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CHAPTER 6 PROCESS COSTING QUESTIONS 1.

A company that produces homogeneous goods in mass quantities is likely to use a process costing system. The company can either have a single department or multiple departments. Job order costing and process costing are similar in that they are both methods of assigning costs to products. Also, the methods use similar product accounts (raw materials, work in process, finished goods, cost of goods sold) to capture the costs associated with production and use similar cost pools (direct material, direct labor, and overhead). Job order costing and process costing differ in the way in which costs are gathered. In a job order costing system, costs are accumulated by department and by job; in a process costing system, costs are accumulated by production departments for the products that flow through those departments. In process costing, production must be determined on the basis of equivalent units to properly allocate the costs associated with each cost component to the work that was completed during the period and to the work that is still in process at the end of the period. Equivalent units of production are unnecessary in job order costing.

2.

The only difference between weighted average and FIFO equivalent units of production is in the treatment of the work that was completed on beginning inventory in the prior period. Under weighted average, the work performed on beginning inventory in the prior period is combined with the work performed during the current period. Under FIFO, the work performed on beginning inventory during the prior period is held out separately and not commingled with the work performed during the current period. The FIFO method more accurately portrays the actual physical flow of units through the manufacturing process because it is most likely that the units in beginning inventory will be the first units to be completed during the current period—thus a firstin, firstout flow.

3.

An equivalent unit of production is an accounting computation that puts partially completed and wholly completed units on a comparable basis. Without use of equivalent units, partially completed and fully completed units would be combined as if they were homogeneous measures of output, resulting in meaningless data since fully and partially completed units are different outputs.

4.

One EUP calculation is generally not sufficient because each component may be at a different percentage of completion within a production department. However, if components are at the same percentage of completion, one EUP calculation can be made. For example, if OH is applied on the basis of direct labor, a single © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.

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“conversion” cost component calculation can be made. Or, if several direct materials are added at the beginning of the process, they may be combined as a single cost component. 5. The units started and completed in a period are calculated as the total units completed during the period minus the units that were in the beginning inventory. This figure can be used in both the weighted average and FIFO methods as shown in the chapter. There are, however, other methods of computing EUP in which the units started and completed are not shown separately. This calculation is necessary for the FIFO method because work in the prior period cannot be commingled with work performed in the current period. This calculation is not necessary for the weighted average method because work performed on the current period’s beginning inventory in the prior period need not be separated from work performed to complete the beginning inventory in the current period. 6.

The term transferredout cost is the cost amount that is sent from WIP Inventory to either the next WIP department or to FG Inventory. Under the WA method, the units transferred are not distinguished by when they were begun (whether in the previous or the current period); thus, all transferred out units have the same perunit cost and only one computation is necessary. Under the FIFO method, the units that were in the beginning WIP Inventory are considered separately from those that were begun in the current period. Thus, the beginning WIP costs must attach to those specific units, which must then be completed at current period costs for direct material, direct labor, and overhead. After determination of the total cost to manufacture the beginning WIP Inventory units, the next computation reflects the units that were started and completed in the current period, which only includes current period costs.

7.

Under either the weighted average or FIFO method, costs are assigned to ending inventory by multiplying the cost per EUP for each cost component times the EUP calculated for that component. The costs for these components are then totaled.

8.

The only difference between process costing in a multidepartment environment and a single department environment is that there will be a cost component labeled “Transferred In.” The costs of previous departments must follow the flow of goods into successor departments to determine the full cost of production.

9.

The cost per unit transferred out of the first department will always be equal to the cost per unit transferred in to the second department unless there is a change in the unit measurement in the second department. For example, the first department might use pounds of cereal, but the second department might measure units in 24oz. boxes of cereal. Thus, if the cost per pound of cereal transferred out were $2, the cereal cost per box transferred in would be ($2 per pound × 1.5 pounds) or $3.

10.

A hybrid costing system is one in which process costing is used to © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.

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account for certain product costs and job order costing is used to account for other product costs. Hybrid costing is common in environments that have, for example, material costs that vary substantially from one production run to another (gold versus copper), but require all products to flow through the same physical conversion processes. In this example, the material would be accounted for on a job order basis and the conversion would be accounted for using process costing. 11. Under a standard costing system, the Raw Material, Work in Process, and Finished Goods Inventory accounts are accounted for at standard costs. Actual costs of each process or each department are also captured in a standard costing system, and variances can be computed as differences between the standard and actual amounts for each cost component. The variances provide information to management about the efficiency of operations because they reflect differences between expected (standard) and actual costs. 12.

The “method of neglect” is used to treat the cost of normal spoilage in a process costing system. Under this method, the spoiled units are simply ignored in the cost of production report because it is assumed that there will always be a given level (or less) of spoilage and that such a level cannot be eliminated. By using the method, the good production absorbs the cost of the spoiled production.

13.

Normal loss refers to an expected reduction in production quantity based on the company’s production technology and production practices. Abnormal loss refers to a quantity of loss above the normal loss quantity. A normal loss creates an expected production cost, and using the “method of neglect,” that cost is inventoriable as part of the cost of good production. The method of neglect ignores the spoiled units in the EUP schedule and, as such, assigns costs to good units. The cost of spoiled units found at an inspection point will be assigned to all units that have passed the inspection point. The method of neglect raises the cost per equivalent unit because no costs are assigned to the spoiled units. Abnormal spoilage cost is not expected, and thus, it is not inventoriable. Abnormal losses would more likely be preventable than normal losses because abnormal losses are less likely to be caused by factors that are inherent in the materials or production methods. For example, a known amount of material loss (waste) is to be expected if lower quality materials are utilized. However, any loss beyond the expected amount would likely be caused by other factors that are subject to management control, e.g., production errors.

© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.

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EXERCISES 14. Each student will have a different answer. No solution provided. 15. a. 24,000 + 600,000 = 624,000 pounds b. & c. Beginning WIP Inventory Started To account for Completed Ending WIP Inventory

24,000 600,000 624,000 (608,000) 16,000

Units started and completed = 608,000 – 24,000 = 584,000 Units DM CC 24,000 24,000 24,000 584,000 584,000 584,000 16,000 16,000 10,400 624,000 624,000 618,400

Beginning WIP Inventory Started & completed Ending WIP Inventory (65%) EUP 16. a. & b. Beginning WIP Inventory (30%) Started To account for

70,000 445,300 515,300

Beginning WIP Inventory Started & completed Ending WIP Inventory (35%) EUP 17. a.

Beginning WIP Inventory Started and completed Ending WIP Inventory Accounted for

Units 70,000 357,500 87,800 515,300

DM 70,000 357,500 87,800 515,300

Beginning WIP Inventory (40%) Started Units to account for

Units 10,000 350,000 360,000

Beginning WIP Inventory Started and completed Transferred out Ending WIP Inventory (70%) Units accounted for

10,000 334,000 344,000 16,000 360,000

Beginning WIP Inventory (30%) Started Units to account for Beginning WIP Inventory Started and completed

Units 40,000 480,000 520,000 40,000 454,000

b.

70,000 357,500 87,800 515,300

CC 70,000 357,500 30,730 458,230 CC

10,000 334,000 11,200 355,200 CC

40,000 454,000


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Transferred out Ending WIP Inventory (80%) Units accounted for Beginning WIP Inventory (55%) Started Units to account for

494,000 26,000 520,000 Units 15,000 405,000 420,000


15,000 400,800 415,800 4,200 420,000


Units 10,800 359,100 369,900


10,800 340,800 351,600 18,300 369,900

c.

d.

20,800 514,800 CC

15,000 400,800 3,780 419,580 CC

10,800 340,800 8,235 359,835

18. a. Work to be performed = 100% – 45% = 55% for conversion costs only b. & c. Beginning WIP Inventory Started Accountable for Completed Ending WIP Inventory

24,000 600,000 624,000 (608,000) 16,000

Units started and completed = 608,000 – 24,000 = 584,000 Units Beginning WIP Inventory (55%) 24,000 Started & completed 584,000 Ending WIP Inventory (65%) 16,000 EUP 624,000 19. a. & b. Beginning WIP Inventory Started To account for

70,000 445,300 515,300

DM

CC 13,200 584,000 10,400 607,600

0 584,000 16,000 600,000

Beginning WIP Inventory Started and completed Ending WIP Inventory Accounted for

Beginning WIP Inventory (70%)

Units 70,000

70,000 357,500 87,800 515,300 DM 0

CC 49,000


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Started & completed Ending WIP Inventory (35%) EUP

357,500 357,500 357,500 87,800 87,800 30,730 515,300 445,300 437,230


Units 10,000 350,000 360,000

Beginning WIP Inventory (60%) Started and completed Transferred out Ending WIP Inventory (70%) Units accounted for

10,000 334,000 344,000 16,000 360,000


Units 40,000 480,000 520,000


40,000 454,000 494,000 26,000 520,000

c. Beginning WIP Inventory (55%) Started Units to account for

Units 15,000 405,000 420,000


15,000 400,800 415,800 4,200 420,000


Units 10,800 359,100 369,900


10,800 340,800 351,600 18,300 369,900

20. a.

b.

d.

