Chapter 9
process costing
PROCESS COSTING is a method of costing
used mainly in manufacturing where units are
continuously mass-produced through one or
more processes.
 manufacture of erasers, chemicals or
processed food.
Cost of production report
1) Physical Unit Schedule
2) Equivalent units of production (EUP)
3) Unit Costs
4) Transferred out Cost
Ending WIP
Physical unit
Beginning WIP
Started
Units to Account for
xxx
xxx
xxx
Beginning WIP
Started and completed
Completed & Transferred out
Ending WIP
Units Accounted for
xxx
xxx
xxx
xxx
xxx
Equivalent units [production
80%
20%
100%
80%
20%
100%
80%
20%
100%
80%
20%
100%
80%
20%
Units Completed
During Month
Units in Process
End of Month
A
B
C
D
10,000
26,000
12,000
20,000
E
45,000
5,000
8,000
2,000
6,000
4,000
2,000
3,000
Stage of
Completion
½
¾
¾
½
¾
1/5
¾
EUP
12,500
32,000
13,500
26,000
47,650
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Problem 2
The Casper Corporation recorded costs
for the month of P15,750 for materials, P40,950 for
labor, and P25,200 for overhead. There was no
beginning Work in Process Inventory; 9,000 units
were completed and transferred and 2,000 were
in process at the end of the period, ¾
completed.
Required:
1) Compute the equivalent production for the
month
Physical Units
Beginning WIP
Started
Units to Account for
0
11,000
11,000
Beginning WIP
Started and completed
Completed & Transferred out
Ending WIP
Units Accounted for
0
9,000
9,000
2,000
11,000
2) Compute the month’s unit cost for each
element of cost.
MATERIAL
LABOR
OVERHEAD
C&T
9,000
9,000
9,000
EWIP
1,500
1,500
1,500
UAF
10,500
10,500
10,500
3) Unit Cost
MATERIAL
P 15,750 /
10,500
P 1.5
LABOR
P 40,950 /
10,500
P3.9
OVERHEAD
P 25,200 /
10,500
P 2.4
P 1.5 + P 3.9 + P 2.4 = P7.8 complete unit cost
Problem 1
4) Transferred Out
T/O 9,000 x P 7.8 = P 70,200
EWIP 1,500 X P 7.8 = P 11,700
= P 81,900
Problem 3
1|Mikee P.
Compute the equivalent production for the
month for each of the following cases:
CASE 1
Started in process 10,000 units; completed
8,000 units; work in process, end of period
2,000 units, 3/4 completed. All material are
added at the beginning of the process.
MATERIAL
CC
8,000
8,000
8,000
10,000
2,000 (3/4)
2,000
1,500
10,000
9,500
CASE 2
Received from preceding department 40,000 units; completed 34,000 units; work in
process, end of period, 6,000 units, 1/4
completed. All materials are added at the
end of the process.
MATERIAL
CC
34,000
34,000
34,000
40,000
6,000 (1/4)
0
1,500
34,000
35,500
CASE 3
Started in process 40,000 units; completed
34,000 units, closing inventory goods in
process 3,000 units. 1/3 completed, and 3,000
units, 1/5 completed. 75% of the materials are
added at the beginning of the process and
25% when the process is 1/2 completed.
34,000
3,000 (1/3)
40,000
6,000
3,000 (1/5)
MATERIAL
34,000
2,250
0
2,250
0
38,500
CC
34,000
1,000
6,000
35,600
The following data appeared in the accounting
records of the Beautiful Company.
Started in Process
12,000 Units
Completed & Transferred
10,500 units
Work in Process, end the month 1,500 untis
Stage of completion
2/5 complete
Costs:
Materials
P 72,000
Labor
88,800
Overhead
44,400
One half of the materials are added at the
beginning of the process and the balance when
the untis are one-half completed.
Required: Calculate the ff:
1) Equivalent production for materials and
conversion cost.
Physical Units
Beginning WIP
Started
Units to Account for
0
12,000
12,000
Beginning WIP
0
Started and completed
10,500
Completed & Transferred out 10,500
Ending WIP
1,500
Units Accounted for
12,000
Equivalent units production
MATERIAL
LABOR
C&T
10,500
10,500
EWIP
750
600
11,250
11,100
2) Cost of the untis completed and transferred.
3) cost of the units in process at the end of the
month.
