Chapter 08 – Process Costing
8-31
8-39. (continued)
b.
Total
Gag-Gift
(5,000
units)
Commuter
(10,000
units)
Sport
(13,000
units)
Retirement
(2,000
units)
Materials …………………
$ 321,000
$15,000
$90,000
$156,000
$60,000
Conversion
Assemblya …………..
$120,000
$20,000
$40,000
$52,000
$ 8,000
Polishingb ……………
69,000
–0–
30,000
39,000
–0–
Special Finishingc ….
20,000
–0–
–0–
–0–
20,000
Packagingd …………..
90,000
15,000
30,000
39,000
6,000
Total conversion …
$299,000
$35,000
$100,000
$130,000
$ 34,000
Total Product Cost ……
$620,000
$50,000
$190,000
$286,000
$94,000
Number of Units ………
5,000
10,000
13,000
2,000
Cost per unit ……………
$10.00
$19.00
$22.00
$47.00
a Unit cost is $4.00 (= $120,000 ÷ 30,000 units).
b Unit cost is $3.00 (= $69,000 ÷ 23,000 units).
c Unit cost is $10.00 (= $20,000 ÷ 2,000 units).
d Unit cost is $3.00 (= $90,000 ÷ 30,000 units).
Chapter 08 – Process Costing
Solutions to Problems
8-40. (45 min.) Compute Equivalent Units: Multiple Choice.
a. The answer is (2).
Materials
Conversion
Costs
Units transferred out ………………………..…
790,000
a
790,000
a
EU in ending inventory:
Materials 100% x 80,000 units ……….………….
80,000
EU
Conversion costs 30% x 80,000
units ……………………………………………………….
24,000
EU
EU produced this period …………………..………
870,000
EU
814,000
EU
aUnits transferred out
=
units started + beg. inventory – ending inventory
=
720,000 + 150,000 – 80,000
=
790,000
Units transferred out ………………………..…
a
a
a
EU in ending inventory:
Prior department costs ………………….……….
EU
Conversion costs 65% x 40,000
EU
EU produced this period …………………..………
330,000
EU
EU in ending inventory 70% x 40,000 units ……..
EU
EU done this period ……………………………………..
EU
Chapter 08 – Process Costing
8-33
8-40. (continued)
d. The answer is (4).
Materials
Conversion
Costs
To complete beginning inventory:
Materials: 0%a x 40,000 units …………………...
0
Conversion costs: 30%b x 40,000 units ……....
12,000
EU
Started and completed during the period ………..
140,000
c
EU
140,000
EU
Units still in ending inventory:
Materials: 100% x 32,000 units ………………....
32,000
EU
Conversion costs: 50% x 32,000 units ………..
16,000
EU
Work done in current period………………………....
172,000
EU
168,000
EU
a 0% = 100% – 100% already done at the beginning of the period.
b 30% = 100% – 70% already done at the beginning of the period.
c 140,000 = 180,000 transferred out – 40,000 from beginning inventory.
Chapter 08 – Process Costing
8-34
8-41. (30 min) FIFO Method: McKenzie Corporation.
a.
Physical
Units
Equivalent Units
Conversion
Costs
Flow of units
Units to be accounted for:
Beginning WIP inventory …………………………..
100,000
Units started this period…………………..………
540,000
Total units to account for …………..………..
640,000
Units accounted for:
Completed and transferred out
From beginning WIP inventory ……..………..
100,000
(100,000 x 20%) …………………………..
20,000
Started and completed currently ……………..
300,000
300,000
Units in ending WIP inventory ………….………..
240,000
(240,000 x 50%) …………………………..
120,000
Total units accounted for ……….………..
640,000
440,000
Conversion Costs
Flow of costs:
Costs to be accounted for:
Costs in beginning WIP inventory …………………….…
$ 387,000
Current period costs ……………………………………….…
2,178,000
Total costs to be accounted for ……………………..…
$2,565,000
Cost per equivalent unit ($2,178,000 ÷ 440,000) …..…
$ 4.95
Costs accounted for:
Costs assigned to units transferred out:
Costs from beginning WIP inventory ……………..…
$ 387,000
Current costs added to complete
beginning WIP inventory:
Conversion costs ($4.95 x 20,000) ………………
99,000
Current costs of units started and completed:
Conversion costs ($4.95 x 300,000) ……………..…
1,485,000
Total costs transferred out……………………………….…
$1,971,000
Cost of ending WIP inventory:
Conversion costs ($4.95 x 120,000) ………….…
594,000
(Answer)
Chapter 08 – Process Costing
8-35
Total costs accounted for ……………………………..…
$2,565,000
8-41. (continued)
b.
Cost per unit for the previous period is $4.8375 [= $387,000 ÷ (100,000 equiv. units x
80%)]
Cost per unit for the current period is $4.95 as calculated in (a) above.
Chapter 08 – Process Costing
8-42.
(50 min.) Prepare a Production Cost Report—Weighted Average Method: Douglas Toys.
a.
Douglas Toys
Assembling Department
Production Cost Report—Weighted-Average
Chapter 08 – Process Costing
8-37
8-42. (continued)
DETAILS
Total costs
Prior
department
costs
Materials
Labor
Manufacturing
overhead
Costs to be accounted for: (Section 3)
Costs in beginning WIP inventory ……………….
