Managerial Accounting 10th Canadian
Edition Solutions Test Bank Garrison
SOLUTIONS MANUAL, answer key for Accounting for Managerial Accounting
10th Canadian Edition by Ray Garrison, G. Richard Chesley, Ray Carroll, Alan
Webb, Theresa Libby. Download:
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TEST BANK for Accounting for Managerial Accounting 10e/10th Canadian
Edition by Ray Garrison, G. Richard Chesley, Ray Carroll, Alan Webb, Theresa
Libby. Download:
https://testbankarea.com/download/managerial-accounting-10th-canadian-edition-test-bank-garrison/
Chapter 6
Systems Design: Process Costing
Solution to Discussion Case
Estimating percentage of completion of products requires a judgment call.
As with all areas where judgment comes to play, managers will tend to be
more or less conservative depending on several factors including the degree to which they inherently tend toward conservative estimates and forecasts. From the perspective of the organization, the objective is to provide
as accurate an estimate of percentage of completion as possible in order to
better understand and control costs and to ensure the integrity of the costing system. Even so, managers also have incentives to improve profit, both
for the shareholder's sake as well as to meet performance evaluation and
bonus targets each year. But “misestimating” is likely of only short term
benefit since the Board will quite quickly fail to trust the manager's esti-
Solutions Manual, Chapter 6
1
mated percentage of completion if they prove to be wrong over several periods. Once this happens, the company would be foolish to continue to provide incentives to base bonuses on divisional profit figures if these figures
cannot be trusted. In the end, the benefit of subverting the integrity of the
accounting system is likely much lower than the potential long-term reputational cost.
© McGraw-Hill Ryerson Ltd., 2015. All rights reserved.
2
Managerial Accounting, 10th Edition
Solutions to Questions
6-1
A process costing system should be
used in situations where a homogeneous products or services are produced on a continuous
basis.
6-2
1. In job-order costing many different jobs are
worked on during each period each with its own
production requirements. In process costing, a
single product is produced on a continuous basis
and all units are identical.
2. The job cost sheet is the key document in
job-order costing while the department production report is the key document in process costing.
3. Unit costs are computed by job in job-order
costing while unit costs are computed by department in process costing.
6-3
Cost accumulation is simpler under process costing because costs only need to be assigned to departments—not separate jobs. A
company usually has a small number of
processing departments, whereas a job-order
costing system often must keep track of the
costs of hundreds or even thousands of jobs.
6-8 Disagree. In fact, flexible manufacturing
systems may actually increase the use of process costing over time. These systems can have
a major impact on costing since they allow for
an easy switch from producing one type of product to another. The systems’ flexibility means
product switching results in little time lost and
relatively low setup costs. Therefore, companies
are able to move between products with about
the same speed as they would if they were
working in a continuous processing environment. As the use of flexible manufacturing systems grows, so should the application of process
costing techniques.
6-9 Advantages of the weighted average
method include: computations are simpler; the
managers does not need information at too fine
a level of detail so the average is informative
enough; there is little change in cost from period
to period; ending inventory are typically low
each period so the average ends up being quite
accurate.
6-4
In a process costing system, a Work in
Process account is maintained for each processing department.
6-5
The journal entry would be:
Work in Process,- Firing ...... XXXX
Work in Process-, Mixing
...
XXXX
6-6
The costs that might be added to the
Firing Department’s Work in Process account during the period are, (1) transferred-in costs from
the Mixing Department; (2) materials costs; (3)
labour costs; and (4) overhead costs added in
the Firing Department.
6-7
Under the weighted-average method,
equivalent units of production consist of units
transferred to the next department (or to finished goods) during the period plus the equivalent units in the department’s ending work in
process inventory.
Solutions Manual, Chapter 6
3
Exercise 6-1 (20 minutes)
a. To record issuing raw materials for use in production:
Work in Process—Moulding Department .......
28,000
Work in Process—Firing Department.............
5,000
Raw Materials .......................................
33,000
b. To record direct labour costs incurred:
Work in Process—Moulding Department .......
Work in Process—Firing Department.............
Wages Payable .....................................
18,000
5,000
23,000
c. To record applying manufacturing overhead:
Work in Process—Moulding Department .......
Work in Process—Firing Department.............
Manufacturing Overhead .......................
24,000
37,000
61,000
d. To record transfer of unfired, molded bricks from the Molding Department to the Firing Department:
Work in Process—Firing Department.............
67,000
Work in Process—Moulding Department .
67,000
e. To record transfer of finished bricks from the Firing Department to the
finished goods warehouse:
Finished Goods............................................
108,000
Work in Process—Firing Department ......
