Wild and Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 16
Chapter 16
Process Costing and Analysis
QUESTIONS
1. The main deciding factor in choosing between a job order costing system or a
process costing system is the type of product or service. Examples where a
2. The main focus in process costing is the production department (process).
3. Yes, services can be delivered by processes. For example, Federal Express delivers
4. The journal entries to match cost flows with product flows are primarily the same
for both process costing and job order costing. In process costing, the materials
5. A materials consumption report is an alternative control document.
6. The computation of equivalent units of production focuses on converting partially
completed units to a measure in terms of completed units. We need to use EUP
7. The two main methods of process costing are the weighted-average and the first-in,
first-out (FIFO) methods. The weighted-average method considers “average flow”
Wild and Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 16
8. A process cost accounting system treats labor that is used entirely within one
9. Direct labor costs flow to the Work in Process Inventory account. Then the direct
10. At the end of the accounting period the Factory Overhead account should have a
zero balance. This is because any balance in Factory Overhead is closed to Cost of
Goods Sold as part of the end-of–period adjustments.
11. Yes, it is possible to have either underapplied or overapplied overhead in a process
12. Equivalent units for direct materials differ from that for direct labor (and overhead) if
direct materials and direct labor (and overhead) are added at different stages in the
13. The four steps in accounting for production activity (for process operations) are: 1)
determine the physical flow of units, 2) compute equivalent units of production, 3)
compute cost per equivalent unit, and 4) assign and reconcile costs.
14. The process cost summary serves at least three purposes: (a) to help department
managers control their departments; (b) to help factory managers evaluate
15. Yes. Google might use process costing to determine the cost of manufacturing its
Nest thermostats. Manufacturing computers might go through several departments
where different features, sensors, batteries, USB connectors, and covers are added.
16. Likely processing steps for digital televisions include making the frame and
17. General Mills, like most food processors, faces risks due to water scarcity and
climate change that could disrupt its supply and lower profits. The company also
Wild and Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 16
18. If the company is successful in reducing water usage, its raw materials cost (water)
should decline. Likewise, assuming water used in its cleaning and cooling
19. 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.
QUICK STUDIES
Quick Study 16-1 (5 minutes)
1. Job order operation
4. Job order operation
3. Job order operation
6. Process operation
Quick Study 16-2 (5 minutes)
Quick Study 16-3 (10 minutes)
1. Process operation 6. Process operation
Wild and Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 16
Quick Study 16-4 (10 minutes)
Units
Total units to account for
Total units accounted for
Quick Study 16-5 (10 minutes)
Equivalent units under the weighted-average method
Equivalent units of production …………………………………………………….
Quick Study 16-6 (10 minutes)
Equivalent units under the FIFO method
Equivalent
Units
30,000
Quick Study 16-7 (5 minutes)
Cost per equivalent unit of production—weighted-average method
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Quick Study 16-8 (10 minutes)
Equivalent units under the weighted-average method
Equivalent
Units
Units completed and transferred out (680,000 x 100%) …………………
680,000
Units of ending work in process
Equivalent units of production …………………………………………………….
Quick Study 16-9 (15 minutes)
Equivalent units under the FIFO method
Equivalent
Units
240,000
360,000
Quick Study 16-10 (15 minutes)
Equivalent units of production—Weighted average
Direct
Materials
Conversion
Units completed & transferred out (9,000 x 100%)
9,000
9,000
Units of ending work in process
Wild and Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 16
Quick Study 16–11 (25 minutes)
Cost per equivalent unit—Weighted average
Direct
Materials
Conversion
Costs of beginning work in process………………
$ 996
$ 585
Costs incurred this period…………………………..
Total costs……………………………………………..
÷ Equivalent units of production (from QS 16–10)…
Quick Study 16-12 (10 minutes)
Cost assignment—Weighted average
Direct
Materials
Conversion
Costs of units transferred out
Direct materials (9,000 EUP* x $1.00 per EUP)…
$9,000
Direct materials (2,400 EUP* x $1.00 per EUP)…
Conversion (900 EUP* x $1.30 per EUP)…………
Quick Study 16-13 (5 minutes)
Work in Process Inventory—Painting …………………….
20,700
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Quick Study 16-14 (15 minutes)
Equivalent units of production—FIFO
Direct
Materials
Conversion
Units of ending work in process
Units to complete beginning work in process
Quick Study 16–15 (5 minutes)
Cost per equivalent unit – FIFO
Direct
Materials
Conversion
Costs incurred this period …………………………………
$10,404
$12,285
÷ Equivalent units of production (from QS 16–14)
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Quick Study 16-16 (20 minutes)
Assignment of costs to output of department—FIFO
Costs of units transferred out
Cost of beginning work in process inventory …….
