtransferredoutminus80 physicalunitscompletedandtransferredoutfrom
beginningworkinprocessinventory.
*Degreeofcompletioninthisdepartment:directmaterials,60%conversioncosts,30%.

178

1722 (20min.) FIFOmethod,assigningcosts(continuationof1721).


SolutionExhibit1722summarizestotalcoststoaccountfor,calculatescostperequivalentunit
ofworkdoneinMay2009intheAssemblyDivisionofFentonWatches,Inc.,andassignstotal
coststounitscompletedandtounitsinendingworkinprocessinventory.
SOLUTIONEXHIBIT1722
Steps 3, 4, and 5: Summarize Total Coststo Account For, Compute Cost perEquivalent Unit,
andAssign Total Costs toUnitsCompletedandtoUnitsinEndingWorkinProcess
FIFOMethodofProcessCosting,AssemblyDivisionof FentonWatches,Inc.,forMay2009.

(Step3)Workinprocess,beginning(given)
Costsaddedincurrentperiod(given)
Totalcoststoaccountfor

Total
Production
Costs
$ 584,400
4,612,000
$5,196,400

Direct
Materials
$ 493,360
3,220,000

Conversion
Costs
$91,040
1,392,000
$1,483,040

$3,713,360
(Step4)Costsaddedincurrentperiod
Dividebyequivalentunitsofworkdonein
currentperiod(SolutionExhibit1721)
Costperequiv.unitofworkdoneincurrentperiod
(Step5)Assignmentofcosts:
Completedandtransferredout(460units):
Workinprocess,beginning(80units)
Costsaddedtobeginningworkinprocess
incurrentperiod
Totalfrombeginninginventory
Startedandcompleted(380units)
Totalcostsofunitscompletedand
transferredout
Workinprocess,ending(120units)
Totalcostsaccountedfor
*

$584,400

$3,220,000

460

$1,392,000

464

$3,000

7,000

$493,360

179

$91,040

(8* $7,000)+(48* $3,000)

200,000
784,400
3,800,000

(380 $7,000)+(380 $3,000)

4,584,400
612,000
$5,196,400

(72# $7,000) + (36# $3,000)


$3,713,360 + $1,483,040

EquivalentunitsusedtocompletebeginningworkinprocessfromSolutionExhibit1721,Step2.
EquivalentunitsstartedandcompletedfromSolutionExhibit1721,Step2.
#
Equivalentunitsinworkinprocess,endingfromSolutionExhibit1721,Step2.

1723 (2025min.) Standardcostingmethod,assigningcosts.


1.
SOLUTIONEXHIBIT1723A
Steps1and2:SummarizeOutputinPhysicalUnitsandComputeOutputinEquivalentUnits
StandardCostingMethodofProcessCostingforBuckysBoxesforJuly2010
(Step2)
EquivalentUnits
Direct
Conversion
Materials
Costs
185,000 (workdonebeforecurrentperiod)
(Step1)
Physical
Units

FlowofProduction

Workinprocess,beginning(given)
Startedduringcurrentperiod(given)
Toaccountfor
Completedandtransferredoutduringcurrentperiod:
Frombeginningworkinprocess
185,000 (100% -100%)185,000 (100% 25%)
Startedandcompleted
327,000 100%,327,000 100%
Workinprocess,ending*(given)
138,000 100% 138,000 80%
Accountedfor
Workdoneincurrentperiodonly

465,000
650,000
185,000
0

138,750

327,000

327,000

138,000
_______
465,000

110,400
_______
576,150

327,000

138,000
_______
650,000

Degreeofcompletioninthisdepartment:directmaterials,100%conversioncosts,25%.
512,000physicalunitscompletedandtransferredoutminus185,000physicalunitscompletedandtransferredout
frombeginningworkinprocessinventory.
*Degreeofcompletioninthisdepartment:directmaterials,100%conversioncosts,80%.

1710

2.
SOLUTIONEXHIBIT1723B
Steps3,4,and5:SummarizeTotalCoststoAccountFor,ComputeCostperEquivalentUnit,
andAssign Total Costs toUnitsCompletedandtoUnitsinEndingWorkinProcess
StandardCostingMethodofProcessCostingforBuckysBoxesforJuly2010

(Step3)Workinprocess,beginning(given)
Costsaddedincurrentperiodatstandardcosts
Totalcoststoaccountfor

Total
Production
Direct
Conversion
Costs
Materials
Costs
$ 337,625
$240,500+
$ 97,125
1,814,415 (465,000 $1.30) + (576,150 $2.10)
$2,152,040
$845,000
+
$1,307,040

(Step4) Standardcostperequivalentunit(given)
(Step5)Assignmentofcostsatstandardcosts:
Completedandtransferredout(512,000units):
Workinprocess,beginning(185,000units)
$ 337,625
Costsaddedtobeg.workinprocessincurrentperiod
291,375
Totalfrombeginninginventory
629,000
Startedandcompleted(327,000units)
1,111,800
Totalcostsofunitstransferredout
1,740,800
Workinprocess,ending(138,000units)
411,240
Totalcostsaccountedfor
$2,152,040
Summaryofvariancesforcurrentperformance:
Costsaddedincurrentperiodatstandardcosts(seeStep3above)
Actualcostsincurred(given)
Variance

$ 1.30

EquivalentunitsstartedandcompletedfromSolutionExhibit1723A,Step2.

EquivalentunitsinendingworkinprocessfromSolutionExhibit1723A,Step2.

1711

2.10

$240,500+
$97,125
(0* $1.30) +(138,750* $2.10)
(327,000 $1.30)+ (327,000 $2.10)
(138,000# $1.30) +(110,400# $2.10)
$845,000 +
$1,307,040
$604,500
$1,209,915
607,500
1,207,415
$ 3,000 U
$ 2,500F

*EquivalentunitstocompletebeginningworkinprocessfromSolutionExhibit1723A,Step2.

1724 (25min.) Weightedaveragemethod,assigningcosts.


1.&2.
SolutionExhibit1724AshowsequivalentunitsofworkdonetodateforBioDocCorporation
fordirectmaterialsandconversioncosts.

SolutionExhibit1724Bsummarizestotalcoststoaccountfor,calculatesthecostperequivalent
unit of work done to date for direct materials and conversion costs, and assigns these costs to
unitscompletedandtransferredoutandtounitsinendingworkinprocessinventory.

SOLUTIONEXHIBIT1724A
Steps1and2:SummarizeOutputinPhysicalUnitsandComputeOutputinEquivalentUnits
WeightedAverageMethodofProcessCosting,BioDoc CorporationforJuly2008.

FlowofProduction
Workinprocess,beginning(given)
Startedduringcurrentperiod(given)
Toaccountfor
Completedandtransferredout
duringcurrentperiod
Workinprocess,ending*(given)
20,000 100%20,000 50%
Accountedfor
Workdonetodate

(Step1)
Physical
Units
12,500
50,000
62,500
42,500
20,000

(Step2)
EquivalentUnits
Direct
Conversion
Materials
Costs

42,500

42,500

20,000

10,000

62,500

52,500

62,500

*Degreeofcompletion:directmaterials,100%conversioncosts,50%.

1712

SOLUTIONEXHIBIT1724B
Steps 3, 4, and 5: Summarize Total Coststo Account For, Compute Cost perEquivalent Unit,
andAssign Total Costs toUnitsCompletedandtoUnitsinEndingWorkinProcess
WeightedAverageMethodofProcessCosting,BioDoc CorporationforJuly2008.
Total
Production
Costs
$162,500
813 ,750
$976,250

(Step3) Workinprocess,beginning(given)
Costsaddedincurrentperiod(given)
Totalcoststoaccountfor
(Step4) Costsincurredtodate
Dividebyequivalentunitsofworkdoneto
date (SolutionExhibit1724A)
Costperequivalentunitofworkdonetodate
(Step5) Assignmentofcosts:
Completedandtransferredout(42,500 units)
Workinprocess,ending(20,000units)
Totalcostsaccountedfor
*Equivalentunitscompletedandtransferredout(given).

Equivalentunitsinendingworkinprocess(given).

1713

$735,250
241,000
$976,250

Direct
Materials
$ 75,000
350,000
$425,000

Conversion
Costs
$ 87,500
463,750
$551,250

$425,000

$551,250

62,500
$ 6.80

52,500
$ 10.50

(42,500* $6.80) +(42,500* $10.50)


(20,000 $6.80) + (10,000 $10.50)
$425,000 +
$551,250

1725 (30min.) FIFOmethod,assigningcosts.


