APPLICATION

PROBLEM 1
The Sweet Temptations Company has two processing departments, Cooking and Packaging. Ingredients are placed into production at the
beginning of the process in Cooking, where they are formed into various shapes. When finished, they are transferred into Packaging, where
the candy is placed into heart and tuxedo boxes and covered with foil. All material added in Packaging is considered as one material for
convenience. Since the boxes contain a variety of candies, they are considered partially complete until filled with the appropriate assortment.

The following information relates to the two departments for February 20X7:
Cooking Department:
Beginning WIP (30% complete as to conversion) 4,500 units
Units started this period 15,000 units
Ending WIP (60% complete as to conversion) 2,400 units
Packaging Department:
Beginning WIP (90% complete as to material, 80% complete as to conversion) 1,000 units
Units started during period ?
Ending WIP (80% complete as to material and 80% complete as to conversion) 500 units

REQUIRED:
1. Determine equivalent units of production for both departments using the weighted average method.
2. Determine equivalent units of production for both departments using the FIFO method.

PROBLEM 2
The formula for a chemical compound requires one pound of Chemical X and one pound of Chemical Y. In the simplest sense, one pound of
Chemical X is processed in Department A and transferred to Department B for further processing where one pound of Chemical Y is added
when the process is 50 percent complete. When the processing is complete in Department B, the finished compound is transferred to finished
goods. The process is continuous, operating 24 hours a day.

Normal spoilage occurs in Department A. Five percent of material is lost in the first few seconds of processing. No spoilage occurs in
Department B.

The following data are available for the month of August 20X6:

Dept. A Dept. B
Units in process, August 1 8,000 10,000
Stage of completion of beginning inventory 3/4 3/10
Units started or transferred in 50,000 ?
Units transferred out 46,500 ?
Units in process, August 31 ? ?
Stage of completion of ending inventory 1/3 1/5
Units of Chemical Y added in Department B 44,500

REQUIRED:
1. Prepare a schedule showing finished equivalents for Chemical X and for conversion cost for Department A using the FIFO method.
2. Determine for Department B the number of units of good product completed during August and the number of units in process on
August 31.
3. Prepare a schedule for Department B showing finished equivalents for preceding department cost, cost of Chemical Y, and
conversion cost using the FIFO method.

PROBLEM 3
Ashcroft Industries manufactures wood furniture. In the Lamination Department, varnish is added when the goods are 60 percent complete as
to overhead. The units that are spoiled during processing are found upon inspection at the end of production. Spoilage is considered discrete.

Production Data for May 20X8

Beginning inventory (80% complete as to labor, 70% complete as to overhead) 1,000 units
Transferred in during month 7,450 units
Ending inventory (40% complete as to labor, 20% complete as to overhead) 1,500 units
Normal spoilage (found during final quality inspection) 100 units
Abnormal spoilage-found at 30% completion of direct labor and 15% of conversion; the sanding 200 units
machine was misaligned and scarred the chairs

All other units were transferred to finished goods

Cost Data for May 20X8

Beginning work in process inventory:
Prior department costs $7,510

Varnish 950

Direct labor 2,194

Overhead 5,522 $ 16,176

Current period costs:

Prior department costs $68,540

Varnish 7,015

Direct labor 23,000

Overhead 56,782 155,337

Total costs to account for $171,513

REQUIRED:
Determine the proper disposition of the May 20X8 costs for the Laminating Department using the weighted average method.

PROBLEM 4
Consider the following data for a cooking department for the month of January:

Physical
Units
Work in process, beginning inventory* 11,000
Started during current period 74,000
To account for 85,000
Good units completed and transferred out during current period:
From beginning work in process 11,000

Started and completed 50,000

Good units completed 61,000

Spoiled units 8,000

Work in process, ending inventory** 16,000
Accounted for 85,000

*Direct material, 100% complete; conversion costs, 25% complete

**Direct material, 100% complete; conversion costs, 75% complete
I
nspection occurs when production is 100 percent completed. Normal spoilage is 11 percent of good units completed and transferred out
during the current period.

