CHAPTER 20 Process Cost Systems
Ex. 20–15
a. $11,646; determined as follows:
Beginning work in process balance……………………………………………
…
$ 10,566
b. Cost of beginning work in process……………………………………………
…
$ 11,646
Cost of units started and completed during November*…………………… 144,900
c. $16,380; determined as follows:
Direct materials ($9.60 × 1,400 units)…………………………………………
…
$ 13,440
d. Direct materials cost per equivalent unit: $10.00 ($9,000 ÷ 900 units)
Conversion cost per equivalent unit: $2.90 ($1,566* ÷ 540 units**)
20-21
…
CHAPTER 20 Process Cost Systems
Ex. 20–16
Whole Direct
UNITS Units Materials Conversion
(1) (1)
Units charged to production:
Inventory in process, August 1 700
Received from materials storeroom 14,300
Total units accounted for by the
MORNING BREW COFFEE COMPANY
Cost of Production Report—Roasting Department
For the Month Ended August 31, 2016
Equivalent Units
20-22
CHAPTER 20 Process Cost Systems
Ex. 20–16 (Concluded)
Direct
COSTS Materials Conversion Total
Costs per equivalent unit:
Total costs for August in Roasting
Department $65,780 $21,942
Total costs accounted for by the
Roasting Department $91,201
Costs allocated to completed and
partially completed units:
Inventory in process, August 1 balance $ 3,479
To complete inventory in process,
1
$65,780 + $21,942
2
560 units × $1.50
b. Materials: From current period……………………………………………
From beginning inventory……………………………………
…
…
Costs
$ 4.60
4.70
20-23
CHAPTER 20 Process Cost Systems
Ex. 20–17
a.
Whole Direct
UNITS
Units Materials Conversion
Units charged to production:
Inventory in process, January 1 1,400
Received from Weaving Department 58,000
KARACHI CARPET COMPANY
Cost of Production Report—Cutting Department
For the Month Ended January 31, 2016
Equivalent Units
20-24
CHAPTER 20 Process Cost Systems
Ex. 20–17 (Concluded)
Direct
COSTS Materials Conversion Total
Costs per equivalent unit:
Total costs for January in Cutting
Department $742,400 $286,161
Total costs accounted for by the
Cutting Department $1,051,521
Cost allocated to completed and
partially completed units:
Inventory in process, January 1 balance $ 22,960
To complete inventory in process,
1
$134,550 + $151,611
2
$742,400 + $134,550 + $151,611
b. Materials: From current period…………………………………………
…
…
Conversion: From current period…………………………………………
…
From beginning inventory…………………………………
…
$ 5.10
5.00
Costs
$12.80
1
20-25
CHAPTER 20 Process Cost Systems
Ex. 20–18
a. 1. Work in Process—Casting Department 350,000
2. Work in Process—Casting Department 49,600
*
$19,840 × 150%
3. Work in Process—Machining Department* 402,684
*
Supporting calculations:
Cost of 2,530 transferred-out pounds:
Inventory in process, May 1………………………………………………………
…
$ 32,844
Cost to complete May 1 inventory:
Supporting equivalent unit and cost per equivalent unit calculations:
Whole Units Materials Conversion
Inventory in process, May 1
(60% completed) 230 0 92
Started and completed in May 2,300 2,300 2,300
Transferred to Machining Department
in May 2,530 2,300 2,392
Inventory in process, May 31
Equivalent Units
1
2
20-26
CHAPTER 20 Process Cost Systems
Ex. 20–18 (Concluded)
b. $29,760; determined as follows:
Direct materials (200 × $140)……………………………
…
$28,000
c. Materials: From current period……………………………………
…
$140
From beginning inventory……………………………
…
132
Increase…………………………………………………
…
$8
…
…
…
20-27
CHAPTER 20 Process Cost Systems
Ex. 20–19
a. 1. Work in Process—Papermaking Department 330,750
Materials—Pulp 330,750
2. Work in Process—Papermaking Department 95,355
3. Work in Process—Converting Department* 420,925
*
Supporting calculations:
Cost of 103,900 transferred-out units:
Inventory in process, March 1……………………………………………………
…
$ 9,139
Cost to complete March 1 inventory:
Supporting equivalent unit and cost per equivalent unit calculations:
Whole Units Materials Conversion
Inventory in process, March 1
(35% completed) 2,600 0 1,690
Started and completed in March 101,300 101,300 101,300
Transferred to Converting Department
$330,750
105,000
b. $14,319; determined as follows:
Direct materials (3,700 × $3.15)……………… $11,655
Equivalent Units
= $3.15 per unitCost per equivalent unit of materials:
1
20-28
CHAPTER 20 Process Cost Systems
Ex. 20–20
a. Cost per mega watt hour (MWh):
Fossil plant costs:
Conversion costs…………………………………
…
$40,500,000
Fuel…………………………………………………… 10,800,000
Wind farm costs:
Conversion costs…………………………………
…
$2,700,000
Wind farm mega watt hours (MWh):
Mega watts…………………………………………
…
100
…
a. The wind farm a cost per mega-watt hour of $90, compared to the fossil plant
cost of $95 per mega-watt hour. The wind farm is the less costly resource.