CC

6,000 334,000 11,200 351,200 CC

28,000 454,000 20,800 502,800 CC

6,750 400,800 3,780 411,330 CC

7,020 340,800 8,235 356,055


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21. a. Beginning WIP Inventory (100%; 60%; 75%) Started To account for

142

Beginning WIP 15,000 Inventory 620,000 Started and completed 635,000 Ending WIP Inventory (100%; 35%; 60%) Accounted for

25,400 635,000

Beginning WIP Inventory Started & completed Ending WIP Inventory Equivalent units

Units 15,000 594,600 25,400 635,000

DM 15,000 594,600 25,400 635,000

Beginning WIP Inventory Started & completed Ending WIP Inventory Equivalent units

Units 15,000 594,600 25,400 635,000

DM 0 594,600 25,400 620,000

DL OH 6,000 3,750 594,600 594,600 8,890 15,240 609,490 613,590

635,000

618,490

624,840

(9,000) 609,490

(11,250) 613,590

b.

c. Equivalent units (WA) EUP in beginning WIP Inventory Equivalent units (FIFO)

(15,000) 620,000

DL 15,000 594,600 8,890 618,490

15,000 594,600

22. a. Beginning WIP Inventory Tons started Total tons to account for

180,000 3,400,000 3,580,000

b. Total tons to account for Tons in ending WIP Inventory Tons transferred out Tons in beginning WIP Inventory Tons started & completed (tons)

3,580,000 (165,000) 3,415,000 (180,000) 3,235,000

c.

OH 15,000 594,600 15,240 624,840

Beginning WIP Inventory Started & completed Ending WIP Inventory (100%, 40%) WA EUP

Material 180,000 3,235,000 165,000 3,580,000

Conversion 180,000 3,235,000 66,000 3,481,000

Beginning WIP Inventory (0%, 35%) Started & completed Ending WIP Inventory (100%, 40%) FIFO EUP

Material 0 3,235,000 165,000 3,400,000

Conversion 63,000 3,235,000 66,000 3,364,000

d.

e. WA EUP

DM 3,580,000

CC 3,481,000


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Equivalent units in BI FIFO EUP

(180,000) (117,000) 3,400,000 3,364,000

23. a. Beginning Inventory Units started Units to account for

21,600 561,000 582,600

b. Units to account for Units in BI Units in EI Units started & completed c.

582,600 (21,600) (13,700) 547,300

BI Started & completed EI (75%, 25%, 10%) EUP (WA)

DM 21,600 547,300 10,275 579,175

DL 21,600 547,300 3,425 572,325

OH 21,600 547,300 1,370 570,270

BI (15%, 40%, 55%) Started & completed EI (75%, 25%, 10%) EUP (FIFO)

DM 3,240 547,300 10,275 560,815

DL 8,640 547,300 3,425 559,365

OH 11,880 547,300 1,370 560,550

EUP (WA) Equivalent units in BI EUP (FIFO)

DM 579,175 (18,360) 560,815

DL 572,325 (12,960) 559,365

OH 570,270 (9,720) 560,550

d.

e.

24. a. DL cost = Conversion cost – OH cost = $189,648 – $85,200 = $104,448 b. Beginning WIP Inventory Current period Total costs Divided by EUP Cost per EUP 25. WA EUP Beginning WIP EUP FIFO EUP Current period cost Divided by EUP Cost per EUP 26. a. Beginning WIP Current period

DM $ 26,232 158,688 $184,920 ÷ 53,600 $3.45 DM 53,600 (7,200) 46,400 $158,688 ÷ 46,400 $3.42

DM $ 19,600 54,000

DL $ 19,504 104,448 $123,952 ÷ 48,800 $2.54

Overhead $ 20,640 85,200 $105,840 ÷ 42,000 $2.52

DL 48,800 (8,000) 40,800 $104,448 ÷ 40,800 $2.56

Overhead 42,000 (7,920) 34,080 $85,200 ÷ 34,080 $2.50

DL $ 6,320 34,720

OH $ 10,020 84,480

Total $ 35,940 173,200


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Total

$ 73,600

$41,040

$ 94,500

$209,140

b. Total costs WA EUP Cost per EUP

$ 73,600 ÷ 160,000 $0.46

$ 41,040 ÷ 152,000 $0.27

$ 94,500 ÷ 150,000 $0.63

$209,140

c. Current costs FIFO EUP Cost per EUP

$ 54,000 ÷ 120,000 $0.45

$ 34,720 ÷ 124,000 $0.28

$ 84,480 ÷ 132,000 $0.64

$173,200

160,000 120,000 40,000

152,000 124,000 28,000

150,000 132,000 18,000

100%

70%

45%

d. WA EUP FIFO EUP Beg. WIP EUP Percent complete

$1.36

Units

27. Beginning WIP Inventory Units started Units to account for

9,800 81,500 91,300

Canisters Beginning WIP Inventory Started & completed EI EUP Costs: Beginning WIP Current period Total cost Divided by EUP Cost per EUP

9,800 76,900 4,600 91,300

Canisters $ 6,535 61,940 $68,475 ÷ 91,300 $0.75

28. a.

$1.37

Units Beginning WIP Inventory Started & completed Ending WIP Inventory Accounted for Other Materials 9,800 76,900 1,840 88,540

Other Materials $ 6,174 86,793 $92,967 ÷ 88,540 $1.05

Beginning WIP Inventory Units started Units to account for

Units 400 3,800 4,200

Beginning WIP Inventory Units started & completed Total units completed Ending WIP Inventory Units accounted for

400 3,500 3,900 300 4,200

DL 9,800 76,900 920 87,620

DL $ 5,594 82,026 $87,620 ÷ 87,620 $1.00

9,800 76,900 4,600 91,300 OH 9,800 76,900 460 87,160 OH $ 1,070 160,176 $161,246 ÷ 87,160 $1.85


Total $ 19,373 390,935 $410,308 $4.65

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Material 400 3,500 120 4,020

Beginning WIP Inventory Units started & completed Ending WIP Inventory EUP b.

Material $ 4,349 60,775 $65,124 ÷ 4,020 $16.20

Beginning WIP Current costs Total cost Divided by EUP (WA) Cost per EUP

29.

Conversion 400 3,500 180 4,080 Conversion $ 4,658 46,750 $51,408 ÷ 4,080 $12.60

Total $ 9,007 107,525 $116,532 $28.80

Units Beginning WIP Inventory Units started Units to account for

Units Beginning WIP Inventory Started & completed Ending WIP Inventory Accounted for

9,800 81,500 91,300

Canisters Beginning WIP Inventory Started & completed EI EUP

0 76,900 4,600 81,500

Costs: Current period Divided by EUP Cost per EUP

Other Materials

Canisters $61,940 ÷ 81,500 $0.76

Other Materials $86,793 ÷ 82,660 $1.05

3,920 76,900 1,840 82,660 DL $82,026 ÷ 83,700 $0.98

9,800 76,900 4,600 91,300 DL

OH

5,880 76,900 920 83,700

7,840 76,900 460 85,200

OH Total $160,176 $390,935 ÷ 85,200 $1.88 $4.67

Units 400 3,800 4,200 400 3,500 3,900 300 4,200

30. a. Beginning WIP Inventory Units started Units to account for Beginning WIP Inventory Units started & completed Total units completed Ending WIP Inventory Units accounted for Material

Conversion


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Beginning WIP Inventory Units started & completed Ending WIP Inventory EUP b. Current costs Divided by EUP (FIFO) Cost per EUP

146

120 3,500 120 3,740

60 3,500 180 3,740

Material $60,775 ÷ 3,740 $16.25

Conversion $46,750 ÷ 3,740 $12.50

Total $107,525 $28.75

31. a. 390,000 × ($7.50 + $9.00 + $10.20) = 390,000 × $26.70 = $10,413,000 b. DM: $7.50 × (55,500 × 100%) DL: $9.00 × (55,500 × 30%) OH: $10.20 × (55,500 × 25%) Total of ending inventory

$416,250 149,850 141,525 $707,625


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c. Cost of goods transferred out Ending WIP Total cost to account for

$10,413,000 707,625 $11,120,625

32. a. BI cost Cost to complete: DM (42,600 × 20% × $10.74) DL (42,600 × 55% × $13.88) OH (42,600 × 70% × $24.80) Total cost of BI transferred

$ 458,482.00 $ 91,504.80 325,208.40 739,536.00

1,156,249.20 $1,614,731.20

b. Goods started and completed = 1,570,000 – 42,600 = 1,527,400 Total FIFO cost per EUP = $10.74 + $13.88 + $24.80 = $49.42 Total cost of BI transferred Cost of goods S&C (1,527,400 × $49.42) Total cost of goods transferred

$ 1,614,731.20 75,484,108.00 $ 77,098,839.20

c. Cost of ending inventory: DM (28,400 × 35% × $10.74) DL (28,400 × 15% × $13.88) OH (28,400 × 25% × $24.80) Total cost of EI d. Total cost to account for Cost of goods transferred Cost of ending inventory Total cost to account for

