DMG 5034: MANAGEMENT ACCOUNTING Tri 2 2021/2022

TUTORIAL 2.2
TOPIC 2: PRODUCT COSTING (PROCESS COSTING)

TUTORIAL 2.2
PRODUCT COSTING (PROCESS COSTING)

Question 1

Eframe Company produces a product in two departments: (1) Mixing and (2) Finishing. The
company uses a process cost accounting system.

(a) Purchased raw materials for RM50,000 on account.

(b) Raw materials requisitioned for production were:

Direct materials
Mixing department RM20,000
Finishing department 14,000

(c) Incurred labor costs of RM69,000.

(d) Factory labor used:

Mixing department RM44,000
Finishing department 25,000

(e) Manufacturing overhead is applied to the product based on machine hours used in each
department:
Mixing department—300 machine hours at RM30 per machine hour.
Finishing department—500 machine hours at RM20 per machine hour.

(f) Units costing RM56,000 were completed in the Mixing Department and were transferred
to the Finishing Department.

(g) Units costing RM60,000 were completed in the Finishing Department and were
transferred to finished goods.

(h) Finished goods costing RM40,000 were sold on account for RM55,000.

Instructions
Prepare the journal entries to record the preceding transactions for Eframe Company.

Question 2

Tashin Painting Company has the following production data for January:
 Beginning work in process, 0 units
 Units transferred out, 35,000
 Units in ending work in process, 8,000, which are 30% complete for conversion costs
Materials are added only at the beginning of the process.

Instructions
Compute equivalent units of production for both materials and conversion costs.

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FMS 1
DMG 5034: MANAGEMENT ACCOUNTING Tri 2 2021/2022
TUTORIAL 2.2
TOPIC 2: PRODUCT COSTING (PROCESS COSTING)

Question 3

At Sanichi Company, materials are entered at the beginning of each process. Work in process
inventories, with the percentage of work done on conversion, and production data for its
Painting Department in selected months are as follows:
Beginning Work In Process Ending Work In Process
Percentage Units Completed Percentage
Month Units Completed and Transferred Out Units Completed
July -0- — 11,000 500 90%
Sept. 2,500 20% 9,000 4,000 70%

Instructions
(a) Compute the physical units for July.
(b) Compute the equivalent units of production for materials and conversion costs for
September.

Question 4

The Assembly Department uses a process cost accounting system and a weighted-average cost
flow assumption. The department adds materials at the beginning of the process and incurs
conversion costs uniformly throughout the process. During July, RM190,000 of materials costs
and RM135,500 in conversion costs were charged to the department. The beginning work in
process inventory was RM93,000 on July 1, comprised of RM80,000 of materials costs and
RM13,000 of conversion costs.

Other data for the month of July are as follows:

Beginning work in process inventory, 7/1 25,000 units (40% complete)
Units completed and transferred out 90,000 units
Ending work in process inventory, 7/31 30,000 units (30% complete)

Instructions
Answer the following questions and show computations to support your answers.
1. How many physical units have to be accounted for in July?
2. What are the equivalent units of production for materials and for conversion costs for the
month of July?
3. What is the total cost assigned to the 90,000 units that were transferred out of the
process in July?
4. What is the total cost of the July 31 inventory?

Question 5

The Assembly Department of Deleum Company has the following production and cost data at
the end of May, 2021.
Production: 25,000 units started into production; 20,000 units transferred out and 5,000 units
100% completed as to materials and 40% completed as to conversion costs.

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FMS 2
DMG 5034: MANAGEMENT ACCOUNTING Tri 2 2021/2022
TUTORIAL 2.2
TOPIC 2: PRODUCT COSTING (PROCESS COSTING)

Manufacturing Costs: Materials added at beginning of process, RM90,000; labor, RM72,000;

overhead RM60,000.
Instructions
Prepare a production cost report for the month of May.

Question 6

Ranhill Company—Cyberjaya Division is a new state of the art production facility that
manufactures landing gears for airplanes. The September 30th ending work in process is
comprised of labor and overhead and is approximately 60% complete. All materials are
assumed to be 100% complete. Total materials costs during the period totaled RM840,000.

Instructions
As the new plant accountant, you are asked to complete the production cost report which
appears as follows:
RANHILL COMPANY—Cyberjaya Division
Assimilation Department
Production Cost Report
For the Month Ended September 30, 2021

Equivalent Units
QUANTITIES Physical Units Materials Conversion Costs
Units to be accounted for
Work in process, September 1 300
Started into production 900
Total units 1,200

Units accounted for

Transferred out 700 700 700
Work in process, September 30 500 500
Total units 1,200 1,200

COSTS
Unit Costs Materials Conversion Costs Total
Costs in September RM840,000 RM RM1,100,000
Equivalent units
Unit costs RM RM 260 RM

Costs to be accounted for

Work in process, Sept. 1 RM 243,400
Started into production
Total costs RM

Cost Reconciliation Schedule

Costs accounted for
Transferred out RM
Work in process, September
Materials RM
Conversion costs 78,000
Total costs RM1,100,000
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FMS 3