Exercise 1

Equivalent units are needed as a measure of production volume. At the end of the period, manu
costs must be spread over the units produced, and it is incorrect to combine fully completed unit
those that are still in production (akin to adding apples and oranges). Separate totals are needed
materials are often introduced at specific points in production whereas conversion is often introd
uniformly throughout manufacturing.

No. The units are still in production, so none of them are fully completed. It would be correct to
the firm has done the work equivalent to manufacturing 9,000 finished units.

Exercise 2

Operation costing is used by firms that produce different models of similar products. The produc
through essentially the same manufacturing process, so conversion costs can be assigned in a m
similar to that used in process-costing systems. Materials, on the other hand, are unique to the i
goods being produced and, accordingly, the cost is assigned by batch (or in a manner similar to t
in job costing).

A sweater manufacturer produces multiple versions of its single product: sweaters. The garment
incur roughly the same labor and overhead cost, with the major difference among models being
areas of fabric, color, and patterns (i.e., materials). Thus, the material cost will often differ and t
manufacturer should take these differences into account, not spread costs equally over all units p
as would be done in a process-cost-type of procedure.

Exercise 3

Transferred-in costs are costs attached to units that are transferred from one processing departm
next. More specifically, these are the manufacturing costs incurred in the "sending" department
direct materials, direct labor, and applied manufacturing overhead).

The receiving department should view these units to be the equivalent of direct materials (na
partially completed units), or units to be worked on and processed by the addition of (possibly s
material, direct labor, and manufacturing overhead.

end of the period, manufacturing

ine fully completed units with
parate totals are needed because
nversion is often introduced

. It would be correct to say that

nits.

r products. The products go

can be assigned in a manner
and, are unique to the individual
in a manner similar to that used

sweaters. The garments likely

e among models being in the
st will often differ and the
s equally over all units produced

one processing department to the

e "sending" department (i.e.,

nt of direct materials (namely,

e addition of (possibly still) more
rhead.

req. 1
direct materials
direct labor
FO
total prodn cost
unit cost

201
50,000.00
80,000.00
60,000.00
190,000.00

job orders
202
203
22,000.00
18,500.00
40,000.00
23,000.00
32,000.00
17,500.00
94,000.00
59,000.00

1,900.00
1,566.67
2,360.00
finished & sold
FG end
wip end

1 direct materials
issued to prodn

work in process
materials

2 direct labor

work in process
payroll

156,000.00

3 factory overhead
applied to
prodn

work in process
factory overhead, applied

118,500.00

4 transfer to
finished goods

finished goods inventory

work in process
-

5 sales

accounts receivable
sales
cost of sales
finished goods inventory

req. 2

204
8,000.00
13,000.00
9,000.00
30,000.00

98,500.00

req. 3
direct materials
direct labor
factory overhead
total manufacturing cost
add: work in process, beg
cost of goods placed in process
less: work in process, end
cost of goods manufactured
add: finished goods, beg.
cost of goods available for sale
less: finishe goods inventory end
cost of goods sold

98,500.00
156,000.00
118,500.00
373,000.00
373,000.00
30,000.00 job 24
343,000.00 job 201, 202, 203
343,000.00
59,000.00 job 23
284,000.00

total
98,500.00
156,000.00
118,500.00
373,000.00

98,500.00

156,000.00

118,500.00

343,000.00
343,000.00
350,000.00
350,000.00
284,000.00
284,000.00

01, 202, 203

1 Material beg
purchases
available for use
Raw Mat, end
Direct & indirect mat used
direct materials used
indirect materials used
2 accrued payroll, beg
labor incurred (squeezed)
total
paid
accrued payroll, end
total labor
less: direct labor cost
indirect labor cost
3 direct labor cost
x
FO, applied

64,000
84,000
148,000 or
(60,000)
88,000
(78,000)
10,000
50,000
50,000
44,000
6,000
50,000
(32,000)
18,000
32,000
125%
40,000

4 DM used
DL cost
Factory overhead, applied
total manufacturing cost
add: WIP, beg
less: WIP, end
cost of goods manufactured

78,000
32,000
40,000
150,000
82,000
(94,000)
138,000

5 cost of goods manufactured

add: FG, beg
less: FG, end
cost of sales, normal

138,000
296,000
(304,000)
130,000

Material beg
material purchases
materials end

indirect mat
indirect labor
insuance
depn
utility

FO, applied
FO, control
variance, f

materials
64,000 direct materials used
84,000 indirect materials used
60,000

1,000
18,000
500
3400
6000
28,900

40,000
28,900
11,100

78,000
10,000 squeezed

FIFO OR WA (same answer)

actual
WIP, beg
started
60,000
units to account for
60,000
WIP, beg, F & T
S, F & T
WIP, end