$106,755.60 59,128.80 176,080.00 $341,964.40 $77,098,839.20 341,964.40 $77,440,080.60

33. a. Because direct material (other than packaging) is 100 percent complete at the start of production, the number of EUP shown for direct material is also the number of units in BI. Material (54,000 ÷ 54,000) = 100% Packaging (0 ÷ 54,000) = 0% Labor (16,200 ÷ 54,000) = 30% Overhead (18,900 ÷ 54,000) = 35% b. Beginning WIP Inventory: DM (other than packaging) DL Overhead Complete beginning WIP Inventory: Packaging (54,000 × 100% × $3.00) DL (54,000 × 70% × $10.84) Overhead (54,000 × 65% × $7.68) Total cost to account for

$789,040 91,862 145,908 $162,000 409,752 269,568

$1,026,810

841,320 $1,868,130


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c. # of units S&C = Units completed – Units in BI # of units S&C = 370,000 – 54,000 = 316,000 Cost of units S&C = 316,000 × ($29.50 + $3.00 + $10.84 + $7.68) = 316,000 × $51.02 = $16,122,320 d. DM (other than packaging) (12,000 × 100% × $29.50) Labor (12,000 × 30% × $10.84) Overhead (12,000 × 55% × $7.68) Total 34. a. Beginning WIP Started Units to account for Beginning WIP Started & completed Ending WIP Units accounted for Beginning WIP Current period Total costs EUP Cost per EUP

$354,000 39,024 50,688 $443,712

1,000 8,400 9,400 Units 1,000 8,100 300 9,400

Material 1,000 8,100 240 9,340

Conversion 1,000 8,100 210 9,310

Total $ 5,006.30 86,354.00 $91,360.30

Material $ 4,133.20 62,928.00 $67,061.20 ÷ 9,340 $7.18

Conversion $ 873.10 23,426.00 $24,299.10 ÷ 9,310 $2.61

$9.79

b. Cost transferred out = 9,100 × $9.79 = $89,089 c. Ending WIP DM (240 × $7.18) CC (210 × $2.61) Total d. Complete BI (40%, 70%) Started & completed Ending WIP Units accounted for Beginning WIP Current Period Total costs EUP Cost per EUP

$1,723.20 548.10 $2,271.30 Units Material 1,000 400 8,100 8,100 300 240 9,400 8,740 Total Material $ 5,006.30 86,354.00 $62,928.00 $91,360.30 ÷ 8,740 $9.80 $7.20

Conversion 700 8,100 210 9,010 Conversion $23,426.00 ÷ 9,010 $2.60


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e. Transferred out: Costs in BI Cost to complete BI DM (400 × $7.20) CC (700 × $2.60) Started & completed (8,100 × $9.80) Total cost transferred

$5,006.30 2,880.00 1,820.00

f. Ending WIP DM (240 × $7.20) CC (210 × $2.60) Total

$ 9,706.30 79,380.00 $89,086.30

$1,728 546 $2,274

g. WIP Inventory RM Inventory

62,928 62,928

WIP Inventory Wages Payable (or Cash)

13,070

WIP Inventory Factory Overhead Control

10,356

FG Inventory WIP Inventory

89,089

13,070 10,356

EUP 4,000 0 3,200

35. a. Ending WIP Inventory Transferred in (4,000 × 100%) Material (4,000 × 0%) Conversion (4,000 × 80%) Total cost

89,089

Cost per EUP $10 2 6 $18

Total Cost $40,000 0 19,200 $59,200

b. Transferred out: 25,000 × ($10 + $2 + $6) = 25,000 × $18 = $450,000 c. Finished Goods Inventory WIP Inventory––Casing Dept. 36. a. Beginning WIP Inventory Transferred in Units to account for

Beginning WIP Inventory Started & completed Ending WIP Inventory

5,000 80,000 85,000

450,000 450,000 Beginning WIP Inventory Started & completed Ending WIP Inventory Units accounted for

Units 5,000 74,000 6,000

Trans. In 5,000 74,000 6,000

Material 5,000 74,000 0

5,000 74,000 6,000 85,000 Conversion 5,000 74,000 4,800


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150

EUP (WA)

85,000

b. Costs Beginning WIP Inventory Current period Total cost to account for Divided by EUP Cost per EUP

85,000

79,000

Total Trans. In Material $ 8,643 $ 7,550 $ 0 104,261 80,000 10,270 $112,904 $87,550 $10,270 ÷ 85,000 ÷ 79,000 $1.34 $1.03 $0.13

83,800

Conversion $ 1,093 13,991 $15,084 ÷ 83,800 $0.18

c. 79,000 × $1.34 = $105,860 d. Transferred in (6,000 × $1.03) Conversion (4,800 × $0.18) Total ending WIP cost 37. a. Beginning WIP Inventory Transferred in Units to account for

$6,180 864 $7,044

5,000 80,000 85,000

Complete BI Started & completed Ending WIP Inventory EUP (WA) b. Costs Beginning WIP Inventory Current period Total cost to account for Divided by EUP Cost per EUP

Beginning WIP Inventory Started & completed Ending WIP Inventory Units accounted for

Units Tran. In 5,000 0 74,000 74,000 6,000 6,000 85,000 80,000

Material 5,000 74,000 0 79,000

Conversion 3,500 74,000 4,800 82,300

Total

Trans. In

Material

Conversion

$80,000

$10,270

$13,991

÷ 80,000 $1.00

÷ 79,000 $0.13

÷ 82,300 $0.17

$ 8,643 104,261 $112,904 $1.30

c. Beginning WIP costs Cost to complete: DM (5,000  $0.13) CC (3,500  $0.17) Started and completed (74,000  $1.30) Cost transferred out d. Transferred in (6,000  $1.00)

Conversion (4,800  $0.17) Total ending WIP cost

5,000 74,000 6,000 85,000

$8,643 650 595 $ 9,888 96,200 $106,088 $6,000 816 $6,816


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38. a. Fabrication: Beginning WIP Inventory Started Units to account for

Beginning WIP Inventory Started & completed Ending WIP Inventory EUP (WA)

Beginning WIP 5,000 Inventory 40,000 Started & completed 45,000 Ending WIP Inventory Units accounted for Units 5,000 33,200 6,800 45,000

Material 5,000 33,200 6,800 45,000

5,000 33,200 6,800 45,000 Conversion 5,000 33,200 4,080 42,280

Units started in Assembly = Units transferred out of Fabrication = 5,000 + 33,200 = 38,200 Assembly: Beginning WIP Inventory Started Units to account for

Beginning WIP Inventory Started & completed Ending WIP Inventory EUP (WA) b. Fabrication: Beginning WIP Inventory Started & completed Ending WIP Inventory EUP (FIFO) Assembly: Beginning WIP Inventory Started & completed Ending WIP Inventory EUP (FIFO) 39. a. Beginning WIP Inventory Started Total

Beginning WIP 2,000 Inventory 38,200 Started & completed 40,200 Ending WIP Inventory Units accounted for Units Trans. In 2,000 2,000 32,100 32,100 6,100 6,100 40,200 40,200 Units 5,000 33,200 6,800 45,000

Material 0 33,200 6,800 40,000

Units Trans. In 2,000 0 32,100 32,100 6,100 6,100 40,200 38,200 0 2,500 2,500

Material 2,000 32,100 0 34,100

2,000 32,100 6,100 40,200 Conversion 2,000 32,100 915 35,015

Conversion 3,750 33,200 4,080 41,030 Material Conversion 2,000 1,300 32,100 32,100 0 915 34,100 34,315

Started & completed Ending WIP Inventory Units accounted for

2,400 100 2,500


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Material 2,400 100 2,500

Started and completed Ending WIP Inventory EUP

Cost of goods transferred out: Direct material: Dacron (250 × $10) Denim (480 × $8) Cotton (1,670 × $12) Direct labor (2,400 × $9) Overhead (2,400 × $6) Total

$ 2,500 3,840 20,040

b. Cost of ending WIP Inventory: Direct material: Dacron (50 × $10) Denim (20 × $8) Cotton (30 × $12) Direct labor (25 × $9) Overhead (35 × $6) Total 40. a. Beginning WIP Inventory Started Total Started and completed Ending WIP Inventory EUP Cost of goods completed: Direct material: Glass (65 × $24) Metal (12 × $15) Natural (28 × $7) Conversion (105 × $23) Total

Labor 2,400 25 2,425

$500 160 360

0 130 130

Overhead 2,400 35 2,435

$26,380 21,600 14,400 $62,380

$1,020 225 210 $1,455

Started & completed Ending WIP Inventory Units accounted for Material 105 25 130

$1,560 180 196

105 25 130

Conversion 105 15 120

$1,936 2,415 $4,351

b. Cost of ending WIP Inventory: Direct material: © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.