1. & 2. Solution Exhibit 1725A calculates the equivalent units of work done in the current
period. Solution Exhibit 1725B summarizes total costs to account for, calculates the cost per
equivalentunitofworkdoneinthecurrentperiodfordirectmaterialsandconversioncosts,and
assignsthesecoststounitscompletedandtransferredoutandtounitsinendingworkinprocess
inventory.
SOLUTIONEXHIBIT1725A
Steps1and2:SummarizeOutputinPhysicalUnitsandComputeOutputinEquivalentUnits
FIFOMethodofProcessCosting,BioDoc CorporationforJuly2008.
(Step2)
EquivalentUnits
Direct
Conversion
Materials
Costs
(workdonebeforecurrentperiod)
12,500

(Step1)
Physical
Units

FlowofProduction

Workinprocess,beginning(given)
Startedduringcurrentperiod(given)
Toaccountfor
Completedandtransferredoutduringcurrentperiod:
Frombeginningworkinprocess
12,500 (100% -100%)12,500 (100% 70%)
Startedandcompleted
30,000 100%,30,000 100%
Workinprocess,ending*(given)
20,000 100% 20,000 50%
Accountedfor
Workdoneincurrentperiodonly

50,000
62,500
12,500
0

3,750

30,000

30,000

20,000

10,000

50,000

43,750

30,000
20,000
62,500

Degreeofcompletioninthisdepartment:directmaterials,100%conversioncosts,70%.
42,500physicalunitscompletedandtransferredoutminus12,500physicalunitscompletedandtransferredout
frombeginningworkinprocessinventory.
*Degreeofcompletioninthisdepartment:directmaterials,100%conversioncosts,50%.

1714

SOLUTIONEXHIBIT1725B
Steps3,4,and5:SummarizeTotalCoststoAccountFor,ComputeCostperEquivalentUnit,andAssignTotalCoststoUnits
CompletedandtoUnitsinEndingWorkinProcess
FIFOMethodofProcessCosting,BioDoc CorporationforJuly2008.

(Step3)Workinprocess,beginning(given)
Costsaddedincurrentperiod(given)
Totalcoststoaccountfor

Total
Production
Costs
$162,500
813,750

Direct
Materials
$ 75,000
350,000

Conversion
Costs
$ 87,500
463,750

$976,250

$425,000

$551,250

$350,000

$463,750

50,000

43,750

$10.60

(Step4)Costsaddedincurrentperiod
Dividebyequivalentunitsofworkdonein
currentperiod(SolutionExhibit1725A)
Costperequivalentunitofworkdoneincurrentperiod
(Step5)Assignmentofcosts:
Completedandtransferredout(42,500units):
Workinprocess,beginning(12,500units)
Costaddedtobeginningworkinprocessincurrentperiod
Totalfrombeginninginventory
Startedandcompleted(30,000units)
Totalcostsofunitscompletedandtransferredout
Workinprocess,ending(20,000units)
Totalcostsaccountedfor

$162,500
39,750
202,250
528,000
730,250
246,000
$976,250

*EquivalentunitsusedtocompletebeginningworkinprocessfromSolutionExhibit1725A,Step2.

EquivalentunitsstartedandcompletedfromSolutionExhibit1725A,Step2.
#
EquivalentunitsinendingworkinprocessfromSolutionExhibit1725A,Step2.

1715

$75,000 +
$87,500
*
(0 $7) +(3,750* $10.60)
(30,000 $7) +(30,000 $10.60)
(20,000# $7) +(10,000# $10.60)
$425,000
+ $551,250

1726 (30min.) Standardcostingmethod,assigningcosts.


1.
Thecalculationsofequivalentunitsfordirectmaterialsandconversioncostsareidentical
tothe calculations of equivalent units undertheFIFO method. Solution Exhibit 1725A shows
theequivalentunitcalculations forstandardcostingandcomputestheequivalentunitsofwork
done in July 2008. Solution Exhibit 1726 uses the standard costs (direct materials, $6.60
conversion costs, $10.40) to summarize total costs to account for, and to assign these costs to
unitscompletedandtransferredoutandtounitsinendingworkinprocessinventory.
2.

SolutionExhibit1726showsthedirectmaterialsandconversioncostsvariancesfor
Directmaterials
Conversioncosts

$20,000U
$8,750U

SOLUTIONEXHIBIT1726
Steps3,4,and5:SummarizeTotalCoststoAccountFor,ComputeCostperEquivalentUnit,
andAssign Total Costs toUnitsCompletedandtoUnitsinEndingWorkinProcess
StandardCostingMethodofProcessCosting,BioDocCorporationforJuly2008.

(Step3) Workinprocess,beginning(given)
Costsaddedincurrentperiodatstandardcosts
Totalcoststoaccountfor
(Step4) Standardcostperequivalentunit(given)
(Step5)Assignmentofcostsatstandardcosts:
Completedandtransferredout(42,500units):
Workinprocess,beginning(12,500units)
Costsaddedtobeg.workinprocessincurrentperiod
Totalfrombeginninginventory
Startedandcompleted(30,000units)
Totalcostsofunitstransferredout
Workinprocess,ending(20,000units)
Totalcostsaccountedfor
Summaryofvariancesforcurrentperformance:
Costsaddedincurrentperiodatstandardcosts(seeStep3above)
Actualcostsincurred(given)
Variance

Total
Production
Direct
Conversion
Costs
Materials
Costs
$173,500 (12,500 $6.60) + (8,750 $10.40)
785,000 (50,000 $6.60) +(43,750 $10.40)
$958,500
$412,500 +
$546,000
$6.60
$173,500
39,000
212,500
510,000
722,500
236,000
$958,500

(12,500 $6.60)+ (8,750 $10.40)


(0* $6.60)+(3,750* $10.40)
(30,000 $6.60)+ (30,000 $10.40)
(20,000# $6.60) + (10,000# $10.40)
$412,500
+
$546,000
$330,000
350,000
$ 20,000U

*EquivalentunitstocompletebeginningworkinprocessfromSolutionExhibit1725A,Step2.

EquivalentunitsstartedandcompletedfromSolutionExhibit1725A,Step2.
#
EquivalentunitsinendingworkinprocessfromSolutionExhibit1725A,Step2.

1716

$10.40

$455,000
463,750
$ 8,750 U

1727 (3540min.) Transferredincosts,weightedaveragemethod.


1, 2. & 3. Solution Exhibit 1727A calculates the equivalent units of work done to date.
SolutionExhibit1727Bsummarizestotalcoststoaccountfor,calculatesthecostperequivalent
unit of work done to date for transferredin costs, direct materials, and conversion costs, and
assignsthesecoststounitscompletedandtransferredoutandtounitsinendingworkinprocess
inventory.
SOLUTIONEXHIBIT1727A
Steps1and2:SummarizeOutputinPhysicalUnitsandComputeOutputinEquivalentUnits
WeightedAverageMethodofProcessCosting
FinishingDepartmentofAsayaClothingforJune2009.
(Step1)
Physical
Units

FlowofProduction

Workinprocess,beginning(given)
Transferredinduringcurrentperiod(given)
Toaccountfor
Completedandtransferredout
duringcurrentperiod
Workinprocess,ending* (given)
60 100% 60 0% 60 75%
Accountedfor
Workdonetodate

(Step2)
EquivalentUnits
Transferred
Direct Conversion
inCosts
Materials
Costs

75
135
210
150
60

150

150

150

60

45

210

150

195

210

*Degreeofcompletioninthisdepartment:transferredincosts,100%directmaterials,0%conversioncosts,75%.

1717

SOLUTIONEXHIBIT1727B
Steps3,4,and5:SummarizeTotalCoststoAccountFor,ComputeCostperEquivalentUnit,andAssignTotalCoststoUnits
CompletedandtoUnitsinEndingWorkinProcess
WeightedAverageMethodofProcessCosting,
FinishingDepartmentof AsayaClothingforJune2009.

(Step3)

Workinprocess,beginning(given)
Costsaddedincurrentperiod(given)
Totalcoststoaccountfor

(Step4)

Costsincurredtodate
Dividebyequivalentunitsofworkdonetodate
(SolutionExhibit1727A)
Costperequivalentunitofworkdonetodate

(Step5)

a
b

Assignmentofcosts:
Completedandtransferredout(150units)
Workinprocess,ending(60units):
Totalcostsaccountedfor

Total
Production
Costs
$105,000
258,000
$363,000

Direct
Materials
$0
37,500
$37,500

Conversion
Costs
$ 30,000
78,000
$108,000

$217,500

$37,500

$108,000

210
$1,035.71

150
$250

195
$ 553.85

$275,934 (150a $1,035.71)+(150a $250) + (150a $553.85)


87,066 (60b $1,035.71) + (0b $250) + (45b $553.85)
$363,000
$ 217,500 + $37,500 +
$108,000

EquivalentunitscompletedandtransferredoutfromSol.Exhibit1727,step2.
EquivalentunitsinendingworkinprocessfromSol.Exhibit1727A,step2.

1718

Transferredin
Costs
$ 75,000
142,500
$217,500

1728 (3540min.) Transferredincosts,FIFOmethod.


SolutionExhibit1728Acalculatestheequivalentunitsofworkdoneinthecurrentperiod(for
transferredin costs, directmaterials, and conversion costs) to complete beginning workin
process inventory, to start and complete new units, and to produce ending work in process.
SolutionExhibit1728Bsummarizestotalcoststoaccountfor,calculatesthecostperequivalent
unitofworkdoneinthecurrentperiodfortransferredincosts,directmaterials,andconversion
costs,andassignsthesecoststounitscompletedandtransferredoutandtounitsinendingwork
inprocessinventory.
SOLUTIONEXHIBIT1728A
Steps1and2:SummarizeOutputinPhysicalUnitsandComputeOutputinEquivalentUnits
FIFOMethodofProcessCosting
FinishingDepartmentof AsayaClothingforJune2009.

