Problem 16-7A (Continued)
Cost per EUP
Direct
Materials Conversion
Costs incurred this period…............... $ 248,400 $1,082,970
EUP
EUP
Cost assignment and reconciliation
Costs transferred out
Cost of beginning Work in Process…….….….….….…. $ 120,870
Cost to complete beginning Work in Process
Costs of ending Work in Process
Direct materials (2,400 EUP x $11.50 per EUP)....... 27,600
Conversion (1,920 EUP x $47.25 per EUP).............. 90,720 118,320
Total costs accounted for…………………….…..….……... $1,452,240
Part 2
Problem 16-7A (Concluded)
Part 3
If equivalent units of production for a production department’s ending
inventory for October are understated, then total equivalent units of
production is also understated. This means the cost per equivalent unit for
October is overstated and that department’s manager would be paid a
Financial and Managerial Accounting, 6th Edition
PROBLEM SET B
Problem 16-1B (45 minutes)
Part 1: Cost of goods transferred and cost of goods sold
Beginning work in process inventory…………….………………..….…... $156,000
Direct materials used in production……………………..………………..… 120,000
Beginning finished goods inventory …………….……………………….... $160,000
Plus goods transferred from production ………………………….….….. 638,500
Part 2: Summary journal entries
a.
June 30 Raw Materials Inventory ………………..….….….…….….….200,000
Accounts Payable ……………..……….…..…….….….…. 200,000
Purchased raw materials.
Used indirect materials.
Problem 16-1B (Continued)
d.
e.
June 30 Factory Overhead………………..………………………………...50,000
Factory Payroll Payable …………………………………... 50,000
Used indirect labor.
f.
June 30 Factory Payroll Payable …………………………………….…..400,000
Cash ……………..………………………………………………… 400,000
Paid payroll cost.
g.
i.
June 30 Finished Goods Inventory……………….………..….….….…638,500
Work in Process Inventory…………………….….….….. 638,500
Transferred completed products from
production to finished goods inventory.
j.
June 30 Accounts Receivable …………….………………….….….……1,000,000
Sales ………………………………………….…..….…….….…. 1,000,000
Sold finished goods.
Financial and Managerial Accounting, 6th Edition
Problem 16-2B (50 minutes)
Part 1
(a) and (b) Equivalent units with respect to direct materials and conversion
Direct
Equivalent units of production Materials Conversion
Units completed & transferred out…..….……........ 80,000 80,000
Units of ending work in process……………….….….
Part 2
Cost per equivalent unit of production
Direct
Materials
Conversion
Costs of beginning work in process…..….……... $ 58,000 $ 86,400
Costs incurred this period………….….….……..….. 712,000 1,980,000
Total costs…………….………..…….….…..…….….…... $770,000 $2,066,400
Part 3: Assigning product costs to units
Costs transferred out
Direct materials (80,000 EUP x $8.75 per EUP).........$ 700,000
Conversion (80,000 EUP x $25.20 per EUP).............. 2,016,000
Total costs transferred out……………..………………….… $2,716,000
*This equals the sum of the total direct materials cost and the total conversion costs ($770,000 +
$2,066,400 = $2,836,400).
Problem 16-2B (Concluded)
Part 4
MEMORANDUM
TO:
FROM:
DATE:
RE: Percentage of Completion Error Analysis
If the units in ending inventory are 75% complete instead of 25% with respect
to conversion, the number of equivalent units in ending inventory with respect
Regarding financial statements, this error causes an overstatement of cost of
goods sold and an understatement of net income on the income statement for
Financial and Managerial Accounting, 6th Edition
Problem 16-3B (75 minutes)
Part 1
BRAUN COMPANY
Process Cost Summary – Weighted Average Method
For Month Ended November 30
Costs Charged to Production
Costs of beginning work in process
Direct materials……………..………………….….…….….….……. $ 6,800
Conversion………………..………………………….……………….... 14,500
Costs incurred this period $ 21,300
Unit cost information
Units to account for Units accounted for
Beginning work in process.............7,500 Completed & transferred out…………………………….................100,000
Equivalent units of production
Direct
Materials Conversion
Units completed & transferred out…........100,000 EUP 100,000 EUP
Units of ending work in process
Cost per EUP
Direct
Materials Conversion
Cost of beginning work in process.......... $ 6,800 $ 14,500
Costs incurred this period…………..……….. 116,400 1,067,000
Total costs…….……………………………….….… $123,200 $1,081,500
[Continued on next page]
Problem 16-3B (Concluded)
Cost assignment and reconciliation
Costs transferred out
Direct materials (100,000 EUP x $1.10 per EUP)..... $110,000
Conversion (100,000 x $10.50 per EUP)………….…... 1,050,000 $1,160,000
Costs of ending work in process
Part 2
Nov. 30 Finished Goods Inventory……………….………..….….….…1,160,000
Financial and Managerial Accounting, 6th Edition
Problem 16-4B (80 minutes)
Part 1
SWITCH CO.
Process Cost Summary – Weighted Average Method
For Month Ended January 31
Costs Charged to Production
Costs of beginning work in process
Direct materials……………..………………….….…….….….……. $ 7,500
Conversion………………..………………………….……………….... 49,840
Unit cost information
Units to account for Units accounted for
Beginning work in process.............10,000 Completed & transferred out.....
220,000
Units started this period…..….….…..250,000 Ending work in process…...... 40,000
Units of ending work in process
Direct materials (40,000 x 50%)………….………….….20,000 EUP
Conversion (40,000 x 30%)………………………………..___________ 12,000 EUP
Equivalent units of production 240,000 EUP 232,000 EUP
Cost per EUP Direct Materials Conversion
Cost of beginning work in process……..…............ $ 7,500 $ 49,840
Costs incurred this period…………………………………. 112,500 616,000
Problem 16-4B (Concluded)
Cost assignment and reconciliation
Costs transferred out
Direct materials (220,000 EUP x $0.50 per EUP).................$110,000
Conversion (220,000 x $2.87 per EUP)………………….….….… 631,400 $741,400
Costs of ending work in process
Part 2
Jan. 31 Finished Goods Inventory………………..……….…….….….741,400
Work in Process Inventory…………………….….….….. 741,400
Transfer of goods to finished inventory.
Part 3
3a. Two major estimates are the: i) overhead allocation rate, and ii)
percentage of completion for materials and conversion.
3b. Management might want an overhead allocation rate that assigns the
least amount of overhead to their respective production process, and
Financial and Managerial Accounting, 6th Edition