Activity 10-Short exercises Process Costing - Solution PDF

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GEI Management Accounting Course 2018-2019 1st semester Group A6

Activity 10 Short exercises on Process Costing Suggested solution Exercise 1 Clonex Labs, Inc., uses a process costing system. The following data are available for one department for October:

The department started 175,000 units into production during the month and transferred 190,000 completed units to the next department. Required: Compute the equivalent units of production for October assuming that the company uses the weighted-average method of accounting for units and costs.

Exercise 1-Suggested solution Weighted-Average Method

Equivalent Units Materials Units transferred out ..........................................

190,000

Conversion 190,000

Work in process, ending: 15,000 units × 80% ........................................

12,000

15,000 units × 40% ........................................ Equivalent units of production .............................

6,000 202,000

196,000

Exercise 2 Superior Micro Products uses the weighted-average method in its process costing system. Data for the Assembly Department for May appear below:

Required: 1. Compute the cost per equivalent unit for materials, for labor, and for overhead. 2. Compute the total cost per equivalent whole unit.

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Exercise 2-Suggested solution Weighted-Average Method 1.

Materials

Labor

Overhead

Cost of beginning work in process inventory .......

$ 18,000

$ 5,500

$ 27,500

Cost added during the period ............................

238,900

80,300

401,500

Total cost (a) ...................................................

$256,900

$85,800

$429,000

Equivalent units of production (b) ......................

35,000

33,000

33,000

Cost per equivalent unit (a) ÷ (b) ......................

$7.34

$2.60

$13.00

2. Cost per equivalent unit for materials .............................

$ 7.34

Cost per equivalent unit for labor ...................................

2.60

Cost per equivalent unit for overhead .............................

13.00

Total cost per equivalent unit ........................................

$22.94

Exercise 3 Data concerning a recent period’s activity in the Prep Department, the first processing department in a company that uses process costing, appear below:

A total of 20,100 units were completed and transferred to the next processing department during the period. Required: Compute the cost of the units transferred to the next department during the period and the cost of ending work in process inventory. Exercise 3-Suggested solution Materials

Conversion

Total

Ending work in process inventory: Equivalent units of production ........................... Cost per equivalent unit ................................... Cost of ending work in process inventory ...........

2,000 $13.86 $27,720

800 $4.43 $3,544

$31,264

Units completed and transferred out: Units transferred to the next department ........... Cost per equivalent unit ................................... Cost of units transferred out .............................

20,100 $13.86 $278,586

20,100 $4.43 $89,043

$367,629

GEI Management Accounting Course 2018-2019 1st semester Group A6

Activity 10 Short exercises on Process Costing Suggested solution Exercise 4 Maria Am Corporation uses a process costing system. The Baking Department is one of the processing departments in its strudel manufacturing facility. In June in the Baking Department, the cost of beginning work in process inventory was $3,570, the cost of ending work in process inventory was $2,860, and the cost added to production was $43,120. Required: Prepare a cost reconciliation report for the Baking Department for June. Exercise 4-Suggested solution Baking Department Cost Reconciliation Costs to be accounted for: Cost of beginning work in process inventory ............................

$ 3,570

Costs added to production during the period ...........................

43,120

Total cost to be accounted for ................................................

$46,690

Costs accounted for as follows: Cost of ending work in process inventory ................................

$ 2,860

Cost of units completed and transferred out ............................

43,830

Total cost accounted for .........................................................

$46,690

*The cost of units completed and transferred out can be deduced as follows:

Cost of beginning Costs added Cost of ending Cost of units work in process + to production = work in process + completed and inventory during the period inventory transferred out Cost of units $3,570 + $43,120 = $2,860 + completed and transferred out Cost of units completed and = $3,570 + $43,120 - $2,860 transferred out Cost of units completed and = $43,830 transferred out

3

*

Exercise 5 Hielta Oy, a Finnish company, processes wood pulp for various manufacturers of paper products. Data relating to tons of pulp processed during June are provided below:

Required: 1. Compute the number of tons of pulp completed and transferred out during June. 2. Compute the equivalent units of production for materials and for labor and overhead for June. Exercise 5-Suggested solution Weighted-Average Method 1. Work in process, June 1 ........................................................................

Tons of Pulp 20,000

Started into production during the month ................................................

190,000

Total tons in process .............................................................................

210,000

Deduct work in process, June 30 ............................................................

30,000

Completed and transferred out during the month ....................................

180,000

Equivalent Units

2.

Labor and Materials Units transferred out .........................................................

180,000

Overhead 180,000

Work in process, ending: Materials: 30,000 tons × 60% complete ..........................

18,000

Labor and overhead: 30,000 tons × 40% complete...................................... Equivalent units of production ............................................

