Requirements
1. Compute the Blending Department’s equivalent units of production for direct ma– terials and for
conversion costs.
2. Compute the total costs of the units (gallons)
a. completed and transferred out to the Packaging Department.
b. in the Blending Department ending Work-in-Process Inventory.
SOLUTION
Requirement 1
Completed units:
6,000 units × 100%
=
6,000 EUP for direct materials
In process units:
3,500 units × 100%
=
3,500 EUP for direct materials
Total EUP for direct materials:
=
9,500 EUP for direct materials
Completed units:
6,000 units × 100%
=
In process units:
3,500 units × 30%
=
Total EUP for conversion costs:
=
Requirement 2
Cost per EUP for direct materials
=
Total direct materials costs
Equivalent units of production for direct materials
=
=
Direct Materials:
Completed
6,000 EUP
×
$ 0.60 per EUP
=
$ 3,600
In Process
3,500 EUP
×
$ 0.60 per EUP
=
2,100
Total
$ 5,700
Conversion Costs:
Completed
6,000 EUP
×
$ 0.58 per EUP
=
$ 3,480
In Process
1,050 EUP
×
$ 0.58 per EUP
=
Total
$ 4,089
E18–19, cont.
Requirement 2, cont.
a.
Completed and Transferred Out
=
Direct Materials
+
Conversion Costs
=
$3,600
+
$3,480
=
$7,080
=
+
Conversion Costs
=
$2,100
+
=
$2,709
Note: Exercise E18-19 must be completed before attempting Exercise E18-20.
E18-20 Preparing journal entries, posting to T-accounts, making decisions
Learning Objectives 4, 5
2. WIP Balance $2,709
Refer to your answers from Exercise E18-19.
Requirements
1. Prepare the journal entries to record the assignment of direct materials and direct labor and the
allocation of manufacturing overhead to the Blending Department. Also, prepare the journal entry to
record the costs of the gallons completed and transferred out to the Packaging Department.
2. Post the journal entries to the Work-in-Process Inventory—Blending T-account. What is the ending
balance?
3. What is the average cost per gallon transferred out of the Blending Department into the Packaging
Department? Why would the company managers want to know this cost?
SOLUTION
Requirement 1
Date
Accounts and Explanation
Debit
Credit
May 31
Work-in–Process Inventory―Blending
5,700
Raw Materials Inventory
5,700
Direct materials assigned to WIP.
Work-in–Process Inventory―Blending
2,085
Wages Payable
2,085
Direct labor assigned to WIP.
Work-in–Process Inventory―Blending
2,004
Manufacturing Overhead
2,004
Overhead allocated to WIP.
Work-in-Process Inventory―Packaging
7,080
7,080
Transfer costs assigned to units transferred.
Requirement 2
Work-in–Process―Blending
Balance, May 1
0
7,080
Transferred to Packaging
Direct Labor
Manufacturing Overhead
Balance, May 31
Requirement 3
Cost per gallon
=
Total Costs
/
Units Completed and Transferred Out
=
$7,080
/
6,000 gallons
=
$1.18 per gallon
E18-21 Computing EUP, assigning costs, no beginning WIP or cost transferred in
Learning Objectives 2, 3
1. EUP for CC 7,200
Anderson Winery in Pleasant Valley, New York, has two departments: Fermenting and Packaging.
Direct materials are added at the beginning of the fermenting process (grapes) and at the end of the
packaging process (bottles). Conversion costs are added evenly throughout each process. Data from the
month of March for the Fermenting Department are as follows:
Requirements
1. Compute the Fermenting Department’s equivalent units of production for direct materials and for
conversion costs.
2. Compute the total costs of the units (gallons)
a. completed and transferred out to the Packaging Department.
b. in the Fermenting Department ending Work-in-Process Inventory.
SOLUTION
Requirement 1
Completed units:
4,400 units × 100%
=
4,400 EUP for direct materials
In process units:
3,500 units × 100%
=
3,500 EUP for direct materials
Total EUP for direct materials:
=
7,900 EUP for direct materials
Completed units:
4,400 units × 100%
=
In process units:
3,500 units × 80%
=
Total EUP for conversion costs:
=
Requirement 2
Cost per EUP for direct materials
=
Total direct materials costs
Equivalent units of production for direct materials
=
=
E18-21, cont.
Direct Materials:
Completed
4,400 EUP
×
$ 1.09 per EUP
=
$ 4,796
In Process
3,500 EUP
×
$1.09 per EUP
=
3,815
Total
$ 8,611
Conversion Costs:
Completed
4,400 EUP
×
$ 0.93 per EUP
=
$ 4,092
In Process
2,800 EUP
×
$ 0.93 per EUP
=
2,604
Total
$ 6,696
Completed and Transferred Out
=
Direct Materials
+
Conversion Costs
=
+
=
Note: Exercise E18-21 must be completed before attempting Exercise E18-22.
