Chapter 6 – Process Costing
6-31
6-47 Weighted-Average Method; FIFO Method (70-80 min)
1. Porter Company — Department A
Production Cost Report
Physical Percentage
Units Completion Materials Conversion
Beginning WIP 500
Materials 100%
Conversion 30%
Units started 1,500
Total to account for 2,000
Units Finished or Trans out 1,600 1,600 1,600
Ending WIP 400
Materials 100% 400
Conversion –
20% 80
Total accounted for 2,000 – –
Total Equivalent Units 2,000 1,680
DETERMINE TOTAL COSTS Materials Conversion Total
Beginning WIP 3,000$ 1,530$ 4,530$
Current Costs 12,000 10,710 22,710
TOTAL 15,000$ 12,240$ 27,240$
WTAVG Cost per EU 7.500$ 7.286$ 14.786$
Units Completed
Units in Ending
COST ASSIGNED –WEIGHTED AVERAGE and Transferred WIP
Out Inventory Total
Transferred Out 1,600 units) 23,657$ $23,657
Weighted Average
Equivalent Units
Chapter 6 – Process Costing
6-32
6-47 (continued –1)
2. Porter Company — Department B
Production Cost Report
Physical Percent Transferred
Units
Completion
in Costs Materials
Conversion
Beginning WIP 300 100%
Materials 0%
Conversion 40%
Units started or Trans-in 1,600 100%
Total to account for 1,900
Units Finished or Trans-out 1,400 100% 1,400 1,400 1,400
Ending WIP 500 100% 500
Mateials – 100% 500
Conversion –
70% 350
Total accounted for 1,900 – – –
Total Equivalent Units 1,900 1,900 1,750
COST ADDED
Trans-in Materials Conversion Total
Beginning WIP 4,200$ –$ 1,900$ 6,100$
Current Costs 23,657 38,000 24,350 86,007
TOTAL 27,857$ 38,000$ 26,250$ 92,107$
& Trans-out in Process Total
1,400 units 69,526$ 69,526$
500 units
Trans-in 500 units 7,331 7,331
Materials 500 units 10,000 10,000
Total Costs Accounted For 69,526$ 22,581$ 92,107$
——–This Dept-–—–
6-33
6-48 Weighted Average Process Costing; Spoilage (50 min)
1.
Whole Percent
Units
Completion
Materials Conversion
Beginning WIP 2,000 100%
Materials 100%
Conversion 30%
Units started or Trans-in 30,000 100%
Total to account for 32,000
Units Finished or Trans-out 25,500 100% 25,500 25,500
Normal spoilage 500 100% 500 500
Abnormal spoilage 500 100% 500 500
Ending WIP 5,500 100%
Materials – 100% 5,500
Conversion –
70% 3,850
Total accounted for 32,000 – –
Total Equivalent Units 32,000 30,350
COST ADDED
Materials Conversion* Total
Beginning WIP 52,500$ 34,000$ 86,500$
Current Costs 332,500 154,000 486,500
TOTAL 385,000$ 188,000$ 573,000$
WTAVG Cost per EU 12.0313$ 6.1944$ 18.2256$
Completed
Ending Work
& Trans-out in Process Total
* Total conversion cost = labor cost + labor cost X $3
= $8,500 +8,500*$3 = $34,000
=$38,500 +38,500x$3 = $154,000
——–This Dept-——
Weighted Average
Equivalent Units
Chapter 6 – Process Costing
6-34
6-48 (continued –1)
2. The new capacity will allow the company to grow which is a positive
for future revenues and profits, but it also has apparently caused two
significant problems. One is the increase in work in process
inventory, which is costly and can lead to waste, especially since the
product is paint. The quality of paint can erode if not properly sealed
and stored. Another is the significant amount of waste, 1,000
the company’s customers expect the highest quality in paint. The
spoilage issues are a threat to the continued success of that strategy.
Alexander needs to review the implementation of the new process,
and perhaps make some significant changes.
3. The spoiled paint could be an environmentally harmful chemical, and
if so, should be disposed of in an environmentally appropriate way.
