Process Costing Problems and Solutions

GENERAL PROCEDURES IN PROCESS COSTING SYSTEM
STEP 1 – Calculate the total units to account for
Beginning Inventory in units X

Add: Units started or transferred in X
TOTAL UNITS TO ACCOUNT FOR (TUTAF) X
Accounted for as follows:

Units completed and transferred to next department X
Ending inventory in units X
Normal loss X
Abnormal loss X
TOTAL UNITS AS ACCOUNTED FOR (TUAF) X
STEP 2 – Calculate equivalent units of production (EUP)

FIFO
Materials Conversion
WIP, Beg (BI units x % work to be done) X X
Started and completed X X
WIP, End (EI units x % work done) X X
EQUIVALENT UNITS OF PRODUCTION X X
WEIGHTED AVERAGE
Finished and transferred X X
WIP, End (EI units x % work done) X X
EQUIVALENT UNITS OF PRODUCTION X X
STEP 3 – Calculate the total cost to account

Beginning Inventory Costs X
Add: Cost Added (DM, DL, OH) X
Add: Transferred-In Costs X
TOTAL COST TO ACCOUNT FOR (TCTAF) X
STEP 4 – Compute the cost per EUP

FIFO
Unit cost = Current Cost
EUP (per Cost element)
WEIGHTED AVERAGE
Unit cost = Beginning Cost + Current Cost
STEP 5 – Assign costs to inventories

FIFO
Finished and transferred:
Beginning Inventory Costs X
Add: Cost to complete the units X
Add: Cost of units started & completed X
Total cost of Finished and transferred X
Ending Inventory Costs X
TOTAL COST AS ACCOUNTED FOR (TCAF) X
WEIGHTED AVERAGE
Finished and transferred X
Add: Ending Inventory Costs X
TOTAL COST AS ACCOUNTED FOR (TCAF) X
SAMPLE PROBLEM 1: Consider the following data for Candy Land Incorporated:
Consider the following data for Candy Land Incorporated:

Beginning Inventory (60% completed)
Started in process
Finished and transferred
Ending Inventory (40% completed)
Candy Land Incorporated adds materials at the end of the process.

Cost data shows the following:
WIP Beg (Conversion) – P201,600
Cost added – Materials – P3,220,000;
Cost added – Conversion – P1,424,000
Prepare the cost of production report under Weighted Average and FIFO methods.
SOLUTIONS
ASSUMPTION 1 - WEIGHTED AVERAGE
Beginning Inventory in units

Add: Units started or transferred in
TOTAL UNITS TO ACCOUNT FOR (TUTAF)

Units completed and transferred to next department
Ending inventory in units
Normal loss
Abnormal loss
TOTAL UNITS AS ACCOUNTED FOR (TUAF)

WEIGHTED AVERAGE

WIP, End (EI units x % work done)
EQUIVALENT UNITS OF PRODUCTION
NOTE: The EUP for Materials is zero because materials are added at the end of the process. Hence, no work was done for WI

Beginning Inventory Costs
Add: Cost Added (DM, DL, OH)
Add: Transferred-In Costs
TOTAL COST TO ACCOUNT FOR (TCTAF)

WEIGHTED AVERAGE
Unit cost =
WIP, Beg
Cost added
Total cost
EUP - see above
Cost per EUP
Total Cost per EUP

WEIGHTED AVERAGE
Finished and transferred (46,000 x 102)
Add: Ending Inventory Costs
Materials (0 x P70)
Conversion (4,800 x P32)
TOTAL COST AS ACCOUNTED FOR (TCAF)
NOTE: One reminder is to always check if the Total Cost to Account For (TCTAF) is equal to the Total Cost as Accounted For (
ASSUMPTION 2 - FIFO


Normal loss
Abnormal loss

FIFO
WIP, Beg (BI units x % work to be done)

Started and completed
NOTE: Note that under FIFO method, you need to separately account for the WIP, Beg units. In this case, since the Materials a
For conversion, since 60% was already completed for WIP, Beg, only 40% shall be completed for the current period.
NOTE: The EUP for Materials is zero because materials are added at the end of the process. Hence, no work was done for WI


FIFO
Unit cost =
WIP, Beg
Cost added
Total cost
EUP - see above
Cost per EUP
Total Cost per EUP
NOTE: Use 2 decimals first in computing for the Cost per EUP. This is the conventional decimal notation.