2-3 answer:
Unit cost
MATERIAL
P 72,00 / 11,250
P 6.4
CONVERSION COST
P 133,200 / 11,100
P 12
P 6.4 + P 12 = P 18.4
Transferred Out
C&T
10,500 x P 18.4
P 193,200
EWIP – M
750 x P 6.4 = P 4,800
– CC 600 x P 12 = P 7,200
EWIP
12,000
P 205,200
Problem 4
2|Mikee P
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Problem 5
ABM Company uses two departments to
produce a product. The following data were
taken from the books for the month of January,
2019.
Dept 1
Units:
Started
Completed &Trasferred
In process, End
Stage of completion
Costs:
Materials
Labor
Factory Overhead
Dept 2
60,000
40,000
20,000
75%
30,000
10,000
80%
P 480,000
330,000
220,000
P 245,000
190,000
114,000
Required: Cost of production report
0
40,000
40,000
Beginning WIP
0
Started and completed
30,000
Completed & Transferred out 30,000
Ending WIP
10,000
Units Accounted for
40,000
C&T
EWIP
MATERIAL
30,000
5,000
35,000
TRANS IN
30,000
10,000
40,000
CC
30,000
8,000
38,000
COSTS ARE TREATED LIKE A
MATERIAL BUT ARE ALWAYS ADDED AT THE
BEGINNING
Unit cost
DEPARTMENT 1
Physical Units
Beginning WIP
Started
Units to Account for
0
60,000
60,000
Beginning WIP
0
Started and completed
40,000
Completed & Transferred out 40,000
Ending WIP
20,000
Units Accounted for
60,000
Equivalent units production
MATERIAL
40,000
20,000
60,000
Beginning WIP
Started
Units to Account for
Equivalent units production
Department 1 - all materials added at the
beginning of the process
Department 2 - 50% of the materials are added
at the beginning of the process remaining
50% added at the end of the process.
C&T
EWIP
Physical Units
CONVERSION COST
40,000
15,000
55,000
Unit cost
MATERIAL
P 480,000 / 60,000
CONVERSION COST
P 550,000 / 55,000
P 8
P 10
TRANS IN
P 720,000 /
40,000
P 18
MATERIAL
P 245,000 /
35,000
P 7
CC
P 304,000 /
38,000
P8
P 8 + P 7 + P 18 = P 33
Transferred Out
C&T
30,000 x P 33
EWIP – T/in 10,000 x P 18
–M
5,000 x P 7
– CC 8,000 x P 8
EWIP
=
P 990,000
= P 180,000
= P 35,000
= P 64,000
P 279,000
P 1,269,000
Department 1
Department 2
P 480,000
P 245,000
330,000
190,000
220,000
114,000
P 1,030,000
P 549,000
= P 1,579,000
EWIP 310,000
C&T & EWIP 1,269,000
P 8 + P 10 = P 18
Transferred Out
C&T
40,000 x P 18 =
P 720,000
EWIP – M 20,000 x P 8 = P 160,000
– CC 15,000 x P 10 = P 150,000
EWIP
P 310,000
P 1,030,000
DEPARTMENT 2
3|Mikee P.
Chapter 10
Average and fifo costing
Problem 1
A company’s record shows the following information concerning the work in process in a
chemical plant.
a) Beginning inventory – 10,000 units (materials are 80% complete; conversion costs are 60%
complete)
b) Transferred out – 50,000 units
c) Ending inventory – (materials are 50% complete, conversion costs are 40% complete)
d) Started this month – 45,000 units
Requirements:
Compute the equivalent units for materials and conversion costs using FIFO and Average.
Physical Units
Beginning WIP
Started
Units to Account for
10,000
45,000
55,000
Beginning WIP
Started and completed
Completed & Transferred out
Ending WIP
Units Accounted for
5,000 ✓
45,000 ✓
50,000
5,000 ✓
55,000
Equivalent units production
FIRST IN - FIRST OUT
WEIGHETD AVERAGE
Materials
CC
Materials
CC
2,000
4,000
40,000
40,000
50,000
50,000
✓
2,500
2,000
2,500
2,500
✓
44,500
46,000
52,500
52,500
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Problem 2
A company’s record show the following information concerning the work in process at an
assembly plant:
a) Beginning inventory – (materials are 60% complete; conversion costs are 75% complete)
b) Transferred out – 50,000 units
c) Ending inventory – 10,000 (materials are 60% complete, conversion costs are 80% complete)
d) Started this month – 45,000 units
Requirements:
Compute the equivalent units for materials and conversion costs using FIFO and Average.
