P 6-67
1.
Units to account for:
Units in beginning WIP……………………………………………………………………………………………………………………………………
10 Transf. Out End. Beg.
Units started……………………………………………………………………………………………………………………………
150 140 + 20 – 10 = 150
Total units to account for……………………………………………………………………………………………………………………………
160
Physical Equivalent
Units accounted for: Flow Units Physical Equivalent
Units completed……………………………………………………………………………………………………………………………
Units in ending WIP ……………………………………………………………………………………………………………………………
Total units accounted for…………………………………………
Costs to account for: Materials Conversion* Total Materials Conversion
Beginning WIP……………………………………………………………………………………………………………………………
$ 252 $846 $ 1,098 252 846
Incurred during March……………………………………………………………………………………………………………………………
3,636 13,854 17,490 3,636 13,854
Total costs to account for……………………………………………………………………………………………………………………………
$3,888 $14,700 $18,588
Equivalent units……………………………………………………………………………………………………………………………
150 150
Cost per equivalent unit……………………………………………………………………………………………………………………………
$123.92 18,588 ÷ 150 = 123.92
*Conversion is labor plus overhead (200% of labor):
BWIP: $282 + ($282 × 2.00) = $846 282 + 282 × 200% = 846
March: $4,618 + ($4,618 × 2.00) = $13,854 4,618 + 4,618 × 200% = 13,854
Transferred Ending Work
Costs accounted for: Out Total
Ending WIP (10 × $123.92)……………………………………………………………………………………………………………………………
Total costs accounted for……………………………………………………………………………………………………………………………
$17,349 $1,239 $18,588
in Process
Benson Pharmaceuticals
Mixing Department
For the Month of March
(Weighted Average Method)
UNIT INFORMATION
COST INFORMATION
Production Report
Units in beginning WIP…………………………………………………………………………………………………………………………………
Units started…………………………………………………………………………………………………………………………………
Total units to account for …………………………………………………………………………………………………………………………………
Beginning WIP…………………………………………………………………………………………………………………………………
Incurred during March…………………………………………………………………………………………………………………………………
Total costs to account for…………………………………………………………………………………………………………………………………
Equivalent units…………………………………………………………………………………………………………………………………
Cost per equivalent unit…………………………………………………………………………………………………………………………………
Benson Pharmaceuticals
Encapsulating Department
For the Month of March
(Weighted Average Method)
Production Report
UNIT INFORMATION
Equivalent Units
Physical
Conversion
Transferred
Ending Work
COST INFORMATION
**
CHAPTER 6 Process Costing
P 6-67 (Concluded)
3. Weighted average is easier to use than FIFO because it does not require separate
tracking for units in BWIP. FIFO requires that prior-period work and costs be
accounted for separately. The weighted average method commingles prior-period
work and costs with current-period work and costs, thus making the computations
CHAPTER 6 Process Costing
Units in beginning WIP……………………………………………………………………………………………………………………………………
Units started………………………………………………………………………………………………………………………………
Total units to account for………………………………………………………………………………………………………………………………
Units started and completed………………………………………………………………………………………………………………………………
Units in BWIP (to complete)………………………………………………………………………………………………………………………………
Units in EWIP………………………………………………………………………………………………………………………………
Total units accounted for………………………………………………………………………………………………………………………………
160 146
Beginning WIP………………………………………………………………………………………………………………………………
Incurred during March………………………………………………………………………………………………………………………………
Total costs to account for………………………………………………………………………………………………………………………………
Equivalent units………………………………………………………………………………………………………………………………
Cost per equivalent unit………………………………………………………………………………………………………………………………
in Process
Benson Pharmaceuticals
Mixing Department
(FIFO Method)
COST INFORMATION
UNIT INFORMATION
For the Month of March
Physical
Transferred
Production Report
Equivalent
Ending Work
Conversion
$846
13,854
$14,700
Materials
Out
$252
3,636
$3,888
***
CHAPTER 6 Process Costing
P 6-68 (Concluded)
2.
