Professional Documents
Culture Documents
QUESTIONS
11-1 A company that should use a process costing system typically has homogenous
11-2 Process costing is likely used in industries such as chemicals, oil refining,
textiles, paints, flour, canneries, rubber, steel, glass, food processing, mining,
automobile production lines, electronics, plastics, drugs, paper, lumber, leather
goods, metal products, sporting goods, cement, and watches.
11-3 Differences between job and process costing: (1) accumulating costs by job vs.
department, (2) collecting cost data using the job cost sheet vs. the production
cost report, and (3) computing unit cost by job vs. department.
11-4 Equivalent units are the number of completed units that could have been
produced given the amount of work actually performed on both complete and
partially completed units.
11-5 If direct materials are added at the beginning of the process rather than uniformly
throughout the process, we do not need to add any equivalent units of direct
materials to finish the work-in-process beginning inventory.
11-6 A production cost report is a report, which summarizes the physical units and
equivalent units of a department, the costs incurred during the period, and costs
assigned to both finished goods and work-in-process inventories. The five key
steps in preparing a production cost report are analysis of physical units,
calculation of equivalent units, determination of total costs to account for,
computation of unit costs, and assignment of total costs.
11-7 The weighted-average method equivalent units include both the units placed into
production in the current period and the units from the prior period that are still
in production at the beginning of this period. FIFO method does not include the
equivalent units of the prior period that are still in production at the beginning of
this period. Equivalent units under the weighted-average method are larger
than those under the FIFO method. They are equal only if there is no beginning
work-in-process inventory.
and ending inventories or manufacturing costs per unit change dramatically from
period to period.
Solutions Manual
11-1
11-11 Transferred-in costs are costs of work done in the prior department that are
transferred into the current department.
xxx
xxx
11-13 Under the FIFO method of handling units transferred out, beginning inventory
cost, the cost added in this period to complete the beginning inventory, and the
cost of units started and completed are considered separately.
11-15 Process costing uses the same manufacturing accounts as job costing. Journal
entries are essentially the same as in job costing. However, instead of tracing
product costs to specific jobs, process costing accumulates costs in production
departments or cost centers.
11-16 Operation costing is a hybrid costing system that uses job costing to assign
direct materials costs, and uses process costing to assign conversion costs to
products or services.
11-17 Automation will reduce the difference of unit costs between the weightedaverage cost method and the FIFO cost method.
EXERCISES
11-18 Physical Units (20 min)
1. Work-in-process inventory, 2/1
80,000
Units started
60,000
Total units to account for
140,000
Units completed
(75,000)
Work-in-process inventory, 2/28
65,000
2. Units completed
Work-in-process inventory, 6/30
Total units accounted for
Units started
Work-in-process Inventory, 6/1
83,000
55,000
138,000
(75,000)
63,000
3. Units completed
Work-in-process inventory, 9/30
Total units accounted for
Work-in-process inventory, 9/1
Units started
7,300
3,400
10,700
(5,500)
5,200
Solutions Manual
11-3
1,500
6,500
8,000
(2,300)
5,700
5,700
1,150
6,850
Conversion:
Units completed
Work-in-process inventory, 5/31 2,300 x 30% =
Total equivalent units
5,700
690
6,390