The following cost data are available:

Work in process, beginning inventory:
Direct material $220,000

Conversion costs  30,000 $  250,000

Costs added during current period:

Direct material 1,480,000

Conversion costs   942,000

Costs to account for $2,672,000

REQUIRED:
Prepare a detailed cost of production report. Use the FIFO method.

PROBLEM 5
Lumberton Industries has two departments. Department 1 uses FIFO costing and Department 2 uses weighted average.

Units are introduced into the process in Department 1 (this is the only material added in Department 1). Spoilage occurs continuously through
the department and normal spoilage should not exceed 10 percent of the units started.

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Department 2 adds material (packaging) at the 75 percent completion point; this material does not cause an increase in the number of units
being processed. A quality control inspection takes place when the goods are 80 percent complete. Spoilage should not exceed 5 percent of
the units transferred in from Department 1.

The following production cost data are applicable for operations for August 20X7:

Department 1 Production Data

Beginning inventory (65% complete) 1,000
Units started 25,000
Units completed 22,000
Units in ending inventory (40% complete) 2,800

Department 1 Cost Data

Beginning inventory:
Material $ 1,550

Conversion  2,300 $  3,850 

Current period:
Material $38,080

Conversion 78,645 116,725 

Total costs to account for $120,575 

Department 2 Production Data

Beginning inventory (90% complete) 8,000
Units transferred in 22,000
Units completed 24,000
Units in ending inventory (20% complete) 4,500
Department 2 Cost Data
Beginning inventory:
Transferred in $40,800

Material 24,000

Conversion  4,320 $ 69,120*

Current period:
Transferred in $113,700

Material` 53,775

Conversion  11,079 178,554 

Total costs to account for $247,674 

*This may not be the same amount determined for Department 1; ignore any difference and use this figure.

REQUIRED:
1. Compute the equivalent units of production in each department.
2. Determine the cost per equivalent unit in each department and compute the cost transferred out, the cost in ending inventory, and
the cost of spoilage (if necessary).

PROBLEM 6
Four Seasons Company makes snow blowers. Materials are added at the beginning of the process and conversion costs are uniformly
incurred. At the beginning of September, work in process is 40% complete and at the end of the month it is 60% complete. Other data for the
month include:

Beginning work-in-process inventory 1,600 units

Units started 2,000 units
Units placed in finished goods 3,200 units

Conversion costs $200,000

Cost of direct materials $260,000
Beginning work-in-process costs:
Materials $154,000
Conversion $ 82,080

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REQUIRED:
1. Prepare a production cost worksheet with supporting schedules using the weighted-average method of process costing.
2. Prepare journal entries to record transferring of materials to processing and from processing to finished goods.

PROBLEM 7
General Fabricators assembles its product in several departments. It has two departments that process all units. During October, the
beginning work in process in the cutting department was half completed as to conversion, and complete as to direct materials. The beginning
inventory included $12,000 for materials and $3,000 for conversion costs. Ending work-in-process inventory in the cutting department was
40% complete. Direct materials are added at the beginning of the process.

Beginning work in process in the finishing department was 75% complete as to conversion. Direct materials are added at the end of the
process. Beginning inventories included $16,000 for transferred-in costs and $20,000 for conversion costs. Ending inventory was 25%
complete. Additional information about the two departments follows:

Cutting Finishing
Beginning work-in-process units 20,000 20,000
Units started this period 40,000 50,000
Units transferred this period 50,000
Ending work-in-process units 10,000 20,000
Material costs added $48,000 $28,000
Direct manufacturing labor $16,000 $40,000
Other conversion costs $ 8,000 $24,000

REQUIRED:
Prepare a production cost worksheet using weighted-average for the cutting department and FIFO for the finishing department.

