Exercise 2-1 (CPR with Production Shrinkage Using Weighted Average Method)

Mio Chemical Inc. uses process costing system with weighted average cost flow assumption to account
for the production of its only product. The product is manufactured in two departments: Cooking
Department and then transferred to the Blending Department where they are completed. Because of
the intense heat applied in the Cooking Department, some units were lost due to evaporation. Data
related to May operations in the Cooking Department follow:

In process, beginning 10,000

Started in process this month 45,000
Transferred to Blending Department this month 40,000
In process, end (100% materials, 40% conversion cost) 9,000

Beginning Added
Inventory This Month
Costs Charged to the Cooking Department:
Materials P4,375 P11,795
Conversion cost 2,975 6,181

Required: Prepare a Cost of Production Report for Cooking Department for May, 2019.

Exercise 2-2 (Spoilage with Salvage Value Using Weighted Average Method)

Sure-Na Company manufactures a single product in two departments, Cutting and Finishing. Production
starts in the Cutting Department and the completed units are transferred to the Finishing Department
for further processing. Units are inspected at the 80% stage of completion in the Finishing Department.
Good units are transferred to finished goods inventory when completed and spoiled units are
transferred to a separate inventory account. Spoiled units are inventoried at their salvage value of P3
each, and the unrecoverable cost of spoilage, which was caused by an internal failure, should be charged
to the appropriate account.

Materials are given at the start of the production process. At the end of June, 2,000 units were still in
process in the Finishing Department, 100% complete as to materials and 60% complete as to conversion
costs. During July, 20,000 units were transferred from the Finishing Department to the stockroom. At
the end of July, the Finishing Department still had 4,000 units in process, 100% complete as to materials
and 20% complete as to conversion costs. Cost data related to July operations in the Finishing
Department follow:

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 Beginning Added
Inventory This Month
Cost Charged to the Finishing Department:
Costs from Preceding Department P6,050 P54,450
Materials 3,410 30,690
Labor 1,638 14,742
Factory overhead 2,184 19,656

Required: Prepare the July Cost Production Report for Finishing Department using the weighted average
method.

Exercise 2-3 (CPR with Normal and Abnormal Discrete Spoilage using FIFO Method)

Endless Co. produces hinges which are inspected at the end of production. Any spoilage in excess of 3%
of the completed goods units is considered abnormal. Materials is added at the start of the process.
Conversion costs are incurred evenly throughout the production process. The May, 2019 production and
cost data follow:

In process, beginning (50% 5,600 Good units completed 70,000

complete)
Units started 74,400 In process, end (1/3 complete) 7,500

Material Conversion Total

Beginning inventory P6,400 P1,232 P7,632
Current period costs 74,400 31,768 106,168
Total P80,800 P33,000 P113,800

REQUIRED: Prepare a FIFO Cost of Production Report for the month of May.

Exercise 2-6 (CPR involving spoiled units with salvage value; using FIFO method)

Petrophil Company uses a FIFO process costing system to account for production in two departments,
namely: Cracking Department and Refining Department. Units are inspected at the end of the
production process in the Refining Department. Good units are transferred to finished goods inventory
and spoiled units are transferred to a separate inventory account. Spoiled units are inventoried at their
salvage value of P8 per unit, and the unrecoverable cost of spoilage resulting from an internal
production failure is charged to the appropriate account. Data related to September operations in the
Refining Department follow:

Units in beginning inventory (60% materials, 30% labor and overhead) 2,800
Units received from Cracking Department this month 8,400
Units transferred to the finished goods inventory this month 7,600
Units spoiled this month ?
Units in ending inventory (100% materials, 50% labor and overhead) 2,500

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 Beginning Added
Inventory This Month
Cost Charged to the Refining Department:
Costs Transferred-In P17,889 P68,040
Materials 2,733 11,900
Labor 7,278 30,063
Factory overhead 12,350 51,016

REQUIRED: Prepare the September, 2019 Cost of Production Report for the Refining Department.

Problem 2-A (Spoilage in Originating Department)

The formula for a chemical compound used in manufacturing Bright Tabs, a kind of vitamin tablet that
enhances the memory allowing its user to recall everything that his senses have felt during the day but
causes amnesia if not used, required on pound of Chemical X and one pound of Chemical Y. One pund of
Chemical X is processed in Department A and transferred to Department B for further processing where
one pound of Chemical Y is added when the process is 50 percent complete. When the processing is
complete in Department B, the finished compound is transferred to finished goods. The process is
continuous, operating 24 hours a day.

Normal spoilage occurs in Department A. Five percent of material is lost in the fist few seconds of
processing. No spoilage occurs in Department B.