(Step1)

FlowofProduction
Workinprocess,beginning(given)
Transferredinduringcurrentperiod(given)
Toaccountfor
Completedandtransferredoutduringcurrentperiod:
Frombeginningworkinprocessa
[75 (100% 100%) 75 (100% 0%) 75 (100% 60%)]
Startedandcompleted
(75 100% 75 100% 75 100%)
Workinprocess,endingc (given)
(60 100% 60 0% 60 75%)
Accountedfor
Workdoneincurrentperiodonly

(Step2)
EquivalentUnits

Physical Transferredin Direct Conversion


Units
Costs
Materials
Costs
75
(workdonebeforecurrentperiod)
135
210
75
0

75

30

75

75

75

60
___
135

0
___
150

45
___
150

75b
60
___
210

Degreeofcompletioninthisdepartment:Transferredincosts,100%directmaterials,0%conversioncosts,60%.

150physicalunitscompletedandtransferredoutminus 75physicalunitscompletedandtransferredoutfrombeginning
workinprocessinventory.
Degreeofcompletion inthisdepartment:transferredincosts,100%directmaterials,0%conversioncosts,75%.

1719

SOLUTIONEXHIBIT1728B
Steps3,4,and5:SummarizeTotalCoststoAccountFor,ComputeCostperEquivalentUnit,andAssign Total CoststoUnits
CompletedandtoUnitsinEndingWorkinProcess
FIFOMethodofProcessCosting,
FinishingDepartmentof AsayaClothingforJune2009.

(Step3) Workinprocess,beginning(given)
Costsaddedincurrentperiod(given)
Totalcoststoaccountfor

Total
Production
Costs
$ 90,000
246,300
$336,300

(Step4) Costsaddedincurrentperiod
Dividebyequivalentunitsofworkdoneincurrentperiod
(SolutionExhibit1728A)
Costperequivalentunitofworkdoneincurrentperiod
(Step5) Assignmentofcosts:
Completedandtransferredout(150units)
Workinprocess,beginning(75units)
Costsaddedtobeginningworkinprocessincurrentperiod
Totalfrombeginninginventory
Startedandcompleted(75units)
Totalcostsofunitscompletedandtransferredout
Workinprocess,ending(60units):
Totalcostsaccountedfor
a

$ 90,000
34,350
124,350
130,416
254,766
81,534
$336,300

Transferredin
DirectMaterials ConversionCosts
Costs
$ 60,000
$
0
$ 30,000
130,800
37,500
78,000
$190,800
$37,500
$108,000
$130,800

$37,500

$ 78,000

135
$ 968.89

1720

150
520

$ 60,000
$
0
$ 30,000
(0a $968.89) +(75a $250) + (30a $520)
(75b $968.89) +(75b $250) + (75b $520)
(60c $968.89) + (0c $250) + (45c $520)
$190,800 +
$37,500
+ $108,000

EquivalentunitsusedtocompletebeginningworkinprocessfromSolutionExhibit1728A,step2.
EquivalentunitsstartedandcompletedfromSolutionExhibit1728A,step2.
c
EquivalentunitsinendingworkinprocessfromSolutionExhibit1728A,step2.
b

150
250

1729 (1520min.)Standardcostingmethod.
1. Since there was no additional work needed on the beginning inventory with respect to
materials,theinitialmulchmusthavebeen100%completewithrespecttomaterials.For
conversion costs, the work done to complete the opening inventory was 434,250
965,000=45%.Therefore,theunfinished mulch inopening inventory musthave been
55%completewithrespecttoconversioncosts.
2. It is clear that the ending WIP is also 100% complete with respect to direct materials
(1,817,0001,817,000),and it is60%(=1,090,2001,817,000)completewithregard
toconversioncosts.
3. We can first obtain the total standard costs per unit. The number of units started and
completedduringAugustis845,000,andatotalcostof$6,717,750isattachedtothem.
The per unit standard cost is therefore ($6,717,750 845,000) = $7.95. If x and y
represent the per unit cost for direct materials and conversion costs, respectively, we
thereforeknowthat:
x+y=7.95
Wealsoknowthattheendinginventoryiscostedat$12,192,070andcontains1,817,000
equivalent units of materials and 1,090,200 equivalent units of conversion costs. This
providesasecondequation:
1,817,000x+1,090,200y=12,192,070.
Solvingtheseequationsrevealsthatthedirectmaterialscostperunit,x,is$4.85,while
theconversioncostperunit,y,is$3.10.
4. Finally,theopening WIPcontained965,000equivalentunitsofmaterialsand(965,000
434,250) = 530,750 equivalent units of conversion costs. Applying the standard costs
computedinstep(3),thecostoftheopeninginventorymusthavebeen:
965,000$4.85+530,750$3.10=$6,325,575.

1721

1730 (25min.) Weightedaveragemethod.


1.
Sincedirectmaterialsareaddedatthebeginningoftheassemblyprocess,theunitsinthis
department must be 100% complete with respect to direct materials. Solution Exhibit 1730A
showsequivalentunitsofworkdonetodate:
Directmaterials
Conversioncosts

25,000equivalentunits
24,250equivalentunits

2.&3. Solution Exhibit 1730B summarizes the total Assembly Department costs for October
2009, calculates cost per equivalent unit of workdoneto date, and assigns these coststo units
completed (and transferred out) and to units in ending work in process using the weighted
averagemethod.
SOLUTIONEXHIBIT1730A
Steps 1 and 2: Summarize Output in Physical Units and Compute Output in Equivalent Units
WeightedAverage Methodof Process Costing, Assembly DepartmentofLarsen Company, for
October2009.
(Step1)

FlowofProduction
Workinprocess,beginning(given)
Startedduringcurrentperiod(given)
Toaccountfor
Completedandtransferredout
duringcurrentperiod
Workinprocess,ending* (given)
2,500 100% 2,500 70%
Accountedfor
Workdonetodate

Physical
Units
5,000
20,000
25,000
22,500
2,500

(Step2)
EquivalentUnits
Direct
Conversion
Materials
Costs

22,500

22,500

2,500

1,750

25,000

24,250

25,000

*Degreeofcompletioninthisdepartment:directmaterials,100%conversioncosts,70%.

1722

SOLUTIONEXHIBIT1730B
Steps 3, 4, and 5: Summarize Total Coststo Account For, Compute Cost perEquivalent Unit,
andAssign Total Costs toUnitsCompletedandtoUnitsinEndingWorkinProcess
WeightedAverage Method of Process Costing, Assembly Department of Larsen Company,
forOctober2009.
Total
Production
Costs
$1,652,750
6,837,500
$8,490,250

(Step3) Workinprocess,beginning(given)
Costsaddedincurrentperiod(given)
Totalcoststoaccountfor
(Step4) Costsincurredtodate
Dividebyequivalentunitsofworkdonetodate
(SolutionExhibit1730A)
Costperequivalentunitofworkdonetodate
(Step5) Assignmentofcosts:
Completedandtransferredout(22,500 units)
Workinprocess,ending(2,500units)
Totalcostsaccountedfor

Direct
Materials
$1,250,000
4,500,000
$5,750,000

Conversion
Costs
$ 402,750
2,337,500
$2,740,250

$5,750,000

$2,740,250

25,000
$
230

24,250
$
113

$7,717,500 (22,500* $230)+ (22,500* $113)


772,750
(2,500 $230) + (1,750 $113)
$8,490,250
$6,150,000 + $2,619,000

EquivalentunitscompletedandtransferredoutfromSolutionExhibit1730A,Step2.
Equivalentunitsinworkinprocess,endingfromSolutionExhibit1730A,Step2.

1731 (10min.) Journalentries(continuationof1730).


1.

2.

3.

WorkinProcessAssemblyDepartment
AccountsPayable
Directmaterialspurchasedandusedin
productioninOctober.

4,500,000

WorkinProcessAssemblyDepartment
Variousaccounts
ConversioncostsincurredinOctober.

2,337,500

4,500,000

2,337,500

WorkinProcessTestingDepartment
7,717,500
WorkinProcessAssemblyDepartment
7,717,500
Costofgoodscompletedandtransferredout
inOctoberfromtheAssemblyDepartmenttotheTestingDepartment.

WorkinProcessAssemblyDepartment
Beginninginventory,October1 1,652,750 3.Transferredoutto
1. Directmaterials
4,500,000
WorkinProcessTesting
2. Conversioncosts
2,337,500
EndingInventory,October31
772,750

1723

7,717,500

1732 (20min.) FIFOmethod(continuationof1730).


