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CHAPTER 6

PROCESS COSTING

EXERCISES

4. Each student will have a different answer. No solution provided.

5. a. 24,000 + 600,000 = 624,000 pounds

b. & c. Beginning WIP In-ventory

24,000

Started 600,000

To account for 624,000Completed (608,000)Ending WIP Invento-ry

16,000

Units started and completed = 608,000 – 24,000 = 584,000

Units DM CCBeginning

WIP Invento-ry

24,000 24,000 24,000

Started &completed

584,000 584,000 584,000

Ending WIP

Inventory(65%)

16,000 16,000 10,400

EUP 624,000 624,000 618,400

16. a. & b. Begin-ng WIP

Invento-

y (30%)

70,000

BeginningWIP

Inventory70,000



hapter 6 137

© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publiclyaccessible website, in whole or in part.

Started445,300

Started andcompleted

357,500

To accountfor 515,300

Ending WIPInventory 87,800

Accounted for 515,300

Units DM CC

BeginningWIP Invento-ry

70,000 70,000 70,000

Started &

completed

357,500 357,500 357,500

Ending WIPInventory(35%)

87,800 87,800 30,730

EUP 515,300 515,300 458,230

17.

.

Units CC

Beginning WIP Inventory(40%)

10,000

Started 350,000Units to account for 360,000

Beginning WIP Invento-

ry 10,000

10,00

0Started and completed 334,000

334,000

Transferred out 344,000

Ending WIP Inventory(70%) 16,000 11,20

0Units accounted for 360,00 355,2



38 Chapter 6


0 00

b.Units

CC

Beginning WIP Invento-ry (30%)

40,000

Started 480,000

Units to account for 520,000


ry

40,000 40,00

0Started and completed 454,00

0454,0

00Transferred out 494,00

0Ending WIP Inventory

(80%) 26,000 20,80

0Units accounted for 520,00

0514,8

00c.

UnitsCC


15,000


00

Beginning WIP Invento-ry

15,000 15,000

Started and completed 400,800 400,800Transferred out 415,800



hapter 6 139


Ending WIP Inventory(90%)

4,200 3,780

Units accounted for 420,000 419,580

d. Units CCBeginning WIP Invento-

ry (35%)10,800



ry

10,800 10,800

Started and completed 340,800 340,800Transferred out 351,600Ending WIP Inventory

(45%)18,300 8,235


8. a. Work to be performed = 100% –

45% = 55% for conversion costs on-ly

b. & c. Beginning WIPInventory 24,000

Started600,000

Accountable for 624,000Completed (608,000)Ending WIP Inven-

tory 16,000

Units started and completed = 608,000 – 24,000 = 584,000

DM CC



40 Chapter 6


Units

Beginning WIP In-ventory (55%)

24,000

0 13,200

Started & completed 584,0

00

584,0

00

584,00

0Ending WIP Invento-

ry (65%) 16,000

16,000

10,400

EUP 624,000

600,000

607,600

9. a. & b. Begin-ningWIPInvento-ry

70,000

Beginning WIPInventory 70,000

Started 445,300

Started andcompleted

357,500

To accountfor

515,300

Ending WIP In-ventory 87,800Accounted for 515,30

0

UnitsDM CC

Beginning WIP In-ventory (70%) 70,000 0 49,000Started & completed 357,500

357,500

357,500

Ending WIP Invento-ry (35%) 87,800 87,8

0030,730

EUP 515,300 437,23



hapter 6 141


445,300

0

0.

.

Units CC


10,000

Started 350,0

00Units to account for 360,0

00


10,000

6,000

Started and completed 334,0

00

334,0

00Transferred out 344,0

00Ending WIP Inventory (70%)

16,000

11,200

Units accounted for 360,0

00

351,2

00

b.Units CC


40,000




42 Chapter 6



40,000 28,000



26,000 20,800


c. Units CC


15,000



15,000 6,750



4,200 3,780


d.Units CC

Beginning WIP Inventory

(35%)

10,800



10,800 7,020

Started and completed 340,800 340,800Transferred out 351,600Ending WIP Inventory 18,300 8,235



hapter 6 143


(45%)Units accounted for 369,900 356,055

1. a. Beginning WIP

Inventory(100%; 60%;75%)

15,000

Beginning WIP

Inventory 15,000

Started 620,000 Started andcompleted

594,600

To account for 635,000 Ending WIP In-ventory

(100%; 35%;60%)

25,400


Units

DM DL OH

Beginning WIPInventory

15,000 15,000 15,000 15,000

Started & completed

594,600 594,600 594,600 594,600

Ending WIP In-ventory

25,400 25,400 8,890 15,240

Equivalent units 635,000 635,000 618,490 624,840

b.

Units DM DL OH


0 6,0003,750

Started & completed 594,600 594,600

594,600 594,600



44 Chapter 6


Ending WIP In-ventory 25,400 25,400

8,890 15,240

Equivalent units635,000 620,000

609,490 613,590

c. Equivalent units(WA) 635,000 618,490

624,840

EUP in beginningWIP

Inventory (15,000) (9,000) (11,250)Equivalent units

(FIFO) 620,000 609,490

613,590

2. a. Beginning WIP Inventory180,000

Tons started3,400,000

Total tons to account for

3,580,000

b. Total tons to account for3,580,000

Tons in ending WIP Invento-ry (165,000)Tons transferred out

3,415,000Tons in beginning WIP In-ventory (180,000)Tons started & completed(tons) 3,235,000

c.Material Conversion




hapter 6 145


180,000 180,000Started & completed

3,235,000 3,235,000Ending WIP Inventory

(100%, 40%) 165,000 66,000WA EUP

3,580,0003,481,000

d.Ma-

terialCon-

version


(0%, 35%) 0 63,000Started & completed

3,235,000

3,235,000

Ending WIP Inventory(100%, 40%) 165,00

066,000

FIFO EUP3,400,0

003,364,00

0

e.DM CC

WA EUP 3,580,000

3,481,000Equivalentunits in BI (180,000) (117,000)

FIFO EUP 3,400,0003,364,000

3. a. Beginning Inven-tory 21,600

Units started



46 Chapter 6


561,000Units to accountfor 582,600

b. Units to accountfor 582,600

Units in BI(21,600)

Units in EI(13,700)

Units started &

completed 547,300

c. DM DL OH

BI 21,600 21,600 21,600Started &completed

547,300 547,300 547,300

EI (75%,

25%,10%)

10,275

3,425 1,370

EUP (WA) 579,175 572,325 570,270

d. DM DL OH

BI (15%,40%,

55%)

3,240 8,640 11,880

Started &completed

547,300 547,300 547,300

EI (75%,25%,10%)

10,275 3,425 1,370

EUP(FIFO)

560,815 559,365 560,550



hapter 6 147


e.

DM DL OH

EUP (WA) 579,175

572,325

570,270

Equivalentunits in BI (18,36

0)(12,96

0)(9,720)

EUP (FIFO)560,8

15

559,365

560,550

4. a. DL cost = Conversion cost – OH cost = $189,648 – $85,200 =$104,448

b. DM DL Overhead


$26,232

$ 19,504 $ 20,640

Current period

158,688

104,448 85,200

Total costs $184,920 $123,952 $105,840Divided by EUP ÷ 53,600 ÷ 48,800 ÷ 42,000Cost per EUP $3.45 $2.54 $2.52

5. DM DL Over-head

WA EUP 53,600 48,800 42,000

Beginning WIPEUP (7,200) (8,000) (7,920)FIFO EUP

46,40040,800 34,080

Current periodcost $158,688

$104,448$85,200

Divided by EUP ÷ ÷ ÷



48 Chapter 6


46,400 40,800 34,080Cost per EUP $3.42 $2.56 $2.50

6

a.

DM DL OH Total

BeginningWIP

$19,600

$ 6,320 $10,020

$ 35,940

Current period 54,000

34,72084,480

173,200

Total $

73,600

$41,040 $

94,500

$209,140

b. Totalcosts

$73,600

$41,040

$94,500

$209,140

WAEUP

÷160,000

÷152,000

÷150,000

Cost per

EUP

$0.46 $0.27 $0.63 $1.36

c. Cur-rentcosts

$54,000

$34,720

$84,480

$173,200

FIFOEUP

÷120,000

÷124,000

÷132,000

Cost perEUP

$0.45 $0.28 $0.64 $1.37

d. WAEUP

160,000 152,000 150,000

FIFOEUP

120,000 124,000 132,000

Beg. WIP 40,000 28,000 18,000



hapter 6 149


EUP

Percentcomplete

100% 70% 45%

.