The following data are available for the month of August 2019:

Dept. A Dept. B
Units in process, August 1 8,000 10,000
Stage of completion of beginning inventory ¾ 3/10
Units started or transferred in 50,000 ?
Units transferred out 46,500 ?
Units in process, August 31 ? ?
Stage of completion of ending inventory 1/3 1/5
Units of Chemical Y added in Department B 44,500

Required:

a. Prepare a schedule showing finished equivalents for Chemical X and for conversion cost for
Department A using the FIFO method.
b. Determine for Department B the number of units of good product completed during August and
the number of units in process on August 31.
c. Prepare a schedule for Department B showing finished equivalents for preceding department
cost, cost of Chemical Y, and conversion cost using the FIFO method.

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Problem 2-B (Normal and Abnormal Spoilage)

Leal Manufacturing employs weighted average process costing system for its products. One product
passes through three departments (Molding, Assembly, and Finishing) during production. The following
activity took place in the Finishing Department during April:

Units in beginning inventory 4,200

Units transferred in from Assembly 42,000
Units spoiled 2,100
Good units transferred out 33,600

The costs per equivalent unit of production for each failure are as follows:

Cost of prior departments P5.00

Raw material 1.00
Conversion 3.00
Total cost per EUP P9.00

Raw material is added at the beginning of the Finishing process without changing the number of units
being processed. Work in process inventory was 40 percent complete as to conversion on April 30. All
spoilage was discovered at final inspection. Of the total units spoiled, 1,680 were within normal limits.

Required:

a. Calculate the equivalent units of production

b. Determine the cost of units transferred out of Finishing
c. Determine the cost of ending Work in Process Inventory
d. The portion of the total transferred in cost associated with beginning Work in Process Inventory
amounted to P18,900. What is the current period cost that was transferred in from Assembly to
Finishing?
e. Determine the cost associated with abnormal spoilage for the month.

CPR with accretion; using FIFO method

I Eat Yogurt Company produces yogurt in two departments—Mixing and Finishing. In Mixing, all
ingredients except fruit are added at the start of production. In Finishing, fruit is added and then the
mixture is placed into containers. Adding the fruit to the basic yogurt mixture increases the volume
transferred in by the number of gallons of fruit added. Any spoilage that occurs is in the Finishing
Department. Spoilage is detected just before the yogurt is placed into containers or at the 98 percent
completion point. All spoilage is abnormal.

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 Finishing Department
BWIP (100% fruit, 0% container, 30% CC) 5,000 gallons
Gallons transferred in 5,500
Gallons of fruit added 1,200
EWIP (100% fruit, 0% container, 60% CC) 1,700 gallons
Gallons transferred out 9,000
Abnormal spoilage 1,000

BWIP Costs:
Transferred In P 9,700
Fruit 10,500
CC 15,000
Current Costs:
Transferred In 12,400
Fruit 54,000
Containers 11,000
CC 98,000
Total Costs P 210,600

Prepare a cost of production report for September 2019 using weighted average and FIFO method.

Using Hybrid Costing in Calculating Unit Production Cost and Total Production Cost

Be-At-Ease Industries manufactures a series of three models of molded plastic chairs: standard (without
arms), deluxe (with arms), and executive (with arms and padding). All are variations of the same design.
The company uses batch manufacturing and has a hybrid costing system. It has an extrusion operation
and subsequent operations to form, trim, and finish the chairs. Plastic sheets are produced by the
extrusion operation, some of which are sold directly to other manufacturers. During the forming
operation, the remaining plastic sheets are molded into chair seats and the legs are added; the standard
model is sold after this operation. During the trim operation, the arms are added to the deluxe and
executive models, and the chair edges are smoothed. Only the executive model enters the finish
operation where the padding is added. All units produced receive the same steps within each operation.

The July production run had a total manufacturing cost of P898,000. The units of production and direct
material costs incurred were as follows:
Units Extrusion Form Trim Finish
Produced Materials Materials Materials Materials
Plastic sheets 5,000 P60,000
Standard Model 6,000 72,000 P24,000
Deluxe Model 3,000 36,000 12,000 P9,000
Executive Model 2,000 24,000 8,000 6,000 P12,000
Totals 16,000 P192,000 P44,000 P15,000 P12,000

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Manufacturing costs applied during July were as follows:
Extrusion Form Trim Finish
Operation Operation Operation Operation
Direct Labor P152,000 P60,000 P30,000 P18,000
Factory Overhead 240,000 72,000 39,000 24,000

a. For each product produced by Be-at-Ease during July, determine the unit cost and total cost. Be sure
to account for all costs incurred during the month and support your answer with appropriate
calculations.

b. Without prejudice to your answer in part (a), assume that only 1,000 units of the deluxe model
remained in Work in Process Inventory at the end of the month. These units were 100% complete as
to materials and 60% complete as to conversion in the trim operation. Determine the value of the
1,000 units of the deluxe model in Be-at-Ease’s Work In Process Inventory at the end of July.