Chapter 3 - Process Costing ( Solution Manual) PDF

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Process Costing Questions & Solutions Accounting Principles (9th edition) Jerry J. Weygandt Paul D. Kimmel Donald E. Kieso

958

Chapter 21 Process Costing

23. Dipak Co. identifies the following activities that pertain to manufa Setups, and Qu ate cost

(a) Identify the steps that pertain to activity-based

BRIEF Journalize en accumulating

ncurs labor

(SO 4)

(SO 4)

that r, and o the

Journalize th overhead cos

uring sign-

Journalize th materials and

(SO 4) Compute ph production.

ected

(SO 6)

as to Cost

Compute equ production.

s and

(SO 5) Compute un production.

ts are ,000.

(SO 6) Assign costs transferred o (SO 6) Compute un (SO 6)

0,000, te for to be pany matersion

(SO 6)

that plete as to conversion cost and 100% complete as to materials. Prepare a cost reconciliation schedule.

Compute equivalent units of production.

BE21-10 The Smelting Department of Massaro Manufacturing Company has the following production and cost data for November.

(SO 5)

Production: Beginning work in process 2,000 units that are 100% complete as to materials and 20% complete as to conversion costs; units transferred out 8,000 units; and ending work in process 5,000 units that are 100% complete as to materials and 40% complete as to conversion costs. Compute the equivalent units of production for (a) materials and (b) conversion costs for the month of November.

Prepare cost schedule.

Do It! Review BE21 velop 1. 2. 3. 4. 5.

959

mporary

J e A A A A r

Ident it tru *BE2 setup $300, age a Com

rates for

D DO IT

ize ts.

In Ju

Units Depa to Fin of un nt units.

DO IT

rent

Mate comp and ( DO IT

ciliation

$10 a ferre costs (a) C (b) Compute the equivalent units of production. (c) Prepare a cost reconciliation schedule, including the costs of materials transferred out and the costs of materials in process. DO IT!

1. 2. 3. 4.

21-4

Indicate whether each of the following statements is true or false.

Just-in-time processing is also known as just-in-case processing. Companies that use just-in-time processing complete finished goods just in time to be sold. A major benefit of just-in-time processing is enhanced product quality. An ABC system is similar to conventional costing systems in accounting for period costs but differs in regard to manufacturing costs.

Answer questions about JIT and ABC. (SO 8, 9)

960

Chapter 21 Process Costing The primary benefit of ABC is significant reduction or elimination of manufacturing inventories. d and

EXER nting.

Understand p accounting.

d in a

(SO 1, 2)

r. l use

, and ocess

ed by

ents: oughits.

Journalize tr (SO 4)

Answer ques production. (SO 3, 5, 6)

?

Production records show that there were 400 units in the beginning inventory, 30% complete, 1,100 units started, and 1,200 units transferred out. The beginning work in process had materials cost of $2,040 and conversion costs of $1,550. The units in ending inventory were 40% complete. Materials are entered at the beginning of the painting process. Instructions (a) How many units are in process at May 31? (b) What is the unit materials cost for May? (c) What is the unit conversion cost for May? (d) What is the total cost of units transferred out in May? (e) What is the cost of the May 31 inventory?

Exercises E21Asse in Pr tions

961

ions for two

Pu In In R U A A 7. Tr 8. Tr 9. So 1. 2. 3. 4. 5. 6.

Instr Journ E21proce for it

units and production.

Mon Janua Marc May July

Instr (a) C (b) C e E21and c

ent units, gnment of

Mate during the process. Instructions (a) Determine the equivalent units of production for (1) materials and (2) conversion costs. (b) Compute unit costs and prepare a cost reconciliation schedule. E21-7 The Sanding Department of Ortiz Furniture Company has the following production and manufacturing cost data for March 2010, the first month of operation. Production: 12,000 units finished and transferred out; 3,000 units started that are 100% complete as to materials and 20% complete as to conversion costs. Manufacturing costs: Materials $33,000; labor $27,000; overhead $36,000.

