360859322 Pa2 M 1403 Process Costing PDF

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PA2-1403: PROCESS COSTINGILLUSTRATIVESIllustrative 1: Basic ApplicationDEF Company produces a certain product in two departments: Processing and Packaging. Raw materials are added at the start of both processes. During February, DEF started 1,000 units of Ener-juice in the Processing Department. The...

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PA2.M-1403: PROCESS COSTING ILLUSTRATIVES Illustrative 1: Basic Application DEF Company produces a certain product in two departments: Processing and Packaging. Raw materials are added at the start of both processes. During February, DEF started 1,000 units of Ener-juice in the Processing Department. The cost accumulated in each department is as follows:

Direct materials used Conversion cost

Processing

Packaging

P 100,000 100,000

P 20,000 130,000

Required: 1. Prepare all necessary journal entries assuming all units are completed. 2. Assume that there were 300 ending units that were 1/3 completed and another 200 ending units that were 1/2 completed in the Processing and Packing departments, respectively. Prepare journal all necessary journal entries and determine the cost of the following: 1. Total work-in process, end ___________ 2. Finished goods ______________ 3. Cost of goods sold __________ 3. Assume further that Processing and Packaging have beginning units with cost information as follows:

Number of units Prior department cost: Direct materials Conversion cost Total Direct materials used Conversion cost

Processing

Packaging

400 (30% complete) -

100 (25% incomplete)

P 29,350 P 6,700

P 19,000 P 22,000 P 41,000 P 3,800 P 17,700

Cost of beginning inventory

P 36.050

P 62.500

Fill in the required information and prepare all journal entries under the following cost flow assumptions:

Weighted Average

Method

FlFO Method

1. Total work in process, end 2. Finished goods 3. Cost of goods sold

Illustrative 2: First or Single Department ABC Manufacturing Company has the following manufacturing data for February: Beginning units Started units Ending units Beginning work-in process: Direct materials Direct labor Factory overhead Total Added this period: Direct materials Direct labor Factory overhead Total

(20% DL, 40% FOH) 10,000 units 80,000 units (70% DL, 80% FOH) 30,000 units P 40,000 P 30,000 P 60,000 P 1300Q P 500,000 P 800,000 P 900,000 P 2.200.000 .

Required: Determine the following: 1. Equivalent units of direct materials assuming:

WA Method Materials added at the start Materials added gradually in proportion to DL Materials added at 60% DL completion Materials added at the end

FIFO Method

2. Equivalent units of conversion cost WA Method

FIFO Method

Direct labor Factory overhead 3. Cost per equivalent units of production for each element of cost (assume materials are added at the start of process) WA Method

FIFO Method

Direct materials Direct labor Factory overhead 4. Unit cost of units finished 5. Allocation of total manufacturing costs placed into process WA Method

FIFO Method

Finished goods Work-in-process, end

Illustrative 3: Subsequent Department Pep Cola produces a soft drink in three departments, Syrup, Carbonation and Bottling. Syrup, which gives the drink its flavor, is produced in the first department. The syrup is then transferred to the second department, where carbonated water is added to give the drink its fizz. After carbonated water has been added, the liquid drink is bottled. Data related to the Carbonation Department during June are:

Units in beginning inventory

1,000

Units received from the Syrup Department this period

2,000

Units added to process in the Carbonation Department this period

6,000

Units transferred to bottling department this period

7,800

Units in ending inventory (100% material, 25% labor and overhead) Beginning

1,200 Added this

Cost charged to the department:

inventory

period

Cost from the preceding department

P 1,120

P 9,680

Materials

190

1,610

Direct labor

60

1,560

Factory overhead

120

3,120

Required: Prepare all necessary journal entries for the Carbonation Department. Illustrative 4: FIFO Refinement The Barkley, Inc. processes its products in two departments: Department A and Department B. Inventories, costs and production data for February are as follows:

Department A

Department

QUANTITY Beginning in-process units Work to finish or to be done Started in Process Transferred out Ending in-process units Stage of completion

6,000 1/3 44,000 40,000 ? 3/5

5,000 2/5 37,000 ? 7/8

COST Beginning in-process units Added this month:

P 5,200

P 10,685

Materials Labor Overhead

19,800 14,200 2,600

34,799 27,470 18,450

Conversion costs are applied evenly in all departments. Materials are applied as follows: Department A — all at the start of the process . Department B — 30% at the start of process, 40% when processing is half complete and 30% at end of the process.