Physical Units
Beginning WIP
Started
Units to Account for
15,000
45,000
60,000
Beginning WIP
Started and completed
Completed & Transferred out
Ending WIP
Units Accounted for
15,000 ✓
35,000 ✓
50,000
10,000 ✓
60,000
4|Mikee P
Equivalent units production
FIRST IN - FIRST OUT
WEIGHETD AVERAGE
Materials
CC
Materials
CC
6,000
3,750
35,000
35,000
50,000
50,000
✓
6,000
8,000
6,000
8,000
✓
47,000
46,750
56,000
58,000
Problem 3
A company uses the FIFO method to account for its work in process inventories. The account records
show the following information:
Beginning work in process inventory
Materials
P 360
Conversion costs
180
Debits to work in process inventory this period:
Materials
P 3,714
Conversion costs
2,258
Units:
Beginning inventory
300 units
Percent of completion (materials, 60%, conversion cost, 30%)
Started this period
2,000 units
Ending inventory
600 units
Percent of completion: (materials, 40%, conversion cost, 20%)
Requirements:
1) Compute the equivalent units for materials and conversion costs.
2) Compute the unit cost for materials and conversion costs.
3) Compute the cost of goods transferred out.
4) Compute the cost of the ending inventory.
Physical Units
Beginning WIP
Started
Units to Account for
300
2,000
2,300
Beginning WIP
Started and completed
Completed & Transferred out
Ending WIP
Units Accounted for
300 ✓
1,400 ✓
1,700
600 ✓
2,300
Equivalent units production
FIRST IN - FIRST OUT
WEIGHETD AVERAGE
Materials
CC
Materials
CC
120
210
1,400
1,400
1,700
1,700
✓
240
120
240,
120
✓
1,760
1,730
1,940
1,820
Unit cost
FIRST IN - FIRST OUT
Materials
CC
3,714
2,258
1,760
1,730
P 2.11
P 1.31
= P 3.42
WEIGHETD AVERAGE
Materials
CC
4,074
2,438
1,940
1,820
P 2.10
P 1.34
= P 3.44
Cost of goods transferred out
FIRST IN - FIRST OUT
Beg WIP
540,000
M (120 X P2.11)
253.20
CC (210 X P1.31)
275.10
Current (1,400 x P3.42)
TOTAL
M (240 x P2.11)
CC (120 x P1.31)
WEIGHETD AVERAGE
1,068.30
4,788
5,856.30
Current (1,700 x P3.44)
ENDING WORK IN PROCESS
506.40
157.20
663.60
M (240 x P2.10)
CC (120 x P1.34)
5,848
504
160.80
664.80
Problem 4
5|Mikee P.
The beginning work in process inventory showed a balance of P48,240. Of this amount, P16,440 is the
cost of direct materials, and P31,800 are conversion costs. There were 8,000 units in the beginning
inventory that were 30% complete with respect to both direct materials and conversion costs.
During the period, 17,000 units were transferred out and 5.000 remained in the ending inventory. The
units in the ending inventory were 80% complete with respect to direct materials and 40% complete with
respect to conversion costs.
Costs incurred during the period amounted to P126,852 for direct materials and P219,120 for conversion
costs.
Requirements: Compute for the following using FIFO and Average
1) Equivalent production for materials and conversion costs.
2) Cost per equivalent unit for materials and conversion costs.
Physical Units
Beginning WIP
Started
Units to Account for
8,000
14,000
22,000
Beginning WIP
Started and completed
Completed & Transferred out
Ending WIP
Units Accounted for
8,000 ✓
9,000 ✓
17,000
5,000 ✓
22,000
Equivalent units production
FIRST IN - FIRST OUT
WEIGHETD AVERAGE
Materials
CC
Materials
CC
5,600
5,600
9,000
9,000
17,000
17,000
✓
4,000
2,000
4,000
2,000
✓
18,600
16,600
21,000
19,000
Unit cost
FIRST IN - FIRST OUT
WEIGHETD AVERAGE
Materials
CC
Materials
CC
126,852
219,120
143,292
250,920
18,600
16,600
21,000
19,000
P 6.82
P 13.20
P 6.82
P 13.21
= P 20.02
= P 20.03
Cost of goods transferred out
FIRST IN - FIRST OUT
Beg WIP
48,240
M (5,600 x P6.82)
38,192
CC (5,600 x P13.20)
73,920
Current (9,000 x P20.02)
TOTAL
M (4,000 x P6.82)
CC (2,000 x P13.20)
PROBLEM 5
6|Mikee P
WEIGHETD AVERAGE
160,352
180,180
340,532
Current (17,000 x P20.03)
ENDING WORK IN PROCESS
27,280
26,400
53,680
M (4,000 x P6.82)
CC (2,000 x P13.21)
340,510
27,280
26,420
53,700
Auto Novelties, Inc. manufactures a small robot that can be moved around by remote control. It can
be used as a novelty to serve food and drinks to guests, and with a special attachment it can vacuum
the carpet. The materials are all added at the beginning of the Assembly Operation (the first operation).