Prepare a production cost report. (SO 5, 6, 7)

962

Chapter 21 Process Costing Instructions ction

Determine eq unit costs, an costs. (SO 5, 6)

00%

or the

ocess. Determine eq unit costs, an costs. (SO 5, 6)

Determine eq unit costs, an costs. (SO 5, 6)

Costs incurred (includes beginning work in process): Direct materials Direct labor Overhead

$101,200 $164,800 $123,600

Instructions (a) Compute equivalent units of production for materials and for conversion costs. (b) Determine the unit costs of production. (c) Show the assignment of costs to units transferred out and in process.

Exercises E21prod of the

963

nt units, unit gned.

Pr co of M $4 bo Instr (a) C o (b) C (c) D E21starte tion c endin meet only

ction cost

Instr endin E21ducti of the

on cost

Begin Ma Co Mate Labo Over Instr Prep *E21 space duce follow

rates and ing ABC.

3. Quality inspections

Number of inspections

24,000

The cost driver volume for each product was as follows.

Cost Driver

Instruments

Gauges

Total

Number of requisitions Number of setups Number of inspections

400 150 200

600 300 400

1,000 450 600

964

Chapter 21 Process Costing

ivityits of Part

Compute pro traditional co (SO 10)

em. g sys1,000

n dt

w ww .

EXER

l ey wi

PROB g and s are d sent ocess. ction

Complete fou to prepare a report. (SO 5, 6, 7)

Units started into production Ending work in process units Percent complete—ending inventory

20,000 2,000 60%

Cost Data Materials Labor Overhead

$198,000 50,400 112,800

Total

$361,200

Problems: Set A

965

Instructions (a) P (b) D (c) C (d) D (e) P P21each Prod turin

s necessary ction cost

Instr (a) F ( ( ( ( (b) P P21proce Octo Work for P comp Mixin P I I U Incurred $790,000 of manufacturing overhead on account. Applied manufacturing overhead on the basis of $22 per machine hour. Machine hours were 28,000 in Mixing and 6,000 in Packaging. 7. Transferred 45,000 units from Mixing to Packaging at a cost of $979,000. 8. Transferred 53,000 units from Packaging to Finished Goods at a cost of $1,315,000. 9. Sold goods costing $1,604,000 for $2,500,000 on account. 1. 2. 3. 4. 5. 6.

Instructions Journalize the October transactions.

ions.

966

Chapter 21 Process Costing

Assign costs duction cost

P21-4A

Cavalier Company has several processing departments. Costs charged to the

(SO 5, 6, 7)

as to nding ng of

mbly

Determine eq unit costs and

ng of ta for

(SO 5, 6, 7)

e ac-

Compute equ complete production cost report. (SO 5, 7)

m and manufactures a single product—a premium rug shampoo and cleaner. The manufacturing activity for the month of October has just been completed. A partially completed production cost report for the month of October for the mixing and cooking department is shown on page 967. Instructions (a) Prepare a schedule that shows how the equivalent units were computed so that you can complete the “Quantities: Units accounted for” equivalent units section shown in the production cost report, and compute October unit costs. (b) Complete the “Cost Reconciliation Schedule” part of the production cost report on page 967.

Problems: Set A

967

LUTHER PROCESSING COMPANY

QUA Units Wo Sta T Units Tra Wo ( c T COS Unit Co Eq Un Costs Wo Sta T COS Costs Tra Wo C

*P21 which per u

products

Manufacturing overhead ($40 per DLH) Total per unit cost

200

160

$1,000

$660

In 2010, Darby manufactured 30,000 units of the Royale and 10,000 units of the Majestic. The overhead rate of $40 per direct labor hour was determined by dividing total expected manufacturing overhead of $7,600,000 by the total direct labor hours (190,000) for the two models. The gross profit on the model was: Royale $500 ($1,500 Ϫ $1,000) and Majestic $540 ($1,200 Ϫ $660). Because of this difference, management is considering phasing out the Royale model and increasing the production of the Majestic model.

