PROBLEM 18.8A
WILSON DYNAMICS (continued)
b.
(1)
4,000
72,000
(2) Forging Direct
Materials Materials Conversion
Forging materials
(4,000 units require 0% to complete) 0
Direct materials
(4,000 units require 100% to complete) 4,000
Conversion
(4,000 units require 75% to complete) 3,000
56,000 56,000 56,000
72,000 60,000 63,800
To start and complete 56,000 units in July
To start units in process on July 31:
Equivalent units of resources in July
(3) Forging Direct Conversion
Materials Materials Costs
Costs charged to Assembly Department in July*
Cost per equivalent unit in July
Equivalent units consumed in July [see part (2) ]
Cost per equivalent unit in July
Requirements for the Assembly Dept. in July
To finish units in process on July 1:
Input resources
Flow of physical units: Assembly Department
Units in beginning inventory, July 1
Units started in July [see part a (1 )]
76,000
60,000
56,000
Units in ending inventory, July 31
Units transferred to Finished Goods in July
Units in beginning inventory, July 1
Units started and completed in July
Units in process during July
PROBLEM 18.8A
WILSON DYNAMICS (concluded)
(4) 1,920,000
Work in Process: Assembly 1,920,000
71,000
(5)
272,000$
14,400
286,400$
Ending inventory in process, July 31
Direct materials (none)
Conversion (4,800 equivalent units × $3)
Finished Goods Inventory
To record the transfer of 60,000 units to the Finished Goods
Inventory in July:
Beginning inventory, July 1 ($68,000 + $3,000)
Work in Process: Finishing Department, July 31
Forging materials (16,000 equivalent units × $17)
July forging materials (56,000 equivalent units × $17)
July direct materials (60,000 equivalent units × $12)
July conversion (59,000 equivalent units × $3)
Total cost of units transferred
Step 1: Determine flow of physical goods
Units transferred out in March
Beginning inventory in process, March 1
Units started and completed in March
Step 2: Determine equivalent units
4,000 4,000 4,000
6,000 4,000 4,700
7,000
(2,000)
5,000
Units started and completed in April
Total equivalent units in March
Step 1: Determine flow of physical goods
Units transferred out in April
Beginning inventory in process, April 1
To finish beginning inventory, March 1:
To start ending inventory in process
To start and complete 4,000 units in March
PROBLEM 18.1B
STREET SMARTS (concluded)
Body Wiring
Materials Materials Conversion
Body materials
(2,000 units require 0% to complete) 0
Step 2: Determine equivalent units consumed
Input resources required
To finish beginning inventory, April 1:
Wiring materials
(2,000 units require 100% to complete) 2,000
Conversion
(2,000 units require 80% to complete) 1,600
Body materials (1,500 units 100% complete) 1,500
Wiring materials (1,500 units 100% complete) 1,500
Conversion (1,500 units 90% complete) 1,350
To start and complete 5,000 units in April
To start ending inventory in process
Total equivalent units in April
20 Minutes, Easy
PROBLEM 18.2B
MOWTOWN MANUFACTURING
a. (1)
b.
In evaluating the overall efficiency of the Engine Department, management would look at
$50 [($180,000 + $30,000 + $90,000) ÷ 6,000 units]
30 Minutes, Medium PROBLEM 18.3B
MOWTOWN MANUFACTURING
Part I. Physical Flow Total Units
Inputs:
• Beginning WIP -0-
• Started 6,000
Part II. Equivalent Units Direct Materials Conversion Costs
Based on monthly input:
• Beginning WIP -0- -0-
• Units started 6,000 6,000
Based on monthly output:
• Units completed 6,000 6,000
• Ending WIP -0- -0-
Part III. Cost per Equivalent Unit Total Unit Cost Direct Materials Conversion Costs
Costs from Deck Department $180,000 $120,000
Costs from Engine Dept. 540,000 120,000
TOTAL $720,000 $240,000
Divide by equivalent units ÷ 6,000 ÷ 6,000
Part IV. Total Cost Assignment Total Costs Direct Materials Conversion Costs
Costs to account for:
• Cost of beginning WIP $ -0-
• Cost added during the period 960,000
Total cost to account for $960,000
Costs accounted for:
• Cost of goods transferred
Beginning WIP last period $ -0- $ -0- $ -0-
Beginning WIP this period -0- -0- -0-
Total cost transferred $960,000 $720,000 $240,000
• Add ending WIP -0- -0- -0-
Mowers to account for: 6,000
Outputs:
• Units completed 6,000
• Ending WIP -0-
PROBLEM 18.4B
SNACK HAPPY
a. 120,000
Materials Inventory 25,000
b.
