Problem 4-15A (45 minutes)
Weighted-Average Method
1.
Equivalent units of production:
Materials
Conversion
Transferred to next department ……………………
160,000
160,000
Ending work in process:
Materials: 40,000 units x 100% complete …….
40,000
Conversion: 40,000 units x 25% complete ……
10,000
Equivalent units of production ……………………..
200,000
170,000
2.
Cost per Equivalent Unit
Materials
Conversion
Cost of beginning work in process …………….
$ 25,200
$ 24,800
Cost added during the period …………………..
334,800
238,700
Total cost (a) ……………………………………….
$360,000
$263,500
Equivalent units of production (b) …………….
200,000
170,000
Cost per equivalent unit, (a) ÷ (b) ……………
$1.80
$1.55
3.
Applying costs to units:
Materials
Total
Ending work in process inventory:
Equivalent units of production
40,000
Cost per equivalent unit …….
$1.80
Cost of ending work in process
inventory ………………………
$72,000
$87,500
Units completed and transferred out:
Units transferred to the next
department …………………..
160,000
Cost per equivalent unit …….
$1.80
Cost of units completed and
transferred out ……………….
$288,000
$536,000
Problem 4-15A (continued)
4.
Cost reconciliation:
Costs to be accounted for:
Cost of beginning work in process inventory
($25,200 + $24,800) …………………………….
$ 50,000
Costs added to production during the period
($334,800 + $238,700) …………………………
573,500
Total cost to be accounted for …………………..
$623,500
Costs accounted for as follows:
Cost of ending work in process inventory ……
$ 87,500
Cost of units completed and transferred out ..
536,000
Total cost accounted for ………………………….
$623,500
Problem 4-16A (45 minutes)
1.
Equivalent units of production
Materials
Conversion
Transferred to next department* ………………….
95,000
95,000
Ending work in process:
Materials: 15,000 units x 60% complete ………
9,000
Conversion: 15,000 units x 20% complete ……
3,000
Equivalent units of production ……………………..
104,000
98,000
*Units transferred to the next department = Units in beginning work in
process + Units started into production − Units in ending work in
process = 10,000 + 100,000 − 15,000 = 95,000
2.
Cost per equivalent unit
Materials
Conversion
Cost of beginning work in process …………….
$ 1,500
$ 7,200
Cost added during the period …………………..
154,500
90,800
Total cost (a) ……………………………………….
$156,000
$98,000
Equivalent units of production (b) …………….
104,000
98,000
Cost per equivalent unit, (a) ÷ (b) ……………
$1.50
$1.00
3.
Cost of ending work in process inventory and units transferred out
Materials
Total
Ending work in process inventory:
Equivalent units of production…
9,000
Cost per equivalent unit ………..
$1.50
Cost of ending work in process
inventory ………………………….
$13,500
$16,500
Units completed and transferred out:
Units transferred to the next
department ………………………
95,000
Cost per equivalent unit ………..
$1.50
Cost of units completed and
transferred out …………………..
$142,500
$237,500
Problem 4-16A (continued)
4.
Cost Reconciliation
Costs to be accounted for:
Cost of beginning work in process inventory
($1,500 + $7,200) ……………………………….
$ 8,700
Costs added to production during the period
($154,500 + $90,800) …………………………..
245,300
Total cost to be accounted for …………………..
$254,000
Costs accounted for as follows:
Cost of ending work in process inventory ……
$ 16,500
Cost of units completed and transferred out ..
237,500
Total cost accounted for ………………………….
$254,000
Problem 4-17A (45 minutes)
1.
a.
Work in Process—Refining Department ………
495,000
Work in Process—Blending Department ……..
115,000
Raw Materials ………………………………….
610,000
b.
Work in Process—Refining Department ………
72,000
Work in Process—Blending Department ……..
18,000
Salaries and Wages Payable ……………….
90,000
c.
Manufacturing Overhead ………………………..
225,000
Accounts Payable ……………………………..
225,000
d.
Work in Process—Refining Department ………
181,000
Manufacturing Overhead ……………………
181,000
d.
Work in Process—Blending Department ……..
42,000
Manufacturing Overhead ……………………
42,000
e.
Work in Process—Blending Department ……..
740,000
Work in Process—Refining Department …
740,000
f.
Finished Goods …………………………………….
950,000
Work in Process—Blending Department …
950,000
g.
Accounts Receivable ………………………………
1,500,000
Sales ……………………………………………..
1,500,000
Cost of Goods Sold ………………………………..
900,000
Finished Goods ………………………………..
900,000
Problem 4-17A (continued)
2.
Accounts Receivable
Raw Materials
(g)
1,500,000
Bal.
618,000
(a)
610,000
Bal.
8,000
Work in Process
Refining Department
Work in Process
Blending Department
Bal.
38,000
(e)
740,000
Bal.
65,000
(f)
950,000
(a)
495,000
(a)
115,000
(b)
72,000
(b)
18,000
(d)
181,000
(d)
42,000
Bal.