30,000
150,000
180,000
Output
Units completed
Work in process inventory, 12/31
Total units accounted for
165,000
15,000
180,000
Solutions Manual
11-5
3,000,000
4,850,000
7,850,000
Output
Units completed
Work-in-process inventory, 9/30
Total units accounted for
5,450,000
2,400,000
7,850,000
5,450,000
2,400,000 x 100% =
2,400,000
7,850,000
3,000,000 x 100% = (3,000,000)
4,850,000
Conversion:
Units completed
Work-in-process inventory(9/30),
Total
Work-in-process inventory(9/1),
Equivalent units
5,450,000
2,400,000 x 80% =
1,920,000
7,370,000
3,000,000 x 25% =
(750,000)
6,620,000
Solutions Manual
100%
12%
9%
11-7
Equivalent Units
DM
Conversion
800
300
1,100
800
36
836
200
900
18
818
100% 60,000
70% 20,000
80,000
20% (30,000)
50,000
60,000
14,000
74,000
(6,000)
68,000
$6.90
50,000
$3.00
68,000
$3.90
555,000
55,000
160,000
340,000
850,000
32,000
320,000
250,000
602,000
Solutions Manual
11-9
740,000
Solutions Manual
11-11
4,000
400
4,400
( 600)
3,800
PROBLEMS
11.27 Weighted-Average Method (25-30 min)
1. Quantity Schedule (not required)
Input
Work-in-process inventory, 3/1
Units started
Total units to account for
Output
Units completed
Work-in-process inventory, 3/31
Total units accounted for
0
25,000
25,000
23,000
2,000
25,000
23,000
2,000
25,000
23,000
24,200
1,200
(20 min)
Whole
Units
Materials Conversion
3,000
100%
50%
7,000
10,000
8,500
1,500
100%
50%
10,000
$ 27.200
$ 34.286
Solutions Manual
11-13
$
$
25.189
24.387
Total
76,000
429,000
505,000
$
$
52.389
58.673
27,000
60,000
87,000
Output
Units completed
Work-in-process inventory, 8/31
Total units accounted for
70,000
17,000
87,000
Equivalent Units:
Material X
Units completed
70,000
Work-in-process inventory, 8/31 17,000 x 100% = 17,000
Total equivalent units
87,000
Material Y
Units completed
Work-in-process inventory, 8/31 17,000 x 0% =
Total equivalent units
70,000
0
70,000
Conversion
Units completed
Work-in-process inventory, 8/31 17,000 x 40% =
Total equivalent units
70,000
6,800
76,800
Solutions Manual
11-15
Units completed
Work-in-process, May 31:
DM 4,000 x 100% =
CON 4,000 x 60% =
Total
Less: EU in WIP, May 1:
DM 3,000 x 100% =
CON 3,000 x 40% =
FIFO equivalent units
Cost added during May
Divided by EU
= Unit cost
(=68,000 3,000)
Equivalent Units
Direct Materials
Conversion
68,000
68,000
4,000
72,000
( 3,000)
69,000
$ 172,500
69,000
$2.50
2,400
70,400
(1,200)
69,200
$224,900*
69,200
$3.25
Cost Incurred
Work-in-process inventory, May 1
Cost added during May
Total cost to account for
$ 13,800
397,400*
$411,200
Solutions Manual
11-17
25,000
19,000 = finished units + % complete x End WIP
22,000 = finished units + % complete x End WIP
Cost Added:
Trans-in
Beginning WIP
Current Costs
Total
Cost per EU
25,000
100,000
125,000
$
0
30,000
30,000
5.000 $
Solutions Manual
1.579 $
5,000
37,000
42,000
30,000
167,000
197,000
1.909 $ 8.488
161,273
6,000 units
30,000
5,727
35,727
197,000
11-19
Total
Solutions Manual
11-21
11-36
FIFO
Whole
Equivalent Units
Units
Materials Conversion
200,000
100%
80%
1,000,000
1,200,000
900,000
300,000
100%
50%
1,200,000
Beginning WIP
200,000
504,000
704,000
Current Costs
1,300,000
3,192,000 4,492,000
Total
1,500,000
3,696,000 5,196,000
Cost per EU
$ 1.3000 $ 3.5865 $ 4.8865
(*Note Coversion costs are labor +60% applied overhead)
704,000
143,461
3,420,562
4,268,022
300,000 units
390,000
537,978
927,978
5,196,000
Solutions Manual
11-23
Whole
Equivalent Units
Units
Materials Conversion
4,000
100%
80%
15,000
19,000
16,000
3,000
19,000
Cost per EU
90%
57,800
141,700
199,500
$
60%
23,400
93,475
116,875
10.500 $
6.250 $
23,360
110,140
133,500
Total
104,560
345,315
449,875
7.500 $ 24.250
388,000
31,500
16,875
13,500
61,875
449,875
Solutions Manual
11-25
15,000
80,000
95,000
Output
Units completed
Work-in-process inventory, 6/30
Total units accounted for
70,000
25,000
95,000
.