Beginning Inventory Costs (see given)
Add: Cost to complete the units
Materials (8,000 x P70)
Conversion (3,200 x P30.96)
Add: Cost of units started & completed
Total cost of Finished and transferred
Ending Inventory Costs
Materials (0 x P70)
NOTE: There may be a difference between Total Cost to Account For (TCTAF) and Total Cost as Accounted For (TCAF). The d
8,000
50,000
46,000
?
8,000
50,000
58,000
46,000
12,000
X
X
58,000
46,000 46,000
0 4,800
46,000 50,800
he process. Hence, no work was done for WIP, End.
201,600
4,644,000
0
4,845,600
Beginning Cost + Current Cost
0 201,600
3,220,000 1,424,000
3,220,000 1,625,600
46,000.00 50,800.00
70.00 32.00
102.00
4,692,000.00
-
153,600.00
4,845,600.00
is equal to the Total Cost as Accounted For (TCAF)
8,000
50,000
58,000
46,000
12,000
X
X
58,000
8,000 3,200
38,000 38,000
0 4,800
46,000 46,000
, Beg units. In this case, since the Materials are added at the end of the process, for this period, we expect that it will be completed, hence,
e completed for the current period.
he process. Hence, no work was done for WIP, End.
201,600.00
4,644,000.00
-
4,845,600.00
Current Cost
0 0
3,220,000 1,424,000
3,220,000 1,424,000
46,000.00 46,000.00
70.00 30.95652
100.96
tional decimal notation.
201,600.00
560,000.00
99,072.00
3,836,480.00
4,697,152.00
-
148,608.00
4,845,760.00
d Total Cost as Accounted For (TCAF). The difference is due to rounding off of decimal places for cost per EUP.
it will be completed, hence, we allocate 100% of EUP for Materials.
SAMPLE PROBLEM 2:
Fruit Salad Company has the following information for October of the current year. It is the practice of the company to add mate
Units:
Started
WIP, Beg (65% incomplete)
Normal Spoilage (discrete)
Abnormal Spoilage
WIP, End (70% complete)
Costs:
WIP, Beginning:
Materials
Conversion
Fruit Salad Company inspects goods at 75% completion as to conversion. The Cost per EUP for Materials and Conversion are
Prepare the Cost of Production Report. Use the FIFO method.
SOLUTIONS


Beginning Inventory
Normal loss
Abnormal loss

FIFO
WIP, Beg (BI units x % work to be done)

Started and completed
Normal loss
Abnormal loss
Cost per EUP (given)
Total Cost per EUP

NOTE: The EUP for Materials is zero because materials are added at the beginning of the process. Meaning, all of the materia
NOTE: Since the work in process, End did not pass the inspection point, only the Finished and transferred out units will absorb
However, the EUP for Materials and Conversion for the normal and abnormal loss shall be based on the inspection point as this
NOTE: The cost of the abnormal loss is treated as a loss (part of Period Cost / Operating Expense)
FIFO
Beginning Inventory Costs (given)
Materials (0 x P1)
Add: Cost of units started & completed (77,000 x P2.5)
Normal loss
Materials (3,500 X P1)
Total cost of finished and transferred


Abnormal Loss
100,000
20,000
3,500
5,000
14,500
P15,000
10,000
20,000
100,000
120,000
20,000
77,000
14,500
3,500
5,000
120,000
- 13,000.00
77,000.00 77,000.00
14,500.00 10,150.00
3,500.00 2,625.00
5,000.00 3,750.00
100,000.00 106,525.00
1 1.5
2.5
work was done for WIP, Beg.
25,000.00
-
19,500.00
192,500.00
3,500.00
3,937.50
244,437.50
14,000.00
15,225.00
29,225.00
5,000.00
5,625.00
10,625.00
284,287.50
PROBLEM 1 (EUP EVEN APPLICATION): The finishing department of Coca-Cola Manufacturing Company presents the follow
Beginning Inventory (3/8 Complete) 4,000

