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Process Costing
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EXERCISES
Ex. 159
Lutz Company produces a product in two departments: (1) Mixing and (2) Finishing. The
company uses a process cost accounting system.
(a) Purchased raw materials for $50,000 on account.
(b) Raw materials requisitioned for production were:
Direct materials
Mixing department $20,000
Finishing department 14,000
(c) Incurred labor costs of $69,000.
(d) Factory labor used:
Mixing department $44,000
Finishing department 25,000
(e) Manufacturing overhead is applied to the product based on machine hours used in each
department:
Mixing department—300 machine hours at $30 per machine hour.
Finishing department—500 machine hours at $20 per machine hour.
(f) Units costing $56,000 were completed in the Mixing Department and were transferred to the
Finishing Department.
(g) Units costing $60,000 were completed in the Finishing Department and were transferred to
finished goods.
(h) Finished goods costing $40,000 were sold on account for $55,000.
Instructions
Prepare the journal entries to record the preceding transactions for Lutz Company.
Test Bank for Accounting, Tools for Business Decision Making Fifth Edition
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Solution 159 (Cont.)
Ex. 160
Sanders Company has two production departments: Fabricating and Finishing. Beginning
inventories are: Work in Process—Fabricating, $6,030; Work in Process—Finishing, $4,100; and
Finished Goods, $5,600. During the month the following transactions occurred:
1. Purchased $40,000 of raw materials on account.
2. Incurred $65,000 of factory labor. Wages are unpaid.
3. Incurred $50,000 of manufacturing overhead; $40,000 was paid and the remainder is unpaid.
4. Requisitioned materials for Fabricating, $10,000 and Finishing, $8,000.
5. Used factory labor for Finishing, $52,000 and Fabricating, $13,000.
6. Applied $45,000 of overhead based on machine hours used in each department. The
Finishing Department used twice as many machine hours as did Fabricating.
Instructions
Journalize the transactions for the month.
Process Costing
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Solution 160 (12–16 min.)
Ex. 161
The Pasta Factory manufactures spaghetti sauce through two production departments: Cooking
and Packaging. For the month of February, the work in process accounts show the following
debits:
Cooking Packaging
Beginning work in process $ -0- $ 6,000
Materials 40,000 26,000
Labor 16,000 9,000
Overhead 30,000 19,000
Costs transferred in 65,000
Instructions
Journalize the February transactions that involved the work in process accounts.
Test Bank for Accounting, Tools for Business Decision Making Fifth Edition
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Solution 161 (Cont.)
Ex. 162
Benson Industries uses a process cost system. Products are processed first by Department A,
second by Department B, and then they are transferred to the finished goods warehouse. Shown
below is the cost information for Department B during the month of October:
Costs of units transferred in $120,000
Manufacturing costs added in Department B:
Direct materials $50,000
Direct labor 6,000
Manufacturing overhead 19,000 75,000
Total costs charged to Department B in October $195,000
The cost of work in process in Department B at October 1 is $25,000, and the cost of work in
process at October 31 has been determined to be $30,000.
Instructions
Prepare journal entries to record for the month of October:
(a) The transfer of production from Department A to B.
(b) The manufacturing costs incurred by Department B.
(c) The transfer of completed units from Department B to the finished goods warehouse.
Ex. 163
Hardy Company manufactures a single product by a continuous process, involving two production
departments. The records indicate that $120,000 of direct materials were issued to and $200,000
of direct labor was incurred by Department 1 in the manufacture of the product. The factory
overhead rate is $25 per machine hour; machine hours were 5,000 in Department 1. Work in
process in the department at the beginning of the period totaled $35,000; and work in process at
the end of the period was $25,000.
Process Costing
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Ex. 163 (Cont.)
Instructions
Prepare entries to record
(a) The flow of costs into Department 1 for
(1) direct materials
(2) direct labor
(3) overhead
(b) The transfer of production costs to Department 2.
Ex. 164
Muffy Painting Company has the following production data for March.
