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Cornerstone Exercise 6-21 Basic Cost Flows Grano Company produces 18-ounce boxes of a wheat cereal in
three departments: Mixing, Cooking, and Packaging. During August, Grano produced 150,000 boxes with the
following costs: Direct materials: Mixing Department $275,000, Cooking Department $125,000, Packaging
Department $110,000 Direct labor: Mixing Department 40,000, Cooking Department 25,000, 60,000 Applied
overhead: Mixing Department 50,000, Cooking Department 27,500, Packaging Department 77,500 Required: 1.
Calculate the costs transferred out of each department. 2. Prepare journal entries that reflect these cost transfers.

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Generating answers for you…

Let’s calculate the costs transferred out of each department first:

1. Mixing Department: The total cost for the Mixing Department is the sum of direct materials, direct
labor, and applied overhead. So, $275,000 (direct materials) + $40,000 (direct labor) + $50,000
(applied overhead) = $365,000.

2. Cooking Department: Similarly, the total cost for the Cooking Department is $125,000 (direct
materials) + $25,000 (direct labor) + $27,500 (applied overhead) = $177,500.

3. Packaging Department: The total cost for the Packaging Department is $110,000 (direct materials) +
$60,000 (direct labor) + $77,500 (applied overhead) = $247,500.

Now let’s prepare the journal entries that reflect these cost transfers:

1. Mixing Department:

o Debit Work in Process—Cooking Department: $365,000

o Credit Work in Process—Mixing Department: $365,000

2. Cooking Department:

o Debit Work in Process—Packaging Department: $177,500

o Credit Work in Process—Cooking Department: $177,500

3. Packaging Department:

o Debit Finished Goods: $247,500

o Credit Work in Process—Packaging Department: $247,500

These entries reflect the transfer of costs from one department to the next as the product moves through the
production process.

OR,

1. The costs transferred out of each department are the sum of the direct materials, direct labor, and
applied overhead for that department. Therefore, we can calculate them as follows:
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Department Costs Transferred Out

Mixing $275,000 + $40,000 + $50,000 = $365,000

Cooking $125,000 + $25,000 + $27,500 = $177,500

Packaging $110,000 + $60,000 + $77,500 = $247,500

2. The journal entries that reflect these cost transfers are:

Account Debit Credit

Work in Process - Cooking 365,000

Work in Process - Mixing 365,000

Work in Process - Packaging 177,500

Work in Process - Cooking 177,500

Finished Goods Inventory 247,500

Work in Process - Packaging 247,500

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Cornerstone Exercise 6-22 Equivalent Units, No Beginning Work in Process Hromas Manufacturing produces
cylinders used in internal combustion engines. During June, Hromas’ welding department had the following
data:

Units in BWIP — Units completed 50,000

Units in EWIP (40 percent complete) 7,500

Required: Calculate June’s output for the welding department in equivalent units of production.

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Generating answers for you…

To calculate June’s output for the welding department in equivalent units of production, we need to consider
both the units completed and the units in ending work in process (EWIP) that are partially complete.

1. Units completed: These are fully complete, so all 50,000 units count as 50,000 equivalent units.
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2. Units in EWIP: These are only 40% complete, so they count as less than their full unit amount. We
calculate their equivalent units as 7,500 units * 40% = 3,000 equivalent units.

Adding these together, June’s output for the welding department in equivalent units of production is 50,000
(from completed units) + 3,000 (from EWIP) = 53,000 equivalent units.

OR,

To calculate the equivalent units of production for the welding department, we need to use the following
formula1:

Equivalent units of production = units transferred out + equivalent units in ending work in process inventory

Since there is no beginning work in process inventory, we can ignore the subtraction term. Therefore, we have:

Equivalent units of production = 50,000 + (7,500 x 40%)

Equivalent units of production = 50,000 + 3,000

Equivalent units of production = 53,000

This means that the welding department produced 53,000 equivalent units of production in June. I hope this
helps you understand how to calculate equivalent units of production. 😊

Cornerstone Exercise 6-23 Unit Cost, Valuing Goods Transferred Out and EWIP

During May, the molding department of Lawler Foundry completed and transferred out 42,000 units. At the end
of May, there were 15,000 units in process, 60 percent complete. Paterson incurred manufacturing costs totaling
$612,000.

Required: 1. Calculate the unit cost.

2. Calculate the cost of goods transferred out and the cost of EWIP.

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Generating answers for you…

1. Calculate the unit cost

The total number of equivalent units is the sum of the units completed and transferred out (42,000 units) and the
equivalent units in ending work in process (EWIP), which is 60% of 15,000 units, or 9,000 units. So, the total
equivalent units is 42,000 + 9,000 = 51,000 units.

The unit cost is then calculated by dividing the total manufacturing costs by the total equivalent units. So,
$612,000 / 51,000 units = $12 per unit.

2. Calculate the cost of goods transferred out and the cost of EWIP

The cost of goods transferred out is the unit cost times the number of units completed and transferred out. So,
$12 per unit * 42,000 units = $504,000.