Aug. 31 120,000
Work in Process: Mixing Department 120,000
Direct Labor 40,000
Manufacturing Overhead 50,000
d.
Aug. 31 210,000
Work in Process: Baking Department 210,000
Summary of costs incurred in baking 5,000
gross of brownies in August. Cost $18 per
gross ($90,000/5,000 gross).
Work in Process: Baking Department
in August.
To record the transfer of 5,000 gross of
brownies sent to the Packaging Department
Work in Process: Packaging Department
e. 24,000
Materials Inventory 3,000
Direct Labor 14,000
Manufacturing Overhead 7,000
Work in Process: Packaging Department 234,000
($234,000/12,000 cases).
Finished Goods Inventory
To record the completion of 12,000 cases of
brownies in August. Cost $19.50 per case
30 Minutes, Medium
Work in Process: Mixing Department
Work in Process: Baking Department
To record the transfer of 20,000 pounds
of batter to the Baking Department in August.
To summarize the Packaging Department’s
costs in packaging 12,000 cases of brownies
in August. Cost $2 per case ($24,000/12,000 cases).
Work in Process: Packaging Department
Direct Labor 60,000
Manufacturing Overhead 35,000
Summary of costs incurred in mixing 20,000 lbs.
of batter in August. Cost $6 per lb.
35 Minutes, Medium
PROBLEM 18.5B
BALFANZ COMPANY
a.
Direct
Materials Conversion
b.
Direct Conversion
Materials Costs
Input resources required
**50,000 units in beginning inventory + 300,000 units started – 280,000 units transferred =
*280,000 units transferred – 50,000 units in beginning inventory = 230,000 units started and
completed.
35 Minutes, Medium PROBLEM 18.6B
BALFANZ COMPANY
a. Production Cost Report
Part I. Physical Flow Total Units
Inputs:
• Beginning WIP 50,000
• Started 300,000
Part II. Equivalent Units Direct Materials Conversion
Consumed
Based on monthly input:
• Finish BWIP -0- 30,000
• Start new units 300,000 286,000
Based on monthly output:
• Transferred units 230,000 260,000
• EWIP units 70,000 56,000
Part III. Cost Per Equivalent Unit Total Unit Cost Direct Materials Conversion Costs
Input costs in September $1,200,000 $2,212,000
Divide by equivalent units,
Costs per equivalent unit, Sept. $11.00 $ 4.00 $ 7.00
Finishing Department, Month of September
Outputs:
• Units completed 280,000
PROBLEM 18.6B
BALFANZ COMPANY (concluded)
Total Costs Direct Materials Conversion Costs
$ 270,000
3,412,000
$3,682,000
b.
Costs accounted for:
Total cost to account for
Part IV. Total Cost Assignment
Costs to account for:
• Cost of beginning WIP
• Cost added during the period
Management can compare production cost reports from month to month to help control costs
and assess efficiency of their processes. For example, the equivalent units can be tracked over
a30,000 EU @ $7 = $210,000
$ 270,000 150,000 $ 120,000
$3,010,000 $1,070,000 $1,940,000
$3,682,000 $1,350,000 $2,332,000
BWIP, September 1
Total cost accounted for
Total cost transferred
To finish BWIP
50 Minutes, Strong
PROBLEM 18.7B
DELRAY INDUSTRIES
a.
