Chapter 14
Process Costing
Process costing is a method of cost accumulation that accumulated production costs by
department. This system is commonly used by companies that manufactures on a continuous
basis only one product or standard products.
Problems in process costing are often given in the CPA examination. To pass Practical
Accounting 2, candidates must be thoroughly familiar with situations encountered in these
problems, typical of which are the following:
1. Preparation of Cost of Production Report using:
a. First-in, First – out (FIFO) costing method
b. Average costing method
2. Accounting for spoilage (lost units)
a. Normal spoilage
b. Abnormal spoilage
COST OF PRODUCTION REPORT
At the end of each month the cost of production report is prepared for each department by the
cost accountant of the department. A production report has two sections:
1. Quantity schedule, which shows the follow of units.
2. cost analysis which shows the flow of cost.
Quantity Schedule
This section shows the number of units that were in process in the department at the start of
the month, the number of units begun during the month, the number of units transferred out
of the department during the month, the number of units still in work in process at the end of
the month.
The principal problem in the quantity schedule is the computation of the equivalents
production (measure of work done in terms of completed units) of units finished and units in
process for materials and conversion costs (labor and overhead). The computation of the
equivalent units of production (EUP) will depend on the inventory costing method used.
a. First in, First out (FIFO) Costing. Under this method, the stage of completion of the units of
Beginning Work in Process (BWIP) is determined separately from the units started and finished
this month. This means that the equivalent units of production are calculated only for work
actually performed during the month.
b. Average Costing. Under this method, the unit in process at the beginning is combined with
the units started and finished this month and presented in one batch of units. This means that
the work performed on the units in progress beginning (last month) is treated as if it were
performed this month.
Cost Analysis
This section summarized the costs incurred in the department, the cost per unit of the product,
the total costs of products completed and transferred out of department, and the costs related
to the ending inventory of work in process in each department. The principal problem in this
section is the computation of unit cost and the allocation of the total costs to units finished and
transferred out and to units in ending work in process.
Unit cost:
a. First in, first out (FIFO) Costing. Total costs incurred this month (current costs) divided by the
equivalent units of production.
b. Average Costing. Cost last month (cost incurred in BWIP) plus cost this month (current costs)
divided by the equivalent units production.
Allocation of total costs:
a. First in, first out (FIFO) Costing:
Finished and transferred out:
BWIP: Cost last month
Cost this month = EUP x UC
Started in process = Actual units UC
EWIP = EUP x UC
b. Average Costing:
Finished and transferred out = Actual units x total UC
EWIP = EUP x UC
ACCOUNTING FOR SPOILAGE (LOST UNITS)
Spoilage units are units of product that have been damaged or improperly manufactured and
cannot be completed as salable products. Spoilage may be classified as normal spoilage,
because it is a common occurrence that is inherent in the manufacturing process and abnormal
spoilage that results from unusual and nonrecurring factors, such as fire or water damage.
Candidates should be familiar with the following procedures in presenting spoilage in the cost
of production report.
Quantity Schedule. Normal and abnormal spoilage are presented separately and the equivalent
units of production computed bases on the work done.
Cost Analysis. The costs of units lost through normal spoilage are absorbed by the remaining
god units produced during the month. Costs of abnormal spoilage are presented separately and
charged to a Loss Abnormal Spoilage account so that the completed units do not absorb the
costs related abnormal lost units.
Computation of the cost of normal spoilage:
Spoiled units may be discovered at the start of the process, during the process or at the end of
the process. The computation of the cost of lost units depends on the point of discovery as
follows:
a. if lost units are discovered at the start or during the process –


In the first department = no cost
In the subsequent department = lost units x unit cost from preceding department
b. if lost units are discovered at the end of the process –


In the first department = lost units x total unit costs in this department
In the subsequent department = lost units x total unit cost from preceding and in this
department
c. if lost units are discovered at inspection point-


In the first department = EUP of lost units x unit cost
In the subsequent department = cost from preceding department plus cost in this
department (EUP x UC)
Allocation of cost of normal spoilage
Cost of normal spoilage is to be absorbed by the good units because good units cannot be made
without also making some units that are spoiled. Cost of normal spoilage should be alloxated
pro-rate among the good units on the bases of actual units or EUP. The allocations procedures
are:
a. If lost units are discovered at the start or during the process –


First In, First Out Costing – To all the goods units started finished this month and units in
process at the end.
Average costing – To all the good units, finished and in process.
b. If lost units are discovered at the end of the process –


First in, First out costing – To all the units finished and transferred out.
Average costing – to all the good units finished and in process.
c. if lost units are discovered at inspection point. To all the good units that passed the
inspection point.
PROBLEMS
1. Department of Hope Manufacturing Company presents the following production data for the
month of May, 2013:
Opening inventory 3/8 completed
Started in process
Transferred
Closing inventory,
1/2 completed
3/4 completed
4,000 units
13,000 units
9,000 units
4,000 units
4,000 units
What are the equivalent units of production for the month of May, 2013.
FIFO
a.12,500 units
b.17,000 units
C. 12,500 units
d. 15,000 units
AVERAGE
13,000 units
12,500 units
14,000 units
14,000 units
2. Rose Co, bad 3,000 units in work in process at April 1, 2013, which were 60% complete as to
conversion cost, During April, 10,000 units was completed. At April 30, 4,000 units remained in
work in process which were 40% complete as to conversion cost. Direct materials are added at
the beginning of the process.
How many units were started during April?
a. 9,000
b. 9,800
c. 10,000
d. 11,000
3. The Ilang-llang Corporation, engaged in a manufacturing business and using process costing,
gave the following production data for three different situations. Stages of completion of the
inventories apply to all cost elements.
(1) Started in process, 6,500 units; transferred, 5,500 units; in process, 400 units
50% completed and 600 units 25% completed.
(2 ) Beginning inventory, 6,250 units 40% completed; started in process, 25,000 units;
transferred, 26,250 units; in process at the end, 3,000 units 50% completed and 2,000 units
25% completed.
(3) Beginning inventory, 6,000 units 30% completed; started in process. I3,000
units; lost in processing, 500 units from production started this period (loss was normal and
occurred throughout the production process); transferred, 14,000 units; in process at the end,
3,000 units 50% completed and 1,500 units 75% completed.
What are the equivalent production of the three different situations under FIFO and average
costing?
FIFO
1
a.5,850
b. 5,850
c.8,550
d. 5,058
2
25,750
27,550
20,575
20,775
3
14,825
18,425
15,428
12,524
AVERAGE
1
5,850
5,580
5,508
5,850
2
28,250
22,850
28,025
28,250
3
16,625
15,662
16,265
16,625
4. Orchids Company has a process cost system using the FIFO cost flow method. All materials
are introduced at the beginning of the process in Department One. The following information is
available for the month of January 2012:
Units
Work in process, 1/1/08 (40% complete as to conversion 500
costs)
Started in January
2,000
Transferred to Department Two during January
2,100
Work in process, 1/31/08 (25% complete as to
400
conversion costs)
What are the equivalent units of production for the month of January 2013?
Materials
a.2,500
b.2,500
c.2,000
d.2,000
Conversion
2,200
1,900
2,200
2,000
5. Anahaw Company's production cycle starts in the Mixing Department. The following
information is available for the month of April 2013?
Units
Work inprocess, April 1 (50% complete)
40,000
Started in April
240,000
work-in-process, April 30 (60% complete)
25,000
Materials are added in the beginning of the process in the Mixing Department. Using the
weighted average method, what are the equivalent units of production for the month of April
2013?
