Financial & Managerial Accounting, 5th Edition
894
Exercise 16–14 (Concluded)
(1)
Beginning goods in process
$ 17,250
Direct materials
$ ?
Direct labor
47,250
Factory overhead
51,300
Total costs added
?
Total costs in process
$242,400
$17,250 + [Total costs added] = $242,400
Therefore, Total costs added = $225,150
$225,150 = Direct materials + $47,250 + $51,300
Therefore, Direct materials = $126,600
Exercise 16-15 (30 minutes)
Costs Charged to Production
Costs of beginning goods in process ($18,550 + $760 + $1,520) …..…….
$ 20,830
Costs incurred this period ($357,500 + $62,890 + $125,780) ………….…….
546,170
Total costs to account for …………………………………………………………..…….
$567,000
Unit Cost Information
Units to Account For
Units Accounted For
Beginning goods in process …..…………
2,000
Completed & transferred out ….……………………….
32,000
Units started this period ……………………
32,500
Ending goods in process ……..……………………
2,500
Total units to account for ……….…………
34,500
Total units accounted for ……..……………………
34,500
Equivalent Units of Production (EUP)
Direct
Materials
Direct
Labor
Factory
Overhead
Units completed and transferred out ……..
32,000
32,000
32,000
Units of ending goods in process ………....
2,500
1,500
1,500
Equivalent units of production ……………...
34,500
33,500
33,500
Cost per EUP
Direct
Materials
Direct
Labor
Factory
Overhead
Costs of beginning goods in process …....
$ 18,550
$ 760
$ 1,520
Costs incurred this period ……………………..
357,500
62,890
125,780
Total costs …………………………………………...
$376,050
$63,650
$127,300
÷ Equivalent units of production …………...
34,500
33,500
33,500
Cost per equivalent unit of production …....
$10.90 per
EUP
$1.90 per
EUP
$3.80 per
EUP
Cost Assignment and Reconciliation
Costs transferred out
Direct materials (32,000 x $10.90) …………………….…….
$348,800
Direct labor (32,000 x $1.90) …………………………….………….
60,800
Factory overhead (32,000 x $3.80) …………………………..
121,600
Total transferred out
$531,200
Cost of ending goods in process
Direct materials (2,500 x $10.90) …………………………..
27,250
Direct labor (1,500 x $1.90) ………………………………………….
2,850
Factory overhead (1,500 x $3.80) ……………………..……
5,700
Total ending goods in process ………………………..…
35,800
Total costs accounted for …………………………………….………….
$567,000
Financial & Managerial Accounting, 5th Edition
896
Exercise 16-16 (40 minutes)
ASHAD COMPANY
Process Cost Summary – FIFO Method
For Month Ended July 31
Costs Charged to Production
Costs of beginning goods in process
Direct materials ………………………………………………….……
$ 18,550
Direct labor ………………………………………………………..…….
760
Factory overhead ……………………………………………….…….
1,520
$ 20,830
Costs incurred this period
Direct materials ………………………………………………….……
357,500
Direct labor ………………………………………………………..…….
62,890
Factory overhead ……………………………………………….…….
125,780
546,170
Total costs to account for …………………………………….…….
$567,000
Unit cost information
Units to account for
Units accounted for
Beginning goods in process …………………………..
2,000
Completed & transferred out ….…….
32,000
Units started this period ……….………………….
32,500
Ending goods in process …………….
2,500
Total units to account for ……..……………………
34,500
Total units accounted for …………….
34,500
Equivalent units of production
Direct
Materials
Direct
Labor
Factory
Overhead
Units to complete beginning goods in process
Direct materials (2,000 x 0%) ………………..……..
0 EUP
Direct labor (2,000 x 80%) …………………….…….
1,600 EUP
Factory overhead (2,000 x 80%) …………………..
1,600 EUP
Units started and completed …………………..……..
30,000 EUP
30,000 EUP
30,000 EUP
Units of ending goods in process
Direct materials …………………………………………..
2,500 EUP
Direct labor …………………………..……………..……..
1,500 EUP
Factory overhead ………………………………………..
_________
_________
1,500 EUP
Equivalent units of production ……………….……..
32,500 EUP
33,100 EUP
33,100 EUP
[Continued on next page]
Exercise 16–16 (Concluded)
Cost per EUP
Direct
Materials
Direct
Labor
Factory
Overhead
Costs incurred this period ………………
$ 357,500
$ 62,890
$125,780
EUP (from prior page) …………………….
÷ 32,500
÷ 33,100
÷ 33,100
Cost per EUP …………………………………
$11.00 per
EUP
$1.90 per
EUP
$3.80 per
EUP
Cost assignment and reconciliation
Costs transferred out
Cost of beginning goods in process …………………….