46,000
(e)
740,000
Bal.
30,000
Finished Goods
Manufacturing Overhead
Bal.
20,000
(g)
900,000
(c)
225,000
(d)
223,000
(f)
950,000
Bal.
2,000
Bal.
70,000
Accounts Payable
Salaries and Wages Payable
(c)
225,000
(b)
90,000
Sales
Cost of Goods Sold
(g)
1,500,000
(g)
900,000
Problem 4-18A (30 minutes)
1.
Equivalent units of production
Materials
Conversion
Transferred to next department ……………………
190,000
190,000
Ending work in process:
Materials: 40,000 units x 75% complete ………
30,000
Conversion: 40,000 units x 60% complete ……
24,000
Equivalent units of production ……………………..
220,000
214,000
2.
Cost per equivalent unit
Materials
Conversion
Cost of beginning work in process …………….
$ 67,800
$ 30,200
Cost added during the period …………………..
579,000
248,000
Total cost (a) ……………………………………….
$646,800
$278,200
Equivalent units of production (b) …………….
220,000
214,000
Cost per equivalent unit, (a) ÷ (b) ……………
$2.94
$1.30
3.
Total units transferred …………………………...
190,000
Less units in the beginning inventory …………
30,000
Units started and completed during April ……
160,000
Note: This answer assumes that the units in the beginning inventory
are completed before any other units are completed.
4. No, the manager should not be rewarded for good cost control. The
Mixing Department’s low unit cost for April occurred because the costs
Analytical Thinking (45 minutes)
Weighted-Average Method
1. The revised computations follow:
Equivalent Units of Production:
Transferred
In Costs
Materials
Conversion
Transferred to finished goods ……………………………..
1,800
1,800
1,800
Ending work in process:
Transferred in costs: 600 units x 100% complete ….
600
Materials: 600 units x 0% complete …………………..
0
Conversion: 600 units x 35% complete……………….
210
Equivalent units of production …………………………….
2,400
1,800
2,010
Cost per Equivalent Unit:
Conversion
Cost of beginning work in process ……………………….
Cost added during the period ……………………………..
Total cost (a) ………………………………………………….
$8,190
Equivalent units of production (b) ……………………….
Cost per equivalent unit, (a) ÷ (b) ………………………
Analytical Thinking (continued)
Transferred
In Costs
Materials
Conversion
Total
Ending work in process inventory:
Equivalent units of production (see above) ..
600
0
210
Cost per equivalent unit ………………………..
$9.17
$4.55
$8.00
Cost of ending work in process inventory ….
$5,502
$0
$1,680
$7,182
Units completed and transferred out:
Units transferred to finished goods ……..
1,800
1,800
1,800
Cost per equivalent unit ………………………..
$9.17
$4.55
$8.00
Cost of units completed and transferred out
$16,506
$8,190
$14,400
$39,096
2. The unit cost computed above is $21.72 (= $9.17 + $4.55 + $8.00) versus $25.71 on the original
report for the units completed and transferred to finished goods. The unit cost on the original report
is high because none of the cost incurred during the month was assigned to the units in the ending
work in process inventory.
Ethics Challenge (90 minutes)
Because there are no beginning inventories, it makes no difference
1.
Computation of the Cost of Goods Sold:
Transferred In
Conversion
Units completed and sold …………………..
200,000
200,000
Ending work in process:
Transferred in:
10,000 units × 100% complete ……….
10,000
Conversion:
10,000 units × 30% complete …………
3,000
Equivalent units of production …………….
210,000
203,000
Transferred In
Conversion
Cost of beginning work in process ……….
$ 0
$ 0
Cost added during the period ……………..
39,375,000
20,807,500
Total cost (a) ………………………………….
$39,375,000
$20,807,500
Equivalent units of production (b) ……….
210,000
203,000
Cost per equivalent unit, (a) ÷ (b) ………
$187.50
$102.50
Cost of goods sold = 200,000 units × ($187.50 per unit + $102.50 per
unit) = $58,000,000
2. The estimate of the percentage completion of ending work in process
inventories affects the unit costs of finished goods and therefore the
Ethics Challenge (continued)
The percentage of completion, X, affects the cost of goods sold by its
effect on the unit cost, which can be determined as follows:
$20,807,500
Because the cost of goods sold must be reduced down to $57,800,000,
the unit cost must be $289.00 ($57,800,000 ÷ 200,000 units). Thus, the
required percentage completion, X, to obtain the $200,000 reduction in
cost of goods sold can be found by solving the following equation:
$20,807,500
$187.50 + = $289.00
200,000 + 10,000X
$20,807,500 = $289.00 – $187.50
200,000 + 10,000X
$20,807,500 = $101.50
200,000 + 10,000X
200,000 + 10,000X 1
=
$20,807,500 $101.50
$20,807,500
200,000 + 10,000X = $101.50
Ethics Challenge (continued)
3. (continued)
Computation of the Cost of Goods Sold:
Transferred In
Conversion
Units completed and sold …………………..
