Chapter 08 – Process Costing
8-21
8-33. (20 min.) Assign Costs to Goods Transferred Out and Ending Inventory—
FIFO Method: Pacific Ink.
Physical
Units
Equivalent Units
Materials
Eq. units
Conversion
Costs Eq. units
Flow of units:
Units to be accounted for:
Beginning WIP inventory ………………………..…
48,000
Units started this perioda
84,000
Total units to account for ……………………..…
132,000
Units accounted for:
Completed and transferred out
102,000
To complete beginning WIP inventory
Materials (48,000 x (1 – 30%)) ……..…
33,600
Conversion (48,000 x (1 – 30%)) ….…
33,600
Started and completed …………………………
54,000
54,000
Units in ending inventory ………………………..…
30,000
Materials (30,000 x 80%) …………………….…
24,000
Conversion costs (30,000 x 40%) ……………
12,000
Total units accounted for ……………………..…
132,000
111,600
99,600
a 84,000 units started this period = 132,000 units to account for – 48,000 units in
beginning work-in-process inventory.
Chapter 08 – Process Costing
8-22
8-33. (continued)
Total
Direct
Materials
Conversion
Costs
Flow of costs:
Costs to be accounted for:
Costs in beginning WIP inventory ………………
$ 744,960
$ 304,920
$ 440,040
Current period costs …………………………………
5,371,440
2,343,600
3,027,840
Total costs to be accounted for ………….……
$6,116,400
$2,648,520
$3,467,880
Cost per equivalent unit
Materials ($2,343,600 ÷ 111,600 units) ….……
$ 21.00
Conversion costs ($3,027,840 ÷ 99,600) .……
$ 30.40
Costs accounted for:
Costs assigned to units transferred out:
Costs from beginning WIP inventory ..……..
$ 744,960
$ 304,920
$ 440,040
Current costs added to complete
beginning WIP inventory …………………..
1,727,040
Materials ($21.00 x 33,600) …………………..
705,600
Conversion costs ($30.40 x 33,600) ..……..
1,021,440
Current costs of units started and
completed: ……………………………….……..
2,775,600
Materials ($21.00 x 54,000) …………………..
1,134,000
Conversion costs ($30.40 x 54,000) ..……..
1,641,600
Total costs transferred out …………………….…….
$ 5,247,600
$2,144,520
$3,103,080
Cost of ending WIP inventory ………………..……..
868,800
Materials ($21.00 x 24,000) …………………..
504,000
Conversion costs ($30.40 x 12,000) ..……..
364,800
Total costs accounted for …………………..……..
$6,116,400
$2,648,520
$3,467,880
Chapter 08 – Process Costing
8-23
8-34. (50 min.) Prepare a Production Cost Report—FIFO method: El Paso
Corporation.
Physical Units
Equivalent Units
Prior
Department
Department
No. B
Flow of units:
Units to be accounted for:
Beginning WIP inventory ………………………..…
7,500
Units started this period …………………………..
17,500
Total units to account for ……………………..…
25,000
Units accounted for:
Completed and transferred out
From beginning WIP inventory ……………..…
7,500
Prior department ……………………………..…
0
Dept. B [7,500 units x (1–20%)] ……………
6,000
Started and completed currently …………..…
15,000
a
15,000
15,000
Units in ending WIP inventory …………………….…
2,500
Prior department ………………………………..…
2,500
Department B (2,500 units x 50%) ………..…
1,250
Total units accounted for ………………….…
25,000
17,500
22,250
a 15,000 = 17,500 units started – 2,500 units in ending WIP inventory.
Chapter 08 – Process Costing
8-24
8-34. (continued)
Total
Prior
Department
Department
No. B
Flow of costs:
Costs to be accounted for:
Costs in beginning WIP inventory ………………
$ 36,675
$29,000
$ 7,675
Current period costs …………………………………
219,075
70,000
149,075
Total costs to be accounted for ……………….
