CHAPTER 11 - AVERAGE AND FIFO COSTING

TRUE OR FALSE MULTIPLE CHOICE - THEORY

1. TRUE 1. B 11. C
2. TRUE 2. A 12. C
3. TRUE 3. A 13. C
4. FALSE 4. B 14. C
5. TRUE 5. A 15. D
6. TRUE 6. C
7. FALSE 7. A
8. TRUE 8. A
9. TRUE 9. D
10. TRUE 10. A

PROBLEM 1
1) FIFO
Units in process, beg. 10,000
Units started 50,000
60,000
Units completed & transferred (40,000)
IP beg. 10,000 70% 7,000
Started & completed 45,000 100% 45,000 100% 45,000
Units in process, end 5,000 100% 5,000 60% 3,000
60,000 50,000 55,000
2) AVERAGE
Units in process, beg. 10,000
Units started 50,000
60,000

Units completed 55,000 100% 55,000 100% 55,000

Units IP end 5,000 100% 5,000 60% 3,000
60,000 60,000 58,000

PROBLEM 2
1) FIFO
Units in process, beg. 3,000
Units started 50,000
53,000
Units completed & transferred (45,000)
IP beg. 3,000 25% 750
Started & completed 42,000 100% 42,000 100% 42,000
Units in process, end 8,000 100% 8,000 60% 4,800
53,000 50,000 47,550
2) AVERAGE
Units in process, beg. 3,000
Units started 50,000
53,000

Units completed 45,000 100% 45,000 100% 45,000

Units IP end 8,000 100% 8,000 60% 4,800
53,000 53,000 49,800

PROBLEM 3
1)
Units in process beg. 300
Units started 2,000
2.300
Units comp. & transf. (1,700)
IP beg. 300 40% 120 70% 210
Started & completed 1,400 100% 1,400 100% 1,400
Units in process, end 600 40% 240 20% 120
2,300 1,760 1,730
2)
540
Unit cost - Materials 3,714/1760 = 2.110227
Conversion 2,258/1730 = 1.305202
6,512 3.415429

3) Cost of units transferred out

From IP beg.
Cost last month 540
Cost added Mat. ( 120 x 2.110227) 253
Conversion ( 210 x 1.305202) 274 1,067
From units started & completed (1,400 x 3.415429) 4,782
5,849
4) Cost of ending inventory
Materials (240 x 2.110227) 507
Conversion ( 120 x 1.305202) 156
663

PROBLEM 4 -
1) FIFO
Units in process, beg 8,000
Units started 14,000
22,000
Units Completed ( 17,000)
IP beg. 8,000 70% 5,600 70% 5,600
Started & completed 9,000 100% 9,000 100% 9,000
Units in process, end 5,000 80% 4,000 40% 2,000
22,000 18,600 16,600
Page 3
48,240
Unit cost Materials 126,852/18,000 = 6.82
Conversion 219,120/16,600 = 13.20
394,212 20.02

Completed & transf.

IP beg.
Cost labor month 48,240
Cost added (5,600 x 20.02) 112,112 160,352
Started & completed ( 9,000 x 20.02) 180,180 340,532

IP end
Materials ( 4,000 x 6.82) 27,280
Conversion ( 2,000 x 13.20) 26,400 53,680
394,212
2) AVERAGE
Units completed 17,000 100% 17,000 100% 17,000
Units IP end 5,000 80% 4,000 40% 2,000
22,000 21,000 19,000

Unit cost Materials 16,440 + 126,852 = 6.823428

21,000
Conversion = 31800 + 219,120 = 13.206316
19,000 20.029744

Completed & transferred ( 17,000 x 20.029744) 340,506

IP end
Materials ( 4,000 x 6.823428) 27,294
Conversion (2000 x 13.206316) 26,412 53,706
394,212

PROBLEM 5 – Auto Novelties, Inc.