Materials
a.240,000
b.255,000
c.270,000
d.280,000
Conversion
250,000
255,000
280,000
270,000
6. Materials are added at the start of the process in Jasmin company's cutting department, the
first stage of the production cycle. The following information is available for the month of
March 2013.
units
Work in process, March 1 (60% complete as to
60,000
conversion costs)
Started in March
150,000
Transferred to the next department
110,000
Lost in production
30,000
Work in process, March 31 (50% complete as to
70,000
conversion costs
Under Jasmin's cost accounting system, the costs incurred on the lost units are absorbed by the
remaining good units. Using the First in, First out method, what are the equivalent units for the
materials unit cost calculation?
a. 120,000
b.145,000
c. 180,000
d. 210,000
7. Bayani Manufacturing Company, using the FIFO process cost system, has the following data
for the month of April:
Percent Complete
Actual Units
Materials
Conversion cost
Beginning Inventory
15,000
* I 00%
40%
Transferred in
150,000
Transferred out
120,000
Ending Inventory
45,000
100%
30%
What are the equivalent units of production for the month of April?
Materials
a.150,000
b.165,000
C. 135,000
d. 150,000
Conversion Costs
127,500
139,500
124,500
133,500
8. Eastern Products Inc., Input all materials at the start of operations in Process 1. The inventory
is process at the beginning of January consisted of 4,000 units with a total cost of materials of
P100,000 and labor and overhead of P20,000 . In January, 20,000 units were started in process
with material cost of P500,000. Labor and overhead in January cost P280,000. As of end of
January., the inventory was 100% complete in materials but only 60% in labor and overhead.
The ending inventory consisted of 10,000 units. The equivalent units of labor and overheard for
the month of January amounted to:
a.20,000
b.10,000
C. 26,000
d. 30,000
9. Yakal Company computed the flow of physical units completed for Department M for the
month, of March 2013 as follows:
Units completed:
From work-in process on March 1, 2008
15,000
From March production
45,000
No. 9 – Continued
Materials are added at the beginning of the process. The 12,000 units of work in process at
March 31, 2013, were 80% complete as to conversion costs. The work in process at March 1,
2043 was 80% complete as to conversion costs. Using the FIFO method, the equivalent units for
March conversion costs were:
a. 55,200
b. 57,000
C. 60,600
d. 63,600
10. Mataba Company sells food processors and manufactures them in a single continuous
process. At the end of August there were 200 units valued at P30,095, which consists of
P25,200 in materials cost and P4,895 in conversion cost. These were 100% complete as to
materials and 25% complete as to conversion cost 1200 units were added to production during
September, and these had materials costs of P168,000. Processors which have not been
completed at the end of September total 200 units and were 100% complete as to materials
and 50% complete as to conversion cost. Conversion cost during September were P158,125.
There were no units lost in process.
What are the equivalent units of production for September?
Materials
Conversion Cost
a.1,400
b.1,200
c.1,200
d.1,200
1,350
1,100
1,150
1,250
11. The Wiring Department is the second stage of Acacia Company's production cycle. On May
1, the beginning work-in process contained 25,000 units which were 60% complete as to
conversion costs. During May, 100,000 units were transferred-in from the first stage of Acacia's
production cycle. On May 31, the ending work in Process contained 20,000 units which were
80% complete as to conversion costs. Material costs are added at the end of the process, using
the weighted-average method, the equivalent units were:
Materials
a.125,000
b.105,000
c.105,000
d.125,000
Conversion costs
100,000
105,000
121,000
121,000
12. Dhalia Company adds materials at the beginning of the process in Department A
Information concerning the materials used in April 2013 production is as follows:
Work-in-process at April
Started during April
Completed and transferred to next
department during April
Normal spoilage incurred
Abnormal spoilage incurred
Work in process at April 30
Units
10,000
50,000
36,000
3,000
5,000
16,000
Under Dhalia's cost accounting system, costs of normal spoilage are treated as part of the costs
of good units produced. However, the costs of abnormal spoilage are charged to factory
overhead. Using the weighted-average method, what are the equivalent units for the materials
unit cost calculation for the month of April?
a.47,000
b.52,000
C. 55,000
d. 57,000
13. The following information pertains Lanao's First Department for the month of
April:
Beginning work-in-process
Started in April
Units completed
Ending work-in-process
Number of units
15,000
40,000
42,000
12,000
Cost of Materials
P 5,000
18,000
All materials are added at the beginning of the process. Using the weighted average method,
the cost per equivalent unit for materials is:
a.P0.59
b.P0.55
C. P0.45
d. P0.43
14. Information concerning Dept. B of Simon Co. follovvs:
Units
Beg. work in process 5,000
P6,300
P2,90
Units transferred in
35,000
58,000
17,500
40,000
P64,300
P20,400
Units completed
End. work in process
P25,500
25,500
P 3,400
15,000
P18,400
37,000
3,000
Conversion costs were 20% complete as to the beginning work in process and 40% complete as
to the ending work in process. All materials are added at the end of the process. Simon Co. uses
the weighted average method.
The unit cost for conversion costs and for transferred-in cost rounded to the nearest centavo
are:
a. P0.44 and P0.48
b. P0.46 and P0.51
c.P0.48 and P0.51
d. P0.50 and P0.53
15. Reyna Company manufactures product X in a two-stage production cycle in Departments A
and B, Materials are added at the beginning of the process in Department B. Roy uses the
weighted-average method. Conversion costs for department B were 50% complete as to the
6,000 units in the beginning work-in- process and 75% complete as to the 8,000 units in the
ending work-in-process,12,000 units were completed and transferred out of Department B
during February 2013. An analysis of the costs relating to work-in-process and production
activity in Department B for February 2013 is as follows:
Work-in-process,
February 1:
costs attached
February activity:
costs added
Transferred
In
Cost
Materials
Conversion
P12,000
P2,500
P1,000
29,000
5,500
5,000
The total cost per equivalent unit transferred out for February 2013 of product X, rounded to
the nearest centavo, was:
a.
b.
c.
d.
P2.75
P2.78
P2.82
P2.85
16. On April 1,2013, the Hari Company had 6,000 units of WIP in Department B, the second and
last stage of their production cycle. The costs attached to these 6,000 units were P12,000 of
costs transferred in from Department A, P2,500 of material cost added in department B and
P2,000 of conversion cost added in Department B. Materials are added in the beginning of the
process in Department B. Conversion was 50% complete on April 1,2013. During April, 14,000
units were transferred in from Department A at a cost of P27,000; and a materials costs of
P3,500 and conversion costs of P3,000 were added in Department B. On April 30, 2011,
Department B had 5,000 units were added in Department B. On April 30,2011 Department B
had 5,000 units of WIP 60% complete as to conversion costs. The costs attached to these 5,000
units were P 1 0,500 of costs transferred in from Department A, P1,800 of material costs added
in Department B and P800 of conversion costs added in Department B.
Using the weighted-average method, what are the unit costs?
Transferred
Materials
in
a.P1.95
P.25
b.P1.95
P.30
c.P1.80
P.30
d. P1.70
P.25
Conversion
cost
P.27
P.28
P.27
P.28
I 7. Department CC has the following April production information:
Beginning work in process
Units started during the month
Units transferred to next operation in April
Ending work in process (40% complete)
Beginning work in process cost
April's production cost
24,000 units
780,000 units
744,000 units
60,000 units
P 120,000
5,256,000
No 17 Continued
The unit cost of production is:
a.P 7.00
b. P20.22
c. P 6.89
d. P 6.69
I 8. For the month of March, Payaso Inc. registered the following information:
Beginning work in process (70% complete)
Started in March
Ending work in process (80% complete)
40,000 units
300,000 units
60,000 units
The cost of beginning work in process was FP 140,000 while the production costs for the month
registered at P 1 ,172,000. Using the average method, what is the unit cost of production for
March?
a.P4.00
b.P3.86
C. P3.91
d. P4.69
I 9. The Masaya Corporation manufactures only one product, and the raw materials must pass
through Processes A, B, and C, in that order, before completion.