$ 255,200
$128,000
$ 80,000
$ 28,800
$18,400
Current period costs …………………………………
1,243,600
640,000
384,000
144,000
75,600
Total costs to be accounted for ……………………..
$1,498,800
$768,000
$464,000
$172,800
$94,000
Cost per equivalent unit: (Section 4)
Prior department costs ($768,000 600,000)
$1.28
Materials ($464,000 580,000) ………………….
$0.80
Labor ($172,800 540,000) ………………………
$0.32
Manufacturing overhead ($94,000 470,000)
$0.20
Costs accounted for: (Section 5)
Costs assigned to units transferred out:
Prior department costs ($1.28 x 400,000) …
$512,000
$512,000
Materials ($0.80 x 400,000) ……………………
320,000
$ 320,000
Labor ($0.32 x 400,000) …………………………
128,000
$128,000
Manufacturing overhead ($0.20 x 400,000)
80,000
$80,000
Total costs of units transferred out ……………..
$1,040,000
Costs assigned to ending WIP inventory:
Prior department costs ($1.28 x 200,000) …
$256,000
256,000
Materials ($0.80 x 180,000) ……………………
144,000
144,000
Labor ($0.32 x 140,000) …………………………
44,800
44,800
Manufacturing overhead ($0.20 x 70,000) ..
14,000
14,000
Total ending WIP inventory………………………..
$458,800
Total costs accounted for ……………………………..
$1,498,800
$768,000
$464,000
$172,800
$94,000
Chapter 08 – Process Costing
8-38
8-42. (continued)
b. The report to management should include the following items:
8-43.
(50 min.) Prepare a Production Cost Report—FIFO Method: Douglas Toys.
a.
Douglas Toys
Assembling Department
Production Cost Report—FIFO
Flow of Production Units
(Section 1)
(Section 2)
COMPUTE EQUIVALENT UNITS
Physical
units
Prior
department
costs
Materials
Labor
Manufacturing
overhead
Units to be accounted for:
Beginning WIP inventory …………………………..
100,000
Units started this period …………………..………
500,000
Total units to be accounted for …………….………..
600,000
Units accounted for:
Units completed and transferred out:
From beginning inventory……………..………..
100,000
–0–
–0–
40,000
(40%)
a
50,000
(50%)
b
Started and completed currently ……………..
300,000
300,000
300,000
300,000
300,000
Units in ending WIP inventory …………..………..
200,000
200,000
180,000
(90%)
140,000
(70%)
70,000
(35%)
Total units accounted for …………………….…….
600,000
500,000
480,000
480,000
420,000
Chapter 08 – Process Costing
8-39
a40% = 100% – 60% already done at the beginning of the period.
b50% = 100% – 50% already done at the beginning of the period.
8-43. (continued)
Costs
DETAILS
Total Costs
Prior
department
costs
Materials
Labor
Manufacturing
overhead
Costs to be accounted for: (Section 3)
Costs in beginning WIP inventory ……………….
$ 255,200
$128,000
$ 80,000
$ 28,800
$18,400
Current period costs …………………………………
1,243,600
640,000
384,000
144,000
75,600
Total costs to be accounted for ……………………..
$1,498,800
$768,000
$464,000
$172,800
$94,000
Cost per equivalent unit: (Section 4)
Prior department costs ($640,000 500,000)
$1.28
Materials ($384,000 480,000) ………………..
$0.80
Labor ($144,000 480,000) ………………………
$0.30
Manufacturing overhead ($75,600 420,000)
$0.18
Chapter 08 – Process Costing
8-40
8-43. (continued)
Details
Total Costs
Prior
department
costs
Materials
Labor
Manufacturing
overhead
Costs accounted for: (Section 5)
Costs assigned to units transferred out:
Costs from beginning WIP inventory ………..
$ 255,200
$128,000
$ 80,000
$ 28,800
$18,400
Current costs added to complete beginning WIP inventory:
Prior department costs ……………………….
–0–
–0–
Materials …………………………………………..
–0–
–0–
Labor ($0.30 x 40,000) ……………………….
12,000
12,000
Manufacturing overhead ($0.18 x 50,000)
9,000
9,000
Total costs from beginning inventory ……….
$276,200
Current costs of units started and completed:
Prior department costs ($1.28 x 300,000) …
384,000
384,000
Materials ($0.80 x 300,000) ……………………
240,000
240,000
Labor ($0.30 x 300,000) …………………………
90,000
90,000
Manufacturing overhead ($0.18 x 300,000)
54,000
54,000
Total costs of units started and completed …..
$768,000
Total costs of units transferred out …………………
$1,044,200
Costs assigned to ending WIP inventory:
Prior department costs ($1.28 x 200,000) ……
$256,000
256,000
Materials ($0.80 x 180,000) ……………………….
144,000
144,000
Labor ($0.30 x 140,000) …………………………...
42,000
42,000
Manufacturing overhead ($0.18 x 70,000) ……
12,600
12,600
Total ending WIP inventory …………………………..
$454,600
Total costs accounted for ……………………………..
$1,498,800
$768,000
$464,000
$172,800
$94,000
8-43. (continued)