a. Average
1) Units in process beg. 15,000
Units started 250,000
265,000

Units completed & transf. 245,000 100% 245,000 100% 245,000

Units in process end 20,000 100% 20,000 40% 8,000
265,000 265,000 253,000

2) Unit cost Materials 210,000 + 3,500,000 = 14.00

265,000

Converion 60,000 + 1,458,000 = 6.00

253,000 20,00
3) Completed & transf. (245000 x 20) 4,900,000
4) IP ined
Materials ( ( 20,000 x 14) 280,000
Conversion ( 8000 x 6) 48,000 328,000
5,228,000
b) FIFO
1) Units completed ( 245,000)
IP beg 15,000 - 1/3 5,000
Started & completed 230,000 100% 230,000 100% 230,000
Units IP beg. 20,000 100% 20,000 40% 8,000
265,000 250,000 243,000

2)Unit cost: Materials 3,500,000/250,000 = 14.00

Conversion 1,458000/243,000 = 6.00
20.00
3) Completed& transferred
From IP beg.
Cost last month 270,000
Cost added ( 5,000 x 6) 30,000 300,000
From started & completed ( 230,000 x 20) 4,600,000 4,900,000

4) IP end
Materials ( 20,000 x 14) 280,000
Conversion (8,000 x 6) 48,000 328,000
5,228,000

PROBLEM 6 - Ellery Company

A) AVERAGE
1) Units IP beg. 15,500
Units started 36,000
51,500
Units completed 48,000 100% 48,000 100% 48,000
Units IP ed 3,500 100% 3,500 45% 1,575
51,500 51,500 49,575

2) Unit cost Materials 7,800 + 54,000 = 1.20

51,500
Conversion 20,150 + 79,000 = 2.00
49,575 3,20

3) Completed & transferred ( 48,000 x 3.20) 153,600

4) IP end
Materials ( 3,500 x 1.20) 4,200
Conversion ( 1,575) x 2.00) 3,150 7,350
160,950

Page 5
B) FIFO
1) Units IP beg 15,500
Units started 36,000
51,500
Units completed (48,000)
IP beg. 15,500 - 35% 5,425
Started & completed 32,500 100% 32,500 100% 32,500
Units IP end 3,500 100% 3,500 45% 1,575
51,500 36,000 39,500

2) Unit cost IP beg. 27,950

Materials 54,000/36000 = 1.50
Conversion 79,000/39,500 = 2.00
160,950 3.50

3) Completed & transferred

IP beg.
Cost last month 27,950
Cost added ( 5,425 x 2) 10,850
Started & completed ( 32,500 x 3.50) 113,750 152,550

4) IP end
Materials ( 3,500 x 1.50) 5,250
Conversion ( 1,575 x 2) 3,150 8,400
160,950
PROBLEM 7 - GDL Company
A) AVERAGE
Units IP beg 10,000
Units received 40,000
50,000

Units completed 35,000 100% 35,000 100% 35,000

Units IP end 10,000 100% 10,000 50% 5,000
Units lost – normal 5,000 ______ ______
50,000 45,000 40,000

Unit cost
Cost from preceding dept. 40,000 + 140,000 = 4.00
50,000 – 5,000

Materials 20,000 + 70,000 = 2.00

45,000

Labor 39,000 + 162,500 = 5.0375

40,000

Overhead 42,000 + 130,000 = 4.30

40,000 _____
15.3375

Problem 7 – continuation
 Completed & transferred ( 35,000 x 15.3375) 536,812.50

IP end
Cost from prec. Dept ( 10,000 x 4) 40,000.00
Materials ( 10,000 x 2) 20,000.00
Labor ( 5,000 x 5.0375) 25,187.50
Overhead ( 5,000 x 4.30) 21,500.00
106,687.50

B)FIFO
Units IP beg. 10,000
Units received 40,000
50,000

Units completed ( 35,000)

IP beg. 10,000 - 1/4 2.500
Started & completed 25,000 100% 25,000 100% 25,000
Units IP end 10,000 100% 10,000 1/2 5,000
Units lost 5,000 ______ ______
50,000 35,000 32,500

Unit cost
IP beg. 141,000
From preceding dept. 140,000/40,000 – 5,000 = 4.00
Materials 70,000/35,000 = 2.00
Labor 162,500/32,500 = 5.00
Overhead 130,000/32,500 = 4.00
643,500 15.00
Completed & transferred *35000)
IP beg
Cost last month 141,000
Cost added ( 2.500 x 9) 22,500
Received & completed ( 25,000 x 15) 375,000
538,500