1.
Theequivalentunitsofworkdone inthecurrentperiodintheAssemblyDepartmentin
October2009fordirectmaterialsandconversioncostsareshowninSolutionExhibit1732A.
2.
The cost per equivalent unit of work done in the current period in the Assembly
Department in October 2009for direct materials and conversion costs is calculated in Solution
Exhibit1732B.
3.
Solution Exhibit 1732B summarizes the total Assembly Department costs for October
2009,andassignsthesecoststounitscompleted(andtransferredout)andunitsinendingworkin
processundertheFIFOmethod.
The cost per equivalent unit of beginning inventory and of work done in the current
perioddiffer:

Directmaterials
Conversioncosts
Totalcostperunit

Beginning
Inventory
$250.00 ($1,250,000 5,000equiv.units)
134.25 ($ 402,750 3,000equiv.units)
$384.25

Costperequivalentunit(weightedaverage)
Costperequivalentunit(FIFO)

Direct
Materials
$230*
$225**

WorkDonein
CurrentPeriod
$225.00
110.00
$335.00
Conversion
Costs
$113*
$110**

fromSolutionExhibit1730B
fromSolutionExhibit1732B

**

Thecostperequivalentunitdiffersbetweenthetwomethodsbecauseeachmethodusesdifferent
costs as the numerator of the calculation. FIFO uses only the costs added during the current
periodwhereasweightedaverageusesthecostsfromthebeginningworkinprocessaswellas
costs added during the current period. Both methods also use different equivalent units in the
denominator.
The following table summarizes the costs assignedto units completed andthose still in
processundertheweightedaverageandFIFOprocesscostingmethodsforourexample.
Weighted
Average
FIFO
(Solution
(Solution
Exhibit1730B) Exhibit1732B) Difference
Costofunitscompletedandtransferredout
$7,717,500
$7,735,250
+ $17,750
Workinprocess,ending
772,750
755,000
- $17,750
Totalcostsaccountedfor
$8,490,250
$8,490,250

1724

The FIFO ending inventory is lower than the weightedaverage ending inventory by
$17,750. This is because FIFO assumes that all the highercost priorperiod units in work in
processarethefirsttobecompletedandtransferredoutwhileendingworkinprocessconsistsof
onlythelowercostcurrentperiodunits.Theweightedaveragemethod,however,smoothesout
cost per equivalent unit by assuming that more of the lowercost units are completed and
transferredout,whilesomeofthe highercostunitsin beginningwork inprocessareplaced in
endingworkinprocess.So,inthiscase,theweightedaveragemethodresultsinalowercostof
unitscompletedandtransferredoutandahigherendingworkinprocessinventoryrelativeto the
FIFOmethod.
SOLUTIONEXHIBIT1732A
Steps1and2:SummarizeOutputinPhysicalUnitsandComputeOutputinEquivalentUnits
FIFOMethodofProcessCosting,
AssemblyDepartmentof LarsenCompanyforOctober2009.
(Step1)

(Step2)
EquivalentUnits
Direct
Conversion
Materials
Costs

Physical
FlowofProduction
Units
Workinprocess,beginning(given)
5,000 (workdonebeforecurrentperiod)
Startedduringcurrentperiod(given)
20,000
Toaccountfor
25,000
Completedandtransferredoutduringcurrent
period:
Frombeginningworkinprocess
5,000 (100% -100%) 5,000 (100% - 60%) 5,000
0
2,000
Startedandcompleted
17,500 100%,17,500 100%
17,000
17,500
17,500
Workinprocess,ending*(given)
2,500
2,500 100% 2,500 70%
_____
2,500
1,750
Accountedfor
25,000
______
Workdoneincurrentperiodonly
20,000
21,250

Degreeofcompletioninthisdepartment:directmaterials,100%conversioncosts,60%.
22,500 physicalunitscompletedandtransferredoutminus 5,000 physicalunitscompletedandtransferredoutfrom
beginningworkinprocessinventory.
*Degreeofcompletioninthisdepartment:directmaterials,100%conversioncosts,70%.

1725

SOLUTIONEXHIBIT1732B
Steps 3, 4, and 5:Summarize Total Coststo Account For, Compute Cost perEquivalent Unit, and AssignTotalCoststo
UnitsCompletedandtoUnitsinEndingWorkinProcess
FIFOMethodofProcessCosting,AssemblyDepartmentof LarsenCompanyforOctober2009.

(Step3)Workinprocess,beginning(given)
Costsaddedincurrentperiod(given)
Totalcoststoaccountfor

Total
Production
Costs
$1,652,750
6,837,500
$8,490,250

(Step4)Costsaddedincurrentperiod
Dividebyequivalentunitsofworkdonein
currentperiod(SolutionExhibit1732A)
Costperequivalentunitofworkdoneincurrentperiod
(Step5)Assignmentofcosts:
Completedandtransferredout(22,500 units):
Workinprocess,beginning(5,000units)
Costsaddedtobeg.workinprocessincurrentperiod
Totalfrombeginninginventory
Startedandcompleted(17,500 units)
Totalcostsofunitscompleted&transferredout
Workinprocess,ending(2,500units)
Totalcostsaccountedfor

$1,652,750
220,000
1,872,750
5,862,500
7,735,250
755,000
$8,490,250

*EquivalentunitsusedtocompletebeginningworkinprocessfromSolutionExhibit1732A,Step2.

Equivalent unitsstartedandcompletedfromSolutionExhibit1732A,Step2.
#
EquivalentunitsinendingworkinprocessfromSolutionExhibit1732A,Step2.

1726

Direct
Materials
$1,250,000
4,500,000
$5,750,000

Conversion
Costs
$ 402,750
2,337,500
$2,740,250

$4,500,000

$2,337,500

20,000
$
225

21,250
110

$1,250,000 + $ 402,750
(0* $225) + (2,000* $110)
(17,500 $225) + (17,500 $110)
(2,500# $225) + (1,750# $110)
$5,750,000 + $2,740,250

1733 (30min.) Transferredincosts,weightedaveragemethod(relatedto1730to1732).


1.
Transferredin costs are 100% complete, and direct materials are 0% complete in both
beginning and ending workinprocess inventory. The reason is that transferredin costs are
always100%completeassoonastheyaretransferredinfromtheAssemblyDepartmenttothe
Testing Department. Direct materials in beginning or ending work in process for the Testing
Departmentare0%completebecausedirectmaterialsareaddedonlywhenthetestingprocessis
90% complete and the units in beginning and ending work in process are only 70% and 60%
complete,respectively.
2.
Solution Exhibit 1733A computes the equivalent units of work done to date in the
TestingDepartmentfortransferredincosts,directmaterials,andconversioncosts.
3.
Solution Exhibit 1733B summarizes total Testing Department costs for October 2009,
calculates the cost per equivalent unit of work done to date in the Testing Department for
transferredin costs, direct materials, and conversion costs, and assigns these costs to units
completedandtransferredoutandtounitsinendingworkinprocessusingtheweightedaverage
method.
4.

Journalentries:
a. WorkinProcessTestingDepartment
WorkinProcessAssemblyDepartment
Costofgoodscompletedandtransferredout
duringOctoberfromtheAssembly
DepartmenttotheTestingDepartment
b. FinishedGoods
WorkinProcessTestingDepartment
Costofgoodscompletedandtransferredout
duringOctoberfromtheTestingDepartment
toFinishedGoodsinventory

1727

7,717,500
7,717,500

23,459,600
23,459,600

SOLUTIONEXHIBIT1733A
Steps1and2:SummarizeOutputinPhysicalUnitsandComputeOutputinEquivalentUnits
WeightedAverageMethodofProcessCosting,
TestingDepartmentof LarsenCompanyforOctober2009.
(Step1)
Physical
FlowofProduction
Units
Workinprocess,beginning(given)
7,500
Transferredinduringcurrentperiod(given)22,500
Toaccountfor
30,000
Completedandtransferredout
duringcurrentperiod
26,300
Workinprocess,ending* (given)
3,700
3,700 100% 3,700 0% 3,700 60%
Accountedfor
30,000
Workdonetodate

(Step2)
EquivalentUnits
Transferredin Direct Conversion
Costs
Materials
Costs

26,300

26,300

26,300

3,700

2,220

30,000

26,300

28,520

*Degreeofcompletioninthisdepartment:transferredincosts,100%directmaterials,0%conversioncosts,60%.

1728

SOLUTIONEXHIBIT1733B
Steps3,4,and5:SummarizeTotalCoststoAccountFor,ComputeCostperEquivalentUnit,andAssignTotal CoststoUnitsCompleted
andtoUnitsinEndingWorkinProcess
WeightedAverageMethodofProcessCosting,
TestingDepartmentof LarsenCompanyforOctober2009.

(Step3)Workinprocess,beginning(given)
Costsaddedincurrentperiod(given)
Totalcoststoaccountfor

Total
Production
Costs
$ 3,767,960
21,378,100
$25,146,060

(Step4)Costsincurredtodate
Dividebyequivalentunitsofworkdonetodate
(SolutionExhibit1733A)
Equivalentunitcostsofworkdonetodate
(Step5)Assignmentofcosts:
Completedandtransferredout(26,300units)
Workinprocess,ending(3,700units)
Totalcostsaccountedfor

$23,459,600
1,686,460
$25,146,060

*EquivalentunitscompletedandtransferredoutfromSolutionExhibit1733A,Step2.

EquivalentunitsinendingworkinprocessfromSolutionExhibit1733A,Step2.

