COST ACCOUNTING AND CONTROL

Process Costing – Self-study activity

GENERAL DIRECTION:
Read and analyze the following questions and type your answer in the space provided for each items.

Part I.
Vance Manufacturing Company began June 2011 with 10,000 units of inventory in process, 20 percent completed.
During the period, 50,000 units were completed and transferred to the finished goods warehouse. Ending inventory
consisted of 5,000 units, 70 percent completed. Materials were added at the beginning of the process.

Required:

Calculate the equivalent units for:

1. Materials costs under the weighted average process cost method.

2. Conversion costs under the weighted average process cost method.

3. Materials costs under the FIFO process cost method.

4. Conversion costs under the FIFO process cost method.

Part II.
Heap Company manufactures a product that passes through two processes: Fabrication and Assembly. The following
was obtained for the Fabrication Department for September:

a. All materials are added at the beginning of the process.

b. Beginning work in process had 80,000 units, 30% complete with respect to conversion costs.
c. Ending work in process had 17,000 units, 25% complete with respect to conversion costs.
d. Started in process, 95,000 units

5. How much is the equivalent units of production for direct materials using the weighted average method?

6. How much is the equivalent unit of production for conversion costs using weighted average method?

7. How much is the equivalent units of production for direct materials using the FIFO method?

8. How much is the equivalent units of production for conversion costs using the FIFO method?

Part III.
Toyco manufactures a wooden toy product in a two-stage production process. Wood material is brought into the
Forming Department where it is shaped. Shaped products are then moved to the Finishing Department where metal is
added. The following data is given for the Forming Department for April:

Units for April:

Work in process, beginning inventory April 1 300 units
Direct materials (100% complete)
Conversion (40% complete)

Units started in April: 2,200 units

Work in process, ending inventory April 30 500 units
 Direct materials (100% complete)
Conversion (25%)

Costs for April:

Work in process, beginning inventory
Direct materials $7,100
Conversion $4,525

Costs added during April:

Direct materials $70,400
Conversion $40,100

Round to two decimal places.

Required:

9. How many units were transferred to Finishing?

10. How many units were started and completed during April?

11. How many equivalent units of conversion does it take to complete the beginning inventory in the current period?

12. What is the FIFO cost assigned to the ending inventory?

13. What is the FIFO cost assigned to the units transferred out?

Part IV.
Xi Corporation produces a product that passes through two departments. For July, the following equivalent unit
schedule was prepared for the first department:

Materials Conversion
Units completed 180,000 180,000
Units, EWIP ´ fraction complete:
10,000 x 100% 15,000
10,000 x 40% 6,000
Equivalent units of output 195,000 186,000

Costs assigned to beginning work in process:

Materials: $51,000
Conversion: $24,750

Manufacturing costs incurred during the month:

Materials: $56,250
Conversion: $45,000

Required:

14. Compute the unit cost for July using the weighted average method.

15. Determine the cost of goods transferred out.

16. Determine the cost of ending work in process.

Part V.
 Fordman Company has a product that passes through two processes: Grinding and Polishing. During December, the
Grinding Department transferred 20,000 units to the Polishing Department. The cost of the units transferred into the
second department was $40,000. Direct materials are added uniformly in the second process. Units are measured the
same way in both departments.

The second department (Polishing) had the following physical flow schedule for December:
Units to account for:
Units, beginning work in process 4,000 40% complete
Units started
?
Total units to account for ?
Units accounted for:
Units, ending work in process 8,000 50% complete
Units completed ?
Units accounted for ?

Costs in beginning work in process for the Polishing Department were direct materials, $5,000; conversion costs, $6,000;
and transferred in, $8,000. Costs added during the month: direct materials, $32,000; conversion costs, $50,000; and
transferred in, $40,000.

