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CHAPTER 21
Process Costing
ASSIGNMENT CLASSIFICATION TABLE
Learning Objectives
Questions
Brief
Exercises
Do It!
Exercises
A
Problems
* 1. Discuss the uses of a
process cost system and
how it compares to a job
order system.
1, 2, 3, 4, 5,
20
1
1
* 2. Explain the flow of costs
in a process cost system
and the journal entries to
assign manufacturing
costs.
6, 7
1, 2, 3
2
2, 3, 4
1A
* 3. Compute equivalent
units.
10, 11, 12, 13
4, 5
3
3, 5, 6, 7, 8, 9,
10, 11, 13, 14,
15
2A, 3A, 4A,
5A, 6A
* 4. Complete the four steps
to prepare a production
cost report.
8, 9, 14, 15,
16, 17, 18, 19
6, 7, 8, 9
4
3, 5, 6, 7, 8, 9,
10, 11, 12, 13,
14, 15
2A, 3A, 4A,
5A, 6A
*5. Explain just-in-time (JIT)
and activity-based
costing (ABC).
21, 22, 23
10
5
*6. Apply activity-based
costing to a
manufacturer.
24
11
16, 17
7A
ASSIGNMENT CHARACTERISTICS TABLE
Problem
Number
Description
Difficulty
Level
Time
Allotted (min.)
1A
Journalize transactions.
Moderate
20–30
2A
Complete four steps necessary to prepare a production
cost report.
Simple
30–40
3A
Complete four steps necessary to prepare a production
cost report.
Simple
30–40
BLOOM’ S TAXONOMY TABLE
Correlation Chart between Bloom’s Taxonomy, Learning Objectives and End-of-Chapter Exercises and Problems
Learning Objective
Knowledge
Comprehension
Application
Analysis
Synthesis
Evaluation
* 1. Discuss the uses of a process cost
system and how it compares to a job
order system.
Q21-1
Q21-2
Q21-3
Q21-4
Q21-5
Q21-20
E21-1
DI21-1
* 2. Explain the flow of costs in a process
cost system and the journal entries to
assign manufacturing costs.
Q21-6
Q21-7
BE21-1
BE21-2
BE21-3
DI21-2
E21-2
E21-3
E21-4
P21-1A
* 3. Compute equivalent units.
Q21-10
Q21-11
Q21-12
Q21-13
BE21-4
BE21-5
DI21-3
E21-3
E21-5
E21-6
E21-7
E21-8
E21-9
E21-10
E21-11
E21-13
E21-14
E21-15
P21-2A
P21-3A
P21-4A
P21-5A
P21-6A
* 4. Complete the four steps to prepare a
production cost report.
Q21-8
Q21-16
Q21-17
Q21-19
Q21-9
Q21-14
Q21-15
Q21-18
BE21-6
BE21-7
BE21-8
BE21-9
DI21-4
E21-3
E21-5
E21-6
E21-7
E21-8
E21-9
E21-10
E21-11
E21-13
E21-14
E21-15
P21-2A
P21-3A
P21-4A
P21-5A
P21-6A
E21-12
5. Explain just-in-time (JIT) and activity-
based costing (ABC).
Q21-21
Q21-22
Q21-23
*6. Apply activity-based costing to a
manufacturer.
Q21-24
BE21-10
BE21-11
E21-16
E21-17
P21-7A
Broadening Your Perspective
BYP21-3
CD-21
BYP21-1
BYP21-2
BYP21-6
BYP21-4
BYP21-5
ANSWERS TO QUESTIONS
1. (a) Process cost.
(b) Process cost.
2. The primary focus of job order cost accounting is on the individual job. In process cost accounting, the
primary focus is on the processes involved in producing homogeneous products.
6. (a) (1) Materials are charged to production on the basis of materials requisition slips.
(2) Labor is usually charged to production on the basis of the payroll register or departmental
payroll summaries.
9. Physical units to be accounted for consist of units in process at the beginning of the period plus
units started (or transferred) into production during the period. Units accounted for consist of units
completed and transferred out during the period plus units in process at the end of the period.
Questions Chapter 21 (Continued)
13.
Equivalent Units
Materials
Conversion Costs
Units transferred out
Work in process
12,000
12,000
14.
Units transferred out were 3,200*
Units to be accounted for
Work in process (beginning)
Started into production
Total units
500
3,000
3,500
15. (a) The cost of the units transferred out is $112,000, or (14,000 X $8).
(b) The cost of the units in ending inventory is $8,500, or [(2,000 X $3) + (500 X $5)].
20. In deciding which system to use, a cost-benefit tradeoff occurs. In a job order system, detailed
information related to the cost of the product is involved. The cost of implementing this system is
often expensive. In a process cost system, an average cost of the product will suffice and therefore
(3) A total quality control system must be established.
22. (a) The principal differences are:
Activity-Based Costing
Traditional Costing
(1)
Primary focus
Activities performed in making
Units of production
23. An appropriate cost driver for each activity is:
Activity
Cost Driver
Materials handling
Machine setups
Number of requisitions
Number of setups
*24. (a) ABC involves the following steps:
(1) Identify the major activities that pertain to the manufacture of specific products.
(2) Accumulate manufacturing overhead costs by activities.
