ACCTG 111n SAMPLE PROBLEM

Production Losses in Process Costing October 7, 2020

SOLUTIONS:

A. WEIGHTED AVERAGE

A1) type of loss ABNORMAL when/how discovered AT THE END OF THE PROCESS

Corbel Company - Finishing Department

Cost of Production Report
For the month of September 2020

QUANTITY SCHEDULE:
Materials Labor Overhead
Actual WD EUP WD EUP WD EUP
WIP, beginning 1,000
Units received 9,000
Total units to be acctd. for 10,000

Completed & transferred 8,000 100% 8,000 100% 8,000 100% 8,000
WIP, end 1,500 100% 1,500 60% 900 50% 750
Abnormal loss-end 500 100% 500 100% 500 100% 500
Total units as acctd. for 10,000 10,000 9,400 9,250

COSTS CHARGED TO THE DEPARTMENT:

Total EUP Unit Cost
WIP, beginning:
Transferred-in cost P 1,580
Materials 1,260
Labor 770
Overhead 1,400
Total P 5,010
Currently added costs:
Transferred-in cost P 32,220 10,000 P 3.38
Materials 36,240 10,000 3.75
Labor 10,510 9,400 1.20
Overhead 21,725 9,250 2.50
Total P100,695 P10.83
Total costs to be accounted for P105,705

COSTS ACCOUNTED FOR AS FOLLOWS:

Completed & transferred (8,000 x P10.83) P 86,640
WIP, end:
Transferred-in (1,500 x P3.38) P5,070
Materials (1,500 x P3.75) 5,625
Labor (900 x P1.20) 1,080
Overhead (750 x P2.50) 1,875 13,650
Spoiled Goods Inventory (500 x P1.25) 625
FOH Control:
Cost (500 x P10.83) P5,415
Salvage value ( 625) 4,790
Total costs as accounted for P 105,705

Entry to record the transfer of completed units:

Finished Goods Inventory 86,640
Spoiled Goods Inventory 625
FOH Control 4,790
WIP – Finishing Department 92,055
A2) type of loss NORMAL when/how discovered AT THE END OF THE PROCESS

Corbel Company - Finishing Department

Cost of Production Report
For the month of September 2020

QUANTITY SCHEDULE:
Materials Labor Overhead
Actual WD EUP WD EUP WD EUP
WIP, beginning 1,000
Units received 9,000
Total units to be acctd. for 10,000

Completed & transferred 8,000 100% 8,000 100% 8,000 100% 8,000
WIP, end 1,500 100% 1,500 60% 900 50% 750
Normal loss-end 500 100% 500 100% 500 100% 500
Total units as acctd. for 10,000 10,000 9,400 9,250

COSTS CHARGED TO THE DEPARTMENT:

Total EUP Unit Cost
WIP, beginning:
Transferred-in cost P 1,580
Materials 1,260
Labor 770
Overhead 1,400
Total P 5,010
Currently added costs:
Transferred-in cost P 32,220 10,000 P 3.38
Materials 36,240 10,000 3.75
Labor 10,510 9,400 1.20
Overhead 21,725 9,250 2.50
Total P100,695 P10.83
Total costs to be accounted for P105,705
Adjustment for lost units [ (500 x P10.83)/8,000 ] 0.67…
Adjusted unit cost P11.50…

COST ACCOUNTED FOR AS FOLLOWS:

Completed & transferred (8,000 x P11.50…) P92,055
WIP, end:
Transferred-in (1,500 x P3.38) P5,070
Materials (1,500 x P3.75) 5,625
Labor (900 x P1.20) 1,080
Overhead (750 x P2.50) 1,875 13,650
Total costs as accounted for P 105,705

Entry to record the transfer of units:

Finished Goods Inventory 92,055
WIP – Finishing 92,055

COST ACCOUNTED FOR AS FOLLOWS:**

Completed & transferred:
Unadjusted cost (8,000 x P10.83) P86,640
Adjustment for the lost units (500 x P10.83) 5,415 P92,055
WIP, end 13,650
Total cost as accounted for P105,705
B. FIFO

B1) type of loss ABNORMAL when/how discovered AT THE END OF THE PROCESS

Corbel Company - Finishing Department

Cost of Production Report
For the month of September 2020

QUANTITY SCHEDULE:
Materials Labor Overhead
Actual WD EUP WD EUP WD EUP
WIP, beginning 1,000
Units received 9,000
Total units to be acctd. for 10,000

WIP, beginning 1,000 40% 400 65% 650 75% 750

Received & Completed 7,000 100% 7,000 100% 7,000 100% 7,000
WIP, end 1,500 100% 1,500 60% 900 50% 750
Abnormal loss-end 500 100% 500 100% 500 100% 500
Total units as acctd. for 10,000 9,400 9,050 9,000

COSTS CHARGED TO THE DEPARTMENT:

Total EUP Unit Cost
WIP, beginning P 5,010

Currently added costs:

Transferred-in cost P 32,220 9,000 P 3.58
Materials 36,240 9,400 3.85…
Labor 10,510 9,050 1.16…
Overhead 21,725 9,000 2.41…
Total P100,695 P11.01…
Total costs to be accounted for P105,705