200,000
200,000
Ending work in process:
Transferred in:
10,000 units x 100% complete ………..
10,000
Conversion:
10,000 units x 50% complete …………
5,000
Equivalent units of production …………….
210,000
205,000
Transferred In
Conversion
Cost of beginning work in process ……….
$ 0
$ 0
Cost added during the period ……………..
39,375,000
20,807,500
Total cost (a) ………………………………….
$39,375,000
$20,807,500
Equivalent units of production (b) ……….
210,000
205,000
Cost per equivalent unit, (a) ÷ (b) ………
$187.50
$101.50
Cost of goods sold = 200,000 units × ($187.50 per unit + $101.50 per
unit) = $57,800,000
4. Mary is in a very difficult position. Collaborating with Gary Stevens in
subverting the integrity of the accounting system is unethical by almost
any standard. To put the situation in its starkest light, Stevens is
suggesting that the production managers lie in order to get their bonus.
Having said that, the peer pressure to go along in this situation may be
Ethics Challenge (continued)
From a broader perspective, if the net profit figures reported by the
managers in a division cannot be trusted, then the company would be
foolish to base bonuses on the net profit figures. A bonus system based
on divisional net profits presupposes the integrity of the accounting
system.
The company should perhaps reconsider how it determines the bonus. It
Chapter 4
Take Two Solutions
Exercise 4-2 (10 minutes)
Weighted-Average Method
Equivalent Units
Materials
Conversion
Units transferred out ………………….
190,000
190,000
Work in process, ending:
15,000 units × 80% ………………..
12,000
15,000 units × 40% ………………..
6,000
Equivalent units of production ……..
202,000
196,000
Exercise 4-3 (10 minutes)
Weighted-Average Method
1.
Materials
Labor
Overhead
Cost of beginning work in process
inventory ……………………………..
$ 18,000
$ 5,500
$ 27,500
Cost added during the period ……..
238,900
81,950
401,500
Total cost (a) ………………………….
$256,900
$87,450
$429,000
Equivalent units of production (b) .
35,000
33,000
33,000
Cost per equivalent unit (a) ÷ (b) .
$7.34
$2.65
$13.00
2.
Cost per equivalent unit for materials …..
$ 7.34
Cost per equivalent unit for labor ………..
2.65
Cost per equivalent unit for overhead …..
13.00
Total cost per equivalent unit ……………..
$22.99
Exercise 4-4 (10 minutes)
Materials
Conversion
Total
Ending work in process inventory:
Equivalent units of production ……
2,000
800
Cost per equivalent unit ……………
$13.86
$5.00
Cost of ending work in process
inventory …………………………..
$27,720
$4,000
$31,720
Units completed and transferred out:
Units transferred to the next
department ………………………..
20,100
20,100
Cost per equivalent unit ……………
$13.86
$5.00
Cost of units transferred out ………
$278,586
$100,500
$379,086
Exercise 4-5 (10 minutes)
Baking Department
Cost Reconciliation
Costs to be accounted for:
Cost of beginning work in process inventory .
$ 3,570
Costs added to production during the period .
43,120
Total cost to be accounted for ………………….
$46,690
Costs accounted for as follows:
Cost of ending work in process inventory ……
$ 1,300
Cost of units completed and transferred out ..
45,390
*
Total cost accounted for ………………………….
$46,690
Cost of units
completed and = $3,570 + $43,120 – $1,300
transferred out
Cost of units
completed and = $45,390
transferred out
Exercise 4-6 (10 minutes)
Weighted-Average Method
1.
Tons of Pulp
Work in process, June 1 ……………………………………
20,000
Started into production during the month ……………..
270,000
Total tons in process ………………………………………..
290,000
Deduct work in process, June 30 …………………………
30,000
Completed and transferred out during the month ……
260,000
2.
Equivalent Units
Materials
Labor and
Overhead
Units transferred out …………………………..
260,000
260,000
Work in process, ending:
Materials: 30,000 tons × 60% complete .
18,000
Labor and overhead:
30,000 tons × 40% complete …………..
12,000
Equivalent units of production ……………….
278,000
272,000
Exercise 4-9 (15 minutes)
Weighted-Average Method
1.
Materials
Labor
Overhead
Units transferred to the next
department ………………………………..
41,000
41,000
41,000
Work in process, ending:
Materials:
8,000 units × 75% complete ……….
6,000
Labor and overhead:
8,000 units × 50% complete ……….
4,000
4,000
Equivalent units of production ………….
47,000
45,000
45,000
2.
Materials
Labor
Overhead
Cost of beginning work in process ….
$ 4,320
$ 1,040
$ 1,790
Cost added during the period ………..
52,800
21,500
32,250
Total cost (a) …………………………….
$57,120
$22,540
$34,040
Equivalent units of production (b) ….
47,000
45,000
45,000
Cost per equivalent unit (a) ÷ (b) …..
$1.22
$0.50
$0.76