On October 1, the inventories of Process C and Finished Goods were:
Process C
Finished Goods
---
1,200 units, 2/3 completed, P4,200.
1,000 units, at P3.00 per unit.
During October, 2,000 units valued at P5,000 were transferred in from Process B.
Direct labor cost in Process C was P3,100 and the overhead cost applied to Process C was
P3,200.
The inventories on October 31 were:
Process C
-660 units, 1/2 completed.
Finished Goods
-1,300 units
The conversion cost per equivalent unit for October is:
No. 19 --- continued
a.P1.50
b.P2.75
C. P3.00
d. P3.50
20. Materials are added at the start of the process in Arce Company's Blending Department, the
first stage of the production cycle. The following information is available for the month of July,
2013.
Work-in-process, July 1 (60% complete as to conversion 60,000 units
costs)
Started in July
150,000 units
Transferred to the next department
110,000 units
Lost in production
30,000 units
'Work-in-process, July 31 (50% complete as to
70,000 units
conversion costs)
Under Arce's cost accounting system, the costs incurred on the lost units are absorbed by the
remaining good units. Using the weighted-average method, what are the equivalent units for
the materials unit cost calculation?
a.
b.
c.
d.
120,000
145,000
180,000
210,000
21. Information for the month of May concerning Department A, the first stage of Pinay
Corporation's production cycle is as follows:
Work-in-process, beginning
Current costs
Total costs
Equivalent units based on
Weighted-average method
Average unit costs
Goods completed
Work in process, end
Materials
P 4,000
20,000
P24,000
Conversion
Costs
P 3,000
16,000
P19,000
100,000
P 0.24
95,000
P 0.20
90,000 units
10 000 units
No. 21 --- Continued
Material costs are added at the beginning of the process. The ending work-in process is 50%
complete as to conversion costs. How would the total costs accounted for be distributed, using
the weighted-averaged method?
Goods Completed
a
P39,600
b.
P39,600
C.
P43,000
dr.
P44,000
Work-in Process, End
P3,400
P4,400
P0
P3,400
22. Samahan, Inc. manufactures a highly sensitive smoke alarm and uses the first-in, first-out
method for process costing and finished goods costing. In costing finished goods, the unit cost
for units completed from the work in process at the beginning of the period is kept separate
from the unit cost of those started and completed during the period.
The total manufacturing costs for the month of June is P264,000 and 2,750 units are completed
during the month.
The inventories at the beginning of
June area
Smoke alarms in process (8O%
complete)
Smoke alarms on hand (complete)
The inventories at the end of June are:
Smoke alarms in process (50%
complete)
Smoke alms on hand (complete)
1,250 units
P128,000
600 units
76,800
500 units
700 units
How would the total costs accounted for be distributed?
Work-in Process
a. P33,000
b. P33,000
c. P32,000
d. P66,000
Finished Goods
P92,000
P79,000
P92,000
P52
23. China, Inc. manufactures a product which goes through three consecutive Processes,
Process I , Process 2 and Process 3. Data for the month of September, 2013 are as follows:
Process 1
Process 2
Process 3
P8,000
P13,000
P2,000
Opening Work in Process
20,000
4,000
5,000
Materials added
10,000
10,000
16,000
Conversion Costs
6,000
9,000
4,000
What was the value of the output transferred from Process 3 to the finished goods warehouse
for the month of September?
a.
b.
c.
d.
P63,000
P65,000
P67,000
P69,000
24. Lucas Company adds materials in the beginning of the process in the 'Forming Department,
which is the first of two stages of its production cycle. Information concerning the materials
used in the Forming Department in October 2013 are as follows:
Work in process at October 1, 2013
Units started during October
Units completed and transferred to
the next department during October
Units
6,000
50,000
Material Costs
P3,000
50,000
40,000
Using the weighted-average method, what was the materials cost of work in process at October
31, 2013?
a. P3,060
b. P5,520
C. P6,000
d. P6,120
25. During March 2013 Binata Co.'s Department Y equivalent unit product costs, computed
under the weighted-average method, were as follows:
Materials
Conversion
Transferred-In
P1
3
5
Materials are introduced at the end of the process in Department There were 4,000 units (40%
complete as to conversion cost) in work-in-process at March 31, 2013, The total costs assigned
to the March 31, 2013, work-in-process inventory should be
a.
b.
c.
d.
P36,000
P28,800
P2 7,200
P24,800
26. The following data pertains to Finishing Department for the month of May, 2013:
I. Opening Inventory
4,000 units
Material
Labor
Overhead
Percentage of completion
100%
50%
50%
Value
P1,992
1,074
826
Put in process 20,000 units
Materials value - P 12,000
Labor --- P9,984
Overhead is 100% of labor cost.
2, Units completed and transferred to store a 21,000 units
3. In process at the end - 3,000 units
Materials - all
Labor and overhead - 60%
No. 26 Continued
What is the cost of the work-in process at the end for the month of May?
Average Method
a. P3,577
b. P3,477
c. P3,528
d. P3,500
FIFO Method
P3.500
P3,228
13,477
P3,577
27. For the month of May, the Cutting Department of Damit Co had 80% complete as to the
beginning work in process and 50% complete as to the ending work in process. Related data
follow:
Units
Conversion Costs
Work in process, 1 May
50,000
P88,000
Units started and costs incurred in May
270,000
572,000
Units completed and transferred to
the next department in May
200,000
If the company were using FIFO method, the conversion cost of the work in process in the
Cutting Department at the end of May would amount to
a.P156,000
b.P254,000
C. P132,000
d. P176,000
28. Matalino, Inc. instituted a new process in October 2013. During October, 10,000 units were
started in Department A. Of the units started, 1,000 were lost in the process, 7,000 were
transferred to Department B and 2,000 remained work-in-process at October 31, 2013. The
work-in-process at October 31, 2013 was 100% complete as to material costs and 50%
complete as to conversion costs. Material costs of P27,000 and conversion costs of P40,000
were charged to Department A in October. What were the total costs transferred to
Department B?
a. P46,900
b.P5.3,600
c. P56,000
d. P57,120
29. The following data for September were taken from the cost records of the Mixing
Department of Love Manufacturing Company, which uses average costing method:
Work in process, August 31:
(all materials, 50% converted)
Put into process during the month of September
Work in process, September 30:
(all materials, 60% converted)
Costs:
Work in process, August 31:
Materials
Labor
Factory overhead
Put into process during September
Materials
Labor
Factory overhead
1,000 units
10,000 units
1,400 units
P 24,000
15,000
7,000
251,000
193,000
149,000
The total cost of the units completed and transferred was:
a.
b.
c.
d.
P576,000
P605,400
P640,400
P693,800`
30. The Forming Department is the first of a two stage production process. Spoilage is identified
when the units have completed the forming process. Cost of spoiled units are assigned to units
completed and transferred to the second department in the period spoilage is identified. The
following information concerns Forming 's conversion costs in May 2013.
Beginning work-in-process (50% complete)
Units started in May
Spoilage-Normal
Units completed and transferred
Ending work in process (80% complete)
Units
2,000
8,000
500
7,000
2,500
Conversion Cost
P10,000
75,000
No. 30 Continued
Using the weighted-average method, what was Forming's conversion cost transferred to the
second production department?
a. P59,850
b. P64,125
C. P67,500
d. P71,250
31. Manuel Company uses process cost system with average costing to account for the
production of its only product The product is manufactured in two departments. Units are
started in Assembling Department, and then transferred to the Finishing Department, where
they are completed. Units are inspected at the end of the production process in the Assembling
Department, and the cost of abnormal lost is charged to Factory Overhead Control account.