1729

Transferred
inCosts
$ 2,932,500
7,717,500
$10,650,000

Direct
Materials
$0
9,704,700
$9,704,700

Conversion
Costs
$ 835,460
3,955,900
$4,791,360

$10,650,000

$9,704,700

$4,791,360

26,300
$
369

28,520
$
168

30,000
355

(26,300* $355) + (26,300* $369) + (26,300* $168)


(3,700 $355) + (0 $369)
+ (2,220 $168)
$10,429,500
+ $9,704,700
+
$4,791,360

1734 (30min.) Transferredincosts,FIFOmethod(continuationof1733).


1.
As explained in Problem 1733, requirement 1, transferredin costs are 100% complete
anddirectmaterialsare0%completeinbothbeginningandendingworkinprocessinventory.
2.
The equivalent units of work done in October 2009 in the Testing Department for
transferredincosts,directmaterials,andconversioncostsarecalculatedinSolutionExhibit17
34A.
3.
Solution Exhibit 1734B summarizes total Testing Department costs for October 2009,
calculatesthecostperequivalentunitofworkdoneinOctober2009intheTestingDepartment
for transferredin costs, direct materials, and conversion costs, and assigns these costs to units
completedandtransferredoutandtounitsinendingworkinprocessusingtheFIFOmethod.
4.

Journalentries:
a. WorkinProcessTestingDepartment
WorkinProcessAssemblyDepartment
Costofgoodscompletedandtransferredout
duringOctoberfromtheAssemblyDept.to
theTestingDept.
b. FinishedGoods
WorkinProcessTestingDepartment
Costofgoodscompletedandtransferredout
duringOctoberfromtheTestingDepartment
toFinishedGoodsinventory.

1730

7,735,250
7,735,250

23,463,766
23,463,766

SOLUTIONEXHIBIT1734A
Steps1and2:SummarizeOutputinPhysicalUnitsandComputeOutputinEquivalentUnits
FIFOMethodofProcessCosting,
TestingDepartmentof LarsenCompanyforOctober2009.

FlowofProduction
Workinprocess,beginning(given)
Transferredinduringcurrentperiod(given)
Toaccountfor
Completedandtransferredoutduringcurrent
period:
Frombeginningworkinprocess
7,500 (100% -100%)7,500 (100% -0%)
7,500 (100% -70%)
Startedandcompleted
18,800 100%18,800 100%18,800 100%
Workinprocess,ending*(given)
3,700 100%3,700 0%3,700 60%
Accounted for
Workdoneincurrentperiodonly

(Step2)
(Step1)
EquivalentUnits
Physical Transferred
Direct
Conversion
Units
inCosts
Materials
Costs
7,500
(workdonebeforecurrentperiod)
22,500
30,000

7,500
0

7,500

2,250

18,800

18,800

18,800

3,700

2,220
______

22,500

_____
26,300

18,800
3,700
______
30,000

23,270

Degreeofcompletioninthisdepartment:Transferredincosts,100%directmaterials,0%conversioncosts,70%.
26,300physicalunitscompletedandtransferredoutminus 7,500physicalunitscompletedandtransferredoutfrom
beginningworkinprocessinventory.
*Degreeofcompletioninthisdepartment:transferredincosts,100%directmaterials,0%conversioncosts,60%.

1731

SOLUTIONEXHIBIT1734B
Steps3,4,and5:SummarizeTotalCoststoAccountFor,ComputeCostperEquivalentUnit,andAssignTotalCoststo
UnitsCompletedandtoUnitsinEndingWorkinProcess
FIFOMethodofProcessCosting,
TestingDepartmentof LarsenCompanyforOctober2009.

(Step3) Workinprocess,beginning(given)
Costsaddedincurrentperiod(given)
Totalcoststoaccountfor

Total
Production
Costs
$ 3,717,335
21,395,850
$25,113,185

(Step4) Costsaddedincurrentperiod
Dividebyequivalentunitsofworkdonein
currentperiod(SolutionExhibit1734A)
Costperequiv.unitofworkdoneincurrentperiod
(Step5) Assignmentofcosts:
Completedandtransferredout(26,300units):
Workinprocess,beginning(7,500units)
Costsaddedtobeg.workinprocessincurrentperiod
Totalfrombeginninginventory
Startedandcompleted(18,800units)
Totalcostsofunitscompleted&transferredout
Workinprocess,ending(3,700units)
Totalcostsaccountedfor

$ 3,717,335
3,150,000
6,867,335
16,596,431
23,463,766
1,649,419
$25,113,185

Direct
Materials
$
0
9,704,700
$9,704,700

Conversion
Costs
$ 835,460
3,955,900
$4,791,360

$ 7,735,250

$9,704,700

$3,955,900

26,300
$ 369.00

23,270
$170.00

22,500
343.79

$2,881,875 +
$0
+ $835,460
(0* $343.79)+ (7,500* $369.00)+ (2,250* $170.00)
(18,800 $343.79)+(18,800 $369.00)+(18,800 $170.00)
(3,700# $343.79) + (0# $369.00) +(2,220# $170.00)
$10,617,125
+ $9,704,700
+ $4,791,360

*EquivalentunitsusedtocompletebeginningworkinprocessfromSolutionExhibit1734A,Step2.

EquivalentunitsstartedandcompletedfromSolutionExhibit1734A,Step2.
#
EquivalentunitsinendingworkinprocessfromSolutionExhibit1734A,Step2.

1732

Transferredin
Costs
$ 2,881,875
7,735,250
$10,617,125

1735 (25min.) Weightedaveragemethod.


SolutionExhibit1735Ashowsequivalentunitsofworkdonetodateof:
Directmaterials
Conversioncosts

625equivalentunits
525equivalentunits

Note that direct materials are added when the Assembly Department process is 10%
complete. Both the beginning and ending work in process are more than 10% complete and
henceare100%completewithrespecttodirectmaterials.
Solution Exhibit 1735B summarizes the total Assembly Department costs for April
2009,calculatescostperequivalentunitofworkdonetodatefordirectmaterialsandconversion
costs, and assigns these costs to units completed (and transferred out), and to units in ending
workin processusingtheweightedaveragemethod.
SOLUTIONEXHIBIT1735A
Steps1and2:SummarizeOutputinPhysicalUnitsandComputeOutputinEquivalentUnits
WeightedAverage Method of Process Costing, Assembly Department of Porter Handcraft for
April2009.
(Step1)

FlowofProduction
Workinprocess,beginning(given)
Startedduringcurrentperiod(given)
Toaccountfor
Completedandtransferredout
duringcurrentperiod
Workinprocess,ending* (given)
125 100% 125 20%
Accountedfor
Workdonetodate

Physical
Units
75
550
625
500
125

(Step2)
EquivalentUnits
Direct
Conversion
Materials
Costs

500

500

125

25

625

525

625

Degreeofcompletioninthisdepartment:directmaterials,100%conversioncosts,20%.

1733

SOLUTIONEXHIBIT1735B
Steps 3, 4, and 5: Summarize Total Coststo Account For, Compute Cost perEquivalent Unit,
andAssign Total Costs toUnitsCompletedandtoUnitsinEndingWorkinProcess
WeightedAverageMethodofProcessCosting,Assembly Departmentof Porter,April2009.

(Step3) Workinprocess,beginning(given)
Costsaddedincurrentperiod(given)
Totalcoststoaccountfor

Total
Production
Costs

Direct
Materials

Conversion
Costs

$ 1,910
28,490
$30,400

$ 1,775
17,600
$19,375

$ 135
10,890
$11,025

$19,375

$11,025

625
$
31

(Step4) Costsincurredtodate
Dividebyequivalentunitsofworkdoneto
date(SolutionExhibit1735A)
Costperequivalentunitofworkdonetodate
(Step5) Assignmentofcosts:
Completedandtransferredout(500units)
Workinprocess,ending(125units)
Totalcostsaccountedfor
*

$26,000
4,400
$30,400

(500* $31)+(500* $21)


(125 $31)+ (25 $21)
$19,375
+ $11,025

EquivalentunitscompletedandtransferredoutfromSolutionExhibit1735A,Step2.
EquivalentunitsinendingworkinprocessfromSolutionExhibit1735A,Step2.

1734

525
21

1736 (510min.)

Journalentries(continuationof1735).

1. WorkinProcess AssemblyDepartment
AccountsPayable
Torecorddirectmaterialspurchasedand
usedinproductionduringApril

17,600

2. WorkinProcessAssembly Department
VariousAccounts
Torecord Assembly Departmentconversion
costsforApril

10,890

3. WorkinProcessFinishingDepartment
WorkinProcessAssembly Department
Torecordcostofgoodscompletedandtransferred
outinAprilfromtheAssembly Department
totheFinishingDepartment

26,000

17,600

10,890

26,000

WorkinProcessAssemblyDepartment
Beginninginventory,April1
1,910 3.Transferredoutto
1.Directmaterials
17,600
WorkinProcessFinishing
2.Conversioncosts
10,890
Endinginventory,April30
4,400

1735

26,000

1737 (20min.) FIFOmethod(continuationof1735).