$20,830
Cost to complete beginning goods in process
Direct materials (0 EUP x $11.00 per EUP) ………….
$ 0
Direct labor (1,600 EUP x $1.90 per EUP) ……………
3,040
Factory overhead (1,600 EUP x $3.80 per EUP) …..
6,080
9,120
Costs of units started and completed this period
Direct materials (30,000 EUP x $11.00 per EUP) ….
330,000
Direct labor (30,000 EUP x $1.90 per EUP) ………….
57,000
Factory overhead (30,000 EUP x $3.80 per EUP) …
114,000
501,000
Total cost of goods finished this period ………………
530,950
Costs of ending goods in process
Direct materials (2,500 EUP x $11.00 per EUP) ……
27,500
Direct labor (1,500 EUP x $1.90 per EUP) ……………
2,850
Factory overhead (1,500 EUP x $3.80 per EUP) …..
5,700
36,050
Total costs accounted for …………………………………….
$567,000
Financial & Managerial Accounting, 5th Edition
898
Exercise 16-17 (10 minutes)
Note: Reasonable arguments can be made to classify #7 and #11 as being made
in a process operation, and #8 in a job order operation, in some cases.
Exercise 16-18 (10 minutes)
Exercise 16-19 (10 minutes)
A hybrid costing system contains features of both process costing and job
order costing. A hybrid system of processes requires a hybrid costing
system to properly cost products or services.
Products or services that might well fit a hybrid costing system would be
Exercise 16-20 (20 minutes)
1. Beginning inventory is 100% complete with respect to materials.
Ending inventory is 100% complete with respect to materials.
EUP for Materials
Goods completed (191,500 EUP x 100%) …………………………….
191,500
Ending goods in process* (29,500 EUP x 100%) …………………..
29,500
Total EUP …………………………………………………………………………..
221,000
2. Beginning inventory is 50% complete with respect to materials.
Ending inventory is 50% complete with respect to materials.
Units of
EUP for Materials
Product
Goods completed (191,500 EUP x 100%) …………………………….
191,500
Ending goods in process (29,500* EUP x 50%) …………………….
14,750
Total EUP …………………………………………………………………………..
206,250
*Ending goods in process = Beginning goods in process + Goods started – Goods completed.
= 31,500 + 189,500 – 191,500
= 29,500
Financial & Managerial Accounting, 5th Edition
900
Exercise 16-21 (20 minutes)
1. Beginning inventory is 100% complete with respect to materials.
Ending inventory is 100% complete with respect to materials.
EUP for Materials
To complete beginning work in process (31,500 EUP x 0%) …..….
0
Units started and completed* (160,000 EUP x 100%) ……………..….
160,000
Ending goods in process** (29,500 EUP x 100%) ……………………….
29,500
Total EUP …………………………………………………………………………….….
189,500
2. Beginning inventory is 50% complete with respect to materials.
Ending inventory is 50% complete with respect to materials.
Units of
EUP for Materials
Product
To complete beginning work in process (31,500 EUP x 50%) …….
15,750
Units started and completed* (160,000 EUP x 100%) ……………..….
160,000
Ending goods in process** (29,500 EUP x 50%) ……………………..….
14,750
Total EUP …………………………………………………………………………….….
190,500
*Units started and completed = Units completed – Beginning goods in process
= 191,500 – 31,500
= 160,000
** Ending goods in process = Beginning goods in process + Goods started – Goods completed
= 31,500 + 189,500 – 191,500
= 29,500
Exercise 16-22 (30 minutes)
HI-TEST COMPANY
Process Cost Summary (Weighted-Average Method)
For Month Ended September 30
Costs Charged to Production
Costs of beginning work in process
Direct materials ……………………………..………………………..
$ 45,000
Direct labor …………………………..……….………………….
25,600
Factory overhead …………………………..
30,720
$101,320
Costs incurred this period
Direct materials ……………………………..………………………..
375,000
Direct labor …………………………..……….………………….
155,000
Factory overhead ($155,000 x 120%) ..…………………………
(a) 186,000
(b) 716,000
Total costs to account for …………………..………
(c)$817,320
Unit Cost Information
Units to Account For
Units Accounted For
Beginning goods in process ………………
2,000
Completed & transferred out .………………………….
23,000
Units started this period …….……………..
28,000
Ending goods in process …..………………………
(d) 7,000
Total units to account for …..……………..
(e)30,000
Total units accounted for …..………………………
(f) 30,000
Equivalent Units of Production (EUP)
Direct
Materials
Direct
Labor
Factory
Overhead
Units completed and transferred out ……………..
(g)23,000EUP
(h)23,000EUP
(i)23,000EUP
Units of ending goods in process …………..……..
