Process Costing – Assignment #1
1. Lutz Company produces a product in two departments: (1) Mixing and (2) Finishing. The
company uses a process cost accounting system.
(a) Purchased raw materials for Php50,000 on account.
(b) Raw materials requisitioned for production were:
Direct materials
Mixing department
Finishing department
Php20,000
14,000
(c) Incurred labor costs of Php69,000.
(d) Factory labor used:
Mixing department
Finishing department
Php44,000
25,000
(e) Manufacturing overhead is applied to the product based on machine hours used in each
department:
Mixing department—300 machine hours at Php30 per machine hour.
Finishing department—500 machine hours at Php20 per machine hour.
(f)
Units costing Php56,000 were completed in the Mixing Department and were transferred to
the Finishing Department.
(g) Units costing Php60,000 were completed in the Finishing Department and were transferred
to finished goods.
(h) Finished goods costing Php40,000 were sold on account for Php55,000.
Instructions
Prepare the journal entries to record the preceding transactions for Lutz Company.
(a)
Raw Materials Inventory.....................................................................
50,000
Accounts Payable........................................................................
50,000
(Purchase of raw materials on account)
(b)
Work in Process—Mixing....................................................................
20,000
Work in Process—Finishing...............................................................
14,000
Raw Materials Inventory...........................................................
(To record materials used in production)
34,000
(c) Factory Labor........................................................................................
69,000
Factory Wages Payable..............................................................
69,000
(To record payroll liability)
(d)
Work in Process—Mixing ………………………………………….
Work in Process—Finishing...............................................................
44,000
25,000
Factory Labor...............................................................................
69,000
(To assign factory labor to production)
(e)
Work in Process—Mixing (300 × Php30)........................................
9,000
Work in Process—Finishing (500 × Php20)....................................
10,000
Manufacturing Overhead..........................................................
19,000
(To assign overhead to processes)
(f)
Work in Process—Finishing...............................................................
56,000
Work in Process—Mixing..........................................................
56,000
(To record transfer of units to the Finishing Department)
(g)
Finished Goods Inventory...................................................................
60,000
Work in Process—Finishing.....................................................
60,000
(To record transfer of units to finished goods)
(h)
Accounts Receivable............................................................................
55,000
Sales Revenue..............................................................................
55,000
(To record sale of finished goods on account)
Cost of Goods Sold..................................................................................
Finished Goods Inventory.........................................................
(To record cost of goods sold)
40,000
40,000
2. Mayer Company uses a process cost system. The Molding Department adds materials at the
beginning of the process and conversion costs are incurred uniformly throughout the process. Work
in process on May 1 was 75% complete and work in process on May 31 was 40% complete.
Instructions
Complete the Production Cost Report for the Molding Department for the month of May using the
above information and the information below.
MAYER COMPANY
Molding Department
Production Cost Report
For the Month Ended May 31, 2013
Equivalent Units
QUANTITIES
Physical Units
Materials
Conversion Costs
Units to be accounted for
Work in process, May 1
8,000
Started into production
27,000
Total units
35,000
Units accounted for
Transferred out
Work in process, May 31
Total units
30,000
30,000
30,000
5,000
5,000
2,000
35,000
35,000
32,000
COSTS
Unit costs
Materials
Conversion Costs
Total
Php140,000
Php160,000
Php300,000
Equivalent units
35,000
32,000
Unit costs
Php 4.00
Php 5.00
Costs in May
Php 9.00
Costs to be accounted for
Work in process, May 1
Php 60,000
Started into production
240,000
Total costs
Php300,000
Cost Reconciliation Schedule
Costs accounted for
Transferred out
( Php. 30,000 x Php. 9)
Php 270,000
Work in process, May 31
Materials
Conversion costs
( Php. 5,000 x Php. 4) = Php. 20,000
( Php. 2,000 x Php. 5) = Php. 10,00
30,000
Total costs
270,000
Php300,000
3. Baker Winery manufactures a fine wine in two departments, Fermenting and Bottling. In the
Fermenting Department, grapes are aged in casks for a period of 30 days. In the Bottling
Department, the wine is bottled and then sent to the finished goods warehouse. Labor and
overhead are incurred uniformly through both processes. Materials are entered at the beginning of
both processes. Cost and production data for the Fermenting Department for December 2013 are
presented below:
Cost data
Beginning work in process inventory
Materials
Conversion costs
Total costs
Production data
Beginning work in process (gallons)
Gallons started into production
Ending work in process (gallons)
$ 37,000 ($30,000 of materials cost)
390,000
121,000
$548,000
5,000 (40%)
65,000
8,000 (25%)
Instructions
(a) Compute the equivalent units of production.
(b) Determine the unit production costs.
(c)
Determine the costs to be assigned to units transferred out and ending work in process.
A.
Transferred Out
Ending WIP
Total:
Physical Units
62,000
8,000
70,000
Equivalent Units
Materials
Conversion cost
62,000
62,000
8,000
2,000
70,000
64,000
( 65,000 +5,000 - 8,000)
B. Unit Production Costs:
Materials
Conversion Costs
Total Unit Cost
$6 ( $ 390,000 + 30,000 = 420,000/70,000)
2 ($ 37,000 - 30,000 + 121,000 / 64,000)
$8
C. Costs assigned to units transferred out and ending work in process:
Total Cost Assigned
Transferred out ( 62,000 x $8 )
$ 496,000
Ending work in process
Materials
(8,000 x 6)
$ 48,000
Conversion ( 2,000 x 2)
4,000
52,000
Total
$ 548,000