TheequivalentunitsofworkdoneinApril2009intheAssembly Departmentfordirectmaterials
andconversioncostsareshowninSolutionExhibit1737A.
SolutionExhibit1737BsummarizesthetotalAssemblyDepartmentcostsforApril2009,
calculatesthecostperequivalentunitofworkdoneinApril2009intheAssemblyDepartment
for direct materials and conversion costs, and assigns these costs to units completed (and
transferredout)andtounitsinendingworkinprocessundertheFIFOmethod.
Theequivalentunitsofworkdoneinbeginninginventoryis:directmaterials,75 100%=
75andconversioncosts75 40%=30.Thecostperequivalentunitofbeginninginventoryand
ofworkdoneinthecurrentperiodare:

Directmaterials
Conversioncosts

Beginning
Inventory
$23.67($1,775 75)
$4.50 ($135 30)

WorkDonein
CurrentPeriod
(CalculatedUnder
FIFOMethod)
$32
$22

The following table summarizes the costs assigned to units completed and those still in
processundertheweightedaverageandFIFOprocesscostingmethodsforourexample.

Costofunitscompletedandtransferredout
Workinprocess,ending
Totalcostsaccountedfor

Weighted
Average
FIFO
(Solution
(Solution
Exhibit1735B) Exhibit1737B) Difference
$26,000
$25,850
$150
4,400
4,550
+$150
$30,400
$30,400

TheFIFOendinginventoryishigherthantheweightedaverageendinginventoryby$150.
ThisisbecauseFIFOassumesthatallthelowercostpriorperiodunitsinworkinprocessarethe
first to be completed and transferred out while ending work in process consists of only the
highercostcurrentperiodunits.Theweightedaveragemethod,however,smoothesoutcostper
equivalentunitbyassumingthatmoreofthehighercostunitsarecompletedandtransferredout,
while some of the lowercost units in beginning work in process are placed in ending work in
process. Hence, in this case, the weightedaverage method results in a higher cost of units
completedandtransferredoutandalowerendingworkinprocessinventoryrelativetotheFIFO
method.

1736

SOLUTIONEXHIBIT1737A
Steps1and2:SummarizeOutputinPhysicalUnitsandComputeOutputinEquivalentUnits
FIFOMethodofProcessCosting,Assembly Departmentof PorterHandcraftforApril2009.

FlowofProduction
Workinprocess,beginning(given)
Startedduringcurrentperiod(given)
Toaccountfor
Completedandtransferredoutduringcurrentperiod:
Frombeginningworkinprocess
75 (100% -100%)75 (100% - 40%)
Startedandcompleted
425 100% 425 100%
Workinprocess,ending*(given)
125 100% 125 20%
Accountedfor
Workdoneincurrentperiodonly

(Step1)
Physical
Units
75
550
625

(Step2)
EquivalentUnits
Direct
Conversion
Materials
Costs
(workdonebeforecurrentperiod)

75
0

45

425

425

125

25

550

495

425
125
625

Degreeofcompletioninthisdepartment:directmaterials,100%conversioncosts,40%.
500 physical units completed and transferred out minus 75 physical units completed and transferred out from
beginningworkinprocessinventory.
*Degreeofcompletioninthisdepartment:directmaterials,100%conversioncosts,20%.

SOLUTIONEXHIBIT1737B
Steps 3, 4, and 5: Summarize Total Coststo Account For, Compute Cost perEquivalent Unit,
andAssign Total Costs toUnitsCompletedandtoUnitsinEndingWorkinProcess
FIFOMethodofProcessCosting,Assembly Departmentof PorterHandcraftforApril2009.

(Step3)Workinprocess,beginning(given)
Costsaddedincurrentperiod(given)
Totalcoststoaccountfor
(Step4)Costsaddedincurrentperiod
Dividebyequivalentunitsofworkdonein
currentperiod(Exhibit1737A)
Costperequivalentunitofworkdoneincurrent
period
(Step5)Assignmentofcosts:
Completedandtransferredout(500 units):
Workinprocess,beginning(75units)
Costsaddedtobegin.workinprocessin
currentperiod
Totalfrombeginninginventory
Startedandcompleted(425units)
Totalcostsofunitscompleted&tsfd.out
Workinprocess,ending(125 units)
Totalcostsaccountedfor

Total
Production
Costs
$ 1,910
28,490
$30,400

Direct
Materials
$ 1,775
17,600
$19,375
$17,600

Conversion
Costs
$ 135
10,890
$11,025
$10,890

550

495

32

$ 1,910

$1,775

990
2,900
22,950
25,850
4,550
$30,400

(0* $32) +

$135
(45* $22)

(425 $32) + (425 $22)


(125# $32) +
$19,375
+

*EquivalentunitsusedtocompletebeginningworkinprocessfromSolutionExhibit1737A,Step2.

Equivalent unitsstartedandcompletedfromSolutionExhibit1737A,Step2.
#
EquivalentunitsinendingworkinprocessfromSolutionExhibit1737A,Step2.

1737

22

(25# $22)
$11,025

1738 (30min.) Transferredincosts,weightedaverage.


1.
Solution Exhibit 1738A computes the equivalent units of work done to date in the
BindingDepartmentfortransferredincosts,directmaterials,andconversioncosts.
Solution Exhibit 1738B summarizes total Binding Department costs for April 2009,
calculates the cost per equivalent unit of work done to date in the Binding Department for
transferredin costs, direct materials, and conversion costs, and assigns these costs to units
completedandtransferredoutandtounitsinendingworkinprocessusingtheweightedaverage
method.
2.

Journalentries:
a. WorkinProcessBindingDepartment
WorkinProcessPrintingDepartment
Costofgoodscompletedandtransferredout
duringAprilfromthePrintingDepartment
to theBindingDepartment
b. FinishedGoods
WorkinProcessBindingDepartment
Costofgoodscompletedandtransferredout
duringAprilfromtheBindingDepartment
toFinishedGoodsinventory

144,000
144,000

249,012
249,012

SOLUTIONEXHIBIT1738A
Steps1and2:SummarizeOutputinPhysicalUnitsandComputeOutputinEquivalentUnits
WeightedAverageMethodofProcessCosting,
BindingDepartmentof Publish,Inc.forApril2009.
(Step1)

FlowofProduction
Workinprocess,beginning(given)
Transferredinduringcurrentperiod(given)
Toaccountfor
Completedandtransferredoutduringcurrentperiod:
Workin process,endinga (given)
(600 100% 600 0% 600 60%)
Accountedfor
Workdonetodate
a

(Step2)
EquivalentUnits
Physical Transferred Direct Conversion
Units
inCosts Materials Costs
900
2,700
3,600
3,000
3,000
3,000
3,000
600
600
0
360
3,600
3,600
3,000
3,360

Degreeofcompletioninthisdepartment:transferredincosts,100%directmaterials,0%conversioncosts,60%.

1738

SOLUTIONEXHIBIT1738B
Steps3,4,and5:SummarizeTotalCoststoAccountFor,ComputeCostperEquivalentUnit,andAssignTotalCoststo
UnitsCompletedandtoUnitsinEndingWorkinProcess
WeightedAverageMethodofProcessCosting,
BindingDepartmentof Publish,Inc.forApril2009.

(Step3)

Workin process,beginning(given)
Costsaddedincurrentperiod(given)
Totalcoststoaccountfor

(Step4)

Costsincurredtodate
Dividebyequivalentunitsofworkdonetodate
(SolutionExhibit1738A)
Costperequivalentunitofworkdonetodate

(Step5)

Total
Production Transferredin
Costs
Costs
$ 47,775
$ 32,775
239,700
144,000
$287,475
$176,775

Assignmentofcosts:
Completedandtransferredout(3,000units)
Workinprocess,ending(600units):

$249,012
38,463

Total costsaccountedfor

$287,475

EquivalentunitscompletedandtransferredoutfromSol.Exhibit1738A,step2.
EquivalentunitsinendingworkinprocessfromSol.Exhibit1738A,step2.

1739

Direct
Materials
$0
26,700
$26,700

Conversion
Costs
$15,000
69,000
$84,000

$176,775

$26,700

$84,000

3,600
$49.104

3,000
$8.90

3,360
$
25

(3,000a $49.104) +(3,000a $8.90) + (3,000a $25)


(600b $49.104) +
(0b $8.90) + (360b $25)

$176,775

+ $26,700

+ $84,000

1739 (30min.) Transferredincosts,FIFOmethod(continuationof1738).


1.
SolutionExhibit1739AcalculatestheequivalentunitsofworkdoneinApril2009inthe
BindingDepartmentfortransferredincosts,directmaterials,andconversioncosts.
Solution Exhibit 1739B summarizes total Binding Department costs for April 2009,
calculatesthecostperequivalentunitofworkdoneinApril2009intheBindingDepartmentfor
transferredin costs, direct materials, and conversion costs, and assigns these costs to units
completedandtransferredoutandtounitsinendingworkinprocessusingtheFIFOmethod.
Journalentries:
a. WorkinProcessBindingDepartment
WorkinProcessPrintingDepartment
Costofgoodscompletedandtransferredout
duringAprilfromthePrintingDepartmentto
theBindingDepartment.
b.

FinishedGoods
WorkinProcessBindingDepartment
Costofgoodscompletedandtransferredout
duringAprilfromtheBindingDepartment
toFinishedGoodsinventory.