Units

Units



0Units started 81,500 Started & com-

pleted76,9

00Units to ac-

count for91,300 Ending WIP In-

ventory 4,600

Accounted for 91,3

00

OtherCan-ister

s

Mate-rials DL

OH

Beginning WIP

Inventory 9,800 9,800 9,800 9,800

Started &completed

76,900

76,900

76,900

76,900

EI4,600

1,840 920 460

EUP 91,300

88,540

87,620

87,160



50 Chapter 6


Costs: OtherCan-

istersMate-rials

DL OH Total

BeginningWIP

$6,535

$6,174

$5,59

4

$1,070

$19,37

3Current pe-

riod 61,940

86,793

82,026

160,176

390,935

Total cost $68,4

75

$92,9

67

$87,

620

$161,

246

$410,

308Divided by

EUP÷

91,300

÷88,54

0

÷87,620

÷87,16

0Cost per

EUP$0.75

$1.05 $1.00

$1.85$4.65

8. a.

Units

Beginning WIP Inven-tory

400

Units started 3,800



400

Units started & completed

3,500

Total units completed 3,900



hapter 6 151


Ending WIP Inventory300


Mate-rial

Conver-sion

Beginning WIP In-ventory

400 400

Units started &completed

3,500

3,500

Ending WIP Inven-tory 120

180

EUP 4,020

4,080

b. Material Conver-sion

Total

BeginningWIP

$ 4,349 $ 4,658 $ 9,007

Currentcosts

60,775 46,750 107,525

Total cost $65,124 $51,408 $116,532Divided

by

EUP(WA)

÷ 4,020 ÷ 4,080

Cost perEUP

$16.20 $12.60 $28.80



52 Chapter 6


9

.

Units

Units

Beginning

WIPInventory

9,800

Beginning WIP

Inventory 9,800

Units started 81,500


76,900

Units to ac-count for

91,300

Ending WIP In-ventory 4,60

0


OtherCanis-

tersMateri-

alsDL OH

Beginning

WIPInvento-ry

0 3,920 5,880 7,840

Started &complet-ed

76,900 76,900 76,900 76,900

EI 4,600 1,840 920 460

EUP 81,500 82,660 83,700 85,200

Costs: Oth-er

Can-isters

Mate-rials

DL OH Total

Current period

$61,940 $86,793 $82,02

6

$160,176 $390,93

5



hapter 6 153


Divided byEUP

÷81,50

0

÷82,660

÷83,700

÷85,200

Cost per

EUP

$0.76 $1.0

5

$0.9

8

$1.8

8

$4.67

0. a.

Units

Beginning WIP Inventory 400

Units started 3,800


Beginning WIP Inventory 400

Units started & completed 3,50

0Total units completed 3,90

0Ending WIP Inventory

300Units accounted for 4,20

0

Material Conversion


120 60


3,500 3,500

Ending WIPInventory

120 180

EUP 3,740 3,740



54 Chapter 6


b. Material Conversion Total

Currentcosts

$60,775 $46,750 $107,525

ivided byEUP(FIFO)

÷ 3,740 ÷ 3,740

Cost perEUP

$16.25 $12.50 $28.75

1. a. 390,000 × ($7.50 + $9.00 + $10.20) = 390,000 × $26.70 =

$10,413,000

b. DM: $7.50 × (55,500× 100%)

$416,250

DL: $9.00 × (55,500 ×30%)

149,850

OH: $10.20 × (55,500

× 25%)

141,525

Total of ending inven-tory

$707,625



hapter 6 155


c. Cost of goods trans-ferred out $10,413,

000

Ending WIP707,625

Total cost to accountfor

$11,120,625

2. a. BI cost $458,482.

00Cost to complete:DM (42,600 × 20% ×

$10.74)$

91,504.80

DL (42,600 × 55% ×$13.88)

325,208.40

OH (42,600 × 70% ×$24.80) 739,536

.001,156,24

9.20Total cost of BI trans-

ferred$1,614,7

31.20

b.

Goods started and completed = 1,570,000 – 42,600 = 1,527,400

Total FIFO cost per EUP = $10.74 + $13.88 + $24.80 = $49.42

Total cost of BI transferred $1,614,731.20

Cost of goods S&C(1,527,400 × $49.42) 75,484,108.00

Total cost of goods trans-ferred

$77,098,839.20



56 Chapter 6


c. Cost of ending inventory:DM (28,400 × 35% ×$10.74)

$106,755.60

DL (28,400 × 15% ×$13.88)

59,128.80

OH (28,400 × 25% ×$24.80)

176,080.00

Total cost of EI $341,964.40

d. Total cost to account

forCost of goods trans-ferred

$77,098,839.20

Cost of ending inven-tory 341,964.40Total cost to accountfor

$77,440,080.60

3. a. Because direct material (other than packaging) is 100 percent completeat the

start of production, the number of EUP shown for direct material is also thenumber of units in BI.

Material (54,000 ÷ 54,000) = 100%

Packaging (0 ÷ 54,000) = 0%Labor (16,200 ÷ 54,000) = 30%Overhead (18,900 ÷ 54,000) = 35%

b. Beginning WIP Inventory:DM (other than packag-ing)

$789,040

DL 91,862



hapter 6 157


Overhead145,90

8

$1,026,810

Complete beginning WIP

Inventory:Packaging (54,000 ×

100% × $3.00)$162,0

00DL (54,000 × 70% ×

$10.84)409,75

2Overhead (54,000 ×

65% × $7.68) 269,56

8

841,320

Total cost to account for $1,868,130

c.

# of units S&C = Units completed – Units in BI# of units S&C = 370,000 – 54,000 = 316,000

Cost of units S&C = 316,000 × ($29.50 + $3.00 + $10.84 + $7.68) =316,000 × $51.02 = $16,122,320

d. DM (other than packaging)(12,000 × 100% × $29.50) $354,000

Labor (12,000 × 30% × $10.84) 39,024Overhead (12,000 × 55% × $7.68) 50,688Total $443,712

4. a. BeginningWIP

1,000

Started 8,400



58 Chapter 6


Units to accountfor

9,400

Units Ma-

terial

Conver-

sionBeginning WIP 1,000 1,000 1,000Started & completed

8,100 8,100 8,100

Ending WIP 300 240 210Units accountedfor

9,400 9,340 9,310

Total Material Conversion

BeginningWIP

$ 5,006.30 $ 4,133.20 $ 873.10

Current period

86,354.00 62,928.00 23,426.00

Total

costs

$91,360.30 $67,061.20 $24,299.10

EUP ÷ 9,340 ÷ 9,310Cost perEUP

$9.79 $7.18 $2.61

b. Cost transferred out = 9,100 × $9.79 = $89,089

c.

Ending WIPDM (240 ×$7.18)

$1,723.20

CC (210 ×$2.61)

548.10

Total $2,271.30

d. Units Mate-rial

Conversion



hapter 6 159


Complete BI(40%, 70%)

1,000400

700


8,1008,100

8,100

Ending WIP 300240

210

Units accountedfor

9,4008,740

9,010


Begin-

ning WIP

$ 5,006.30

CurrentPeriod

86,354.00 $62,928.00 $23,426.00

Totalcosts

$91,360.30

EUP ÷ 8,740 ÷ 9,010Cost per

EUP

$9.80 $7.20 $2.60

e.

Transferred out:Costs in BI $5,006.30Cost to complete BI

DM (400 × $7.20) 2,880.00CC (700 × $2.60) 1,820.00 $ 9,706.30

Started & completed(8,100 × $9.80)

79,380.00



60 Chapter 6


Total cost transferred $89,086.30

f.

