4. Equivalent Units of Production:
During April, 20,000 units were transferred in from department A at a cost o f $39,000. $39,000. Materials cost of $6,500 and conversion cost of o f $9,000 were added in department B. On April 30, department B had 5,000 units of work in process p rocess 60% complete as to conversion as costs. cost s. Materials are added in the beginning of the process in department B. Required:
1. Eq uivalent uivalent units of production calculation. 2. The cost per eq uivalent uivalent unit for conversion costs.
Solution: (1) Quantity Schedule: Units received from preceding preceding department A
20,000 ======
Units transferred to finished goods
15,000
Units still in process
5,000
20,000
--------
======
Materials
Conversion
15,000
15,000
15,000
5,000
5,000
3,000
-------
--------
-------
20,000
20,000
20,000
======
======
======
Equivalent Production: Transferred
in from Department A
Transferred
to finished goods
Ending inventory
(2) cost per e quivalent unit for conversion costs: $9,000 / 18,000 = $0.50 per unit
5.
Costing of Units Transferred Out; Abnormal Loss
During February, the Assembly department received 60,000 units from Cutting department at a unit cost of $3.54. Costs added in the Assembly department were: materials, $41,650; labor, $101,700; and factory overhead. $56,500. There was no beginning inventory. Of the 60,000 units received, 50,000 were transferred out; 9,000 units were in process at the en d of the month (all materials, 2/3 converted); 1,000 lost units were 1/2 complete as to materials and conversion costs. The entire loss is considered abnormal and is to be charged to factory overhead. Required: Cost of production report.
Solution: Assembly Department Cost of Production Report For the month of April, 19|____ Quantity Schedule: Units received from preceding department
60,000 ======
Units transferred to next department Units still in process (All materials - 2/3 labor and overhead)
50,000 9,000
Units lost in process (Abnormal loss - 1/2 materials, labor, and overhead)
Cost Charged to the Department:
1,000
60,000
-------
======
Total
Cost
Unit Cost
Cost from preceding department: Transferred
in during the month
(60,000 units)
$212,400
$3.54
--------
------
$41,650
$1.70
$101,700
$1.80
$56,500
$1.00
--------
------
$199,850
$3.50
--------
------
$412,250
$7.04
=======
=====
Cost added by the department: Materials Labor Factory overhead
Total
Total
cost added
cost to be accounted for
Cost Accounted for as Follows:
Transferred
to next department (50,000 × $7.04)
T ransferred
to Factory Overhead:
From preceding department
$352,000
$3,540
(1,000 × $3.54)
Materials (1,000 × 1/2 × $0.70)
350
Labor
900
(1,000 × 1/2 × $1.80)
Factory overhead
500
(1,000 × 1/2 × $1.00)
5,290
-------W ork
in process - ending inventory:
Cost from preceding department
(9000 × $3.54)
Materials (9,000 × 0.70) Labor
Total
6,300 10,800
(9,000 × 2/3 × 1.80)
Factory overhead
$31,860
(9,000 × 2/3 × 1.00)
6,000
54,960
--------
-------
cost accounted for
$412,250 ======
Additional Computations Equivalent Production:
Materials = 50,000 + 9,000 + 1,000/2 lost units = 59,500 units Labor and factory overhead = 50,000 + (9,000 × 2/3) + 1,000/2 lost units = 56,500 Unit
Cost:
Materials = $41,650 / 59,500 = $0.70 per unit Labor = $101,700 / 56,500 = $1.80 per unit Factory overhead = $56,500 / 56,500 = $1.00 per unit
6.
Cost of Production Report; Normal and Abnormal Loss:
The
Sterling Company uses process costing. In department B, conversion costs are i ncurred uniformly throughout the process. Materials are added at the end of the process, following
inspection. Normal spoilage is expected to be 5% of good output. The
following information related to department B for January:
Received from department A Transferred
to finished goods
Units
Dollars
12,000
$84,000
9,000
Ending inventory (70% complete)
2,000
Cost incurred: Materials
18,000
Labor and factory overhead
45,600
Required: Cost of Production report for department B.
