h a n g e Pro h a n g e Pro

XC d XC d
F- F-

uc

uc
PD

PD
!

!
W

W
t

t
O

O
N

N
y

y
bu

bu
to

to
ww

ww
om

om
k

k
lic

lic
C

C
.c

.c
w

w
tr re tr re
.

.
ac ac
k e r- s o ft w a k e r- s o ft w a
 h a n g e Pro h a n g e Pro
XC d XC d
F- F-

uc

uc
PD

PD
!

!
W

W
t

t
O

O
N

N
y

y
bu

bu
to

to
ww

ww
om

om
k

k
lic

lic
C

C
.c

.c
w

w
tr re tr re
.

.
ac ac
k e r- s o ft w a k e r- s o ft w a

Sussex Corporation’s production cycle starts in the Mixing

Department.The following information is available for April:
Units
 WIP, April 1 (50% complete)……………………………..40,000
 Started in April……………………………………………240,000
 WIP, April 30 (60% complete)……………………………25,000
Materials are added at 55% stage of completion in the Mixing
Department. Determine the EUP under both FIFO and Weighted
Average.
 h a n g e Pro h a n g e Pro
XC d XC d
F- F-

uc

uc
PD

PD
!

!
W

W
t

t
O

O
N

N
y

y
bu

bu
to

to
ww

ww
om

om
k

k
lic

lic
C

C
.c

.c
w

w
tr re tr re
.

.
ac ac
k e r- s o ft w a k e r- s o ft w a
 h a n g e Pro h a n g e Pro
XC d XC d
F- F-

uc

uc
PD

PD
!

!
W

W
t

t
O

O
N

N
y

y
bu

bu
to

to
ww

ww
om

om
k

k
lic

lic
C

C
.c

.c
w

w
tr re tr re
.

.
ac ac
k e r- s o ft w a k e r- s o ft w a

Continuous Loss
The input in a manufacturing process may result to a lower output due
to evaporation or shrinkage, which are inherent in the production
process.
The costs of normal loss due to shrinkage or evaporation are
accounted using the method of neglect. The decrease in the units
resulting to loss or spoilage is not included in EUP computation. The
effect of this method increases the cost per EUP.
 h a n g e Pro h a n g e Pro
XC d XC d
F- F-

uc

uc
PD

PD
!

!
W

W
t

t
O

O
N

N
y

y
bu

bu
to

to
ww

ww
om

om
k

k
lic

lic
C

C
.c

.c
w

w
tr re tr re
.

.
ac ac
k e r- s o ft w a k e r- s o ft w a

Discrete Loss
Discrete loss is assumed to occur at a specific point, normally when
quality check is made at inspection point.
Some production losses may be due to errors in the production
process; thus, resulting to units that are rejected for failure to meet
quality standards.
These spoiled units are included in EUP computation (when inspection
point is at end of process) because the percentage of work done on
these units can be clearly identified.
 h a n g e Pro h a n g e Pro
XC d XC d
F- F-

uc

uc
PD

PD
!

!
W

W
t

t
O

O
N

N
y

y
bu

bu
to

to
ww

ww
om

om
k

k
lic

lic
C

C
.c

.c
w

w
tr re tr re
.

.
ac ac
k e r- s o ft w a k e r- s o ft w a

Normal loss vs. Abnormal loss

The accounting for the cost of the spoiled units depends on whether
the loss is considered normal or abnormal.
Normal spoilage is inherent in a particular production process. It
arises even under efficient operating conditions. If the number of lost
or spoiled units falls within a tolerance level expected during
production, the units are presumed to be normal loss.
Any loss in excess of the normal level is considered abnormal loss.
The cost of normal spoilage is typically included as a component of
good units manufactured whereas; the cost associated with abnormal
spoilage is treated as a period cost.
 h a n g e Pro h a n g e Pro
XC d XC d
F- F-

uc

uc
PD

PD
!

!
W

W
t

t
O

O
N

N
y

y
bu

bu
to

to
ww

ww
om

om
k

k
lic

lic
C

C
.c

.c
w

w
tr re tr re
.