E18-22 Preparing journal entries and posting to T-accounts
Learning Objectives 4, 5
2. WIP Balance $6,419
Refer to the data and your answers from Exercise E18-21.
Requirements
1. Prepare the journal entries to record the assignment of direct materials and direct labor and the
allocation of manufacturing overhead to the Fermenting Department. Also prepare the journal entry
to record the cost of the gallons completed and transferred out to the Packaging Department.
SOLUTION
Requirement 1
Date
Accounts and Explanation
Debit
Credit
Mar. 31
Work-in–Process Inventory―Fermenting
8,611
Raw Material Inventory
8,611
Direct materials assigned to WIP.
Work-in–Process Inventory―Fermenting
2,196
Wages Payable
2,196
Direct labor assigned to WIP.
Work-in–Process Inventory―Fermenting
4,500
Manufacturing Overhead
4,500
Overhead allocated to WIP.
Work-in-Process Inventory―Packaging
8,888
8,888
Transfer costs assigned to units transferred.
Requirement 2
Work-in–Process―Fermenting
Balance, Mar. 1
0
8,888
Transferred to Packaging
Direct Labor
Manufacturing Overhead
Balance, Mar. 31
Requirement 3
Cost per gallon
=
Total Costs
/
Units Completed and Transferred Out
=
$8,888
/
4,400 gallons
=
$2.02 per gallon
E18-22, cont.
Requirement 3, cont.
The managers would compare the average cost per gallon against their budgeted costs to determine
whether the costs of the blending process remain under control. If budgeted costs are higher than the
E18-23 Preparing production cost report, missing amounts
Learning Objectives 2, 3
(p) $2.65
Complete the missing amounts in the following production report. Materials are added at the beginning
of the process; conversion costs are incurred evenly; the ending inventory is 60% complete.
SOLUTION
BRYAN COMPANY
Production Cost Report―FINISHING DEPARTMENT
Month Ended September 30, 2016
Equivalent Units
UNITS
Whole
Units
Transferred
In
Direct
Materials
Conversion
Costs
Units to account for:
Beginning work-in-process
Started in production
Total units to account for
(a) 2,300
Units accounted for:
Completed and transferred out
(b) 1,400
n/a
Ending work-in-process
n/a
(h) 540
Total units accounted for
n/a
COSTS
Transferred
In
Direct
Materials
Conversion
Costs
Total
Costs
Costs to account for:
Beginning work-in-process
n/a
$ 1,600
(j) 1,450
$ 3,050
Costs added during period
n/a
15,420
3,691
(k) 19,111
Total costs to account for
n/a
(l) 17,020
5,141
22,161
Divided by: Total EUP
n/a
(m) 2,300
(n) 1,940
Cost per equivalent unit
n/a
(o) $7.40
(p) $2.65
(q) $10.05
Costs accounted for:
Completed and transferred out
n/a
Ending work-in-process
n/a
(u) 6,660
Total costs accounted for
n/a
E18-23, cont.
a.
2,300 units
900 + 1,400
b.
1,400
2,300 – 900
c.
2,300
Equal to total units to account for (a) 2,300
d.
1,400
1,400 × 100%
e.
900
900 × 100%
f.
2,300
1,400 + 900
g.
1,400
1,400 × 100%
h.
540
900 × 60%
i.
1,940
1,400 + 540
k.
$22,161 – $3,050 or $15,420 + $3,691
l.
$1,600 + $15,420
m.
2,300 units
Transferred from above total units accounted for (f)
n.
1,940
Transferred from above total units accounted for (i)
o.
$17,020 / 2,300 units
p.
$5,141 / 1,940 units
q.
$7.40 + $2.65
r.
(d) 1,400 units × (o) $7.40
(g) 1,400 units × (p) $2.65
t.
$10,360 + $3,710
u.
(e) 900 units × (o) $7.40
v.
(h) 540 units × (p) $2.65
$6,660 + $1,431
x.
$10,360 + $6,660
y.
$ 3,710 + $1,431
E18-24 Computing EUP, first and second departments
Learning Objectives 2, 3
2. EUP for DM 85,000
Selected production and cost data of Sharon’s Color Co. follow for May 2016:
On May 31, the Mixing Department ending Work-in-Process Inventory was 65% complete for
materials and 25% complete for conversion costs. The Heating Department ending Work-in-Process
Inventory was 75% complete for materials and 60% complete for conversion costs.
Requirements
1. Compute the equivalent units of production for direct materials and for conversion costs for the
Mixing Department.
2. Compute the equivalent units of production for transferred in costs, direct materials, and conversion
costs for the Heating Department.
