Problem 20-8B (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 labor, the number of equivalent units in ending inventory with respect to
Regarding financial statements, this error causes an overstatement of cost of
goods sold and an understatement of net income on the income statement for
Fundamental Accounting Principles, 21st Edition
1194
Problem 20-9B (80 minutes)
Part 1
BELDA CO.
Process Cost Summary – FIFO Method
For Month Ended March 31
Costs Charged to Production
Costs of beginning goods in process
Direct materials…………………………………………………….…
Direct labor …………………………………………………………..….
Factory overhead………………………………………………….….
$ 114,520
Costs incurred this period
Direct materials…………………………………………………….…
Direct labor …………………………………………………………..….
Factory overhead………………………………………………….….
1,457,160
Total costs to account for ………………………………………….
$1,571,680
Unit cost information
Units to account for
Units accounted for
Beginning goods in process ……….
10,000
Completed & transferred out ……
220,000
Units started this period ……….…….
250,000
Ending goods in process ………
40,000
Total units to account for ……..…….
260,000
Total units accounted for ………
260,000
Equivalent units of production
Direct
Materials
Direct
Labor
Factory
Overhead
Units to complete beginning goods in process
Direct materials (10,000 x 25%) ………….
2,500 EUP
Direct labor (10,000 x 40%) ………………..
4,000 EUP
Factory overhead (10,000 x 40%) ……….
4,000 EUP
Units started and completed ……………….
210,000 EUP
210,000 EUP
210,000 EUP
Units of ending goods in process
Direct materials (40,000 x 50%) ………….
20,000 EUP
Direct labor (40,000 x 30%) ………………..
12,000 EUP
Factory overhead (40,000 x 30%) ……….
__________
___________
12,000 EUP
Equivalent units of production…………….
232,500 EUP
226,000 EUP
226,000 EUP
[Continued on next page]
Problem 20-9B (Continued)
Cost per EUP
Direct
Materials
Direct Labor
Factory
Overhead
Costs incurred this period ……………...
$ 223,200
$ 352,560
$ 881,400
÷ EUP …………………………………………….
÷ 232,500
÷ 226,000
÷ 226,000
Cost per EUP ………………………………...
$ 0.96 per
EUP
$ 1.56 per
EUP
$ 3.90 per
EUP
Cost assignment and reconciliation
Costs transferred out
Cost of beginning goods in process ……………………….….
$ 114,520
Cost to complete beginning goods in process
Direct materials (2,500 EUP x $0.96 per EUP) ………..……….
$ 2,400
Direct labor (4,000 EUP x $1.56 per EUP) ……………………….
6,240
Factory overhead (4,000 EUP x $3.90 per EUP) ……..……….
15,600
24,240
Costs of units started and completed this period
Direct materials (210,000 EUP x $0.96 per EUP) …….……….
201,600
Direct labor (210,000 EUP x $1.56 per EUP) …………..……….
327,600
Factory overhead (210,000 EUP x $3.90 per EUP) ….……….
819,000
1,348,200
Total cost of goods finished this period ………………….……….
1,486,960
Costs of ending goods in process
Direct materials (20,000 EUP x $0.96 per EUP) ……………….
19,200
Direct labor (12,000 EUP x $1.56 per EUP) …………….……….
18,720
Factory overhead (12,000 EUP x $3.90 per EUP) …………….
46,800
84,720
Total costs accounted for ……………………………………….……….
$1,571,680
Part 2
Mar. 31
Finished Goods Inventory …………………………..
1,486,960
Goods in Process Inventory ………………….……….
1,486,960
Transfer of goods to finished inventory.
Problem 20-9B (Concluded)
If equivalent units of production for the production department’s ending
inventory for March are overstated, then total equivalent units of
SERIAL PROBLEM — SP 20
1. Features of job order and process costing follow.
Job order costing
Process costing
• Custom orders
• Repetitive operations
• Heterogeneous products
• Homogeneous products
• Low production volume
• High production volume
• High product flexibility
• Low product flexibility
• Low to medium standardization
• High standardization
2. Given the size of her company, and the types of products she sells,
Adria should probably stay with job order costing. The furniture she
Fundamental Accounting Principles, 21st Edition
1198
COMPREHENSIVE PROBLEM
Comprehensive Problem, Major League Bat Company (110 minutes)
[Instructor note: General Ledger accounts are shown in Part 4.]