11-39 (Continued)
2. Costs per equivalent unit:
Costs
Material A Material B Conversion
Costs incurred in June
$260,000 $403,750 $461,437.50
Divided by EU
80,000
95,000
80,250
Unit cost
$3.25
$4.25
$5.75
3. Cost of units transferred out:
Work-in-process inventory, June 1
$ 85,437.50
Cost to finish beginning WIP:
Material B 15,000 x $4.25 =
$63,750
Conversion 15,000 x 60% x $5.75 = 51,750 115,500.00
Total
$200,937.50
Cost of units started and completed:
($3.25 + $4.25 + $5.75) x (70,000 - 15,000) = 728,750.00
Cost of units transferred out
$929,687.50
4. Cost of ending work-in-process inventory:
Material A $3.25 x 25,000 =
Material B $4.25 x 25,000 =
Conversion $5.75 x 16,250 =
Solutions Manual
11-27
$ 81,250.00
106,250.00
93,437.50
$280,937.50
11- 40 (continued)
Fabrication Department Cost Report
QUANTITY RECAP: PHYSICAL UNITS
Beginning WIP
Units started or Trans-in
TOTAL IN Process
Units Finished or Trans-out
Normal spoilage
Abnormal spoilage
Ending WIP
TOTAL OUT Process
Whole
Equivalent Units
Units
Materials Conversion
6,000
100%
20%
48,000
54,000
50,000
4,000
100%
40%
54,000
Beginning WIP
Current Costs
Total
WTAVG
15,000
117,500
132,500
Cost per EU
$ 2.4537
Solutions Manual
Conversion
11-29
Total
20,000
310,850
330,850
35,000
428,350
463,350
6.4118
$ 8.8655
443,276
20,074
463,350
Whole
Equivalent Units
Units
Materials Conversion
10,000
0%
40%
50,000
60,000
55,000
5,000
0%
40%
60,000
Beginning WIP
Current Costs
Total
WTAVG
Cost per EU
92,000
443,276
535,276
$
8.9213
292,000
1,166,676
1,458,676
$ 16.2000 $ 25.1213
200,000
723,400
923,400
1,381,670
77,006
1,458,676
100%
DM
WIP, January 1
$
0
Costs incurred during Jan. 300,000
Total costs to acct. for
$300,000
Divided by equivalent units
Costs per equivalent unit
50,000
$6.00
50,000
50,000
50,000
0
50,000
50,000
0
50,000
0
50,000
$50,000
Total
$
0
350,000
$350,000
50,000
$1.00
$7.00
Conv
Solutions Manual
11-31
53,000
2,000
55,000
100%
25%
Trans.In
$350,000
50,000
$7.00
53,000
2,000
53,000
500
55,000
53,500
(5,000)
( 1,250)
50,000
52,250
Conv
Total
$15,000
$40,000 390,000
$405,000
52,250
$0.7656
$7.7656
Solutions Manual
11-33
$390,619.80
14,382.80
$405,002.60*
$8.00
= $12,000/ 1,500
$7.00
= $10,710/ 1,530
11-42 (Continued 1)
(Step 5)
Cost Assignment
Direct
Total
Materials
Units Completed:
From work-in-process,
beginning inventory $ 4,530
Current costs incurred
completing units
2,450 = 500 x 70% x $7
Total cost from beginning
inventory
$ 6,980
Units started and completed
this period
16,500 = (1,600-500) x $15
Total cost of units
completed
$23,480
Work-in-process,
(400x$8)
ending inventory
3,760
$3,200
Total costs acct. for $27,240
Solutions Manual
11-35
Conversion
Costs
(80x$7)
$560
$49.568
($27,680/
1,900)
$14.568
($38,000/
1,900)
$20.00
($26,250/
1,750)
$15.00
(Step 5)
Units completed
Work-in-process,
4/30
Total costs