141,750
141,750

240,525
240,525

2.
Theequivalentunitsofworkdoneinbeginninginventoryis:Transferredincosts,900
100%=900directmaterials,900 0%=0andconversioncosts,900 40%=360.Thecost
perequivalentunitofbeginninginventoryandofworkdoneinthecurrentperiodare:

Transferredincosts(weightedaverage)
Transferredincosts(FIFO)
Directmaterials
Conversioncosts

Beginning
Inventory
$36.42($32,775 900)
$30.95($27,855 900)

$41.67($15,000 360)

WorkDonein
CurrentPeriod
$53.33($144,000 2,700)
$52.50($141,750 2,700)
$ 8.90
$23.00

The following table summarizes the costs assigned to units completed and those still in
process under the weightedaverage and FIFO processcosting methods for the Binding
Department.
Weighted
Average
FIFO
(Solution
(Solution
Exhibit1738B) Exhibit1739B) Difference
Costofunitscompletedandtransferredout
$249,012
$240,525
$8,487
Workinprocess,ending
38,463
39,780
+$1,317
Totalcostsaccountedfor
$287,475
$280,305

1740

The FIFO ending inventory is higher than the weightedaverage ending inventory by
$1,317. This is because FIFO assumes that all the lowercost priorperiod units in work in
process(resulting fromthe lowertransferredincostsinbeginning inventory)arethefirsttobe
completed and transferred out while ending work in process consists of only the highercost
currentperiodunits.Theweightedaverage method,however,smoothesoutcostperequivalent
unit by assuming that more of the highercost units are completed and transferred out, while
someofthelowercostunitsinbeginningworkinprocessareplacedinendingworkinprocess.
Hence,inthiscase,theweightedaveragemethodresultsinahighercostofunitscompletedand
transferred out and a lower ending workinprocess inventory relative to FIFO. Note that the
difference in cost of units completed and transferred out ($8,487) does not fully offset the
difference in ending workinprocess inventory (+$1,317). This is because the FIFO and
weightedaveragemethodsresultindifferentvaluesfortransferredincostswithrespecttoboth
beginninginventoryandcoststransferredinduringtheperiod.
SOLUTIONEXHIBIT1739A
Steps1and2:SummarizeOutputinPhysicalUnitsandComputeOutputinEquivalentUnits
FIFOMethodofProcessCosting,
BindingDepartmentof Publish,Inc.forApril2009.
(Step1)

FlowofProduction
Workinprocess,beginning(given)
Transferredinduringcurrentperiod(given)
Toaccountfor
Completedandtransferredoutduringcurrentperiod:
Frombeginningworkinprocessa
[900 (100% 100%) 900 (100% 0%) 900
Startedandcompleted
(2,100 100% 2,100 100% 2,100 100%)
Workinprocess,endingc (given)
(600 100% 600 x 0% 600 60%)
Accountedfor
Workdoneincurrentperiodonly
a

(Step2)
EquivalentUnits

Physical Transferredin Direct Conversion


Units
Costs
Materials
Costs
900
(workdonebeforecurrentperiod)
2,700
3,600
900

(100% 40%)]

900

540

2,100

2,100

2,100

600
____
2,700

0
____
3,000

360
____
3,000

2,100b
600
____
3,600

Degreeofcompletioninthisdepartment:Transferredincosts,100%directmaterials,0%conversioncosts,40%.

3,000physicalunitscompletedandtransferredoutminus 900physicalunitscompletedandtransferredoutfrombeginning
workinprocessinventory.

Degreeofcompletioninthisdepartment:transferredincosts,100%directmaterials,0%conversioncosts,60%.

1741

SOLUTIONEXHIBIT1739B
Steps 3, 4, and 5: Summarize Total Costs to Account For, Compute Cost per Equivalent Unit, and Assign Total Costs to Units
CompletedandtoUnitsinEndingWorkinProcess
FIFOMethodofProcessCosting,
BindingDepartmentof Publish,Inc.forApril2009.

(Step3) Workinprocess,beginning(given)
Costsaddedincurrentperiod(given)
Totalcoststoaccountfor

Total
Production
Costs
TransferredinCosts
$ 42,855
$ 27,855
237,450
141,750
$280,305
$169,605

(Step4) Costsaddedincurrentperiod
Dividebyequivalentunitsofworkdoneincurrentperiod(Sol.
Exhibit1739A)
Costperequivalentunitofworkdoneincurrentperiod
(Step5) Assignmentofcosts:
Completedandtransferredout(3,000units)
Workinprocess,beginning(900units)
Costsaddedtobeginningworkinprocessincurrentperiod
Totalfrombeginninginventory
Startedandcompleted(2,100units)
Totalcostsofunitscompletedandtransferredout
Workinprocess,ending(600units):
Totalcostsaccountedfor
a

$ 42,855
20,430
63,285
177,240
240,525
39,780
$280,305

1742

Conversion
Costs
$15,000
69,000
$84,000

$141,750

$26,700

$69,000

2,700
$ 52.50

3,000
$ 8.90

3,000
$23.00

$27,855+
(0a $52.50)+

$0+
$15,000
(900a $8.90)+ (540a $23)

(2,100b $52.50)+(2,100b $8.90)+(2,100b $23)


(600c $52.50) +
$169,605
+

EquivalentunitsusedtocompletebeginningworkinprocessfromSolutionExhibit1739A,step2.
EquivalentunitsstartedandcompletedfromSolutionExhibit1739A,step2.
c
EquivalentunitsinendingworkinprocessfromSolutionExhibit1739A,step2.
b

Direct
Materials
$
0
26,700
$26,700

(0c $8.90) + (360c $23)


$26,700
+
$84,000

1740 (45min.) Transferredincosts,weightedaverageandFIFOmethods.


1.
Solution Exhibit 1740A computes the equivalent units of work done to date in the
Drying and Packaging Department for transferredin costs, direct materials, and conversion
costs. Solution Exhibit 1740B summarizes total Drying and Packaging Department costs for
week 37, calculates the cost per equivalent unit of work done to date in the Drying and
Packaging Department for transferredin costs, direct materials, and conversion costs, and
assignsthesecoststounitscompletedandtransferredoutandtounitsinendingworkinprocess
usingtheweightedaveragemethod.
2.
Solution Exhibit 1740C computesthe equivalent unitsof work done in week 37 in the
Drying and Packaging Department for transferredin costs, direct materials, and conversion
costs. Solution Exhibit 1740D summarizes total Drying and Packaging Department costs for
week 37, calculates the cost per equivalent unit of work done in week 37 in the Drying and
Packaging Department for transferredin costs, direct materials, and conversion costs, and
assignsthesecoststounitscompletedandtransferredoutandtounitsinendingworkinprocess
usingtheFIFOmethod.
SOLUTIONEXHIBIT1740A
Steps1and2:SummarizeOutputinPhysicalUnitsandComputeOutputinEquivalentUnits
WeightedAverageMethodofProcessCosting,
DryingandPackagingDepartmentofFritoLayInc.forWeek37.
(Step1)
(Step2)
EquivalentUnits
Physical Transferred Direct Conversion
FlowofProduction
Units
inCosts
Materials
Costs
Workinprocess,beginning(given)
1,250
Transferredinduringcurrentperiod(given) 5,000
Toaccountfor
6,250
Completedandtransferredout
duringcurrentperiod
5,250
5,250
5,250
5,250
Workinprocess,ending*(given)
1,000
1,000 100%1,000 0%1,000 40%
1,000
0
400
Accountedfor
6,250
Workdonetodate
6,250
5,250
5,650
*Degreeofcompletioninthisdepartment:transferredincosts,100%directmaterials,0%conversioncosts,40%.

1743

SOLUTIONEXHIBIT1740B
Steps3,4,and5:SummarizeTotalCoststoAccountFor,ComputeCostperEquivalentUnit,andAssignTotal
Costs toUnitsCompletedandtoUnitsinEndingWorkinProcess
WeightedAverageMethodofProcessCosting,
DryingandPackagingDepartmentofFritoLayInc.forWeek37.

(Step3)

Workinprocess,beginning(given)
Costsaddedincurrentperiod(given)
Totalcoststoaccountfor

(Step4)

Costsincurredtodate
Dividebyequivalentunitsofworkdone
todate(SolutionExhibit1740A)
Equivalentunitcostsofworkdonetodate

(Step5)

Assignmentofcosts:
Completedandtransferredout(5,250units)
Workinprocess,ending(1,000units)
Totalcostsaccountedfor

Total
Production
Costs
$38,060
159,600
$197,660

$174,300
23,360
$197,660

EquivalentunitscompletedandtransferredoutfromSolutionExhibit1740A,Step2.
EquivalentunitsinendingworkinprocessfromSolutionExhibit1740A,Step2.

1744

Transferred
inCosts
$29,000
96,000
$125,000

Direct
Materials
$0
25,200
$25,200

Conversion
Costs
$9,060
38,400
$47,460

$125,000

$25,200

$47,460

6,250
$20

5,250
$4.80

5,650
$8.40

(5,250*$20)+ (5,250*$4.80)+(5,250*$8.40)
(1,000 $20) + (0 $4.80) + (400 $8.40)

$125,000 +

$25,200

+ $47,460

SOLUTIONEXHIBIT1740C
Steps1and2:SummarizeOutputinPhysicalUnitsandComputeOutputinEquivalentUnits
FIFOMethodofProcessCosting,
DryingandPackagingDepartmentofFritoLayInc.forWeek37.