SOLUTION
Requirement 1
Mixing Department
Completed units:
80,000 units × 100%
=
80,000 EUP for direct materials
In process units:
15,000 units × 65%
=
Total EUP for direct materials:
=
89,750 EUP for direct materials
In process units:
15,000 units × 25%
=
Total EUP for conversion costs:
=
Requirement 2
Heating Department
Completed units:
76,000 units × 100%
=
76,000 EUP for transferred in
In process units:
12,000 units × 100%
=
12,000 EUP for transferred in
Total EUP for transferred in
=
88,000 EUP for transferred in
Completed units:
76,000 units × 100%
=
In process units:
12,000 units × 75%
=
Total EUP for direct materials:
=
Completed units:
76,000 units × 100%
=
In process units:
12,000 units × 60%
=
Total EUP for conversion costs:
=
E18-25 Preparing production cost report, journalizing, second department
Learning Objectives 2, 3, 4
3. WIP Balance $20,700
(Requirement 1 only)
Pure Spring Company produces premium bottled water. In the second department, the Bottling
Requirements
1. Prepare a production cost report for the Bottling Department for the month of February.
2. Prepare the journal entry to record the cost of units completed and transferred out.
3. Post all transactions to the Work-in-Process Inventory—Bottling T-account. What is the ending
balance?
SOLUTION
Requirement 1
PURE SPRING COMPANY
Production Cost Report―BOTTLING DEPARTMENT
Month Ended February 29, 2016
Equivalent Units
UNITS
Whole
Units
Transferred
In
Direct
Materials
Conversion
Costs
Units to account for:
Beginning work-in-process
Transferred in
166,000
Total units to account for
170,000
Units accounted for:
Completed and transferred out
150,000
150,000
Ending work-in-process
Total units accounted for
170,000
150,000
COSTS
Transferred
In
Direct
Materials
Conversion
Costs
Total
Costs
Costs to account for:
Beginning work-in-process
$ 1,500
$ 0
$ 930
$ 2,430
Costs added during period
Total costs to account for
Divided by: Total EUP
Cost per equivalent unit
$ 0.79
Costs accounted for:
Completed and transferred out
$ 52,500
Ending work-in-process
Total costs accounted for
$ 57,400
Requirement 2
Date
Accounts and Explanation
Debit
Credit
Feb. 29
Finished Goods Inventory
204,000
204,000
Requirement 3
Work-in–Process―Bottling
Balance, Feb. 1
2,430
204,000
Transferred to Finished Goods
Transferred In
Direct Materials
Direct Labor
Manufacturing Overhead
Balance, Feb. 29
E18-26 Preparing journal entries—inputs
Learning Objective 4
Austin Company had the following transactions in October:
• Purchased raw materials on account, $50,000
SOLUTION
Date
Accounts and Explanation
Debit
Credit
Trans. 1
Raw Materials Inventory
50,000
Accounts Payable
50,000
Materials purchased, accumulated in RM.
Trans. 2
Work-in–Process Inventory―Mixing
20,000
Work-in–Process Inventory―Packaging
5,000
Manufacturing Overhead
Raw Materials Inventory
25,900
Materials used, direct materials assigned to WIP, indirect
materials accumulated in MOH.
Trans. 3
Work-in–Process Inventory―Mixing
8,000
Work-in–Process Inventory―Packaging
3,500
Manufacturing Overhead
2,400
Wages Payable
13,900
Labor incurred, direct labor assigned to WIP, indirect
labor accumulated in MOH.
Trans. 4
Manufacturing Overhead
9,000
Accumulated Depreciation
9,000
Overhead incurred, costs accumulated in MOH.
Manufacturing Overhead ($2,900 + $1,730)
4,630
Cash
4,630
E18-27 Preparing journal entries—outputs
Learning Objective 4
Galvan Company has a production process that involves three processes. Units move through the
processes in this order: cutting, stamping, and then polishing. The company had the following
transactions in November:
• Cost of units completed in the Cutting Department, $19,000
• Cost of units completed in the Stamping Department, $23,000
• Cost of units completed in the Polishing Department, $39,000
• Sales on account, $20,000
• Cost of goods sold is 40% of sales
Prepare the journal entries for Galvan Company.
SOLUTION
Date
Accounts and Explanation
Debit
Credit
Nov. 30
Work-in-Process Inventory―Stamping
19,000
Work-in–Process Inventory―Cutting
19,000
Transfer costs assigned to units transferred.
Work-in–Process Inventory―Polishing
23,000
Work-in–Process Inventory―Stamping
23,000
Transfer costs assigned to units transferred.
Work-in–Process Inventory―Polishing
39,000
Transfer costs assigned to finished goods.
Accounts Receivable
20,000
20,000
Cost of Goods Sold ($20,000 × 40%)
Units sold, costs assigned to COGS.
