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Problem 16-7A (Concluded)
Part 3
If equivalent units of production for a production department's ending
inventory for October are understated, then total equivalent units of
production is also understated. This means the cost per equivalent unit for
Problem 16-1B (45 minutes)
Part 1: Cost of goods transferred and cost of goods sold
Beginning work in process inventory ..............................................
$156,000
Direct materials used in production ................................................
120,000
Direct labor used in production........................................................
350,000
Overhead applied (75% of direct labor cost) ...................................
262,500
Total production costs ......................................................................
888,500
Less ending work in process inventory ..........................................
(250,000)
Transferred to finished goods inventory (a) ...................................
$638,500
Beginning finished goods inventory ..............................................
$160,000
Plus goods transferred from production ........................................
638,500
Goods available for sale ...................................................................
798,500
Less ending finished goods inventory ............................................
(198,000)
Cost of goods sold (b) ......................................................................
$600,500
Part 2: Summary journal entries
a.
June 30
Raw Materials Inventory ...............................................
200,000
Accounts Payable ...................................................
200,000
Purchased raw materials.
b.
June 30
Work in Process Inventory................................
120,000
Raw Materials Inventory ................................
120,000
Used direct materials.
c.
June 30
Factory Overhead .........................................................
42,000
Raw Materials Inventory ................................
42,000
Used indirect materials.
Problem 16-1B (Continued)
d.
June 30
Work in Process Inventory................................
350,000
Factory Payroll Payable ................................
350,000
Used direct labor.
e.
June 30
Factory Overhead ..........................................................
50,000
Factory Payroll Payable ................................
50,000
Used indirect labor.
f.
June 30
Factory Payroll Payable ...............................................
400,000
Cash ................................................................
400,000
Paid payroll cost.
g.
June 30
Factory Overhead .........................................................
170,500
Other Accounts .......................................................
170,500
Incurred other overhead costs.
h.
June 30
Work in Process Inventory................................
262,500
Factory Overhead ....................................................
262,500
Applied overhead at 75% of direct labor cost.
i.
June 30
Finished Goods Inventory................................
638,500
Work in Process Inventory................................
638,500
Transferred completed products from
production to finished goods inventory.
j.
June 30
Accounts Receivable ....................................................
1,000,000
Sales ................................................................
1,000,000
Sold finished goods.
June 30
Cost of Goods Sold ......................................................
600,500
Finished Goods Inventory ................................
600,500
To record cost of goods sold for June.
Problem 16-2B (50 minutes)
Part 1
(a) and (b) Equivalent units with respect to direct materials and conversion
Direct
Equivalent units of production
Materials
Conversion
Units completed & transferred out .......................
80,000
80,000
Units of ending work in process ..........................
Direct materials (8,000 x 100%) ......................
8,000
Conversion (8,000 x 25%)................................
______
2,000
Equivalent units of production .............................
88,000
82,000
Part 2
Cost per equivalent unit of production
Direct
Materials
Conversion
Costs of beginning work in process ..................
$ 58,000
$ 86,400
Costs incurred this period ................................
712,000
1,980,000
Total costs ............................................................
$770,000
$2,066,400
÷ Equivalent units of production ........................
88,000 EUP
82,000 EUP
Cost per equivalent unit of production ..............
$8.75 per EUP
$25.20 per EUP
Part 3: Assigning product costs to units
Costs transferred out
Direct materials (80,000 EUP x $8.75 per EUP) .........
$ 700,000
Conversion (80,000 EUP x $25.20 per EUP) ..............
2,016,000
Total costs transferred out .........................................
$2,716,000
Cost of ending work in process
Direct materials (8,000 EUP x $8.75 per EUP) ...........
70,000
Conversion (2,000 EUP x $25.20 per EUP) ................
50,400
Total costs of ending work in process ......................
120,400
Total costs accounted for* ............................................
$2,836,400
*This equals the sum of the total direct materials cost and the total conversion costs ($770,000 +
$2,066,400 = $2,836,400).
Problem 16-2B (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
Problem 16-3B (75 minutes)
Part 1
BRAUN COMPANY
Process Cost Summary – Weighted Average Method
For Month Ended November 30
Costs Charged to Production
Costs of beginning work in process
Direct materials .................................................................
$ 6,800
Conversion ........................................................................
14,500
Costs incurred this period
$ 21,300
Direct materials .................................................................
116,400
Conversion ........................................................................
1,067,000
1,183,400
Total costs to account for ..................................................
$1,204,700
Unit cost information
Units to account for
Units accounted for
Beginning work in process .............
7,500
Completed & transferred out ................................
100,000
Units started this period ..................
104,500
Ending work in process ................................
12,000
Total units to account for ................
112,000
Total units accounted for ................................
112,000
Equivalent units of production
Direct
Materials
Conversion
Units completed & transferred out ...........
100,000 EUP
100,000 EUP
Units of ending work in process
Direct materials (12,000 x 100%) ............
12,000 EUP
Conversion (12,000 x 25%) ......................