108,000
f. To record Cost of Goods Sold:
Cost of Goods Sold ......................................
Finished Goods .....................................
4
106,000
106,000
Managerial Accounting, 10th Canadian Edition
Exercise 6-2 (10 minutes)
Weighted-Average Method
Quantity Schedule
Units to be accounted for:
Work in process, October 1
Units started into production
Total units
Units transferred to the next department .............................................
Ending work in process:
Materials: 15,000 units × 70%
complete.....................................
Conversion: 15,000 units × 50%
complete.....................................
Equivalent units of production ...........
Solutions Manual, Chapter 2
25,000
195,000
220,000
Equivalent Units
Materials Conversion
205,000
205,000
15,000
10,500
220,000
215,500
205,000
7,500
212,500
5
Exercise 6-3 (10 minutes)
Weighted-Average Method
Costs per Equivalent Unit:
Work in process, May 1 ...
Cost added during May ...
Total cost (a) .................
Equivalent units of
production (b) .............
Cost per equivalent unit
(a) ÷ (b) .....................
Total
Cost
Materials Labour Overhead
$156,270 $ 14,550 $23,620 $118,100
174,330
88,350 14,330
71,650
$330,600 $102,900 $37,950 $189,750
---------
1,200
1,100
1,100
$85.75
$34.50
$172.50
Total cost per equivalent Unit = $85.75 + $34.50 + $172.50 = $292.75
6
Managerial Accounting, 10th Canadian Edition
Exercise 6-4 (10 minutes)
Weighted-Average Method
Ending work in process inventory:
Equivalent units of production ................
Cost per equivalent unit .........................
Cost of ending work in process inventory
Units completed and transferred out:
Units transferred to the next department
Cost per equivalent unit .........................
Cost of units completed and transferred
out ...................................................
Solutions Manual, Chapter 2
Materials
Conversion
Total
300
$31.56
$9,468
100
$9.32
$932 $10,400
1,300
$31.56
1,300
$9.32
$41,028
$12,116 $53,144
7
Exercise 6-5 (10 minutes)
Work in Process—Mixing .................................
Raw Materials Inventory ............................
330,000
Work in Process—Mixing .................................
Work in Process—Baking .................................
Wages Payable ..........................................
260,000
120,000
Work in Process—Mixing .................................
Work in Process—Baking .................................
Manufacturing Overhead ............................
190,000
90,000
Work in Process—Baking .................................
Work in Process—Mixing ............................
760,000
Finished Goods ...............................................
Work in Process—Baking............................
980,000
8
330,000
380,000
280,000
760,000
980,000
Managerial Accounting, 10th Canadian Edition
Exercise 6-6 (20 minutes)
Weighted-Average Method
1. Equivalent Units (EU)
Litres transferred to the next department during
June* ...............................................................
Work in process, June 30:
Materials: 50,000 litres × 60% complete ............
Labour and overhead: 50,000 litres × 20% complete ..............................................................
Equivalent units of production ..............................
Labour &
Materials Overhead
790,000
790,000
30,000
820,000
10,000
800,000
* Beginning WIP 80,000 + Started 760,000 – Ending WIP 50,000 =
790,000 litres.
2. Cost per Equivalent Unit:
Cost of beginning work in process .....
Costs added during June .................
Total cost (a) ...................................
Equivalent units of production (b) .....
Cost per equivalent unit (a) ÷ (b) .....
Solutions Manual, Chapter 2
Materials
Labour
Overhead
$ 68,600 $ 30,000 $ 48,000
907,200 370,000 592,000
$975,800 $400,000 $640,000
820,000 800,000 800,000
$1.19
$.50
$.80
9
Exercise 6-7 (10 minutes)
Weighted-Average Method
Equivalent Units (EU)
Litres transferred to the Heating Department during October* .....................................................
Work in process, October 31:
Materials: 5,000 litres × 100% complete ............
Labour and overhead: 5,000 litres × 70% complete ..............................................................
Equivalent units of production ..............................
Labour &
Materials Overhead
45,000
45,000
5,000
50,000
3,500
48,500
* Beginning WIP 25,000 + Started 25,000 – Ending WIP 5,000 = 45,000 litres .
10
Managerial Accounting, 10th Canadian Edition
Exercise 6-8 (30 minutes)
Weighted-Average Method
1. Equivalent Units:
Materials Conversion
Units transferred to the next process .......... 320,000
320,000
Ending work in process:
Materials: 60,000 units × 45% complete ..
27,000
Conversion: 60,000 units × 20% complete.