E18A-28 Computing EUP—FIFO method
Learning Objective 6
Appendix 18A
Paul’s Frozen Pizzas uses FIFO process costing. Selected production and cost data fol– low for April
2016.
Requirements
1. Calculate the following:
a. On March 31, the Mixing Department beginning Work-in-Process Inventory was 30% complete
for materials and 45% complete for conversion costs. This means that for the beginning
inventory ____ % of the materials and ____ % of the conversion costs were added during April.
b. On April 30, the Mixing Department ending Work-in-Process Inventory was 65% complete for
materials and 75% complete for conversion costs. This means that for the ending inventory ____
% of the materials and ____ % of the conversion costs were added during April.
c. On March 31, the Cooking Department beginning Work-in-Process Inventory was 70% complete
for materials and 80% complete for conversion costs. This means that for the beginning
inventory ____ % of the materials and ____ % of the conversion costs were added during April.
d. On April 30, the Cooking Department ending Work-in-Process Inventory was 55% complete for
materials and 80% complete for conversion costs. This means that for the ending inventory ____
% of the materials and ____ % of the conversion costs were added during April.
2. Use the information in the table and the information in Requirement 1 to compute the equivalent
units of production for transferred in costs, direct materials, and conversion costs for both the
Mixing and the Cooking Departments.
SOLUTION
Requirement 1
a.
70%, 55%
65%, 75%
c.
30%, 20%
55%, 80%
Requirement 2
Mixing Department
Total EUP for transferred in = 0 EUP (Mixing Department is the first process, so there is no
transferred in.)
Beginning WIP units:
22,000 units × 70%
=
Started and completed units:
25,000 units × 100%
=
In process units:
45,000 units × 65%
=
Total EUP for direct materials:
=
Beginning WIP units:
22,000 units × 55%
=
Started and completed units:
25,000 units × 100%
=
In process units:
45,000 units × 75%
=
Total EUP for conversion costs:
=
Cooking Department
Beginning WIP units:
10,000 units × 0%
=
0 EUP for transferred in
Completed units:
40,000 units × 100%
=
40,000 EUP for transferred in
In process units:
7,000 units × 100%
=
7,000 EUP for transferred in
Total EUP for direct materials:
=
47,000 EUP for transferred in
Beginning WIP units:
10,000 units × 30%
=
Completed units:
40,000 units × 100%
=
In process units:
7,000 units × 55%
=
Total EUP for direct materials:
=
Beginning WIP units:
10,000 units × 20%
=
Completed units:
40,000 units × 100%
=
In process units:
7,000 units × 80%
=
Total EUP for conversion costs:
=
Problems (Group A)
For all Problems, assume the weighted-average method is to be used unless you are told otherwise.
P18-29A Preparing a production cost report, no beginning WIP or costs transferred in
Learning Objectives 2, 3
1. Cost per EUP for DM $3.72
2. WIP Balance $114,957
Abby Electronics makes DVD players in three processes: assembly, programming, and packaging.
Direct materials are added at the beginning of the assembly process. Conversion costs are incurred
evenly throughout the process. The Assembly Department had no Work-in-Process Inventory on
October 31. In mid-November, Abby Electronics started production on 101,000 DVD players. Of this
number, 76,900 DVD players were assembled during November and transferred out to the Programming
Department. The November 30 Work-in-Process Inventory in the Assembly Department was 35% of the
way through the assembly process. Direct materials costing $375,720 were placed in production in
Assembly during November, direct labor of $157,500 was assigned, and manufacturing overhead of
$98,505 was allocated to that department.
Requirements
1. Prepare a production cost report for the Assembly Department for November.
SOLUTION
Requirement 1
ABBY ELECTRONICS
Production Cost Report―ASSEMBLY DEPARTMENT
Month Ended November 30.
Equivalent Units
UNITS
Whole
Units
Transferred
In
Direct
Materials
Conversion
Costs
Units to account for:
Beginning work-in-process
Started in Production
101,000
Total units to account for
101,000
Units accounted for:
Completed and transferred out
n/a
Ending work-in-process
n/a
Total units accounted for
101,000
n/a
101,000
COSTS
Transferred
In
Direct
Materials
Conversion
Costs
Total
Costs
Costs to account for:
Beginning work-in-process
n/a
$ 0
$ 0
$ 0
Costs added during period
n/a
375,720
256,005
631,725
Total costs to account for
n/a
375,720
256,005
631,725
Divided by: Total EUP
n/a
Cost per equivalent unit
n/a
$ 3.00
Costs accounted for:
Completed and transferred out
n/a
$ 516,768
Ending work-in-process
n/a
114,957
Total costs accounted for
n/a
$ 256,005
$ 631,725
a 24,100 × 35% = 8,435