IP end
Cost from preceding dept. ( 10,000 x 4) 40,000
Materials (10,000 x 2) 20,000
Labor ( 5,000 x 5) 25,000
Overhead ( 5,000 x 4) 20,000
105,000

PROBLEM 8 – Nofat Company Material A Material B Conversion

1) Units IP beg. 600
Units received 3,900
4,500
Units completed 4,100 100% 4,100 100% 4,100 190% 4,100
Units IP end 400 100% 400 _____ 30% 120
4,500 4,500 4,100 4,220
2) Units cost
From preceding department 9,090 + 67,410 = 17,00
 4,500

Material A 4,000 + 21,200 = 5.60

4,500

Material B 0 + 16,400 = 4.00

4,100

Conversion 1,340 + 17,650 = 4.50

4,220 ______
31.10
3) Completed ( 4,100 x31.10) 127,510
4) IP end
Cost from precede dept. ( 400 x 17.00) 6,800
Material A ( 400 x 5.60) 2,240
Conversion ( 120 x 4.50) 540
9,580

PROBLEM 9 - Alonzo Manufacturing

Materials Conversion Total
Cost – IP beg. P 6,544 P 16,803 P 23,347
Current cost 281,656 344,817 626,473
Total costs P288,200 P 361,620 P649,820
Divided by equivalent prod. 262,000 258,300
Unit cost P 1.10 P 1,40 P 2.50

1. Completed & transferred ( 255,200 x 2.50) P 638,000

2. Total costs to be accounted for P 649,820

Less: Cost of units IP end 11,597
Costs of units completed P 638,223

PROBLEM 10 - Nicole Mfg. Co.

1) Units IP beg. 12,000
Units received 80,000
Increase in units 4,000
96,000

Units completed 86,000 100% 86,000 100% 86,000

Units IP end 10,000 100% 10,000 2/5 4,000
06,000 96,000 90,000

Transf. In Materials Labor Overhead Total

Costs – IP beg. P 11,800 P 3,125 P 1,490 P 1,320 P 17,735
Curr ent cost 86,120 21,835 43,510 34,680 186,145
Total costs P 97,920 P 24,960 P45,000 P 36,000 P203,880
Divided by EP 96,000 96,000 90,000 90,000
Unit cost P 1.02 P 0.26 P 0.50 P 0.40 P 2.18

2) Completed & transferred ( 86,000 x 2.18) P 187,480

3) IP end
Cost from prec. Dept (10,000 x 1.02) P 10,200
Materials ( 10,000 x 0.26) 2,600
Labor ( 4,000 x 0.50) 2,000
Overhead ( 4,00 x 0.40) 1,600
P 16,400
PROBLEM 11 -
1) Units received. 60,000

Units completed 50,000 100% 50,000 100% 50,000

Units IP beg. 9,000 100% 9,000 50% 4,500
Units lost – abnormal 1,000 ______ ______
60,000 59,000 54,500
Cost from prec. Dept. 212,400 3.54
Materials 84,370 1.43
Coversion 129,710 2.38
426,480 7.35

2) Factory OH ( 1,000 x 3.54) P 3,540

3) Completed & transf. (50,000 x 7.35) 367,500

4) IP end
Cost from prec. Dept ( 9,000 x 3.54) 31,860
Materials ( 9,000 x 1.43) 12,870
Conversion ( 4,500 x 2.38) 10,710
55.440
PROBLEM 12 – Nicole Company
Units IP beg. 1,400
Units received 14,000
15,400

Units Completed & transf. 11,200 100% 11,200 100% 11,200

Units IP end 3,500 100% 3,500 40% 1,400
Units lost – normal 560 100% 560 100% 560
Units lost – abnormal 140 100% 140 100% 140
15,400 15,400 13,300

1) Completed & transf. ( 11,200 x 9) + (560 x 9) P 105,840

2) FOC ( 140 x 9) 1,260

3) IP end
Cost from prec dept. ( 3,500 x 5) 17,500
Materials ( 3,500 x 1) 3,500
Conversion ( 1,400 x 3) 4,200