Part 1 (Using either weighted-average or FIFO)
July Journal Entries
a.
Raw Materials Inventory ………………………………………..
125,000
Cash ………………………………………………………………..
125,000
Purchased raw materials for cash.
b.
Goods in Process Inventory …………………………………..
52,440
Factory Overhead …………………………………………..……..
10,000
Raw Materials Inventory …………………………….……..
62,440
To record use of raw materials.
c.
Factory Payroll ……………………………………………………..
227,250
Cash ………………………………………………………..……..
227,250
Paid factory payroll with cash.
d.
Goods in Process Inventory …………………………………..
202,250
Factory Overhead …………………………………………..……..
25,000
Factory Payroll ………………………………………………..
227,250
To record direct and indirect labor.
e.
Factory Overhead …………………………………………..……..
80,000
Cash ………………………………………………………..……..
80,000
Paid other overhead with cash.
f.
Goods in Process Inventory …………………………………..
101,125
Factory Overhead ……………………………………..……..
101,125
Allocated overhead at 50% of direct labor.
Comprehensive Problem (Continued)
Part 2 (Using weighted-average)
MAJOR LEAGUE BAT CO.
Process Cost Summary (Weighted Average)
For Month Ended July 31
Costs Charged to Production
Costs of beginning goods in process
Direct materials…………………………………………………..…..
$ 2,660
Direct labor ………………………………………………………………
3,650
Factory overhead………………………………………………..……
1,825
$ 8,135
Costs incurred this period
Direct materials…………………………………………………..…..
52,440
Direct labor ………………………………………………………………
202,250
Factory overhead………………………………………………..……
101,125
355,815
Total costs to account for …………………………………….……
$363,950
Unit cost information
Units to account for
Units accounted for
Beginning goods in process …………………………..
5,000
Complete & transferred out …..…….
11,000
Units started this period ……….………………….
14,000
Ending goods in process …………….
8,000
Total units to account for ……..……………………
19,000
Total units accounted for …………….
19,000
Equivalent units of production
Direct
Materials
Direct
Labor
Factory
Overhead
Units completed & transferred out ………….…
11,000 EUP
11,000 EUP
11,000 EUP
Units of ending goods in process
Direct materials (8,000 x 100%) ……………..…
8,000 EUP
Direct labor (8,000 x 40%) ……………………..…
3,200 EUP
Factory overhead (8,000 x 40%) …………….…
__________
__________
3,200 EUP
Equivalent units of production
19,000 EUP
14,200 EUP
14,200 EUP
Cost per EUP
Direct
Materials
Direct
Labor
Factory
Overhead
Cost of beginning goods in process ……….…
$ 2,660
$ 3,650
$ 1,825
Costs incurred this period …………………………
52,440
202,250
101,125
Total costs …………………………………………….…
$55,100
$205,900
$102,950
÷ EUP …………………………………………………….…
19,000 EUP
14,200 EUP
14,200 EUP
Cost per EUP ……………………………………………
$2.90 per
EUP
$14.50 per
EUP
$7.25 per
EUP
[Continued on next page]
Fundamental Accounting Principles, 21st Edition
1200
Comprehensive Problem (Continued)
(Using weighted-average)
Cost assignment and reconciliation
Costs transferred out
Direct materials (11,000 EUP x $2.90 per EUP) ……………….
$ 31,900
Direct labor (11,000 EUP x $14.50 per EUP) ……………..…….
159,500
Factory overhead (11,000 EUP x $7.25 per EUP) …………….
79,750
$271,150
Costs of ending goods in process
Direct materials (8,000 EUP x $2.90 per EUP) …………..…….
23,200
Direct labor (3,200 EUP x $14.50 per EUP) ……………….…….
46,400
Factory overhead (3,200 EUP x $7.25 per EUP) ………..…….
23,200
92,800
Total costs accounted for ………………………………………….…….
$363,950
Part 3 — Journal entries (Using weighted-average)
g.
Finished Goods Inventory …………………………..