Required:

17. Assuming the use of the weighted average method, compute the unit cost for the month

18. Assume the company uses the FIFO method, compute the unit cost for the month.

Part VI.
Larkin Company produces leather strips for western belts using three processes: cutting, design and coloring and
punching. The weighted average method is used for all three departments. The following information pertains to the
Design and Coloring Department for the month of June:
a. There was no beginning work in process.
b. There were 400,000 units transferred in from the Cutting Department.
c. Ending work in process, June 30: 50,000 strips, 80% complete with respect to conversion costs.
d. Units completed and transferred out: 330,000 strips. The following costs were added during the month:
Transferred in $2,000,000
Direct materials 600,000
Conversion costs 780,000
e. Direct materials are added at the beginning of the process.
f. Inspection takes place at the end of the process. All spoilage is considered normal
 Required:

19. Calculate equivalent units of production for transferred-in materials.

20. Calculate the equivalent units of production for direct materials added.

21. Calculate the equivalent units of production for conversion costs

22. Calculate the unit cost for transferred in materials

23. Calculate the unit costs for direct materials.

24. Calculate the unit cost for conversion cost.

25. What is the total cost of units transferred out?

26. What is the cost of ending work in process inventory?

27. Assume that all spoilage is considered abnormal? How much is the cost of units transferred out?

28. Assume that 80% of the units spoiled are abnormal and 20% are normal spoilage. How much is the loss charged to
abnormal loss account?

29. Assume that 80% of the units spoiled are abnormal and 20% are normal spoilage. How much is the loss that would be
assigned to the cost of goods transferred out?
COST ACCOUNTING AND CONTROL
Answer Section

PROBLEM

1. ANS:
a. and b.
Materials Conversion
Units completed 50,000 50,000
Add: Equiv. units in end. inv. 5,000 3,500
Equivalent units (a) 55,000 (b) 53,500

PTS: 1

2. ANS:
53,500

PTS: 1

3. ANS:
c. and d.
Materials Conversion costs
Equivalent units in process 55,000 53,500
Less: Equiv. units in beg. inv. 10,000 2,000
Equivalent units (c) 45,000 (d) 51,500

PTS: 1

4. ANS:
51,500

PTS: 1

5. ANS:
Equivalent units—Weighted average method:

Direct Materials Conversion Costs

Units completed ....................................................................... 158,000 158,000

Units, ending work in process:
17,000 × 100% ................................................................. 17,000
17,000 × 25% ............................................................................... 4,250
Equivalent units of output ...................................................... 175,000 162,250

PTS: 1

6. ANS:
162,250

PTS: 1

7. ANS:
Equivalent units—FIFO method:

Direct Materials
Conversion Costs
 Units started and completed..................................................... 78,000 78,000
Units, beginning work in process:
80,000 × 0%................................................................................ 0
80,000 × 70% ............................................................................... 56,000
Units, ending work in process:
17,000 × 100% ................................................................. 17,000
17,000 × 25% ...................................................................... 4,250
Equivalent units of output ........................................................ 95,000 138,250

PTS: 1

8. ANS:
138,250

PTS: 1

9. ANS:
2,500 - 500 = 2,000

PTS: 1

10. ANS:
Units started and completed = Units transferred out - Beginning inventory
Transferred out = 300 + 2,200 - 500 = 2,000
Started and completed = 2,000 - 300 = 1,700

PTS: 1

11. ANS:
300 - 120 = 180 (60%)

PTS: 1

12. ANS:
(500 x $32*) + (125 x $20*) = $18,500
* calculation of cost per unit

Equivalent units in process: Materials Conversion

Units completed 2,000 2,000
Add: Eq. units in end. inv. 500 125
Equivalent units in process 2,500 2,125
Less: Eq. units in beg. inv. 300 120
Equivalent units manufactured 2,200 2,005

Total costs to be accounted for: Materials Conversion Total

Beginning WIP $ 11,625
Current costs $70,400 $40,100 110,500
Total costs in process $122,125
Costs per equivalent unit $32.00 $20.00 $ 52.00