40,000
20,000
60,000

EUP

cost, this month

divide: EUP
total

department 1
direct material

100%
100%

conversion cost

40,000
20,000

100%
75%

60,000
total
1,030,000
18

40,000
15,000
55,000

direct materi direct labor overhead

480,000
330,000
220000
60,000
55,000
55,000
8
6
4

S, F & T (40,000 units x 18) =

WIP, end (20,000 units)
DM (20,000 units x 8)
=
DL (15,000 X 6)
CC (15,000 units x 4)
=
total

720,000
160,000
90,000
60,000

310,000
1,030,000

DEPARTMENT 2
actual

T in

wip beg
received fr. D1
units to account for

40,000
40,000

Recd, F & T
WIP, end

30,000
10,000
40,000

EUP

cost, this month

divide by EUP
unit cost

DM

###
###

100%
50%

40,000

1,269,000
33

Recd, F & T (30,000 units x 33) =

WIP, end
Transferred in (10,000 units x 18) =

T in
720,000
40,000
18

35,000
DM
245,000
35,000
7
990,000

180,000

30,000
5,000

DL
190000
38,000
5

DM (5,000 units x 7)
DL (8,000 X 5)
OH (8,000 units x 3) =

35,000
40,000
24,000

279,000
1,269,000

wip-d2
wip-d1

720,000
720,000

CC

100%
80%

30,000
8,000
38,000

OH
114,000
38,000
3
FG

990,000
WIP - D2

990,000

EXERCISE 7

WEIGHTED AVERAGE METHOD

ACTUAL
30,000
?
60,000
90,000

WIP BEG
STARTED

req. a

req. b

req. c

req. d

TRANSFERRED OUT
(70,000)
WIP BEG F & T
STARTED F & T
WIP END
UNITS ACCOUNTED FOR
EUP

WIP BEG COST

CURRENT COST
TOTAL
DIVIDED BY EUP
UNIT COST

30,000
40,000
20,000
90,000

DM

100%
100%
100%

30,000
40,000
20,000
90,000

TOTAL
392,000
953,600
1,345,600

DM
120,000
258,000
378,000
90,000
4.20

16.00

TRANSFERRED OUT
70,000 X 16
WIP END
DM 20,000 X 4.2
DL 12,000 X 11.80

1,120,000
84000
141600

225,600
1,345,600

CC

100%
100%
60%

30,000
40,000
12,000
82,000

CC
272,000
695,600
967,600
82,000
11.80

T out
WIP, end
req. 1

req. 2
req. 3

req. d

actual
90,000
10,000
100,000

EUP

current cost
divide by EUP
unit cost
Tout (90,000 x 4.50) =
WIP end:
Strawberry ( 10,000 x 1.80) =
Chocolate (0 x 1.50) =
CC (7,000 x 1.20)
=

strawberry
100%
90,000
100%
10,000
100,000

total
431,400
4.50

strawberry
180,000
100,000
1.80

18,000
8,400

chocolate
100%
90,000
0%
-

CC
100%
90,000
70%
7,000

90,000

97,000

chocolate
135,000
90,000
1.50

CC
116,400
97,000
1.20

405,000

26,400
431,400

department 1
wip beg
placed in process
units to account for

60,000
60,000
actual

Tout
WIP, end ?
normal lost units
units accounted for
EUP

cost, this month

divide: EUP
cost per eup

36,000
9,000
15,000
60,000

direct material
100%
100%
0%

conversion cost

36,000
9,000
-

100%
1/3
0%

45,000
total
273,600

DM
180,000
45,000
4.00

6.40

Tout 36,000 x 6.40

WIP, end
DM 9000 x 4
=
DL 3,000 X 2
OH 3,000 x .40=
Normal loss ( 0 x6.40)
total

DL
78,000
39,000
2.00

230,400
36,000
6,000
1,200

43,200
0
273,600

DEPARTMENT 2

Recd from D1
added
completed
WIP, end
EUP

cost, this month

divide by EUP
unit cost
Tout:
39,000 x 11.20 =

actual
T in
36,000
9,000
45,000
39,000
39,000
6,000
6,000
45,000
45,000
total
489,600
11.12

T in
230,400
45,000
5.120

DM

100%
100%

39,000
6,000
45,000

DM
135,000
45,000
3.000

DL
82800
41,400
2.000

433,680 FG
WIP-D2

WIP end:

Tin cost 6,000 x 5.12

DM 6,000 x 3
DL 2400 x 2
OH 2,400 x 1

30,720
18,000
4,800
2400

55,920
489,600

conversion cost
36,000
3,000
39,000
OH
15,600
39,000
0.40
WIP - D2
WIP-D1

230,400
230,400

CC

100%
40%

39,000
2,400
41,400

OH
41,400
41,400
1.000

433,680
433,680

rec'd from previous dept

added to prodn

T out
WIP, end
EUP

cost, this month

divide by EUP
unit cost
Tout: 48,000 x 1.4825 =
WP end:
Tin 12,000 x .45
DM 12,000 x .12
CC 8,400 x .95