Units to account for:
Units in beginning WIP…………………………………………………………………………………………………………………………………
4,000 4,000
Units started…………………………………………………………………………………………………………………………………
210,000 208,000 + 6,000 – 4,000 = 210,000
Total units to account for…………………………………………………………………………………………………………………………………
214,000
Units accounted for: Flow Trans. In Materials Conversion
Units started and completed…………………………………………………………………………………………………………………………………
Units in BWIP (to complete)…………………………………………………………………………………………………………………………………
Units in EWIP…………………………………………………………………………………………………………………………………
Total units accounted for…………………………………………………………………………………………………………………………………
214,000 210,000 210,000 208,400
Costs to account for: Trans. In Materials Total Trans In Materials Conversion*
Beginning WIP…………………………………………………………………………………………………………………………………
$ 140 $32 $50 $222 140 32 50 *
Incurred during March…………………………………………………………………………………………………………………………………
17,390 1,573 4,860 23,823 17,390 1,573 4,860 *
Total costs to account for…………………………………………………………………………………………………………………………………
$17,530 $1,605 $4,910 $24,045
Equivalent units…………………………………………………………………………………………………………………………………
210,000 210,000 208,400
Cost per equivalent unit***…………………………………………………………………………………………………………………………………
$0.0828 $0.0075 $0.0233 $0.1136
*BWIP: $20 + ($20 × 1.50) = $50 20 + 20 × 150% = 50
** March: $1,944 + ($1,944 × 1.50) = $4,860 1,944 + 1,944 × 150% = 4,860
*** The numbers are rounded and the unit costs are calculated using only costs for March
because FIFO is being used.
Ending
Costs accounted for: Work in Process Total
Current period (2,000 × $0.0233)…………………………………………………………………………………………………………………………………
Transferred In (6,000 × $0.0828)…………………………………………………………………………………………………………………………………
Materials (6,000 × $0.0075)…………………………………………………………………………………………………………………………………
Conversion (2,400 × $0.0233)…………………………………………………………………………………………………………………………………
Total costs accounted for*…………………………………………………………………………………………………………………………………
$23,443 $598 $24,041
Transferred
Conversion
COST INFORMATION
Benson Pharmaceuticals
UNIT INFORMATION
Encapsulating Department
(FIFO Method)
For the Month of March
Production Report
*
**
CHAPTER 6 Process Costing
Case 6-69
1. Unit cost computation:
Physical flow schedule:
Units, beginning work in process………………………………………………………………………………..………………………………..
0 0
Units started………………………………………………………………………………………………………..………………………………..
2,800 2,500 + 300 = 2,800
Total units to account for…………………………………………………………………………………………..…………………………..
2,800
Units completed and transferred out:
Started and completed……………………………………………………………………………………………..………………………………
2,500
From beginning work in process………………………………………………………………………………..…………………………………
0
Units, ending work in process…………………………………………………………………………………..…………………………………
300
Total units accounted for…………………………………………………………………………………………..……………………………
2,800
Direct Conversion
Costs charged to the department: Materials Cost Total
Costs in BWIP…………………………………………………………………..…………………………………………………………………..
Costs added by department*…………………………………………………………………..…………………………………………………………………..
Total costs…………………………………………………………………..…………………………………………………………………..
Direct Conversion
Equivalent units calculation: Materials Cost
Units completed…………………………………………………………………..…………………………………………………………………..
2,500 2,500
Equivalent units in ending work in process…………………………………………………………………..…………………………………………………………………..
300 240 300 × 80% = 240
Total equivalent units…………………………………………………………………..…………………………………………………………………..
2,800 2,740
Unit cost calculation:
Unit Cost = Unit Direct Materials Cost + Unit Conversion Costs
Direct material cost**………………………………………………………………………………………………………………………………..……………………………..
$40.71 114,000 ÷ 2,800 = 40.71
Unit conversion cost………………………………………………………………………………………………………………………………..……………………………..
30.00 82,201 ÷ 2,740 = 30.00
Total unit cost……………………………………………………………………………………………………………………………………..……………………………
$70.71
** Rounded
Units, beginning work in process…………………………………………………………………………………..…………………………………………………..
Units started…………………………………………………………………………………………………………..…………………………………………………….
Total units to account for…………………………………………………………………………………………..……………………………………………….
1,600
CASES
CHAPTER 6 Process Costing
Case 6-69 (Continued)
Units completed and transferred out:
Started and completed…………………..………………………………………………………………………………………………………………………………………….
1,500 1,500
From beginning work in process………..………………………………………………………………………………………………………………………………………….