(1)
3,000
(2) Direct
Materials Conversion
900
1,800
800
To start and complete 49,000 units in June
Conversion (1,000 units 20% complete)
To start units in process on June 30:
Equivalent units of resources in June
Direct materials (1,000 units 80% complete)
(3) Direct Conversion
Materials Costs
912,600$ 612,000$
÷ 50,700 ÷ 51,000
18$ 12$
Total cost of units transferred
June conversion (50,800 equivalent units × $12)
Cost of beginning inventory, June 1 ($37,800 + $14,400)
June direct materials (49,900 equivalent units × $18)
Department in June:
Work in Process: Finishing Department
To record the transfer of 52,000 units to the Finishing
Requirements for the Molding Department in June
Flow of physical units: Molding Department
Units in beginning inventory, June 1
Cost per equivalent unit consumed in June
Input resources
To finish units in process on June 1:
Direct materials (3,000 units require 30% to complete)
Conversion (3,000 units require 60% to complete)
Cost per equivalent unit in June
Costs incurred by Molding Department in June
Equivalent units in June [see part (2) ]
Units started and completed in June
Units started in June
Units in beginning inventory, June 1
Units transferred to Finishing Department in June
Units in process during June
Units in ending inventory, June 30
PROBLEM 18.7B
DELRAY INDUSTRIES (continued)
b.
(1)
5,000
52,000
(2) Molding Direct
Materials Materials Conversion
Molding materials
(5,000 units require 0% to complete) 0
Direct materials
(5,000 units require 80% to complete) 4,000
Conversion
Molding materials
(2,000 units 100% complete) 2,000
Cost per equivalent unit in June
Equivalent units in June [see part (2) ]
Cost per equivalent unit in June
Costs charged to Finishing Department in June*
To finish units in process on June 1:
Input resources
Units in beginning inventory, June 1
Requirements for the Finishing Dept.
Flow of physical units: Finishing Dept.
in June
Units started in June [see part a (1) ]
57,000
55,000
50,000
Units transferred to Finished Goods in June
Units in beginning inventory, June 1
Units started and completed in June
Units in process during June
Units in ending inventory, June 30
PROBLEM 18.7B
DELRAY INDUSTRIES (concluded)
(4) 2,310,000
Work in Process: Finishing Department 2,310,000
(5)
Conversion (1,800 equivalent units × $8)
Ending inventory in process, June 30
Direct materials
(1,500 equivalent units × $4)
60,000$
Finished Goods Inventory
To record the transfer of 55,000 units
Work in Process: Finishing Department,
Molding materials
to the Finished Goods Inventory in June:
June 30
(2,000 equivalent units × $30)
Beginning inventory, June 1
June molding materials
June direct materials
June conversion
Total cost of units transferred 2,310,000$
50 Minutes, Strong
PROBLEM 18.8B
THOMPSON TOOLS
a.
(1)
5,000
80,000
85,000
(2) Direct
Materials Conversion
0
3,500
71,000 71,000
9,000
7,200
80,000 81,700
Direct materials (9,000 units 100% complete)
To start units in process on March 31:
Equivalent units of resources in March
To start and complete 71,000 units in March
Conversion (9,000 units 80% complete)
(3) Direct Conversion
Materials Costs
720,000$ 490,200$
÷ 80,000 ÷ 81,700
9$ 6$
(5)
43,200
124,200$
To record the transfer of 76,000 units to the Packaging
Work in Process: Packaging Department
March conversion (74,500 equivalent units × $6)
Department in March:
Conversion (7,200 equivalent units × $6)
Ending inventory in process, March 31
Cost of beginning inventory, March 1 ($45,000 + $9,000)
March direct materials (71,000 equivalent units × $9)
Work in Process: Assembly Department, March 31
Requirements for the Assembly Department in March
Cost per equivalent unit in March
Costs incurred by Assembly Department in March
Equivalent units in March [see part (2) ]
Cost per equivalent unit in March
Conversion (5,000 units require 70% to complete)
Units in beginning inventory, March 1
Units in process during March
Flow of physical units: Assembly Department
Input resources
To finish units in process on March 1:
Direct materials (5,000 units require 0% to complete)
Units started in March
76,000
71,000
Units transferred to Packaging Department in March
Units in beginning inventory, March 1
Units started and completed in March