Ending WIPDM (240 × $7.20) $1,728

CC (210 × $2.60) 546Total $2,274

g. WIP Inventory 62,928RM Inventory 62,928

WIP Inventory 13,070

Wages Payable (orCash)

13,070

WIP Inventory 10,356Factory Overhead

Control10,356

FG Inventory 89,089WIP Inventory 89,089

5. a. Ending WIP Invento-y

EUP Cost perEUP

TotalCost

Transferred in (4,000 ×100%)

4,000 $10 $40,000

Material (4,000 × 0%) 0 2 0Conversion (4,000 ×80%)

3,200 6 19,200

Total cost $18 $59,200

b. Transferred out: 25,000 × ($10 + $2 + $6) = 25,000 × $18 = $450,000

c.

Finished Goods In-ven

450,000



hapter 6 161


to-ry

WIP Inventory –– Casing Dept.

450,000

6. a. BeginningWIP

Inventory5,000


Transferred in 80,000 Started & completed

74,000

Units to ac-

count for

85,000 Ending WIP In-

ventory

6,000

Units accountedfor

85,000

Units Trans.In

Material Conversion

Beginning

WIP Inven-tory

5,000 5,000 5,000 5,000

Started &completed

74,000 74,000 74,000 74,000

EndingWIP Inven-tory

6,000 6,000 0 4,800

EUP (WA) 85,000 85,000 79,000 83,800



62 Chapter 6


b. Costs Total Trans.In

Material Conversion

BeginningWIP In-

ventory

$ 8,643 $ 7,550 $ 0 $ 1,093

Current period

104,261 80,000 10,270 13,991

Total costto ac-count for

$112,904 $87,550 $10,270 $15,084

Divided

by EUP

÷

85,000

÷

79,000

÷ 83,800

Cost perEUP

$1.34 $1.03 $0.13 $0.18

c. 79,000 × $1.34 = $105,860

d. Transferred in (6,000 ×

$1.03)

$6,180

Conversion (4,800 ×$0.18)

864

Total ending WIP cost $7,044

7. a. BeginningWIP

Inventory

5,000Beginning WIP

Inventory 5,000

Transferred in 80,000 Started & completed

74,000


85,000 Ending WIP In-ventory

6,000

Units accountedfor

85,000

Units Ma- Conver-



hapter 6 163


Tran.In

terial sion

Complete BI 5,000 0 5,000 3,500Started & com-

pleted

74,00

0

74,00

0

74,00

0

74,000

Ending WIP In-ventory 6,000 6,000 0

4,800

EUP (WA) 85,000

80,000

79,000

82,300

b. Costs Total Trans.

In

Mate-

rial

Conver-

sionBeginning WIP

Inventory $8,643

Current period104,2

61

$80,000

$10,270

$13,991

Total cost to ac-count for

$112,904

Divided by EUP ÷80,00

0

÷79,00

0

÷82,300

Cost per EUP$1.30

$1.00 $0.13 $0.17

c. Beginning WIP costs $8,643Cost to complete:

DM (5,000 $0.13) 650

CC (3,500 $0.17) 595 $ 9,888

Started and completed

(74,000 $1.30)

96,200

Cost transferred out $106,088



64 Chapter 6


d.

Transferred

in (6,000 $1.00)

$6,000

Conversion (4,800 $0.17)

816Total ending WIP cost $6,816

8. a. Fabri-ation:BeginningWIP

Invento-ry

5,000Beginning WIP

Inventory 5,000

Started 40,000 Started & completed

33,200



6,800

Units accounted

for

45,000

Units Material Conversion


5,000 5,000 5,000

Started & com-

pleted

33,200 33,200 33,200

Ending WIPInventory

6,800 6,800 4,080

EUP (WA) 45,000 45,000 42,280

Units started in Assembly = Units transferred out of Fabrication = 5,000 +33,200 = 38,200

Assembly:



hapter 6 165


BeginningWIP

Inventory2,000


Started 38,200 Started & com-

pleted

32,100



6,100

Units accountedfor

40,200

Units

Trans.In

Material Conversion

BeginningWIP In-ventory

2,000 2,000 2,000 2,000

Started &completed

32,100 32,100 32,100 32,100

EndingWIP In-ventory

6,100 6,100 0 915

EUP (WA) 40,200 40,200 34,100 35,015

b. Fabrication:Unit

s

Mate-

rial

Conver-

sionBeginning WIPInventory 5,00

00 3,750

Started & complet-ed

33,200

33,200

33,200

Ending WIP Inven-tory 6,80

06,800 4,080



66 Chapter 6


EUP (FIFO) 45,000

40,000

41,030

Assembly:

Units Trans.In

Material Conversion

BeginningWIP In-ventory

2,000 0 2,000 1,300

Started &completed

32,100 32,100 32,100 32,100

EndingWIP In-ventory

6,100 6,100 0 915

EUP(FIFO)

40,200 38,200 34,100 34,315

9. a. Beginning WIP

nventory

0 Started & com-

pleted

2,400

Started 2,500 Ending WIPInventory

100

Total 2,500 Units accountedfor

2,500

Material Labor Overhead

Started and completed 2,400 2,400 2,400


10025

35

EUP 2,500 2,425 2,435



hapter 6 167


Cost of goodstransferred out:Direct material:

Dacron (250 ×$10)

$ 2,500

Denim (480 ×$8)

3,840

Cotton (1,670× $12)

20,040 $26,380

Direct labor

(2,400 × $9)

21,600

Overhead (2,400× $6)

14,400

Total $62,380

b. Cost of ending WIP In-ventory:

Direct material:Dacron (50 × $10) $500Denim (20 × $8) 160Cotton (30 × $12) 360 $1,02

0Direct labor (25 × $9) 225Overhead (35 × $6)

210Total $1,45



68 Chapter 6


5

0. a. Beginning WIPnventory

0 Started & completed

105

Started 130 Ending WIP In-ventory

25

Total 130 Units accountedfor

130

Material Conversion

Started and com-

pleted

105 105


25 15

EUP 130 120

Cost of goods completed:

Direct material:Glass (65 × $24) $1,560Metal (12 × $15) 180 Natural (28 × $7) 196 $1,936

Conversion (105 ×$23)

2,415

Total $4,351

b. Cost of ending WIP In-ventory:

Direct material:Glass (5 × $24) $120Metal (13 × $15) 195 Natural (7 × $7) 49 $364

Conversion (25 × 60%× $23)

345



hapter 6 169


Total $709

1. a. Beginning WIP In-entory

12,000



12,000

Started & completed 302,000Ending WIP Inventory 8,000


Ingred. Packaging Conversion


0 12,000 3,600

Started and completed 302,000 302,000 302,000Ending WIP Invento-

ry

8,000 0 4,800

EUP 310,000 314,000 310,400

b. Standard cost of goods completed: 314,000 × $0.67 = $210,380

c.

Cost of ending WIPInven-

tory:Ingredients (8,000 ×$0.25)

$2,000


1,776

Total $3,776

2. a. DM (180,000 × 100%$0.10)

$18,000



70 Chapter 6


CC (180,000 × 45% ×$0.11)

8,910

Total cost in BI $26,910

b. DM (144,000 × 100% ×$0.10)

$14,400

CC (144,000 × 65% ×$0.11)

10,296

Total cost in EI $24,696

c. Beginning WIP In-

vento-ry

180,000

Started 1,300,000Units to account for 1,480,000

Total units to account for 1,480,000Ending WIP Inventory (144,000)

Units transferred out 1,336,000

Cost transferred out = 1,336,000 × $0.21 = $280,560

d. Mate-rial

La- bor

OH

To complete BI

(units) 0

99,000

99,000Started & completed

1,156,000 1,156,0001,156,000

Ending invento-ry 144,000

93,60093,600

Equivalent units(FIFO) 1,300,000

1,348,6001,348,600

Multiply by unitcost

×0.10

× 0.02 ×0.09



hapter 6 171


Standard cost of period

$130,000

$ 26,972 $121,374

Actual cost of period (184,000) (27,126) (118,500)

Variance $(54,000) U

$(154) U

$2,874 F

e. Work in ProcessIn-ven-tory

130,000

Material Variance 54,000Raw Material In-

ventory184,000

Work in Process In-ventory

26,972

Labor Variance 154

Wages Payable (orCash)

27,126

Work in Process In-ventory

121,374

ManufacturingOverhead

118,500

Overapplied Over-head 2,874

3. a b.