0 0
Units, ending work in process…………..………………………………………………………………………………………………………………………………………….
100 100
Total units accounted for………………..………………………………………………………………………………………………………………………………………
1,600
Direct materials cost charged to the department: Direct
Materials
Costs in beginning work in process……..…………………………………………………………………………………………………………………………………………
Costs added by department………………..………………………………………………………………………………………………………………………………………
Equivalent units calculation:
Direct
Materials
Units completed……………………………..…………………………………………………………………………………………………………………………………..
1,500 1,500
Add: Equivalent units in ending work in process…………..…………………………………………………………………………………………………………………
100 100
Total equivalent units…………………………………………..…………………………………………………………………………………………………………
1,600
Direct material cost per unit………………………………..………………………………………………………………………………………………………………………
Unit conversion cost…………………………………………..…………………………………………………………………………………………………………………….
Deluxe Model
Physical flow schedule:
Units, beginning work in process…………………………..………………………………………………………………………………………………………………..
0 0
Units started…………………………………………………..………………………………………………………………………………………………………………….
1,200 1,000 + 200 = 1,200
Total units to account for…………………………………..……………………………………………………………………………………………………………….
1,200
Units completed and transferred out:
Started and completed……………………………………..……………………………………………………………………………………………………………………..
1,000
From beginning work in process…………………………..……………………………………………………………………………………………………………………..
0
Units, ending work in process……………………………..……………………………………………………………………………………………………………………..
200
Total units accounted for…………………………………..………………………………………………………………………………………………………………….
1,200
Materials
Costs in beginning work in process……………………..……………………………………………………………………………………………………………………….
Costs added by department……………………………..……………………………………………………………………………………………………………………….
CHAPTER 6 Process Costing
Case 6-69 (Concluded)
Equivalent units calculation: Direct
Materials
Units completed………..………………………………………………………………………………………………………………………………………………………
1,000 1,000
Add: Equivalent units in ending work in process………..……………………………………………………………………………………………………………….
200 200
Total equivalent units……………………………………..………………………………………………………………………………………………………………..
1,200
Direct material cost per unit …………………………………..…………………………………………………………………………………………………………………
Unit conversion cost…………………………………………..…………………………………………………………………………………………………………………..
Total unit cost…………………………………………………..………………………………………………………………………………………………………………..
3.
Unit cost for Econo model……………………………..…………………………………………………………………………………………………………………………
$ 48.75
Unit cost for Deluxe model…………………………..……………………………………………………………………………………………………………………………
100.00
Unit cost for both together……………………………..…………………………………………………………………………………………………………………………
$148.75
Using pure process costing understates the cost of the Deluxe model and overstates
the cost of the Econo model.The error is large, so Karen seems to be justified in her
4. The profitability of the Econo line was being understated by nearly $22, while that of
the Deluxe line was overstated by over $29 producing an erroneous $51 difference
in profitability under the current process-costing system. This easily could be enough
CHAPTER 6 Process Costing
Case 6-70
1. Physical flow schedule:
Units, beginning work in process……………………………………………………………..…………………………….
10,000 10,000
Units started (transferred in)…………………..………………………………………………………………………………………………………………………………………………..………………………..
51,000 50,000 + 11,000 – 10,000 = 51,000
Total units to account for……………………..………………………………………………………………………………………………………………………………………………..…………………………
61,000
Units completed and transferred out:
Started and completed………………………..……………………………………………………………………………………………………………………………………………………………………………………
40,000
From beginning work in process……………..……………………………………………………………………………………………………………………………………………….……………………………….
10,000
Units, ending work in process………………..…………………………………………………………………………………………………………………………………………………………………………..
11,000
Total units accounted for………………………..…………………………………………………………………………………………………………………………………………..……………………………
61,000
*Assumes that overhead is used in the same proportion as direct labor
Direct Conversion
Equivalent units calculation: Materials Costs
Units started and completed……………………………………………….…..………………………………………………………………………………………………………………………………..
40,000 40,000
Units completed from beginning work in process……………………………..…………………………………………………………………………………………………………………..
4,000 10,000 × 1 – 60% = 4,000
Add: Equivalent units in ending work in process……………………….……..…………………………………………………………………………………………………………..