25,200
PROBLEM 13 - Samahan Inc.
1) Units IP end ( 500 x 50% x 132) P 33,000

2) Finished goods, end ( 700 x 132) P 92,400

3) From FG beg. 600 uittz P 76,800

From units completed – IP beg. 1,250 “ 161,000
From units received and completed 800 “ 105600
Cost of goods sold 2,650 P 343,400

Or
Total available for sale
FG beg. 600 units P 76,800
Completed from IP beg. 1,250 161,000
Completed from started 1,500 x 132 198,000
Total goods available for sale 435,800
Less: FG Inventory 92,400
Cost of goods sold P 343,400

Computation of equivalent production

Units IP beg. 1,250
Units started 2,000
3,250
Units completed (2,750)
IP beg. 1,250 20% 250
Started & completed 1,500 100% 1,500
Units IP end 500 50% 250
3,250 2,000

Unit cost ( 264000/2000 = 132.00

Completed & transferred

IP beg.
Cost last month P 128,000
Cost added ( 250 x 132) 33.000
Cost of IP beg. upon completion P 161,000

Units started & completed ( 1,500 x 132) P 198,000

PROBLEM 14 - Michelle Company

Department 1 Department 2
Actual Materials Conversion Actual Materials Conversion
Started or received 60,000 45,000

Comp. & transf. 45,000 45,000 45,000 40,000 40,000 40,000

IP end 15,000 15,000 9,000 5,000 5,000 4,000
60,000 60,000 54,000 45,000 45,000 44,000
Costs charged to the dept.
Cost from preceding dept. 171,000 3.80
Cost added in the dept.
Materials 90,000 1,50 112,500 2.50
Labor 64,800 1.20 61,600 1.40
Overhead 59400 1.10 50,600 1.15
Total added 214,200 3.80 224,700 5.05
Total costs 214,200 3.80 395,700 8.85
Costs accounted for as follows
Comp. & transf. ( 45,000 x 3.80) 171,000 (40,000 x 8.85) 354,000
IP beg
Cost from prec dept (5,000 x 3.80) 19,000
Mat. ( 15,000 x 1.50) 22,500 (5,000 x 2.50) 12,500
Labor ( 9,000 x 1.20) 10,800 (4,000 x 1.40) 5,600
OH ( 9,000 x 1.10) 9,900 43,200 (4,000 x 1.15) 4,600 41,700
Total costs as accounted for 214,200 395,700

Journal entries
1. Materials 180,000
Accounts payable 180,000

2. Work in process – Dept. 1 90,000

Work in process – Dept. 2 112,500
Materials 202,500

3. Payroll 125,600
Accrued payroll 125,600

4. Work in process – Dept. 1 64,800

Work in process – Dept. 2 61,600
Factory OH 9,200
Payroll 135,600

5. Work in process – Dept. 1 59,400

Work in process – Dept. 2 50,600
Factory OH Applied 110,000

6. Work in process – Dept. 2 171,000

Work in process – Dept. 1 171,000

7. Finished goods 354,000

Work in process – Dept. 2 354,000

8. Accounts receivable 400,000

Sales 400000

Cost of goods sold 252,000

Finished goods 252,000
75,000 + (20,000 x 8.85)
 Michelle Company
Cost of Goods sold Statement
For the month of June, 2008

Direct materials used

Materials, June 1 P 50,000
Purchases 180,000
Total available for use 230,000
Less: Materials, June 30 27,500 P 202,500
Direct labor 126,400
Factory overhead 110,000
Total manufacturing costs 438,900
Less: Work in process, June 30 84,900
Cost of goods manufactured 354,000
Finished goods, June 1 75,000
Total goods available for sale 429,000
Less: Finished goods, June 30 177,000
Cost of goods sold P 2,52,000

Multiple choice (problems)

1. A 11. B 21. A 31, C
2. A 12. C 22. D 32. D
3. D 13 A 23. C 33. B
4. C 14. C 24. D 34. C
5. A 15. C 25. B 35. B
6. A 16 A 26 A
7. A 17. A 27. B
8. C 18. A 28. B
9. D 19. A 29 C
10. C 20. A 30. B