Direct materials [(j)7,000 x 100%] …………..……..
(k) 7,000EUP
Direct labor [(l)7,000 x 40%] …………………..……..
(m) 2,800EUP
Factory overhead [(n)7,000 x 40%] …………..……..
.
.
(o) 2,800EUP
Equivalent units of production ……………….…………
(p)30,000EUP
(q)25,800EUP
(r)25,800EUP
Cost per EUP
Direct
Materials
Direct
Labor
Factory
Overhead
Costs of beginning goods in process …….
$ 45,000
$ 25,600
$ 30,720
Costs incurred this period ……………………..
375,000
155,000
(s) 186,000
Total costs ……………………………………………
$420,000
$180,600
(t) $216,720
÷ EUP ……………………………………………………
(u) 30,000
(v) 25,800
(w) 25,800
Cost per equivalent unit of production …….
(x) $14.00
per EUP
(y) $7.00
per EUP
(z) $8.40
per EUP
[Continued on next page]
Financial & Managerial Accounting, 5th Edition
902
Exercise 16–22 (concluded)
Cost Assignment and Reconciliation
Costs transferred out
Direct materials [(aa)$14.00 x (bb)23,000] ……………….….
(cc)$322,000
Direct labor [(dd)$ 7.00 x (ee)23,000] ………………………….
(ff) 161,000
Factory overhead [(gg)$ 8.40 x (hh)23,000] ……………..….
(ii) 193,200
Total transferred out ……………………………………………….
(jj) $676,200
Cost of ending goods in process
Direct materials [(kk)$14.00 x (ll)7,000] ……………………….
(mm) 98,000
Direct labor [(nn)$ 7.00 x (oo)2,800] ………………………..…
(pp) 19,600
Factory overhead [(qq)$ 8.40 x (rr)2,800]…………………….
(ss) 23,520
Total ending goods in process ……………………………….….
(tt) 141,120
Total costs accounted for …………………………………..…..
(uu)$817,320
PROBLEM SET A
Problem 16-1A (45 minutes)
Part 1: Cost of goods transferred and cost of goods sold
Beginning goods in process inventory …………………….…….
$ 435,000
Direct materials used in production …………………………..
157,500
Direct labor used in production ……………………………….……..
780,000
Overhead applied (115% of direct labor cost) …………………..
897,000
Total production costs …………………………………………..……..
2,269,500
Less ending goods in process inventory ………………..……..
(515,000)
Transferred to finished goods inventory (a) ……………..……..
$1,754,500
Beginning finished goods inventory ……………………….….
$ 633,000
Plus goods transferred from production ………………….……..
1,754,500
Goods available for sale ………………………………………………..
2,387,500
Less ending finished goods inventory ……………………..……
(605,000)
Cost of goods sold (b) …………………………………………….……..
$1,782,500
Part 2: Summary journal entries
a.
May 31
Raw Materials Inventory …………………………….………….
250,000
Accounts Payable ………………………………..………….
250,000
Purchased raw materials.
b.
May 31
Goods in Process Inventory ……………………….….
157,500
Raw Materials Inventory ………………………..…
157,500
Used direct materials.
c.
May 31
Factory Overhead ……………………………………..………….
60,000
Raw Materials Inventory ……………………….….
60,000
Used indirect materials.
Problem 16-1A (Continued)
d.
May 31
Factory Payroll ………………………………………….………….
1,530,000
Cash ……………………………………………………….
1,530,000
Incurred payroll cost.
e.
May 31
Goods in Process Inventory ……………………….….
780,000
Factory Payroll …………………………………….………….
780,000
Used direct labor.
f.
May 31
Factory Overhead ……………………………………..………….
750,000
Factory Payroll …………………………………….………….
750,000
Used indirect labor.
g.
May 31
Factory Overhead ……………………………………..………….
87,000
Other Accounts ……………………………………………….
87,000
Incurred other overhead costs.
h.
May 31
Goods in Process Inventory ……………………….….
897,000
Factory Overhead …………………………………………….
897,000
Applied overhead at 115% of direct labor cost.
i.
May 31
Finished Goods Inventory …………………………..
1,754,500
Goods in Process Inventory ………………….……….
1,754,50
0
Transferred completed products from
production to finished goods inventory.
j.
May 31
Accounts Receivable …………………………………………….
2,500,000
Sales ……………………………………………………….
2,500,00
0
Sold finished goods.
May 31
Cost of Goods Sold …………………………………..………….
1,782,500
Finished Goods Inventory …………………………..
1,782,50
0
To record cost of goods sold for May.
Problem 16-2A (50 minutes)
Part 1
(a) and (b) Equivalent units with respect to direct materials and direct labor
Direct
Direct
Equivalent units of production (EUP)
Materials
Labor
Units completed and transferred out ……………….