SOLUTIONS TO BRIEF EXERCISES
BRIEF EXERCISE 21-1
Mar. 31 Raw Materials Inventory .................................. 50,000
Accounts Payable ..................................... 50,000
BRIEF EXERCISE 21-2
Mar. 31 Work in Process—Assembly Department ...... 24,000
Work in Process—Finishing Department ....... 26,000
Raw Materials Inventory ........................... 50,000
BRIEF EXERCISE 21-3
Mar. 31 Work in Process—Assembly Department
($35,000 X 160%) .......................................... 56,000
BRIEF EXERCISE 21-4
Materials
Conversion Costs
January
March
45,000 (35,000 + 10,000)
48,000 (40,000 + 8,000)
39,000 (35,000 + 4,000a)
46,000 (40,000 + 6,000b)
BRIEF EXERCISE 21-5
(a)
Materials
(b)
Conversion Costs
Units transferred out
Work in process, November 30
9,000
9,000
BRIEF EXERCISE 21-6
Total materials
costs
$33,000
÷
Equivalent units
of materials
10,000
=
Unit materials
cost
$3.30
BRIEF EXERCISE 21-7
Assignment of Costs
Equivalent Units
Unit Cost
Transferred out
Transferred out
40,000
$11
$440,000
BRIEF EXERCISE 21-8
Total materials
costs
$12,000
÷
Equivalent units
of materials
20,000
=
Unit materials
cost
$.60
BRIEF EXERCISE 21-9
Costs accounted for
Transferred out
Work in process
(18,000 X $3.10)
$55,800
BRIEF EXERCISE 21-10
1. False. Just-in-time processing results in a “pull” approach.
2. True.
*BRIEF EXERCISE 21-11
SOLUTIONS FOR DO IT! REVIEW EXERCISES
DO IT! 21-1
1. False
DO IT! 21-2
Work in Process—Mixing ................................................... 10,000
Work in Process—Mixing ................................................... 8,000
Work in Process—Packaging ............................................ 36,000
Work in Process—Mixing ................................................... 12,000
Work in Process—Packaging ............................................ 21,000
DO IT! 21-3
(a) Since materials are entered at the beginning of the process, the equiva-
lent units of ending work in process are 10,000.
20,000 units + 10,000 units = 30,000 equivalent units of production for
materials.
DO IT! 21-4
(a) 0 (Work in process, March 1) + 26,000* (Started into production) = 26,000
*22,000 + 4,000
(b) Equivalent units of production:
Materials Conversion
(c) Cost reconciliation schedule
Costs accounted for
DO IT! 21-5
1. False
2. True
SOLUTIONS TO EXERCISES
EXERCISE 21-1
1. True.
2. True.
EXERCISE 21-2
April 30 Work in Process—Cooking .............................. 21,000
Work in Process—Canning .............................. 9,000
Raw Materials Inventory ........................... 30,000
EXERCISE 21-3
(a) Work in process, May 1 400
Started into production 1,600
(b) and (c)
Equivalent Units
Materials
Conversion Costs
Units transferred out
1,700
1,700
Direct
Materials
Conversion Costs
Work in process, May 1
$2,040
$1,550
(d) Transferred out (1,700 X $6.60) $11,220
EXERCISE 21-4
1. Raw Materials Inventory .......................................... 62,500
Accounts Payable ............................................ 62,500
2. Factory Labor ........................................................... 60,000
Wages Payable ................................................. 60,000
5. Work in Process—Cutting ....................................... 33,000
Work in Process—Assembly .................................. 27,000
Factory Labor ................................................... 60,000
8. Finished Goods Inventory ....................................... 134,900
Work in Process—Assembly ........................... 134,900
EXERCISE 21-5
(a)
January
May
Units to be accounted for
Beginning work in process
Started into production
Total units
Units accounted for
0
13,000
13,000
0
21,000
21,000
(b)
(1)
Materials
(2)
Conversion Costs
January
13,000 (11,000 + 2,000)
12,200 (11,000 + 1,200)
EXERCISE 21-6
(a)
(1)
Materials
(2)
Conversion Costs
Units transferred out
Work in process, July 31
12,000
12,000
(b) Materials: $45,000 ÷ 15,000 = $3.00
Conversion costs: ($16,200 + $18,300) ÷ 13,800 = $2.50
EXERCISE 21-7
QUIK FURNITURE COMPANY
Sanding Department
Production Cost Report
For the Month Ended March 31, 2017
Equivalent Units
Quantities
Physical
Units
Materials
Conversion
Costs
Units to be accounted for
Work in process, March 1
0
Costs
Materials
Conversion
Costs
Total
Unit costs
Total cost
Equivalent units
Unit costs (a) ÷ (b)
$33,000
10,000
$3.30
$57,000*
7,600
$7.50
$90,000
$10.80
EXERCISE 21-8
(a)
(1)
Materials
(2)
Conversion
Costs
Units transferred out
17,000
17,000
(b)
Materials
Conversion
Costs
Total
Total cost
Equivalent units
Unit costs
$900,000(1)
18,000
$ 50
$435,000(2)
17,400
$ 25
$1,335,000
$ 75
EXERCISE 21-9
(a) Materials: 30,000* + 6,000 = 36,000
Conversion costs: 30,000* + (6,000 X 40%) = 32,400
*36,000 – 6,000
EXERCISE 21-10
(a)
Physical
Units
Equivalent Units
Beginning work in process
20,000
Units started into production
164,000
(b)
Conversion
Materials
Costs
Total
(c)
Assignment of costs:
Transferred out (160,000 X $2.55)
$408,000
EXERCISE 21-11
(a)
Physical
Units
Work in process, September 1
1,600
EXERCISE 21-11 (Continued)
Equivalent Units
Materials
Conversion Costs
Units transferred out
39,500
39,500
(b)
Materials
Work in process, September 1
Direct materials
Costs added to production
$ 20,000
Conversion Costs
Work in process, September 1
Conversion costs
$ 43,180
(c) Costs accounted for
Transferred out (39,500 X $15.05) $594,475
