EXERCISE 21–12
To: David Skaros
From: Student
Re: Ending inventory
The reason for any confusion related to your department’s ending inventory
quantity stems from the fact that the quantity can be measured in two different
ways, depending on what the information is used for.
The ending inventory quantity can be measured in physical units or equivalent
units. Physical units are actual units present without regard to the stage of
EXERCISE 21–13
HEALTHY COMPANY
Welding Department
Production Cost Report
For the Month Ended February 28, 2017
Equivalent Units
Quantities
Physical
Units
Materials
(Step 1)
(Step 2)
Work in process, February 28
(11,000 X 20%)
Total units
Units to be accounted for
Work in process, February 1
15,000
Costs
Materials
Conversion
Costs
Total
Unit costs (Step 3)
Total cost
Equivalent units
(a)
(b)
$198,000(1)
66,000
$143,000(2)
57,200
$341,000
Cost Reconciliation Schedule (Step 4)
Conversion costs (2,200 X $2.50)
Total costs
Costs accounted for
Transferred out (55,000 X $5.50)
$302,500
EXERCISE 21–14
(a)
Containers in transit, April 1
0
Containers loaded
1,200
Total containers
1,200
Containers off-loaded
850
Containers in transit, April 30
350
Total containers
1,200
Equivalent Units
(b)
Physical
Units
Direct
Materials
Conversion
Costs
Containers off-loaded
Containers in transit, April 30
Total equivalent units
*350 x 40% = 140
**350 x 20% = 70
EXERCISE 21–15
(a)
Materials
Conversion
Costs
Applications transferred out
800
800
Work in process, September 30
300*
180**
Equivalent units
1,100
980
(b)
Materials: $5,500 ÷ 1,100 = $5.00
Conversion costs: $25,480* ÷ 980 = $26.00
Costs accounted for:
Transferred out (800 X $31.00)
$24,800
Work in process, September 30
Materials (300 X $5.00)
Conversion costs (180 X $26.00)
Total costs
*EXERCISE 21-16
(a) The overhead rates are:
Activity Cost Pools
Estimated
Overhead
÷
Expected Use
of Cost Drivers
per Activity
=
Activity-Based
Overhead Rates
Machine setups
Materials handling
$40,000
1,000
$40
(b) The assignment of the overhead costs to products is as follows:
Instruments
Gauges
Cost
Assigned
Cost Driver
Number
Cost
Number
Cost
Requisitions ($40)
400
$16,000
600
$24,000
$40,000
*EXERCISE 21-16 (Continued)
(c) MEMO
To: President, Major Instrument, Inc.
From: Student
Re: Benefits of activity-based costing (ABC)
ABC focuses on the activities performed in producing a product.
Overhead costs are assigned to products based on cost drivers that
measure the activities performed on the product.
*EXERCISE 21-17
(a) Direct materials (1,000 X $35) …………………………. $35,000
Direct labor (1,000 X $15) ……………………………….. 15,000
SOLUTIONS TO PROBLEMS
PROBLEM 21–1A
1. Raw Materials Inventory ……………………………. 300,000
Accounts Payable ……………………………… 300,000
2. Work in Process—Mixing ………………………….. 210,000
Work in Process—Packaging ……………………. 45,000
Raw Materials Inventory …………………….. 255,000
PROBLEM 21–2A
(a)
Physical units
Units to be accounted for
Work in process, June 1
Started into production
Total units
0
22,000
22,000
(b)
Equivalent units
Materials
Conversion Costs
Units transferred out
Total equivalent units
20,000
22,000
20,000
20,800
(c)
Unit Costs
Materials
$9.00 ($198,000 ÷ 22,000)
(d) Costs accounted for
Transferred out (20,000 X $17.00) $340,000
Work in process, June 30
PROBLEM 21-2A (Continued)
(e) ROSENTHAL COMPANY
Molding Department
Production Cost Report
For the Month Ended June 30, 2017
Equivalent Units
Quantities
Physical
Units
Materials
Conversion
Costs
(Step 1)
(Step 2)
Work in process, June 30
(2,000 X 40%)
Total units
Units to be accounted for
Work in process, June 1
Started into production
Total units
0
22,000
22,000
Costs
Materials
Conversion
Costs
Total
Unit costs (Step 3)
Total cost
(a)
$198,000
$166,400
$364,400
Cost Reconciliation Schedule (Step 4)
Costs accounted for
Transferred out (20,000 X $17.00)
Work in process, June 30
$340,000
PROBLEM 21–3A
(a) (1) Physical units
T12
Tables
C10
Chairs
Units to be accounted for
Work in process, July 1
0
0
(2) Equivalent units
T12 Tables
Materials
Conversion
Costs
Units transferred out
Work in process, July 31
17,000
17,000
C10 Chairs
Materials
Conversion
Costs
Units transferred out
Work in process, July 31
17,500
17,500
PROBLEM 21-3A (Continued)
(3) Unit costs
T12
Tables
C10
Chairs
Materials ($380,000 ÷ 20,000)
($288,000 ÷ 18,000)
$19
$16
(4) T12 Tables
Costs accounted for
Transferred out (17,000 X $37) $629,000
Total costs $718,400
C10 Chairs
Costs accounted for
Transferred out (17,500 X $28) $490,000
PROBLEM 21-3A (Continued)
(b) THAKIN INDUSTRIES INC.
Cutting Department—Plant 1
Production Cost Report
For the Month Ended July 31, 2017
Equivalent Units
Quantities
Physical
Units
Materials
Conversion
Costs
(Step 1)
(Step 2)
Work in process, July 31
(3,000 X 60%)
Total units
Units to be accounted for
Work in process, July 1
0
Costs
Materials
Conversion
Costs
Total
Unit costs (Step 3)
Total cost
(a)
$380,000
$338,400
$718,400
Cost Reconciliation Schedule (Step 4)
Costs accounted for
Transferred out (17,000 X $37)
$629,000
PROBLEM 21–4A
(a)
Equivalent Units
Physical
Units
Materials
Conversion
Costs
695,000
Units to be accounted for
Work in process, November 1
Started into production
Total units
35,000
660,000
695,000
Beginning work in
process
Added during month
Materials cost
$ 79,000
1,589,000
Conversion costs
$ 48,150
563,850
($225,920 + $337,930)
(b)
Costs accounted for
Transferred out (670,000 X $3.30)
$2,211,000