__________
3,000 EUP
Equivalent units of production .................
112,000 EUP
103,000 EUP
Cost per EUP
Direct
Materials
Conversion
Cost of beginning work in process ..........
$ 6,800
$ 14,500
Costs incurred this period ........................
116,400
1,067,000
Total costs ..................................................
$123,200
$1,081,500
÷ EUP ...........................................................
112,000 EUP
103,000 EUP
Cost per EUP ..............................................
$1.10 per EUP
$10.50 per EUP
[Continued on next page]
Problem 16-3B (Concluded)
Cost assignment and reconciliation
Costs transferred out
Direct materials (100,000 EUP x $1.10 per EUP) ....
$110,000
Conversion (100,000 x $10.50 per EUP) ..................
1,050,000
$1,160,000
Costs of ending work in process
Direct materials (12,000 EUP x $1.10 per EUP) ......
13,200
Conversion (3,000 EUP x $10.50 per EUP) ..............
31,500
44,700
Total costs accounted for ...........................................
$1,204,700
Part 2
Nov. 30
Finished Goods Inventory................................
1,160,000
Work in Process Inventory................................
1,160,000
Transfer of goods to finished goods
inventory.
Problem 16-4B (80 minutes)
Part 1
SWITCH CO.
Process Cost Summary – Weighted Average Method
For Month Ended January 31
Costs Charged to Production
Costs of beginning work in process
Direct materials ................................................................
$ 7,500
Conversion ........................................................................
49,840
Costs incurred this period
$ 57,340
Direct materials ................................................................
112,500
Conversion ........................................................................
616,000
728,500
Total costs to account for ..................................................
$785,840
Unit cost information
Units to account for
Units accounted for
Beginning work in process .............
10,000
Completed & transferred out .....
220,000
Units started this period .................
250,000
Ending work in process .........
40,000
Total units to account for ................
260,000
Total units accounted for.......
260,000
Equivalent units of production
Direct
Materials
Conversion
Units completed & transferred out ..........................
220,000 EUP
220,000 EUP
Units of ending work in process
Direct materials (40,000 x 50%) .............................
20,000 EUP
Conversion (40,000 x 30%) ................................
___________
12,000 EUP
Equivalent units of production
240,000 EUP
232,000 EUP
Cost per EUP
Direct Materials
Conversion
Cost of beginning work in process .......................
$ 7,500
$ 49,840
Costs incurred this period ................................
112,500
616,000
Total costs ................................................................
$120,000
$665,840
÷ EUP ................................................................
240,000 EUP
232,000 EUP
Cost per EUP .............................................................
$0.50 per EUP
$2.87 per EUP
[Continued on next page]
Problem 16-4B (Concluded)
Cost assignment and reconciliation
Costs transferred out
Direct materials (220,000 EUP x $0.50 per EUP) .................
$110,000
Conversion (220,000 x $2.87 per EUP) ................................
631,400
$741,400
Costs of ending work in process
Direct materials (20,000 EUP x $0.50 per EUP) ...................
10,000
Conversion (12,000 EUP x $2.87 per EUP) ...........................
34,440
44,440
Total costs accounted for ........................................................
$785,840
Part 2
Jan. 31
Finished Goods Inventory................................
741,400
Work in Process Inventory................................
741,400
Transfer of goods to finished inventory.
Part 3
3a. Two major estimates are the: i) overhead allocation rate, and ii)
percentage of completion for materials and conversion.
3b. Management might want an overhead allocation rate that assigns the
least amount of overhead to their respective production process, and
we might anticipate underestimation of the percentage of completion.
If materials are added at the beginning of the process, then this number
is difficult to “manage.” More typically, management might try to
underestimate the percentage complete because this reduces the
equivalent units for conversion. This results in lowering the dollar
value assigned to these components of ending inventory.
Problem 16-5B (80 minutes)
Part 1
SWITCH COMPANY
Process Cost Summary – FIFO Method
For Month Ended January 31
Costs Charged to Production
Costs of beginning work in process
Direct materials ................................................................
$ 7,500
Conversion ................................................................
49,840
$ 57,340
Costs incurred this period
Direct materials ................................................................
112,500
Conversion ................................................................
616,000
728,500
Total costs to account for ..................................................
$785,840
Unit cost information
Units to account for
Units accounted for
Beginning work in process ...............
10,000
Completed & transferred out........
220,000
Units started this period ..................
250,000
Ending work in process ...........
40,000
Total units to account for ................
260,000
Total units accounted for .........
260,000
Equivalent units of production
Direct
Materials
Conversion
Units to complete beginning WIP
Direct materials (10,000 x 25%) ........
2,500 EUP
Conversion (10,000 x 40%) ................
4,000 EUP
Units started and completed ...............
210,000 EUP
210,000 EUP
Units of ending work in process
Direct materials (40,000 x 50%) ........
20,000 EUP
Conversion (40,000 x 30%) ................
__________
12,000 EUP
Equivalent units of production ...........
232,500 EUP
226,000 EUP
[Continued on next page]