11,000 6,600 11,000 × 60% = 6,600
Direct material cost per unit……………………………………..……………………………………………………………………………………………………………..
Unit conversion cost*……………………………………………..……………………………………………………………………………………………………………..
*Rounded
Value of ending work in process:
Direct materials (11,000 × $1.70)…..…………..……………………………………………………………………………………………………………………………..
$18,700 11,000 × 1.70 = 18,700
Conversion costs (6,600 × $8.12)…..…………..……………………………………………………………………………………………………………………………..
53,592 6,600 × 8.12 = 53,592
Total cost of units in ending work in process………………..…………………………………………………………………………………………………………..
$72,292
Assumptions: Overhead is used at the same rate as direct labor.
CHAPTER 6 Process Costing
Case 6-70 (Continued)
2.
Units, beginning work in process…………………..…………………………………………………………………………………………………………………
8,000 8,000
Units started (transferred in)………………………………………………………………………………………………………………………….………………………………….
50,000 50,000 + 8,000 – 8,000 = 50,000
Total units to account for……………………………………………………………………………………………………………………………………………………………………..
58,000
Units completed and transferred out:
Started and completed……………………………………………………………………………………………………………………………………..………………………………
42,000
From beginning work in process……………………………………………………………………………………………………………………………………………………………
8,000
Units, ending work in process……………………………………………………………………………………………………………………………………..…………………………..
8,000
Total units accounted for……………………………………………………………………………………………………………………………………...……………………………
58,000
Direct Conversion Transferred
Units started and completed…..…………………………………………………………………………………………………………
Costs: * See Assumption below
Transferred-in cost (50,000 × $9.82)*…………………………………………………………………………………………………………………..…………
$491,000 50,000 × 9.82 = 491,000
Costs incurred by shell creating:
Direct materials ($378,000 × 0.47)………………………………………………………………………………………………………………..……………..
$177,660 378,000 × 70% – 23% = 177,660
Direct labor ($530,300 × 0.15)………………………………………………………………………………………………………………..……………..
79,545 530,300 × 50% – 35% = 79,545
Overhead ($643,518 × 0.15)………………………………………………………………………………………………………………..……………..
96,528 643,518 × 50% – 35% = 96,528
Total conversion cost……………………………………………………………………………………………………………………………………………….
353,733
Total costs………………………………………………………………………………………………………………………………………………………….
Unit direct materials cost* ……………………………………………………………………………………………………………………………………………………………………………………………..
Unit conversion costs* ………………………………………………………………………………………………………………………………….
Unit transferred-in cost………………………………………………………………………………………………………………………………….
Units, ending work in process:*
Direct materials (8,000 × $3.55)……………………………………………………………………………………………………………………..
$ 28,400 8,000 × 3.55 = 28,400
Conversion costs (2,400 × $3.47)……………………………………………………………………………………………………………………..
8,328 2,400 × 3.47 = 8,328
Transferred in (8,000 × $9.82)……………………………………………………………………………………………………………………..
78,560 8,000 × 9.82 = 78,560
Total cost of ending work in process……………………………………………………………………………………………………………………..
$115,288
*Rounded
CHAPTER 6 Process Costing
Case 6-70 (Concluded)
In addition to the same assumptions made for the first department, we had to assume
that the unit cost of all units transferred out was equal to the FIFO method unit cost.
Case 6-71
1. Gary’s proposal requires Donna to falsify the equivalent unit calculation so that
income and assets can be inflated and reported incorrectly. Falsification of the
production report would be a violation of at least two major ethical standards:
integrity and credibility. If Donna agrees to the proposal, she would be taking action
2. Donna has an obligation to report Gary to a superior only if an actual ethical problem
exists. If Gary decides that the course of action he is suggesting is not really in his or
the company’s best interests, then no ethical problem exists and no action by Donna
is needed.
3. If Gary insists on his idea of falsification of the division’s reports, Donna should
attempt to resolve the conflict by appealing to Gary’s immediate supervisor (and on
up, if necessary and with the immediate supervisor’s knowledge, assuming he or
she is not involved) until a satisfactory resolution is achieved. If no satisfactory
resolution is possible, then Donna should consult her own attorney as to legal
obligations and rights concerning the ethical conflict. She may also clarify the
ethical issues by initiating a confidential discussion with an IMA Ethics Counselor.