1

UNIVERSITY OF SANTO TOMAS

UST - ALFREDO M. VELAYO COLLEGE OF ACCOUNTANCY

SECOND TERM; AY 2019-2020

PROCESS COST SYSTEM

Part I. LECTURE AND ILLUSTRATION

1. Understand who uses process cost systems.

Process cost systems are used by companies that mass-produce similar products in a
continuous fashion. Once production begins, it continues until the finished product
emerges. Each unit of finished product is indistinguishable from every other unit.

Manufacturers of consumer goods use process costing i.e. manufacturers of textile, milk, sugar,
Coffee, pharmaceuticals, paint, detergents, shampoos, toothpaste, etc.

2. Similarities and differences between job order cost and process cost systems.
Similarities:
A. Both systems track the same cost elements—direct materials, direct labor, and
manufacturing overhead.
B. Costs are accumulated in the same accounts—Raw Materials Inventory, Factory Labor,
and Manufacturing Overhead.
C. Accumulated costs are assigned to the same accounts—Work in Process, Finished Goods
Inventory, and Cost of Goods Sold.

Differences Job Order Costing Process Costing

1.WIP inventory account One WIP account per job Separate WIP account for
used order each production process or
manufacturing process
2. Cost Summaries To individual jobs and In a cost of production
summarized in a job cost report for each department;
sheet and totaled upon and cost are totaled at the
completion of a job end of a time period
3. Computation of unit Unit cost in a job cost system Unit cost is calculated as
cost is total cost per job ÷ units total manufacturing costs
produced for the period ÷ the units
produced during the period.
4. Reports prepared Statement of Cost of Goods
Manufactured and Sold Cost of Production Report

3. Explain the flow of costs in a process cost system. Manufacturing costs for raw materials,
labor, and overhead are assigned to work in process accounts for various departments or
manufacturing processes, and the costs of units completed in a department are transferred
from one department to another as those units move through the manufacturing process.
The costs of completed work are transferred to Finished Goods Inventory. When inventory is
sold, costs are transferred to Cost of Goods Sold.

4. Compute equivalent units.

- Equivalent Units of Production measure work done during a period, expressed in fully
completed units.
- This concept is used to determine the cost per unit of completed product.
- Equivalent units are the sum of the units completed and transferred out ( beg inventory
completed + started and completed) plus equivalent units of ending work in process.

5. Explain the four steps necessary to prepare a production cost report.

(1) Compute the physical unit flow—that is, the Total Units to be Accounted For or the
TUTAF.
(2) Compute the equivalent units of production.
(3) Compute the unit production costs, expressed in terms of equivalent units of production.
(4) Prepare a cost reconciliation schedule, which shows that the total costs accounted for
equal the total costs to be accounted for.
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6. Cost of Production Report. The production cost report contains both Quantity Schedule
and Cost data/analysis for a production department.

7. Costing method uses: FIFO costing and Weighted Average costing

Problem 1: ANCHOR Manufacturing Co. uses process costing in the manufacture of its sole product. The
following production data are presented to you:

Case A: Beginning Inventory- 120,000 lbs./ 60% converted

Started in process 400,000 “
Ending Inventory- 150,000 “/ 60% converted

 All materials are added at the start of processing.

1. EUP for Materials and Conversion using FIFO and Average Costing:
A. 322,000 & 352,000; 400,000 & 358,000 C. 400,000 & 388,000; 520,000 &460,000
B. 322,000 & 352,000; 400,000 & 358,000 D. 400,000 & 358,000; 400,000 & 430,000

REQUIRED: Quantity Schedule (all in units)

CASE A: Material added at the beginning of Production

Beg. Inv. 120,000

Started in Prod. 400,000
TUTAF 520,000
FIFO Costing Average Costing
Whole EUP EUP Whole EUP EUP
Units Materials Conversion Units Materials Conversion
BI, completed 120,000 - (40%) 48,000 120,000 120,000 (100%)120,000
Started & Com. 250,000 250,000 250,000 250,000 250,000 250,000
EI (still inc.) 150,000 150,000 (60%) 90,000 150,000 150,000 (60%) 90,000
Units As Accted 520,000 400,000 388,000 520,000 520,000 460,000

 Started and completed units are given 100% EUP since they are started this period and are
completed this period also.
 EUP for the BI for conversion is equal to the work added this period to make it 100% complete.
 Since materials are all added at the beginning of processing, all units started shall be given 100%
work done whether completed or not.
 No EUP for materials was assigned to the BI since it was started last period therefore all
materials were already added last period and nothing was this period.
 THEREFORE, THE ONLY DIFFERENCE BETWEEN THE EUP IN THE TWO COSTING METHODS IS THE
EUP OF THE BI. If there are no BI, the EUPs under FIFO and Average costing will be the same.
 Under average costing the BI is given 100% regardless of the stage of completion. It is assumed
that there are comingling of units, that is, we cannot segregate the BI completed from the
Started and Completed units; they can be combined as completed units and shall be assigned
100% EUP.
 EI are assumed to come from the units started during the current period.

CASE B: The same information as in Case 1 except that materials are all added at the end
of processing and that the beginning inventory and ending inventory still have to be 10% and 20%
converted.