271,150
Goods in Process Inventory …………………..………
271,150
Transferred goods to Finished Goods.
h.
Cash …………………………………………………………..…………
625,000
Sales …………………………..…………………………..
625,000
Sold finished goods for cash.
Cost of Goods Sold …………………………………….…………
265,700
Finished Goods Inventory …………………………..
265,700
Transferred cost from finished goods
to cost of goods sold.
Comprehensive Problem (Continued)
Part 4 (Using weighted-average)
General ledger accounts
Raw Materials Inventory
Acct. No. 132
Date
Explanation
Debit
Credit
Balance
June
30
Balance
25,000
(a)
Purchases
125,000
150,000
(b)
Usage
62,440
87,560
Goods in Process Inventory
Acct. No. 133
Date
Explanation
Debit
Credit
Balance
June
30
Balance
8,135
(b)
Direct materials
52,440
60,575
(d)
Direct labor
202,250
262,825
(f)
Overhead allocation
101,125
363,950
(g)
Transfer to Fin. Goods
271,150
92,800
Finished Goods Inventory
Acct. No. 135
Date
Explanation
Debit
Credit
Balance
June
30
Balance
110,000
(g)
Transfer in from prod.
271,150
381,150
(h)
July sales
265,700
115,450
Fundamental Accounting Principles, 21st Edition
1202
Comprehensive Problem (Concluded)
Part 4 (Using weighted-average)
Sales
Acct. No. 413
Date
Explanation
Debit
Credit
Balance
(h)
July sales
625,000
625,000
Cost of Goods Sold
Acct. No. 502
Date
Explanation
Debit
Credit
Balance
(h)
July sales
265,700
265,700
Factory Payroll
Acct. No. 530
Date
Explanation
Debit
Credit
Balance
(c)
July costs
227,250
227,250
(d)
Allocation
227,250
0
Factory Overhead
Acct. No. 540
Date
Explanation
Debit
Credit
Balance
(b)
Indirect materials
10,000
10,000
(d)
Indirect labor
25,000
35,000
(e)
Other overhead costs
80,000
115,000
(f)
Overhead application
101,125
13,875
Part 5 (Using weighted-average)
Computation of gross profit for July
Sales …………………………………………………………………………………….…
$ 625,000
Cost of goods sold* …………………………………………………………………
(279,575)
Gross profit ………………………………………………………………………….…
$ 345,425
* $279,575 = $265,700 + $13,875 (underapplied overhead)
Comprehensive Problem (Continued)
Part 2 (Using FIFO)
MAJOR LEAGUE BAT CO.
Process Cost Summary (FIFO)
For Month Ended July 31
Costs Charged to Production
Costs of beginning goods in process
Direct materials…………………………………………………..…..
$ 2,660
Direct labor ………………………………………………………………
3,650
Factory overhead………………………………………………..……
1,825
$ 8,135
Costs incurred this period
Direct materials…………………………………………………..…..
52,440
Direct labor ………………………………………………………………
202,250
Factory overhead………………………………………………..……
101,125
355,815
Total costs to account for …………………………………….……
$363,950
Unit cost information
Units to account for
Units accounted for
Beginning goods in process …………………………..
5,000
Complete & transferred out …..…….
11,000
Units started this period ……….………………….
14,000
Ending goods in process …………….
8,000
Total units to account for ……..……………………
19,000
Total units accounted for …………….
19,000
Equivalent units of production
Direct
Materials
Direct
Labor
Factory
Overhead
Units to complete beginning goods in process
Direct materials (5,000 x 25%) ……………
0 EUP
Direct labor (5,000 x 25%) ………………….
1,250 EUP
Factory overhead (5,000 x 25%) …………
1,250 EUP
Units started and completed ……………….
6,000 EUP
6,000 EUP
6,000 EUP
Units of ending goods in process
Direct materials (8,000 x 100%) ………….
8,000 EUP
Direct labor (8,000 x 40%) ………………….
3,200 EUP
Factory overhead (8,000 x 40%) …………
_________
_________
3,200 EUP
Equivalent units of production…………….
14,000 EUP
10,450 EUP
10,450 EUP
[Continued on next page]