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Glass (5 × $24) Metal (13 × $15) Natural (7 × $7) Conversion (25 × 60% × $23) Total

$120 195 49

$364 345 $709

41. a. Beginning WIP Inventory Started Units to account for

12,000 310,000 322,000


12,000 302,000 8,000 322,000 Ingred. Packaging Conversion 0 12,000 3,600 302,000 302,000 302,000 8,000 0 4,800 310,000 314,000 310,400

Beginning WIP Inventory Started and completed Ending WIP Inventory EUP

b. Standard cost of goods completed: 314,000 × $0.67 = $210,380 c. Cost of ending WIP Inventory: Ingredients (8,000 × $0.25) Conversion (4,800 × $0.37) Total

$2,000 1,776 $3,776

42. a. DM (180,000 × 100% × $0.10) CC (180,000 × 45% × $0.11) Total cost in BI

$18,000 8,910 $26,910

b. DM (144,000 × 100% × $0.10) CC (144,000 × 65% × $0.11) Total cost in EI

$14,400 10,296 $24,696

c.

Beginning WIP Inventory Started Units to account for

180,000 1,300,000 1,480,000

Total units to account for Ending WIP Inventory Units transferred out

1,480,000 (144,000) 1,336,000

Cost transferred out = 1,336,000 × $0.21 = $280,560 d. To complete BI (units) Started & completed Ending inventory

Material 0 1,156,000 144,000

Labor 99,000 1,156,000 93,600

OH 99,000 1,156,000 93,600


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154

Equivalent units (FIFO) Multiply by unit cost Standard cost of period Actual cost of period Variance e.

1,300,000 1,348,600 1,348,600 × 0.10 × 0.02 × 0.09 $ 130,000 $ 26,972 $ 121,374 (184,000) (27,126) (118,500) $ (54,000) U $ (154) U $ 2,874 F

Work in Process Inventory Material Variance Raw Material Inventory

130,000 54,000

Work in Process Inventory Labor Variance Wages Payable (or Cash)

26,972 154

Work in Process Inventory Manufacturing Overhead Overapplied Overhead

121,374

184,000

27,126 118,500 2,874 Material

Conversion

Beginning inventory (60%; 70%) Gallons started Gallons to account for

Units 16,000 360,000 376,000

Beginning inventory completed Gallons started and completed Total gallons transferred Ending inventory (40%; 20%) Normal spoilage* Gallons accounted for (FIFO EUP)

16,000 349,200 365,200 8,000 2,800 376,000

6,400 349,200

4,800 349,200

3,200 0 358,800

1,600 0 355,600

43. a & b.

*All spoilage is normal; the 2,800 gallons is less than 0.02 × 360,000.

44. Normal spoilage allowed = 120,000 pounds × 0.08 = 9,600 pounds Material

Beginning inventory Pounds started Pounds to account for

Units 36,000 120,000 156,000

Beginning WIP Inventory Started and completed Ending WIP Inventory Normal spoilage Pounds accounted for (FIFO)

36,000 90,000 21,600 8,400 156,000

0 90,000 21,600 0 111,600

Beginning inventory cost Current costs Total costs Divided by EUP

Total $24,800 72,972 $97,772

Material

Conversion

19,800 90,000 3,240 0 113,040 Conversion

$ 39,060

$ 33,912

÷ 111,600

÷ 113,040


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Cost per EUP

$0.65

Cost Assignment Transferred out: Beginning WIP Inventory cost Conversion cost to complete (19,800 × $0.30) Total cost of beginning inventory Started & completed (90,000 × $0.65) Ending WIP Inventory: Material (21,600 × $0.35) Conversion (3,240 × $0.30) Total cost accounted for

$0.35

$24,800 5,940 $30,740 58,500 $ 7,560 972

$0.30

$89,240 8,532 $97,772

45. a. Units to account for = 20,000 + 120,000 = 140,000 units


Chapter 6

b. Units to account for Units completed Units in ending WIP Inventory Spoiled units

156

140,000 (116,400) (16,000) 7,600

Normal loss = 120,000 × 0.03 = 3,600 units Abnormal loss = 7,600 – 3,600 = 4,000 units c.

Units 20,000 120,000 140,000

Material

Beginning inventory Units started Units to account for Transferred out Ending inventory Normal spoilage Abnormal spoilage Units accounted for

116,400 16,000 3,600 4,000 140,000

116,400 16,000 0 4,000 136,400

Conversion

116,400 3,200 0 4,000 123,600

The normal spoilage is considered continuous because it is shrinkage. d.

Using the “method of neglect,” the cost of normal spoilage is automatically spread among all of the remaining units produced (including the abnormal spoilage).

e. Cost of abnormal spoilage is written off as a period cost (loss).

Beginning inventory Pounds started Pounds to account for

Units 40,000 425,000 465,000

BI completed Started & completed* Ending inventory Normal spoilage Abnormal spoilage EUP (FIFO)

40,000 405,000 10,000 2,000 8,000 465,000

46. a.

Material

Conversion

0 405,000 10,000 0 8,000 423,000

6,000 405,000 2,500 0 5,600 419,100

*Amount necessary to balance the calculation. The normal spoilage is treated under the method of neglect. b. Ending inventory: Material (10,000 × $0.08) Conversion (2,500 × $0.15) Total cost

$ 800 375 $1,175

c. Abnormal spoilage: © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.

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Material (8,000 × $0.08) Conversion (5,600 × $0.15) Total cost (treated as a loss)

$ 640 840 $1,480


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158

PROBLEMS Beginning WIP Inventory Units started Units to account for

Units 200,000 1,000,000 1,200,000


200,000 700,000 300,000 1,200,000

47. a.

Material

200,000 700,000 300,000 1,200,000

Conversion

200,000 700,000 210,000 1,110,000

b. BI conversion cost = $671,875 × 1.6 = $1,075,000 Current period conversion cost = $3,976,250 × 1.6 = $6,362,000 Cost in BI Current cost Total cost to account for Divided by EUP Cost per EUP c.

Total $ 2,275,000 14,162,000 $16,437,000 $14.20

Transferred out (900,000 × $14.20) Ending inventory: Material (300,000 × $7.50) Conversion (210,000 × $6.70) Total cost accounted for

48. a. (1) BI units Units started & completed EI unit EUP (2) BI Current Total Divided by EUP Cost per EUP

Total $ 1,115,500 12,628,500 $13,744,000 $9.10

(3) Beginning FG Inventory CGM (1,200,000 × $9.10) Goods available for sale Ending FG Inventory CGS b. Finished Goods Inventory Work in Process Inventory

Material $1,200,000 7,800,000 $9,000,000 ÷ 1,200,000 $7.50

Conversion $1,075,000 6,362,000 $7,437,000 ÷ 1,110,000 $6.70 $12,780,000

$2,250,000 1,407,000

3,657,000 $16,437,000

Material 100,000 1,100,000 400,000 1,600,000

Labor 100,000 1,100,000 240,000 1,440,000

Overhead 100,000 1,100,000 240,000 1,440,000

Material $ 750,000 5,650,000 $6,400,000 ÷ 1,600,000 $4.00

Labor $ 215,000 4,105,000 $4,320,000 ÷ 1,440,000 $3.00

Overhead $ 150,500 2,873,500 $3,024,000 ÷ 1,440,000 $2.10

$ 0 10,920,000 $10,920,000 (124,000) $10,796,000 10,920,000 10,920,000


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Cost of Goods Sold Finished Goods Inventory 49. a. Gallons transferred out Gallons in ending WIP Total gallons to account for Gallons in beginning WIP Gallons started b. Beginning WIP Inventory Started & completed Ending WIP Inventory WA EUP BI costs Current costs Total cost EUP–FIFO Cost per EUP

10,796,000

10,796,000

242,000 23,500 265,500 (36,000) 229,500 Material 36,000 206,000 23,500 265,500

Labor 36,000 206,000 3,525 245,525

Overhead 36,000 206,000 2,350 244,350

Material $ 183,510 1,136,025 $1,319,535 ÷ 265,500 $4.97

Labor $ 98,526 451,450 $ 549,976 ÷ 245,525 $2.24

Overhead $ 78,273 723,195 $801,468 ÷ 244,350 $3.28

Total cost to account for = $1,319,535 + $549,976 + $801,468 = $2,670,979 Transferred out = 242,000 × ($4.97 + $2.24 + $3.28) = 242,000 × $10.49 = $2,538,580 c. DM (23,500 × $4.97) DL (3,525 × $2.24) OH (2,350 × $3.28) Total EI 50. a.