FlowofProduction
Workinprocess,beginning(given)
Transferredinduringcurrentperiod(given)
Toaccountfor
Completedandtransferredoutduringcurrentperiod:
Frombeginningworkinprocess
1,250 (100% - 100%)1,250 (100% - 0%)
1,250 (100% - 80%)
Startedandcompleted
4,000 100%4,000 100%4,000 100%
Workinprocess,ending*(given)
1,000 100%1,000 0%1,000 40%
Accountedfor
Workdoneincurrentperiodonly

(Step1)
Physical
Units
1,250
5,000
6,250

(Step2)
EquivalentUnits
Transferred
Direct
Conversion
inCosts
Materials
Costs
(workdonebeforecurrentperiod)

1,250
0

1,250

250

4,000

4,000

4,000

1,000

400

5,000

5,250

4,650

4,000
1,000
6,250

Degreeofcompletioninthisdepartment:Transferredincosts,100%directmaterials,0%conversioncosts,80%.
5,250physicalunitscompletedandtransferredoutminus1,250physicalunitscompletedandtransferredoutfrom
beginningworkinprocessinventory.
*Degreeofcompletioninthisdepartment:transferredincosts,100%directmaterials,0%conversioncosts,40%.

1745

SOLUTIONEXHIBIT1740D
Steps3,4,and5:SummarizeTotalCoststoAccountFor,ComputeCostperEquivalentUnit,andAssignTotalCosts
toUnitsCompletedandtoUnitsinEndingWorkinProcess
FIFOMethodofProcessCosting,
DryingandPackagingDepartmentofFritoLayInc.forWeek37.

(Step3) Workinprocess,beginning(given)
Costsaddedincurrentperiod(given)
Totalcoststoaccountfor

Total
Production
Costs
$37,980
157,600
$195,580

(Step4) Costsaddedincurrentperiod
Dividebyequivalentunitsofworkdoneincurrentperiod
(SolutionExhibit1740C)
Costperequivalentunitofworkdoneincurrentperiod

Transferred
inCosts
$ 28,920
94,000
$122,920

Direct
Materials
$0
25,200
$25,200

Conversion
Costs
$ 9,060
38,400
$47,460

$94,000

$25,200

$38,400

5,000
$18.80

5,250
$4.80

4,650
$8.258

(Step5) Assignmentofcosts:
Completedandtransferredout(5,250units):
Workinprocess,beginning(1,250units)
Costsaddedtobeg.workinprocessincurrentperiod
Totalfrombeginninginventory
Startedandcompleted(4,000units)
Totalcostsofunitscompleted&transferredout
Workinprocess,ending(1,000units)
Totalcostsaccountedfor

$37,980
8,065
46,045
127,432
173,477
22,103
$195,580

$28,920+
$0
+
$9,060
*
*
(0 $18.80) + (1,250 $4.80) + (250 $8.258)
*

(4,000 $18.80)+(4,000 $4.80)+(4,000 $8.258)


(1,000# $18.80) +(0# $4.80) +
$122,920 + $25,200

(Step3)
*

EquivalentunitsusedtocompletebeginningworkinprocessfromSolutionExhibit1740C,Step2.
EquivalentunitsstartedandcompletedfromSolutionExhibit1740C,Step2.
#
EquivalentunitsinendingworkinprocessfromSolutionExhibit1740C,Step2.

1746

(400# $8.258)
$47,460

1741 (3035min.)Weightedaverageandstandardcostingmethod.
1.
SolutionExhibit1741AcomputestheequivalentunitsofworkdoneinNovember2010
by PaquitasPearlsCompanyfordirectmaterialsandconversioncosts.
2.and3.
SolutionExhibit1741BsummarizestotalcostsofthePaquitasPearlsCompany
forNovember30,2010and,usingthestandardcostperequivalentunitfordirectmaterialsand
conversioncosts,assignsthesecoststounitscompletedandtransferredoutandtounitsinending
work in process. The exhibit also summarizes the cost variances for direct materials and
conversioncostsforNovember2010.
SOLUTIONEXHIBIT1741A
Steps1and2:SummarizeOutputinPhysicalUnitsandComputeOutputinEquivalentUnits
StandardCostingMethodof ProcessCosting,
PaquitasPearlsCompanyforthemonthendedNovember30,2010.
(Step2)
EquivalentUnits
Direct
Conversion
Materials
Costs
25,000 (workdonebeforecurrentperiod)

(Step1)
Physical
Units

FlowofProduction

Workinprocess,beginning(given)
Startedduringcurrentperiod(given)
Toaccountfor
Completedandtransferredoutduringcurrentperiod:
Frombeginningworkinprocess
25,000 (100% -100%)25,000 (100% 75%)
Startedandcompleted
100,000 100%,100,000 100%
Workinprocess,ending*(given)
26,250 100% 26,250 50%
Accountedfor
Workdoneincurrentperiodonly

126,250
151,250
25,000
0

6,250

100,000

100,000

26,250
_______
126,250

13,125
_______
119,375

100,000
26,250
_______
151,250

Degreeofcompletioninthisdepartment:directmaterials,100%conversioncosts,75%.

125,000physicalunitscompletedandtransferredoutminus25,000physicalunitscompletedandtransferredout
frombeginningworkinprocessinventory.

*Degreeofcompletioninthisdepartment:directmaterials,100%conversioncosts,50%.

1747

SOLUTIONEXHIBIT1741B
Steps3,4,and5:SummarizeTotalCoststoAccountFor,ComputeCostper
EquivalentUnit,andAssignTotal CoststoUnitsCompletedandtoUnitsin
EndingWorkinProcess
StandardCostingMethodofProcessCosting,
PaquitasPearlsCompanyforthemonthendedNovember30,2010.

(Step3)Workinprocess,beginning(given)
Costsaddedincurrentperiodatstandardcosts
Totalcoststoaccountfor

Total
Production
Direct
Conversion
Costs
Materials
Costs
$ 250,000
$ 62,500+ $ 187,500
1,509,375 (126,250 2.50) + (119,375 $10.00)
$1,759,375
$378,125
+
$1,381,250

(Step4) Standardcostperequivalentunit(given)
(Step5)Assignmentofcostsatstandardcosts:
Completedandtransferredout(125,000units):
Workinprocess,beginning(25,000units)
$ 250,000
Costsaddedtobeg.workinprocessincurrentperiod
62,500
Totalfrombeginninginventory
312,500
Startedandcompleted(100,000units)
1,250,000
Totalcostsofunitstransferredout
1,562,500
Workinprocess,ending(26,250units)
196,875
Totalcostsaccountedfor
$1,759,375
Summaryofvariancesforcurrentperformance:
Costsaddedincurrentperiodatstandardcosts(seeStep3above)
Actualcostsincurred(given)
Variance

2.50

EquivalentunitsstartedandcompletedfromSolutionExhibit1741A,Step2.

EquivalentunitsinendingworkinprocessfromSolutionExhibit1741A,Step2.

1748

10.00

$62,500
+
$187,500
(0* $2.50) +(6,250* $10.00)
(100,000 $2.50) + (100,000 $10.00)
(26,250# $2.50) + (13,125# $10.00)
$378,125 +
$1,381,250
$315,625
327,500
$ 11,875 U

*EquivalentunitstocompletebeginningworkinprocessfromSolutionExhibit1741A,Step2.

$1,193,750
1,207,415
$ 13,665 U

1742 (2530min.)Operationcosting
1. Toobtaintheoverheadrates,dividethebudgetedcostofeachoperationbythepairsofshoes
thatareexpectedtogothroughthatoperation.

Operation 1
Operation2
Operation3
Operation4
Operation5
Operation6

Budgeted
Conversion
Cost
$145,125
58,050
4,275
67,725
13,500
2,025

Budgeted
Pairsof
Shoes
32,250
32,250
2,250
32,250
30,000
2,250

Conversion
CostperPair
ofShoes
$4.50
1.80
1.90
2.10
0.45
0.90

2.

Shoetype:
Quantity:
DirectMaterials
Operation1
Operation2
Operation3
Operation4
Operation5
Operation6
Total

WorkOrder
10399
Basic
1,000
$13,000
4,500
1,800
0
2,100
450
0
$21,850

WorkOrder
10400
Elaborate
150
$4,200
675
270
285
315
0
135
$5,880

Thedirectmaterialscostsperunitvarybasedonthetypeofshoe($390,00030,000=$13for
theBasic,and$63,0002,250=$28fortheElaborate).Conversioncostsarechargedusingthe
rates computed in part (1), taking into account the specific operations that each type of shoe
actuallygoesthrough.
3.

Workorder10399(Basicshoes):

Workorder10400(Elaborate shoes):

Totalcost
$21,850
Dividedbynumberof
pairsofshoes:
1,000
Costperpairofplainshoes: $ 21.85

Totalcost:
$5,880
Dividedbynumberof
pairsof shoes:
150
Costperpairoffancyshoes: $39.20

1749