Tutorial on Process Costing

Question 1: Anchor Inc. uses the weighted-average method in its process costing system.
The following data concern the operations of the company's first processing
department for a recent month.

Work in process, beginning:

Units in process............................................................ 800
Stage of completion with respect to materials............. 60%
Stage of completion with respect to conversion.......... 10%
Costs in the beginning inventory:
Materials cost............................................................ $1,296
Conversion cost........................................................ $2,416

Units started into production during the month.............. 16,000

Units completed and transferred out............................... 16,500

Costs added to production during the month:

Materials cost............................................................... $47,076
Conversion cost............................................................ $497,213

Work in process, ending:

Units in process............................................................ 300
Stage of completion with respect to materials............. 60%
Stage of completion with respect to conversion.......... 70%

Required:

Prepare a production report for the department using the weighted-average method.
Solution:
Weighted Average method:
Quantity schedule and equivalent units
Quantity
Schedule
Units to be accounted for:
Work in process, beginning............. 800
Started into production.................... 16,000
Total units accounted for.................... 16,800

Equivalent Units
Material Conversio
s n
Units accounted for as follows:
Transferred to next department....... 16,500 16,500 16,500
Work in process, ending.................. 300 180 210
Total units........................................... 16,800 16,680 16,710

Costs per equivalent unit

Material Conversio
Total Cost s n
Cost to be accounted for:
Work in process, beginning............. $ 3,712 $ 1,296 $ 2,416
Cost added during the month........... 544,289 47,076 497,213
Total cost (a)....................................... $548,001 $48,372 $499,629

Equivalent units (above) (b).............. 16,680 16,710

Cost per EU, (a) ÷ (b)........................ $2.900 $29.900
Cost per whole unit $32.800

Cost reconciliation
Total Equivalent Units
Material Conversio
Cost s n
Cost accounted for as follows:
Transferred out................................ $541,200 16,500 16,500
Work in process, ending:
Materials....................................... 522 180
Conversion................................... 6,279 210
Total work in process, ending.......... 6,801
Total cost............................................ $548,001
Question 2:
Bae Inc. uses the weighted-average method in its process costing system. The
following data concern the operations of the company's first processing department for
a recent month.

Work in process, beginning:

Units in process............................................................ 100
Stage of completion with respect to materials............. 70%
Stage of completion with respect to conversion.......... 90%
Costs in the beginning inventory:
Materials cost............................................................ $182
Conversion cost........................................................ $3,429

Units started into production during the month.............. 10,000

Units completed and transferred out............................... 9,700

Costs added to production during the month:

Materials cost............................................................... $27,986
Conversion cost............................................................ $373,815

Work in process, ending:

Units in process............................................................ 400
Stage of completion with respect to materials............. 90%
Stage of completion with respect to conversion.......... 70%

Required:

Using the weighted-average method:

a. Determine the equivalent units of production for materials and conversion costs.
b. Determine the cost per equivalent unit for materials and conversion costs.
c. Determine the cost of units transferred out of the department during the month.
d. Determine the cost of ending work in process inventory in the department.
Solution:
Quantity schedule and equivalent units
Quantity
Schedule
Units to be accounted for:
Work in process, beginning............. 100
 Started into production.................... 10,000
Total units accounted for.................... 10,100

Equivalent Units
Material Conversio
s n
Units accounted for as follows:
Transferred to next department....... 9,700 9,700 9,700
Work in process, ending.................. 400 360 280
Total units........................................... 10,100 10,060 9,980

Costs per equivalent unit

Material Conversio
Total Cost s n
Cost to be accounted for:
Work in process, beginning............. $ 3,611 $ 182 $ 3,429
Cost added during the month........... 401,801 27,986 373,815
Total cost (a)....................................... $405,412 $28,168 $377,244

Equivalent units (above) (b).............. 10,060 9,980

Cost per EU, (a) ÷ (b)........................ $2.800 $37.800
Cost per whole unit............................. $40.600

Cost reconciliation
Total Equivalent Units
Material Conversio
Cost s n
Cost accounted for as follows:
Transferred out................................ $393,820 9,700 9,700
Work in process, ending:
Materials....................................... 1,008 360
Conversion................................... 10,584 280
Total work in process, ending.......... 11,592
Total cost............................................ $405,412