12,000
Equivalent units of production .................... 347,000
332,000
2. Costs per Equivalent Unit:
Materials Conversion
Cost of beginning work in process .............. $ 76,600
$ 34,900
Cost added during the period ..................... 410,000
234,500
Total cost (a) ............................................ $486,600
$269,400
Equivalent units of production (b) .............. 347,000
332,000
Cost per equivalent unit (a) ÷ (b)...............
$1.40
$0.81*
3.
Ending work in process inventory:
Equivalent units of production
(see above) ........................
Cost per equivalent unit (see
above) ...............................
Cost of ending work in process
inventory............................
Materials Conversion
27,000
12,000
$1.40
$0.81
$37,800
$9,720
Total
$47,520
Units completed and transferred out:
Units transferred to the next
department ........................
Cost per equivalent unit
(see previous exercise) .......
Cost of units completed and
transferred out………………….
320,000
320,000
$1.40
$0.81
$448,000
$259,200
$707,200
*rounded
Solutions Manual, Chapter 2
11
12
Managerial Accounting, 10th Canadian Edition
Exercise 6-9 (20 minutes)
Cost Reconciliation
Cost accounted for as follow:
Transferred to Packaging
Dept:
45,000 rolls x $14.50
Work in process, January 31:
Materials, $10.50 per EU
Conversion , $4.00 per EU
Total cost accounted for
Solutions Manual, Chapter 2
Total Cost
Materials
$652,500
45,000
$42,000
$12,800
54,800
$707,300
4,000
Conversion
45,000
3,200
13
Problem 6-10 (45 minutes)
Weighted-Average Method
1. Equivalent Units of Production
Transferred to next department ......................
Ending work in process:
Materials: 100,000 units × 60% complete .....
Conversion: 100,000 units × 40% complete ..
Equivalent units of production.........................
2. Cost per Equivalent Unit
Cost of beginning work in process .................
Cost added during the period .......................
Total cost (a) ...............................................
Equivalent units of production (b) .................
Cost per equivalent unit, (a) ÷ (b) ................
Materials Conversion
380,000
60,000
440,000
380,000
40,000
420,000
Materials Conversion
$ 45,500
425,500
$471,000
440,000
$1.07
$ 25,000
145,000
$170,000
420,000
$0.405*
*rounded
3.
Applying Costs to Units
Materials
Ending work in process inventory:
Equivalent units of production
(materials: 100,000 units ×
60% complete; conversion:
100,000 units × 40% complete) ................................
60,000
Cost per equivalent unit .......
$1.07
Cost of ending work in process
inventory...........................
$64,200
Units completed and transferred out:
Units transferred to the next
department .......................
380,000
Cost per equivalent unit .......
$1.07
14
Conversion
Total
40,000
$0.405
$16,200
$80,400
380,000
$0.405
Managerial Accounting, 10th Canadian Edition
Cost of units completed and
transferred out ..................
Solutions Manual, Chapter 2
$406,600
$153,900 $560,500
15
Problem 6-10 (continued)
4. Cost Reconciliation
Costs to be accounted for:
Cost of beginning work in process inventory
($45,500 + $25,000) .................................
Costs added to production during the period
($425,500 + $145,000) ..............................
Total cost to be accounted for ......................
Costs accounted for as follows:
Transferred to next department:
380,000 units x $1.475.....................................
Work in process June 30
Materials at $1.07 per EU .............................
Conversion at $0.405 per EU ........................
Total cost accounted for ...............................
$ 70,500
570,500
$641,000
$560,500
64,200
16,200
80,400
$640,900*
*off $100 due to rounding
16
Managerial Accounting, 10th Canadian Edition
Problem 6-11 (45 minutes)
Weighted-Average Method
1. Equivalent Units of Production
Transferred to next department* .....................
Ending work in process:
Materials: 55,000 units × 65% complete ........
Materials Conversion
395,000
35,750
Conversion: 55,000 units × 30% complete .....
Equivalent units of production..........................
395,000
16,500
430,750
411,500
*Units transferred to the next department = Units in beginning work in
process + Units started into production − Units in ending work in
process = 85,000 + 365,000 − 55,000 = 395,000
2. Cost per Equivalent Unit
Materials
Cost of beginning work in process ................. $ 101,000
Cost added during the period .......................
462,000
Total cost (a) ............................................... $563,000
Equivalent units of production (b) .................
430,750
Cost per equivalent unit, (a) ÷ (b) ................
$1.31
Conversion
$ 51,000
213,000
$264,000
411,500
$0.64*
*rounded
Solutions Manual, Chapter 2
17
Problem 6-11 (continued)
3. Cost of Ending Work in Process Inventory and Units Transferred Out
Materials Conversion
Ending work in process inventory:
Equivalent units of production
(materials: 55,000 units × 65%
complete; conversion: 55,000
units × 30% complete) ......