2. EUP for Materials and Conversion using FIFO and Average Costing:
A. 370,000 & 382,000; 370,000 & 490,000 C. 400,000 & 382,000; 520,000 & 490,000
B. 370,000 & 292,000; 370,000 & 40,000 D. 400,000 & 292,000; 520,000 & 490,000

CASE B: Materials added at the end of production

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Beg. Inv. 120,000

Started in Prod. 400,000
TUTAF 520,000
FIFO Costing Average Costing
Whole EUP EUP Whole EUP EUP
Units Materials Conversion Units Materials Conversion
BI, completed 120,000 120,000 (10%) 12,000 120,000 120,000 (100%)120,000
Started & Com. 250,000 250,000 250,000 250,000 250,000 250,000
EI (still inc.) 150,000 - (80%)120,000 150,000 - (80%) 120,000
Units As Accted 520,000 370,000 382,000 520,000 370,000 490,000

 Only 10% EUP was given to BI since they only need 10% to convert and that the EI still need 20%
to convert therefore they are 80% converted already.
 Students must be able to differentiate “Stage of completion” from “Additional Work to
Complete”.

CASE C: Beginning inventory- 150,000 units/ 2/5 to complete

Transferred-out 520,000
Units started 450,000
Ending inventory ? / 80% completed

 Twenty five percent of materials is added at the start of processing; 50% is added when the units
are 60% completed; remaining materials are added when the units are 90% converted

3. EUP for Materials and Conversion using FIFO and Average Costing:
A. 410,000 & 428,000; 588,000 & 566,000 C. 400,000 & 474,000; 467,500 & 580,000
B. 410,500 & 444,000; 588,000 & 568,000 D. 467,500 & 494,000; 580,000 &584,000

CASE C: Materials added at different stage of production

Beg. Inv. 150,000

Started in Prod. 450,000
TUTAF 600,000
FIF0 Costing Average Costing
Whole EUP EUP Whole EUP EUP
Units Materials Conversion Units Materials Conversion
BI, completed 150,000 (25%) 37,500 (2/5) 60,000 150,000 150,000 (100%)150,000
Started & Com. 370,000 370,000 370,000 370,000 370,000 370,000
EI (still inc.) 80,000 60,000 (80%) 64,000 80,000 60,000 (80%) 64,000
Units As Accted 520,000 467,500 494,000 520,000 580,000 584,000

 BI were 3/5 completed so they only need 25% material to complete; but still need 2/5 to be
converted.
 EI were already 80% converted therefore 75% of the materials were added (had passed the 25%
and 50% boundaries already); likewise 80% conversion had been applied already.

CASE D: Transferred-out 120,000 units

Started in Process 150,000
Ending Inventory 45,000/ 7/8 converted

 Forty percent of materials is added when the processing is halfway completed; balance when
80% completed. Beginning inventories, if any, need 3/5 to be completed.

4. EUP for Materials and Conversion using FIFO and Average Costing:
A. 164,000 & 159,375; 164,000 & 150,375 C. 164,000 &163,375; 165,000 &159,375
B. 165,000 & 153,375; 165,000 & 150,375 D. 165,000 & 153,375; 165,000 & 159,375
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CASE D: Materials added at different stage of production

Beg. Inv. 15,000

Started in Prod. 150,000
TUTAF 165,000
FIFO Costing Average Costing
Whole EUP EUP Whole EUP EUP
Units Materials Conversion Units Materials Conversion
BI, completed 15,000 (100%)15,000 (3/5) 9,000 15,000 15,000 (100%) 15,000
Started & Com. 105,000 105,000 105,000 105,000 105,000 105,000
EI (still inc.) 45,000 (100%)45,000 (7/8) 39,375 45,000 45,000 (7/8) 39,375
Units As Accted 165,000 . 165,000 153,375 520,000 165,000 159,375

 100% EUP for the Materials of BI since they are only 2/5 completed; 3/5 EUP for conversion
because they still need 3/5 to complete.
 100% EUP for the Materials of EI since they are already 7/8 (87.5%) converted.
 Started & Completed = Started in Process- EI (150,000-45,000 = 105,000)
 BI = Transferred out- Started & Completed (120,000-105,000=15,000

5. ARNEL Company had beginning Work in Process Inventory of 5,000 units that were 40 percent complete
as to conversion costs. ARNEL started and completed 42,000 units this period and had ending Work in
Process Inventory of 12,000 units. How many units were started this period?
A 42,000 B. 47,000 C. 54,000 D. 59,000

42,000 + 5,000 = 47,000 transferred-out units + 12,000 in-process, end = 59,000 units as accounted

59,000 – 5,000 in-process, beg = 54,000 units started in process

6. ACER Company uses a weighted average process costing system. Material is added at the start of
production. ACER Company started 13,000 units into production and had 4,500 units in process at the
start of the period that were 60 percent complete as to conversion costs. If ACER transferred out 11,750
units, how many units were in ending Work in Process Inventory?
A. 1,250 B. 3,000 C. 3,500 D. 5,750
13,000 + 4,500 = 17,500 units to be accounted for ;

17,500 - 11,750 units completed = 5,750 units in process at the end

7. ADLER Company uses a weighted average process costing system and started 30,000 units this month.
ADLER had 12,000 units that were 20 percent complete as to conversion costs in beginning Work in
Process Inventory and 3,000 units that were 40 percent complete as to conversion costs in ending Work
in Process Inventory. What are equivalent units for conversion costs?
A. 37,800 B. 40,200 C. 40,800 D. 42,000