Required: Using FIFO Method, determine the following 1. Total cost of units that was transferred out in Department A 2. Total cost of ending in-process units in Department A 3. Total cost of units transferred out to store room from Department B 4. Total cost of ending in-process units in Department B

Illustrative 5: WA Refinement Session reports the following production data for the month of June 2008: I

II

Quantity schedule: In process, beginning (stage of completion) Transferred out to next department

(2/3) 15,000 30,000

(1/3) 9,000 ?

In process, end (additional work to complete)

(3/5) 5,000

(1/8) 8,000

Cost analysis: Cost last month Cost from preceding department Cost of this department: Material Labor Overhead Cost added this month

P 8,910 P 8,390 3,315 . 1,050

P 4,464 1,998 1,332

Material Labor Overhead

P 10,860 7,181 2,534

P 30,636 23,310 15,540

In Department I, all materials at the start of process while labor and overhead are applied evenly to the process. In Department lI, 50% of the materials are added at the start of the process and the balance is added when the process is % completed. Conversion costs are applied uniformly to the process. Required: Using average costing method, determine the following: 1. Total cost of units transferred out in Department I __________ 2. Total cost of units in process at the end in Department I __________ 3. Total cost of units transferred out in Department II __________ 4. Total cost of units in process at the end in Department Il _________

Illustrative 6 Petroleum, Inc. manufactures a product in two departments. Units of the product are started in the Cracking Department and then transferred to the Refining Department, where they are completed. Because of the intense heat applied in the Cracking Department, some of the production volume is lost to evaporation. Data related to May operations in the Cracking Department are: Units in beginning inventory 5,000 units Units started in process this period 55,000 units Units transferred to the Refining Department this period 49,000 units Units in ending inventory (100% material, 70% conversion cost) 6,000 Units

Cost charged to the department: Material Conversion cost

Beginning inventory P 1,900 360

Added this period P 20,100 7,620

Required: Prepare all necessary journal entries for the Cracking Department.

Illustrative 7 Waste Company has the following data for March. Any loss unit is deemed abnormal loss. Beginning units (60% converted) 10,000 Transferred out 60,000 Started into process 80,000 Ending units(30% converted) 20,000 Required: Complete the following table using the following cost flow assumption: INSPECTION POINT --->

50% of processing

End of processing

WA Method FIFO Method

WA Method FIFO Method

A. EUP of direct materials, if 1. added at the start 2. addedat50% of processing 3. Added at the end 4. added gradually B. EUP of conversion cost *All loss units are traceable to currently started units.

Illustrative 2 ABC manufactures a certain products. Units are started in the Cutting Department and then transferred to Finishing Department where they are completed. Units are inspected at the end of the production process in the Finishing Department. Spoiled units are inventoried at their recoverable value of Pl0 each and the unrecoverable value of spoilage is deemed a normal loss and is charged to Factory Overhead Control.

At the end of June, 500 units were still in processed in the Finishing Department, 80% complete as to material and 60% complete as to conversion cost. During July, 4,500 units were transferred from the Cutting Department to the Finishing Department and 3,800 were transferred to finished goods inventory. At the end of July, the Finishing Department still had 800 units in process, 40% complete as to materials and 20% complete as to conversion cost. Cost data related to July operations in the Finishing Department are:

Cost charged to the department:

Beginning

Added this

Inventory

period

Cost from preceding department Materials Labor Factory overhead

p 5,500 1,950 1,180 1,770

p 54,500 20,650 16,260 24,390

Required: Assuming WA method, prepare all necessary journal entries for the Finishing Department.