.
ac ac
k e r- s o ft w a k e r- s o ft w a
 h a n g e Pro h a n g e Pro
XC d XC d
F- F-

uc

uc
PD

PD
!

!
W

W
t

t
O

O
N

N
y

y
bu

bu
to

to
ww

ww
om

om
k

k
lic

lic
C

C
.c

.c
w

w
tr re tr re
.

.
ac ac
k e r- s o ft w a k e r- s o ft w a

 If the lost units are normal, the normal lost units are assumed to be
discovered at the beginning of the process; therefore, no EUP should
be given to these units. The remaining good units will absorb the cost
of the lost units. This is because normal lost units are easy to be
identified.
 If the lost units are abnormal, the abnormal lost units are assumed to
be discovered at the ending of the process; therefore, EUP is
considered 100% work done for these units. Cost of these units will
be charged to Loss from spoilage account, which is a period cost.
This is because abnormal loss unis are difficult to be identified.
 h a n g e Pro h a n g e Pro
XC d XC d
F- F-

uc

uc
PD

PD
!

!
W

W
t

t
O

O
N

N
y

y
bu

bu
to

to
ww

ww
om

om
k

k
lic

lic
C

C
.c

.c
w

w
tr re tr re
.

.
ac ac
k e r- s o ft w a k e r- s o ft w a

Nestle Makati produces condensed milk in process costing. The ingredients are introduced in the Cooking Department
where all the ingredients are mixed then cooked in large vats. During the cooking process, some of the ingredients turn to
liquid and some of the liquid evaporates. The company uses the weighted average method.
The following cost information was gathered from the cost accountant of Nestle Makati:
In gallons:
WIP, beg: 8,000
Started in process: 52,000
Transferred to Canning Dept 40,000
WIP, end, 25% complete 10,000
Costs:
WIP, beg:
Materials P54,500
Conversion costs 16,050
Costs added during the period:
Materials 325,500
Conversion costs 226,200
Total costs to account: 622,250
 h a n g e Pro h a n g e Pro
XC d XC d
F- F-

uc

uc
PD

PD
!

!
W

W
t

t
O

O
N

N
y

y
bu

bu
to

to
ww

ww
om

om
k

k
lic

lic
C

C
.c

.c
w

w
tr re tr re
.

.
ac ac
k e r- s o ft w a k e r- s o ft w a

Required:
Determine the following:
1. EUP for each cost element
2. Assign the costs to F&T and WIP, end
 h a n g e Pro h a n g e Pro
XC d XC d
F- F-

uc

uc
PD

PD
!

!
W

W
t

t
O

O
N

N
y

y
bu

bu
to

to
ww

ww
om

om
k

k
lic

lic
C

C
.c

.c
w

w
tr re tr re
.

.
ac ac
k e r- s o ft w a k e r- s o ft w a
 h a n g e Pro h a n g e Pro
XC d XC d
F- F-

uc

uc
PD

PD
!

!
W

W
t

t
O

O
N

N
y

y
bu

bu
to

to
ww

ww
om

om
k

k
lic

lic
C

C
.c

.c
w

w
tr re tr re
.

.
ac ac
k e r- s o ft w a k e r- s o ft w a
 h a n g e Pro h a n g e Pro
XC d XC d
F- F-

uc

uc
PD

PD
!

!
W

W
t

t
O

O
N

N
y

y
bu

bu
to

to
ww

ww
om

om
k

k
lic

lic
C

C
.c

.c
w

w
tr re tr re
.

.
ac ac
k e r- s o ft w a k e r- s o ft w a

The production records of Department 1 of XXX Manufacturing Company are provided below:
Units:
 WIP, beginning……………………………………..10,000 (25%)

 WIP, end……………………………………………..15,000 (80%)

 Started in process……………………………….....74,000

 Completed & transferred………………………….61,000

Costs:
WIP, beg:
 Materials………………………………………………P220,000
 Conversion costs………………………………………..30,000

Added during the period:

 Materials……………………………………...........P1,480,000
 Conversion costs………………………………….......942,000

XXX Manufacturing Company uses FIFO method of process costing and adds materials at the beginning of the process.
Inspection is done at the end of the process. Normal spoilage is 10% of completed and transferred to the next
department.
Required: Allocate the total cost to Finished & Transferred, WIP, end, and abnormal spoilage (if any).
 h a n g e Pro h a n g e Pro
XC d XC d
F- F-

uc

uc
PD

PD
!