Labor and added uniformly during the month. Data for the month of July in the assembly Operation
are given as follow
Units
Work in process, July 1
15,000
Units started in process
250,000
Costs
Work in process, July
Materials 1
P210,000
Labor and overhead
60,000
July costs:
Materials
3,500,000
Labor and overhead
1,458,000
The inventory of work in process on July 1 was complete as to materials but only 2/3 complete as to
labor and overhead. On July 31, the inventory consisted of 20,000 units that were 40% complete with
respect to labor and overhead.
Required: Using average method and FIFO method compute for
1) Equivalent production for materials, labor and overhead
2) Unit cost for materials, labor and overhead
3) Total costs of units completed ad transferred
4) Total costs of units in process, end
Physical Units
Beginning WIP
Started
Units to Account for
15,000
250,000
265,000
Beginning WIP
Started and completed
Completed & Transferred out
Ending WIP
Units Accounted for
15,000 ✓
20,000 ✓
245,000
20,000 ✓
265,000
Equivalent units production
FIRST IN - FIRST OUT
WEIGHETD AVERAGE
Materials
CC
Materials
CC
0
5,000
230,000
230,000
245,000
245,000
✓
20,000
8,000
20,000
8,000
✓
250,000
243,000
265,000
253,000
Unit cost
FIRST IN - FIRST OUT
Materials
CC
3,500,000
1,458,000
250,000
243,000
P 14
P6
= P 20
WEIGHETD AVERAGE
Materials
CC
3,710,000
1,518,000
265,000
253,000
P 14
P6
= P 20
Cost of goods transferred out
FIRST IN - FIRST OUT
Beg WIP
270,000
M (0 x P14)
0
CC (5,000 x P6)
30,000
Current (230,000 x P20)
TOTAL
M (20,000 x P14)
CC (8,000 x P6))
WEIGHETD AVERAGE
30,000
4,600,000
4,900,000
Current (245,000 x P20)
ENDING WORK IN PROCESS
280,000
48,000
328,000
M (20,000 x P14)
CC (8,000 x P6)
4,900,000
48,000
328,000
7|Mikee P.
Problem 6
At the beginning of September, the Ellery Company had P 27,950 (direct materials - P7.800, conversion
cost - P 20,150) in Department A's beginning work inprocess inventory. The inventory consisted of 15,500
units which had 100% of direct materials and 65% of conversion cost. During September, 36,000 units
were started in process. Costs incurred during the month were: direct materials - P54.000, conversion
costs P 79.000. As the 48,000 units were completed, they were immediately transferred to Department
B. At the end of September, 3,500 were still in process and are 100% complete as to materials, and 45%
converted.
