Miranda, Sweet Jenesie V.

Chapter V: Process Cost Accounting – General Procedures

III- BSBA- A

Exercise
Debit: Work in Process, FOH 1) Issuance of raw materials and supplies to the factory.
Credit: Materials
Debit: Work in Process, FOH 2) Incurrence of direct and indirect factory labor costs.
Credit: Payroll
Debit: Factory Overhead (each department) 3) Distribution of actual factory overhead costs to individual
departments. Credit: Factory Overhead
Work in Process (each department) 4) Application of factory overhead to individual departments.
Credit: Factory Overhead (each department)
Accountable 5) Accumulating costs for which the department is
Cost of Production Summary 6) These data are reported on
Stage of Completion 7) Represents the fraction or percentage of materials, labor, and
overhead
Equivalent Production 8) Represents the number of whole units
Average Cost Method 9) The cost of the work in process at the beginning of the period
Products Accumulate Cost 10) They pass through each successive production department

Problem:
1. Xanadu Company had 400 units in Work in Process at the beginning of the month. During the month,
14,600 units were started in production, 13,400 of which, along with the beginning work in process, were
completed by the end of the month. The uncompleted units were in ending inventory, one fourth
complete. The equivalent units of production for the month were
Answer:
Given: 400 units work in process
14,600 units started in production
13,400 units completed

Units completed from Beginning Work in Process 400

Units started and completed this month 13,400
Equivalent units in Ending Work in Process 300 [(14,000 – 13,400) x .25]
Total Equivalent units of Production 14,100

2.Gurry Company has 2,000 units in process in Blending at the beginning of the month that have a
transferred-in cost of $10,000 from Mixing. During the month, an additional 15,000 units are received
from Mixing with a transferred-in cost of $77,000. Fourteen thousand units are completed and transferred
to Finishing during the month, with the remaining units two thirds complete at the end of the month. The
adjusted unit cost from the prior department that should appear on the Blending cost of production
summary is $_______________. (Round unit cost to three decimal places.)
Answer:
Units Cost
Beginning Inventory 2,000 P10,000
Transferred – in during month 15,000 77,000
Total 17,000 P 87,000

Average cost per unit = 87,000

Total Units / 17,000
P 5.118

3. Assume that the 2,000 units in the ending work in process inventory are one-half complete. If
materials, labor, and overhead are applied evenly throughout the process, one-half of the total cost for
completing 2,000 units can be applied to these units
Answer:
Units Started in Production 19,000
Units finished during the period 17,000
Equivalent units of work in process at the end of the period
(2,000 units one-half completed) 1,000
Equivalent production for the period 18,000 units
Cost per equivalent unit:
P 36,000 / 18, 000 = P 2 per equivalent unit
Inventory cost at the end of the month:
Transferred to finished goods (17,000 units at Php2) P 34,000
Work in process (2,000 units x 1/2 x Php2) 2,000
Total production costs accounted for Php36,000

4. Michaels, Inc., uses the process cost system. The following data, taken from the organization’s books,
reflect the results of manufacturing operations during the month of June in its only department,
Machining
ANSWER:

Michaels, Inc.
Cost of Production Summary - Machining
For the Month Ended June 2020

Production Cost
Work in Process, beginning of period:
Materials P 5,200
Labor 4,600
Factory Overhead 2,000 P 11,800
Costs during the month:
Materials P 20,000
Labor 15,000
Factory Overhead 12,000 P 47,000
Total cost to be accounted for P 58,800

Units output for the month:

Finished and transferred to finished goods 19,000
Equivalent units of WIP, end of month: 400 units
One – fourth completed 1,000
Total Equivalent Production 20,000

Units cost for month:

Materials (P 5,200 + 20,000) / 20,000 P 1.26
Labor ( P4,600 + 15,000 ) / 20,000 0.98
FOH ( P 2,000 + 12,000 ) / 20,000 0.70
Total P 2.94

Inventory Cost
Cost of goods finished transferred to
Finished goods (19,000 x 2.94) P55,860
Cost of WIP, end of the month
Materials ( 4,000 x ¼ x P 1.26) P 1,260
Labor (4,000 X ¼ X .98) 980
FOH (4,000 x ¼ x .70) 780 P2,940
Total production costs accounted for P58,800