Ending Work in Process
Beginning Units % Complete as to
Month Work in Process Transferred Out Units Conversion Cost
March 3,000 42,000 8,000 75%
Instructions
Compute equivalent units of production for March for both materials and conversion costs.
Materials are entered at the beginning of the process.
Test Bank for Accounting, Tools for Business Decision Making Fifth Edition
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Ex. 165
The Nitrogen Fixation Department of Tomco Company began the month of December with
beginning work in process of 4,000 units that are 100% complete as to materials and 30%
complete as to conversion costs. Units transferred out are 12,000 units. Ending work in process
contains 5,000 units that are 100% complete as to materials and 40% complete as to conversion
costs.
Instructions
Compute the equivalent units of production for materials and conversion costs for the month of
December.
Ex. 166
At Crenshaw Company, materials are entered at the beginning of each process. Work in process
inventories, with the percentage of work done on conversion, and production data for its Painting
Department in selected months are as follows:
Beginning Work In Process Ending Work In Process
Percentage Units Completed Percentage
Month Units Completed and Transferred Out Units Completed
July -0- — 11,000 500 90%
Sept. 2,500 20% 9,000 4,000 70%
Instructions
(a) Compute the physical units for July.
(b) Compute the equivalent units of production for materials and conversion costs for
September.
Process Costing
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Solution 166 (10–14 min.)
Ex. 167
Watts Company adds materials at the beginning of the process and conversion costs are incurred
uniformly throughout the process.
Instructions
Complete the following calculation of equivalent units for materials and conversion costs.
Equivalent Units
Physical Units Materials Conversion Costs
Completed and transferred out 40,000
Ending work in process
Materials
Conversion costs, 75% complete 9,000
Total units
Test Bank for Accounting, Tools for Business Decision Making Fifth Edition
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Ex. 168
The general ledger of Oates Company has the following work in process account.
WORK IN PROCESS—FINISHING
6/1 Balance 8,000 6/30 Transferred out ?
6/30 Materials 1,800
6/30 Labor 3,800
6/30 Overhead 2,800
6/30 Balance ?
Production records show that there were 2,000 units in beginning inventory, 50% complete; 6,000
units started, and 4,500 units transferred out. The beginning work in process had conversion
costs of $3,300. The units in ending inventory were 60% complete. Materials are added at the
beginning of the process.
Instructions
Answer the following questions.
(a) How many units are in process at June 30?
(b) What is the unit conversion cost for June?
(c) What is the conversion cost in the June 30 inventory?
Ex. 169
The Assembly Department uses a process cost accounting system and a weighted-average cost
flow assumption. The department adds materials at the beginning of the process and incurs
conversion costs uniformly throughout the process. During July, $190,000 of materials costs and
$135,500 in conversion costs were charged to the department. The beginning work in process
inventory was $93,000 on July 1, comprised of $80,000 of materials costs and $13,000 of
conversion costs.
Other data for the month of July are as follows:
Beginning work in process inventory, 7/1 25,000 units (40% complete)
Units completed and transferred out 90,000 units
Ending work in process inventory, 7/31 30,000 units (30% complete)
Process Costing
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Ex. 169 (Cont.)
Instructions
Answer the following questions and show computations to support your answers.
1. How many physical units have to be accounted for in July?
2. What are the equivalent units of production for materials and for conversion costs for the
month of July?
3. What is the total cost assigned to the 90,000 units that were transferred out of the process in
July?
4. What is the total cost of the July 31 inventory?
Ex. 170
The Finishing Department of Edwards Company has the following production and cost data for
July:
1. Transferred out, 4,000 units.
2. Started 2,000 units that are 40% completed at July 31.
3. Materials added, $30,000; conversion costs incurred, $19,200.
Materials are entered at the beginning of the process. Conversion costs are incurred uniformly
during the process.
Test Bank for Accounting, Tools for Business Decision Making Fifth Edition
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Ex. 170 (Cont.)
Instructions
(a) Compute the equivalent units of production for materials and conversion costs for the month
of July.
(b) Compute unit costs and prepare a cost reconciliation schedule.
Ex. 171
Massey Corporation uses a process cost system and the weighted-average cost flow assumption.