This could be costly to the company, and the cost should be captured
Chapter 6 – Process Costing
6-35
6-49 Spoilage; Weighted-Average Method;
Transferred-in Costs (40 Min)
1.
a. Normal amount of defective or spoiled bikes
Bikes passing through assembly 48,000
Less:
Bikes not inspected during current year
Beginning work–in-process inventory
(inspected in prior year – 80% complete) 3,000
Ending work–in–process inventory
b. Abnormal amount of defective/spoiled bikes
Total bikes lost 4,000
Chapter 6 – Process Costing
6-36
6-49 (continued –1)
2.
a. 48,000
d. $119,060
Whole Percent Transferred
Units Completion in Costs Materials Conversion
Beginning WIP 3,000 100%
Materials 100%
Conversion 80%
Units started or Trans-in 45,000 100%
Total to account for 48,000
Units Finished or Trans-out 40,000 100% 40,000 40,000 40,000
Normal spoilage 2,050 * 2,050 2,050 1,435
Abnormal spoilage 1,950 * 1,950 1,950 1,365
Ending WIP 4,000 100% 4,000
Materials – 50% 2,000
Conversion – 20% 800
Total accounted for 48,000 – – –
Total Equivalent Units 48,000 46,000 43,600
* Materials and Transferred in costs are 100% lost; but conversion is only 70% lost, to the
inspection point
COST ADDED
Trans-in Materials Conversion Total
Beginning WIP 82,200$ 6,660$ 11,930$ 100,790$
Current Costs 1,237,800 96,840 236,590 1,571,230
TOTAL 1,320,000$ 103,500$ 248,520$ 1,672,020$
WTAVG Cost per EU 27.50$ 2.25$ 5.70$ 35.45$
Completed Ending Work
& Trans-out in Process Total
Finished Goods
40,000 units 1,418,000$ 1,418,000$
plus Normal Spoilage
2,050 units 69,167 69,167
Abnormal Spoilage
1,950 units 65,793
Ending Work-in-process
4,000 units
Trans-in 4,000 units 110,000 110,000
Materials 2,000 units 4,500 4,500
Conversion 800 units – 4,560 4,560
Total Costs Accounted For 1,487,167$ 119,060$ 1,672,020$
—–This Dept—–
Chapter 6 – Process Costing
6-37
6-49 (continued –2)
5. a. The cost of the normal spoiled units of $69,167 would be
transferred to the Packing Department as a portion of the cost of
the 40,000 good units transferred out. Thus, this amount would be
b. The abnormal losses of $65,793 would appear as a period
expense on the company’s income statement.
c. The cost of the good units completed and transferred to the
Packing Department ($1,487,167) would be included in the
Chapter 6 – Process Costing
6-38
6-50 Process Costing and Activity Based Costing (40 min)
1.
Physical Percentage
Units Completion Materials Conversion
Beginning WIP 200
Materials 100%
Conversion 60%
Units started 1,000
Total to account for 1,200
Units Finshed 800 800 800
Ending WIP 400
Materials 100% 400
Conversion –
30% 120
Total accounted for 1,200 – –
Total Equivalent Units 1,200 920
DETERMINE TOTAL COSTS Materials Conversion Total
Beginning WIP 55,000$ 7,250$ 62,250$
Current Costs 176,000 66,900 242,900
TOTAL 231,000$ 74,150$ 305,150$
WTAVG Cost per EU 192.500$ 80.598$ 273.098$
Units Completed
Units in Ending
COST ASSIGNED -WEIGHTED AVERAGE and Transferred WIP
Out Inventory Total
Finished Goods 800 units 218,478$ 218,478$
Equivalent Units
Weighted Average
Chapter 6 – Process Costing
6-50 (continued –1)
2.
Physical Percentage Number of
Units Completion Materials Conversion Batches
Beginning WIP 200
Materials 100%
Conversion 60%
Units started 1,000
Total to account for 1,200
Units Finished 800 800 800 25
Ending WIP 400 75
Materials 100% 400
Conversion –
30% 120
Total accounted for 1,200 – – –
Total Equivalent Units 1,200 920 100
Total Number of Batches
DETERMINE TOTAL COSTS Materials Conversion Batch Total
Beginning WIP 55,000$ 7,250$ 62,250$
Current Costs 176,000 38,400 28,500 242,900
TOTAL 231,000$ 45,650$ 28,500$ 305,150$
WTAVG Cost per EU 192.5000$ 49.6196$ 285.0000$ 242.1196$
Units Completed Units in Ending
COST ASSIGNED -WEIGHTED AVERAGE and Transferred WIP
Out Inventory Total
Finished Goods
800 units 193,696$ 193,696$
Batch Costs 25 batches 7,125 7,125
Ending WIP
400 units –
Materials 77,000$ 77,000
Conversion – 5,954 5,954
Batch costs 75 batches – 21,375 21,375
Total Mfg. Costs Accounted For 200,821$ 104,329$ 305,150$
Weighted Average
Equivalent Units