Solution: The
Sterling Company Department B Cost of Production Report For the month of January Quantity Schedule: Units received from preceding department
12,000 ======
Units transferred to finished goods
9,000
Units still in process
2,000
Units lost in process
(Normal Spoilage 9000 × 5%)
450
Units lost in process
(Abnormal Spoilage 1,000 - 450)
550
12,000
-------
======
Cost Charged to the Department:
Total
Cost
Unit Cost
Cost from preceding department: Transferred
in during the month
$84,000
$7.00
--------
------
Materials
$18,000
$2.00
Labor and factory 0verhead
$45,600
$4.00
--------
------
$63,600
$6.00
--------
------
$147,600
$13.00
=======
=====
(12,000 units)
Cost added by the department:
Total
Total
cost added
cost to be accounted for
Cost Accounted for as Follows: Transferred
to finished goods
Transferred
to Factory Overhead
W ork
6,050
(550** × $11)
in process - ending inventory:
Cost from preceding department Labor and factory overhead
Total
$121,950
[(9,000 × $13) + (450* × $11)]
$14,000
(2000 × $7.00)
(2,000 × 70% × $4)
5,600
19,600
--------
-------
cost accounted for
$147,600 ======
*Normal spoilage **Abnormal spoilage
Additional Computations Equivalent Production:
Materials = 9,000 units Labor and factory overhead = 9,000 + (2,000 Unit
Costs:
×
70%) + 450 + 550
Materials = $18,000 / 9,000 = $2.00 per unit Labor and factory overhead = $45,600 / 11,400 = $4.00 per unit
7.
Cost of Production Report; Spoiled Units - Normal and Abnormal:
Hettinger
Inc., uses process costing system in its two producing departments. In department 2, inspection takes place at th e 96% stage of completion, after which materials are added to good units. A spoilage rate of 3% of good output is considered normal. Department 2 records for April shows:
Received from department 1
30,000 units
Cost
$135,000
Materials
$12,500
Conversion cost (labor + factory overhead) Transferred
to finished goods
$139,340 25,000 units
Ending work in process inventory (50% complete)
4,200 units
Required: Cost of production report.
Solution: The
Sterling Company Department B Cost of Production Report For the month of January Quantity Schedule: Units received from preceding department
30,000 ======
Units transferred to finished goods Units still in process (50% complete)
25,000 4,200
Units lost in process
(Normal Spoilage 25,000 × 3%)
Units lost in process
(Abnormal Spoilage 800 - 750)
Cost Charged to the Department:
750 50
30,000
-------
======
Total
Cost
Unit Cost
Cost from preceding department: Transferred
in during the month
(30,000 units)
$135,000
$4.50
--------
------
$12,500
$0.50
$139,340
$5.00
--------
------
$151,840
$5.50
--------
------
$286,840
$10.00
=======
=====
Cost added by the department: Materials Labor and factory 0verhead
Total
Total
(Conversion cost)
cost added
cost to be accounted for
Cost Accounted for as Follows: T ransferred
to finished goods:
Cost of completed units N ormal
spoilage -
(25,000 × $10.00)
$250,000
all related to units transferred to finished goods:
Cost from preceding department
(750 × $4.50)
Conversion cost (720 × $5.00)
3,375 3,600
$256,975
-------T ransferred
to Factory Overhead - Abnormal spoilage:
Cost from preceding department Conversion cost
(48 × $5.00)
(50 × $4.50)
$225 240 --------
W ork
in process - ending inventory:
465
Cost from preceding department Labor and factory overhead
Total
(4,200 × $4.50)
(2,100 × $5)
$18,900 10,500
29,400
--------
-------
cost accounted for
$286,840 ======
Additional Computations Equivalent Production:
Materials = 25,000 units Labor and factory overhead = 25,000 + (42,00 × 50%) + (750 × 96%) + (50 × 96%) = 27,888 units Unit
Costs:
Materials = $12,500 / 25,000 = $.50 per unit Labor and factory overhead = $139,340 / 27,888 = $5.00 per unit
8.Computation of Equivalent Production:
Pietra - Gonatas, Inc. uses process costing to account for the costs of its only product, product D. Production takes place in three departments; Fabrication, Assembly, and Packaging. At the end of the fiscal year, June 30, the following inventory of product D is on hand: y y
y y
y
No unused raw materials or packaging materials. Fabrication department: 300 units, 1/3 complete as to raw materials and 1/2 complete as to direct labor Assembly department: 1,000 units, 2/5 complete as to direct labor. Packaging department: 100 units, 3/4 complete as to packaging materials and 1/4 complete as to direct labor. Shipping for finished goods are: 400 units.
Required: 1.
The
2.
The
number of equivalent units of raw materials in all invent ories at June 30. number of equivalent units of the fabrication department's direct labor in all inventories at June 30
3.
The
number of equivalent units of packaging materials in all inventories at June 30.
Solution: (1) Equivalent units of raw materials in all inventories, June 30, 19__ Fabrication department
(300 × 1/3)
100
Assembly department
1,000
Packaging department
100
Shipping area
400 -------1,600 =======
(2) Equivalent units of Fabrication department's direct labor in all inventories, Jun 30, 19___ Fabrication department
(300 × 1/3)
150
Assembly department
1,000
Packaging department
100
Shipping area
400 --------1,650 =======
(3) Equivalent units of packaging materials in all inventories, June 30, 19___ Packaging department
(300 × 4/3)
75
Shipping area
400 ------475 ======