COST ACCOUNTED FOR AS FOLLOWS:

WIP, beginning:
Beginning balance P 5,010.00
Added: DM (400 x P3.85…) 1,542.13
Labor (650 x P1.16…) 754.86
OH (750 x P2.41…) 1,810.42 P 9,117.41

Received & completed (7,000 x P11.01…) 77,073.74

WIP, end:
Transferred-in (1,500 x P3.58) P 5,370.00
Materials (1,500 x P3.85…) 5,782.98
Labor (900 x P1.16…) 1,045.19
OH (750 x P2.41…) 1,810.42 14,008.59

Spoiled Goods Inventory (500 x P1.25) 625.00

FOH Control:
Cost (500 x P11.01…) P5,505.26
Salvage value ( 625.00) 4,880.26
Total costs as accounted for P105,705

Journal entry to record the transfer of units:

Finished Goods Inventory 86,191.15
Spoiled Goods Inventory 625.00
FOH Control 4,880.26
WIP – Finishing 91,696.41
B2) type of loss NORMAL when/how discovered AT THE END OF THE PROCESS

Corbel Company - Finishing Department

Cost of Production Report
For the month of September 2020

QUANTITY SCHEDULE:
Materials Labor Overhead
Actual WD EUP WD EUP WD EUP
WIP, beginning 1,000
Units received 9,000
Total units to be acctd. for 10,000

WIP, beginning 1,000 40% 400 65% 650 75% 750

Received & Completed 7,000 100% 7,000 100% 7,000 100% 7,000
WIP, end 1,500 100% 1,500 60% 900 50% 750
Normal loss-end 500 100% 500 100% 500 100% 500
Total units as acctd. for 10,000 9,400 9,050 9,000

COSTS CHARGED TO THE DEPARTMENT:

Total EUP Unit Cost
WIP, beginning P 5,010

Currently added costs:

Transferred-in cost P 32,220 9,000 P 3.58
Materials 36,240 9,400 3.85…
Labor 10,510 9,050 1.16…
Overhead 21,725 9,000 2.41…
Total P100,695 P11.01…
Total costs to be accounted for P105,705
Adjustment for lost units [ (500 x P11.01…) / 8,000 ] 0.68…
Adjusted unit cost P11.69…

COSTS ACCOUNTED FOR AS FOLLOWS:

WIP, beginning:
Beginning balance P 5,010.00
Materials (400 x P3.85…) 1,542.13
Labor (650 x P1.16…) 754.86
OH (750 x P2.41…) 1,810.42
Adjust for lost units (1,000 x P0.68…) 688.16 P 9,805.57
Received & completed (7,000 x P11.69…) 81,890.84
WIP, end:
Transferred-in (1,500 x P3.58) P 5,370.00
Materials (1,500 x P3.85…) 5,782.98
Labor (900 x P1.16…) 1,045.19
OH (750 x P2.41…) 1,810.42 14,008.59
Total costs as accounted for P105,705

Entry:
Finished Good Inventory 91,696.41
WIP – Finishing 91,696.41

COSTS ACCOUNTED FOR AS FOLLOWS:**

WIP, beginning:
Beginning balance P 5,010.00
Materials (400 x P3.85…) 1,542.13
Labor (650 x P1.16…) 754.86
OH (750 x P2.41…) 1,810.42
Adjust for lost units [(500 x P11.01…) (1,000/8,000)] 688.16 P 9,805.57

Received & completed:

Unadjusted cost (7,000 x P11.01…) P77,073.74
Adjustment [(500 x P11.01…) (7,000/8,000)] 4,817.10 81,890.84

WIP, end:
Transferred-in (1,500 x P3.58) P 5,370.00
Materials (1,500 x P3.85…) 5,782.98
Labor (900 x P1.16…) 1,045.19
OH (750 x P2.41…) 1,810.42 14,008.59
Total costs as accounted for P105,705
ACCTG 111n ASSIGNMENT with ANSWERS
Production Losses in Process Costing October 10, 2020

NO. 1 Salve Company sells a single product that is manufactured in two departments, Tooling and Finishing. Units of product
are started in the Tooling Department, where they are cut and shaped. The units are then transferred to the Finishing Department
where they are ground and polished. Materials are added at the beginning of the process in the Tooling Department. Units are
inspected at the 90-percent stage of completion in the Tooling Department. The cost of spoilage is charged to FOH Control.
Cost data related related to March operations in the Tooling Department are:
Costs charged to the Department Beginning WIP Added this Period
Materials ₱ 3,200 ₱ 19,500
Labor 580 4,640
Factory Overhead 1,900 18,400

At the end of February, the Tooling Department had 2,000 units still in process, 70% complete as to labor and 60% complete as
to overhead. At the end of March, 3,000 units were still in process in the Tooling Department, 50% complete as to labor and
40% complete as to overhead. during March, 13,000 units were started in the Tooling Department, and 7,000 units were
completed and transferred to the Finishing Department. sunrise

Required:
a) Assuming the company uses FIFO process costing, prepare a Cost of Production Report for the Tooling Department
for March.
b) Prepare the journal entry to record the transfer of cost out of the Tooling Department this period.