Production begins in the Fabricating Department where materials are added at the beginning of
the process and conversion costs are incurred uniformly throughout the process. On March 1, the
beginning work in process inventory consisted of 20,000 units which were 60% complete and had
a cost of $175,000, $145,000 of which were materials costs. During March, the following
occurred:
Materials added $305,000
Conversion costs incurred $120,000
Units completed and transferred out in March 65,000
Units in ending work in process March 31 (40% complete) 25,000
Instructions
Answer the following questions and show the computations that support your answers.
1. What are the equivalent units of production for materials and conversion costs in the
Fabricating Department for the month of March?
2. What are the costs assigned to the ending work in process inventory on March 31?
3. What are the costs assigned to units completed and transferred out during March?
Process Costing
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Solution 171 (15–20 min.)
Ex. 172
Given below are the production data for Department No. 1 for the first month of operation:
Costs charged to Department 1:
Materials $12,000
Labor 2,600
Overhead 13,600
During this first month of operations, 3,000 units were started into production; 2,500 units were
transferred out; and the remaining 500 units are 100% completed with respect to materials and
40% complete with respect to conversion costs.
Instructions
Compute the following:
(a) Unit materials cost.
(b) Equivalent units of conversion costs.
(c) Unit conversion cost.
(d) Total cost of 500 units in process at end of month.
(e) Total cost of 2,500 units transferred out.
Test Bank for Accounting, Tools for Business Decision Making Fifth Edition
16 - 52
Solution 172 (14–18 min.)
Ex. 173
The ledger of Kinsler Company has the following work in process account.
Work in Process—Painting
5/1
5/31
5/31
5/31
Balance
Materials
Labor
Overhead
5,390
7,740
4,110
2,470
5/31
Transferred out
?
5/31
Balance
?
Production records show that there were 700 units in the beginning inventory, 30% complete,
2,900 units started, and 3,100 units transferred. The beginning work in process had materials
cost of $3,060 and conversion costs of $2,330. The units in ending inventory were 40% complete.
Materials are entered at the beginning of the painting process.
Instructions
(a) How many units are in process at May 31?
(b) What is the unit materials cost for May?
(c) What is the unit conversion cost for May?
(d) What is the total cost of units transferred out in May?
(e) What is the cost of the May 31 inventory?
Process Costing
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Solution 173 (10 min.)
Ex. 174
The Cutting Department of Sanderson Company has the following production and cost data for
July.
Production
Costs
1. Transferred out 10,000
units
2. Started 5,000 units that
are 60% complete as
to conversion costs
and 100% complete as
to materials at July 31.
Beginning work in process
Materials
Labor
Manufacturing overhead
$ -0-
60,000
21,600
25,200
Test Bank for Accounting, Tools for Business Decision Making Fifth Edition
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Ex. 174 (Cont.)
Materials are entered at the beginning of the process. Conversion costs are incurred uniformly
during the process.
Instructions
(a) Determine the equivalent units of production for (1) materials and (2) conversion costs.
(b) Compute unit costs and prepare a cost reconciliation schedule.
Ex. 175
Wilkinson Company has gathered the following information.
Units in beginning work in process -0-
Units started into production 60,000
Units in ending work in process 10,000
Percent complete for conversion costs in
ending work in process 40%
Costs incurred:
Direct materials $ 81,000
Direct labor $ 99,000
Overhead $130,500
Instructions
(a) Compute equivalent units of production for materials and for conversion costs.
(b) Determine the unit costs of production.
(c) Show the assignment of costs to units transferred out and in process.
Process Costing
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Solution 175 (8 min.)
Ex. 176
Carlton Company has gathered the following information
Units in beginning work in process 25,000
Units started into production 115,000
Units in ending work in process 30,000
Percent complete for conversion costs in
ending work in process 60%
Costs incurred:
Direct materials $161,000
Direct labor $235,400
Overhead $180,600
Instructions
(a) Compute equivalent units of production for materials and for conversion costs.
(b) Determine the unit costs of production.
(c) Show the assignment of costs to units transferred out and in process.