$ 1,581
Costs to complete beginning work in process
Direct materials (800 EUP x $1.02 per EUP) ……..
Conversion (1,200 EUP x $1.35 per EUP) ………….
Cost of units started and completed this period
Direct materials (7,000 EUP x $1.02 per EUP) …..
Conversion (7,000 EUP x $1.35 per EUP) ………….
9,450
Total cost of units started and completed ………..
16,590
Total costs of units transferred out ……………………
$20,607
Cost of ending work in process inventory
Conversion (900 EUP x $1.35 per EUP) …………….
Quick Study 16-17 (5 minutes)
Work in Process Inventory—Painting …………………….
20,607
935
Quick Study 16-18 (10 minutes)
a.
Equivalent units of production—Weighted average
Direct
Materials
Units completed & transferred out (17,000 x 100%)
17,000
Units of ending work in process
19,400
b.
Cost per equivalent unit—Weighted average
Direct
Materials
Costs of beginning work in process ………………….
$ 1,200
Costs incurred this period …………………………………
÷ Equivalent units of production ……………………….
EUP
Quick Study 16-19 (10 minutes)
Cost assignment—Weighted average
Direct
Materials
Costs of units transferred out
Costs of ending work in process
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Quick Study 16-20 (10 minutes)
The ending balance in Work in Process Inventory—Cutting is $7,100 and
the ending balance in Work in Process Inventory—Binding is $17,042, as
computed below.
Work in Process—Cutting
Beg. Inventory
3,445
Dir. materials
8,240
Conversion
End. Inventory
7,100
Work in Process—Binding
Beg. Inventory
6,426
Dir. materials
6,356
Conversion
End. Inventory
Wild and Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 16
Quick Study 16-21 (15 minutes)
Equivalent units under the FIFO method
Equivalent
Units
600
Cost per equivalent unit—FIFO
Direct
Materials
Costs incurred this period …………………………………
$27,900
EUP
Quick Study 16–22 (15 minutes)
Assignment of direct materials costs to output of department—FIFO
Costs transferred out
Cost of direct materials in beginning WIP ………….
$2,170
Costs to complete beginning WIP ……………………..
Cost of units started and completed this period
23,250
Cost of ending work in process inventory
Wild and Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 16
Quick Study 16-23 (10 minutes)
1.
Raw Materials Inventory ………………………………………..
62,000
2.
Work in Process Inventory—Mixing ……………………….
50,000
Quick Study 16-24 (10 minutes)
1.
Work in Process Inventory—Mixing ……………………….
75,000
2.
Factory Overhead ………………………………………………….
10,000
3.
Factory Wages Payable …………………………………………
135,000
Quick Study 16-25 (15 minutes)
1.
Factory Overhead ………………………………………………….
9,000
2.
Factory Overhead ………………………………………………….
156,000
3.
Work in Process Inventory—Mixing ……………………….
105,000
Work in Process Inventory—Shaping …………………….
70,000
Wild and Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 16
Quick Study 16-26 (10 minutes)
EXERCISES
Exercise 16-1 (10 minutes)
1. Process operation 6. Process operation
Exercise 16-2 (10 minutes)
1. Process operation 4. Both
Exercise 16-3 (10 minutes)
1. F 5. G
940
Exercise 16-4 (30 minutes)
1. Beginning inventory is 100% complete with respect to materials.
Ending inventory is 100% complete with respect to materials.
EUP for Materials
Units of
Product
Goods completed (80,000 EUP x 100%) ………………………………
80,000
Ending work in process (16,000 EUP x 100%) ……………………..
2. Beginning inventory is 40% complete with respect to materials.
Ending inventory is 75% complete with respect to materials.
Units of
EUP for Materials
Product
Goods completed (80,000 EUP x 100%) ………………………………
80,000
Ending work in process (16,000 EUP x 75%) ……………………….
12,000
3. Beginning inventory is 60% complete with respect to materials.
Ending inventory is 30% complete with respect to materials.
Units of
EUP for Materials
Product
Goods completed (80,000 EUP x 100%) ………………………………
80,000
Ending work in process (16,000 EUP x 30%) ……………………….
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Exercise 16-5 (30 minutes)
1. Beginning inventory is 100% complete with respect to materials.
Ending inventory is 100% complete with respect to materials.
