Professional Documents
Culture Documents
Bab14
Bab14
QUESTIONS
11-1 A company that should use a process costing system typically has homogenous
products, which pass through a series of similar processes or departments.
These firms usually engage in continuous mass production of a few products .
11-2 Process costing is likely used in industries such as chemicals, oil refining,
textiles, paints, flour, canneries, rubber, steel, glass, food processing, mining,
automobile production lines, electronics, plastics, drugs, paper, lumber, leather
goods, metal products, sporting goods, cement, and watches.
11-3 Differences between job and process costing: (1) accumulating costs by job vs.
department, (2) collecting cost data using the job cost sheet vs. the production
cost report, and (3) computing unit cost by job vs. department.
11-4 Equivalent units are the number of completed units that could have been
produced given the amount of work actually performed on both complete and
partially completed units.
11-5 If direct materials are added at the beginning of the process rather than uniformly
throughout the process, we do not need to add any equivalent units of direct
materials to finish the work-in-process beginning inventory.
11-6 A production cost report is a report, which summarizes the physical units and
equivalent units of a department, the costs incurred during the period, and costs
assigned to both finished goods and work-in-process inventories. The five key
steps in preparing a production cost report are analysis of physical units,
calculation of equivalent units, determination of total costs to account for,
computation of unit costs, and assignment of total costs.
11-7 The weighted-average method equivalent units include both the units placed into
production in the current period and the units from the prior period that are still
in production at the beginning of this period. FIFO method does not include the
equivalent units of the prior period that are still in production at the beginning of
this period. Equivalent units under the weighted-average method are larger
than those under the FIFO method. They are equal only if there is no beginning
work-in-process inventory.
11-10 From the standpoint of cost control, the FIFO method is superior to weighted-
average because the cost per equivalent unit under FIFO represents the cost for
the current period’s efforts only. It is impossible to monitor cost trends using the
weighted-average method because the costs of the prior period and the current
period are mixed together.
11-11 Transferred-in costs are costs of work done in the prior department that are
transferred into the current department.
11-13 Under the FIFO method of handling units transferred out, beginning inventory
cost, the cost added in this period to complete the beginning inventory, and the
cost of units started and completed are considered separately.
11-15 Process costing uses the same manufacturing accounts as job costing. Journal
entries are essentially the same as in job costing. However, instead of tracing
product costs to specific jobs, process costing accumulates costs in production
departments or cost centers.
11-16 Operation costing is a hybrid costing system that uses job costing to assign
direct materials costs, and uses process costing to assign conversion costs to
products or services.
11-17 Automation will reduce the difference of unit costs between the weighted-
average cost method and the FIFO cost method.
Conversion:
Units completed 5,700
Work-in-process inventory, 5/31 2,300 x 30% = 690
Total equivalent units 6,390
Quantity Schedule
Input
Work-in-process inventory, 1/1 30,000
Units started 150,000
Total units to account for 180,000
Output
Units completed 165,000
Work in process inventory, 12/31 15,000
Total units accounted for 180,000
Conversion:
Units completed 165,000
Work-in-process inventory,12/31 15,000 x 60% = 9,000
Total equivalent units 174,000
Output
Units completed 5,450,000
Work-in-process inventory, 9/30 2,400,000
Total units accounted for 7,850,000
Conversion:
Units completed 5,450,000
Work-in-process inventory(9/30), 2,400,000 x 80% = 1,920,000
Total 7,370,000
Work-in-process inventory(9/1), 3,000,000 x 25% = (750,000)
Equivalent units 6,620,000
Units completed
by 12/31 800 100% 800 800
Work-in-process,12/31 300 12% 300 36
Total units accounted 1,100 1,100 836
1. Equivalent units