$116,795 7,896 7,708 $132,399 Delacroix Co. Cost of Production Report For the Month of March 2013

Production Data Units 800 11,400 12,200

Material

Labor

Overhead

Beginning Inventory Units started Units to account for Beginning WIP Inventory Started & completed Ending WIP Inventory Units accounted for

800 11,000 400 12,200

800 11,000 280 12,080

800 11,000 360 12,160

800 11,000 320 12,120

Total $ 21,138

Material $ 6,748

Labor $ 8,680

Overhead $ 5,710

Cost Data Beginning WIP Inventory


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160

Current costs Total cost to account for Divided by EUP Cost per EUP

505,422 $526,560 $43.50

Cost Assignment Transferred out (11,800 units × $43.50) Ending Inventory: Material (280 × $22) Labor (360 × $5.50) Overhead (320 × $16) Total cost accounted for b. Raw Material Inventory Accounts Payable (for RM purchases) WIP Inventory Raw Material Inventory

13,260 $526,560

XXX XXX 259,012 58,200 188,210

Factory Overhead Control Various accounts (for actual OH) Finished Goods Inventory WIP Inventory

Raw Material Inventory Beg. XXX Issued 259,012 Purch. XXX XXX 58,200

Factory Overhead Control Actual XXX Applied 188,210

188,210

XXX XXX 513,300

Cost of Goods Sold (for the cost of sales) Finished Goods Inventory

Wages Payable DL

$6,160 1,980 5,120

58,200

WIP Inventory Factory Overhead Control

End.

188,210 $193,920 ÷ 12,120 $16.00

$513,300

259,012

WIP Inventory Wages Payable

c.

259,012 58,200 $265,760 $66,880 ÷ 12,080 ÷ 12,160 $22.00 $5.50

513,300

XXX XXX Beg. DM DL OH End.

WIP Inventory 21,138 CGM 259,012 58,200 188,210 13,260

Beg. CGM End.

FG Inventory XXX CGS 513,300 XXX

513,300

XXX

Accounts Payable RM Purch. XXX


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Cost of Goods Sold CGS XXX


Units 20,000 321,600 341,600


20,000 305,600 16,000 341,600

0 305,600 16,000 321,600

Total $ 53,580 1,055,808 $1,109,388

Material

51. a.

b. Beginning WIP cost Current cost Total cost to account for Divided by EUP Cost per EUP c.

$3.26

Beginning WIP Inventory Complete WIP CC (12,000 × $0.84) Started & completed (305,600 × $3.26) Cost transferred out

b.

12,000 305,600 12,800 330,400 Conversion

$778,272

$277,536

÷ 321,600 $2.42

÷ 330,400 $0.84

10,080 $ 63,660 996,256 $1,059,916 $38,720 10,752 $49,472

242,000 23,500 265,500 (36,000) 229,500 Material

Beginning WIP Inventory Started & completed Ending WIP Inventory EUP––FIFO

Conversion

$53,580

d. DM (16,000 × $2.42) CC (12,800 × $0.84) Total cost of ending WIP Inventory 52. a. Gallons transferred out Gallons in ending WIP Total gallons to account for Gallons in beginning WIP Gallons started

Material

0 206,000 23,500 229,500 Material

Labor 16,200 206,000 3,525 225,725

Overhead 10,800 206,000 2,350 219,150

Labor

Overhead


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162

Current costs EUP––FIFO Cost per EUP

$1,136,025 ÷ 229,500 $4.95

$451,450 ÷ 225,725 $2.00

$723,195 ÷ 219,150 $3.30

Beginning WIP ($183,510 + $98,526 + $78,273) $360,309 Complete beginning WIP Inventory DL (16,200 × $2.00) $32,400 CC (10,800 × $3.30) 35,640 68,040 Total cost of BI transferred $428,349 c. Total cost per EUP = $4.95 + $2.00 + $3.30 = $10.25 Total cost of BI transferred Started & completed (206,000 × $10.25) Total cost of goods completed d.

$2,539,849 ÷ 242,000 = $10.50 (rounded)

e.

DM (23,500 × $4.95) DL (3,525 × $2.00) OH (2,350 × $3.30) Total EI

53. a.

$ 428,349 2,111,500 $2,539,849

$116,325 7,050 7,755 $131,130

Delacroix Co. Cost of Production Report For the Month of March 2013 Production Data: Beginning inventory Units started Units to account for

Units 800 11,400 12,200

Material

800 11,000 400 12,200

440 11,000 280 11,720

Total $ 21,138 505,422 $526,560

Beginning WIP Inventory Started & completed Ending inventory Units accounted for Cost Data: Cost in BI Current costs Total cost to account for Divided by EUP Cost per EUP

Cost Assignment Transferred out: Beginning WIP Inventory Cost to complete: Material (440 × $22.10) Labor (280 × $5.00)

$43.05

Labor

Overhead

280 11,000 360 11,640

480 11,000 320 11,800

Material

Labor

Overhead

$259,012

$58,200

$188,210

÷ 11,720 $22.10

÷ 11,640 $5.00

÷ 11,800 $15.95

$21,138 9,724 1,400


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Overhead (480 × $15.95) 7,656 $ 39,918 Started & completed (11,000 × $43.05) 473,550 Ending WIP Inventory: Material (280 × $22.10) $ 6,188 Labor (360 × $5.00) 1,800 Overhead (320 × $15.95) 5,104 13,092 Total cost accounted for $526,560 b.

WA and FIFO process costing differ because of how the work performed in the prior period on beginning WIP Inventory is treated. WA includes such work in the determination of equivalent units of production, whereas FIFO does not. In addition, because WA includes the beginning inventory work in EUP, this method also includes the cost of beginning inventory in the determination of cost per EUP (whereas FIFO excludes it). These two items cause the cost per EUP to differ and, thus, the cost of the goods transferred out as well as the cost of ending inventory.

54. a. Phunky Phingers Cost of Production Report (WA Method) For the Month of November 2013 Production Data: Beginning WIP Inventory Units started Units to account for

Units 12,000 90,000 102,000


Units 12,000 70,000 20,000 102,000

Material 12,000 70,000 20,000 102,000

Labor 12,000 70,000 8,000 90,000

OH 12,000 70,000 16,000 98,000

Total $ 19,564 206,616 $ 226,180

Material $ 13,020 90,000 $103,020 ÷ 102,000 $1.01

Labor $ 1,908 45,792 $47,700 ÷ 90,000 $0.53

OH $ 4,636 70,824 $75,460 ÷ 98,000 $0.77

Cost Data: Beginning WIP Inventory Current costs Cost to account for Divided by EUP Cost per EUP

Cost Assignment: Transferred out (82,000 × $2.31) Ending inventory: Material (20,000 × $1.01) Direct labor (8,000 × $0.53) Overhead (16,000 × $0.77) Total cost accounted for

$2.31

$189,420 $20,200 4,240 12,320

36,760 $226,180

b. Phunky Phingers Cost of Production Report (FIFO Method) © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.

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164

For the Month of November 2013 Production Data: Beginning WIP Inventory Units started Units to account for

Units 12,000 90,000 102,000


Units 12,000 70,000 20,000 102,000

Material 0 70,000 20,000 90,000

Labor 8,400 70,000 8,000 86,400

Total $ 19,564 206,616 $226,180

Material

Labor

Overhead 4,800 70,000 16,000 90,800


$2.31

Cost Assignment: Transferred out: Beginning WIP Inventory Complete beginning WIP DL (8,400 × $0.53) OH (4,800 × $0.78) Started & completed (70,000 × $2.31) Ending WIP Inventory: Material (20,000 × $1.00) Direct labor (8,000 × $0.53) Overhead (16,000 × $0.78) Total cost accounted for

Overhead

$90,000

$45,792

$70,824

÷ 90,000 $1.00

÷ 86,400 $0.53

÷ 90,800 $0.78

$19,564 4,452 3,744 $ 27,760 161,700 $20,000 4,240 12,480 36,720 $226,180

55. a. Springtime Paints Cost of Production Report For Month Ended May 31, XXXX Production data: Beginning WIP Inventory Units started Units to account for

Units 4,000 21,000 25,000 Units

DIRECT MATERIALS Chemicals Cans Conversion

Beginning WIP © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.

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Inventory Started & completed Ending WIP Inventory Units accounted for Cost data: Beginning inventory Current costs Cost to account for Divided by EUP Cost per equivalent unit

4,000 16,000 5,000 25,000 Total $ 51,900 281,900 $333,800 $13.51

Cost assignment: Transferred out ($13.51 × 20,000) Ending WIP Chemicals (5,000 × $10.96) Conversion (4,000 × $2.20) Total cost accounted for

4,000 16,000 5,000 25,000

4,000 16,000 0 20,000

4,000 16,000 4,000 24,000

DIRECT MATERIALS Chemicals Cans Conversion $ 45,100 $ 0 $ 6,800 228,900 7,000 46,000 $274,000 $ 7,000 $52,800 ÷ 25,000 ÷ 20,000 ÷ 24,000 $10.96 $0.35 $2.20

$270,200 $54,800 8,800

63,600 $333,800

b. Springtime Paints Cost of Production Report For Month Ended May 31, XXXX Production data: Beginning WIP Inventory Units started Units to account for

Units 4,000 21,000 25,000 Units


4,000 16,000 5,000 25,000

DIRECT MATERIALS Chemicals Cans Conversion 16,000 5,000 21,000

4,000 16,000 0 20,000

3,000 16,000 4,000 23,000

Cost data: Beginning inventory Current costs Cost to account for

Total $ 51,900 281,900 $333,800

DIRECT MATERIALS Chemicals Cans Conversion $228,900

$ 7,000

$46,000


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166

Divided by EUP Cost per equivalent unit

$13.25

÷ 21,000 $10.90

Cost assignment: Transferred out Beginning WIP Inventory Complete beginning WIP Cans (4,000 × $0.35) Conversion (3,000 × $2.00) Total cost of BI transferred Started & completed (16,000 × $13.25) Ending WIP Inventory Chemicals (5,000 × $10.90) Conversion (4,000 × $2.00) Total cost accounted for

÷ 20,000 $0.35

÷ 23,000 $2.00

$ 51,900 1,400 6,000 $ 59,300 212,000 $ 54,500 8,000

$271,300 62,500 $333,800

c. The WA calculations are easier to make, but this method tends to obscure current period costs because the cost per EUP includes both current costs and prior costs that were in beginning inventory. This method is most appropriate when conversion costs, inventory levels, and raw material prices are stable. The FIFO method is based on current period work only. This method is most appropriate when conversion costs, inventory levels, or raw material prices fluctuate. This method should also be appropriate when accuracy in current equivalent unit costs is important or when a standard cost system is used. (CMA adapted) 56.