Started in process 13,000
Transferred Out 9,000
Ending Inventory (1/2 Complete) 4,000
Ending Inventory (1/4 Incomplete) 4,000
What are the equivalent units of production under FIFO and Average Method for the current month?
FIFO Average
A. 12,000 13,000
B. 17,000 12,500
SOLUTIONS
ASSUMPTION 1 - FIFO
Beginning Inventory in units 4,000

Add: Units started or transferred in 13,000
TOTAL UNITS TO ACCOUNT FOR (TUTAF) 17,000

Beginning Inventory 4,000
Units completed and transferred to next department 5,000
Ending inventory in units 8,000
Normal loss 0
Abnormal loss 0
TOTAL UNITS AS ACCOUNTED FOR (TUAF) 17,000

FIFO
WIP, Beg (BI units x % work to be done) 2,500 2,500
Started and completed 5,000 5,000
WIP, End (EI units x % work done) - 1/2 complete 2,000 2,000
EQUIVALENT UNITS OF PRODUCTION 12,500 12,500
uring Company presents the following production data (in units) for the current month:
rrent month?
FIFO Average
C. 12,500 14,000
D. 15,000 14,000



Normal loss 0
Abnormal loss 0

WEIGHTED AVERAGE
Finished and transferred 9,000 9,000
PROBLEM 2 (EUP UNEVEN APPLCATION): Hamon Company adds materials at the end of the process in the Curing Departm
Work In Process, April 1 (60% complete as to Conversion) 3,000

Units started in April 25,000
Completed 20,000
Work In Process, April 30 (75% complete as to Conversion) 8,000
What are the equivalent units of production under FIFO and Average Method for the current month?
FIFO Average
Materials Conversion Materials
A. 28,000 28,000 28,000
B. 20,000 20,000 26,000
SOLUTIONS
ASSUMPTION 1 - FIFO


Normal loss 0
Abnormal loss 0

FIFO
WIP, Beg (BI units x % work to be done) 3,000 1,200
Started and completed 17,000 17,000
WIP, End (EI units x % work done) - 6,000
e process in the Curing Department. The following information pertains to the work in process account (in units) in April:
ent month?
Average FIFO
Conversion Materials Conversion
28,000 C. 20,000 24,200
26,000 D. 24,200 20,000



Normal loss 0
Abnormal loss 0

WEIGHTED AVERAGE
WIP, End (EI units x % work done) - 6,000
nits) in April:
Average
20,000 26,000
26,000 20,000
PROBLEM 3 (EUP UNEVEN APPLICATION): The Spaghetti Incorporated makes spaghetti plastic containers.
The company began the month of December with 250 containers in process that were 30% complete as to materials and 40% c
During the month, 5,000 containers were started. At month end, 1,700 containers were still in process (45% complete as to ma
Using Average Method, what are the Equivalent units of production for Materials and Conversion?
A. 4,315 4,910 C.
B. 4,440 4,810 D.
SOLUTIONS
WEIGHTED AVERAGE
Beginning Inventory in units 250


Normal loss 0
Abnormal loss 0

WEIGHTED AVERAGE
WIP, End (EI units x % work done) 765 1,360
ti plastic containers.
% complete as to materials and 40% complete as to conversion.
in process (45% complete as to materials and 80% complete as to conversion).
d Conversion?
4,485 3,890
4,315 4,810
PROBLEM 4: (EUP WITH TRANSFERRED-IN): The Wiring Department of Christmas Lights Company is on the second stage
On December 1, the WIP Beg contained 25,000 meters of which 60% was complete as to Conversion Costs. During December
On December 31, the WIP End contained 20,000 meters which were 80% complete as to conversion costs.
1. Using FIFO Method, the EUP for the month of December were:
Transferred In Materials Conversion
A. 100,000 125,000 100,000 C.
B. 125,000 105,000 105,000 D.
2. Using Average Method, the EUP for the month of December were:
A. 100,000 125,000 100,000 C.
B. 125,000 105,000 105,000 D.
SOLUTIONS
ASSUMPTION 1 - FIFO