12,000 + 30,000 = 42, 000 units to be accounted for

Transferred-out 39,000 x 100% = 39,000

In-process, end 3,000 x 40% = 1,200
40,200

8. ALTIS Company makes small metal containers. The company began December with 250 containers in
process that were 30 percent complete as to material and 40 percent complete as to conversion costs.
During the month, 5,000 containers were started. At month end, 1,700 containers were still in process
(45 percent complete as to material and 80 percent complete as to conversion costs). Using the
weighted average method, what are the equivalent units for conversion costs and materials?
A. 3,450 & 4,315 B. 4,560 & 3,550 C. 4,610 & 3,550 D. 4,910 & 4,315

250 + 5,000 = 5,250 units to be accounted for

Conversion Cost:
Transferred-out 3,550 x 100% = 3,550
In-process, end 1,700 x 80% = 1,360
4,910
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Materials:
Transferred-out 3,550 x 100% = 3,550
In-process, end 1,700 x 45% = 765
4,315

9. ADLER Company Co. uses a FIFO process costing system. The company had 5,000 units that were 60
percent complete as to conversion costs at the beginning of the month. The company started 22,000
units this period and had 7,000 units in ending Work in Process Inventory that were 35 percent complete
as to conversion costs. What are equivalent units for material, if material is added at the beginning of
the process?
A. 18,000 B. 22,000 C. 25,000 D. 27,000

5,000 + 22,000 = 27,000 units to be accounted for ; 27,000 – 7,000 in process, end = 20,000 completed

Materials:

Transferred-out (from last month) 5,000 x 0 = 0

(from this month) 15,000 x 100% =15,000
In-process, end 7,000 x 100% = 7,000
22,000

LOST UNITS IN PROCESS COST SYSTEM

Lost units are always shown with other whole units under “Units accounted for” in the cost of production
report.

1. CONTINUOUS NORMAL LOSS

- Lost units are not extended to the EUP schedule (method of neglect)
- All good production (both fully and partially completed) absorbs the cost of lost units through
higher per unit cost.

2. CONTINUOUS ABNORMAL LOSS

-All units are appropriately extended to the EUP schedule. (accounted separately)
-Cost of loss units is assigned as period cost.

3. DISCRETE NORMAL LOSS

- Normal loss is appropriately extended to EUP schedule.

- Determine whether ending inventories have passed the inspection point.
A. If yes, cost of lost units is pro-rated between units in the ending work-in-process and
units transferred out
B. If no, cost of lost units is assigned only to the good production that was transferred
out.

4. DISCRETE ABNORMAL LOSS

- All units are appropriately extended to the EUP. (accounted separately)

- Cost of the loss units is assigned as a period cost.

 IF THERE IS AN INSPECTION POINT, LOST UNITS ARE DISCRETE BECAUSE THE

EXACT POINT OF OCCURENCE CAN DETERMINED.
 THE COSTS OF NORMAL LOSS UNITS ARE INVENTORIABLE COSTS WHILE THE COSTS
OF ABNORMAL LOSS ARE PERIOD COSTS.
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Problem A: The following information is available for SCHOFIELD Company for the current
year:

Beg Inventory (60% complete) 12,000 units

Started 75,000
Transferred Out 72,000
Ending Inventory (60% done) ?

COSTS INCURRED Total Materials Conversion Cost

BWIP P 54,750 P 32,700 P 22,050
Costs Added 334,500 150,000 184,500
Total 389,250 P182,700 P206,550
======= ======== ========

All materials are added at the start of production.

PREPARE THE COST OF PRODUCTION REPORT USING FIFO AND WEIGHTED AVERAGE:
FIFO COSTING
EQUIVALENT UNITS OF PRODUCTION
Quantity Schedule Whole Units Materials Conversion
BI 12,000
Started in Production 75,000
Total Units to be Accted For 87,000
======
BI Comp. & Transferred 12,000 - 4,800
Started, Comp & Transferred 60,000 60,000 60,000
EI 15,000 15,000 9,000
Total Units As Accted For 87,000 75,000 73,800
====== ===== =====

COSTS ANALYSIS Total Materials Conversion Cost

BWIP P 54,750 P - P -
Costs Added 334,500 150,000 184,500
Total Cost to be Acctd. For P 389,250 P150,000 P184,500
Divided by EUP 75,000 73,800
Cost per EUP P4.50 P2.00 P2.50
====== ===== =====

BI Completed and Transferred

BWIP- Cost P 54,750
Cost to complete 4,800 X 2.50 12,000
Started, Completed and Transferred
60,000 X 4.50 270,000
Total Cost Transferred to FG Invty. 336,750
Cost of Ending Inventory
Materials 15,00 X P2.00 30,000
Conversion 9,000 X 2.50 22,500 52,500
Total Cost As Accounted For P389,250
=======
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WEIGHTED AVERAGE COSTING

EQUIVALENT UNITS OF PRODUCTION

Quantity Schedule Whole Units Materials Conversion
BI 12,000
Started in Production 75,000
Total Units to be Accted. For 87,000
======
Completed and Transferred 72,000 72,000 72,000
EI 15,000 15,000 9,000
Total Units As Accted. For 87,000 87,000 81,000
====== ====== ======

COSTS ANALYSIS Total Materials Conversion Cost

BWIP P 54,750 P 32,700 P 22,050
Costs Added 334,500 150,000 184,500
Total Cost to be Acctd. For P 389,250 P182,700 P206,550
Divided by EUP 87,000 81,000
Cost per EUP P 4.65 P2.10 P2.55
====== ====== =====

Completed and Transferred

72,000 X 4.65 P 334,800
Total Cost Transferred to FG Invty. 334,800
Cost of Ending Inventory
Materials 15,00 X P2.10 31,500
Conversion 9,000 X 2.55 22,950 54,450
Total Cost As Accounted For P389,250
========

