THEORIES (10 MINUTES)

1. A major advantage of using the FIFO process costing method is

FIFO provides managers with information about changes in the cost per unit from one period to the next
2. A service department includes which of the following?
payroll- yes; production - no
3. All costs that are incurred between the split-off point and the point of sale are known as
incremental separate costs
4. An equivalent unit of direct materials or conversion cost is equal to
The amount of direct materials or conversion cost necessary to complete one unit of production
5. Assume there is no beginning work in process inventory and the ending work in process inventory is 100%
complete with respect to material costs. The number of equivalent units with respect to material costs under
the weighted average method is:
The same as the number of units put into production
6. Assume there was no beginning work in process inventory and the ending work in process inventory is 70%
complete with respect to conversion cost. Under the weighted average method, the number of equivalent units
of production with respect to conversion costs would be:
Less than the units started during the period
7. Consider the following statements about the step-down method of service department cost allocation: I. Under
the step-down method, all service department costs are eventually allocated to production departments. II. The
order in which service department costs are allocated is important. III. Once a service department's costs have
been allocated, no costs are re-circulated back to that department. Which of the above statements is (are)
correct?
I, II, and III.
8. If a process has inspection point, how should the costs of normal spoilage be accounted for?
Allocated to the good units passing through inspection point
9. If two or more products share a common process before they are separated, the joint costs should be assigned
in a manner that
assigns a proportionate amount of the total cost to each product on a quantitative basis.
10. In a process costing system, the cost of abnormal spoilage should be
Treated as a loss in the period incurred
11. Incremental revenues and costs need to be considered when using which allocation method?
Physical measures – no; Sales value at split-off – no
12. Process costing would be appropriate for each of the following except:
Custom furniture manufacturing
13. Spoilage from a manufacturing process was discovered during an inspection of work in process. In a process
costing system, the cost of the spoilage is added to the cost of the good units produced if the spoilage is:
Abnormal – No; Normal – Yes
14. Which of the following would not be considered a service department in a hospital?
Cardiac Care.
15. Fisher Company produces three products from a joint process. The products can be sold at split-off or processed
further. In deciding whether to sell at split-off or process further, management should
ignore the joint cost in making the decision.

SUMMARY

1. FIFO provides managers with information about changes in the cost per unit from one period to the next
2. payroll- yes; production - no
3. incremental separate costs
4. The amount of direct materials or conversion cost necessary to complete one unit of production
5. The same as the number of units put into production
6. Less than the units started during the period
7. I, II, and III.
8. Allocated to the good units passing through inspection point
9. assigns a proportionate amount of the total cost to each product on a quantitative basis.
10. Treated as a loss in the period incurred
11. Physical measures – no; Sales value at split-off – no
12. Custom furniture manufacturing
13. Abnormal – No; Normal – Yes
14. Cardiac Care.
15. ignore the joint cost in making the decision.
PROBLEMS (50 MINUTES)

1. The Graduate Company makes mugs in two departments: Forming and Decorating. Forming began the month
with 750 mugs in process that were 100% complete as to material and 40% complete as to conversion. During
the month, 9,750 mugs were started. At the month end, Forming had 3,150 mugs that were still in process that
were 100% complete as to material and 50% complete as to conversion. Assume Forming uses the weighted
average method of process costing. Cost in the Forming Department is as follows:

Beginning Costs

Material P1,500.00
Conversion P2,250.00

Current Costs

Material P4,800.00
Conversion P7,567.50

The Decorating department had 900 mugs in process at the beginning of the month that were 80% complete as to
material and 90% complete as to conversion. The department had 450 units in ending work in process that were 50%
complete as to material and 80% complete as to conversion. Decorating uses FIFO method of process costing, and cost
associated to Decorating are:

Beginning Costs

Transferred In P1,755
Material P6,480
Conversion P9,315

Current Costs

Transferred In ???
Material P13,149
Conversion P4,410

1. How many units were transferred to Decorating during the month? Answer: 7,350

2. Refer to Graduate Company. What was the cost transferred out of Forming during the month?

Answer:

