BANITOG, BRIGITTE C.

BSA 211
Systems Design: Process Costing System
Exercise 3 (Quantity Schedule, Equivalent Units, and Cost per Equivalent Unit – Weighted Average
Method)
Maddox Inc., manufactures an antacid product that passes through two departments. Data for May for
the first department follow:          
Gallons Materials Labor Overhead
Work in process, May 1 80,000 P 68,600 P 30,000 P 48,000
Gallons started in process 760,000
Gallons transferred out 790,000
Work in process, May 31 50,000
Cost added during May P 907,200 P 370,000 P 592,000

The beginning work in process inventory was 80% complete with respect to materials and 75% complete
with respect to processing. The ending work in process inventory was 60% complete with respect to
materials and 20% complete with respect to processing.

Required:
1. Assume that the company uses the weighted-average method of accounting for units and costs.
Prepare a quantity schedule and a computation of equivalent units for May’s activity for the first
department.

Quantity schedule and equivalent unit

Quantity
Schedule
Gallons to be accounted for:
Work in process inventory, May 1 (materials 80% 80,000
complete; labor & overhead 75% complete)
Started into production during May 760,000
Total gallons to be accounted for 840,000

Equivalent Units
Materials Labor Overhead
Gallons accounted for as follows:
Transferred out during May 790,000 790,000 790,000 790,000
Work in process inventory, May 31 (materials 50,000 30,000 10,000 10,000
60% complete; conversion 20% complete)
Total gallons accounted for 840,000 820,000 800,000 800,000
2. Determine the costs per equivalent unit for May.

Cost per equivalent unit

Cost to be accounted for: Total Cost Materials Labor Overhea Whole

d Unit
Work in process May 1 P 146,600 P 68,600 P 30,000 P 48,000
Cost added during the month 1,869,200 907,200 370,000 592,000
Total cost to be accounted for (a) 2,015,800 975,800 400,000 640,000
Equivalent units (b) 820,000 800,000 800,000
Cost per equivalent unit (a) ÷ (b) P 1.19 P 0.5 P 0.8 P 2.49

Exercise 4 (Quantity Schedule, Equivalent Units, and Cost per Equivalent Unit – FIFO Method)
Addy Inc., manufactures an antacid product that passes through two departments. Data for May for the
first department follow:
Gallons Materials Labor Overhead
Work in process, May 1 80,000 P 68,600 P 30,000 P 48,000
Gallons started in process 760,000
Gallons transferred out 790,000
Work in process, May 31 50,000
Cost added during May P 907,200 P 370,000 P 592,000

The beginning work in process inventory was 80% complete with respect to materials and 75% complete
with respect to processing. The ending work in process inventory was 60% complete with respect to
materials and 20% complete with respect to processing.

Required:
1. Assume that the company uses the FIFO method of accounting for units and costs. Prepare a
quantity schedule and a computation of equivalent units for May’s activity for the first processing
department.

Quantity schedule and equivalent units

Quantity
Schedule
Gallons to be accounted for:
Work in process inventory, May 1 (materials 80% 80,000
complete; labor & overhead 75% complete)
Started into production during May 760,000
Total gallons to be accounted for 840,000

Equivalent Units
Materials Labor Overhead
Gallons accounted for as follows:
Transferred out during May:
 From the beginning inventory 80,000 16,000 20,000 20,000
Started and completed during May 710,000 710,000 710,000 710,000
Work in process inventory, May 31 (materials 50,000 30,000 10,000 10,000
60% complete; conversion 20% complete)
Total gallons accounted for 840,000 756,000 740,000 740,000

2. Determine the costs per equivalent unit for May.

Cost per equivalent unit

Cost to be accounted for: Total Cost Materials Labor Overhea Whole

d Unit
Work in process May 1 P 146,600
Cost added during the month 1,869,200 907,200 370,000 592,000
Total cost to be accounted for (a) 2,015,800
Equivalent units (b) 756,000 740,000 740,000
Cost per equivalent unit (a) ÷ (b) P 1.20 P 0.5 P 0.8 P 2.50
PROBLEM 2
Great Mix Company makes a unique syrup using cane sugar and local herbs. The syrup is sold in small
bottles and is prized as a flavoring for the drinks and for use in desserts. The bottles are sold for P12
each. The first stage in the production process is carried out in the Mixing Department, which removes
foreign matter from the raw materials and mixes them in the proper proportions in large vats. The
company uses the weighted-average method in its process costing system.

A hastily prepared report for the Mixing Department for April appears below:

     
Requirement 1
Equivalent units of production
Materials Conversion
Transferred to next department 190,000 190,000
Ending Work in Process: 30,000
Materials: 40,000 units x 75% complete
Conversion: 40,000 units x 60% complete 24,000
Equivalent units of production 220,000 214,000

Requirement 2
Cost per equivalent unit
Materials Conversion Total
Cost of beginning work in process P 67,800 P 30,200 P 98,000
Cost added during the period 579,000 248,000 827,000
Total cost (a) P 646,800 P 278,200 P 925,000
Equivalent units of production (b) 220,000 214,000
Cost per equivalent units, (a) ÷ (b) P 2.94 P 1.30 P 4.24

Requirement 3
Total units transferred 190,000
Less units in the beginning inventory (30,000)
Units started and completed during April 160,000

Requirement 4
No, the manager should not be rewarded for good cost control. The Mixing Department’s low
unit cost for April occurred because the costs of the prior month have been averaged in with April’s
costs. This is a major criticism of the weighted-average method. Costs computed for product costing
purposes should not be used to evaluate cost control or to measure performance for the current period.