PTS: 1

13. ANS:
$11,625 + (180 x $20) + (1,700 x $52) = $103,625

PTS: 1
14. ANS:
a. Cost per equivalent unit:
Materials = ($51,000 + $56,250)/195,000 = $0.55
Conversion = ($24,750 + $45,000)/186,000 = $0.375
Total unit cost = $0.925 per equivalent unit

PTS: 1

15. ANS:
Cost of goods transferred out = $0.925 180,000 = $166,500

PTS: 1

16. ANS:
c. Cost of ending work in process
= (15,000 $0.55) + (6,000 $0.375)
= $8,250 + $2,250 = $10,500

PTS: 1

17. ANS:
Costs charged to the department:

Direct Conversion Transferred

Materials Costs In Total
Costs in BWIP ..................................................... $ 5,000 $ 6,000 $ 8,000 $ 19,000
Costs added by department ............................... 32,000 50,000 40,000 122,000
Total costs ............................................................ $37,000 $56,000 $48,000 $141,000

Unit cost = Unit direct materials cost + Unit conversion costs + Unit
transferred-in cost
= $37,000/20,000 + $56,000/20,000 + $48,000/24,000
= $1.85 + $2.80 + $2.00
= $6.65

PTS: 1

18. ANS:
Equivalent units schedule:
Direct Conversion Transferred
Materials Costs In
Units started and completed ................................................ 12,000 12,000 12,000
Units to complete in BWIP:
4,000 × 60% .........................................................2,400 2,400
Units in EWIP:
8,000 × 100% ................................................................. 8,000
8,000 × 50% .................................................................. 4,000 4,000
Total equivalent units ............................................................ 18,400 18,400 20,000

Unit cost = Unit direct materials cost + Unit conversion costs +

Unit transferred-in cost
= $32,000/18,400 + $50,000/18,400 + $40,000/20,000
= $1.74* + $2.72* + $2.00
= $6.46

*Rounded.
 PTS: 1

19. ANS:
400,000
TransferredDirect Conversion
In Materials Costs
Transferred out............................................................... 330,000 330,000 330,000
Normal spoilage ............................................................... 20,000 20,000 20,000
Ending work in process .................................................. 50,000 50,000 40,000
Equivalent units ............................................................. 400,000 400,000 390,000

PTS: 1

20. ANS:
400,000

PTS: 1

21. ANS:
390,000

PTS: 1

22. ANS:
Transferred in = $2,000,000/400,000 = $5.00

PTS: 1

23. ANS:
Unit direct materials = $600,000/400,000 = $1.50

PTS: 1

24. ANS:
Unit conversion costs = $780,000/390,000 = $2.00
Total unit cost = $5.00 + $1.50 + $2.00 = $8.50

PTS: 1

25. ANS:
Cost of units transferred out = ($8.50 × 330,000) + ($8.50 × 20,000)
= $2,805,000 + $170,000
= $2,975,000
Note: Normal spoilage is added to the cost of goods transferred out.

PTS: 1

26. ANS:
Cost of ending work in process:
($5.00 × 50,000) + ($1.50 × 50,000) + ($2.00 × 40,000) = $405,000

PTS: 1

27. ANS:
Cost of units transferred out = 2,805,000
 If all spoilage is abnormal, it would not be added to the cost of goods transferred out. It would be assigned to a loss
account and treated as a loss of the period. The following journal entry is required:

Loss from Abnormal Spoilage ............................................................... 170,000

Work in Process—Design and Coloring .................................................. 170,000

Viewing all spoilage as abnormal is consistent with a total quality management view. All waste is bad and should be
eliminated. There is no “normal waste.”

PTS: 1

28. ANS:
If there is 80% abnormal spoilage, then the cost of 16,000 units ($8.50 × 16,000)—$136,000—would be assigned to the
abnormal loss account,

PTS: 1

29. ANS:
the cost of the other 4,000 units would be assigned to the cost of goods transferred out ($8.50 × 4,000), or $34,000.

PTS: 1