Normal loss 0
Abnormal loss 0

FIFO
Transferred-In Materials Conversion
WIP, Beg (BI units x % work to be done) - 25,000 10,000
Started and completed 80,000 80,000 80,000
WIP, End (EI units x % work done) 20,000 - 16,000
EQUIVALENT UNITS OF PRODUCTION 100,000 105,000 106,000
NOTE: The EUP for Transferred-In in the WIP, Beg is ALWAYS ZERO since the materials were already added at the prior d
NOTE: The EUP for Transferred-In in the WIP, End is ALWAYS AT 100% since the materials were already added at the pri
NOTE: The treatment for EUP for WIP, End is the same under FIFO and Average Method.
y is on the second stage of the production process. It is the practice of the company to add Materials at the end of the process.
Costs. During December, 100,000 meters were transferred in from the first stage of the production cycle.

125,000 105,000 121,000
100,000 105,000 106,000

125,000 105,000 121,000
100,000 105,000 106,000



Normal loss 0
Abnormal loss 0

WEIGHTED AVERAGE
Finished and transferred 105,000 105,000 105,000
WIP, End (EI units x % work done) 20,000 - 16,000
eady added at the prior department.

already added at the prior department.
d of the process.
PROBLEM 5: (COMPREHENSIVE - EUP WITH LOST UNITS):
Given on a certain process of Fruit Cocktail Company and all materials are added at the start of the production while conversion
All lost units occur at the end of the process.
Beginning Work In Process Inventory, 40% converted 500

Transferred-In 2,000
Normal loss 200
Abnormal loss 300
Goods completed and transferred out 1,700
Ending Work In Process Inventory, 1/3 converted 300
Cost data follow:

Beginning Inventory Added this period
Transferred-In Cost P812.50 P1,000.00
Materials 750.00 2,000.00
Conversion Costs 610.00 3,990.00
P2,172.50 P6,990.00
Prepare the cost of production report under FIFO and Weighted Average Method
SOLUTIONS
ASSUMPTION 1 - FIFO
Beginning Inventory in units 500


Beginning Inventory 500
Ending inventory in units 300
Normal loss 200
Abnormal loss 300

FIFO
WIP, Beg (BI units x % work to be done) - - 300
Started and completed 1,200 1,200 1,200
WIP, End (EI units x % work done) 300 300 100
Normal Loss 200 200 200
Abnormal Loss 300 300 300
NOTE: The EUP for both Normal and Abrnormal Loss are at 100% because the loss was discovered at the end of the p

Beginning Inventory Costs 1,360.00
Add: Cost Added (DM, DL, OH) 5,990.00
Add: Transferred-In Costs 1,812.50
TOTAL COST TO ACCOUNT FOR (TCTAF) 9,162.50

FIFO
Unit cost = Current Cost

WIP, Beg 0 0 0
Cost added 1,000 2,000 3,990
Total cost 1,000 2,000 3,990
EUP - see above 2,000.00 2,000.00 2,100.00
Cost per EUP 0.50 1.00 1.90
Total Cost per EUP 3.40

FIFO
Beginning Inventory Costs (given) 2,172.50
Conversion (300 x P1.9) 570.00
Add: Cost of units started & completed (1,200 x P3.40) 4,080.00
Normal loss (200 x P3.40) 680.00
Total cost of finished and transferred 7,502.50
Transferred-In (300 x P0.50) 150.00

Materials (300 x P1) 300.00
Ending Inventory Costs 640.00
Transferred-In (300 x P0.50) 150.00

Materials (300 x P1) 300.00
Abnormal Loss 1,020.00
TOTAL COST AS ACCOUNTED FOR (TCAF) 9,162.50
oduction while conversion costs are added evenly throughout the process (in units):
ered at the end of the process.

are added evenly throughout the process (in units):