Units Mate-rial

Con-version

Beginning inventory(60%; 70%) 16,00

0Gallons started



72 Chapter 6


360,000

Gallons to account for376,0

00

Beginning inventorycompleted 16,00

0

6,400 4,800

Gallons started andcompleted 349,2

00

349,200

349,200

Total gallons transferred365,2

00Ending inventory (40%;20%) 8,000

3,200 1,600

Normal spoilage*

2,800 0 0Gallons accounted for(FIFO EUP) 376,0

00

358,800

355,600

*All spoilage is normal; the 2,800 gallons is less than 0.02 × 360,000.

4. Normal spoilage allowed = 120,000 pounds × 0.08 = 9,600 pounds

Units Mate-rial

Conver-sion

Beginning in-ventory

36,000

Pounds started 120,000Pounds to ac-count for

156,000



hapter 6 173



36,000 0 19,800

Started and

completed

90,000 90,000 90,000

Ending WIPInventory

21,600 21,600 3,240

Normal spoil-age

8,400 0 0

Pounds ac-counted for

(FIFO)

156,000 111,600 113,040

Total Materi-al

Conver-sion

Beginning in-ventory cost

$24,800

Current costs

72,972

$

39,060

$ 33,912

Total costs $97,772Divided byEUP

÷111,600

÷ 113,040

Cost per EUP $0.65 $0.35 $0.30

Cost Assignment

Transferred out:Beginning WIP Inventory cost $24,800Conversion cost to complete

(19,800 × $0.30)5,940

Total cost of beginning inven-tory

$30,740

Started & completed (90,000 ×$0.65)

58,500 $89,240

Ending WIP Inventory:



74 Chapter 6


Material (21,600 × $0.35) $ 7,560Conversion (3,240 × $0.30) 972

8,532Total cost accounted for $97,772

5. a. Units to account for = 20,000 + 120,000 = 140,000 units



hapter 6 175


b. Units to account for140,000

Units completed (116,400)Units in ending WIPInventory

(16,000)

Spoiled units7,600

Normal loss = 120,000 × 0.03 = 3,600 units

Abnormal loss = 7,600 – 3,600 = 4,000 units

c. Units Mate-rial

Conver-sion


20,000



140,000

Transferred out 116,400 116,400 116,400Ending inven-tory

16,000 16,000 3,200

Normal spoil-

age

3,600 0 0

Abnormalspoilage

4,000 4,000 4,000

Units account-ed for

140,000 136,400 123,600

The normal spoilage is considered continuous be-cause it is shrinkage.



76 Chapter 6


d.

Using the “method of neglect,” the cost of normal spoilage is automaticallyspread among all of the remaining units produced (including the abnormalspoilage).

e.

Cost of abnormal spoilage is written off as a period cost (loss).

6. Units Mate-rial

Conver-sion


40,000

Pounds started 425,000

Pounds to ac-count for

465,000

BI completed 40,000 0 6,000Started & completed*

405,000 405,000 405,000

Ending inven-

tory

10,000 10,000 2,500

Normal spoil-age

2,000 0 0

Abnormalspoilage

8,000 8,000 5,600

EUP (FIFO) 465,000 423,000 419,100

*Amount necessary to balance the calculation.

The normal spoilage is treated under the method of neglect.

b. Ending inventory:Material (10,000 × $0.08) $ 800Conversion (2,500 ×$0.15) 375Total cost $1,175



hapter 6 177


c. Abnormal spoilage:Material (8,000 × $0.08) $ 640Conversion (5,600 ×

$0.15)

840

Total cost (treated as aloss)

$1,480



78 Chapter 6


PROBLEMS

7.

.

Units Materi-

al

Conver-

sionBeginningWIP Inven-tory

200,000

Units start-ed

1,000,000

Units to ac-

count for

1,200,000

BeginningWIP Inven-tory

200,000 200,000 200,000

Started &completed

700,000 700,000 700,000

Ending WIPInventory

300,000 300,000 210,000

Units ac-counted for

1,200,000 1,200,000 1,110,000

b. BI conversion cost = $671,875 × 1.6 =$1,075,000

Current period conversion cost = $3,976,250 ×1.6 = $6,362,000


Cost inBI

$ 2,275,000 $1,200,000 $1,075,000

Currentcost

14,162,000 7,800,000 6,362,000

Total $16,437,000 $9,000,000 $7,437,000



hapter 6 179


cost toaccountforDivided

by EUP

÷

1,200,000

÷

1,110,000Cost perEUP

$14.20 $7.50 $6.70

c. Transferred out(900,000 ×

$14.20)

$12,780,000

Ending inventory:Material (300,000 ×

$7.50)$2,250,000

Conversion(210,000 × $6.70)

1,407,000 3,657,000

Total cost accounted for $16,437,000

8. a.1)

Material Labor Over-head

BI units 100,000 100,000 100,000Units started &completed

1,100,000 1,100,000 1,100,000

EI unit 400,000 240,000 240,000EUP 1,600,000 1,440,000 1,440,000

(2) Total Materi-al

Labor Over-head

BI $1,115,5

00

$750,000

$215,000

$150,500

Current



hapter 6 181


Gallons in begin-ning WIP

(36,000)

Gallons started 229,500

b. Material Labor Over-head


36,000 36,000 36,000


206,000 206,000 206,000

Ending WIP Inven-

tory

23,500 3,525

2,350WA EUP 265,500 245,525 244,35

0

Material Labor Over-head

BI costs $

183,510

$

98,526

$

78,273Current costs

1,136,025

451,450 723,195

Total cost $1,319,535

$549,976

$801,468

EUP – FIFO ÷

265,500

÷

245,525

÷

244,350Cost per EUP $4.97 $2.24 $3.28

Total cost to account for = $1,319,535 + $549,976 + $801,468 =2,670,979

Transferred out = 242,000 × ($4.97 + $2.24 + $3.28) = 242,000 × $10.49 =$2,538,580



82 Chapter 6


c. DM (23,500 ×$4

.97)

$116,795

DL (3,525 × $2.24) 7,896OH (2,350 ×$3.28)

7,708

Total EI $132,399

0. a. Delacroix Co.Cost of Production Report

For the Month of March 2013

Production Data

Units Material Labor OverheadBeginning Inven-tory

800

Units started 11,400Units to accountfor

12,200

Beginning WIPInventory 800 800 800 800


11,000

11,000

11,000

11,000

Ending WIP In-ventory 400 280 360

320

Units accountedfor

12,200

12,080

12,160

12,120



hapter 6 183


Cost DataTotal Mate-

rialLabor Over-

headBeginning WIP

Inventory

$

21,138

$

6,748

$

8,680

$

5,710

Current costs505,4

22259,0

1258,20

0188,21

0Total cost to ac-count for

$526,560

$265,760

$66,880

$193,920


0

÷12,16

0

÷12,120

Cost per EUP $43.50

$22.00

$5.50 $16.00

Cost AssignmentTransferred out (11,800units × $43.50)

$513,300

Ending Inventory:Material (280 × $22) $6,160Labor (360 × $5.50) 1,980Overhead (320 × $16) 5,120

13,260Total cost accounted for $526,560

b. Raw Material Inventory XXXAccounts Payable (for

RM purchases)XXX




84 Chapter 6


2Raw Material Inventory 259,01

2

WIP Inventory 58,200Wages Payable 58,200


Factory Overhead Con-trol

188,210

Factory Overhead Control XXXVarious accounts (for ac-

tual OH)XXX

Finished Goods Inventory 513,300


Cost of Goods Sold (for thecost of sales)

XXX

Finished Goods Invento-ry

XXX

c.

Raw Material Inventory WIP Inventory

Beg. XXX

Is-sued

259,012

Beg.

21,138

CGM

513,300

Purch.

XXX

DM

259,012

DL 58,200



hapter 6 185


OH 188,210

End. XXX

End.

13,260

Wages Payable FG Inventory

DL 58,200

Beg.

XXX CGS

XXX

CGM

513,300

En

d.

XXX

Factory Overhead Con-trol

Accounts Payable

ActualXXX

Applied188,210

RM Purch.XXX

Cost of Goods Sold

CGSXXX

1. .



