Basadre, Jessa G.

BSA 3RD yr.

Managerial Accounting
Assignment no. 1

Multiple choice

1. C 7. D
2. B 8. A
3. D 9. A
4. C 10. C
5. A 11. B
6. B

Short Answers

1. Process costing is used when a company produces a continuous flow of units that are
indistinguishable from one another. It would make no sense to try to identify materials, labor,
and overhead costs with a particular customer order as opposed to job-order costing because
each order is just one of many that are filled from a continuous flow of virtually identical units
from the production line.

2. In the multiple choice question no. 7, the cost per equivalent unit is greater compared to the
cost per equivalent unit in question no. 5 because the equivalent units of production decreases.
20 of the remaining 50 unsold bookcases, only 40 percent is completed or only 8 bookcases.
All in all we have a 138 equivalent units and the total cost is 9,700 which gives us a $70.29 for
the cost per EU.

3. Job-order costing is used when many different jobs or products are worked on each period,
while in process costing each order is just one of many that are filled from a continuous flow of
virtually identical units from the production line. With that saidwhen using job order costing
system there are higher number of materials requisition form filed within a period compared in
a process costing system.

Define the Following

1. Transferred out costs - are costs that are accumulated by the product at any given point in
production and are eventually transferred in to the new business department. These are
combined manufacaturing costs by the various departments and production processes.

2. Equivalent production - the product of the number of partially completed units and the
percentage completion of those units with respect to the processing in the department. The
equivalent units is the number of complete units that could have been obtained from the
materials and effort that went into the partially complete units.

3. Production report - summarizes the production and cost activity within a department for a
reporting period. It is simply a formal summTrary of the four steps performed to assign costs to
units transferred out and units in ending work-in-process (WIP) inventory.

4. Average cost method - a process costing method that blends together units and costs from
both the current and prior periods.

5. Sequential production process - perform a series of consecutive actions on an element,

from a predefined start point to a predefined end point. Every activity and milestone except the
first and last should be connected to at least one predecessor with a finish-to-start logical
relationship.
 6. FIFO cost method - a process costing method in which equivalent units and unit costs
relate only to
work done during the current period.

True or False

1. True 5. True
2. False 6. True
3. False 7. True
4. True 8. False

EXERCISES

Ridgely Manufacturing Company uses the moving average method of process

costing:

1. 3.
Transferred out and completed 85,000 Materials Conversion
WIP, End 10,000 WIP, Beg. 18,000 7,500
Total units to account for 95,000 Current costs 100,000 148,500
WIP, Beginning (15,000) Total costs to be accounted for 118,000 156,000
Total units started during July 80,000 Equivalent units ÷ 95,000 87,000
Cost per equivalent unit P 1.24 1.79
2.
Equivalent production for Materials: 4.
Transferred out and completed 85,000 Materials Conversion
WIP, End (10,000 x 100%) 10,000 Transferred out and completed 85,000 85,000
Equivalent units of production 95,000 Cost per equivalent unit x 1.24 1.79
Costs assigned 105,578.95 152,413.79
Equivalent production for Conversion:
Transferred out and completed 85,000 Total Costs: 105,578.95 + 152,413.79 = P 257,992.74
WIP, End (10,000 x 20%) 2,000
Equivalent units of production 87,000
5.
Materials Conversion
Work In Process, End 10,000 2,000
Cost per equivalent unit x 1.24 1.79
Costs assigned 12,421.05 3,586.21

Total costs: 12,421.05 + 3,586.21 = P 16,007.26

Ridgely Manufacturing Company

Production report
July 1992
Quantity of Production
TOTAL MATERIALS CONVERSION
WIP, Beg. 15000 100% 30%
Started this month 80000
Total units to be accounted for 95000
 Transferred out and completed 85000 85000 85000
WIP, End 10000 10000 2000
Equivalent units of production 95000 95000 87000

Cost of Production
WIP, Beg. 25,500 18,000 7,500
Current costs 248,500 100,000 148,500
Total costs to be accounted for: 274,000 118,000 156,000
Equivalent units of production ÷ 95,000 87,000
Unit cost/equiv. unit 1.24 1.79

Cost Recapitulation
WIP, Beg. 25,500 18,000 7,500
Current costs 248,500 100,000 148,500
Total costs to be accounted for: P 274,000 118,000 156,000

Transferred out and completed 257,993 105,579 152,414

WIP, End 16,007 12,421 3,586
Total costs accounted for: P 274,000 118,000 156,000

6.
The answer would be the same for the problem 1-5 because if the spoilage was considered normal in nature, the
spoilage cost would be treated as a product cost and simply added to the cost of the good units completed.

Assume the remaining questions are based on the FIFO cost method of process
costing:

7. 8.
Equivalent production for Materials: Materials Conversion
Transferred out and completed Current costs 100,000 148,500
Beginning 0 Equivalent units ÷ 80,000 82,000
Current month 70,000 Cost per equivalent unit P 1.25 1.80
WIP, End 10,000
Equivalent units of production 80,000 9.
Materials Conversion
Equivalent production for Conversion: Transferred out and completed
Transferred out and completed WIP, beg. 0 10,500
Beginning (15,000 x 70%) 10,500 Current 70,000 70,000
Current month 70,000 Total units 70,000 80,500
WIP, End 2,000 Cost per equivalent unit x 1.25 1.80
Equivalent units of production 82,500 87,500 144,900
Costs of WIP, Beg. + 18,000 7,500
Total Costs 105,500 152,400

Costs assigned to completed and transferred out:

105,500 + 152,400 = P 257,900
10.
Materials Conversion
Work In Process, End 10,000 2,000
Cost per equivalent unit x 1.25 1.80
Total costs 12,500 3,600

Costs assigned to completed and transferred out:

12,500 + 3,600 = P 16,100

Ridgely Manufacturing Company

Production report
July 1992
Quantity of Production
UNITS TOTAL MATERIALS CONVERSION
WIP, Beg. 15000 100% 30%
Started this month 80000
Total units to be accounted for 95000

Transferred out and completed

Beginning 15000 0 10500
Current month 70000 70000 70000
WIP, End 10000 10000 2000
Equivalent units of production 95000 80000 82500

Cost of Production
WIP, Beg. 25,500 18,000 7,500
Current costs 248,500 100,000 148,500
Total costs to be accounted for 274,000 118,000 156,000

Current costs 248,500 100,000 148,500

Equivalent units of production ÷ 274,000 118,000 156,000
Unit cost/equiv. unit 1.25 1.80

Cost Recapitulation
WIP, Beg. 25,500 18,000 7,500
Current costs 248,500 100,000 148,500
Total costs to be accounted for: ₱274,000 118,000 156,000

Transferred out and completed

Beginning 44,400 18,000 26,400
Current month 213,500 87,500 126,000
WIP, End 16,100 12,500 3,600
Total costs accounted for: ₱274,000 118,000 156,000