968

Chapter 21 Process Costing Before finalizing its decision, management asks the controller, Marie Stumfall, to prepare an over-

head te 0 0 0 0

based

PROB g and ki. In wareoverlding

Complete fou to prepare a report. (SO 5, 6, 7)

(a) (b) (c) (d) (e) Complete four steps necessary to prepare a production cost report. (SO 5, 6, 7)

Compute the physical units of production. Determine the equivalent units of production for materials and conversion costs. Compute the unit costs of production. Determine the costs to be assigned to the units transferred out and in process. Prepare a production cost report for the Molding Department for the month of January.

P21-2B Slocum Corporation manufactures in separate processes refrigerators and freezers for homes. In each process, materials are entered at the beginning and conversion costs are incurred uniformly. Production and cost data for the first process in making two products in two different manufacturing plants are as follows.

Problems: Set B

969

Instr (a) F ( ( ( ( (b) P P21proce On A $0, W Pack to m lowin

ions.

P I I U I A B 7. T 8. T 9. S

1. 2. 3. 4. 5. 6.

Instr Journ P21Depa

repare pro.

Overhead

108,000

Production records show that 25,000 units were in beginning work in process 40% complete as to conversion cost, 425,000 units were started into production, and 35,000 units were in ending work in process 40% complete as to conversion costs. Materials are entered at the beginning of each process. Instructions (a) Determine the equivalent units of production and the unit production costs for the Assembly Department. (b) Determine the assignment of costs to goods transferred out and in process. (c) Prepare a production cost report for the Assembly Department.

970

Chapter 21 Process Costing

Determine eq unit costs and

ls are rmly.

(SO 5, 7)

e ac-

manr the r the

Compute equ complete pro report. (SO 5, 6, 7)

Total units

110,000

?

?

Materials

Conversion Costs

Total

$156,000

$98,000

$254,000

?

?

COSTS Unit costs Costs in March Equivalent units Unit costs

$

?

ϩ

$ ?

ϭ $

?

971

Broadening Your Perspective Costs to be accounted for Wo Sta T COS Costs Tra Wo C

ol

/c

l e y .c o m wi

Visit Com

ww w .

P

g an dt ey

l ege

/w

Instr (a) P p c (b) C

BRIEF EXERCISE 21-1 Mar. 31 31

Raw Materials Inventory........................................ Accounts Payable...........................................

45,000

Factory Labor ........................................................... Wages Payable ................................................

50,000

45,000 50,000

BRIEF EXERCISE 21-2 Mar. 31

31

Work in Process—Assembly Department....... Work in Process—Finishing Department........ Raw Materials Inventory...............................

24,000 21,000

Work in Process—Assembly Department....... Work in Process—Finishing Department........ Factory Labor...................................................

30,000 20,000

45,000

50,000

BRIEF EXERCISE 21-3 Mar. 31

Work in Process—Assembly Department ($30,000 X 200%) .................................................. Work in Process—Finishing Department ($20,000 X 200%) .................................................. Manufacturing Overhead ..............................

60,000 40,000 100,000

BRIEF EXERCISE 21-4 January

March

July

Beginning work in process Started into production Total units

0 40,000 40,000

0 48,000 48,000

0 56,000 56,000

Transferred out Ending work in process Total units

30,000 10,000 40,000

40,000 8,000 48,000

40,000 16,000 56,000

Copyright © 2009 John Wiley & Sons, Inc.

Weygandt, Accounting Principles, 9/e, Solutions Manual

(For Instructor Use Only)

21-9

BRIEF EXERCISE 21-5 January March July

Materials

Conversion Costs

40,000 (30,000 + 10,000) 48,000 (40,000 + 8,000) 56,000 (40,000 + 16,000)

34,000 (30,000 + 4,000) 46,000 (40,000 + 6,000) 44,000 (40,000 + 4,000)

BRIEF EXERCISE 21-6 Total materials costs $32,000 Total conversion costs $54,000 Unit materials cost $3.20

÷

Equivalent units of materials 10,000

÷

Equivalent units of conversion costs 12,000

+

Unit conversion cost $4.50

=

Unit materials cost $3.20

=

Unit conversion cost $4.50

=

Total manufacturing cost per unit $7.70

BRIEF EXERCISE 21-7 Assignment of Costs Transferred out Transferred out Work in process, 4/30 Materials Conversion costs Total costs

Equivalent Units

Unit Cost

40,000

$13.00

5,000 2,000

$ 4.00 $ 9.00

$520,000

$20,000 18,000

38,000 $558,000

BRIEF EXERCISE 21-8 Total materials costs $15,000

21-10

÷

Equivalent units of materials 20,000

Copyright © 2009 John Wiley & Sons, Inc.