700,000
700,000
Units of ending goods in process ……………………
Direct materials (180,000 x 100%) ………………
180,000
Direct labor (180,000 x 30%) ………………………
_______
54,000
Total equivalent units of production ………………..
880,000
754,000
Part 2
Cost per equivalent unit of production
Direct
Materials
Direct
Labor
Costs of beginning goods in process …………….………
$ 420,000
$ 139,000
Costs incurred this period ……………………………..………
2,220,000
3,254,000
Total costs …………………………………………………….…
$2,640,000
$3,393,000
÷ Equivalent units of production …………………….…….
880,000 EUP
754,000 EUP
Cost per equivalent unit of production ……………………
$3.00 per EUP
$4.50 per EUP
Part 3 Assigning product costs to units
Costs transferred out
Direct materials (700,000 EUP x $3.00 per EUP) …….
$2,100,000
Direct labor (700,000 EUP x $4.50 per EUP) ……….….
3,150,000
Total costs transferred out ……………………………….….
$5,250,000
Costs of ending goods in process
Direct materials (180,000 EUP x $3.00 per EUP) …….
540,000
Direct labor (54,000 EUP x $4.50 per EUP) …………….
243,000
Total costs of ending goods in process …………….….
783,000
Total costs accounted for* ………………………………….….
$6,033,000
*This equals the sum of the total direct materials cost and the
total direct labor costs ($2,640,000 + $3,393,000 = $6,033,000).
Financial & Managerial Accounting, 5th Edition
906
Problem 16-2A (Concluded)
Part 4
MEMORANDUM
TO:
FROM:
DATE:
RE: Percentage of Completion Error Analysis
If the units in ending inventory are 60% complete instead of 30% with
respect to labor, the number of equivalent units in ending inventory with
respect to labor is understated, and the total equivalent units produced for
the period is also understated. If the correct percentage of completion with
respect to labor is used, the direct labor cost per equivalent unit will be
Problem 16-3A (60 minutes)
Part 1
a.
Mar. 31
Raw Materials Inventory ……………………………..………….
250,000
Accounts Payable …………………………………………….
250,000
Raw materials purchased.
b.
Mar. 31
Goods in Process Inventory ……………………….….
168,000
Raw Materials Inventory ………………………..…
168,000
Direct materials used in production.
c.
Mar. 31
Factory Overhead ………………………………………………….
70,000
Raw Materials Inventory ………………………..…
70,000
Indirect materials used.
d.
Mar. 31
Factory Payroll …………………………………………..………….
244,850
Cash …………………………………………………….…
244,850
Factory payroll costs.
e.
Mar. 31
Goods in Process Inventory ……………………….….
199,850
Factory Payroll ……………………………………..………….
199,850
Direct labor used in production.
f.
Mar. 31
Factory Overhead ………………………………………………….
45,000
Factory Payroll ……………………………………..………….
45,000
Indirect labor used.
g.
Mar. 31
Factory Overhead ………………………………………………….
164,790
Other Accounts …………………………………….………….
164,790
Other overhead costs.
h.
Mar. 31
Goods in Process Inventory ……………………….….
279,790
Factory Overhead …………………………………………….
279,790
Application of overhead at 140%
of direct labor cost.
Problem 16-3A (Continued)
i.
Mar. 31
Finished Goods Inventory …………………………..
572,390
Goods in Process Inventory ………………….……….
572,390
Transfer goods to finished goods.
j.
Mar. 31
Cash ………………………………………………………….………….
1,200,000
Sales …………………………………………………….…
1,200,000
Sales of finished goods. (10,000 x $120)
Mar. 31
Cost of Goods Sold ……………………………………………….
592,390
Finished Goods …………………………………….………….
592,390
Cost of goods sold.
Part 2
ELLIOTT COMPANY
Process Cost Summary – Weighted Average Method
For Month Ended March 31
Costs Charged to Production
Costs of beginning goods in process
Direct materials ………………………………………………………..
$ 2,500
Direct labor ………………………………………………………………
2,650
Factory overhead ……………………………………………………..
3,710
$ 8,860
Costs incurred this period
Direct materials ………………………………………………………..
168,000
Direct labor ………………………………………………………………
199,850
Factory overhead ……………………………………………………..
279,790
647,640
Total costs to account for …………………………………………..
$656,500
Unit cost information
Units to account for
Units accounted for
Beginning goods in process …………………………..
2,000
Completed & transferred out ………….
17,000
Units started this period ………….……………….
20,000
Ending goods in process …………….
5,000
Total units to account for ………..…………………
22,000
Total units accounted for …………….
22,000
[Continued on next page]