!
W

W
t

t
O

O
N

N
y

y
bu

bu
to

to
ww

ww
om

om
k

k
lic

lic
C

C
.c

.c
w

w
tr re tr re
.

.
ac ac
k e r- s o ft w a k e r- s o ft w a
 h a n g e Pro h a n g e Pro
XC d XC d
F- F-

uc

uc
PD

PD
!

!
W

W
t

t
O

O
N

N
y

y
bu

bu
to

to
ww

ww
om

om
k

k
lic

lic
C

C
.c

.c
w

w
tr re tr re
.

.
ac ac
k e r- s o ft w a k e r- s o ft w a
 h a n g e Pro h a n g e Pro
XC d XC d
F- F-

uc

uc
PD

PD
!

!
W

W
t

t
O

O
N

N
y

y
bu

bu
to

to
ww

ww
om

om
k

k
lic

lic
C

C
.c

.c
w

w
tr re tr re
.

.
ac ac
k e r- s o ft w a k e r- s o ft w a
 h a n g e Pro h a n g e Pro
XC d XC d
F- F-

uc

uc
PD

PD
!

!
W

W
t

t
O

O
N

N
y

y
bu

bu
to

to
ww

ww
om

om
k

k
lic

lic
C

C
.c

.c
w

w
tr re tr re
.

.
ac ac
k e r- s o ft w a k e r- s o ft w a
 h a n g e Pro h a n g e Pro
XC d XC d
F- F-

uc

uc
PD

PD
!

!
W

W
t

t
O

O
N

N
y

y
bu

bu
to

to
ww

ww
om

om
k

k
lic

lic
C

C
.c

.c
w

w
tr re tr re
.

.
ac ac
k e r- s o ft w a k e r- s o ft w a

Pink Manufacturing Company uses the average method of process

costing . The product is processed into two departments: Forming and
Finishing Departments. Direct materials are added at the beginning of
each department. Conversion costs are incurred evenly throughout the
process.
Spoiled units are discovered as follows:
Forming Department: Units are inspected at the end of the process
(spoiled units are discovered at this point).
Finished Department: Units are inspected at 40% completion
(spoiled units are discovered at this point).
 h a n g e Pro h a n g e Pro
XC d XC d
F- F-

uc

uc
PD

PD
!

!
W

W
t

t
O

O
N

N
y

y
bu

bu
to

to
ww

ww
om

om
k

k
lic

lic
C

C
.c

.c
w

w
tr re tr re
.

.
ac ac
k e r- s o ft w a k e r- s o ft w a

The following data for the two departments for May are as follows:
 h a n g e Pro h a n g e Pro
XC d XC d
F- F-

uc

uc
PD

PD
!

!
W

W
t

t
O

O
N

N
y

y
bu

bu
to

to
ww

ww
om

om
k

k
lic

lic
C

C
.c

.c
w

w
tr re tr re
.

.
ac ac
k e r- s o ft w a k e r- s o ft w a

The production report for each department is given below. Lost units in excess of
normal ones are considered as abnormal lost units.
 h a n g e Pro h a n g e Pro
XC d XC d
F- F-

uc

uc
PD

PD
!

!
W

W
t

t
O

O
N

N
y

y
bu

bu
to

to
ww

ww
om

om
k

k
lic

lic
C

C
.c

.c
w

w
tr re tr re
.

.
ac ac
k e r- s o ft w a k e r- s o ft w a

The production report for each department is given below. Lost units in excess of
normal ones are considered as abnormal lost units.
 h a n g e Pro h a n g e Pro
XC d XC d
F- F-

uc

uc
PD

PD
!