Octavia Corp. Curing Dept. Cost of Production Report For the Month Ended May 31, 2013 Production Data: Units Beginning WIP Inventory Units started Units to account for Beginning WIP Inventory Started & completed Ending WIP Inventory Units accounted for

TI

DM

DL

OH

8,000 40,000 48,000 8,000 8,000 8,000 36,000 36,000 36,000

8,000 8,000 36,000 36,000

4,000 4,000 2,800 48,000 48,000 46,800

2,000 1,600 46,000 45,600

Cost Data: Total Beginning WIP Inventory Current costs

TI

$ 278,872 $ 200,160 2,739,020 1,620,000

DM

DL

$ 42,504 $ 31,360 333,300 517,880

OH $ 4,848 267,840


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Cost to account for Divided by EUP Cost per EUP

$3,017,892 $1,820,160 ÷ 48,000 $63,87 $37.92

Cost Assignment: Transferred out (44,000 × $63.87) Ending WIP Inventory: TI (4,000 × $37.92) DM (2,800 × $8.03) DL (2,000 × $11.94) OH (1,600 × $5.98) Total cost accounted for

$375,804 $549,240

$272,688

÷ 46,800 $8.03

÷ 45,600 $5.98

÷ 46,000 $11.94 $2,810,280

$151,680 22,484 23,880 9,568

207,612 $3,017,892 (CMA adapted)


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168

57.

Octavia Corp. Curing Dept. Cost of Production Report For the Month Ended May 31, 2013 Production Data:

Units

Beginning WIP Inventory Units started Units to account for Beginning WIP Inventory Started & completed Ending WIP Inventory Units accounted for

TI

DM

DL

OH

8,000 40,000 48,000 8,000

0

1,600

4,800

5,600

36,000

36,000 4,000 40,000

36,000 2,800 40,400

36,000 2,000 42,800

36,000 1,600 43,200

Total

TI

DM

DL

OH

$ 278,872 2,739,020

$1,620,000

$333,300

$517,880

$267,840

÷ 40,000 $40.50

÷ 40,400 $8.25

÷ 42,800 $12.10

÷ 43,200 $6.20

4,000


$3,017,892 $67.05

Cost Assignment: Transferred out: Beginning WIP Inventory Complete beginning inventory: DM (1,600 × $8.25) DL (4,800 × $12.10) OH (5,600 × $6.20) Started & completed (36,000 × $67.05) Total cost of transferred out Ending WIP Inventory: TI (4,000 × $40.50) DM (2,800 × $8.25) DL (2,000 × $12.10) OH (1,600 × $6.20) Total cost accounted for

$ 278,872 $ 13,200 58,080 34,720

106,000 2,413,800 $2,798,672

$162,000 23,100 24,200 9,920 219,220 $3,017,892 (CMA adapted)


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58. a. Cutting Dept.

Always Christmas Cost of Production Report For the Month Ended October 31, 2013

Production Data:

Units


8,000 36,000 44,000 Units


8,000 32,400 3,600 44,000

Cost Data: Beginning WIP Inventory Current costs Total cost to account for Divided by EUP Cost per EUP

Total

Material 8,000 32,400 3,600 44,000

8,000 32,400 2,520 42,920

Material

Conversion

$ 373,000 $ 293,000 2,672,440 1,379,000 $3,045,440 $1,672,000 ÷ 44,000 $70 $38

Cost Assignment: Transferred out (40,400 × $70) Ending inventory: Material (3,600 × $38) Conversion (2,520 × $32) Total cost accounted for

Conversion

$ 80,000 1,293,440 $1,373,440 ÷ 42,920 $32 $2,828,000

$136,800 80,640

217,440 $3,045,440

b. Always Christmas Boxing Dept. Cost of Production Report For the Month Ended October 31, 2013 Production Data: Beginning WIP Inventory Units started Units to account for Beginning WIP Inventory

Units

Trans. In

Material Conversion

2,500 40,400 42,900 2,500

2,500

2,500

2,500


Chapter 6

Started & completed Ending WIP Inventory Units accounted for

170

39,200 1,200 42,900

39,200 1,200 42,900

39,200 0 41,700

39,200 840 42,540


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Cost Data: Cost in BI Current costs Total to acct. for Divided by EUP Cost per EUP

Total Trans. In Material Conversion $ 173,413 $ 166,420 $ 0 $ 6,993 3,457,760 2,828,000 383,640 246,120 $3,631,173 $2,994,420 $383,640 $253,113 ÷ 42,900 ÷ 41,700 ÷ 42,540 $84.95 $69.80 $9.20 $5.95

Cost Assignment: Transferred out (41,700 × $84.95) Ending inventory: Transferred in (1,200 × $69.80) Conversion (840 × $5.95) Total cost accounted for 59. a. Striping Dept.: Beginning inventory Current costs: DM DL OH ($80,000 × 0.8) Total Less ending inventory Costs transferred to Adhesion

$3,542,415 $83,760 4,998

88,758 $3,631,173

$ 20,000 90,000 80,000 64,000 $254,000 (17,000) $237,000

b. Adhesion Dept.: (let CC = conversion costs) BI + TI + DM + CC – TO = EI $70,000 + $237,000 + $22,600 + CC – $480,000 = $20,600 CC – $150,400 = $20,600 CC = $171,000 DL + OH = CC DL + 0.8DL = CC 1.8DL = $171,000 DL = $95,000 OH = $95,000 × 0.80 = $76,000 c. CGM is equal to the cost of goods transferred into FG Inventory ($880,000). OH = 0.8DL $90,000 = 0.8DL DL = $112,500 BI + TI + DM + DL + OH – CGM = $40,000 $150,000 + $480,000 + DM + $112,500 + $90,000 – $880,000 = $40,000 DM – $47,500 = $40,000 DM = $87,500 d.

WIP Inventory—Adhesion WIP Inventory—Striping

237,000

WIP Inventory—Packaging WIP Inventory—Adhesion

480,000

237,000 480,000


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172

Finished Goods Inventory WIP Inventory—Packaging

880,000

Cost of Goods Sold Finished Goods Inventory

720,000

880,000 720,000

60. a. Cutting Department: Material


Units 1,300 4,800 6,100

Beginning WIP Inventory Started & completed Ending WIP Inventory EUP

1,300 3,700 1,100 6,100

260 3,700 440 4,400

Coating Department: Beginning WIP Inventory Units started Units to account for

Units Trans. In 900 5,000 5,900

Beginning WIP Inventory Started & completed Ending WIP Inventory EUP

900 3,600 1,400 5,900

0 3,600 1,400 5,000

Material

900 3,600 0 4,500

Conversion

325 3,700 220 4,245 Conversion

360 3,600 560 4,520

b. Cutting Department: Beginning WIP Inventory Current costs Total cost to account for Divided by EUP Cost per EUP

Total $16,065 56,425 $72,490 $13

c. Cost transferred out of Cutting (FIFO): Cost of BI Cost to complete BI Material (260 × $8) $ 2,080 Conversion (325 × $5) 1,625 S&C (3,700 × $13) 48,100 Total cost of goods transferred Ending WIP: DM (440 × $8) $ 3,520 CC (220 × $5) 1,100 Total

Material

Conversion

$35,200

$21,225

÷ 4,400 $8

÷ 4,245 $5

$16,065

51,805 $67,870 4,620 $72,490


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d. Coating Department: Cost in BI Current costs Total Divided by EUP Cost per EUP *Rounded

e.