SOLUTION:
Salve Company – Tooling Department
Cost of Production Report
For the month of March 2020

QUANTITY SCHEDULE
Materials Labor Overhead
Actual WD EUP WD EUP WD EUP
WIP, beginning 2,000
Units started 13,000
Total units to be acctd. for 15,000

WIP, beginning 2,000 - - 30% 600 40% 800

Started & completed 5,000 100% 5,000 100% 5,000 100% 5,000
WIP, end 3,000 100% 3,000 50% 1,500 40% 1,200
Abnormal loss-during 5,000 100% 5,000 90% 4,500 90% 4,500
Total units as accounted for 15,000 13,000 11,600 11,500
because materials are added at the beginning of the process
COSTS ACCOUNTED FOR AS FOLLOWS:
Total EUP Unit Cost
WIP, beginning P 5,680
Added this Period:
Materials P19,500 13,000 P1.50
Labor 4,640 11,600 0.40
Overhead 18,400 11,500 1.60
Total P42,540 P3.50
Total Costs as Accounted for P48,220

COSTS ACCOUNTED FOR AS FOLLOWS:

WIP, beginning:
Beginning balance P5,680
Added: Labor (600 x P0.40) 240
Overhead (800 x P1.60) 1,280 P 7,200
Started & completed (5,000 x P3.50) 17,500
WIP, end:
Materials (3,000 x P1.50) P4,500
Labor (1,500 x P0.40) 600
Overhead (1,200 x P1.60) 1,920 7,020
FOH Control:
Materials (5,000 x P1.50) P7,500
Labor (4,500 x P0.40) 1,800
Overhead (4,500 x P1.60) 7,200 16,500
Total Costs as Accounted for P48,220

Journal Entry:
WIP – Finishing 24,700
FOH Control 16,500
WIP – Tooling 41,200
NO. 2 Eastern Star, Inc. uses a process cost system with a FIFO cost flow assumption to account for the production of its only
product. The product is manufactured in three departments. Most of the required ingredients for flavoring are added and mixed
in the Mixing Department. Next, the mixture is transferred to the Cooking Department, where more ingredients are added at
various stages of the cooking process. Finally, the syrup is transferred to the Bottling Department, where the product is
completed. Because of the heat applied in the Cooking Department, some of the production volume is lost to evaporation.
During August, 40,000 units were transferred from Mixing to Cooking, and 37,000 units were transferred from Cooking
to Bottling. The Cooking Department had 10,000 units still in process (75% complete as to materials and 25% complete as to
conversion cost) at the end of July, and 8,000 units still in process at the end of August (complete as to materials but only 75%
complete as to conversion cost). Cost data related to August operations in the Cooking Department are:
Beginning WIP Added this Period
Costs from preceding department ₱ 5,840 ₱ 21,700
Materials 610 3,000
Labor 280 4,860
Factory overhead 420 7,290

Required:
a) Prepare a Cost of Production Report for the Cooking Department based on the data presented for August.
b) Prepare the journal entry to record the transfer of cost out of the Cooking Department this period.

SOLUTION:
Eastern Star – Cooking Department
Cost of Production Report
For the month of August 2020

QUANTITY SCHEDULE:
Materials Conversion Costs
Actual WD EUP WD EUP
WIP, beginning 10,000
Units received 40,000
Total units to be accounted for 50,000

WIP, beginning 10,000 25% 2,500 75% 7,500

Received & completed 27,000 100% 27,000 100% 27,000
WIP, end 8,000 100% 8,000 75% 6,000
Normal loss-during 5,000 - - . - - . –the loss is considered as
Total units to account for 50,000 37,500 40,500 continuous

COSTS CHARGED TO THE DEPARTMENT:

Total EUP Unit Cost
WIP, beginning P 7,150
Added this Period: **or use 35,000 to directly get
Transferred-in P21,700 40,000 P0.5425 the adjusted unit cost
Materials 3,000 37,500 0.08 (40,000u received – 5,000u lost =
Conversion 12,150 40,500 0.30 which also equals to the total units
Total P36,850 P0.9225 who will absorb the cost of lost units)
Total Costs to be Accounted for P44,000
Adjustment for lost units [(5,000 x P0.5425) / 35,000) 0.0775
Adjusted unit cost P1.00

COSTS ACCOUNTED FOR AS FOLLOWS:

WIP, beginning:
Beginning balance P7,150
Added: Materials (2,500 x P0.08) 200
Conversion (7,500 x P0.30) 2,250 P 9.600
Received & completed (27,000 x P1.00) 27,000
WIP, end:
Transferred-in (8,000 x P0.5425) P4,340
Materials (8,000 x P0.08) 640
Conversion (6,000 x P0.30) 1,800
Adjustment (8,000 x P0.0775) 620 7,400
Total Costs as Accounted for P44,000

Journal entry:
WIP – Bottling 36,600
WIP – Cooking 36,600

**from now on, you may opt to use the alternatives.