Returns completed during March 1,200*
Returns in process, 3/31: 200 x 90% = 180
- Returns in process, 2/1: 100 x 30% = (30)
FIFO equivalent units 1,350
Conversion:
Units completed 1,000 + 3,000 = 4,000
Work-in-process, 11/30 2,000 x 20% = 400
Total equivalent units 4,400
Conversion:
Units completed 1,000 + 3,000 = 4,000
Work-in-process, 11/30 2,000 x 20% = 400
Total 4,400
Work-in-process, 11/1 1,000 x 60% = ( 600)
Equivalent units 3,800
Output
Units completed 23,000
Work-in-process inventory, 3/31 2,000
Total units accounted for 25,000
Conversion:
Units completed 23,000
Work-in-process inventory, 3/31 2,000 x 60% = 1,200
Total equivalent units 24,200
Output
Units completed 70,000
Work-in-process inventory, 8/31 17,000
Total units accounted for 87,000
Equivalent Units:
Material X
Units completed 70,000
Work-in-process inventory, 8/31 17,000 x 100% = 17,000
Total equivalent units 87,000
Material Y
Units completed 70,000
Work-in-process inventory, 8/31 17,000 x 0% = 0
Total equivalent units 70,000
Conversion
Units completed 70,000
Work-in-process inventory, 8/31 17,000 x 40% = 6,800
Total equivalent units 76,800
Equivalent Units
Direct Materials Conversion
Units completed 68,000 68,000
Work-in-process, May 31:
DM 4,000 x 100% = 4,000
CON 4,000 x 60% = 2,400
Total 72,000 70,400
Less: EU in WIP, May 1:
DM 3,000 x 100% = ( 3,000)
CON 3,000 x 40% = (1,200)
FIFO equivalent units 69,000 69,200
2. Cost reconciliation:
Blocher,Chen,Cokins,Lin: Cost Management 3e 11-16 © The McGraw-Hill Companies, Inc., 2005
Cost Incurred
Work-in-process inventory, May 1 $ 13,800
Cost added during May 397,400*
Total cost to account for $411,200
Cost Assignment
Cost of units completed:
Work-in-process inventory, May 1 $ 13,800
Cost to complete WIP:
3,000 x 60% x $3.25 = 5,850
Started and completed units:
65,000 x ($2.50 + $3.25) = 373,750 $ 393,400
Cost of work-in-process inventory, May 31:
Direct materials 4,000 x $2.50 = $10,000
Conversion 4,000 x 60% x $3.25 = 7,800 17,800
Total cost accounted for $411,200
1. Equivalent units:
Direct Materials: 175,000 + (30,000 x 80%) = 199,000
Conversion: 175,000 + (30,000 x 40%) = 187,000
Output
Units completed 70,000
Work-in-process inventory, 6/30 25,000
Total units accounted for 95,000
Material B
Units completed 70,000
Work-in-process inventory, 6/30 25,000 x 100% = 25,000
Total 95,000
Less: EU in WIP inventory, 6/1 15,000 x 0% = ( 0)
Total equivalent units 95,000
Conversion:
Units completed 70,000
Work-in-process inventory, 6/30 25,000 x 65% = 16,250
Total 86,250
Less: EU in WIP inventory, 6/1 15,000 x 40% = ( 6,000)
Total equivalent units 80,250
1. 54,000; 51,600
2. $2.4537; $6.4118; $8.8655
3. 50,000 x $8.8655 = $443,276
4. $20,074
5. 60,000; 57,000
6. $8.9213; $ 16.20
7. $1,381,670
8. $77,006
For calculations supporting the above answers, see the following cost
reports:
Costs:
DM Conv Total
WIP, January 1 $ 0 $ 0 $ 0
Costs incurred during Jan. 300,000 50,000 350,000
Total costs to acct. for $300,000 $50,000 $350,000
Cost incurred to produce units that were both started and completed during
Jan.:
Conversion:
(# of equivalent units of conversion.) x (Conversion cost per equivalent
unit)
= 500 x $0.7656 = $382.80
Step 4
Units Completed:
From work-in-process,
beginning inventory $ 4,530
Current costs incurred
completing units 2,450 = 500 x 70% x $7
Total cost from beginning
inventory $ 6,980
Units started and completed
this period 16,500 = (1,600-500) x $15
Total cost of units
completed $23,480
Work-in-process, (400x$8) (80x$7)
ending inventory 3,760 $3,200 $560
Total costs acct. for $27,240
Cost Reconciliation
Cost of 107,000 good units at $.4158 $44,490.60
Abnormal spoilage (2,300 X $.378) 869.40
Total production costs $45,360.00
Supporting Calculations
Cost Added:
Materials Conversion Total
Beginning WIP 45,600 8,125 53,725
Current Costs 228,400 45,500 273,900
Total 274,000 53,625 327,625
a. Transferred- b. c.
in from Assembly Assembly
Molding Material Conversion
Units transferred out 40,000 40,000 40,000
Equivalent units in
ending work-in-process
4,000 x 100% 4,000
1.
Cost Added:
Materials Conversion Total
Beginning WIP 55,000 7,250 62,250
Current Costs 176,000 66,900 242,900
Total 231,000 74,150 305,150
WTAVG Cost per EU; Cost per batch $ 192.500 $ 80.598 $ 273.098
Cost Added:
Materials Conversion Batch Total
Beginning WIP 55,000 7,250 - 62,250
Current Costs 176,000 38,400 28,500 242,900
Total 231,000 45,650 28,500 305,150