Data related to June operations in the Assembling Department are:
Quantity:
Units in beginning inventory (60% materials,
35% labor, and 25% overhead)
1,000
Units started in process this period
59,000
Units transferred to the Finishing Department this
8,000
period
Units in ending inventory (100% materials, 75% labor,
Aand 50% overhead)
1,500
Cost data:
Beginning Inventory
Costs charged to the Department:
Materials
P 1 ,260
Direct labor
770
Factory overhead
1,400
Added This Period
P36,240
10,780
21,725
What is the total cost transferred to the Finishing Department?
a. P56, 752
b. P59,600
C. P59,452
d. P58,000 or less
32. Datu Chemical Industries, Inc. produces a product through a continuous process in different
departments. Each department has an independent cost accountant who prepares cost of
production report. You have been assigned as cost accountant for Department A.
Production data of Department A for the month of July, 2013 were as follows:
Work in process, July 1 (70% completed)
Started in process
Work in process, July 31 (60% completed)
Lost units (normal) at end of process
In this department, costs are applied as follows:
Materials --- added at the start.
Labor and overhead --- evenly applied
Department costs incurred in July were:
Materials
Labor
Overhead
Work in process, July 1
14,000 units
70,000 units
12,000 units
2,000 units
P56,000
17,000
13,000
8,000
What is the cost of?
Units transferred
a. P82,390
b. P81,890
c. P72,000
d. P82,3 90
Work in process-July 31
P 9,600
P 9,600
P12,840
P12,840
33. The Classmate Company manufactures a single product in a continuous process in two
departments. Cost and production data for the finishing department, the last department for
the month of April, 2013 are shown below:
Costs:
Cost from preceding department
Work in process, April 1
Materials
Labor
Factory overhead
P135,000
18,000
85,800
47,200
No. 33 Continued
Quantity:
Units in process, April 1
(All materials, 50% converted)
Units received from preceding department
Units in process, April 30
(All materials, 60% converted)
Loss during the process
4,000
30,000
6,000
3,000
In the Finishing Department, what is the total cost transferred to finished goods?
a. P250,000
b. P286,000
C. P238,000
d. P210,000
34. Adonis Manufacturing Company makes a single product in two departments. The
production data for Department 2 for May 2013 follows:
Quantities:
In process, May I, (40% completed)
4,000 units
Received from Department 1
30,000 units
Completed and transferred
25,000 units
In process, May 31, (60% completed)
6,000 units
Production Costs:
May 1
May 31
Received from Department 1
P16,300
P89,100
Materials
3,800
67,500
Conversion cost
1,940
81,000
Materials are added at the start of the process, and losses normally occur during the early stage
of the operation.
Using the Average Costing Method, what is the inventory cost of the ending work in process?
a. P44,640
b. P45,460
c. P45,600
d. P46,000
Numbers 35 to 37 are based on the following information
Air Force Inc. manufactures their product in two departments in a continuous process.
Production data for the month of October 2013 are as follows:
Beginning work in process, 40% completed
500 units
Received from preceding department
Normal spoilage
Abnormal spoilage
Units completed and transferred out
Ending work in process, 1/3 completed
Conversion costs in beginning inventory
Current period conversion costs
2,000 units
200 units
300 units
1,700 units
300 units
P610
P3,990
All spoilage occurs at the end of the process.
35. What is the conversion cost per equivalent unit?
FIFO Method
a.
P1.90
b.
P2.19
c.
P2.00
d.
P1.90
Average Method
P1.73
P2.00
P1.90
P2.00
36. What is the conversion cost of normal spoilage?
FIFO Method
a. P438
b. P380
c. P400
d. P380
Average Method
P400
P346
P380
P400
37. What is the conversion cost of abnormal spoilage?
FIFO Method
a.
P570
b.
P657
c.
P570
d.
P600
Average Method
P519
P600
P600
P570
Use the following data in answering Numbers 38 to 41
The Cooking Department of Red Crab, Inc., uses process system Direct materials are added at
the beginning of the cooking process. Conversion costs are added evenly during the cooking
process. Consider the following data for the Cooking Department for January:
Physical Units
Direct Materials
Conversion
costs
Work in process, January 1:
25% conversion costs
Started in January
74,000
250,000
30,000
Good units completed and
transferred
out during January
Spoiled units
Work in process, January 31
Costs added during January
Cost per equivalent unit of
work
done in January
61,000
8,000
15,000
P1,480,000
P942,000
P20
P12
Red Crab uses the FIFO method of process costing. Inspection occurs when production is 100%
complete, normal spoilage is 11% of good units completed during the period.
38. What is the total cost of the units completed and transferred-out?
a.
b.
c.
d.
P1,632,000
P1,972,000
P2,186,720
P2,228,000
39. What is the total cost of the units in ending work in process?
a. P444,000
b. P685,280
C. P658,720
d. P300,000
40. What is the cost of abnormal spoilage?
a. P256,000
b. P214,720
c. P 41,280
d. 41,000
Questions 41 and 42 are based on the following information:
A sporting goods manufacturer buys wood as a direct material for baseball bats. The Fanning
Department processes the baseball bats, and the bats are then transferred to the Finishing
Department where a sealant is applied. The Forming Department began manufacturing 10,000
"Casey sluggers" during the month of May. There was no beginning inventory.
Costs for the Forming Department for the month of May were as follows:
Direct materials
Conversion costs
Total
P33,000
17,000
P50,000
A total of 8,000 bats were completed and transferred to the Finishing Department; the
remaining 2,000 bats were still in the forming process at the end of the month. All of the
Forming Department's direct materials were placed in process, but, on average, only 25% of the
conversion cost was applied to the ending work-in- process inventory.
41. The cost of the units transferred to the Finishing Department is:
a. P50,000
b. P40,000
C. P53,000
d. P42,400
42. The cost of the work-in-process inventory in the Forming Department at the end of May is:
a. P10,000
b. P 2,500
c. P20,000
d. P 7,600
Question 43 and 44 are based on the following information:
A manufacturer began operations on October 1. It buys wood as a direct material for the
production of floor lamps. The company’s Forming Department processes the lamp frames, and
the frames are then transferred to the Finishing Department where a sealant is applied. The
Forming Department began manufacturing 10,000 lamps during the month of October. Costs
for the Forming Department for the month of October were as follows:
Direct materials
Conversion cost
P66,000
34,000
43. The cost of the units transferred to the Finishing Department (after rounding each
calculation to the nearest cent) is:
a.
b.
c.
d.
P68,760
P60,000
P39,600
P29,160
44. The cost (after rounding each calculation to the nearest cent) of the work-in-process
inventory in the Forming Department of October is:
a. P11,460
b. P26,400
c. P31,260
d. P45,840
Question 45 and 44 are based on the following information:
A company employs a process costing system for its two-department manufacturing operation
using the first-in, first-out (FIFO) inventory method. When units are completed in Department
1, they are transferred to Department 2 for completion. Inspection takes place in Department
2 immediately before the direct materials are added, when the process is 70% complete with
respect to conversion. The specific identification method is used to account for lost units.
The number of defective units (that is, those failing inspection) is usually below the normal
tolerance limit of 4% of units inspected. Defective units have minimal value, and the company
sells them without any further processing for whatever it can.