=

Unit materials cost $.75

Weygandt, Accounting Principles, 9/e, Solutions Manual

(For Instructor Use Only)

BRIEF EXERCISE 21-8 (Continued) Total conversion *costs* $47,500

÷

Equivalent units of conversion costs 19,000

=

Unit conversion cost $2.50

*$29,500 + $18,000 BRIEF EXERCISE 21-9 Costs accounted for Transferred out Work in process Materials Conversion costs Total costs

$58,500

(18,000 X $3.25) (2,000 X $.75) (1,000 X $2.50)

$1,500 2,500

4,000 $62,500

BRIEF EXERCISE 21-10

Units transferred out Work in process, November 30 Materials (5,000 X 100%) Conversion costs (5,000 X 40%) Total equivalent units

Materials

Conversion Costs

8,000

8,000

5,000 13,000

2,000 10,000

BRIEF EXERCISE 21-11 1. 2. 3. 4. 5.

False. Just-in-time processing results in a “pull” approach. True False. A major advantage of JIT processing is enhanced product quality. True False. A major disadvantage of conventional costing is that it uses a single unit-level basis, such as direct labor to allocate overhead.

Copyright © 2009 John Wiley & Sons, Inc.

Weygandt, Accounting Principles, 9/e, Solutions Manual

(For Instructor Use Only)

21-11

*BRIEF EXERCISE 21-12 Machine setups Machining Inspections

$120,000 ÷ 1,000 = $120 per setup $300,000 ÷ 25,000 = $12 per machine hour $70,000 ÷ 2,000 = $35 per inspection

DO IT! 21-1 Work in Process—Mixing ............................................................ Work in Process—Packaging .................................................... Raw Materials Inventory ..................................................... (To record materials used)

10,000 24,000

Work in Process—Mixing ............................................................ Work in Process—Packaging .................................................... Factory Labor ......................................................................... (To assign factory labor to production)

8,000 36,000

Work in Process—Mixing ............................................................ Work in Process—Packaging .................................................... Manufacturing Overhead .................................................... (To assign overhead to production)

12,000 54,000

Work in Process—Packaging .................................................... Work in Process—Mixing ................................................... (To record transfer of units to the Packaging Department)

21,000

34,000

44,000

66,000

21,000

Finished Goods Inventory........................................................... 102,000 Work in Process—Packaging............................................ 102,000 (To record transfer of units to finished goods) DO IT! 21-2 (a) Since materials are entered at the beginning of the process, the equivalent units of ending work in process are 16,000. 20,000 units + 16,000 units = 36,000 equivalent units of production for materials.

21-12

Copyright © 2009 John Wiley & Sons, Inc.

Weygandt, Accounting Principles, 9/e, Solutions Manual

(For Instructor Use Only)

DO IT! 21-2 (Continued) (b) Since ending work in process is only 70% complete as to conversion costs, the equivalent units of ending work in process for conversion costs are 11,200 (70% X 16,000 units). 20,000 units + 11,200 units = 31,200 equivalent units of production for conversion costs. DO IT! 21-3 (a) 0 (Work in process, March 1) + 24,000 (Started into production) = 24,000 (b) Equivalent units of production: Units transferred out .................... Work in process, March 31......... Total ...................................................

Materials 22,000 2,000 24,000

Conversion 22,000 800 (2,000 X 40%) 22,800

(c) Cost reconciliation schedule Costs accounted for Transferred out (22,000 X $18) .............. Work in process, March 31 Materials (2,000 X $10) ..................... $20,000 Conversion costs (800 X $8).......... 6,400 Total costs ..........................