$255,750
$99,000
$156,750
Cost per equivalent unit
Prior department ($70,000 ÷ 17,500 units) ….
$ 4.00
Department. B ($149,075 ÷ 22,250 units) …..
$ 6.70
Costs accounted for:
Costs assigned to units transferred out:
Costs from beginning WIP inventory ……….
$ 36,675
$29,000
$ 7,675
Current costs added to complete beginning
WIP inventory …………………………………………….
40,200
Prior department ……………………………….
0
Department B ($6.70 x 6,000 units) …….
40,200
Current costs of units started and completed:
160,500
Prior department ($4.00 x 15,000) ……….
60,000
Department B ($6.70 x 15,000) ………….
100,500
Total costs transferred out …………………………...
$237,375
$89,000
$148,375
Cost of ending WIP inventory ……………………….
18,375
Prior department ($4.00 x 2,500) ………..
10,000
Department B ($6.70 x 1,250) …………….
8,375
Total costs accounted for ……………………….
$255,750
$99,000
$156,750
Chapter 08 – Process Costing
8-35. (50 min.) Prepare a Production Cost Report—Weighted-Average Method: El
Paso Corporation.
a.
Physical
Units
Equivalent Units
Prior
Department
Department
No. B
Flow of units:
Units to be accounted for:
Beginning WIP inventory ………………………..…
7,500
Units started this period …………………………..
17,500
Total units to account for ……………………..…
25,000
Units accounted for:
Completed and transferred out ………………..…
22,500
22,500
22,500
Units in ending inventory ………………………..…
2,500
Prior department (2,500 units x 100%) ….…
2,500
Department No. B (2,500 units x 50%) ….…
1,250
Total units accounted for ………………….…
25,000
25,000
23,750
Flow of costs:
Costs to be accounted for:
Costs in beginning WIP inventory ……………….
Current period costs ………………………………...
Total costs to be accounted for ……………….
Cost per equivalent unit
Prior department ($99,000 ÷ 25,000 units) …..
Department No. B ($156,750 ÷ 23,750) ……….
Costs accounted for:
Costs of ending WIP inventory …………………..
Chapter 08 – Process Costing
8-26
8-35. (continued)
8-36. (50 min.) Prepare a Production Cost Report—Weighted-Average Method:
Calgary Corporation.
Physical
Units
Equivalent Units
Mixing
Department
Finishing
Department
Flow of units:
Units to be accounted for:
Beginning WIP inventory …………………………..
10,000
Units started this period…………………………..
98,000
Total units to account for ……………………....
108,000
Units accounted for:
Completed and transferred out …………………..
94,000
94,000
94,000
Units in ending inventory …………………………..
14,000
Mixing (14,000 units x 100%) ………………...
14,000
Finishing (14,000 units x 60%) ……………....
8,400
Total units accounted for …………………....
108,000
108,000
102,400
Total
Direct
Materials
Conversion
Costs
Flow of costs:
Costs to be accounted for:
Costs in beginning WIP inventory ……………...
$120,606
$109,600
$ 11,006
Current period costs ………………………………...
1, 260,994
862,400
398,594
Total costs to be accounted for ……………....
$1,381,600
$972,000
$409,600
Cost per equivalent unit
Mixing ($972,000 ÷ 108,000 units) ……………..
$ 9.00
Finishing ($409,600 ÷ 102,400) ………………....
$ 4.00
Costs accounted for:
Costs assigned to units transferred out ……....
$1,222,000
$846,000
$376,000
8-27
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Costs of ending WIP inventory ………………..…
159,600
126,000
33,600
Total costs accounted for …………………….…
$1,381,600
$972,000
$409,600
8-37. (50 min.) Production Cost Report—FIFO method: Calgary Corporation.
a.
Physical Units
Equivalent Units
Mixing
Department
Finishing
Department
Flow of units:
Units to be accounted for:
Beginning WIP inventory ………………………..…
10,000
Units started this period …………………………..