!
W

W
t

t
O

O
N

N
y

y
bu

bu
to

to
ww

ww
om

om
k

k
lic

lic
C

C
.c

.c
w

w
tr re tr re
.

.
ac ac
k e r- s o ft w a k e r- s o ft w a

Required:
1. Compute for EUP for each cost element and cost per EUP.
2. Assign the costs to Transferred out, WIP, end, and abnormal spoilage (if any).
 h a n g e Pro h a n g e Pro
XC d XC d
F- F-

uc

uc
PD

PD
!

!
W

W
t

t
O

O
N

N
y

y
bu

bu
to

to
ww

ww
om

om
k

k
lic

lic
C

C
.c

.c
w

w
tr re tr re
.

.
ac ac
k e r- s o ft w a k e r- s o ft w a
 h a n g e Pro h a n g e Pro
XC d XC d
F- F-

uc

uc
PD

PD
!

!
W

W
t

t
O

O
N

N
y

y
bu

bu
to

to
ww

ww
om

om
k

k
lic

lic
C

C
.c

.c
w

w
tr re tr re
.

.
ac ac
k e r- s o ft w a k e r- s o ft w a
 h a n g e Pro h a n g e Pro
XC d XC d
F- F-

uc

uc
PD

PD
!

!
W

W
t

t
O

O
N

N
y

y
bu

bu
to

to
ww

ww
om

om
k

k
lic

lic
C

C
.c

.c
w

w
tr re tr re
.

.
ac ac
k e r- s o ft w a k e r- s o ft w a

Conversion Costs (1,600 x 6.2)

 h a n g e Pro h a n g e Pro
XC d XC d
F- F-

uc

uc
PD

PD
!

!
W

W
t

t
O

O
N

N
y

y
bu

bu
to

to
ww

ww
om

om
k

k
lic

lic
C

C
.c

.c
w

w
tr re tr re
.

.
ac ac
k e r- s o ft w a k e r- s o ft w a
 h a n g e Pro h a n g e Pro
XC d XC d
F- F-

uc

uc
PD

PD
!

!
W

W
t

t
O

O
N

N
y

y
bu

bu
to

to
ww

ww
om

om
k

k
lic

lic
C

C
.c

.c
w

w
tr re tr re
.

.
ac ac
k e r- s o ft w a k e r- s o ft w a
 h a n g e Pro h a n g e Pro
XC d XC d
F- F-

uc

uc
PD

PD
!

!
W

W
t

t
O

O
N

N
y

y
bu

bu
to

to
ww

ww
om

om
k

k
lic

lic
C

C
.c

.c
w

w
tr re tr re
.

.
ac ac
k e r- s o ft w a k e r- s o ft w a

Since normal loss was detected in the second department during the process, we have
to check if WIP, end passes the inspection point. Since the WIP, end (60% completed)
has already passed the inspection point (40% completion), WIP, end are already good
units. Cost of normal loss will then be allocated between Finished & Transferred and
WIP, ending.To compute first for the cost of normal loss:
 h a n g e Pro h a n g e Pro
XC d XC d
F- F-

uc

uc
PD

PD
!

!
W

W
t

t
O

O
N

N
y

y
bu

bu
to

to
ww

ww
om

om
k

k
lic

lic
C

C
.c

.c
w

w
tr re tr re
.

.
ac ac
k e r- s o ft w a k e r- s o ft w a
 h a n g e Pro h a n g e Pro
XC d XC d
F- F-

uc

uc
PD

PD
!

!
W

W
t

t
O

O
N

N
y

y
bu

bu
to

to
ww

ww
om

om
k

k
lic

lic
C

C
.c

.c
w

w
tr re tr re
.

.
ac ac
k e r- s o ft w a k e r- s o ft w a

 Dayag, A.J. (2015). Practical Accounting 2015 Edition. GIC Enterprises & Co., Inc.
 Guerrero, P.P. (2014). Principles and Procedural Applications. GIC Enterprises &
Co., Inc.
 Rante, G.A. (2016). Cost Accounting. Millenium Books, Inc.