TARLAC STATE UNIVERSITY- COLLEGE OF BUSINESS AND ACCOUNTANCY

COST ACCOUNTING AND COST MANAGEMENT

PROCESS COSTING: FIFO METHOD

COMPUTE FOR THE EQUIVALENT UNITS OF PRODUCTION FOR MATERIALS AND CONVERSION COSTS:
Questions are independent from each other. Figures presented are in units.

1. WIP- beg. (30% completed) 22, 000

Started in process 114, 000
WIP-end (80% completed) 18, 000
Finished and Transferred ???

No units are considered lost throughout the production process.

*Materials are added at the 50% of the process. Conversion costs evenly throughout the process.

2. WIP-beg. (20% completed) 10, 000

Received from prior department 30, 000
WIP, end
80% completed 5,000
70% completed 5, 000
50% completed 10, 000
30% completed 10, 000
10% completed 10,000
*Materials are added at 90% completion stage. Conversion costs evenly throughout the process.

3. WIP-beg. (40% completed) 5, 000

Started in process 50, 000
F&T 55, 000
WIP-end 5, 000

Materials are added at the start of the process were equivalent to 10% increase in the number of
units are encountered. No lost units were accounted

4. WIP-beg.
20% completed 8,000
50% completed 10, 000
80% completed 12, 000
Started in process 50, 000
Finished and transferred 60, 000
WIP-end
70% completed 10, 000
Lost Units 10, 000

Inspection takes place at the end of the process. Materials are added at 75% completion stage.
Conversion costs evenly throughout the process. All lost units are normal.

5. WIP-beg.
10% completed 120, 000
30% completed 130, 000
50% completed 140, 000
WIP-end
40% completed 120, 000
60% completed 130, 000
80% completed 135, 000
Lost Units 5, 000

No units were started nor finished in the current period. Materials are added at 35% completion
stage. Conversion costs evenly throughout the process. Inspection point is at the end of the process
all lost units are abnormal.
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COST ACCOUNTING AND COST MANAGEMENT

Problem #1: The following journal entries are recorded in the books of Derick Company relating to its
three (3) producing departments for its first month of production.

All materials are added at the start of the process for all departments. Conversion costs are applied
evenly throughout the process.

Factory overhead is applied in Dept A as 62% of direct labor costs. Factory overhead is applied in Dept. B
and Dept. C as 50% and 100% of direct materials costs for their respective departments.

ENTRIES MADE RELATED TO DEPARTMENT A

WIP- Dept. A ????? WIP- Dept. B ?????
Materials 60, 000 WIP- Dept. A ?????
Payroll 30, 000
Applied FOH ?????

ENTRIES MADE RELATED TO DEPARTMENT B

WIP- Dept B ?????? WIP- Dept C ?????
Materials 50, 000 WIP- Dept B ?????
Payroll 20, 000
Applied FOH ??????

ENTRIES MADE RELATED TO DEPARTMENT C

WIP- Dept C 270, 000 FGI ?????
Materials 70, 000 WIP- Dept C ?????
Payroll ?????
Applied FOH ?????

The number of units started in process in Dept A was 6, 000 units. Once the units were completed in the
current dept., they will be transferred immediately to the next dept. The number of units completed per
department for the current period is as follows: Dept A 5, 000 units; Dept B 3, 500 units and Dept C 3,
000 units.

Percentage of completion for the ending inventory is as follows: Dept A 40% completed; Dept B 2/3
completed and Dept C 40% completed.

Compute for the following:

a. Total costs of transferred to next department for departments A and B

b. Costs of Goods Manufactured for the current period

c. Total direct materials costs component absorbed by the finished goods

d. WIP, end for Departments A, B and C

Problem #2: Hope Company manufactures alarm clocks on an assembly line business. On January 1,
2014, Work in Process includes 5, 000 units of partially completed inventory. During the month, an
additional 110, 000 units were started and 105, 000 units were completed. The ending Work in Process
was 60% complete as to conversion cost. Conversion costs are added evenly throughout the process.
The following conversion costs were incurred:
Beginning costs of Work in Process P 1, 500
Total current conversion costs 273, 920
The conversion costs assigned to ending Work in Process totaled P15, 360 using FIFO method of
process costing.

Compute for the following:

a. The percentage of completion as to conversion cost of the beginning Work in Process
b. Total conversion costs charged to the 105, 000 completed units
 TARLAC STATE UNIVERSITY- COLLEGE OF BUSINESS AND ACCOUNTANCY
COST ACCOUNTING AND COST MANAGEMENT

Problem #3: Derick Company’s 2014 year-end unaudited financial statements include the following
information regarding its inventories and cost of sales (Assume that the number of units is correct.
While assigned values are subject for examination for validity):
Php
Work in process (70% competed) 120, 000units 2, 685, 500
Finished goods 130, 000units 3, 500, 000
Cost of Sales 200, 000units 6, 500, 000

The manufacturing process takes place in a single department. Materials are added 80% at the start and
20% at the end of the process, and conversion costs are added evenly throughout the process.