THEORETICAL QUESTIONS

1. Which cost accumulation procedure is most applicable in continuous mass-production manufacturing environments?
a. standard
b. actual
c. process
d. job order

2. Process costing is used in companies that

a. engage in road and bridge construction.
b. produce sailboats made to customer specifications.
c. produce bricks for sale to the public.
d. construct houses according to customer plans.

3. A producer of ________ would not use a process costing system.

a. gasoline
b. potato chips
c. blank videotapes
d. stained glass windows

4. A process costing system is used by a company that

a. produces heterogeneous products.
b. produces items by special request of customers.
c. produces homogeneous products.
d. accumulates costs by job.

5. Equivalent units of production are equal to the

a. units completed by a production department in the period.
b. number of units worked on during the period by a production department.
c. number of whole units that could have been completed if all work of the period had been used to produce whole units.
d. identifiable units existing at the end of the period in a production department.

6. In a process costing system using the weighted average method, cost per equivalent unit for a given cost component is found by dividing
which of the following by EUP?
a. only current period cost
b. current period cost plus the cost of beginning inventory
c. current period cost less the cost of beginning inventory
d. current period cost plus the cost of ending inventory

7. The weighted average method is thought by some accountants to be inferior to the FIFO method because it

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a. is more difficult to apply.
b. only considers the last units worked on.
c. ignores work performed in subsequent periods.
d. commingles costs of two periods.

8. The first step in determining the cost per EUP per cost component under the weighted average method is to
a. add the beginning Work in Process Inventory cost to the current period's production cost.
b. divide the current period's production cost by the equivalent units.
c. subtract the beginning Work in Process Inventory cost from the current period's production cost.
d. divide the current period's production cost into the EUP.

9. The difference between EUP calculated using FIFO and EUP calculated using weighted average is the equivalent units
a. started and completed during the period.
b. residing in beginning Work in Process Inventory.
c. residing in ending Work in Process Inventory.
d. uncompleted in Work in Process Inventory.

10. EUP calculations for standard process costing are the same as
a. the EUP calculations for weighted average process costing.
b. the EUP calculations for FIFO process costing.
c. LIFO inventory costing for merchandise.
d. the EUP calculations for LIFO process costing.

11. In a FIFO process costing system, which of the following are assumed to be completed first in the current period?
a. units started this period
b. units started last period
c. units transferred out
d. units still in process

12. To compute equivalent units of production using the FIFO method of process costing, work for the current period must be stated in units
a. completed during the period and units in ending inventory.
b. completed from beginning inventory, units started and completed during the period, and units partially
completed in ending inventory.
c. started during the period and units transferred out during the period.
d. processed during the period and units completed during the period.

13. The FIFO method of process costing will produce the same cost of goods transferred out amount as the weighted average method when
a. the goods produced are homogeneous.
b. there is no beginning Work in Process Inventory.
c. there is no ending Work in Process Inventory.
d. beginning and ending Work in Process Inventories are each 50 percent complete.

14. The primary difference between the FIFO and weighted average methods of process costing is
a. in the treatment of beginning Work in Process Inventory.
b. in the treatment of current period production costs.
c. in the treatment of spoiled units.
d. none of the above.

15. Material is added at the beginning of a process in a process costing system. The beginning Work in Process Inventory for the process
was 30 percent complete as to conversion costs. Using the FIFO method of costing, the number of equivalent units of material for the process
during this period is equal to the:
a. beginning inventory this period for the process.
b. units started this period in the process.
c. units started this period in the process plus the beginning Work in Process Inventory.
d. units started and completed this period plus the units in ending Work in Process Inventory.

16. Transferred-in cost represents the cost from

a. the last department only.
b. the last production cycle.
c. all prior departments.
d. the current period only.

17. Process costing techniques should be used in assigning costs to products

a. if a product is manufactured on the basis of each order received.
b. when production is only partially completed during the accounting period.
c. if a product is composed of mass-produced homogeneous units.
d. whenever standard-costing techniques should not be used.

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 “Dreams don’t work unless you take action. The surest way to make your dreams come true is to live them”
TO GOD BE THE HIGHEST GLORY!

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