PROBLEM B: SUCRE Manufacturing company produces a single product and uses process costing.
Materials are all added at the start of production while conversion costs are applied evenly
throughout the manufacturing operations. Units are inspected at the end of processing. The
following information is available for the month of April:

Beginning WIP Inventory (80% converted) 10,000 units

Started this period 120,000
Ending WIP (need 10% to convert) 20,000
Normal Loss 1,000
Abnormal Loss 2,000

Materials Cost Conversion Cost Total

Beginning WIP Cost P 56,000 P 83,200 P 139,200
Current Period Costs 360,000 480,000 840,000

PREPARE THE COST OF PRODUCTION REPORT USING 1. FIFO Costing 2. Average Costing
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FIFO Costing Whole Units Materials Conversion

Beg Inventory 10,000
Starter in production 120,000
TUTAF 130,000
=======

Beg Inty. Completed 10,000 - 2,000

Started & completed 97,000 97,000 97,000
Ending Invty. 20,000 20,000 18,000
Normal Loss 1,000 1,000 1,000
Abnormal Loss 2,000 2,000 2,000
TUAAF 130,000 120,000 120,000
======= ======= ======

COST ANALYSIS/ ASSIGNMENT

Total Materials Cost Conversion Cost
Beginning WIP Cost P 139,200 P- P -
Current Period Costs 840,000 360,000 480,000
Total Cost to Acct. For P 979,200 P 360,000 P 480,000
DIVIDED BY EUP 120,000 120,000
COST / EUP P 7.00 P 3.00 P 4.00
====== ====== =======

BEGINNING INVENTORY
BWIP Inventory Cost P 139,200
Cost to complete 2,000 x P4 8,000

STARTED & COMPLETED

97,000 X P7 679,000
NORMAL LOSS 1,000 X P7 7,000
Total Cost Transferred to FG Invty P 833,200

ENDING INVENTORY
Materials 20,000 X P3= 60,000
Conversion 18,000 X P4 = 72,000 132,000

ABNORMAL LOSS
2,000 X P7 14,000

TOTAL COST AS ACCOUNTED FOR P979,200

=======

 Lost units, whether normal or abnormal, are assigned 100% EUP for Material since the latter is
applied at the start of processing and ,at this point, we still do not know that they will
become lost units.
 Lost units, whether normal or abnormal, are assigned 100% EUP for Conversion since the
inspection point is at the end. If these units are not 100% converted they could not be
subjected to inspection (therefore it is assumed that they are 100% converted).
 Computation of cost / EUP:
FIFO Costing = Current Period Cost/ EUP
Average Costing = BWIP Cost + Current Period Cost/ EUP
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PART II. PRACTICE EXERCISES

Jones Company

The following information is available for Jones Company for April:

Started this month 80,000 units

Beginning WIP
(40% complete) 7,500 units
Normal spoilage (discrete) 1,100 units
Abnormal spoilage 900 units
Ending WIP
(70% complete) 13,000 units
Transferred out 72,500 units

Beginning Work in Process Costs:

Material $10,400
Conversion 13,800
Current Costs:
Material $120,000
Conversion 350,000

All materials are added at the start of production and the inspection point is at the end of the process.

112. Refer to Jones Company. What are equivalent units of production for material using FIFO?
a. 80,000
b. 79,100
c. 78,900
d. 87,500
ANS: A

Materials: FIFO

Beginning Work in Process - 0% -

65,
+ Units Started and Completed 000 100% 65,000
13,
+ Ending Work in Process 000 100% 13,000
1,
+ Normal Spoilage (discrete) 100 100% 1,100

+ Abnormal Spoilage 900 100% 900

Equivalent Units of Production 80,000

DIF: Moderate OBJ: 6-2,6-4,6-8

113. Refer to Jones Company. What are equivalent units of production for conversion costs using FIFO?
a. 79,700
b. 79,500
c. 81,100
d. 80,600
ANS: D

Conversion: FIFO %
Units Complete EUP
7,
Beginning Work in Process 500 60% 4,500
65,
+ Units Started and Completed 000 100% 65,000
13,
+ Ending Work in Process 000 70% 9,100
1,
+ Normal Spoilage (discrete) 100 100% 1,100
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+ Abnormal Spoilage 900 100% 900

Equivalent Units of Production 80,600

DIF: Moderate OBJ: 6-2,6-4,6-8

114. Refer to Jones Company. What are equivalent units of production for material using weighted average?
a. 86,600
b. 87,500
c. 86,400
d. 85,500
ANS: B

Materials: Weighted Average Units % EUP

Complete
7
Beginning Work in Process 7,500 100% ,500
65,
+ Units Started and Completed 000 100% 65,000
13,
+ Ending Work in Process 000 100% 13,000
1,
+ Normal Spoilage (discrete) 100 100% 1,100

+ Abnormal Spoilage 900 100% 900

Equivalent Units of Production 87,500

DIF: Easy OBJ: 6-2,6-3,6-8

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115. Refer to Jones Company. What are equivalent units of production for conversion costs using weighted
average?
a. 83,600
b. 82,700
c. 82,500
d. 81,600
ANS: A

Conversion: FIFO %
Units Complete EUP
7,
Beginning Work in Process 500 100% 7,500
65,
+ Units Started and Completed 000 100% 65,000
13,
+ Ending Work in Process 000 70% 9,100
1,
+ Normal Spoilage (discrete) 100 100% 1,100

