Chapter 06 – Process Costing
6-29 (continued -1)
3. As in most process industries, sustainability issues arise in the
manufacture of refined sugar. For example, the sugar company
produces a large amount of shredded cane as one of the outputs of
the milling process. The shredded cane is called “bagasse” and is
sold for feed for livestock. It can also be considered a “by product’ of
the production of sugar; the costing of by products is covered in
Chapter 7. To achieve sustainability, the sugar manufacturer works
producing fuel in a renewable and environmentally friendly manner.
4. As noted in the problem, the production and consumption of sugar
takes place world-wide, with many of the producing countries (India,
Cuba, Brazil, China, Thailand, and Mexico) somewhat different from
the consuming countries (E.U., U.K., U.S.A., Japan). In addition, the
sugar cane and raw sugar may be processed in one country and then
Source: Alexandra Wexler, “Sugar Runs Into Barriers,” The
Wall Street Journal, March 26, 2012, p C10; Alexandra Wexler,
Chapter 06 – Process Costing
6-30 Equivalent Units; Weighted-Average Method (15 min)
Equivalent Units:
Materials 205,500
Conversion: 204,000
Learning Objective: 06-04
Topic: Illustration of Process Costing
Category:
Blooms: Apply
AACSB: Analytic
AICPA FN: Measurement
Quantity Schedule
Input
Work-in-process inventory, 1/1 30,000
Units started 180,000
Total units to account for 210,000
Output
Units completed (=210,000 – 15,000) 195,000
Work in process inventory (12/31) 15,000
Total units accounted for 210,000
Equivalent Units — Weighted-Average Method
Materials
Units completed 195,000
Work-in-process inventory(12/31) 15,000 x 70% = 10,500
Total equivalent units 205,500
6-12
Chapter 06 – Process Costing
6-31 Equivalent Units; Weighted-Average and FIFO (20
min)
Equivalent Units – Weighted-Average Method
Direct Materials
Equivalent units 7,410,00
Conversion:
Equivalent units 7,890,000
Equivalent Units — FIFO Method
Direct Materials
Equivalent units 5,410,000
Category:
Blooms: Apply
AACSB: Analytic
AICPA FN: Measurement
AICPA BB:
Difficulty: Medium
Feedback:
Physical Flow:
6-13
Education.
Chapter 06 – Process Costing
6-31 (continued -1)
Equivalent Units – Weighted-Average Method
Direct Materials
Units completed 6,450,000
Work-in-process inventory (9/30), 2,400,000 x 40% = 960,000
Equivalent units 7,410,000
Conversion:
Units completed 6,450,000
Work-in-process inventory(9/30), 2,400,000 x 60% = 1,440,000
Equivalent units 7,890,000
Equivalent Units — FIFO Method
Direct Materials
Conversion:
Units completed 6,450,000
Work-in-process inventory(9/30), 2,400,000 x 60% = 1,440,000
Work-in-process inventory(9/1), 4,000,000 x 20% = ( 800,000)
Equivalent units 7,090,000
6-14
Education.
Chapter 06 – Process Costing
6-32 Equivalent Units; FIFO Method (20 min)
Equivalent Units:
Weighted Average:
Materials = 1,100
Conversion= 920
FIFO
Materials = 900
Conversion = 880
Learning Objective: 06-04
Topic: Illustration of Process Costing
Category:
Blooms: Apply
AACSB: Analytic
AICPA FN: Measurement
AICPA BB:
Difficulty: Medium
Feedback:
Equivalent Units:
Weighted Average:
6-15
Education.
Chapter 06 – Process Costing
6.33 Equivalent Units: Weighted-Average Unit Cost (20 min)
Cost per equivalent unit for materials is $1,000
Cost per equivalent unit for conversion is $1,250
Learning Objective: 06-04
Topic: Illustration of Process Costing
Category:
Blooms: Apply
AACSB: Analytic
AICPA FN: Measurement
AICPA BB:
Difficulty: Easy
Feedback
Physical Percentage
Units Completion Materials Conversion
Beginning WIP 100
Materials 50%
Conversion 50%
Units started 600
Total to account for 700
Units Finished 500 500 500
Ending WIP 200
Materials 50% 100
Conversion – 30% 60
Total accounted for 700 – –
Total Equivalent Units 600 560
DETERMINE TOTAL COSTS Total Materials Conversion
Beginning WIP 110,000$ 50,000$ 60,000$
Current Costs 1,190,000 550,000 640,000
TOTAL 1,300,000$ 600,000$ 700,000$
WTAVG Cost per EU 2,250$ 1,000$ 1,250$
Equivalent Units
Weighted Average
Chapter 06 – Process Costing
6-34 Equivalent Units; FIFO Unit Cost (25 min)
Cost per Equivalent Unit
Weighted Average:
Materials: $1.80
Conversion: $3.4468
FIFO:
Materials: $1.7143
Conversion: $3.6585
Learning Objective: 06-04
Topic: Illustration of Process Costing
Category:
Blooms: Apply
AACSB: Analytic
AICPA FN: Measurement
AICPA BB:
Difficulty: Medium
Feedback:
1.
Weighted Average:
Materials: $1.80 = ($60,000+$120,000)/(70,000+1.0×30,000)
2. The differences between the cost per equivalent unit (FIFO vs weighted-
average) for materials and conversion are due to differences in the per unit
amounts in beginning WIP and current costs. These differences are
6-34 (continued -1)
6-17
Education.
Chapter 06 – Process Costing
6-18
Education.
Chapter 06 – Process Costing
6-35 FIFO Method (25 min)
1. Number of equivalent units (returns): 1,650
4. Cost of returns in process on March 31 = $18,900
Learning Objective: 06-04
Topic:3 Illustration of Process Costing
Category:
Blooms: Apply
Difficulty: Medium
Feedback:
1. Number of Equivalent units (returns):
Returns completed during March 1,500 =100+1,600-200
2. Cost per equivalent unit $173,250 / 1,650 = $105
3. Cost of completed returns
From beginning inventory, 3/1: $2,500
Added to finish the beginning inventory:
$105 x 100 x (1 – 30%) = 7,350
Total $ 9,850
4. Cost of returns in process on March 31
$105 x (200 x 90%) = $18,900
PROBLEMS
6-19
Education.
Chapter 06 – Process Costing
6-36 Weighted Average Method
1.
Materials Conversion
Answers are shown in the process cost report below.
6-20
Education.