Units in ending inventory, March 31
PROBLEM 18.8B
THOMPSON TOOLS (continued)
b. Requirements for the Packaging
(2) Assembly Direct
Input resources Materials Materials Conversion
To finish units in process on March 1:
Assembly material
0
Direct materials
To start and complete 56,000 units in March 56,000 56,000 56,000
To start units in process on March 31:
Direct materials (20,000 units 0% complete) 0
Conversion (20,000 units 30% complete) 6,000
Equivalent units of resources in March 76,000 60,000 65,200
(20,000 units 100% complete)
(4,000 units require 100% to complete)
(4,000 units require 80% to complete)
(3)
Assembly Direct Conversion
Cost per equivalent unit in March Materials Materials Costs
Costs charged to Packaging Dept. in March* 1,140,000$ 840,000$ 260,800$
Equivalent units in March [see part (2) ]÷ 76,000 ÷ 60,000 ÷ 65,200
Cost per equivalent unit in March 15$ 14$ 4$
Department in March
(4,000 units require 0% to complete)
Units started in March [see part a (1) ]76,000
Units in process during March 80,000
Units in ending inventory, March 31 (20,000)
Units transferred to Finished Goods in March 60,000
Units in beginning inventory, March 1 (4,000)
PROBLEM 18.8B
THOMPSON TOOLS (concluded)
(4) 1,980,000
Work in Process: Packaging Department 1,980,000
(5)
300,000$
324,000$
Direct materials (none)
Conversion (6,000 equivalent units × $4)
Ending inventory in process, March 31
Finished Goods Inventory
(20,000 equivalent units × $15)
To record the transfer of 60,000 units
Inventory in March:
Work in Process: Packaging Dept., March 31
Assembly materials
to the Finished Goods
Total cost of units transferred 1,980,000$
SOLUTIONS TO CRITICAL THINKING CASES
CASE 18.1
SHOULDN’T WE DO THINGS DIFFERENTLY?
30 Minutes, Strong
Mr. Brown:
Thank you for your recent memo. I am glad to see that you have become familiar with our cost
accounting methods and have constructive suggestions. You are correct that we could use job
order costing and, also, that we could base our unit cost computations upon equivalent units,
rather than upon units completed. But let me explain briefly why we are currently doing what
we do.
Given that we have a substantial amount of work in process in our fermenting tanks, you may
ask, Why? The answer is that we always have the same quantity of beer in our fermenting
tanks. As the amount of our work in process does not change from month to month, our
productive effort is essentially equivalent to the amount of finished product coming off our
bottling line.
CASE 18.2
METAL PRODUCTS, INC.
a.
b.
c.
20 Minutes, Medium
The cost per equivalent unit of cut materials transferred into the Assembly Department in
February and reported as beginning inventory on March 1 was $25 per unit ($25,000 ÷ 1,000
The cost per equivalent unit of conversion for the Assembly Department in March was $25.
The cost of conversion added by the Assembly Department in February and reported as
There are many reasons why the cost of cut materials transferred in from the Cutting
Department and conversion costs incurred by the Assembly Department may have
decreased. Possible reasons include:
The company may have begun a more efficient manufacturing process in either or both
departments that resulted in lower manufacturing overhead costs.
CASE 18.3
PROCESS COSTING
INTERNET
a.
d.
Responses to this question will vary. Some may argue that certain environmental and safety
25 Minutes, Easy
Carbonated water comprises over 90% of a soft drink’s direct material. The second main
ingredient is sugar, which comprises another 7% – 12% of the direct materials. Much
smaller quantities of ingredients (that often are considered indirect materials) include
CASE 18.4
WRIGLEY COMPANY
ETHICS, FRAUD & CORPORATE GOVERNANCE
a.
Melting
Mixing
b.
c.
d.
One configuration of processing departments could include a “Production Department” and a
wrapping, and packing activities. Other configurations may also be acceptable.
Major overhead costs at Wrigley might include the cost of maintaining the various machines
30 Minutes, Medium
A sample flowchart of the activities involved in manufacturing chewing gum could be
constructed as follows:
Responses to this question will vary. Some may argue that certain environmental and charitable