+ Abnormal Spoilage 900 100% 900

Equivalent Units of Production 83,600
DIF: Easy OBJ: 6-2,6-3,6-8

116. Refer to Jones Company. What is cost per equivalent unit for material using FIFO?
a. $1.63
b. $1.37
c. $1.50
d. $1.56
ANS: C

FIFO:
Materials

Current Period $ 120,000

120,000 ÷ 80,000 = $ 1.50
units per unit
DIF: Easy OBJ: 6-2,6-4

117. Refer to Jones Company. What is cost per equivalent unit for conversion costs using FIFO?
a. $4.00
b. $4.19
c. $4.34
d. $4.38
ANS: C

FIFO: Conversion

Current Period $ 350,000

350,000 ÷ 80,600 = $ 4.34
units per unit

DIF: Easy OBJ: 6-2,6-4

118. Refer to Jones Company. What is cost per equivalent unit for material using weighted average?
a. $1.49
b. $1.63
c. $1.56
d. $1.44
ANS: A
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Weighted Average:
Materials
Beginning $ 10,400
Current Period 120,000
130,400 ÷ 87,500 = $ 1.49
units per unit

DIF: Easy OBJ: 6-2,6-3

119. Refer to Jones Company. What is cost per equivalent unit for conversion costs using weighted average?
a. $4.19
b. $4.41
c. $4.55
d. $4.35
ANS: D

Weighted Average:
Conversion
Beginning $ 13,800
Current Period 350,000
363,800 ÷ 83,600 = $ 4.35
units per unit

DIF: Easy OBJ: 6-2,6-3

120. Refer to Jones Company. What is the cost assigned to ending inventory using FIFO?
a. $75,920
b. $58,994
c. $56,420
d. $53,144
ANS: B

Ending Inventory: FIFO

Materials 13,000 $ 1.50 $ 19,500.00

9,1
Conversion (13,000 * 70%) 00 4.34 39,494.00
Total $ 58,994.00

DIF: Moderate OBJ: 6-2,6-4

 13

121. Refer to Jones Company. What is the cost assigned to abnormal spoilage using FIFO?
a. $1,350
b. $3,906
c. $5,256
d. $6,424
ANS: C

Abnormal Price per

Spoiled Units Equivalent
Unit Total
900 $5.84 $5,256

DIF: Moderate OBJ: 6-2,6-4,6-8

122. Refer to Jones Company. What is the cost assigned to normal spoilage and how is it classified using
weighted average?
a. $6,193 allocated between WIP and Transferred Out
b. $6,424 allocated between WIP and Transferred Out
c. $6,193 assigned to loss account
d. $6,424 assigned to units Transferred Out
ANS: D

Normal Price per

Spoiled Equivalent
Units Unit Total
1,100 $5.84 $6,424
Transferred
Out

DIF: Moderate OBJ: 6-2,6-4,6-8

123. Refer to Jones Company. What is the total cost assigned to goods transferred out using weighted average?
a. $435,080
b. $429,824
c. $428,656
d. $423,400
ANS: B

Price per
Goods Equivalent
Transferred Out Unit Total
73,600 $5.84 $429,824

DIF: Difficult OBJ: 6-2,6-3

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PART III. ADDITIONAL PROBLEMS:

Problem A
The FORMING Department is the first stage of INFINITY Manufacturing Company’s production cycle.
Beginning WIP inventory of this department was 60% incomplete as to conversion. Ending WIP was 25%
converted. Information as to conversion in the FORMING Department follows:
Units Conversion Costs
Beg. WIP 25,000 P21,100
Units started and cost incurred 135,000 197,400
Completed and transferred 100,000

1. Using FIFO costing, what is the conversion cost in the Ending WIP?
A. P21,100 B. P28,900 C. P28,200 D. P28,500

2. Using weighted average costing, what is the conversion cost in the Ending WIP?
A. P25,800 B. P21,100 C. P28,200 D. P28,500

Beg. Inv. 25,000

Started in Prod. 135,000
TUTAF 160,000
FIFO Costing AVE. Costing
Whole EUP EUP
Units Conversion Conversion
BI, completed 25,000 (60%) 15,000 (100%) 25,000
Started & Com. 75,000 75,000 75,000
EI (still inc.) 60,000 (25%) 15,000 (25%) 15,000
Units As Accted 520,000 105,000 115,000

FIFO: P197,400/105,000 = 1.88 * 15,000 = P28,200

Ave.: P21,100 + P197,400 = P218,500/115,000 = P1.90 * 15,000 = P28,500

Problem B
The CRACKING Department is the first of a two-stage production process. Spoilage is identified when the
units have been completed in the cracking process. The following information are available for the month of
September:
Units Conversion Cost
BWIP 2,000 P10,000
Additional work to complete 50%
Completed and transferred 7,000
Units started 8,000 P75,500
Spoilage-normal 500
EWIP 2,500
Stage of completion 80%

1. What was CRACKING’s conversion cost transferred to the second department using weighted average
costing?
A. P63,000 B. P59,850 C. P64,125 D. P67,500

Trans-out units 7,000 *100% = 7,000

In-process, end 2,500 *80% = 2,000
Normal Lost units 500 *100% = 500 9,500

P10,000 + P75,500 = P85,500/9,500 =P9 *7,500= P67,500 (including the cost of the normal lost units)