20,000




86 Chapter 6


Units to accountfor

341,600


20,000 0 12,000


305,600 305,600 305,600


16,000 16,000 12,800

Units accountedfor

341,600 321,600 330,400

b. Total Material ConversionBeginningWIP cost

$ 53,580

Current cost 1,055,808 $778,272 $277,536Total cost toaccount for

$1,109,388

Divided by

EUP

÷

321,600

÷ 330,400

Cost per EUP $3.26 $2.42 $0.84

c. Beginning WIPI

t

r

$53,580

Complete WIPCC (12,000 ×

$0.84)10,080 $ 63,660



hapter 6 187



(305,600 ×$3.26)

996,256

Cost transferredout

$1,059,916

d. DM (16,000 × $2.42) $38,720CC (12,800 × $0.84) 10,752Total cost of ending WIP

Inventory$49,472

2. a. Gallons trans-rred out 242,000

Gallons in endingWIP 23,500Total gallons to ac-count for 265,500

Gallons in begin-ning WIP (36,000)Gallons started

229,500

b. Material Labor Over-head


0 16,200 10,800

Started &completed

206,000 206,000 206,000

Ending WIPInventory

23,500 3,525 2,350

EUP –– FIFO 229,500 225,725 219,150



88 Chapter 6


Material Labor Overhead

Current costs $1,136,025 $451,450 $723,195EUP –– FIFO ÷ 229,500 ÷

225,725÷

219,150

Cost perEUP

$4.95 $2.00 $3.30

Beginning WIP ($183,510 + $98,526 + $78,273) $360,309Complete beginning WIP Inventory

DL (16,200 × $2.00) $32,400

CC (10,800 × $3.30) 35,64068,040

Total cost of BI trans-ferred

$428,349

c. Total cost per EUP = $4.95 + $2.00 + $3.30 = $10.25

Total cost of BI transferred $ 428,349Started & completed (206,000 ×

$10.25)2,111,500

Total cost of goods completed $2,539,849

d.

$2,539,849 ÷ 242,000 = $10.50 (rounded)

e.

DM (23,500 ×$4.95)

$116,325

DL (3,525 ×$2.00)

7,050



hapter 6 189


OH (2,350 ×$3.30)

7,755

Total EI $131,130

3. a. Delacroix Co.Cost of Production Report

For the Month of March 2013

Production Da-ta: Units

Mate-rial

La- bor

Over-head

Beginning in-

ventory

800

Units started 11,400Units to ac-count for

12,200

BeginningWIP In-

ventory

800 440 280 480

Started &complet-ed

11,000 11,000 11,000 11,000

Endinginventory

400 280 360 320

Units ac-

countedfor

12,200 11,720 11,640 11,800

Cost Da-ta:

Total Materi-al

Labor Overhead

Cost in BI $ 21,138Currentcosts

505,422 $259,012 $58,200 $188,210

Total cost $526,560



90 Chapter 6


to ac-count forDivided by EUP

÷ 11,720 ÷11,640

÷ 11,800

Cost perEUP

$43.05 $22.10 $5.00 $15.95

Cost AssignmentTransferred out:


$21,138

Cost to complete:Material (440 ×

$22.10)9,724

Labor (280 × $5.00) 1,400Overhead (480 ×

$15.95)7,656 $ 39,918

Started & completed

(11,000 × $43.05)

473,550

Ending WIP Inventory:Material (280 ×

$22.10)$

6,188Labor (360 × $5.00) 1,800Overhead (320 ×

$15.95) 5,10413,092

Total cost accountedfor $526,560

b.

WA and FIFO process costing differ because of how the work performedin the prior period on beginning WIP Inventory is treated. WA includessuch work in the determination of equivalent units of production, whereasFIFO does not. In addition, because WA includes the beginning inventorywork in EUP, this method also includes the cost of beginning inventory inthe determination of cost per EUP (whereas FIFO excludes it). These two



hapter 6 191


items cause the cost per EUP to differ and, thus, the cost of the goodstransferred out as well as the cost of ending inventory.

4. a. Phunky Phingers

Cost of Production Report (WA Method)For the Month of November 2013

Production Data: Units


12,000


Units to accountfor

102,000

Units Mate-rial

La- bor

OH


12,000 12,000 12,000 12,000


70,000 70,000 70,000 70,000

Ending WIPInventory

20,000 20,000 8,000 16,000

Units account-ed for

102,000 102,000 90,000 98,000

Cost Data: Total Material Labor OH


$19,564

$13,020

$ 1,908 $ 4,636

Currentcosts 206,616 90,000

45,792 70,824

Cost to ac-count for

$226,180 $103,020

$47,700 $75,460



92 Chapter 6


Divided byEUP

÷102,000

÷90,000

÷98,000

Cost perEUP

$2.31$1.01

$0.53 $0.77

Cost Assignment:Transferred out (82,000× $2.31)

$189,420


$1.01)$20,200

Direct labor (8,000 ×$0.53)

4,240

Overhead (16,000 ×$0.77)

12,320 36,760

Total cost accountedfor

$226,180

b.

Phunky PhingersCost of Production Report (FIFO Method)

For the Month of November 2013

Production Da-ta:

Units



102,000

Units Mate-rial

Labor Over-head



hapter 6 193



12,000

0 8,400 4,800


70,000

70,000 70,000

70,000


0

20,0008,000

16,000

Units accountedfor

102,000

90,000 86,400

90,800

Cost Data:Total Mate-

rialLa-

borOver-head


$19,564

Current costs206,61

6

$90,000

$45,792

$70,824

Cost to accountfor $226,1

80Divided by EUP ÷

90,000

÷

86,400

÷

90,800Cost per EUP $2.31 $1.00 $0.53 $0.78

Cost Assignment:Transferred out:

Beginning WIP Inventory $19,564Complete beginning WIP

DL (8,400 × $0.53) 4,452



94 Chapter 6


OH (4,800 × $0.78)3,744

$ 27,760


161,700

Ending WIP Inventory:Material (20,000 × $1.00) $20,000Direct labor (8,000 × $0.53) 4,240Overhead (16,000 × $0.78) 12,480 36,720

Total cost accounted for $226,180

5. a. Springtime Paints

Cost of Production ReportFor Month Ended May 31, XXXX

Production da-ta:

Units


4,000


25,000

DIRECTMATERIALS

Units Chemi-

cals

Cans Con-

versionBeginning WIPInventory 4,00

04,000 4,000 4,000


16,000

16,000 16,000

16,000


0

5,0000 4,000



hapter 6 195


Units accountedfor

25,000

25,000 20,000

24,000

Cost data: DIRECT

MATERIALSTotal Chemi-

calsCans Con-

version


$51,90

0

$45,100

$0

$6,800

Current costs

281,900

228,900

7,000 46,000

Cost to accountfor

$333,800

$274,000

$7,000

$52,800

Divided byEUP

÷25,000

÷20,00

0

÷24,00

0

Cost per equiva-lent unit

$13.51

$10.96 $0.35 $2.20

Cost assignment:Transferred out($13.51 × 20,000)

$270,200

Ending WIPChemicals (5,000 × $54,800



96 Chapter 6


$10.96)Conversion (4,000

× $2.20) 8,800 63,600Total cost accounted

for

$333,800

b.

Springtime PaintsCost of Production Report

For Month Ended May 31, XXXX

Production data: Units



25,000

DIRECT MATERIALS

Units

Chem-icals

Cans Con-version

Beginning WIPInventory 4,000 4,000 3,000


16,000

16,000

16,000

16,000

Ending WIP In-ventory 5,000 5,000 0 4,000Units accountedfor

25,000

21,000

20,000

23,000

Cost data:DIRECT MATERIALS

Total Chem-icals

Cans Con-version



hapter 6 197



$51,90

0Current costs

281,900

$228,

900

$

7,000

$46,0

00

Cost to accountfor

$333,800


0

÷20,00

0

÷23,00

0

Cost per equiva-lent unit

$13.25

$10.90

$0.35 $2.00

Cost assignment:Transferred out


$ 51,900

Complete beginningWIP

Cans (4,000 ×$0.35)

1,400

Conversion (3,000× $2.00)

6,000

Total cost of BI trans-

ferred

$ 59,300

Started & completed(16,000 × $13.25) 212,0

00

$271,300

Ending WIP InventoryChemicals (5,000 ×$10.90)

$ 54,500


8,00062,500



98 Chapter 6



c.