98,000
Total units to account for ……………………..…
108,000
Units accounted for:
Completed and transferred out
From beginning WIP inventory ……………..…
10,000
Mixing …………………………..……………….…
0
Finishing [10,000 units x (1–30%)] …….…
7,000
Started and completed currently …………..…
84,000
a
84,000
84,000
Units in ending WIP inventory …………………….…
14,000
Mixing …………………………………………………
14,000
Finishing (14,000 units x 60%) ……………..…
8,400
Total units accounted for ………………….…
108,000
98,000
99,400
a 84,000 = 98,000 units started – 14,000 units in ending WIP inventory.
Chapter 08 – Process Costing
8-28
8-37. (continued)
Total
Mixing
Department
Finishing
Department
Flow of costs:
Costs to be accounted for:
Costs in beginning WIP inventory ………………
$120,606
$109,600
$ 11,006
Current period costs …………………………………
1, 260,994
862,400
398,594
Total costs to be accounted for ……………….
$1,381,600
$972,000
$409,600
Cost per equivalent unit
Mixing ($862,400 ÷ 98,000 units) ………………
$ 8.80
Finishing ($398,594 ÷ 99,400 units) …………..
$ 4.01
Costs accounted for:
Costs assigned to units transferred out:
Costs from beginning WIP inventory ……….
$120,606
$109,600
$ 11,006
Current costs added to complete beginning
WIP inventory …………………………………………….
28,070
Mixing ………………………………………………
0
Finishing ($4.01 x 7,000 units) ……………
28,070
Current costs of units started and completed:
1,076,040
Mixing ($8.80 x 84,000) ………………………
739,200
Finishing ($4.01 x 84,000) …………………
336,840
Total costs transferred out …………………………...
$1,224,716
$848,800
$375,916
Cost of ending WIP inventory ……………………….
156,884
Prior department ($8.80 x 14,000) ………
123,200
Department B ($4.01 x 8,400) …………….
33,684
Total costs accounted for ……………………….
$1,381,600
$972,000
$409,600
Chapter 08 – Process Costing
8-29
8-37. (continued)
c. The decision depends on the decisions that will be made using the data. If the
8-38. (50 min.) Operations Costing―Ethical Issues: Brokia Electronics.
a.
Total
Basic
(40,000
units)
Photo
(30,000
units)
UrLife
(10,000
units)
Materials ………………….
$2,240,000
$480,000
$1,200,000
$560,000
Conversion
Assemblya …………..
$ 2,100,000
1,050,000
787,500
262,500
Special Packaging ..
600,000
–0–
–0–
600,000
Total conversion ..
$ 2,700,000
$1,050,000
$787,500
$862,500
Total Product Cost
$4,940,000
$1,530,000
$1,987,500
$1,422,500
Number of Units
40,000
30,000
10,000
Cost per unit
$38.25
$66.25
$142.25
a Unit cost is $26.25 (= $2,100,000 ÷ 80,000 units)
b.
(1)
Total
Basic
(40,000
units)
Photo
(30,000
units)
UrLife
(10,000
units)
Materials
$2,240,000
$480,000
$1,200,000
$560,000
Conversion
Assemblya
$ 2,100,000
450,000
1,125,000
525,000
Special Packaging
600,000
–0–
–0–
600,000
Total conversion cost
$ 2,700,000
$450,000
$1,125,000
$1,125,000
Total Product Cost
$4,940,000
$930,000
$2,325,000
$1,685,000
Chapter 08 – Process Costing
8-30
Number of Units
40,000
30,000
10,000
Cost per unit
$23.250
$77.50
$168.50
a Unit cost is 93.75% of material dollars (= $2,100,000 ÷ $2,240,000 material
dollars)
(2) If there is a reason that conversion costs are related to material dollars (for example,
because of the difficulty of working with different materials), this change might be
justified. If it is done simply to shift cost to the cost-plus customer, this is not ethical.
8-39. Operation Costing: Ferdon Watches.
a.