2. Assuming that there were no units in beginning inventory, and the ending work in process inventory is
100% complete as to material costs, the number of equivalent units as to material costs would be
. A. The same as the units placed in process
BB. The same as the units completed
C. Less than the units placed in process
D. Less than the units completed
 15

Problem C
The following information is known about a company’s process costing system.
COSTS Total Material Labor
Overhead
Beginning Inventory P 48,000 P 16,000 P 32,000
Current work 346,000 126,000 220,000
Total P394,000 P142,000 P252,000
Equivalent production 20,400 20,000
Cost per unit P6.96078 P 12.60
====== =======
Which method of costing is used?
A. FIFO
B. Weighted average
C. Either FIFO or weighted average because both give the same answer
D. Unit costs do not depend on the method used

(Unit cost under the average method is equal to cost of last month and current month divided by EUP)

D. In computing the current period’s manufacturing cost per equivalent unit, the FIFO method of process
costing considers current period costs
A. Only
B Plus cost of beginning work in process inventory
C. Less cost of beginning work in process inventory
D. Plus cost of ending work in process inventory

E. Direct materials added to a second production department without a subsequent increase in output will
A. Increase total unit cost
B. No change the cost amount transferred out of the department
C. Decrease ending work in process inventory
D. Increase the amount of manufacturing overhead included in the ending
work in process inventory

Problem F.
Equivalent production under FIFO computation shows:
BWIP. Completed & transferred 24, 000 X 75% = 18,000
Started, “ & “ 125, 000 X 100% = 125,000
EWIP 30, 000 X 20% = 6,000

EUP under weighted average costing method

A. 155,000 B. 154,000 C. 131,000 D. 133,000

Completed (24,000 + 125,000) 149,000 x 100% = 149,000

EWIP 30,000 x 20% = 6,000 154,000

Problem G.
EUP under weighted average costing method shows:
Transferred-out 500,000 X 100% = 500,000
EWIP 120,000 X 4/5 = 96,000

With BWIP consisting of 130,000 units with additional work to complete of 1/5, the EUP under FIFO
A. 466,000 B. 500,000 C. 492,000 D. 596,000

BWIP. Completed & transferred 130, 000 X 20% = 26,000

Started, “ & “ 370, 000 X 100% = 370,000
EWIP 120, 000 X 80% = 96,000 P492,00
16

Problem H.
Compute the EUP of conversion cost for each of the following cases:
A. In Process, End (4/7 incomplete) 280,000 units
In Process, beginning (1/3 work done) 450,000 units
(Units started in process is 250% of the work in process at the end)

EUP using FIFO:

A. 840,000 B. 880,000 C. 780,000 D. 1,120,000

WIP, beg 450,000

Started in Process 700,000 (280,000 *2.5)
To be accounted 1,150,000

BWIP. Completed & transferred 450, 000 X 2/3 = 300,000

Started, “ & “ 420, 000 X 100% = 420,000
EWIP 280, 000 X 3/7 = 120,000 P840,000
1,150,000

Problem I.
In Process, beginning (3/5 additional work to be done) 120,000 units
Finished and Transferred units 750,000 units
(Of the units started in process, ½ represents work in process at end
Which were 40% completed during the current period)

EUP using Average costing:

A. 792,000 B. 870,000 C. 1,002,000 D. 954,000

WIP, beg 120,000

Started in Process 1,260,000
To be accounted 1,380,000

WIPbeg + Units Started = Units Completed + WIP end

(120,000 + X = 750,000 + .50X)
.50x = 630,000 = 1,260,000

BWIP. Completed & transferred 120, 000 X 100% =120,000

Started, “ & “ 630, 000 X 100% = 630,000
EWIP 630, 000 X 40% = 252,000 P1,002,000
1,380,000

Problem J.
VALERA Fashion Company uses a process costing system to accumulate costs related to silk scarf
production. Selected data for scarf production for last quarter is provided below

Materials Conversion Cost

Unit cost, FIFO method P2.00 P 5.00
FIFO equivalent units ? (A) 140,O00
Cost in beginning work in process P 65,000 P105,000
Total cost to be accounted for P 295,000 P ?(B)

What are the unknown amounts of A and B?

A. P147,500 and P805,000 C. P115,000 and P700,000
B. P147,500 and P700,000 D. P115,000 and P805,000

(A) P295,000 – P65,000 = P230,000/2 = 115,000

(B) 140,000 x P5 = P700,000 + P105,000 = P805,000
17

Problem K.
PASCUAL LAB Company had 250,000 lbs. of work in process inventory in Department A on February 1.
These units were 60% complete as to conversion. Direct materials are added at the beginning of the
process. During the month of February, 500,000 lbs. were started and 600,000 lbs. completed. PASCUAL
LAB had 150,000 units of work in process inventory on February 28. These units were 80% complete as to
conversion costs.

