ACTG 22 – COST ACCOUNTING AND CONTROL

CHAPTER 7 - SUGGESTED ANSWERS TO EXERCISES AND PROBLEMS

Exercise 1:
Job Order Costing Process Costing
A B
D C
E F
G G
H
I
J

Exercise 2:
Work-in-process - Mixing 780,000.00
Direct Materials Inventory 330,000.00
Factory Wages Payable 260,000.00
Various Accounts 190,000.00

Work-in-process - Baking 760,000.00

Work-in-process - Mixing 760,000.00

Work-in-process - Baking 210,000.00

Factory Wages Payable 120,000.00
Various Accounts 90,000.00

Finished Goods Inventory 980,000.00

Work-in-process - Baking 980,000.00
 ACTG 22 – COST ACCOUNTING AND CONTROL
CHAPTER 7 - SUGGESTED ANSWERS TO EXERCISES AND PROBLEMS

Exercise 3:
Units to account for: Costs to account for:
% of completion Costs
Physical units Materials Labor Overhead Materials Labor Overhead Total
WIP June 1 80,000 80% 75% 75% WIP June 1 ₱ 68,600.00 ₱ 30,000.00 ₱ 48,000.00 ₱ 146,600.00
Started 760,000 Costs added this period ₱ 907,200.00 ₱ 370,000.00 ₱ 592,000.00 ₱ 1,869,200.00
Total 840,000 Total ₱ 975,800.00 ₱ 400,000.00 ₱ 640,000.00 ₱ 2,015,800.00

Units as accounted for:

Transferred out 790,000 100% 100% 100%
WIP June 30 50,000 60% 20% 20%
Total 840,000

EUP: Cost per EUP ₱ 1.19 ₱ 0.50 ₱ 0.80 ₱ 2.49

Costs as accounted for:
Transferred out 790,000 790,000 790,000 790,000 Transferred out ₱ 940,100.00 ₱ 395,000.00 ₱ 632,000.00 ₱ 1,967,100.00
WIP June 30 50,000 30,000 10,000 10,000 WIP June 30 ₱ 35,700.00 ₱ 5,000.00 ₱ 8,000.00 ₱ 48,700.00
Total 840,000 820,000 800,000 800,000 Total ₱ 975,800.00 ₱ 400,000.00 ₱ 640,000.00 ₱ 2,015,800.00

Exercise 4:
Units to account for: Costs to account for:
% of completion Costs
Physical units Materials Labor Overhead Materials Labor Overhead Total
WIP June 1 80,000 80% 75% 75% WIP June 1 ₱ 68,600.00 ₱ 30,000.00 ₱ 48,000.00 ₱ 146,600.00
Started 760,000 Costs added this period ₱ 907,200.00 ₱ 370,000.00 ₱ 592,000.00 ₱ 1,869,200.00
Total 840,000 Total ₱ 975,800.00 ₱ 400,000.00 ₱ 640,000.00 ₱ 2,015,800.00

Units as accounted for: % effort this period

Beg WIP Transferred out 80,000 20% 25% 25%
Units started and transferred out this period 710,000 100% 100% 100%
WIP June 30 50,000 60% 20% 20%
Total 840,000

EUP: Cost per EUP ₱ 1.20 ₱ 0.50 ₱ 0.80 ₱ 2.50

Costs as accounted:
BWIP balance ₱ 68,600.00 ₱ 30,000.00 ₱ 48,000.00 ₱ 146,600.00
Beg WIP transferred out 80,000 16,000 20,000 20,000 Cost to finish BWIP ₱ 19,200.00 ₱ 10,000.00 ₱ 16,000.00 ₱ 45,200.00
Units started and transferred out this period 710,000 710,000 710,000 710,000 Cost of Units started and transferred out this period ₱ 852,000.00 ₱ 355,000.00 ₱ 568,000.00 ₱ 1,775,000.00
WIP June 30 50,000 30,000 10,000 10,000 WIP June 30 ₱ 36,000.00 ₱ 5,000.00 ₱ 8,000.00 ₱ 49,000.00
Total 840,000 756,000 740,000 740,000 Total ₱ 975,800.00 ₱ 400,000.00 ₱ 640,000.00 ₱ 2,015,800.00
 ACTG 22 – COST ACCOUNTING AND CONTROL
CHAPTER 7 - SUGGESTED ANSWERS TO EXERCISES AND PROBLEMS

