INTEGRATION: ADVANCED FINANCIAL ACCOUNTING AND REPORTING

PROCESS COSTING

PROBLEM 1
INSPIRE Inc.is a company manufacturing a product known as “HOPE” which undergoes a uniform process prior to its
completion. For the year ended Dec 31, 2022, the following data are provided by the company:
a. The work in process inventory on Jan 1, 2022 is 10,000 units which are 80% incomplete as regards to conversion
cost while the work in process inventory on Dec 31, 2022 is 60% complete as regards to conversion cost
b. The total units started during the year amounted to 90,000 units while the total units manufactured during the year
amounted to 70,000 units
c. There is no spoilage during the period
d. It is the company’s policy to apply direct labor and factory overhead evenly throughout the period while 2/5 of direct
materials are added at the start of the process while the remaining direct materials are added at the end of the
process.
e. The cost of Jan 1, 2022 work in process inventory consists of P100,000 direct materials, P200,000 direct labor and
P300,000 factory overhead.
f. The total manufacturing cost for the year consisted of P2M direct materials, P5M direct labor and P3M factory
overhead.

1. Under the Weighted Average process costing system, what is the cost per equivalent unit of production of
direct material and conversion cost, respectively?
2. Under the FIFO process costing system, what is the cost per equivalent unit of production of direct material
and conversion cost, respectively?

PROBLEM 2
SUCCESS Company employs weighted average process costing system in the assembly department and FIFO process
costing system in the finishing department concerning its only product which undergoes production in assembly department
and finishing department. The following data for the year ended Dec 31, 2022 are provided:

ASSEMBLY DEPARTMENT
Jan 1, 2022 10,000 units - 40% completed Direct Materials 300,000
as to conversion cost Direct Labor 500,000
Factory Overhead 200,000
Dec 31, 2022 15,000 units - 80% completed ?
as to conversion cost
Units started during 40,000 units Cost added during 2022
the year Direct Materials 1,200,000
Direct Labor 1,500,000
Factory Overhead 1,300,000
FINISHING DEPARTMENT
Jan 1, 2022 5,000 units - 70% incomplete Transferred In 1,000,000
as to conversion cost Direct Materials 600,000
Direct Labor 100,000
Factory Overhead 300,000
Dec 31, 2022 3,000 units - 10% incomplete ?
as to conversion cost
Units started during Cost added during 2022
the year Direct Materials 3,000,000
Direct Labor 4,000,000
Factory Overhead 1,000,000

Additional information for the year:

 It is the company’s policy to add conversion cost evenly throughout the period in the two departments.
 It is the company’s policy to add all direct materials in the assembly department at the start of the process while all
direct materials in the finishing department are added at the end of the process
 There is no spoilage in both departments.
INTEGRATION: ADVANCED FINANCIAL ACCOUNTING AND REPORTING
PROCESS COSTING

1. In the assembly department, what is the cost of goods manufactured or cost assigned to units completed
for the year ended December 31, 2022?
2. In the assembly department, what is the cost assigned to December 31, 2022 work in process inventory?
3. In the finishing department, what is the cost of goods manufactured or cost assigned to units completed
for the year ended Dec 31, 2022?
4. In the finishing department, what is the cost assigned to Dec 31, 2022 work in process inventory?

PROBLEM 3
JASSEN Company employs process costing system regarding its 3-point enhancer product. The following data are provided
for the year ended Dec 31, 2022:
a. It is the company’s policy to add conversion cost evenly throughout the period while 4/5 of the direct materials are
added at the start of the process while the remaining direct materials are added at the end of the process.
b. 10% of units started are normally spoiled which all come from the units started.
c. The January 1, 2022 work in process inventory consists of 20,000 units with the following costs: 400,000 direct
materials, 500,000 direct labor and 100,000 factory overhead. The beginning inventory is 72% complete as to
conversion cost.
d. The total manufacturing costs added during the year consists of P1,000,000 direct materials, P1,200,000 direct
labor and P300,000 factory overhead.
e. The units started during the year totaled 80,000 units while the units completed totaled 60,000 units.
f. The Dec 31, 2022 work in process inventory consists of 10,000 units which is 20% incomplete as to conversion
costs.
g. The inspection point occurs when the percentage of completion is 75% as to conversion cost.

1. Under the weighted average process costing system, what is the cost per equivalent unit for direct
materials and conversion cost, respectively?
2. Under the FIFO process costing system, what is the cost per equivalent unit for direct material and
conversion cost, respectively?

PROBLEM 4
China Manufacturing Company applied process costing in the manufacture of its sole product, “Sinovac”.
 Manufacturing starts in Department 1, where materials are all added at the start of processing. The good units are
then transferred to Department 2 where all the incremental materials needed for its completion are added after final
inspection.
 In Department 1, units are inspected at the end of processing while Department 2, inspection takes place when the
units are 90% completed.
 Department 1 uses FIFO costing while Department 2 uses the weighted average costing.

The production data for the month of August show the following:

Department 1 Department 2
Units
Work in process, beg 20,000 10,000
Work to be done 80% 20%
Work in process, end 30,000 17,500
Work completed 2/3 5/7
Started in process during August 150,000
Normal spoilage (4% of units started in
process) 2,500
Abnormal spoilage (1/4 of normal spoilage) 1,250

Cost
Work in Process, Aug 1:
Transferred in - 285,450
Materials 135,000 214,875
Conversion Costs 97,500 280,725

Current costs:
INTEGRATION: ADVANCED FINANCIAL ACCOUNTING AND REPORTING
PROCESS COSTING

Transferred in - ?
Materials 1,980,000 840,000
Conversion Costs 3,088,800 1,282,500

1. What is the total costs transferred to Department 2 and the amount of work in process, end in Department
1, respectively?
2. What is the total costs transferred to the Storeroom and the amount of work in process, end in Department
2, respectively?

PROBLEM 5
Blengblong Company employs process cost system, using FIFO method. A unit of product passes through two departments:
Assembly and Finishing before it is complete. Information regarding Assembly Department follow:

Work in Process, Aug 1 10,000 units

Spoiled units 7,500 units
Started in Production 65,000 units
Transferred out 60,000 units
Raw materials are added at the beginning of 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. The company usually experienced a 5% loss based on the completed units. Cost data for the month of August follow:
Materials Labor Overhead
Work in Process, beg 81,000 66,000 71,250
Current Cost 279,000 220,500 286,875

What is the total cost of units transferred out and total cost of work in process, end?