35,750
Cost per equivalent unit .......
$1.31
Cost of ending work in process
inventory...........................
$46,833
Units completed and transferred out:
Units transferred to the next de395,000
partment ...........................
Cost per equivalent unit .......
$1.31
Cost of units completed and
transferred out ..................
$517,450
18
Total
16,500
$0.64
$10,560
$57,393
395,000
$0.64
$252,800
$770,250
Managerial Accounting, 10th Canadian Edition
Problem 6-11 (continued)
4. Cost Reconciliation
Costs to be accounted for:
Cost of beginning work in process inventory
($101,000 + $51,000) ....................................
Costs added to production during the period
($462,000 + $213,000) ..................................
$152,000
675,000
Total Cost
Costs accounted for as follows:
Transferred to the Coating Department
395,000 x $1.95
Work in process, May 31
Materials at $1.31 per EU
Conversion at $0.64 per EU
Total ending Work in process
Total cost
$827,000
$770,250
46,833
10,560
57,393
*$827,643
*Difference of $643 due to rounding of the per unit costs
Solutions Manual, Chapter 2
19
Problem 6-12 (30 minutes)
Weighted-Average Method
1. Total units transferred to the next department ..
Less units in the May 1 inventory ......................
Units started and completed in May ..................
2. The equivalent units were:
28,000
8,000
20,000
Materials Conversion
Transferred to next department ..................
Ending work in process:
Materials: 6,000 units × 75% complete .....
Conversion: 6,000 units × 50% complete..
Equivalent units of production.....................
28,000
28,000
4,500
3,000
31,000
32,500
3. The costs per equivalent unit were:
Cost of beginning work in process .................
Cost added during the period .......................
Total cost (a) ...............................................
Equivalent units of production (b) .................
Cost per equivalent unit, (a) ÷ (b) ................
Materials Conversion
£ 9,000
56,000
£65,000
32,500
£2.00
£ 4,400
31,250
£35,650
31,000
£1.15
4. The ending work in process figure is verified as follows:
Materials
Ending work in process inventory:
Equivalent units of production
(see above) .................................
Cost per equivalent unit .................
Cost of ending work in process
inventory.....................................
4,500
£2.00
£9,000
Conversion
Total
3,000
£1.15
£3,450 £12,450
5. Multiplying the total unit cost figure of £3.15 per unit by 1,000 units
does not provide a valid estimate of the incremental cost of processing
an additional 1,000 units through the department. If there is sufficient
idle capacity to process an additional 1,000 units, the incremental cost
per unit is almost certainly less than £3.17 per unit because the conversion costs are likely to include fixed costs.
20
Managerial Accounting, 10th Canadian Edition
Problem 6-13 (45 minutes)
Weighted-Average Method
1. Equivalent Units of Production
Materials Conversion
Transferred to next department* ..................... 270,000
Ending work in process:
Materials: 45,000 kilograms × 100% complete
45,000
2 3
Conversion: 45,000 kilograms × / complete .
Equivalent units of production.......................... 315,000
*35,000 + 280,000 – 45,000 = 270,000.
2. Cost per Equivalent Unit
Cost of beginning work in process .................
Cost added during the period .......................
Total cost (a) ...............................................
Equivalent units of production (b) .................
Cost per equivalent unit, (a) ÷ (b) ................
Materials
$ 43,400
397,600
$441,000
315,000
$1.40
270,000
30,000
300,000
Conversion
$ 20,300
189,700
$210,000
300,000
$0.70
3. Cost of Ending Work in Process Inventory and Units Transferred Out
Materials Conversion
Ending work in process inventory:
Equivalent units of production
(see above) .......................
45,000
Cost per equivalent unit .......
$1.40
Cost of ending work in process
inventory...........................
$63,000
Units completed and transferred out:
Units transferred to the next department ...........................
270,000
Cost per equivalent unit .......
$1.40
Cost of units completed and
transferred out ..................
$378,000
Solutions Manual, Chapter 2
Total
30,000
$0.70
$21,000
$84,000
270,000
$0.70
$2.10
$189,000
$567,000
21
Problem 6-13 (continued)
4. In computing unit costs, the weighted-average method mixes costs of
the prior period with current period costs. Thus, under the weighted-average method, unit costs are influenced to some extent by what happened in a prior period. This problem becomes particularly significant
when attempting to measure performance in the current period. Good
(or bad) cost control in the current period might be concealed by the
costs that have been brought forward in the beginning inventory.
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Managerial Accounting, 10th Canadian Edition