Exercise 5:
Materials Labor Overhead
Work-in-process, May 1 ₱ 14,550.00 ₱ 23,620.00 ₱ 118,100.00
Cost added during May ₱ 88,350.00 ₱ 14,330.00 ₱ 71,650.00
Total costs to account for ₱ 102,900.00 ₱ 37,950.00 ₱ 189,750.00
EUP 1,200 1,100 1,100
Costs per EUP ₱ 85.75 ₱ 34.50 ₱ 172.50

Exercise 6:
Units to account for:
% of completion
Physical units Materials Labor Overhead
WIP June 1 400 75% 25% 25%
Started 42,600
Total 43,000

Units as accounted for: % effort this period

Beg WIP Transferred out 400 25% 75% 75%
Units started and transferred out this period 42,100 100% 100% 100%
WIP June 30 500 80% 30% 30%
Total 43,000

EUP:

Beg WIP transferred out 400 100 300 300

Units started and transferred out this period 42,100 42,100 42,100 42,100
WIP June 30 500 400 150 150
Total 43,000 42,600 42,550 42,550

Exercise 7:
Product Sales % Allocated Joint Cost
R ₱ 273,000.00 60% ₱ 123,000.00
S ₱ 182,000.00 40% ₱ 82,000.00
Total ₱ 455,000.00 100% ₱ 205,000.00
 ACTG 22 – COST ACCOUNTING AND CONTROL
CHAPTER 7 - SUGGESTED ANSWERS TO EXERCISES AND PROBLEMS

Exercise 8:
Sales - main product 35,000.00 35,000.00
Sales - by-product 445.00
Total sales revenue 35,445.00 35,000.00

Cost of goods sold 18,000.00 18,000.00

Less: NRV of by-product 445.00
Adjusted cost of goods sold 18,000.00 17,555.00

Gross profit 17,445.00 17,445.00

Problem 1:
Units to account for:
% of completion
Physical units Materials Labor Overhead
WIP June 1 30,000 100% 55% 55%
Started 480,000
Total 510,000

Units as accounted for:

Transferred out 490,000 100% 100% 100%
WIP June 30 20,000 100% 90% 90%
Total 510,000

EUP:

Transferred out 490,000 490,000 490,000 490,000

WIP June 30 20,000 20,000 18,000 18,000
Total 510,000 510,000 508,000 508,000
 ACTG 22 – COST ACCOUNTING AND CONTROL
CHAPTER 7 - SUGGESTED ANSWERS TO EXERCISES AND PROBLEMS

Problem 2:
Units to account for: Costs to account for:
% of completion Costs
Physical units Materials Conv Cost Materials Labor Total
WIP April 1 30,000 90% 80% WIP June 1 ₱ 67,800.00 ₱ 30,200.00 ₱ 98,000.00
Started 200,000 Costs added this period ₱ 579,000.00 ₱ 248,000.00 ₱ 827,000.00
Total 230,000 Total ₱ 646,800.00 ₱ 278,200.00 ₱ 925,000.00

Units as accounted for:

Transferred out 190,000 100% 100%
WIP April 30 40,000 75% 60%
Total 230,000

EUP: Cost per EUP ₱ 2.94 ₱ 1.30 ₱ 4.24

Costs as accounted for:
Transferred out 190,000 190,000 190,000 Transferred out ₱ 558,600.00 ₱ 247,000.00 ₱ 805,600.00
WIP April 30 40,000 30,000 24,000 WIP June 30 ₱ 88,200.00 ₱ 31,200.00 ₱ 119,400.00
Total 230,000 220,000 214,000 Total ₱ 646,800.00 ₱ 278,200.00 ₱ 925,000.00
Requirement 3:
Units transferred out 190,000
WIP April 1 30,000
Units started and finished this period 160,000

Requirement 4
Let us first note the valid points of the manager. His claim about material prices is valid as shown below:
April 1 WIP Current Cost
Material cost ₱ 67,800.00 ₱ 579,000.00
Materials EUP 27,000 193,000 Note: The EUP for Current Cost Column is on FIFO Basis
Cost per EUP ₱ 2.51 ₱ 3.00

As shown in our cost of production report above, the material cost per EUP under weighted average is P2.94 which is lower than the P3.00 current market cost for materials.
The lower cost can be attribtued fully to the usage of averaging under weighted average method and not to any effort of the manager, unless there is evidence to the contrary.