Generally, the amount collected equals, or slightly exceeds, the transportation cost. A summary
of the manufacturing activity for Department 2, in units for the current month, is presented
below:
Beginning inventory (60% complete with respect to conversion)
Units transferred from Department 1
Total units to account for
Units completed in Department 2 during the month
Units found to be defective at inspection
Ending inventory (80% complete with respect to conversion)
Total units accounted for
Physical Flow(output units)
20,000
180,000
200,000
170,000
5,000
25,000
200,000
45. The equivalent units for direct materials for the current month would be:
a. 175,000 units
b. 181,500 units
c. 193,000 units
d. P200,000 units
46. The units that failed inspection during the current month would be classified as:
a.
b.
c.
d.
abnormal spoilage
normal scrap
normal rework units
normal waste
47 to 50 are based on the following data:
DXR Compamy employs process cost system. A unit of product passes through two department.
Assembly and Finishing before it is complete. Information regarding Assembly Department
follow:
BWIP, Aug. 1
Spoiled units
Suited in Production
Transffered out
4,000 units
3,000
26,000
24,000
Raw materials are added at the beginning of processing in the Assembly Department without
changing the number of units being processed. Work-in-process on August 1 was 90% complete
as to conversion while 80% converted on August 31. In the Assembly Department, inspection
takes place when the units are 75% converted. The company usually experienced a 5% loss
based on the completed units,
Cost data for the month of August follow:
BWIP
Current cost
Materials
P32,400
111,600
Labor
P26,400
88,200
Overhead
P28,500
114,750
Using Weighted Average Costing: Assuming that the allocation of cost of normal lost units is
based on EUP.
47. What the cost of units transferred-out?
a.
b.
c.
d.
P331,200
P331,400
P343,684
P343,860
48. What is the cost of units of ending work-in-process?
a. P37,376
b. P37,500
c.P36,200
d. P37,400
Using FIFO Costing: Assuming that the allocation of the cost of normal lost units is based on
actual units.
49. What is the cost of units transferred out?
a.
P349,136
b.
c.
d.
P258,067
P339,267
P368,069
50. What is the cost of units of ending work-in-process?
a.
b.
c.
d.
P33,850
P32,310
P31,580
P33,580
ANSWERS
1.C
2.d
3.a
4.d
5.d
6.a
7.a
8.a
9.c
10.d
11.c
12.d
13.d
14.c
15.b
16.b
17.a
18.a
19.c
20.c
21.a
22.a
23.d
24.d
25.d
26.b
27.a
28.c
29.a
30.c
31.b
32.d
33.c
34.a
35.d
36.d
37.c
38.c
39.a
40.C
41.d
42.d
43.a
44.C
4S. C
46.b
47.a
48.a
49.a
5O. a
SOLUTIONS AND EXPLANATIONS
1. Under FIFO method the work done this month on the opening inventory should be
determined. The equivalent production is computed as follows:
Transferred:
Opening inventory (3/8 x 4,000)
Started (9,000- 4,000)
Closing Inventory:
1/2 x 4,000
3/4 x 4,000
Equivalent production
2,000
5,000
2,000
3,000
5,000
12,000
Under the average cost method, to compute the equivalent production, the work done on the
opening inventory is not determined.
Transferred
Closing Inventory:
9,000
1/2 x 4,000
2,000
3/4 x4,
3,000
5,000
Equivalent production
14,000
2. This is computed by using the equation, units in process beginning and units started is equal
to units completed and units in process at the end, therefore the with units started is 11,000
units as computed below:
Units completed
Units in process-end
Units as accepted for
Less: Units in process, beg.
Units started
3. FIFO:
Units completed and
transferred
Add: Units in process, ending:
1.
(400 x 50%) + (600 x
25%)
2.
(3,000 x 50%) + (2,000 x
25%)
3.
(3,000 x 50%) + (1,500 x
75%)
Equivalent production figures,
Average Costing
Less: Units in process,
beginning:
2.
(6,250 x 40%)
3.
(6,000 x 30%)
Equivalent production figures,
FIFO Costing
Units completed and transferred
Add: Units in process, ending:
1.
(400 x 50%) + (600 x 25%)
2.
(3,000 x 50%) + (2,000 x
25%)
3.
(3,000 x 50%) + (1,500 x
75%)
Equivalent production figures,
Average Costing (see also FIFO)
10,000
4,000
14,000
3,000
11,000
Case 1
5,500
Case 2
26,250
Case 3
14,000
350
2,000
____
____
2,625
5,850
28,250
16,625
____
5,850
2,500
_____
25,750
1,800
14,825
Case .1
5,500
350
Case 2
26,250
Case 3
14,000
2,000
_____
____
2,625
5,850
28,250
16,625
4. The computation is:
Work to complete WIP-Beg.
Units started and transferred
Work to date on WIP-end
EUP
Materials
0
1,600
400
2,000
Conversion
300
1,600
100
2,000
Since materials are introduced at the beginning of the process, WIP Beg. is already complete as
to materials. All materials were added this month for any units started this month, whether
those units were transferred or remain in W1P End, since WIP Beg. is 40% complete on 1/1/08
as to conversion costs, 60% of the work (60% x 500, or 300) must have been done in January.
WIP End is 25% complete at 1/31/08, which means 25% of the conversion work (25% x 400, or
100) was done in January. Remember, under the FIFO assumption, equivalent production
measures only the work done in the current period.
5. Equivalent units, under the weighted-average method, is equal to units completed
plus equivalent units in ending work-in-process.
Beginning work-in-process
Units started
Units to be accounted for
Less ending work-in-process
Units completed
40,000
240,000
80,000
25,000
255,000
Computation of equivalent units of production is then computed as follows:
Units completed
Equivalent units
Equivalent units
Materials
255,000
25,000
280,000
Conversion
255,000
15,000
270,000
Materials added at beginning of process; 100% complete
(25,000) (60% complete)
6. Since the materials are added at the beginning of the process, all units are 100%
complete with respect to materials.
Actual
Work Done
Materials
Actual Work Done Materials
Finished and transferred:
Work in process, March 1
60,000
Started in March (110,00050,000
100%
50,000
60,000)
Work in process, March 31
70,000
100%
70,000
Equivalent units of
120,000
production
As stated in the problem, the cost of the 30,000 spoiled units will be spread over the 180,000
equivalent units. Hence, the spoiled units are not considered in the equivalent unit
computation.
7. The computation is shown below:
Transferred out:
Beginning inventory
Transferred in (120,000-15,000)
Ending inventory
Equivalent production
Materials
Conversion Cost
105,000
45,000
150,000
9,000
105,000
13,000
127,000
8. Units finished [(R4,000 20,000 — 10,000) x 100% =]
Units in process-end (10,000 x 60%)
Equivalent units of labor and overhead
14,000
6,000
20,000
Note: The average method was used because the percentage of completion as to conversion
cost on the units in process beginning is not given.
9. Equivalent units for conversion costs can be computed under the FIFO method as follows:
Units completed:
Work in process, March 1 (15,000 x 40%)*
From March production
Work in process, March 31 (12,000 x 80%)
Equivalent units
6,000
45,000
9,600
60,600
* Work done this month.
Another computation is:
Units completed
Work in process, March 31
Total
Less: Work in process, March 1 (15,000 x
60%)*
Equivalent units
* Work done this month.
60,000
9,600
69,600
9,000
60,600
10. Using the FIFO, the computation is:
Actual
Units completed:
In process, beginning 200
Started & completed
1,000
Units in process, end
200
Equivalent units
Materials
Conversion Cost
1,000
200
1,200
150
1,000
100
1,250
11. Under the weighted-average method, the computation is as follows:
Actual
Material
Units in process, beg.