The WA calculations are easier to make, but this method tends to obscure

current period costs because the cost per EUP includes both current costsand prior costs that were in beginning inventory. This method is most appropriate when conversion costs, inventory levels, and raw material pricesare stable.

The FIFO method is based on current period work only. This method ismost appropriate when conversion costs, inventory levels, or raw material

prices fluctuate. This method should also be appropriate when accuracy incurrent equivalent unit costs is important or when a standard cost system isused.

(CMA adapted)

6. Octavia Corp. Curing Dept.Cost of Production Report

For the Month Ended May 31, 2013

ProductionData:

UnitsTI

DM DL OH

Beginning

WIPInventory 8,000


48,000

BeginningWIP

Inventory8,000

8,000 8,0008,000

8,000



hapter 6 199


Started &completed

36,00036,000 36,000

36,00036,000

Ending WIPInventory 4,000

4,000 2,800

2,000

1,600Units ac-counted for

48,00048,000 46,800

46,00045,600

Cost Da-ta:

Total TI DM DL OH

BeginningWIPInven-tory

$ 278,872 $ 200,160 $ 42,504 $ 31,360 $ 4,848

Currentcosts

2,739,020 1,620,000 333,300 517,880 267,840

Cost to

ac-countfor

$3,017,892 $1,820,160 $375,804 $549,240 $272,688

Divided byEUP

÷ 48,000 ÷ 46,800 ÷ 46,000 ÷ 45,600

Cost per

EUP

$63,87 $37.92 $8.03 $11.94 $5.98

Cost Assignment:Transferred out(44,000 × $63.87)

$2,810,280

Ending WIP Invento-ry:

TI (4,000 × $37.92) $151,680DM (2,800 × $8.03) 22,484



hapter 6 201


7. Octavia Corp. Curing Dept.Cost of Production Report


ProductionData:

Units TI DM DL OH

BeginningWIP

Invento-

ry

8,000

Units start-ed

40,000


48,000

Beginning

WIPInvento-

ry

8,000 0 1,600 4,800 5,600

Started &complet-

ed36,000 36,000 36,000 36,000 36,000

Ending

WIPInvento-ry

4,000 4,000 2,800 2,000 1,600

Units ac-counted for

40,000 40,400 42,800 43,200

Cost Data:Total TI DM DL OH

Beginning



02 Chapter 6


WIPInven-tory

$278,87

2Current

costs 2,739,020

$1,620,

000

$333,

300

$517,

880

$267,

840

Cost toaccountfor

$3,017,892

Divided by EUP ÷

40,000

÷

40,400

÷

42,800

÷

43,200

Cost perEUP

$67.05 $40.50 $8.25 $12.10

$6.20



$ 278,872

Complete beginninginventory:

DM (1,600 ×$8.25)

$ 13,200

DL (4,800 ×

$12.10)

58,080

OH (5,600 ×$6.20)

34,720 106,000


2,413,800

Total cost of transferredout

$2,798,672

Ending WIP Inventory:TI (4,000 × $162,000



hapter 6 203


$40.50)DM (2,800 ×

$8.25)23,100

DL (2,000 ×

$12.10)

24,200

OH (1,600 ×$6.20)

9,920 219,220


$3,017,892

(CMA adapted)

8.a. Always Christmas Cutting Dept.Cost of Production Report

For the Month Ended October 31, 2013

Production Da-ta:

Units



Units to ac-count for 44,000

Units Mate-rial

Conver-sion


8,0008,000

Started & com- 32,400 32,400



04 Chapter 6


pleted 32,400Ending WIPInventory

3,6003,600

2,520

Units account-

ed for

44,000

44,000

42,920

Cost Data:Total Materi-

alConver-

sion

Beginning WIPInventory $

373,000

$

293,000

$

80,000Current costs

2,672,440

1,379,000

1,293,440


$3,045,440 $1,672,

000

$1,373,440


÷42,920

Cost per EUP $70$38

$32

Cost Assignment:Transferred out

(40,400 × $70)

$2,828,000

Ending inventory:Material (3,600 ×$38)

$136,800

Conversion (2,520× $32)

80,640 217,440

Total cost account-ed for

$3,045,440



06 Chapter 6


CostData:

Total Trans. In Material Conversion

Cost inBI

$ 173,413 $ 166,420 $ 0 $ 6,993

Currentcosts

3,457,760 2,828,000 383,640 246,120

Total toacct.for

$3,631,173 $2,994,420 $383,640 $253,113

Divided byEUP

÷ 42,900 ÷ 41,700 ÷ 42,540

Cost perEUP

$84.95 $69.80 $9.20 $5.95

Cost Assignment:Transferred out (41,700× $84.95)

$3,542,415

Ending inventory:Transferred in

(1,200 × $69.80)$83,760

Conversion (840 ×

$5.95)

4,998 88,758

Total cost accounted for $3,631,173

9. a. Striping Dept.:Beginning inventory $ 20,000Current costs:

DM 90,000DL 80,000OH ($80,000 × 0.8) 64,000



08 Chapter 6


Adhesion

Finished Goods Inven-tory

880,000

WIP Inventory —

Packaging880,000

Cost of Goods Sold 720,000Finished Goods In-

ventory

720,000

0. a. Cutting Department:Units Material Conversion


1,300

Units started 4,800



1,300 260 325

Started & completed 3,700 3,700 3,700Ending WIP Inventory 1,100 440 220EUP 6,100 4,400 4,245

CoatingDepart-ment:

Units Trans.In

Material Conversion


900



hapter 6 209


Units start-ed 5,000Units to ac-count for

5,900


900 0 900 360

Started &completed

3,600 3,600 3,600 3,600

Ending WIP

Inventory

1,400 1,400 0 560

EUP 5,900 5,000 4,500 4,520

b. Cutting De- partment:

Total Material Conver-sion


$16,065

Current costs 56,425 $35,200 $21,225Total cost toaccount for $72,490Divided byEUP

÷ 4,400 ÷ 4,245

Cost per EUP $13 $8 $5

c. Cost transferred out of Cut-ting (FIFO):

Cost of BI $16,065Cost to complete BI

Material (260 × $8) $2,080

Conversion (325 × 1,625



10 Chapter 6


$5)S&C (3,700 × $13) 48,100 51,805Total cost of goodstransferred

$67,870

Ending WIP:DM (440 × $8) $

3,520CC (220 × $5)

1,1004,620

Total $72,490

d. CoatingDepartment:

Total Trans.In

Material Conversion

Cost in BI $13,514

Currentcosts 84,120 $67,870 $4,950 $11,300

Total $97,634Divided by EUP

÷5,000

÷ 4,500 ÷ 4,520

Cost perEUP

$17.17 $13.57* $1.10 $2.50

*Rounded



hapter 6 211


e.

Cost Assignment:Transferred outBeginning inventory cost $13,514Cost to complete:

Material (900 × $1.10) 990Conversion (360 ×

$2.50)900 $15,404

Units S&C (3,600 ×$17.17)

61,812

Total cost transferred out $77,216Ending inventory:

Transferred in (1,400 ×$13.57)

$18,998

Conversion (560 ×$2.50)

1,40020,398

Cost accounted for (off dueto rounding)

$97,614

1. a. Extru-sion

Form Trim Finish

Units pro-duced

16,000 11,000

5,000 2,000

Materialcosts

$192,000

$44,00

0

$15,00

0

$12,000

Unit cost $12.00 $4.00 $3.00 $6.00Conversioncost

$392,000

$132,000

$69,00

0

$42,000

Unit cost $24.50

$12.00

$13.80

$21.00

Plastic Standard Deluxe Executive



12 Chapter 6


Unit costs: Sheets Model Model Model

Extrusion mate-rial

$ 12.00 $ 12.00 $ 12.00 $ 12.00

Form material –– 4.00 4.00 4.00

Trim material –– –– 3.00 3.00Finish material –– –– –– 6.00Extrusion con-version

24.50 24.50 24.50 24.50

Form conversion –– 12.00 12.00 12.00Trim conversion –– –– 13.80 13.80Finish conver-

sion

–

–

–– –– 21.00

Total unit cost $ 36.50 $ 52.50 $ 69.30 $ 96.30Times units pro-duced

×5,000

× 6,000 × 3,000 × 2,000

Total productcost

$182,500 $315,000 $207,900 $192,600

b. EQUIVALENT UNITSMaterial Conversion

Entering trim opera-tion: % Qty. % Qty.