Total $13,514 84,120 $97,634 $17.17

Trans. In

Material

$67,870

$4,950

$11,300

÷ 5,000 $13.57*

÷ 4,500 $1.10

÷ 4,520 $2.50

Cost Assignment: Transferred out Beginning inventory cost Cost to complete: Material (900 × $1.10) Conversion (360 × $2.50) Units S&C (3,600 × $17.17) Total cost transferred out Ending inventory: Transferred in (1,400 × $13.57) Conversion (560 × $2.50) Cost accounted for (off due to rounding)

61. a. Units produced Material costs Unit cost Conversion cost Unit cost Unit costs: Extrusion material Form material Trim material Finish material Extrusion conversion Form conversion Trim conversion Finish conversion Total unit cost Times units produced Total product cost

Extrusion 16,000 $192,000 $ 12.00 $392,000 $ 24.50

Form 11,000 $ 44,000 $ 4.00 $132,000 $ 12.00

Conversion

$13,514 990 900

$18,998 1,400 Trim 5,000 $ 15,000 $ 3.00 $ 69,000 $ 13.80

$15,404 61,812 $77,216 20,398 $97,614 Finish 2,000 $12,000 $ 6.00 $42,000 $ 21.00

Plastic Standard Deluxe Executive Sheets Model Model Model $ 12.00 $ 12.00 $ 12.00 $ 12.00 –– 4.00 4.00 4.00 –– –– 3.00 3.00 –– –– –– 6.00 24.50 24.50 24.50 24.50 –– 12.00 12.00 12.00 –– –– 13.80 13.80 –– –– –– 21.00 $ 36.50 $ 52.50 $ 69.30 $ 96.30 × 5,000 × 6,000 × 3,000 × 2,000 $182,500 $315,000 $207,900 $192,600


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174

b.

EQUIVALENT UNITS Material Conversion % Qty. % Qty. 100 2,000 100 2,000 100 1,000 60 600 100 2,000 100 2,000 5,000 4,600 Unit Cost Total Costs $12.00 $12,000 4.00 4,000 3.00 3,000 24.50 24,500 12.00 12,000 9.00* 9,000* $64.50 $64,500

Entering trim operation: 2,000 Deluxe units 1,000 Deluxe units 2,000 Executive units Total equivalent units Deluxe model WIP costs: Extrusion material Form material Trim material (100%) Extrusion conversion Form conversion Trim conversion (60%) Work in process costs

*Conversion cost = ($30,000 + $39,000) ÷ 4,600 = $15 per equivalent unit. (CMA adapted) 62. a. Components in produced inventory: Plain W/logos & streamers W/logos, streamers, & handles 25,000 W/streamers W/streamers & handles 2,800 W/handles 5,000

Total components

DM Logos Streamers Handles 60,000 418,000 418,000 418,000 25,000 25,000 25,000 15,200 2,800

15,200 2,800

5,000

526,000

443,000 461,000

32,800

Ending WIP Inventory (all 9,000 units had the direct material): Plain = 9,000 × 0.70 = 6,300 With logo = 9,000 × 0.25 = 2,250 With streamers = 9,000 × 0.05 = 450 BI Started Units to account for

Units 15,000 520,000 535,000

BI Started and completed Completed EI Units accounted for

Units DM Logos Streamers Handles 15,000 511,000 526,000 526,000 443,000 461,000 32,800 9,000 9,000 2,250 450 0 535,000 535,000 445,250 461,450 32,800


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Chapter 6

BI cost Current period

1,312

Total DM cost EUP 32,800 Material cost per EUP Conversion BI Started and completed Completed EI (95% complete) Units accounted for

$ 17,285 $ 13,250 888,274 468,250

$ 4,035 298,735

$ 0 119,977

$ 0

$905,559 $481,500 $302,770 ÷ 535,000 ÷ 445,250

$119,977 ÷461,450

$ 1,312

$0.90 $0 .68 $0.26 $0.04

Units 15,000 511,000 526,000 9,000 535,000

EUP 526,000 8,550 534,550

Conversion costs = $5,703 + $282,954 = $288,657 Conversion cost per EUP = $288,657 ÷ 534,550 = $0.54 Total cost to account for = $905,559 + $288,657 = $1,194,216 Cost of ending WIP towels: Plain towels DM (6,300 × $0.90) CC (6,300 × 0.95 × $0.54) Towels with logos DM [2,250 × ($0.90 + $0.68)] CC (2,250 × 0.95 × $0.54) Towels with streamers DM [450 × ($0.90 + $0.26)] CC (450 × 0.95 × $0.54) Total cost of ending WIP Inventory b. Plain W/logos & streamers W/logos, streamers, & handles W/streamers W/streamers & handles W/handles

$5,670.00 3,231 .90

$ 8,901.90

$3,555.00 1,154 .25

4,709.25

$ 522.00 230 .85

752 .85 $14,364 .00

Production Sales 60,000 58,000 418,000 417,500 25,000 24,800 15,200 15,175 2,800 2,730 5,000 4,350

Plain 2,000 × ($0.90 + $0.54) W/logos & streamers 500 × ($1.84 + $0.54) W/logos, streamers, & handles 200 × ($1.88 + $0.54) W/streamers 25 × ($1.16 + $0.54) W/streamers & handles 70 × ($1.20 + $0.54) W/handles 650 × ($0.94 + $0.54) Total cost of ending FG Inventory

Ending Inv. 2,000 500 200 25 70 650 $2,880.00 1,190.00 484.00 42.50 121.80 962 .00 $5,680 .30


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176

c. Plain 58,000 × ($0.90 + $0.54) $ 83,520.00 W/logos & streamers 417,500 × ($1.84 + $0.54) 993,650.00 W/logos, streamers, & handles 24,800 × ($1.88 + $0.54) 60,016.00 W/streamers 15,175 × ($1.16 + $0.54) 25,797.50 W/streamers & handles 2,730 × ($1.20 + $0.54) 4,750.20 W/handles 4,350 × ($0.94 + $0.54) 6,438 .00 $1,174,171 .70 Cost of ending WIP Inventory Cost of ending FG Inventory Cost of goods sold Total cost accounted for

$ 14,364.00 5,680.30 1,174,171 .70 $1,194,216 .00

d. The conversion cost for all towels should not be the same amount. Each of the different addons creates additional costs for labor and overhead. As such, Randazzo should be dividing these costs into different cost pools and assigning them based on alternative bases. Activitybased costing would be useful in this company. 63. a.

Material

Conversion

Beginning inventory Units started Units to account for

Units 10,000 180,000 190,000

Beginning inventory completed Units started & completed Units completed Ending inventory EUP

10,000 140,000 150,000 40,000 190,000

0 140,000

3,000 140,000

40,000 180,000

24,000 167,000

b. Donbrowski Co. Cost of Production Report For the Month of May 2013 Production Data: Beginning inventory Units started Units to account for Beginning inventory completed Units started & completed Ending inventory EUP

Units 10,000 180,000 190,000 10,000 140,000 40,000 190,000

Material

Conversion

0 140,000 40,000 180,000

3,000 140,000 24,000 167,000

Material $ 55,000

Conversion

Cost Data (all at standard): BI: DM (10,000 × $5.50) CC (7,000 × $12.50) Current costs:

Total $ 55,000 87,500

$ 87,500


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Chapter 6

DM (180,000 × $5.50) CC (167,000 × $12.50) Total cost to account for

990,000 2,087,500 $3,220,000

990,000 $1,045,000

Cost Assignment Transferred out (150,000 × $18) Ending inventory: Material (40,000 × $5.50) Conversion (24,000 × $12.50) Total costs assigned

2,087,500 $2,175,000 $2,700,000

$220,000 300,000

520,000 $3,220,000

c. Total variance = Total actual cost – Total standard cost = $3,137,000 ‒ $3,077,500 = $59,500 unfavorable Material: Current actual cost Standard cost (180,000 × $5.50) Direct material variance

$1,001,000 (990,000) $ 11,000 U

Conversion: Current actual cost Standard cost (167,000 × $12.50) Conversion cost variance

$ 2,136,000 (2,087,500) $ 48,500 U

Cost of Goods Sold Direct Material Variance Conversion Cost Variance

59,500 11,000 48,500 Material

BI Units started Units to account for

Units 14,800 385,000 399,800

BI completed Units S&C Units completed EI EUP

14,800 380,700 395,500 4,300 399,800

0 380,700

8,880 380,700

4,440 380,700

4,300 385,000

2,580 392,160

3,655 388,795

64. a.

b. Total BI cost: DM (14,800 × $8.25) DL (5,920 × $1.60) OH (10,360 × $4.90) Total cost of BI

Labor

Overhead

$122,100 9,472 50,764 $182,336

c. Cost transferred out = 395,500 × $14.75 = $5,833,625 Cost in EI: © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.

