COST ACCOUNTING Process Costing

Dave Clark de Lara, CPA

Problem 1 Cost of Production Report; First Department; FIFO
Tokyo Manufacturing Company produces a product in two manufacturing departments, Molding and Finishing. The
product is molded out of plastic in the Molding Departments and then transferred to the Finishing Department, where
parts are added to the molded plastic unit. Because only one product is manufactured by the company, a process cost
system is used.

Data related to August operations in the Molding department are:

Beginning Added This

Inventory Period
Costs charged to the department:
Materials………………………………………………………… P4,120 P39,980
Direct labor……………………………………………………. 522 12,638
Factory overhead……………………………………………. 961 18,779

During the period, 9,200 units were transferred from the Molding Department to the Finishing Department. The
Molding Department had 1,000 units still in process at the end of July; they were 100% complete as to materials and
40% complete as to conversion cost. The Molding Department had 800 units still in process at the end of August; they
were 75% complete as to materials and 25% complete as to conversion cost.

Required: Prepare an August cost of production report for the Molding Department using the FIFO and Weighted
Average cost flow assumption and identify the following:
a. Costs of units transferred to the Finishing Department.
b. Costs of the ending Work in Process inventory.

Problem 2 Cost of Production Report; First Department; FIFO

Tyndol Fabricators Inc. manufactures a product in two departments. The product is cut out of sheet metal and bent to
shape in the Cutting and Forming Department and then Transferred to the Assembling Department, where parts
purchased from outside vendors are added to the base unit. Because only one product is manufactured by the
company, a process cost system is used. The company uses the average cost flow assumption to account for its work
in process inventories. Data related to November operations in the Cutting and Forming Department are:

Units in beginning inventory 800

Units started in process this period 3,200
Units transferred to Assembling Department this period 3,400
Units in ending inventory (75% materials, 40% labor, 25% overhead) 600

Beginning Added This

Inventory Period
Cost charged to the department:
Materials P17,923 P68,825
Direct labor 2,352 14,756
Factory overhead 3,800 29,996

Required: Prepare a November a November cost of production report for the Cutting and Forming Department and
identify the following:
a. Costs of units transferred to the Assembling Department.
b. Costs of the ending Work in Process Inventory.

Problem 3
Kimbeth Manufacturing uses process costing to control costs in the manufacture of Dust Sensors for the mining
industry. The following information pertains to operations for November 2008.

Units
Work-in-Process Inventory, November 01, 2008 16,000
Started in production during November 100,000
Work-in-Process Inventory, November 30, 2008 24,000

The beginning inventory was 60% complete as to materials and 20% complete as to conversion costs. The ending
inventory was 90% complete as to materials and 40% complete as to conversion costs.

Costs pertaining to November are as follows:

Beginning inventory: direct materials, $54,560; direct labor, $20,320; manufacturing overhead, $15,240
Costs incurred during the month: direct materials, $468,000; direct labor, $182,880; manufacturing overhead,
$391,160

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Required:
1. What is the equivalent unit cost for materials and conversion costs assuming the use of FIFO?
2. What are the costs of units transferred out in this department using the FIFO cost flow assumption?
3. What are the costs of units in ending inventory using the FIFO cost flow assumption?

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