12,000 198,000

192,000

GEI Management Accounting Course 2018-2019 1st semester Group A6

Activity 10 Short exercises on Process Costing Suggested solution Exercise 6 Helix Corporation produces prefabricated flooring in a series of steps carried out in production departments. All of the material that is used in the first production department is added at the beginning of processing in that department. Data for May for the first production department follow:

Required: 1. Assume that the company uses the weighted-average method of accounting for units and costs. Determine the equivalent units for May for the first process. 2. Compute the costs per equivalent unit for May for the first process. 3. Determine the total cost of ending work in process inventory and the total cost of units transferred to the next process in May. Exercise 6-Suggested solution Weighted-Average Method 1.

Materials Units transferred to the next production department ...................

175,000

Conversion 175,000

Ending work in process: Materials: 10,000 units × 100% complete ...............................

10,000 3,000

Conversion: 10,000 units × 30% complete.............................. Equivalent units of production ................................................... 2.

185,000

Materials Cost of beginning work in process.............................................

$ 1,500

178,000

Conversion $ 4,000

Cost added during the period ...................................................

54,000

352,000

Total cost (a) ..........................................................................

$55,500

$356,000

Equivalent units of production (b) .............................................

185,000

178,000

Cost per equivalent unit (a) ÷ (b) .............................................

$0.30

$2.00

5

Materials

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 ............................................ Units completed and transferred out: Units transferred to the next department .... Cost per equivalent unit (see above) ........................................ Cost of units completed and transferred out

Conversion

10,000 $0.30

3,000 $2.00

$3,000

$6,000

175,000

175,000

$0.30 $52,500

$2.00 $350,000

Total

$9,000

$402,500

Exercise 7 Pureform, Inc., manufactures a product that passes through two departments. Data for a recent month for the first department follow:

The beginning work in process inventory was 80% complete with respect to materials and 60% complete with respect to labor and overhead. The ending work in process inventory was 75% complete with respect to materials and 50% complete with respect to labor and overhead. Required: Assume that the company uses the weighted-average method of accounting for units and costs. 1. Compute the equivalent units for the month for the first department. 2. Determine the costs per equivalent unit for the month. Exercise 7-Suggested solution Weighted-Average Method

Materials

1. Units transferred to the next department....................

42,000

Labor

Overhead

42,000

42,000

4,000

4,000

46,000

46,000

Work in process, ending: Materials: 8,000 units × 75% complete ..............................

6,000

Labor and overhead: 8,000 units × 50% complete .............................. Equivalent units of production ...................................

48,000

GEI Management Accounting Course 2018-2019 1st semester Group A6

Activity 10 Short exercises on Process Costing Suggested solution 2. Cost of beginning work in process .........................

Materials $ 4,320

Labor $ 1,040

Overhead $ 1,790

Cost added during the period................................

52,800

21,500

32,250

Total cost (a) ......................................................

$57,120

$22,540

$34,040

Equivalent units of production (b) .........................

48,000

46,000

46,000

Cost per equivalent unit (a) ÷ (b) .........................

$1.19

$0.49

$0.74

Exercise 8 Superior Micro Products uses the weighted-average method in its process costing system. During January, the Delta Assembly Department completed its processing of 25,000 units and transferred them to the next department. The cost of beginning inventory and the costs added during January amounted to $599,780 in total. The ending inventory in January consisted of 3,000 units, which were 80% complete with respect to materials and 60% complete with respect to labor and overhead. The costs per equivalent unit for the month were as follows:

Required: 1. Compute the equivalent units of materials, labor, and overhead in the ending inventory for the month. 2. Compute the cost of ending inventory and of the units transferred to the next department for January. 3. Prepare a cost reconciliation for January. (Note: You will not be able to break the cost to be accounted for into the cost of beginning inventory and costs added during the month.) Exercise 8-Suggested solution Weighted-Average Method 1. Computation of equivalent units in ending inventory:

Materials

Labor

Overhead

Units in ending inventory ............................

3,000

3,000

3,000

Percent completed ......................................

80%

60%

60%

Equivalent units of production .....................

2,400

1,800

1,800

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2. Cost of ending work in process inventory and units transferred out:

Materials

Labor

Overhead

Total

Ending work in process inventory: Equivalent units of production .....

2,400

1,800

1,800

Cost per equivalent unit ..............

$12.50

$3.20

$6.40

$30,000

$5,760

$11,520

department .............................

25,000

25,000

25,000

Cost per equivalent unit ..............

$12.50

$3.20

$6.40

$312,500

$80,000

$160,000

Cost of ending work in process inventory ................................

$47,280

Units completed and transferred out: Units transferred to the next

Cost of units completed and transferred out ........................ 3. Cost reconciliation: Total cost to be accounted for ......................................................

$599,780

Costs accounted for as follows: Cost of ending work in process inventory ................................

$ 47,280

Cost of units completed and transferred out ............................

552,500

Total cost accounted for ........................................................

$599,780

$552,500...