2,000 Deluxeunits

100 2,000

100 2,000

1,000 Deluxe

units

100 1,00

0

60 600

2,000 Executiveunits

100 2,000

100 2,000

Total equivalentunits

5,000

4,600

Deluxe model WIPcosts:

UnitCost

TotalCosts

Extrusion material$12.0

$12,000



hapter 6 213


0Form material

4.004,000

Trim material

(100%) 3.00 3,000Extrusion conver-sion 24.50

24,500

Form conversion12.00

12,000

Trim conversion(60%) 9.00*

9,000*

Work in processcosts $64.5

0

$64,500

*Conversion cost = ($30,000 + $39,000) ÷ 4,600 = $15 per equivalent unit.(CMA adapted)

2. a. Components in produced inventory:DM Logos Streamers Handles

Plain 60,000W/logos & streamers 418,000 418,000 418,000W/logos, streamers, & handles25,000 25,000 25,000 25,000W/streamers 15,200 15,200W/streamers & handles 2,800 2,800 2,800

W/handles 5,000 5,000Total components 526,000443,000 461,00032,800

Ending WIP Inventory (all 9,000 units had the direct material):Plain = 9,000 × 0.70 = 6,300With logo = 9,000 × 0.25 = 2,250With streamers = 9,000 × 0.05 = 450

Units



14 Chapter 6


BI 15,000Started 520,000Units to account for535,000

Units DM Logos Streamers HandlesBI 15,000Started and completed511,000Completed 526,000 526,000443,000461,00032,800EI 9,000 9,000 2,250 450 0Units accounted for535,000535,000445,250461,45032,800

BI cost $ 17,285$ 13,250$ 4,035$ 0$ 0Current period 888,274 468,250 298,735 119,977 1,312Total DM cost $905,559$481,500$302,770$119,977$ 1,312EUP ÷ 535,000÷ 445,250÷461,450÷ 32,800Material cost per EUP $0.90 $0.68 $0.26 $0.04

Conversion Units EUP

BI 15,000Started and completed511,000Completed 526,000 526,000EI (95% complete) 9,000 8,550Units accounted for535,000534,550

Conversion costs = $5,703 + $282,954 = $288,657Conversion cost per EUP = $288,657 ÷ 534,550 = $0.54

Total cost to account for = $905,559 + $288,657 = $1,194,216

Cost of ending WIP towels:Plain towels

DM (6,300 × $0.90) $5,670.00CC (6,300 × 0.95 × $0.54) 3,231.90 $ 8,901.90



hapter 6 215


Towels with logosDM [2,250 × ($0.90 + $0.68)] $3,555.00CC (2,250 × 0.95 × $0.54) 1,154.25 4,709.25

Towels with streamers

DM [450 × ($0.90 + $0.26)]$ 522.00CC (450 × 0.95 × $0.54) 230.85 752.85

Total cost of ending WIP Inventory $14,364.00

b. Production Sales Endingnv.

Plain 60,000 58,000 2,000

W/logos & streamers 418,000 417,500 500W/logos, streamers, & handles25,00024,800 200W/streamers 15,200 15,175 25W/streamers & handles 2,800 2,730 70W/handles 5,000 4,350 650

Plain 2,000 × ($0.90 + $0.54)$2,880.00

W/logos & streamers 500 × ($1.84 + $0.54)1,190.00W/logos, streamers, & handles200 × ($1.88 + $0.54)484.00W/streamers 25 × ($1.16 + $0.54) 42.50W/streamers & handles 70 × ($1.20 + $0.54) 121.80W/handles 650 × ($0.94 + $0.54) 962.00

Total cost of ending FG Inventory $5,680.30

c.

Plain 58,000 × ($0.90 + $0.54) $ 83,520.00 W/logos & streamers 417,500 × ($1.84 + $0.54) 993,650.00W/logos, streamers, & handles 24,800 × ($1.88 + $0.54)

60,016.00W/streamers 15,175 × ($1.16 + $0.54)

25,797.50W/streamers & handles 2,730 × ($1.20 + $0.54)4,750.20

W/handles 4,350 × ($0.94 + $0.54)6,438.00



16 Chapter 6


$1,174,171.70

Cost of ending WIP Inventory$ 14,364.00Cost of ending FG Inventory 5,680.30

Cost of goods sold 1,174,171.70Total cost accounted for $1,194,216.00

d. The conversion cost for all towels should not be the same amount. Each ofthe different add-ons creates additional costs for labor and overhead. Assuch, Randazzo should be dividing these costs into different cost pools andassigning them based on alternative bases. Activity-based costing would be

useful in this company.

63. .


Beginning invento-ry

10,000



Beginning invento-ry completed

10,000 0 3,000


140,000 140,000 140,000

Units completed 150,000

Ending inventory 40,000 40,000 24,000EUP 190,000 180,000 167,000

b.

Donbrowski Co.Cost of Production Report

For the Month of May 2013

Production Da-ta:



hapter 6 217




10,000



190,000

Beginning in-ventory completed

10,000 0 3,000


140,000 140,000 140,000

Ending invento-ry

40,000 40,000 24,000

EUP 190,000 180,000 167,000

Cost Data (all atstandard):

Total Materi-

al

Con-

versionBI: DM (10,000 ×$5.50)

$55,000

$55,000

CC (7,000 ×$12.50)

87,500 $87,500

Current costs:DM (180,000 ×

$5.50)

990,000

990,000CC (167,000 ×

$12.50) 2,087,500

2,087,500


$3,220,000

$1,045,000

$2,175,000

Cost Assignment



18 Chapter 6


Transferred out (150,000× $18)

$2,700,000


$5.50)

$220,000

Conversion (24,000 ×$12.50)

300,000 520,000

Total costs assigned $3,220,000

c.

Total variance = Total actual cost – Total standard cost = $3,137,000 ‒ $3,077,500 = $59,500 unfavorable

Material:Current actual cost

$1,001,000Standard cost (180,000× $5.50) (990,000)Direct material variance $

11,000 U

Conversion:Current actual cost $

2,136,000Standard cost (167,000× $12.50) (2,087,500)Conversion cost vari-ance

$48,500 U

Cost of Goods Sold 59,500Direct Material

Variance11,000



hapter 6 219


Conversion CostVariance

48,500

64.

.

Units Material Labor Overhead

BI 14,800Units start-ed

385,000


399,800

BI completed

14,800 0 8,880 4,440

Units S&C 380,700 380,700 380,700 380,700Units completed

395,500

EI 4,300 4,3002,580

3,655

EUP 399,800 385,000 392,160 388,795

b. Total BI cost:DM (14,800 × $8.25)$122,100DL (5,920 × $1.60) 9,472OH (10,360 × $4.90) 50,764

Total cost of BI $182,336

c. Cost transferred out = 395,500 × $14.75 = $5,833,625

Cost in EI:DM (4,300 × $8.25) $35,475.00DL (2,580 × $1.60) 4,128.00OH (3,655 × $4.90) 17,909.50

Total cost of BI $57,512.50



20 Chapter 6


d.

Standard DM cost = 385,000 × $8.25 = $3,176,250.00Standard DL cost = 392,160 × $1.60 = $627,456.00Standard OH cost = 388,795 × $4.90 = $1,905,095.50

DM DL OHCurrent period costs $ 3,201,032.00$ 625,510.00 $

,904,390.00Standard costs (3,176,250.00) (627,456.00) (1,905,095.50)Variance $ 24,782.00 U $ 1,946.00 F $

05.50 F

5. a. Beginning pounds2,000

Started250,000

Pounds to accountfor 252,000Pounds transferred (238,200)

Pounds in EI (6,000)Pounds of shrinkage

7,800

b.