25,000
Units transferred in
100,000
Total units to account for
125 000
Units completed (Squeeze)
105,000
105,000
Units in process, end
20,000
______
Units as accounted for
125,000
105,000
Conversion Cost
105,000
16,000
121,000
No. 11 - Continued
Under the average method the equivalent production &the total units transferred-in would be
the total units in process, beginning and the unit transferred-in of
100,000.
12. No equivalent production is to be computed on normal spoilage since the cost is to be
allocated to all the good units. However abnormal spoilage is to be given a
100% e equivalent production since its costs are charged to factory overhead. Therefore, the
equivalent production under the average method is 57,000 units, Computed as follows:
Completed and transferred (100%)
Work in process, end (100%)
Abnormal spoilage (100%)
Equivalent production of materials
36,000
16,000
5,000
57,000
13. Under the weighted average method, equivalent units of production and cost per unit are
based on all work (this period's and last period's) done on units completed plus all work done to
date on the units in ending work in process. Since materials are added at the beginning of the
production process, both the units completed in the ending work-in-process are 100 percent
complete with respect to materials.
The cost per equivalent unit can be computed as follows:
Units completed
Ending work in process
Total equivalent units
Cost of materials:
Beginning work in process
Units started
Total costs incurred
Divided by Equivalent Production
Cost pa equivalent unit
14. Unit cost for conversion cost
Units completed
Units in process, end (3,000 x 40%)
Equivalent production for conversion cost
Unit cost, rounded to the nearest centavo is:
P18,400 + 38,200
42,500
12,500
55 000
P 5,500
18,000
P23,00
÷55,000
P.43
37,000
1,200
38,200
P0.48
Unit cost for transferred-in cost is P0.51, completed by dividing transferred in
cost (P20,400) by the total units of in Process beginning and units transferred-in (40,000 units).
15. Since Reyna Company is using the weighted-average method, the solutions approach is to
combine the transferred-in cost, material costs and conversion costs in the beginning inventory
with their counterparts for costs added in February The next step is to compute the equivalent
units for the transferred-in, materials and conversion elements. Finally, dividing the total costs
of the beginning inventory and costs added in the period for each element by the equivalent
units for the corresponding element gives the unit cost for each of the elements.
Department B
Beginning work-in
Completed and
process (conv. 50%)
6,000
12,000
transferred
Transferred in
Ending work-in(not needed)
?
8,000
process (conv. 75%)
Department B Product X Equivalent Units:
Transferred in
Units completed and transferred
12,000
Ending work-in process (conv. 75%) 8,000
Equivalent units production
20,000
Cost per Equivalent Unit:
Beginning work-in process
P12,000
Costs added in February
29,000
P41,000
Cost per EUP
P 2.05
12,000
8,000
20,000
12,000
6,000
18,000
P 2,000
5,000
P 8,000
P 0.40
P 1,000
5,000
P 6,000
P- 033
Total
P 2.78
16. First compute equivalent units of production as shown below:
Physical
Stage of
TransferredFlow
Completion
in
M
CC
Beginning work-inprocess, 4/1/08
6000
100%
50%
Transferred in
14,000
Available
20,000
Units completed
15,000
15000
Ending work-inprocess,
4/30/08
5,000
100%
60% 5,000
Weighted average
equivalent units
20,000
Materials
Conversion
15,000
15,000
5,000
5,000
20,000
18,000
No. 16 -- continued
Under the weighted average method, unit costs (rounded) as follows:
Transferred in (P12,000 + P27,000) + 20,000
=P1.95
Materials (P2,500 + P3,500) + 20,000
= P0.30
Conversion cost (P2,000 • + P3,000) t 18,000
= P0.28
17.
Total cost to account for (P120,000 +
P5,256,000)
Divided by the equivalent production:
Units finished and transferred
Work in process, end (60,000 x 40%)
Unit cost of production
P5,376,000
744,000
24 000
18.
Total cost of units in process beginning and cost for
the month
(P140,000 + P1,172,000)
Divided by the equivalent production:
Units finished and transferred (340,000-60,000)
280,000
Work in process, end (60,000 x 80%)
48,000
Unit cost of production
÷768,000
P 7.00
P1,312,000
÷ 328,000
P 4.00
19. Since no materials are added in process C, then only unit cost for conversion Cost is to be
computed:
Units in process, Oct. 1 (1,200 x 1/3)
Units started and completed this October:
Total units completed R1,200 + 2,000- 600]
Less: In process, Oct. 1
Units in process, Oct. 31 (600 x 1/2)
Equivalent units of production
Unit cost of labor and overhead (116,300 ÷
2,100)
400
2,600
1,200
1,400
300
2,100
p 3.00
Unit cost of labor and overhead (116,300 ÷ 2,100)
20. Since the materials are added at the beginning of the process, all units are 100% complete
with respect to materials.
Units
% Complete
Equivalent units
completed units
110000
x
100%
=
110000
Units in ending
inventory
70,000
x
100%
=
70,000
Total equivalent units
180,000
As stated in the problem, the cost of the 30,000 spoiled units will be spread over the
180,000 equivalent units. Hence, the spoiled units are not considered in the equivalent unit
computation.
21. The total cost of P43,000 (P24,000 for materials and P19,000 for Conversion cost) is
distributed as follows:
Goods completed (90,000 x P.44)
P39,600
Work in process, end:
Materials (10,000 x P0.24)
P2,400
Conversion cost (5,000 x P0.20)
1,000
3,400
Total
P43,000
22. Cost assigned to work in process inventory, end:
Units completed:
Units in process, June 1 (1,250 x 20%)
250
Units started and completed (2,750 —1,250)
1,500
Units in process, June 30 (500 x 50%)
Equivalent production
Unit cost, FIFO (P264,000 ÷ 2,000)
Cost of work in process inventory (250 x P132)
1,750
250
2,000
P 132
p33,000
Cost assigned to the finished inventory
at the end of June: 700 x P132
P92,400
Note: On a "first-in, first-out" basis, all units in the finished goods inventory at the end of June
would have come from units that were started and completed during the month of June.
23.
Total cost of opening work in process (8,000 +13,000
+ 2,000)
Add: Materials cost
Conversion cost
Total cost
Less: Cost of closing work ,in process
Cost of units transferred to finished goods
P23,000
P29,000
36,000
65,000
88,000
19 000
P69,000
24. The major point to remember is that both the equivalent units and equivalent units cost
computations combine the beginning inventory with the current Production.