55,000
5,000
60,000

actual
T in
48,000
###
12,000
###
60,000
60,000

DM
48,000
12,000
60,000

T in
DM
CC
24,750
7,200
53,580
60,000
60,000
56,400
1.4825 0.41250
0.1200
0.9500
85,530

71,160
4,950
1,440
7,980

14,370
85,530

CC
48,000
8,400
56,400

FIFO
1ST
2ND

ACTUAL
6,000
42,000
48,000

WIP BEG
STARTED

TRANSFERRED OUT (40,000)

WIP BEG F & T
STARTED F & T
WIP END
?
UNITS ACCOUNTED FOR

6,000
34,000
8,000
48,000

DM

80%
100%
10%

EUP

4,800
34,000
800

70%
100%
15%

39,600

WEIGHTED AVERAGE
ACTUAL
6,000
42,000
48,000

WIP BEG
STARTED

TRANSFERRED OUT
WIP BEG F & T
STARTED F & T
WIP END
UNITS ACCOUNTED FOR
EUP

6,000
34,000
8,000
48,000

DM

100%
100%
10%

6,000
34,000
800

40,800

100%
100%
15%

CC

4,200
34,000
1,200

39,400

CC

6,000
34,000
1,200

41,200

actual
WIP beg F & T
SF&T
WIP, end
req. 1

DM
40%
100%
40%

300
1,400
600
2,300

EUP
DM
wip beg. Cost
current cost

req. 2

req. 3

req. 4

divide by EUP
unit cost

540
5,972
6,512
3.415430

Tout (1,700 units)

WIP beg. F & T
wip beg. cost. (360 +180)
540
cost, this mo.
DM 120 x 2.110227
253
CC 210 x 1.30520
274
527
cost of wip beg., F & T
S F & T (1400 x 3.41543)
Total cost of goods manufactured(transferred out cost)
WIP end
DM 240 x 2.110227
cc 120 x 1.30520

3,714
1,760
2.110227

1,067
4,782

506
157

DM
120
1,400
240

CC
70%
100%
20%

1,760

210
1,400
120
1,730

CC
2,258
1,730
1.30520

wip-d2
wip-d1

5,849

663
6,512

5,849
5,849

WEIGHTED AVERAGE METHOD

WIP beg
units started

DM

ACTUAL
15,000.00
250,000.00
265,000.00

Transferred out (245,000)

WIP beg.
Started
WIP, end
req. 1

15,000.00
230,000.00
20,000.00

100%
100%
100%

265,000.00

WIP beg. Cost

cost this month

DM
210,000
3,500,000
3,710,000
265,000
14

TOTAL
270,000.00
4,958,000.00
5,228,000.00

req. 2

req. 3
req. 4

divided by EUP
cost per EUP

transferred out (245,000 x 20)

DM (20,000 X 14)
CC (8,000 X 6)

15,000
230,000
20,000
265,000

20.00

4,900,000
280,000.00
48,000.00

328,000
5,228,000

FIFO

CC
WIP beg
units started

ACTUAL
15,000.00
250,000.00
265,000.00

100%
100%
40%

CC
60,000
1,458,000
1,518,000
253,000
6

15,000
230,000
8,000
253,000 req. 1

Transferred out (245,000)

WIP beg.
Started
WIP, end

15,000.00
230,000.00
20,000.00

EUP

265,000.00

WIP beg. Cost

cost this month

total
270,000.00
4,958,000.00
5,228,000.00

divided by EUP

req. 2

cost per EUP

20

cost of WIP beg. F & T

WIP beg. Cost
current cost:
DM 0 x 14

DL 5,000 x 6
cost of WIP beg. F & T
req. 3

cost of Rec'd F & T (230,000 x 20)

TOTAL cost of goods completed

req. 4

cost of WIP end:

DM (20,000 x 14)
DL (8,000 x 6)

30,000

280,000
48,000

CC

DM

0%
100%
100%

5,000
230,000
8,000
243,000

1/3
230,000 100%
20,000
40%
250,000

CC

DM
3,500,000

1,458,000

250,000

243,000
6

14

270,000

30,000
300,000
4,600,000
4,900,000

328,000.00
5,228,000

WEIGHTED AVERAGE
WIP beg
Placed in process

Tout (8,000u)
WIP beg. F & T
Pin P F & T
WIP end
abnormal loss
EUP

WIP beg. Cost

current cost
divided by: EUP
cost per EUP

ACTUAL
1,000
9,000
10,000

1,000
7,000
1,500
500
10,000

DM

100%
100%
100%
100%

TOTAL
6,860
137,490
144,350

DL

1,000
7,000
1,500
500
10,000

DM
2,520
72,480
75,000
10,000
7.500

14.900

cost of Abnormal lost units (500 units x 14.9)