The cost of EWIP is the unit cost times the number of equivalent units in EWIP. So, $12 per unit * 9,000
equivalent units = $108,000.
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OR,

Here is my answer to your question:

1. To calculate the unit cost, we need to first calculate the equivalent units of production for the molding
department. We can use the following formula1:

Equivalent units of production = units transferred out + equivalent units in ending work in process inventory

Since there is no beginning work in process inventory, we can ignore the subtraction term. Therefore, we have:

Equivalent units of production = 42,000 + (15,000 x 60%)

Equivalent units of production = 42,000 + 9,000

Equivalent units of production = 51,000

Next, we need to divide the total manufacturing costs by the equivalent units of production to get the unit cost.
Therefore, we have:

Unit cost = $612,000 / 51,000

Unit cost = $12

2. To calculate the cost of goods transferred out and the cost of EWIP, we need to multiply the unit cost
by the equivalent units for each category. Therefore, we have:

Cost of goods transferred out = $12 x 42,000

Cost of goods transferred out = $504,000

Cost of EWIP = $12 x 9,000

Cost of EWIP = $108,000

I hope this helps you understand how to calculate unit cost, cost of goods transferred out and cost of EWIP in
process costing. 😊

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Cornerstone Exercise 6-24 Weighted Average Method, Unit Cost, Valuing Inventories Manzer Enterprises
produces premier raspberry jam. Output is measured in pints. Manzer uses the weighted average method. During
January, Manzer had the following production data:

Units in process, January 1, 60 percent complete 36,000 pints

Units completed and transferred out 240,000 pints

Units in process, January 31, 40 percent complete 75,000 pints

Costs: Work in process, January 1 $ 54,000

Costs added during January 351,000

Required: 1. Using the weighted average method, calculate the equivalent units for January.
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2. Calculate the unit cost for January.

3. Assign costs to units transferred out and EWIP.

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Generating answers for you…

1. Equivalent Units for January

The equivalent units for January are calculated by adding the units completed and transferred out and the
equivalent units in ending work in process (EWIP), which is 40% of 75,000 pints.

So, equivalent units = 240,000 pints (units completed and transferred out) + (75,000 pints * 40%) = 240,000
pints + 30,000 pints = 270,000 pints

2. Unit Cost for January

The unit cost for January is calculated by dividing the total costs by the equivalent units. The total costs include
the costs of work in process at the beginning of January and the costs added during January.

So, unit cost = ($54,000 + $351,000) / 270,000 pints = $405,000 / 270,000 pints = $1.50 per pint

3. Costs Assigned to Units Transferred Out and EWIP

The cost of units transferred out is the unit cost times the number of units completed and transferred out.

So, cost of units transferred out = $1.50 per pint * 240,000 pints = $360,000

The cost of EWIP is the unit cost times the number of equivalent units in EWIP.

So, cost of EWIP = $1.50 per pint * 30,000 pints = $45,000

OR,

Here is my answer to your question:

1. Using the weighted average method, the equivalent units for January are calculated as follows:

Cost Units Completed and

Units in EWIP Equivalent Units
Component Transferred Out

75,000 x 40% = 240,000 + 30,000 =

Materials 240,000
30,000 270,000

75,000 x 40% = 240,000 + 30,000 =

Conversion 240,000
30,000 270,000
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Note: Since there is no information given about the percentage of completion for materials and conversion in the
beginning work in process inventory, we assume that they are the same as the overall percentage of completion
(60%).

2. The unit cost for January is calculated by dividing the total costs (including the beginning work in
process costs and the costs added during January) by the equivalent units. Therefore, we have:

Cost Component Total Costs Equivalent Units Unit Cost

$54,000 + $351,000 =
Materials 270,000 $405,000 / 270,000 = $1.50
$405,000

$54,000 + $351,000 =
Conversion 270,000 $405,000 / 270,000 = $1.50
$405,000

3. The costs assigned to units transferred out and EWIP are calculated by multiplying the unit cost by the
equivalent units for each cost component. Therefore, we have:

Equivalent Cost of Goods Equivalent

Cost Unit Cost of
Units Transferred Units in
Component Cost EWIP
Transferred Out Out EWIP

$1.50 x
$1.50 x 240,000
Materials $1.50 240,000 30,000 30,000 =
= $360,000
$45,000

$1.50 x
$1.50 x 240,000
Conversion $1.50 240,000 30,000 30,000 =
= $360,000
$45,000

Total Costs $720,000 $90,000

I hope this helps you understand how to use the weighted average method to calculate equivalent units, unit cost
and cost assignment in process costing. 😊
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Cornerstone Exercise 6-25 Physical Flow Schedule Buckner Inc. just finished its second month of operations.
Buckner mass produces integrated circuits. The following production information is provided for December:
Units in process, December 1, 80 percent complete 100,000 Units completed and transferred out 475,000 Units
in process, December 31, 60 percent complete 75,000 Required: Prepare a physical flow schedule.

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Generating answers for you…

A physical flow schedule is a summary of the units of product that are moving through a production process.
Here’s the physical flow schedule for Buckner Inc. for December:

Description Units

Units in process, December 1 100,000

Units started into production during December 450,000

Total units accounted for 550,000

Units completed and transferred out 475,000

Units in process, December 31 75,000

Here’s how we got these numbers:

 The total units accounted for (550,000) is the sum of the units in process at the beginning of December
(100,000) and the units started into production during December. We can find the latter by adding the
units completed and transferred out (475,000) and the units still in process at the end of December
(75,000), which gives us 450,000.

 The units completed and transferred out (475,000) and the units in process at the end of December
(75,000) are given in the problem.

This schedule helps Buckner Inc. keep track of its product as it moves through the production process.

OR,

To prepare a physical flow schedule, we need to analyze the flow of actual units and account for the units in
process, completed and transferred out, and in process at the end of the period1. The physical flow schedule can
be presented in a table format as follows:

Category Units

Units in process, December 1 100,000

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Category Units

+ Units started during December 450,000

= Total units to account for 550,000

- Units completed and transferred out 475,000

= Units in process, December 31 75,000

Note: The units started during December can be calculated by adding the units completed and transferred out
and the units in process at the end of the period, and then subtracting the units in process at the beginning of the
period. Alternatively, they can be given in the problem.

I hope this helps you understand how to prepare a physical flow schedule. 😊