PROCESS COSTING

Units To Account For – total units for the period

Units Accounted For –
Equivalent Units of Production – amount of work done in partially completed units
Cost per Equivalent Units of production – unit cost
Cost To Account For – input of all the cost
Cost Accounted For – total output of the cost

Note:

➢ Units To Account For is always equal to the Units Accounted For

➢ Cost To Account For is always equal to the Cost Accounted For

Two Methods:
FIFO – costs are transferred to the next department to finished goods in the order
which they entered the current department.
Weighted Average – cost of good available for sale is divided by the number of units
available for sale.

PROBLEM 1:

The cost data and production data for Flood Company for the month of August
were as follows:

Cost Data:
Work in process, August 1: Materials P 20,800
Conversion costs 27,600
Cost added this month: Materials 240,000
Conversion costs 640,800
Production Data:
Work in process, August 1 (40% complete) 3,750 units
Started in production this August 40,000 units
Transferred out 36,250 units
Work in process, August 31 (70% complete) 6,500 units
Normal lost units 550 units
Abnormal lost units ?

All materials are added at the start of the process and lost units are detected at the
inspection point of 75% completion.

a. Using the FIFO method, what are the cost assigned to units transferred out and
units in ending work in process?
Transferred out Ending WIP
a. P 807,650 P 113,450
b. P 809,300 P 111,800
c. P 807,650 P 111,800
d. P 809,300 P 113,450

Conversion Cost = Direct Labor + Overhead

 EUP
Conversion EUP as to
Units Materials as to
Cost CC
M
Transferred out:
Work in process, beginning 3,750 0% 0 60% 2,250
Started in production this
32,500 100% 32,500 100% 32,500
August (P36,250 – 3,750)
Work in process, ending 6,500 100% 6,500 70% 4,550
Normal spoilage 550 100% 550 75% 412.50
Abnormal spoilage [squeeze] 450 100% 450 75% 337.50
Total Units Accounted For* 43,750 40,000 40,050

EUP as to materials, transferred out 32,500

EUP as to materials, normal spoilage 550
Total 33,050
Multiply: Cost per EUP, Materials** 6 P 198,300
EUP as to conversion cost, transferred out (2,250 + 32,500) 34,750
EUP as to conversion cost, normal spoilage 412.50
Total 35,162.50
Multiply: Cost per EUP, Conversion Cost*** 16 562,600
Work in process, beginning**** 48,400
Transferred out P 809,300

EUP as to materials, Work in process ending 6,500

Multiply: Cost per EUP, Materials 6 P 39,000
EUP as to conversion cost, Work in process ending 4,550
Multiply: Cost per EUP, Conversion Cost 16 72,800
Work in Process P 111,800

Notes:
*Work in process, beginning 3,750
Started in production this August 40,000
Units To Account For P 43,750

**Cost added this month, materials P 240,000

Divide: Total equivalent units of production as to materials 40,000
Cost per Equivalent Units of Production, Materials 6

***Cost added this month, Conversion cost P 640,800

Divide: Total equivalent units of production as to materials 40,050
Cost per Equivalent Units of Production, Conversion Cost 16

****Work in process, August 1:

Materials P 20,800
Conversion costs 27,600
Work in Process, Beginning P 48,400
b. Using the weighted average method, what are the cost assigned to units
transferred out and units in ending work in process?
Transferred out Ending WIP
a. P 807,638 P 113,450
b. P 799,229 P 113,450
c. P 809,143 P 111,941
d. P 799,212 P 38,748

EUP
Conversion EUP as to
Units Materials as to
Cost CC
M
Transferred out: 36,250 100% 36,250 100% 36,250
Work in process, ending 6,500 100% 6,500 70% 4,550
Normal spoilage 550 100% 550 75% 412.50
Abnormal spoilage 450 100% 450 75% 337.50
Total Units Accounted For 43,750 43,750 41,550

EUP as to materials, transferred out 36,250

EUP as to materials, normal spoilage 550
Total 36,800
Multiply: Cost per EUP, Materials* 5.9611 P 219,368.48
EUP as to conversion cost, transferred out 36,250
EUP as to conversion cost, normal spoilage 412.50
Total 36,662.50
Multiply: Cost per EUP, Conversion Cost** 16.0866 589,774.97
Transferred out P 809,143.45

EUP as to materials, Work in process ending 6,500

Multiply: Cost per EUP, Materials 5.9611 P 38,747.15
EUP as to conversion cost, Work in process ending 4,550
Multiply: Cost per EUP, Conversion Cost 16.0866 73,194.03
Work in Process P 111,941.18

Notes:
* Cost of materials (P20,800 + 240,000) P 260,800
Divide: Total equivalent units of production as to materials 43,750
Cost per Equivalent Units of Production, Materials 5.9611

** Conversion cost (P27,600 + 640,800) P 668,400

Divide: Total equivalent units of production as to materials 41,550
Cost per Equivalent Units of Production, Conversion Cost 16.0866
c. What is the cost of abnormal lost units?
FIFO WAVE
a. 8,100 8,100
b. 9,900 9,920
c. 5,430 5,400
d. 8,100 8,112

FIFO:
Abnormal spoilage, Materials 450
Multiply: Cost per EUP, Materials 6 2,700
Abnormal spoilage, Conversion cost 337.50
Multiply: Cost per EUP, Conversion cost 16 5,400
Abnormal Lost Units 8,100

WAVE:
Abnormal spoilage, Materials 450
Multiply: Cost per EUP, Materials 5.9611 2,682.50
Abnormal spoilage, Conversion cost 337.50
Multiply: Cost per EUP, Conversion cost 16.0866 5,429.23
Abnormal Lost Units 8,111.73