Illustrative 8 DEF manufactures a certain products ¡n two departments. Units are started in the Tooling Department where they are cut and shaped and are transferred to the Finishing Department where they are ground and polished. Materials are added at the start of the process in the Tooling Department. Units are inspected at 90-percent of processing. Costs related to the Tooling Department are:

Cost charged to the department: Materials Labor Factory overhead

Beginning

Added this

inventory P 1,600 290 950

period P 9,750 2,320 9,200

At the end of February, the Tooling Department had 2,000 still in process, 70% complete as to labor and 60% complete as to overhead. At the end of March, 3,000 units were still in process in the Tooling Department, 50% complete as to labor and 40% complete as to overhead. During March, 13,000 units were started in the Tooling Department, and 7,000 units were completed and transferred to Finishing Department. Loss units up to 50% of good units are deemed normal.

Required: Assuming FIFO method, prepare all necessary journal entry for the Tooling Department

Illustrative 9 Baguio Plant applies process costing in the manufacture of its sole product, “e-tox”. Manufacturing starts in Department 1 where materials are all added at the start of processing. The good units are then transferred to Department 2 where all the incremental materials are needed for its completion are added after final inspection. In Department 1, units are inspected at the end of processing while in Department 2, inspection takes place when the units are 90% converted. Assume that Department 1 uses FIFO while Department 2 uses WA. The following production for the month of April show: Department 1

Department 2

BWIP

P 8,000

P 4,000

Work to be done

4/5

1/5

EWIP

12,000

7,000

Quantity schedule:

Stage of completion Put into process Normal loss Abnormal loss

2/3 60,000

Cost data: Work-in process, June 1 Transferred-in Materials Conversion costs Current period costs: Materials Conversion costs Transferred-in

5/7 -

2,400 600

1,000 500

P 9,000 6,500

P 19,030 P 14,325 18,715

P 132,000 205,920

P 56,000 85,500 ?

Required: Determine the following: 1. Total cost transferred to Department 2 and the amount of WIP, end in Department 1 a. P281,820; P52,800 c. P297,320; P52,800 b. P284, 120; P26,400 d. P2,320; P36,620

A 2. Total costs transferred to storeroom and the amount of WIP, end in Department 2 a. P43,910; P450 c. P43 1,650; P38,850 b. P431,650; P48,350 d. P 438,910; P 38,850

MC:

Department Il of Charity Manufacturing Company presents the following production data for the month of May, 2008: Opening inventory, 3/8 completed Started in process Transferred

4,000 units 13,000 units 9,000 units

Closing inventory, 1/2 completed

4,000 units

3/4 completed

4,000 units

What are the equivalent units of production for the month of May, 2008? FIFO Method Average Method A. 500 units 13,000 units B. 17,000 units 12,500 units

FIFO Method

Average Method

C. 12,500 units 14,000 units D. 15,000 units 14,000 units

The following data for the month of September were taken from the cost records of Department I of Pro-life Products which uses process costing system: Opening inventory of work-in-process: Units — 500 (with all materials added and 50% of labor and overhead) Cost— Materials Labor Factory overhead

P 2,400 1,500 760

Put into production: Units - 5,000 Labor Factory overhead

P 25,100 19,380 14,900

Completed and transferred —4,800 units Ending inventory of work-in-process: Units —700 (with all materials, and 60% of labor and overhead) The cost per equivalent unit, order (rounded to nearest centavo): FIFO Average FIFO Average A. P11.92 B. P12.00

P11.92 P11.92

C. P12.00 D. P11.92

P12.00 P12.00

The following data relates to Department 1 of Single Manufacturing Company: Work-in-process, October 1: Cost in Department 1 P11,380 Cost in Department 2 Materials None Labor P500 Factory overhead 50 Cost in Department 2 in October: Materials None Labor P13,000 Factory overhead 450 Unit in process, October 1, 60% completed as to conversion cost 500 Units received from Department 1 in October at P2.60 per unit 6,700 Units completed and transferred to Department 3 in October 6,800 Units in process, October 31, half completed as to conversion cost

400

Compute the conversion costs per equivalent unit (rounded to nearest centavo) FIFO Average FIFO Average A. P2.00 P2.00 C. P2.01 P2.00 B. P2.01