Normal shrinkage = 250,000 × 0.01 = 2,500 poundsFor accounting purposes, normal shrinkage is simply ignored, which meansits costs will be spread over all good units produced.

c. Abnormal shrinkage = 7,800 – 2,500 = 5,300 poundsThe cost of abnormal shrinkage is treated as a loss of the period.

d.Total Material Conversion



hapter 6 221



2,000

Started 250,000Units to account

for

252,000


2,000 2,000 2,000


236,200 236,200 236,200

Ending WIP In-

ventory

6,000 6,000 1,800

ormal loss 2,500Abnormal loss 5,300 5,300 5,300EUP (WA) 252,000 249,500 245,300

e. Total Material Conversion

Beginning

WIP costs

$ 1,957 $ 1,807 $ 150

Current costs 264,588 240,208 24,380Total costs $266,545 $242,015 $ 24,530Divide byEUP

÷249,500

÷ 245,300

Cost per EUP $1.07 $0.97 $0.10

Transferred out (238,200 $1.07) $254,874

Ending inventory:

Material (6,000 $0.97)

$5,820

Conversion (1,800 $0.10)

180 6,000

Abnormal spoilage (5,300 $1.07)

5,671



22 Chapter 6



f.

The easiest way to reduce shrinkage loss is to buy higher quality turkey at ahigher input cost per pound. The higher quality would have a lower fat

content and would shrink less. Because of the reduced shrinkage, conver-sion cost per pound of finished product might decline, and the companywould probably be able to sell its product at a higher price.

g. The approximate cost of April turkey was $1.13 per pound ($1,807 BI costof turkey ÷ 1,600 EUP pounds in BI), while the average cost per pound inMay was approximately $0.97 per pound. It is highly likely that buying the

lower-priced ground turkey was the cause of the abnormally high spoilagerate. The information on the cost differences between April and May is notclear when using weighted average process costing.

6. a. Gary’s Tools Grinding DepartmentCost of Production Report

For the Month Ended August 31, 2013

UnitsBeginningWIPInven-tory

1,000

Transferredin

50,800

Units toaccount 51,800



hapter 6 223


for

UnitsTrans.

In

DM DL OH

Beg. WIPInventory 1,000 1,000 1,000 1,000 1,000

Started &completed 48,000 48,000 48,000 48,000 48,000

Ending WIPInventory 1,800 1,800 0 720 1,170

ormalspoilage

650 650 0 650 650

Abnormalspoilage 350

350 0 350350

EUP (WA) 51,800 51,800 49,000 50,720 51,170

Total

Trans.In

DM DL OH

Beg. WIPInven-

tory$

7,355$

6,050$0

$325

$980

Currentcosts 235,5

57

149,35

0

12,250 23,76

7

50,19

0Total costs $242,912

$155,400

$12,250

$24,092

$51,170

Divided byEUP

÷51,800

÷49,000

÷50,72

0

÷51,17

0Cost perEUP

$4.725

$3.00 $0.25 $0.475

$1.00



24 Chapter 6



Good units (49,000 ×$4.725)

$231,525

Normal spoilage (650× $4.475)

2,909 $234,434

Ending inventory:Transferred in (1,800 ×$3.00)

$ 5,400

Labor (720 × $0.475) 342Overhead (1,170 ×

$1.00)

1,170 6,912

Abnormal spoilage (350× $4.475)

1,566

Total costs accountedfor

$242,912

b. Loss on Abnormal Spoilage 1,566

Work in Process Inventory —

Grinding 1,566

7. a. Beginning invento-y

3,000

Transferred in 45,000Units to account for 48,000

Transferred out 40,000Ending inventory 4,000Bikes lost 4,000Units accounted for 48,000

(1) Bikes passing through As-sembly 48,000Minus bikes in EI (have notreached the



hapter 6 225


inspection point, so thereis no way

to determine acceptabil-ity)

(4,000)

Bikes reaching the inspection point 44,000 Normal defective rate ×

0.05 Normal number of defective bikes 2,200

(2) Total bikes lost4,000

Normal number of defec-tive bikes

(2,200)

Abnormal number of de-fective bikes 1,800

b. Units Trans.In

Material Conversion

Trans-ferred out

40,000 40,000 40,000 40,000

EndingWIP

Inven-

tory

4,000 4,000 2,000 800

Normalloss

2,200 2,200 2,200 2,200

Abnormalloss

1,800 1,800 1,800 1,800

EUP(WA)

48,000 48,000 46,000 44,800

c. Total Trans. In Material Conversion



26 Chapter 6


Begin-ning WIP

$ 102,790 $ 82,200 $ 6,660 $ 13,930

Currentcosts

1,576,070 1,237,800 96,840 241,430

Totalcost

$1,678,860 $1,320,000 $103,500 $255,360

Divided by EUP

÷ 48,000 ÷ 46,000 ÷ 44,800

Cost perEUP

$35.45 $27.50 $2.25 $5.70

d.

(1) Normal defective bikes: 2,200 × $35.45 = $77,990

(2) Abnormal defective bikes: 1,800 × $35.45 = $63,810

(3) Good bikes completed: 40,000 × $35.45 = $1,418,000

(4)

Ending WIP Inventory

Transferred in (4,000 ×$27.50)

$110,000

Material (2,000 × $2.25) 4,500Conversion (800 × $5.70)

4,560Total $119,060

e.

Total cost transferred = Cost of good bikes + Normal spoilage cost =$1,418,000 + $77,990 = $1,495,990 (or an average cost per bike of $37.40)

f.

Normal spoilage cost is an expected cost of producing good units. As such,it is not an extra cost but thought to be inherent in producing good units. Normal spoilage may occur because of material or labor quality, machinemalfunctions, or human error. Management should do cost-benefit studiesto determine if it is economically sensible to reduce spoilage. Three ques-



hapter 6 227


tions should be addressed: (1) What does the spoilage actually cost? (2)Why does it occur? (3) How can it be controlled?

(CMA adapted)

8. Maximum normal spoilage = 70,000 × 0.03 = 2,100 units

LaToya CompanyCost of Production Report


Units Mate-rial

Conversion


5,600

Units started 74,400Units to account

for

80,000


5,600 5,600 5,600


64,400 64,400 64,400

Ending WIP In-

ventory

7,500 7,500 2,500

Normal spoilage 2,100 2,100 2,100Abnormal spoil-age

400 400 400

Units accountedfor

80,000 80,000 75,000

Total Ma-terial

Con-version



28 Chapter 6



$ 7,632 $ 6,400 $ 1,232

Current costs 106,168 74,400 31,768Cost to account for $113,800 $80,800 $33,000


÷ 75,000

Cost per EUP $1.45 $1.01 $0.44

Cost Assignment:Units completed(70,000 × $1.45)

$101,500

Normal spoilage:*Direct material

(2,100 × $1.01)$2,121


924 3,045 $104,545

Ending inventory:Direct material

(7,500 × $1.01)

$ 7,575


1,100 8,675

Abnormal spoilage:*Direct material

(400 × $1.01)$ 404

Conversion (400 ×

$0.44)

176 580


$113,800

*Spoilage was found at the end of the production process when units are ful-ly complete; thus, computations could have been made at the full cost of$1.45 per unit. Had the spoilage been found earlier, the DM and conversionwould not have been at the same stage of production and separate calcula-tions would have been needed.



hapter 6 229


9. Maximum normal spoilage = 70,000 × 0.03 = 2,100 units

LaToya CompanyCost of Production Report


Units Mate-

rial

Conversion


5,600

Units started 74,400Units to account for 80,000

Beginning WIP In-

ventory

5,600 0 2,800


64,400 64,400 64,400

Ending WIP Inven-tory

7,500 7,500 2,500

Normal spoilage 2,100 2,100 630Abnormal spoilage 400 400 120Units accountedfor

80,000 74,400 70,450



hapter 6 231

× $1.00)Conversion (2,500 ×

$0.45)1,125.00 8,625.00

Abnormal spoilage:

Direct material (400 ×$1.00)

$ 400.00

Conversion (120 ×$0.45)

54.00 454.00

Total cost accounted for(off due to rounding)

$113,734.50

ch6 raiborn sm

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