Normal loss
Abnormal loss

WEIGHTED AVERAGE

Normal Loss
Abnormal Loss


WEIGHTED AVERAGE
Unit cost =
WIP, Beg
Cost added
Total cost
EUP - see above
Cost per EUP
Total Cost per EUP

WEIGHTED AVERAGE
Finished and transferred (1,700 x P3.83)
Normal loss (200 x P3.83)
Total cost of finished and transferred
Transferred-In (300 x P0.73)

Materials (300 x P1.10)
Conversion (100 x P2)
Transferred-In (300 x P0.73)

Materials (300 x P1.10)
Conversion (300 x P2)
Abnormal Loss
NOTE: There may be a difference between Total Cost to Account For (TCTAF) and Total Cost as Accounted For (TCAF).
The difference is due to rounding off of decimal places for cost per EUP.
500
2,000
2,500
1,700
300
200
300
2,500

1,700 1,700 1,700
300 300 100
200 200 200
300 300 300
2,500 2,500 2,300
1,360.00
5,990.00
1,812.50
9,162.50
Beginning Cost + Current Cost


812.50 750 610
1,000 2,000 3,990
1,812.50 2,750 4,600
2,500.00 2,500.00 2,300.00
0.73 1.10 2.00
3.83
6,511.00
766.00
7,277.00
228.00
330.00
200.00
758.00
219.00
330.00
600.00
1,149.00
9,184.00
ted For (TCAF).

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Process Costing Problems and Solutions

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GENERAL PROCEDURES IN PROCESS COSTING SYSTEM

STEP 1 – Calculate the total units to account for

Beginning Inventory in units X

Accounted for as follows:

STEP 2 – Calculate equivalent units of production (EUP)

STEP 3 – Calculate the total cost to account

STEP 4 – Compute the cost per EUP

STEP 5 – Assign costs to inventories

Consider the following data for Candy Land Incorporated:

Candy Land Incorporated adds materials at the end of the process.

Beginning Inventory in units

Accounted for as follows:

STEP 2 – Calculate equivalent units of production (EUP)

Finished and transferred

STEP 3 – Calculate the total cost to account

STEP 4 – Compute the cost per EUP

EUP - see above

Cost per EUP

Total Cost per EUP

STEP 5 – Assign costs to inventories

Beginning Inventory in units

Accounted for as follows:

STEP 2 – Calculate equivalent units of production (EUP)

WIP, Beg (BI units x % work to be done)

STEP 3 – Calculate the total cost to account

STEP 4 – Compute the cost per EUP

EUP - see above

Cost per EUP

Total Cost per EUP

STEP 5 – Assign costs to inventories

tional decimal notation.

Prepare the Cost of Production Report. Use the FIFO method.

Beginning Inventory in units

Accounted for as follows:

STEP 2 – Calculate equivalent units of production (EUP)

WIP, Beg (BI units x % work to be done)

Cost per EUP (given)

Total Cost per EUP

Materials (14,500 x P1)

Materials (5,000 x P1)

Beginning Inventory (3/8 Complete) 4,000

Beginning Inventory in units 4,000

Accounted for as follows:

STEP 2 – Calculate equivalent units of production (EUP)

ASSUMPTION 2 - WEIGHTED AVERAGE

Beginning Inventory in units 4,000

Accounted for as follows:

STEP 2 – Calculate equivalent units of production (EUP)

Work In Process, April 1 (60% complete as to Conversion) 3,000

Beginning Inventory in units 3,000

Accounted for as follows:

STEP 2 – Calculate equivalent units of production (EUP)

ASSUMPTION 2 - WEIGHTED AVERAGE

Beginning Inventory in units 3,000

Accounted for as follows:

STEP 2 – Calculate equivalent units of production (EUP)

Beginning Inventory in units 250

Accounted for as follows:

STEP 2 – Calculate equivalent units of production (EUP)

Beginning Inventory in units 25,000

Accounted for as follows:

STEP 2 – Calculate equivalent units of production (EUP)

Transferred In Materials Conversion

Transferred In Materials Conversion