P2.01

D. P2.00

P2.01

4. The Glorious Corporation manufactures only one product in which the raw material must pass through Processes A, B and C, in that order, before completion. Inventories of Process C and of Finished Goods on Oct. 1 were as follows: - Process C — 1,200 units, 2/3 completed P4,200 - Finished goods — 1,000 units at P3.00 per unit During October the following transactions were completed: - 2,000 units with a value of P5,000 were transferred from Process B. - Direct labor applied to Process C during October was P3,100 - Overhead costs for October applied to Process C were P3,200 Inventories on October 31 are as follows: - Process C—600 units 1/2 completed - Finished goods — 1,300 units Using FIFO method, the value of Process C inventory in process for October 31 is: A. P4,200

B. P3,500

C. P5,400

D. P2,400

5. Information concerning Department B of Serene Co. is as follows: Units Total Cost Beg. work in process Units transferred in 58,000

Cost

Transfer In

5,000 P 6,300 P 2,900 35,000 58,000 17,500

40,000 P64,300 P20,400 P64.300 Units completed 37,000 . Ending work in process 3.000

Materials

Conversion

P 3,400 25,500

P 6,300 15,000

P25500

P18.400

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. Serene Co. uses the weighted average method. The portion of the total cost of ending work-in-process attributable to transferred-in cost is:

A. P0

B. P1,500

C. P1,530

D. P1,650

6. Elsa Inc. instituted a new process in October. During this month, 20,000 units were started in Department A. Of the units started, 2,000 were lost in the process, 14,000 units were transferred to Department B, and 4,000 remained in work in process at October 31. The work in process at October 31 was 100% complete as to material costs and 50% complete as to conversion costs. Material costs of P54,000 and conversion costs of P80,000 was charged to Department A in October. What were the total costs transferred to Department B? A. P93,800

B. P112,000

C. P105,000

D. P144,200

7. Following data for September were taken from the cost records of the Mixing Department, Fair Manufacturing Company which uses the average costing method: Work in process, August 31 (all material, 50% converted) Put into process during the month Work in process, September 30 (all material, 60% converted) Costs Work in process, August 31: Materials Labor Factory overhead Put into process during the month Material Labor Factory overhead

1,000 units 10,000 units 1,400 units

P24,000 15,000 7,600 . P251,000 193,800 149,000

The total cost of the units completed and transferred to the next department was: A. P576,000

B. P605,400

C. P640,400

D. P693,800

8. In the immediately preceding problem, compute the total cost of the September 30 work-in process: A. P29,400

B. P46,600

C. P64,400

D. P103,800

9. Sonic Inc. manufactures a highly sensitive smoke alarm. The company uses the FIFO method for process costing and for costing goods sold. In costing finished goods, the unit cost for units completed for work in process inventory at the beginning is kept separate from the unit cost of smoke alarm started and completed during the month. 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 are as follows: Smoke alarm in process . (estimated 80% completed) Smoke alarm on hand (completed)

1,250 units 600 units

P128,000 76,800

The inventories at the end of June are: Smoke alarms in process (50% complete) Smoke alarms on hand (complete) Compute the cost assigned to: Work-in-Process, Finished Goods, End End A. P33,000 P79,200 B. P33,000 92,400

500 units 700 units

Work-in-Process, End C. P 33,200 D. P 64,400

Finished Goods, End P 79,200 P 66,000

10. Ablan Co. produces a special kind of insecticides. Materials are added at the end of production of Mixing Department. For the month of March, 2008, the following data were gathered: No. of Units Work-in-process March 1, 40% complete as to conversion costs 40,000 Started in process during the month 100,000 Transferred to the Molding Department 85,000 Lost units in processing 10,000 Work-in-process, March 31, 60% complete as to

conversion costs

45,000

The costs corresponding to the lost units were absorbed by the remaining units. What are the equivalent units for the materials unit cost calculation? FIFO a. 130,000 b. 85,000

Average 130,000 85,000

FlFO

Average c. 140,000 140,000 d. 85,000 130,000