Required: Using average method and FIFO method determine the following
1) Equivalent production for materials and conversion cost
2) Unit cost for materials and conversion cost
3) Total costs of units completed and transferred
4) Total costs of units in process, end
Physical Units
Beginning WIP
Started
Units to Account for
15,500
36,000
51,500
Beginning WIP
Started and completed
Completed & Transferred out
Ending WIP
Units Accounted for
15,500 ✓
32,500 ✓
48,000
3,500 ✓
51,500
Equivalent units production
FIRST IN - FIRST OUT
WEIGHETD AVERAGE
Materials
CC
Materials
CC
0
5,425
32,500
32,500
48,000
48,000
✓
3,500
1,575
3,500
1,575
✓
36,000
39,000
51,500
49,575
Unit cost
FIRST IN - FIRST OUT
Materials
CC
54,000
79,000
36,000
39,500
P 1.50
P2
= P 3.50
WEIGHETD AVERAGE
Materials
CC
61,800
99,150
51,500
49,575
P 1.20
P2
= P 3.20
Cost of goods transferred out
FIRST IN - FIRST OUT
Beg WIP
27,950
M (0 x P1.50)
0
CC (5,425 x P2)
10,850
Current (32,500 x P3.50)
TOTAL
M (3,500 x P1.50)
CC (1,575 x P2)
8|Mikee P
WEIGHETD AVERAGE
38,800
113,750
152,550
Current (48,000 x P3.2)
ENDING WORK IN PROCESS
5,250
3,150
8,400
M (3,500 x P1.2)
CC (1,575 x P2)
153,600
4,200
3,150
7,350
PROBLEM 14
The following were taken from the books of Michelle Company for the month of June, 2019. The
company uses FIFO in costing finished goods and goods sold
Inventories, June 1
Materials
P 50,000
Finished goods ( 5,000 units)
75,000
The transactions for the month of June are as follows:
1) Purchased materials on account, P 180,000
2) Issued materials - Dept. 1 P 90,000, Dept. 2 - P112,500
3) The total payroll for the month amounted to P 135,600 distributed as follows:
Dept. 1-P 64,800, Dept. 2-P 61,600 and the balance - indirect labor
4) Factory overhead applied amounted to Dept 1-P 59,400, Dept. 2-P 50,600
5) Units completed and transferred to finished goods - 40.000
6) Sold 25.000 units at P 400.000
QUANTITY DATA
DEPARTMENT 1
60,000
45,000
60%
Units Started
Uunits Completed
Stage of Completion
DEPARTMENT 2
40,000
80%
Materials, in both departments, are added 100% at the beginning!
Requirements:
1. Journal entries to record the above transactions
(1) Raw materials Inventory
Accounts Payable
180,000
180,000
(2) Work in Process – Dept 1
Work in Process – Dept 2
Raw Materials Inventory
64,800
112,500
202,500
(3) Work in Process – Dept 1
Work in process - Dept 2
Factory overhead control
Accrued payroll
64,800
61,600
9,100
135,600
(4) Work in Process – Dept 1
59,400
Work in Process – Dept 2
50,600
Factory overhead applied
110,000
(5) Work in Process – Dept 2
Work in Process – Dept 1
171,000
171,000
Finished Goods Inventory
Work in Procfess – Dept 2
354,000
354,000
(6) Accounts Receivable
Sales (25 untis)
400,000
400,000
Cost of Goods Sold
Finished Goods Inventory
Beginning Finished Goods
Current (at P8.85)
Units Sold
252,000
252,000
5,000
75,000
20,000 177,000
25,000 252,000
2. Cost of units completed and transferred - Dept. 1
Physical Units
Beginning WIP
15,500
Started
36,000
Units to Account for
51,500
Beginning WIP
Started and completed
Completed & Transferred out
Ending WIP
Units Accounted for
15,500
32,500
48,000
3,500
51,500
EUP
FIRST IN - FIRST OUT
Materials
CC
BWIP
S&T
EWIP
45,000
45,000
15,000
15,000
60,000
54,000
UNIT COSTS
FIRST IN - FIRST OUT
Materials
CC
90,000
124,200
60,000
54,000
P 1.50
P 2.30
= P 3.80
TRANSFERRED OUT COSTS
BWIP
Current Cost (45,000 x P3.8)
ENDING WIP
M (15,000 x P1.5)
CC (9,000 x P2.3)
171,000
171,000
22,500
20,700
9|Mikee P.
43,200
3. Cost of units completed and transferred - Dept. 2
Physical Units
Beginning WIP
Started
45,000
Units to Account for
45,000
Beginning WIP
Started and completed
Completed & Transferred out
Ending WIP
Units Accounted for
Materials
40,000
40,000
5,000
45,000
EUP
FIRST IN - FIRST OUT
Trans in
CC
BWIP
S&T
EWIP
UNIT COSTS
FIRST IN - FIRST OUT
Materials
CC
90,000
124,200
60,000
54,000
P 1.50
P 2.30
= P 3.80
TRANSFERRED OUT COSTS
BWIP
Current Cost (45,000 x P3.8)
171,000
171,000
ENDING WIP
M (15,000 x P1.5)
22,500
CC (9,000 x P2.3)
20,700
43,200
4. Cost of goods sold statement
10 | M i k e e P
/