For questions 1 to 3:

Air Force Inc. manufactures their product in two departments in a continuous process. Production data
for the month of October 2022 are as follows:
Beginning work in process, 40% completed 500 units
Received from preceding department 2,000 units
Normal spoilage 200 units
Abnormal spoilage 300 units
Units completed and transferred out 1,700 units
Ending work in process, 1/3 completed 300 units
Conversion cost in beginning inventory P 610
Current period conversion costs P 3,990

All spoilage occurs at the end of the process.

1. What is the conversion cost per equivalent unit?

FIFO method Average method
a. P 1.90 P 1.73
b. P 2.19 P 2.00
c. P 2.00 P 1.90
d. P 1.90 P 2.00

2. What is the conversion cost of normal spoilage?

FIFO method Average method
a. P 438 P 400
b. P 380 P 346
c. P 400 P 380
d. P 380 P 400

3. What is the conversion cost of abnormal spoilage?

FIFO method Average method
a. P 570 P 519
b. P 657 P 600
c. P 570 P 600
d. P 600 P 570

For questions 4 to 6:

The Cooking Department of Red Crab, Inc., uses a process costing system. Direct materials are added at
the beginning of the cooking process. Conversion costs are added evenly during the accounting process.
Consider the following data for the Cooking Department for January.

Physical Units Direct materials Conversion costs

Work in process, Jan. 1:
25% conversion costs 10,000 P 250,000 P 30,000
Started in January 74,000
Goods unit completed and
 transferred out during January 61,000
Spoiled units 8,000
Work in process, January 31 15,000
Cost added during January P 1,480,000 P 942,000
Cost per equivalent unit of work
done in January P 20 P 12

Red Crab uses the FIFO method of process costing. Inspection occurs when production is 100%
complete, normal spoilage is 11% of good units completed during the period.

4. What is the total cost of the units completed and transferred out?
a. P 1,632,000
b. P 1,972,000
c. P 2,186,720
d. P 2,228,000

5. What is the total cost of the units in ending work in process?

a. P 444,000
b. P 685,280
c. P 658,720
d. P 300,000

6. What is the cost of abnormal spoilage?

a. P 256,000
b. P 214,720
c. P 41,280
d. P 41,000

For questions 7 to 8:

A sporting goods manufacturer buys wood as a direct material for baseball bats. The Forming
Department processes the baseball bats, and the bats are then transferred to the Finishing Department
where a sealant is applied. The Forming Department began manufacturing 10,000 “Casey sluggers”
during the month of May. There was no beginning inventory.

Costs for the Forming Department for the month of May were as follows:
Direct materials P 33,000
Conversion costs 17,000
Total P 50,000

A total of 8,000 bats were completed and transferred to the Finishing Department; the remaining 2,000
bats were still in the forming process at the end of the month. All of the Forming Department’s direct
materials were placed in process, but, on average, only 25% of the conversion cost was applied to the
ending work in process inventory.

7. The cost of the units transferred to the Finishing Department is:

a. P 50,000
 b. P 40,000
c. P 53,000
d. P 42,400

8. The cost of the work in process inventory in the Forming Department at the end of May is:
a. P 10,000
b. P 2,500
c. P 20,000
d. P 7,600

For questions 9 to 10:

A company employs a process costing system for its two-department manufacturing operations using
the first in first out (FIFO) inventory method. When units are completed in Department 1, they are
transferred to Department 2 for completion. Inspection takes place in Department 2 immediately before
the direct materials are added, when the process is 70% complete with respect to conversion. The
specific identification method is used to account for the lost units.

The number of defective units (that is, those falling inspection) is usually below the normal tolerance
limit of 4% of units inspected. Defective units have minimal value, and the company sells them without
any further processing for whatever it can.

Generally, the amount collected equals, or slightly exceeds, the transportation cost. A summary of the
manufacturing activity for Department 2, in units for the current month, is presented below.

Physical flow (output units)

Beg. Inventory (60% complete with respect to conversion) 20,000
Units transferred from Department 1 180,000
Total units to account for 200,000

Units completed in Department 2 during the month 170,000

Units to be found defective at inspection 5,000
Ending inventory (80% complete with respect to conversion) 25,000
Total units accounted for 200,000

9. The equivalent units for direct materials for the current month would be:
a. 175,000 units
b. 181,500 units
c. 195,000 units
d. 200,000 units

10. The units that failed inspection during the current month would be classified as:
a. abnormal spoilage
b. normal scrap
c. normal rework units
d. normal waste
For questions 11 to 14:

DXR Company employs process cost system. A unit of product passes through two departments:
Assembly and Finishing before it is complete. Information regarding Assembly Department follow:

BWIP, Aug. 1 4,000 units

Spoiled units 3,000
Started in production 26,000
Transferred out 24,000

Raw materials are added at the beginning of the processing in the Assembly Department without
changing the number of units being processed. Work in process on August 1 was 90% complete as to
conversion while 80% converted on August 31. In the Assembly Department, inspection takes place
when the units are 75% converted. The company usually experienced a 5% loss based on the completed
units. Cost data for the month of August follow:
Materials Labor Overhead
BWIP P 32,400 P 26,400 P 28,500
Current cost 111,600 88,200 114,750

Using the weighted average costing: assuming that the allocation of cost of normal lost units is based on
EUP.

11. What is the cost of units transferred out?

a. P 331,200
b. P 331,400
c. P 343,684
d. P 343,860

12. What is the cost of units of ending work in process?

a. P 37,376
b. P 37,500
c. P 36,200
d. P 37,400

Using FIFO costing: assuming that the allocation of the cost of normal lost units is based on actual units.

13. What is the cost of units transferred out?

a. P 349,136
b. P 258,067
c. P 339,267
d. P 368,069

14. What is the cost of units of ending work in process?

a. P 33,850
b. P 32,310
c. P 31,580
d. P 33,580
15. Adonis Manufacturing Company makes a single product in two departments. The production data
for Department 2 for May 2022 follows:

Quantities:
In process, May 1, (40% completed) 4,000 units
Received from Department 1 30,000 units
Completed and transferred 25,000 units
In process, May 31, (60% completed) 6,000 units

Production costs:
May 1 May 31
Received from Department 1 P 16,300 P 89,100
Materials 3,800 67,500
Conversion cost 1,940 81,000

Materials are added at the start of the process and losses normally occur during early stage of the
operation.

Using the average costing method, what is the cost of ending work in process inventory?
a. P 44,640
b. P 45,460
c. P 45,600
d. P 46,000