EUP for Materials
Units of
Product
To complete beginning work in process (24,000 EUP x 0%) ………
0
56,000
Ending work in process (16,000 EUP x 100%) …………………………..
2. Beginning inventory is 40% complete with respect to materials.
Ending inventory is 75% complete with respect to materials.
Units of
EUP for Materials
Product
To complete beginning work in process (24,000 EUP x 60%) …….
14,400
56,000
Ending work in process (16,000 EUP x 75%) …………………………..
12,000
3. Beginning inventory is 60% complete with respect to materials.
Ending inventory is 30% complete with respect to materials.
Units of
EUP for Materials
Product
To complete beginning work in process (24,000 EUP x 40%) …….
9,600
56,000
Ending work in process (16,000 EUP x 30%) …………………………..
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Exercise 16-6 (30 minutes)
1.
Equivalent units of production—Weighted average
Direct
Materials
Conversion
Units completed & transferred out (295,000 x 100%) ………………..
295,000
295,000
Units of ending work in process
319,000
2.
Cost per equivalent unit—Weighted average
Direct
Materials
Conversion
Costs of beginning work in process …………………………..
$ 44,800
$ 15,300
Costs incurred this period ……………………………………………………….
Total costs ……………………………………………………………………………..
÷ Equivalent units of production (from part 1) ………………………….
304,000
3.
Cost assignment—Weighted average
Costs of units transferred out
Direct materials (295,000 EUP x $4.00 per EUP) …………………….
$1,180,000
Conversion (295,000 EUP x $3.00 per EUP) …………………………..
885,000
Total costs transferred out ………………………………………………………
Costs of ending work in process
Direct materials (24,000 EUP x $4.00 per EUP) ………………………
96,000
Conversion (9,000 EUP x $3.00 per EUP) …………………………..
27,000
Total costs of ending work in process …………………………..
Total costs assigned* …………………………..…………………………..
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Exercise 16-7 (30 minutes)
1.
Equivalent units of production—FIFO
Direct
Materials
Conversion
Units of ending work in process
Equivalent units of production ………………………………………………..
Units to complete beginning work in process
2.
Cost per equivalent unit—FIFO
Direct
Materials
Conversion
Costs incurred this period ……………………………….
$1,231,200
$896,700
÷ Equivalent units of production (from part 1) ….
944
Exercise 16-8 (20 minutes)
Units transferred out
Units
Dept. 1 – units
Units in beg. inventory
60,000
Beg. Inv
60,000
Units started
322,000
Units in ending inventory
Units transferred out
300,000
End. Inv
EUP
Equivalent units of production – weighted-average
Direct
Materials
Conversion
Units completed & transferred out (300,000 x 100%)
300,000
300,000
Units in ending work in process
Direct materials, (82,000 x 80%)
Conversion, (82,000 x 30%)
Equivalent units of production
Exercise 16-9 (20 minutes)
1. and 2. Cost per EUP
Cost per equivalent unit – weighted-average
Direct
Materials
Conversion
Costs of beginning inventory
$118,472
$48,594
Costs incurred this period
649,296
Total costs
$968,840
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Exercise 16-9 (continued)
3.
Cost assignment and reconciliation – weighted-average
Costs of units transferred out
Direct materials (300,000 EUP x $2.65 per EUP)
$795,000
Conversion costs (300,000 EUP x $2.15 per EUP)
645,000
Total cost of 300,000 units transferred out
Costs of units in ending inventory
Direct materials (65,600 EUP x $2.65 per EUP)
$173,840
Conversion costs (24,600 EUP x $2.15 per EUP)
Total cost of 82,000 units in ending inventory
Costs to be assigned:
Beginning inventory
$167,066
Dept. 1 – WIP
Beg. Inv
167,066
DM
850,368
End. Inv.
226,730
946
Exercise 16-10 (20 minutes)
Units
Units
Units in beginning inventory
60,000
60,000
60,000
Units started
322,000
322,000
240,000
Units in ending inventory
382,000
300,000
Units transferred out
300,000
Equivalent units of production – FIFO
Direct
Materials
Conversion
Complete beginning inventory (60,000 x 40% Mtl, 60% Conv.)
24,000
36,000
Units started and completed (240,000 x 100%)
240,000
240,000
Units of ending work in process
Direct materials, 82,000 x 80%
65,600
Conversion, 82,000 x 30%
Exercise 16–11 (20 minutes)
1. and 2.
Cost per equivalent unit – FIFO
Direct
Materials
Conversion