b. Equivalent units of production are calculated when there are beginning or
ending inventories that are partially completed to either coversion costs or
20-29
…
…
CHAPTER 20 Process Cost Systems
Ex. 20–21
Memo
To: Production Manager
The cost of production report is used to identify the cost per case for each of the
four flavors as follows:
Orange Cola Lemon-Lime Root Beer
Total cost
$19,125 $391,800 $324,000 $36,000
Orange Cola Lemon-Lime Root Beer
Concentrate
$1.85 $2.15 $2.10 $1.90
Sugar
1.20 1.20 1.20 1.20
Bottles
2.20 2.20 2.20 2.20
This table indicates that the concentrate per case is actually less for Orange
and Root Beer than for Cola and Lemon-Lime. This is because the concentrate
supplier charges a higher price for the more popular flavors. The costs per case
Cost per Case by Cost Element
20-30
CHAPTER 20 Process Cost Systems
Ex. 20–22
The solution to this exercise is to determine if the cost per pound trends in paper
stock, conversion, and coating costs are remaining stable over time. The
following table can be developed from the data:
a.
January February March April May June
Paper stock
($ ÷ pounds output) $0.70 $0.70 $0.70 $0.70 $0.70 $0.70
Coating
b. Operator 1 believes that energy consumption is becoming less efficient. The
energy cost is part of the conversion cost. The conversion cost per output
pound has remained constant for the six months. If the energy efficiency were
declining, it would take more energy per pound of output over time. Thus, we
would expect to see the conversion rate per pound increasing if Operator 1
were correct.
20-31
CHAPTER 20 Process Cost Systems
Ex. 20–23
The Hawkeye Machining managers are displaying typical fears to a just-in-time
processing system. Just-in-time removes the safety provided by materials, in-
process, and finished goods inventory balances. Indeed, these types of comments
reflect conventional manufacturing philosophy, which views inventory as a
necessary buffer against surprises and other unwelcome events. The just-in-time
philosophy focuses on removing the causes that require a need for inventory.
The in-process inventories can be reduced significantly if the underlying
manufacturing processes are made reliable. The director of manufacturing is
correct in his observation, but his solution is wrong. The solution is not to
increase inventory but to improve the reliability of the machines so that they do
not experience emergency breakdowns. Thus, the manufacturing operation must
20-32
CHAPTER 20 Process Cost Systems
Ex. 20–24
a. and b.
a. Whole b. Equivalent Units
Units of Production
Units to be accounted for:
Beginning work in process 1,900
Units started during period 15,100
1
20-33
CHAPTER 20 Process Cost Systems
Ex. 20–25
a. Drawing Department
Whole Equivalent Units
Units of Production
Units to be accounted for:
Beginning work in process 500
Units started during period 11,600
b. Winding Department
Whole Equivalent Units
Units of Production
Units to be accounted for:
Beginning work in process 350
1
20-34
CHAPTER 20 Process Cost Systems
Ex. 20–26
a. Units in process, May 1…………………………………………………………
…
4,200
b.
Equivalent
Whole Units of
Units Production
Units to be accounted for:
Beginning work in process 4,200
Units started during the period 23,600
20-35
CHAPTER 20 Process Cost Systems
Ex. 20–27
a. and b.
Equivalent
Whole Units of
Units Production
Units to be accounted for:
Beginning work in process 900
Total Equivalent Units
c. Cost per Equivalent Unit =
Total Production Costs
20-36
CHAPTER 20 Process Cost Systems
Ex. 20–28
a.
Equivalent
Whole Units of
Units Production
Units to be accounted for:
Beginning work in process 500
Units started during the period 3,700
Total Equivalent Units
Cost per Equivalent Unit =
Total Production Costs
20-37
CHAPTER 20 Process Cost Systems
Ex. 20–29
Whole Equivalent Units
UNITS Units of Production
Units to account for during production:
Inventory in process, May 1 1,150
Received from materials storeroom 10,900
COSTS Costs
Costs per equivalent unit:
Total costs for May in Roasting Department $42,804
Total equivalent units 11,890
HIGHLANDS COFFEE COMPANY
Cost of Production Report—Roasting Department
For the Month Ended May 31, 2016
1
÷
20-38
CHAPTER 20 Process Cost Systems
Ex. 20–30
Whole Equivalent Units
UNITS Units of Production
Units charged to production:
Inventory in process, January 1 3,400
Received from Weaving Department 64,000
COSTS Costs
Costs per equivalent unit:
Total costs for January in Cutting Department $575,010
Costs assigned to production:
Inventory in process, January 1 $ 23,000
Costs incurred in January 552,010
DALTON CARPET COMPANY
Cost of Production Report—Cutting Department
For the Month Ended January 31, 2016
1
2
20-39
CHAPTER 20 Process Cost Systems
Prob. 20–1A
1. a. Materials 84,900
Accounts Payable 84,900
b. Work in Process—Spinning Department 43,600
Work in Process—Tufting Department 34,100
c. Work in Process—Spinning Department 26,300
Work in Process—Tufting Department 17,900
d. Factory Overhead—Spinning Department 5,300
Factory Overhead—Tufting Department 3,400
Accumulated Depreciation 8,700
g. Work in Process—Tufting Department 88,000
Work in Process—Spinning Department 88,000
20-40