accounted for
Solutions Manual
Cost Assignment
$69,395.20 = 1,400 x $ 49.568
($14.568
($20.00
x 500)
x 500)
22,534.00
$7,284
$10,000
$91,929.20
11-37
($15.00
x 350)
$5,250
Good
10%
Good
Total
Output Normal Abnormal
Unit
Costs
Units Spoilage Spoilage
Cost
$45,360
107,000 10,700 2,300
$0.4158
$.4350
.4158
$.0192
Cost Reconciliation
Cost of 107,000 good units at $.4158
Abnormal spoilage (2,300 X $.378)
Total production costs
$44,490.60
869.40
$45,360.00
Supporting Calculations
a. 10% of good output = units of normal spoilage
.10 X 107,000 units = 10,700 units of normal spoilage
b. Total spoilage
13,000
Less normal spoilage10,700
Abnormal spoilage
2,300
c. Total cost of November production
Divide by total input (units)
Unit cost of production
$45,360
120,000
$ .378
$40,446.00
11-39
(107,000 X $.378)
Normal spoilage
(10,700 X $.378)
Total cost of good units
Units cost of good units
($44,490.60/107,000)
d. Abnormal spoilage (units)
Multiplied by unit cost of production
Total cost of abnormal spoilage
4,044.60
$44,490.60
$ .4158
2,300
.378
$869.40
Whole
Equivalent Units
Units
Materials Conversion
4,000
100%
25%
21,000
25,000
20,000
500
500
4,000
100%
80%
25,000
Cost Added:
Materials Conversion
Beginning WIP
Current Costs
Total
WTAVG
Cost per EU
45,600
228,400
274,000
$ 10.960 $
Solutions Manual
8,125
45,500
53,625
2.216 $
Total
53,725
273,900
327,625
13.176
270,106
500 units
6,588
4,000 units
43,840
7,091
50,931
327,625
11-41
3,000
45,000
48,000
4,000
2,050
1,950
Transferredin from
Molding
40,000
c.
Assembly
Conversion
40,000
4,000
4,000 x 50%
4,000 x 20%
Equivalent units lost
4,000 x 100%
4,000 x 70%
Total equivalent units
b.
Assembly
Material
40,000
2,000
4,000
4,000
48,000
46,000
800
2,800
43,600
Total
Prior
Current
Cost per
Period Period
Total Equivalent Equivalent
Cost
Cost
Cost
Units
Unit
Transferred in $82,200 $1,237,800 $1,320,000 48,000 $27.50
Materials
6,660
96,840
103,500 46,000
2.25
Conversion
11,930
236,590
248,520 43,600
5.70
$35.45
4. The total production cost:
a. Normal defective/spoiled bikes
Transferred-in
2,050 x $27.50 = $56,375.00
Material
2,050 x 2.25 =
4,612.50
Conversion
2,050 x .7 x 5.70 = 8,179.50
$69,167.00
Solutions Manual
11-43
$ 1,418,000.00
4,000 x $27.50 = $110,000.00
2,000 x 2.25 =
4,500.00
800 x 5.70 =
4,560.00
$ 119,060.00
$1,672,020.00
1,200
920
Cost Added:
Materials
WTAVG
Total
Beginning WIP
Current Costs
Total
55,000
176,000
231,000
7,250
66,900
74,150
192.500 $
80.598 $ 273.098
Ending WIP
Materials
Conversion
62,250
242,900
305,150
800 gallons
218,478
400 gallons
77,000
9,672
Solutions Manual
Conversion
86,672
305,150
11-45
Conversion Batch
55,000
176,000
231,000
7,250
38,400
45,650
28,500
28,500
49.620
285.00 $ 242.120
Total
400 gallons
77,000
5,954
21,375
62,250
242,900
305,150
200,821
104,329
305,150
Solutions Manual
11-47