Beginning inventory
Started
Available
Completed
Ending inventory
Weighted average
equivalent units
Equivalent Units
Physical Flow
Raw Material Stage
of Completion
100%
Physical
Flow
6,000
50,000
56,000
44,000
12,000
100%
100%
Equivalent units
Raw Materials
44,000
12,000
56,000
Unit cost of material [(P3,000 P25,560) ÷ 56,000] = P.51
Material cost of work in process, Oct 31 (12,000 x .51) P6,120
25. Cost of work-in process at March 31, 2011.
Materials
Conversion cost (4,000 x 40%) x P3
Transferred in cost (4,000 x P5)
Total
26. Equivalent productions:
Average method:
Units completed
Material
21,000
0
P 4,800
20,000
P24, 8000
Conversion Cost
21,000
In process, end
Equivalent production
3,000
24,000
1,800
22,800
FIFO Method:
Unit in process
Units started (21,000-4,000)
In process, end
Equivalent production
4,000
17,000
3,000
24,000
2,000
17,000
1,800
20,800
Unit Cost:
Average method:
Material (P1,992 + P12,000) + 24,000 =
Conversion cost (P1,920 + P19,968) 4- 22,800 =
Total units cost
P0.583
0.96
P1.543
FIFO method:
Materials (P12,000 ÷ 24,000)
Conversion cost (P19,968 ÷ 20,800)
Total unit cost
P 0.50
0.96
P 1.46
Cost of work in process, end:
Average:
Materials (3,000 x P0,583)
Conversion cost (3,000 x 60%) x P0.96)
Total
P1,749
1,728
P3,477
FIFO method:
Materials (3,000 x P0.50)
Conversion cost (3,000 x 60%) x P.96
Total
P1,500
1,728
p3,228
27. Equivalent Production of Conversion cost:
Work in process, May I (50,000 x 20%)
Units started and completed (200,000 -- 50,000)
Work inprocess, May 30 (320,000 200,000) X 50%)
Total
Unit cost (P572,000÷ 220,000)
Conversion cost (60,000 x P2.60)
28. Equivalent production;
10,000
150,000
60,000
220,000
P 2.60
P156,000
Unit completed
Units lost
in process, end
Equivalent production
Materials
7,000
Conversion Cost
7,000
2,000
9,000
1,000
8,000
Unit cost:
Material (P27,000 ÷ 9,000)
Conversion cost (P40,000 ÷ 8,000)
Total unit cost
P3
5
P8
Total cost of units transferred to Dept. B:
7,000 units x P8 = P56,000
Note - This situation allocates all the material and conversion costs incurred to "units lost".
Assuming a conceptually sound cost system, the following implications can be drawn:
1.
the loss was "normal", and
2.
the loss was reported before work-win-process reached the current stage
Of completion.
29. The total unit cost is computed first as follows:
Equivalent production
units
In process, Aug. 31
Put into process
In process, Sept. 30
Completed
In process, Sept. 30
(all M; 60% L&OH)
Equiv. production units
Materials
(Labor & Overhead)
1,000
10,000
( 1 400)
9,600
9,600
9,600
1,400
1,400
840
11,000
10,440
Average unit costs:
Materials:
Conversion cost
(P24,000 + P251,000)/11,000 = P25
Direct Labor: (P15,000 + P193,800)/10,440 = 20
Overhead
(P 7,600 + P149,000)/10,440 = 15
Total
P60
Total cost of units completed and transferred:
9,600 x P60
P576,000
30. The computation is as follows:
Actual
Units
7,000
500
2,500
10,000
Units completed
Spoilage --- normal
Work in process, end (80%)
Unit Cost (P85,500/9,500)
Conversion
Costs
7,000
500
2,000
9,500
P9
Conversion Costs transfered:
Good units completed (7,000 x
P9)
Spoiled units (500 x P9)
Conversion costs transferred
31.
P63,000
4 500
P67,500
The computations are as follows:
Actual
Quantity
1000
Schedule:
In process,
9000
beginning
Started in
10000
process
Accounted for as follows:
Finished and
8,000
transferred
In process, end
1,500
Work
Done
EP
Mat.
Work
Done
EP
Lab.
Work
Done
EP
CC
100%
8,000
100%
8,000
100%
8,000
100%
1,500
75%
1,125
50%
750
Abnormal lost
500
100%
10,000
500
10,000
100%
500
9,625
100%
500
9250
Total cost transferred:
Materials: (P1,260 + P36,240) ÷ 10,000
P 3.75
Direct Labor: (P770 + P10,780) ÷ 9,625
1.20
Overhead: (P1,400 + P21,725) ÷9,250
2.50
Cost per equivalent unit
P 7.45
Multiplied by: No. of units transferred
8,000
Total cost transferred
P59,600
32.
Since the details of the costs of Work in Process, beginning is not given, FIFO method is
to be used.
Equivalent productions:
WIP, beginning, F/T
Started, F/T (squeeze)
In process, ending
Normal lost units
Total
Actual
14,000
56,000
12,000
2,000
84,000
Materials:
56,000 (100%)
12,000 (100%)
2000 (100%)
70,000
Unit costs:
Materials (P56,000 / 70,000)
P0.80
Conversion costs (P31,230/69,400) P0.45
Adjustment for lost units:
Cost of lost units (2,000 x P1.25)
P2,500
Divided by absorbing good units (F/T)
70,000
Conversion Costs
4,200 ( 30%)
56,000 (100%)
7200( 60%)
2000 (100%)
69,400
Adjusted unit cost
P0.35714
No. 32 -- continued
Cost of units finished and transferred:
Beginning MP, F/T:
Cost last month
P8,000
Cost this month:
Conversion costs (4,200 x
1,890
P0.45)
Adjustment for lost units (
500
14,000 x P0.35714)
started, F/T [56,000 x (P1.25 +
P0.35714)]
Total
Cost of units in process
Materials (12,000 x P.80)
P9,600
Conversion costs (7,200 x
3,240
P.45)
33. The computations are shown below:
Quantity Schedule:
In process, beginning
Received from Preceding Dept.
Accounted for as follows:
In process, beg., F&T
Started F&T (25,000 - 4,000)
In process, ending
Normal lost
Cost per equivalent unit:
From preceding dept.: (P135,000 /30,000)
From this dept:
Materials
Conv. cost: (P85,800 + P47,200) 26,600
Adjustment for lost units: (3,000 x P4.5) +
P10,390
72,000
P82,390
P12,840
Actual
4,000
30,000
34,000
Work
Done
EP
CC
4,000
21,000
6,000
3,000
34,000
1/2
100%
60%
2
21
3
26,000
P4.50
5.00
50
P10,000
27,000*
Total cost transferred:
In process, beg., F&T
Cost last month
Cost this month:
Materials
Conv. Costs: (PS x 2,000)
Started F&T: (P 1 0.00 x 21,000)
Total cost transferred to FG
*21,000+ 6,000, remaining good units.
P18,000
0
10,000
28,000
210,000
P238,000
34. To compute the cost of the ending work in process, the following are the First: Compute the
equivalent units of production as follows:
Completed and transferred
In process, end
Lost units (34,000 -31,000)
Total equivalent production
Actual
25,000
6,000
3,000
Materials
25
6
31,000
Second: Compute the unit cost using the average method as follows:
Total
EUP
Cost
Cost from preceding department:
May 1
P 16,300 4,000
May 31
89,100
30,000
Total
P105,400 34,000
Cost added this department:
Materials:
May I
P 3,800
May 31
67 500
Total
P 71,300 31,000
Conversion Costs:
May 1
P 1,940
May 31
81,000
Total
P 82,830 28,600
Adjustment for lost units:
Cost from preceding department:
(3,000 x P3.10)
P 9,300
31,000
Total adjusted unit cost
Finally: Compute the cost of ending work in
process (6,0(0 units):
Cost from preceding department(6,000 x P3.10
cost added this department EUP x unit cost)
Conversion cost
25
3
28,000
Unit
Cost
P3,10
2.30
2.90
30
P8.60
P18,600
Materials (6,000 x P2.30)
Conversion costs (3,600 x P2.90)
Adjustment fat lost units (6,000 x .30)
Total
35.
Quantity schedule,
In process, beginning
Received from preceding
department
Accounted for as follows ask
FIFO:
in process, beg., F&T
Received, F&T (1,7004- 500)
In process, ending
Normal lost
Abnormal lost
Accounted for as follows Average
Finished and transferred.