By what amount did the equivalent units for the month of February using the weighted average exceed
the equivalent units for direct materials and conversion costs the month of February using the FIFO
method?
A. 250,000 and 100,000, respectively C. 250,000 and 150,000, respectively
B. 150,000 and 100,000, respectively D. 150,000 and 150,000, respectively

Beg. Inv. 250,000

Started in Prod. 500,000
TUTAF 750,000
FIFO Costing Average Costing
Whole EUP EUP Whole EUP EUP
Units Materials Conversion Units Materials Conversion
BI, completed 250,000 - (40%)100,000 250,000 250,000 (100%)250,000
Started & Com. 350,000 350,000 350,000 350,000 350,000 350,000
EI (still inc.) 150,000 150,000 (80%) 120,000 150,000 150,000 (80%) 120,000
Units As Accted 750,000 500,000 570,000 750,000 750,000 720,000

Problem L.
GREAT TASTE MANUFACTURING COMPANY produces plastic drinking cups and uses a process cost system.
Cups go through three departments: MIXING, MOLDING, and PACKING. During the month of February,
the following information is known about the MIXING department:
Work in process at February 1 (3/4 converted) 10,000 units
Units started during February 140,000 units
Work in process at February 28 (5/6 converted) 24,000 units
Lost units 2, 000 units
In the MIXING Department, Materials A and B are added at different points in the process. Twenty
percent of Material A is added at the start of processing; fifty percent when halfway converted and the
balance when the cups are 80% processed. Fifty percent of Material B is added when the units 40%
converted; twenty-five when 70% converted; balance when the cups are 90% converted. Conversion costs
are incurred uniformly throughout the mixing process. Normal loss units should not be more than 1.5
percent of the units started.

Using FIFO costing, what are the equivalent units of production for Material A and B?
A. 143,000 & 139,000 C. 145,000 & 137,000
B. 141,000 & 134,500 D. 138,000 & 132,000

Beg. Inv. 10,000

Started in Prod. 140,000
TUTAF 150,000
FIFO Costing
Whole EUP EUP
Units A B
BI, completed 10,000 3,000 2,500
Started & Com. 114,000 114,000 114,000
EI (still inc.) 24,000 24,000 18,000
Normal lost units 2,000 0 0
Units As Accounted 150,000 141,000 134,500

*lost units are considered normal up to 2,100 (140,000 x 1.5%) within expectation.
*There is no inspection point therefore the lost units are considered continuous; apply method of
neglect.
18

Problem M.
MONIQUE TEXTILE INC., produces sophisticated fabrics that are being supplied to 5-star hotels and to
high-end condominiums that require components to be integrated in various points of the production. At
the beginning of the month, 4,000 units were in process. These were 20% converted.

For the current month, MONIQUE started to produce 16,000 units. Only 12,000 of these were completed.
The remainder were behind 25% from completion.

Due to the complexity of this textile, materials are added at various points in the production. To sum up:

Direct Materials:
40% are put into production at the start of production
50% are placed when the fabric is 55% completed
10% are placed when the fabric is 99% done

What is the EUP under FIFO For the purpose of allocating direct materials cost?
A. 16,000 B. 16,200 C. 18,000 D. 18,200

Beg. Inv. 4,000

Started in Prod. 16,000
TUTAF 20,000
FIFO
Whole EUP
Units A
BI, completed 4,000 2,400
Started & Com. 12,000 12,000
EI (still inc.) 4,000 3,600
Units As Accounted 20,000 18,000

Problem N.
BLACK HAIRY Manufacturing uses a process costing system to accumulate costs related to the production
of "Mane & tail" an industrial strength hair grower. Material costs and conversion costs for first quarter
are provided below:
Materials Conversion
Costs in beginning work in process P 235,200 P382,500
Current costs for the quarter 844,800 2,047,500
The equivalent bottles of production under the weighted average method are 1,200,000 for materials
and 1,350,000 for conversion costs. All materials are added at the beginning of the production process.
Beginning work in process was composed of 240,000 bottles that were 75% complete with conversion
costs.
What is the Equivalent Units of Production under FIFO?
MAT CONVERSION MAT CONVERSION x
A. 1,200,000 1,350,000 C. 1,200,000 1,170,000
B. 960,000 1,170,000 D. 960,000 1,350,000

EUP (average) Materials 1,200,000 -240,000 = 960,000

EUP (average) Conversion 1,350,000 – (240,000*75%) = 1,170,000

*The only difference between average and FIFO is on how they account the units in process beginning
done last month. Under average method, it is as if all were done this month.

If the number of bottles completed during the quarter is 1,100,000, what is the total cost that should be
assigned to these bottles under the weighted average method?
A. P2,970,000 B. P3,205,200 C. P3,587,700 D. P2,892,300

*Materials (P235,200 + 844,800 =P1,080,000/1,200,000 = .90)

Conversion (P382,500 + 2,047,500 = P2,430,000/1,350,000 = 1.80)
1,100,000 x P2.70 = 2,970,000
19

If BLACK HAIRY Manufacturing Company had used the FIFO method, total cost assigned to ending work in
process would have been P539,000. What is the total cost that should be assigned to the completed
bottles under the FIFO method?
A. P2,984,500 B. P2,892,300 C. P3,127,500 D. P2,971,000

*Total Cost to be accounted (P235,200 + 844,800 +382,500+ 2,047,500 = P3,510,000 – 539,000 =

P2,971,000)

Problem O
MAXWELL Manufacturing Company adds materials at the start of production. Units are inspected when
they are 90% converted. Normal lost units is not to exceed 2% of the units started. The following
information is available for August:

Beginning WIP Inventory (70% complete as to conversion) 10,000 units

Started this period 120,000
Ending WIP ( needs 10% to convert) 20,000
Lost units 3,000

Beginning WIP Costs

Materials- P36,500 Conversion- P33,860
Current Period Costs
Materials- P360,000 Conversion- P482,800

The costs per EUP under FIFO were P3.00 and P4.00 for materials and conversion costs, respectively
while for average costing were P3.05 an P4.04589, respectively, for materials and conversion costs.