Units started in process is 300, 000. No lost units were observed in the process.

Materials used for the current year totaled P5, 328, 000. Conversion costs totaled P3, 757, 500.

Using the 2013 (last year’s) audited financial statements; you obtained the following accurate
information:
Php
Work in process (30% completed) 100, 000units 2, 137, 500
Finished goods 50, 000units 1, 462, 500

The company uses the FIFO method of costing for all units of inventory.

Required:
a. Compute for the EUP for materials and conversion costs for the current year.
b. Audited costs of work in process inventory, ending.
c. Audited costs of finished goods inventory, ending.
d. Audited Cost of sales for the year.
e. The correcting entry appropriate to restate the values of the inventories and cost of sales.

Problem #4: The Assembly department of Venus Manufacturing Company received 22, 400 units from
Cutting department during April with a carried cost of P33, 600. As compared to last March, the unit cost
from Cutting Department increases by P0.50

Assembly department has a total processing period of 14 days and the materials application are
described as follows: 1/5 of the material requirement is applied on the 3 rd day of processing; 30% when
the process reaches 50% completion; 40% on the 12 th day; and the remainder on the last day.
Conversion costs are applied uniformly throughout the process.

The production data of Assembly department for the month of April show:

Work in process, beginning 1, 600 units (2/5 completed)

Work in process, ending 4, 000 units (1/2 completed)

Cost incurred in Assembly department for April, were:

Direct Materials P17, 344

Direct Labor 12, 816
Factory Overhead 8, 544

Last month’s unit cost in Assembly department showed: direct materials, P0.50; direct labor, P0.40;
factory overhead, P0.60.

Required:
a. Cost of the Work in process beginning inventory
b. Total cost of completed units in the Assembly department.
c. Cost of the Work in process ending inventory
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COST ACCOUNTING AND COST MANAGEMENT

Problem #5: DALI Company is manufacturing special corn chips named "SHARAP". It passes in a three
department stage named as Department X, Y and Z. The following information was provided by the
company:
Department Y Department Z
Units % completed Units % completed
WIP, beg 25,000 45% 15,000 25%
SIP/RFPD 120,000 ???
WIP, end 5,000 75% 20,000 50%
Lost Units 10,000 5,000

Unit costs per Equivalent units of production are as follows:

Last month
Materials 0.60 1.00
Conversion costs 0.55 0.90
Costs from prior department 2.05 3.15

Cost from prior department this month 1.95 ???

This month
Materials 0.65 1.05
Conversion Costs 0.50 0.95

In Department Y, 60% of the materials are applied at the start of the process; the balance is applied
at 80% completion stage. The inspection point is at the end of the process.

In Department Z, 50% of materials are applied at 30% completion; balance after the inspection
point. The inspection point is 90% completion.

Normal lost units are equal to 3% of the good units passing inspection.

Note: For unit costs per EUP, assume all decimal places are significant for costing purposes. Round off
your final answers only to nearest peso.

Without preparing for the costs of production report for the current month for Department Y and Z,
compute for the:

A. Equivalent units of production

B. Total costs of transfer
C. Costs of WIP, end
D. Costs of the abnormal lost units
E. Prepare the necessary journal entries for the following transactions for both departments:
a. Entry to record cost incurred this month in department Y and Z
b. Entry to record cost of completed units in department Y and Z
c. Entry to record the cost of lost units for department Y and Z

Problem #6: CATACUTAN Inc., manufactures stainless water guns. Each gun’s left and right frames are
produced in the molding department. The left and right frames are then transferred to the assembly
department where the trigger mechanism is inserted and the halves are glued together. (The left and
right halves together define the unit of output for the molding department.)

In June, the molding department reported the following data:

a. In the molding department, all direct materials are added at the beginning of the process.
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COST ACCOUNTING AND COST MANAGEMENT

b. Beginning work in process consisted of 6,000 units, 20 percent complete with respect to direct
labor and overhead. Costs in beginning inventory included direct materials, $900; and
conversion costs, $276.
c. Costs added to production during the month were direct materials, $2, 380; and conversion
costs, $4,325.
d. Inspection takes place at the end of the process. Malformed units are discarded. All spoilage is
considered abnormal.
e. During the month, 14,000 units were started, and 17,000 good units were transferred out to
finishing. All other units finished were malformed and discarded.
f. There were 2,000 units that remained in ending work in process, 75 percent incomplete.

In June, the assembly department reported the following data:

a. In the assembly department, all materials are added at the end of the process but after
inspection point of 95%.
b. There was no beginning inventory during the month.
c. Costs added to production during the month were direct materials $960; and conversion costs
$508.50
d. Ending inventory was 800 units, ready for the insertion of the trigger mechanism which is at
95% completion.
e. Remaining units are considered lost which are not usual in the manufacturing process. This are
discovered when the supposed ending inventory were counted.

Without preparing for the costs of production report for the current month, compute for the following
for both departments:

a. Equivalent units of production

b. Total costs of transfer
c. Costs of WIP, end
d. Costs of the abnormal lost units
e. Prepare the necessary journal entries relating to the data presented above