In process, ending
Normal lost
Abnormal lost
Conversion cost per equivalent
unit:
In-process, beginning
Added Conversion Costs
Divided by Equivalent Units
EUP
P13,800
10,440
24,240
1,800
p44 640
Actual
500
2,000
2,500
Work
Done
EP
CC
500
1,200
300
200
300
2,500
3/5
100%
1/3
100%
100%
500
1,200
300
200
300
2,100
1,700
300
200
300
2,500
100%
1/3
100%
100%
FIFO
1,700
100
200
300
2,300
Average
P
3,990
P3,990
2,100
P1.90
P 610
3,990
P4,600
2,300
P2.00
36.FIF 0: Conversion Costs component of normal lost: 200 x P1.90 = P380
Average; Conv, Costs component of normal lost: 200 x P2.00 = P400
37. FIFO: Conv. Costs component of abnormal lost: 300 x P1.90 = P570
Average: Conv. Costs component of abnormal lost: 300 x P2,00 = P600
38. To compute cost of good units completed and transferred out, the following steps are to be
used
Step I: Compute the total equivalent units of production for Materials and conversion Costs as
follows:
Cost added in January (Current cost)
Divided by cost per equivalent unit of
production for January
Equivalent units of production in January
Direct
Materials
P1,480,000
Conversion
Costs
P942,000
P
20
74,000
P
12
78,500
Step 2: Compute the equivalent units of production of units in process, ending by working
backward in the quantity schedule as follows:
Work in process, beginning
Started during January
To account for
Completed and transferred (61,000)
From beginning work in process
Started and completed, 100%
Normal spoilage (61,000 x 11%), 100%
Abnormal spoilage (8,000— 6 710), 100%
Work in process ending
Total
(a) , Total equivalent units ofproductton
(step I)
Less equivalent twits of production:
Completed and transferred: From beginning WIP
From started and completed
Normal spoilage
Abnormal spoilage
Equivalent production of WIP
Actual
Units
10,000
74,000
84,000
10,000
51,000
6,710
1,290
15,000
84,000
Equivalent production
Direct
Conversion
Materials
Costs
51,000
6,710
1,290
15,000(a)
74,000
74, ,000
7
51,000
6,710
1,290
12,000(b)
78,000
78,500
(51,000)
(6
1,290
15,000
( 7,500)
(51,000)
(6,710)
( 1,290)
12,000
No 38 Continued
step 3: The cost of the units completed and transferred out can now be computed
as follows:
Completed and transferred out (61,000) units
From beginning WIP:
Cost last month
Cost this month:
Conversion costs (7,500 x P12)
Total
From started (5 1 ,000 x P32)
Normal spoilage (6,710 x P32)
Total cost of units transferred out
P 250k000
90,000
P 340,000
1,632,000
214,720
P2,186,720
39.
The cost of units in ending work in process is computed as follows:
Direct materials (15,000 x P20)
P300,000
Conversion costs (12,000 x P 2)
144,000
Total cost of work in process, ending
P444,000
40.
The computation of abnormal spoilage is shown below:
Abnormal spoilage (1,290 x P32)
P41,280
41. The correct answer is (d). The total equivalent units for raw materials equal I 0,000 because
all materials for the ending work-inn-process had already been added to production. Hence, the
materials cost per unit was P330 (P33,000 4. 10,000). For conversion costs, the total equivalent
units equals 8,500 [8,000 completed + (25%x 2,000 in EWIP)}. Thus, the conversion cost was
P2.00 per unit (P17,000 /8,500). The total cost transferred was therefore P42,400 [8,000 units
x. (133.30+P2.00)),
42. The correct answer is (d). As calculated in the preceding question, P42,400 ofcosts were
transferred out. Consequently, the cost of ending work-in-process must have been P7,600
(P50,000 total costs incurred --- P42,400).
43. The correct answer 00. The total equivalent units for raw materials equal i10,000 units (the
total units placed into production) because all direct materials were added to production. The
materials cost per equivalent unit is therefore P6 60 (P66,000 total DM costs 10,000 equivalent
units). The total equivalent units for conversion costs equal 7,000 units [6,000 finished units
/(25% x 4,000 units in EWIP)] Hence conversion cost per equivalent unit is P4.86 (P34,000 total
CC ÷ 7,000 equivalent units). Total product cost per equivalent unit is P,11.46 (P6.60 + P4.86),
so total transferred-out cost is P68,760 (P11.46 x 6,000 units transferred).
44.The correct answer is (c). As determined in the preceding question, direct materials cost and
conversion cost per equivalent unit are P6.60 and P4.86, respectively.Because the ending work
in-process contains 4,0® equivalent units of direct materials costs (4,000 physical units x 100%)
and 1,000 equivalent units of conversion costs (4,000 physical units x 25%). its recorded balance
is P31,260 (4,000 x P6.60) + (1,000 x P4.86).
45. The correct answer is (c). The equivalent unit for direct materials equals 195,000 units
(20,000 BWIP + 150,000 units started and completed + 25,000 EWIP). This calculation
recognizes that direct materials had not been added to beginning inventory (60% complete)
and spoiled units (70% complete), but that ending inventory (80% complete) includes direct
materials.
46. The correct answer is (b). The units that failed inspection are classified as normal scrap
because they have minimal value and can be sold without further reworking. The defective
units are less than 4% tolerance limit for normal spoilage. Scrap can be sold, disposed of, or
reused.
47.The answer is (c), computed as follows:
First, compute the EIJP and the unit cost as follows:
EUP
Transferred-out
Ending WIP
Normal lost units
Abnormal lost units
Actual
24,000
3,000
1200
1,800
30,000
Materials
24,000
3,000
1,200
1,800
30,000
Conversion Cost
24,000
2,400
900
1,350
28,650
N0.47 continued
Unit Cost.
Materials (P1 44,000 ÷ 30,000)
Conversion cost (P257,850 ÷ 28,650)
Total units cost
P4.80
9.00
P13.80
The cost of units transferred-out can now be computed as follows:
Transferred out (24,000 x
P331 ,200
P13.80)
Add: Cost of normal lost units
M (1,200 x 4.80)
5,760
CC (900 x 9.00)
8,100
Total
13,860
Allocation:
M (24/27 x 5.760)
5,120
CC (24/26.4 x 8,100)
7,364
12,484
Total cost of units transferredout
P343,684
48. The answer is (a). The computation is:
Ending work-in-process:
M (3,000 x 4.80)
14,400
CC (2,400 x 9.00)
21,60
Normal lost units:
M (3127 x 5,760)
640
CC (2.4/26.4 x 8,100)
736
Total cost of ending work-inprocess
49. The answer is (a) as computed below:
EUP
Actual
Transferred-out
Beginning WIP
4,000
SIP
20,000
Ending WIP
3,000
Normal lost units
1 ,200
Abnormal lost units
1,800
30,000
P36,000
1,376
P37,376
Materials
Conversion Cost
20,000
3,000
1,200
1,800
26,000
4,000
20,000
2,400
900
1,350
25,050
No. 49 -.Continued
Schedule I - Allocation of normal lost units based on actual units:
Transferred-out
Beginning WIP(4/27 x P13,860)
SIP
(20/27 x P13,860)
Ending W1P ( 3/27 x P13,860)
Total
Unit Cost (Rounded):
Materials (11,600 +26,000)
CC (202,950 25,050)
Total unit cost
Transferred-out:
BWIP: Cost last month
Cost this month
Normal lost units (Sch. 1)
SIP: Completed (20,000 x P12.39)
Normal lost units (Sch. 1)
Total cost of units transferred-out
P 2,053
10,267
1,540
P13,1860
P 4.29
8.10
P12.39
P 87,300
1,716
2,053
P247,800
10,267
P 91,069
258,067
P349,136
50. The answer is (a) as computed below:
EWIP:
M (3,000 x P4.29)
CC (2,400 x P8.10)
Normal lost unit (Sch. 1)
Total cost of EWIP
P 12,870
19,440
1,540
P33,850