1. How many units are to be accounted for?

A. 118,200 B. 128,200 C. 130,000 D. 138,200

10,000 WIPbeg + 120,000 Started in Process

2. What is the total cost to be accounted for?

A. P841,600 B. P911,960 C. P913,160 D. P840,000

P36,500 + P33,860 + P360,000 + P482,800 = P913,160

3. What are the total cost transferred to Finished Goods Inventory under (1) FIFO and (2) Average
costing?
A. (1) P832,812; (2) P836,910 C. (1) P771,446; (2) P758,630
B. (1) P773,073; (2) P836,910 D. (1) P774,651; (2) P772,909
20

Beg. Inv. 10,000

Started in Prod. 120,000
TUTAF 130,000
FIFO Costing
Whole EUP EUP
Units Materials Conversion
BI, completed 10,000 0 3,000
Started & Com. 97,000 97,000 97,000
EI (still inc.) 20,000 20,000 18,000
Normal lost units 2,400 2,400 2,160
Abnormal lost units 600 600 540
Units As Accounted 130,000 120,000 120,700

Cost of trans-out (FIFO)

Cost last month (P36,500 + 33,860) P 70,360

Cost this month:
Conversion (3,000 x P4) 12,000
Started & Completed (97,000 x P7) 679,000
Cost of Normal lost units (allocated) 13,291 P774,651

*Cost of normal lost units ( allocated between trans-out and In-process, end) In this situation, the units
in-process, end were already inspected, therefore they are considered already good units and will absorb
NORMAL loss together with units transferred-out based on EUP.

Trans-out WIP, end

Materials (2,400 x P3) P7,200 97/117 P5,969 20/117 P1,231
Conversion(2,160 X P4) P8,640 100/118 P7,322 18/118 P1,318
P13,291 P2,549
Cost of In-process, end (FIFO)

Materials 20,000 x P3 = P60,000

Conversion 18,000 x P4 = P72,000
Cost of Normal lost allocated P2,549 P134,549

Beg. Inv. 10,000

Started in Prod. 120,000
TUTAF 130,000
Average Costing
Whole EUP EUP
Units Materials Conversion
BI, completed 10,000 10,000 10,000
Started & Com. 97,000 97,000 97,000
EI (still inc.) 20,000 20,000 18,000
Normal lost units 2,400 2,400 2,160
Abnormal lost units 600 600 540
Units As Accounted 130,000 130,000 127,700

4. What are the cost of the Ending WIP under (FIFO) and (2) Average Costing?
A. (1) P134,403; (2) P133,720 C. (1) P134,549; (2) P136,237
B. (1) P132,000; (2) P133,720 D. (1) P132,000; (2) P135,990

Average Method:

Trans-out 107,000 x P7.09589 = P759,261

Cost of Normal Lost (allocated) 13,648 P772,909

Trans-out WIP, end

Materials (2,400 x P3.05) P7,320 107/127 P6,167 20/127 P1,153
Conversion(2,160 X P4.04589) P8,739 107/125 P7,481 18/125 P1,258
P13,648 P2,411
21

Cost of In-process, end (Average)

Materials 20,000 x P3.05 = P61,000

Conversion 18,000 x P4.04589 = P72,826
Cost of Normal lost allocated P2,411 P136,237

Problem P
UNITEX MANUFACTURING COMPANY applies process costing in the manufacture of its sole product,
“AXEL”.
Manufacturing starts in Department 1 where materials are all added at the start of processing. The good
units are then transferred to Department 2 where all the incremental materials needed for its
completion are added after final inspection. In both departments, units are inspected at the end of
processing. Normal loss units should not exceed 2% 0f the units started or transferred in as the case
maybe.
Assume that Department 1 uses FIFO while Department 2 uses average costing.

The following production data for the month of AUGUST show:

Department 1 Department 2
QUANTITY SCHEDULE:
BWIP 36,000 46,000
Stage of completion 1/3 70%
EWIP 45,000 110,000
Stage of completion 2/3 60%
Started in production 250,000 -
Lost units 7,000 5,000

COST DATA:
WORK IN PROCESS, August 1
Transferred-in P- P 1,496,500
Materials 201,500 -
Conversion Costs 173,500 1,050,000
CURRENT PERIOD COSTS
Materials 1,125,000 1,980,000
Conversion costs 1,295,000 2,490,000
Transferred-in- - ?

DEPARTMENT 1:
1. What is the total Equivalent Units of Production under FIFO for Materials and Conversion?
A. 274,000 & 259,000 C. 274,000 & 244,000
B. 250,000 & 259,000 D. 274,000 & 271,000

2. What is the cost per EUP for Material and Conversion?

A. P4.50 & P5.00 B. P4.50 & P4.50 C. P5.00 & P5.00 D. P5.00 & P4.50

3. What is the total cost transferred to Department 2?

A. P2,303,500 B. P1,881,000 C. P2,423,500 D. P2,376,000

4. What is the cost of ending work in process inventory?

A. P352,000 B. P202,500 C. P352,500 D. P208,500

DEPARTMENT 2:
5. What is the Equivalent Units of Production under Average Costing for Transferred-In, Materials and
Conversion?
A. 280,000,165,000 & 231,000 C. 244,000, 234,000 & 231,000
B. 280,000, 165,000 & 236,000 D. 244.000, 234,000 & 236,000

6. What is the total cost transferred to Finished Goods Inventory?

A. P6,765,000 B. P6,774,280 C. P6,900,720 D. P6,910,000

7. What is the cost of ending work in process inventory?

A. P2,530,000 B. P2,538,280 C. P3,850,000 D. P3,859,280
22

-end of materials-