100%
100%
75%
100%

DL
1,540
21,560
23,100
9,625
2.400

7,450

transferred out (8,000 x 14.9)

WIP end
DM
DL
OH
WIP end cost
loss from abnormal spoilage(abnormal lost units)

11,250
2,700
3,750

FIFO
WIP beg
Placed in process

Tout (8,000u)
WIP beg. F & T
Pin P F & T
WIP end
abnormal loss
EUP

ACTUAL
1,000
9,000
10,000

1,000
7,000
1,500
500
10,000

DM

40%
100%
100%
100%

DL

400
7,000
1,500
500
9,400

65%
100%
75%
100%

WIP beg. Cost

current cost
divided by: EUP
cost per EUP

TOTAL
6,860
137,490
144,350

DM
72,480
72,480
9,400
7.71064

14.8629

WIP beg. F & T (1,000 u)

wip beg. Cost
current costs:
DM
DL
FO
WIP BEG F & T cost
Started F & T (7,000 x 14.8629)
transferred out cost (8,000 units)
wip end:
DM
DL
FO
abnormal loss (500 x 14.8629) loss fr. AS

DL
21,560
21,560
9,275
2.32453

6,860
3,084
1,511
3,621

8,216
15,076
104,041
119,117

11,566
2,615
3,621

17,802
7,431
144,350

IF NORMAL SPOILAGE 500UNITS

WIP beg. F & T (1,000 u)
wip beg. Cost
current costs:
DM
DL
FO
WIP BEG F & T cost
Started F & T (7,000 x 14.8629)
NORMAL SPOILAGE
transferred out cost (8,000 units)
wip end:
DM
DL
FO

6,860
3,084
1,511
3,621

8,216
15,076
104,041
7,431
126,548

11,566
2,615
3,621

17,802
144,350

DL

OH

1,000
7,000
1,125
500
9,625

100%
100%
50%
100%

1,000
7,000
750
500
9,250

FO
2,800
43,450
46,250
9,250
5.000

charged to "loss from abnormal spoilage"

119,200 wip-d2
loss fr. As
wip-d1

119,200
7,450
126,650

17,700
7,450
144,350

DL

OH

650
7,000
1,125
500
9,275

75%
100%
50%
100%

750
7,000
750
500
9,000

FO
43,450
43,450
9,000
4.82778

req. 1
A
B
C

MV @
split off
420,000
270,000
60,000
750,000

JC allocated
56.00%
36.00%
8.00%

252,000
162,000
36,000
450,000

req. 2
units
A
B
C

ave. cost
50,000
40,000
10,000
100,000

450,000/100,000 u =

JC allocated
4.50
225,000
4.50
180,000
4.50
45,000
450,000

add'l cost

total cost

88,000
30,000
12,000
130,000

340,000
192,000
48,000
580,000

add'l cost
total cost
88,000
313,000
30,000
210,000
12,000
57,000
130,000
580,000
4.50

Z
final sales value
further proc. Cost
Mktg & admin
operating profit
reversal cost/market value per unit
x units produced
1 amount allocated to Z

2
X
Y

6.00
(2.00)
(1.00)
(1.00)
2.00
2,000.00
4,000.00

market value at split off

ratio
(20-5) x 8000
120,000.00
40%
(25-7) x 10000
180,000.00
60%
300,000.00

joint cost allocated

80,000.00
120,000.00
200,000.00

E 17
Process 1 material
Process 1 processing cost
TOTAL JOINT COST
less: by-product revenue (south)
sales
200
less: selling & adm.
20
joint cost to be allocated to East & West

2
EAST
WEST

RELATIVE SALE VALUE AT SPLIT OFF

(3,000 X 7) - 3,000
2,000 X 5

1 SALES
COST OF SALES:
Share in joint cost
subsequent cost
total manufacturing cost (3,000 U; 2,00
less: ending inventory
cost of sales
GROSS PROFIT
less: operating expense
net income

6,260
4,000
10,260

180
10,080

18,000.00
10,000.00
28,000.00

EAST
17,500
6,480
3,000
9,480
1,580
7,900
9,600
3,500
6,100

RATIO
64.29%
35.71%

WEST
8,500
3,600
0
3,600
540
3,060
5,440
1,700
3,740

JC allocated add'l proc total cost unit cost inventory end

6,480
3000
9,480
3.16
1,580
3,600
0
3,600
1.80
540
10,080
13,080
2,120

TOTAL
26,000
10,080
3,000
13,080
2,120
10,960
15,040
5,200
9,840

sales
17500
8500