Chapter 6

DM (4,300 × $8.25) DL (2,580 × $1.60) OH (3,655 × $4.90) Total cost of BI

178

$35,475.00 4,128.00 17,909 .50 $57,512 .50

d. Standard DM cost = 385,000 × $8.25 = $3,176,250.00 Standard DL cost = 392,160 × $1.60 = $627,456.00 Standard OH cost = 388,795 × $4.90 = $1,905,095.50 DM DL OH Current period costs $ 3,201,032.00 $ 625,510.00 $ 1,904,390.00 Standard costs (3,176,250.00) (627,456 .00) (1,905,095 .50) Variance $ 24,782.00 U $ 1,946.00 F $ 705.50 F 65. a. Beginning pounds Started Pounds to account for Pounds transferred Pounds in EI Pounds of shrinkage

2,000 250,000 252,000 (238,200) (6,000) 7,800

b. Normal shrinkage = 250,000 × 0.01 = 2,500 pounds For accounting purposes, normal shrinkage is simply ignored, which means its costs will be spread over all good units produced. c. Abnormal shrinkage = 7,800 – 2,500 = 5,300 pounds The cost of abnormal shrinkage is treated as a loss of the period. d. Beginning WIP Inventory Started Units to account for

Total 2,000 250,000 252,000

Beginning WIP Inventory Started & completed Ending WIP Inventory Normal loss Abnormal loss EUP (WA)

2,000 236,200 6,000 2,500 5,300 252,000

e. Beginning WIP costs Current costs Total costs Divide by EUP Cost per EUP Transferred out (238,200  $1.07)

Total $ 1,957 264,588 $266,545 $1.07

Material

Conversion

2,000 236,200 6,000

2,000 236,200 1,800

5,300 249,500

5,300 245,300

Material $ 1,807 240,208 $242,015 ÷ 249,500 $0.97

Conversion $ 150 24,380 $ 24,530 ÷ 245,300 $0.10

$254,874


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Chapter 6

Ending inventory: Material (6,000  $0.97) Conversion (1,800  $0.10) Abnormal spoilage (5,300  $1.07) Total cost accounted for

$5,820 180

6,000 5,671 $266,545

f. The easiest way to reduce shrinkage loss is to buy higher quality turkey at a higher input cost per pound. The higher quality would have a lower fat content and would shrink less. Because of the reduced shrinkage, conversion cost per pound of finished product might decline, and the company would probably be able to sell its product at a higher price. g. The approximate cost of April turkey was $1.13 per pound ($1,807 BI cost of turkey ÷ 1,600 EUP pounds in BI), while the average cost per pound in May was approximately $0.97 per pound. It is highly likely that buying the lower priced ground turkey was the cause of the abnormally high spoilage rate. The information on the cost differences between April and May is not clear when using weighted average process costing.

66. a. Gary’s Tools Grinding Department Cost of Production Report For the Month Ended August 31, 2013 Units Beginning WIP Inventory Transferred in Units to account for

1,000 50,800 51,800 Units

Beg. WIP Inventory Started & completed Ending WIP Inventory Normal spoilage Abnormal spoilage EUP (WA)

Trans. In

DM

DL

OH

1,000

1,000

1,000

1,000

1,000

48,000

48,000

48,000

48,000

48,000

1,800 650 350 51,800

1,800 650 350 51,800

0 0 0 49,000

720 650 350 50,720

1,170 650 350 51,170

Total

Trans. In

DM

DL

Beg. WIP © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.

OH

Chapter 6

Inventory Current costs Total costs Divided by EUP Cost per EUP

180

$ 7,355 235,557 $242,912 $4.725

$ 6,050 149,350 $155,400 ÷ 51,800 $3.00

Cost Assignment: Transferred out: Good units (49,000 × $4.725) Normal spoilage (650 × $4.475) Ending inventory: Transferred in (1,800 × $3.00) Labor (720 × $0.475) Overhead (1,170 × $1.00) Abnormal spoilage (350 × $4.475) Total costs accounted for b.

$ 0 12,250 $12,250 ÷ 49,000 $0.25

$231,525 2,909 $ 5,400 342 1,170

$234,434

6,912 1,566 $242,912

Loss on Abnormal Spoilage 1,566 Work in Process Inventory—Grinding 1,566 3,000 45,000 48,000

67. a. Beginning inventory Transferred in Units to account for Transferred out Ending inventory Bikes lost Units accounted for

40,000 4,000 4,000 48,000

(1) Bikes passing through Assembly Minus bikes in EI (have not reached the inspection point, so there is no way to determine acceptability) Bikes reaching the inspection point Normal defective rate Normal number of defective bikes (2) Total bikes lost Normal number of defective bikes Abnormal number of defective bikes b. Transferred out Ending WIP Inventory Normal loss Abnormal loss EUP (WA) c.

$ 325 $ 980 23,767 50,190 $24,092 $51,170 ÷ 50,720 ÷ 51,170 $0.475 $1.00

48,000 (4,000) 44,000 × 0.05 2,200 4,000 (2,200) 1,800

Units 40,000

Trans. In 40,000

Material 40,000

4,000 2,200 1,800 48,000

4,000 2,200 1,800 48,000

2,000 2,200 1,800 46,000

Trans. In

Material

Total

Conversion 40,000 800 2,200 1,800 44,800 Conversion


181

Chapter 6

Beginning WIP Current costs Total cost Divided by EUP Cost per EUP

$ 102,790 1,576,070 $1,678,860 $35.45

$ 82,200 1,237,800 $1,320,000 ÷ 48,000 $27.50

$ 6,660 96,840 $103,500 ÷ 46,000 $2.25

$ 13,930 241,430 $255,360 ÷ 44,800 $5.70

d. (1) Normal defective bikes: 2,200 × $35.45 = $77,990 (2) Abnormal defective bikes: 1,800 × $35.45 = $63,810 (3) Good bikes completed: 40,000 × $35.45 = $1,418,000 (4) Ending WIP Inventory Transferred in (4,000 × $27.50) Material (2,000 × $2.25) Conversion (800 × $5.70) Total

$110,000 4,500 4,560 $119,060

e. Total cost transferred = Cost of good bikes + Normal spoilage cost = $1,418,000 + $77,990 = $1,495,990 (or an average cost per bike of $37.40) f. Normal spoilage cost is an expected cost of producing good units. As such, it is not an extra cost but thought to be inherent in producing good units. Normal spoilage may occur because of material or labor quality, machine malfunctions, or human error. Management should do costbenefit studies to determine if it is economically sensible to reduce spoilage. Three questions should be addressed: (1) What does the spoilage actually cost? (2) Why does it occur? (3) How can it be controlled? (CMA adapted)

68. Maximum normal spoilage = 70,000 × 0.03 = 2,100 units LaToya Company Cost of Production Report For the Month Ended May 31, 2013 Units 5,600 74,400 80,000

Material

Conversion

Beginning WIP Inventory Units started Units to account for Beginning WIP Inventory Started & completed Ending WIP Inventory Normal spoilage Abnormal spoilage Units accounted for

5,600 64,400 7,500 2,100 400 80,000

5,600 64,400 7,500 2,100 400 80,000

5,600 64,400 2,500 2,100 400 75,000

Total

Material

Conversion


Chapter 6

182

Beginning WIP Inventory Current costs Cost to account for Divided by EUP Cost per EUP

$ 7,632 106,168 $113,800

Cost Assignment: Units completed (70,000 × $1.45) Normal spoilage:* Direct material (2,100 × $1.01) Conversion (2,100 × $0.44) Ending inventory: Direct material (7,500 × $1.01) Conversion (2,500 × $0.44) Abnormal spoilage:* Direct material (400 × $1.01) Conversion (400 × $0.44) Total cost accounted for

$1.45

$ 6,400 74,400 $80,800 ÷ 80,000 $1.01

$ 1,232 31,768 $33,000 ÷ 75,000 $0.44

$101,500 $2,121 924

3,045

$104,545

$ 7,575 1,100

8,675

$ 404 176

580 $113,800

*Spoilage was found at the end of the production process when units are fully complete; thus, computations could have been made at the full cost of $1.45 per unit. Had the spoilage been found earlier, the DM and conversion would not have been at the same stage of production and separate calculations would have been needed.

69. Maximum normal spoilage = 70,000 × 0.03 = 2,100 units LaToya Company Cost of Production Report For the Month Ended May 31, 2013 Material


Units 5,600 74,400 80,000

Beginning WIP Inventory Started & completed Ending WIP Inventory Normal spoilage Abnormal spoilage Units accounted for

5,600 64,400 7,500 2,100 400 80,000

0 64,400 7,500 2,100 400 74,400

Conversion

2,800 64,400 2,500 630 120 70,450


183

Chapter 6

Beginning WIP Inventory Current costs Total cost to account for Divided by EUP Cost per EUP *Rounded

Total $ 7,632 106,168 $113,800 $1.45

Cost Assignment: Transferred out: Beginning WIP Inventory cost Cost to complete Conversion (2,800 × $0.45) Total cost of BI Started & completed (64,400 × $1.45) Normal spoilage:* Direct material (2,100 × $1.00) Conversion (630 × $0.45) Total cost transferred out Ending WIP Inventory: Direct material (7,500 × $1.00) Conversion (2,500 × $0.45) Abnormal spoilage: Direct material (400 × $1.00) Conversion (120 × $0.45) Total cost accounted for (off due to rounding)

Material

Conversion

$74,400

$31,768

÷ 74,400 $1.00

÷ 70,450 $0.45*

$ 7,632.00 1,260.00 $ 8,892.00 93,380.00 $2,100.00 283.50 $7,500.00 1,125.00 $ 400.00 54.00

2,383.50 $104,655.50 8,625.00 454.00 $113,734.50


Ch6 Raiborn SM

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