3. Refer to Graduate Company. What was the EUP for Conversion of Decorating Department?
Answer:

4. Refer to Graduate Company. What was the total cost per EUP of Decorating Department (two
decimal places)? Answer:

5. Refer to Graduate Company. What was the total cost transferred out of Decorating Department?

Answer:
2. Given for a certain process: Beginning WIP, 2/5 completed – 500 units; Transferred in – 2,000 units; Normal
spoilage – 200 units; Abnormal spoilage – 300 units; Goods completed and transferred – 1,700 units, Ending
WIP, 1/3 completed – 300 units; Conversion costs in beginning inventory – P610; Current period conversion
costs – P3,990. All spoilage occurs at the end of the process. The conversion cost per EUP to under FIFO and
Average respectively will be: Answer: 1.90 and 2.00

Using the same information, the conversion costs components of abnormal spoilage under FIFO and Average
respectively will be: Answer: 570 and 600

3. The following information is available for Hawk Company for the current year:

Started this period 112,500 units

Transferred Out 99,000 units
Beg WIP (75% comp.) 21,750 units
Beg WIP Cost – Materials P37,650
Normal Shrinkage 7,500 units
Beg WIP Cost – Conversion P75,000
Abnormal Spoilage 3,750 units
Current Costs – Materials P180,000
Ending WIP (60% comp.) 24,000 units
Current Costs – Conversion P450,000

All materials are added at the start of the production. What is the EUP for Materials using weighted
average? Answer: 2.07

What is the Cost per EUP for Materials using FIFO? (two decimal places). Answer: 1.72

4. Jag Products transferred 15,000 units to one department. An additional 4,500 units of materials were added in
the department. At the end of the month, 10,500 units were transferred to finished goods; while 6,000 units
remained in work in process inventory. There was no beginning inventory, and lost units were a result of normal
product shrinkage.

The production costs for the period in this department would be effectively allocated over: Answer:

If all lost units were a result of abnormal production spoilage, The production costs for the period in this
department would be effectively allocated over: Answer:

5. The following information is available for Kamaru Company for May:

Started this period 120,000 units

Transferred Out 108,750 units
Beg WIP (40% comp.) 11,250 units
Beg WIP Cost – Materials P15,600
Normal Spoilage 1,650 units
Beg WIP Cost – Conversion P20,700
Abnormal Spoilage 1,350 units
Current Cost – Materials P180,000
Ending WIP (70% comp.) 19,500 units
Current Costs - Conversion P525,000

All materials are added at the start of the production and the inspection point is at the end of the process.
What is the total cost assigned to goods transferred out (including the spoilage) using weighted average?
Answer:

What is the EUP for conversion using FIFO? Answer:

 6. Black Forest Company uses a weighted average method in its process costing system. The company’s work in
process in inventory on April 30 consists of 37,500 units. The units in the ending inventory are 100% complete
with respect to materials and 75% complete with respect to conversion costs. If the cost per equivalent unit is
P3.00 for materials and P5.50 for conversion costs, the total cost in the April 30 work in process is

a. P267,187.50
b. P318,750.00
c. P164,062.50
d. P239,062.50
e. None

7. Marithe Company uses FIFO method in its process costing system. The conversion cost for the month of April is
P5.00 per EUP and the material cost is P2.90 per EUP. At the beginning of the month, 1,500 units were in
process, that were 100% complete with respect to materials and 30% complete with respect to conversion, with
a total cost at that point of P3,600. If these units are fully complete by the end of the month, their total cost will
be:
a. P5,250
b. P5,850
c. P12,000
d. None of the above
e. P8,850

8. During May, Volume Company’s Department Y equivalent unit product costs, computed under the average cost
method, were as follows: Materials – P1; Conversion – P3; Transferred in – P5. Materials are introduced at the
end of the process in Department Y. There were 6,000 units (40% complete as to conversion cost) in work in
process in May 31. The total costs assigned to May 31 work in process inventory should be:

a. P43,200
b. P40,800
c. None of the above
d. P54,000
e. 37, 200

9. Nido Corporation uses the weighted-average method in its process costing system. The following information
pertains to one of the company’s processing departments for a recent month:

No. of units
Beginning 45,000
Started this period 120,000
Units completed 127,500
Ending 37,500

Material costs
P33,000
P108,000

All materials are added at the beginning of the process. The cost per equivalent unit for materials is closest to:

a. None of the above

b. P1.10
c. P0.90
d. P1.18
 10. Biogenic Company uses the FIFO method in its process costing system. The following data are taken from the
accounting records of a particular department for June:

Beginning Work in Process

Costs P26,250
Units 30,000

Percentage of Completion

Materials 100%
Conversion 60%

Cost per EUP

Materials P1.75
Conversion P0.50

Units Completed and transferred out 112,500 units

The cost of the 112,500 units transferred out is:

a. P197,250
b. P253,125
c. P217,875
d. P226,875

11. The Assembly Department started the month with 88,500 units in its beginning work in process inventory. An
additional 411,000 units were started during the period There were 31,500 units in the ending inventory of the
Assembly Department. How many units transferred out to the next department during the month?
a. P531,000
b. P354,000
c. P499,500
d. P379,500
e. P468,000

12. Nescafe Company uses weighted average method in its process costing system. Operating data for the first
processing department for the month of June appear below:

Units % Complete as to Conversion

Beginning 16,500 90%
Started this period 87,000
Ending 25,500 10%

According to the company’s records, the conversion cost in beginning work in process inventory was
P119,839.50 at the beginning of June. Additional conversion costs of P515,745 were incurred in the department
during the month. What was the cost per EUP for conversion costs for the month? (round off to three decimal
places).

a. P8.070
b. P4.584
c. P7.891
d. P5.928
e. None of the above

13. Solutions Company manufactures Product X in a two-stage production cycle in Department A and B. Materials
are added at the beginning of the process in Department B. Solutions uses the average costing method.
Conversion costs for Department B were 50% complete as to the 9,000 units in beginning work in process and
75% complete as to the 12,000 units in ending work in process. A total of 18,000 units were completed and
 transferred out of Department B during the period. An analysis of the cost relating to work in process and
production activity in Department B for the month:

Beginning Costs Current Period Costs

Transferred in P18,000 P43,500
Materials P3,750 P8,250
Conversion P1,500 P7,500

The total cost per EUP transferred out for the Month of Product X rounded to the nearest centavo:

a. P2.78
b. P2.82
c. P2.75
d. P2.05

14. ANA Electronics uses a weighted average process costing system for its production process in which all materials
are added at the beginning of the production. Company management has specified that the normal loss cannot
exceed 7 percent of the units started in a period. Normal loss happens during the production while abnormal
loss was discovered at the end. March processing information follows: Beginning inventory (10% complete –
conversion) – 7,000 units; Started during March – 60,000 units; Completed during March – 52,000 units; Ending
inventory (60% completed – conversion) – 10,000 units. The EUP for material and conversion cost: Answer

Materials Conversion
FIFO ??? ???
Average ??? ???

a. 55,000 57,300 62,000 58,000

b. 55,800 58,100 62,800 58,800
c. 60,000 62,300 67,000 63,000
d. 62,800 58,800 55,800 58,100

15. The APA Factory of New England Chemical produces environmental chemicals in processes in which normal loss
takes place and while abnormal loss were discovered at the end. Management considers normal spoilage to be
0.5 percent or less of gallons of material placed into production. The following operating statistics are available
for September 2019 for the chemical XZP: Beginning inventory (20% complete as to Material: 30% complete as
to conversion) – 8,000 gallons; Started during September – 180,000 gallons; Ending inventory (60% complete as
to Materials; 70% complete as to conversion) – 4,000 gallons; Spoiled – 1,400 gallons. The EUP for material and
conversion cost will be Answer

Materials Conversion
FIFO ??? ???
Average ??? ???

a. 183,900 183,500 185,500 185,700

b. 183,400 183,000 185,000 185,700
c. 184,400 184,000 186,000 186,400
d. 185,500 185,900 183,900 183,500