AE 222 COST ACCOUNTING AND CONTROL

CHAPTER 6- PROCESS COSTING SYSTEM

ACTIVITY 8

Direction: Answer the following problems. Show your solutions and mark your final answers. You can
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include a body of a letter.

Any form of cheating will not be tolerated. Answer honestly. Good luck!

THEORIES.

1. In your own words, explain the process costing system. (5 points)

PRACTICE PROBLEMS.

2. JAPAN COMPANY uses a weighted average process costing system. All materials are added
at the start of the production process. Direct labor and overhead are added at the same rate
throughout the process. JAPAN’s records indicate the following production for October 2019:

Beginning inventory (70% complete as to conversion) 120,000 units

Started during October 170,000 units
Completed during October 260,000 units
Ending inventory for October is 25% complete as to conversion.

Required:
a. Determine the EUP for direct material. (2 points) 290,000
b. Determine the EUP for conversion costs. (2 points) 267,500
Solution:

c. Assume that JAPAN COMPANY uses the FIFO method of process costing, determine the
EUP for direct material. (2 points) 170,000
d. Determine the EUP for conversion costs. (2 points) 183,500
 AE 222 COST ACCOUNTING AND CONTROL

Solution:

3. SLOVAK REPUBLIC CORPORATION makes toy metal soldiers in a one-department

production process. All metals are added at the beginning of the process. Paint for the figures
and the plastic bags for packaging are considered indirect materials. The following information
is available to September 2019 production activities:

Beginning inventory: 75,000 figures (60% complete as to DL; 75% complete as to OH)
Started this period: metal for 250,000 figures, which were cast during the month
Ending inventory: 30,000 figures (40% complete as to DL; 60% complete as to OH)

Required:
a. Compute the EUP for DM, DL, and OH using the WA process costing. (6 points)
325,000; 307,000; 313,000
Solution:

b. Compute the EUP for DM, DL, and OH using the FIFO process costing. (6 points)
250,000; 262,000; 256,750
Solution:
 AE 222 COST ACCOUNTING AND CONTROL

4. GREAT BRITAIN FIGURINES manufactures wax figurines. In October 2019, company

production is 26,800 equivalent units for direct material, 24,400 equivalent units for labor, and
21,000 equivalent units for overhead. During October, direct material, direct labor and overhead
costs incurred are as follows:

Direct materials P78,800

Direct labor 122,400
Overhead 42,600

Beginning inventory costs for October were P14,920 for direct material, P36,200 for labor, and
P9,900 for overhead.

Required:
a. What is the weighted average cost per equivalent unit for the cost components for October?
Round to the nearest two decimal places. (6 points) P3.50; P6.50; P2.50
Solution:

b. Assume that GREAT BRITAIN FIGURINES had 3,600 EUP for direct material in
October’s beginning inventory, 4,000 EUP for direct labor, and 3,960 EUP for overhead.
What was the FIFO cost per equivalent unit for direct material, labor, and overhead for
October? Round to the nearest two decimal places. (6 points)
P2.59; P4.31; P1.71
Solution:

5. JORDAN, INC. uses weighted average process costing. The company’s cost accountant has
determined the following production and cost per EUP information for January 2019:

Units transferred out during the month 260,000

Units in ending inventory (100% complete as to direct materials;
80% complete as to labor; 95% complete as to overhead) 37,000
Direct material cost per EUP P3.75
Direct labor cost per EUP P4.50
Overhead cost per EUP P5.10

Required:
a. What is the cost of goods transferred during January? (2 points) P3,471,000
 AE 222 COST ACCOUNTING AND CONTROL

Solution:

b. What is the cost of goods in ending inventory at January 31, 2019? (2 points) P451,215
Solution:

“DO YOUR BEST AND GOD WILL DO THE REST.”

Prepared by:

JOHN JOSEPH R. PERMEJO

Part-time Lecturer
johnjosephpermejo05@gmail.com