9/30/2018 Cost Accounting: Process Costing System - Exercises and Problems:

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Cost Accounting

THURSDAY, AUGUST 5, 2010

Process Costing System - Exercises and Problems:

Learning Objective:

1. Prepare the format of cost of production report.

2. Calculate equivalent units of production.
3. What is the treatment of normal and abnormal loss in process costing
system?
4. How the timing of normal and abnormal loss is considered in a cost of
production report? FOLLOWERS
5. Cost of Production Report Followers (5)
6. Cost of Production Report; Normal Loss
7. Cost of Production Report
Follow
8. Equivalent Units of Production
9. Costing of Units Transferred Out; Abnormal Loss
10. Cost of Production Report; Normal and Abnormal Loss BLOG ARCHIVE

11. Cost of Production Report; Spoiled Units - Normal and Abnormal ▼ 2010 (102)

12. Computation of Equivalent Production ▼ August (102)

► Aug 01 (3)
1. COST OF PRODUCTION REPORT:
► Aug 02 (5)
A company's Department 2 costs for June were:
Cost from Department 1 $16320 ► Aug 03 (2)
Cost added in Department 2: ► Aug 04 (17)
Materials 43,415
▼ Aug 05 (33)
Labor 56,100
Job Order Costing System:
Factory overhead (FOH) 58,575
The quantity schedule shows 12,000 units were received during the month from Measuring Direct Materials
Cost in Job Order
Department 1; 7,000 units were transferred to finished goods; and 5,000 units
Costi...
in process at the end of June were 50% complete as to materials cost and 25%
complete as to conversion cost. Measuring Direct Labor
Cost Under Job Order
Required: Prepare Cost of production report. Costin...
Application of
SOLUTION: Manufacturing Overhead
Department 2 Cost in Job ...
Cost of Production Report Job Order Costing - The
For the Month of June, 19___ Flow of Cost:
Quantity Schedule: Multiple Predetermined
Units received from department 1 12,000 Overhead Rates:
Units transferred to finished goods 7,000
Under-applied and Over-
Units still in process (50% materials, 25% conversion) 5,000 applied Overhead
Cost Charged to the Department: Total cost Unit cost
Disposition of Underapplied
Cost from preceding department: or Overapplied
Transferred in during the month (12,000 units) $16,320 $1.36 Overhea...
------- ------
Predetermined Overhead
Cost added by department: Rate and Capacity:
Materials $43,415 $4.57
Recording Non-
Labor 56,100 6.80 manufacturing Costs in a
Factory overhead 58,575 7.10 Job Order C...
------- -------
Recording Cost of Goods
Total cost added $158,090 $18.47 Manufactured and Sold

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9/30/2018 Cost Accounting: Process Costing System - Exercises and Problems:

-------- ------- in J...

Total cost to be accounted for $174,410 $19.83 Job Order Costing in
======= ===== Service Companies:
Cost Accounted for as Follows: Use of Information
Transferred to finished goods (7,000 × $19.83) $138,810 Technology in Job Order
Work in process ending inventory: Costing...
Cost from preceding department $6,800 Advantages and
Materials (5,000 × 50% × $4.75) 11,425 Disadvantages of Job
Labor (5,000 × 25% × $6.80) 8,500 Order Costing ...
Factory overhead (5,000 × 25% × $7.10) 8,875 Job Order Costing
-------- 35,600 Questions and Answers:
-------- Job Order Costing System
Total cost accounted for $174,410 Exercises and Problems:
======= Job Order Costing System-
Additional computations: Case Study:
Equivalent production:
Process Costing System:
Materials = 7,000 + (5,000 × 50%) = 9,500 units Definition and
Labor and factory overhead = 7,000 + (5,000 × 25%) = 8,250 units Explanation...
Characteristics and
2. COST OF PRODUCTION REPORT - NORMAL LOSS:
Procedure of Process
For December, the Production Control Department of Carola Chemical, Inc., Costing S...
reported the following production data for Department 2: Costing By Departments:
Product Flow in Process
Transferred in from Department 1 55,000 liters
Costing System:
Transferred out to Department 3 39,500liters
In process at the end of December (with 1/2 labor and factory Procedures for Materials,
10,500 liters Labor, and Factory
overhead) Overh...
All materials were put into process in Department 1. The cost department
Cost of Production Report
collected following figures for department 2:
(CPR): Definition and
Ex...
Unit cost for units transferred in from department 1 $1.80
Cost of Production Report
Labor cost in department 2 $27,520
(CPR):
Applied factory overhead $15480
Cost of Production Report -
Required: A cost of production report for department 2 for December.
Blending Department
(1...
SOLUTION:
Cost of Production Report -
Carola Chemical Inc. Testing Department
Department 2 (2n...
Cost of Production Report Cost of Production Report -
For the Month of December. 19____ Terminal Department
(3...

Quantity Schedule: Combined Cost of

Units received from preceding department 55,000 Production Report (CPR)
- Process...
======
Units transferred to next department 39,500 General Questions and
Answers about Process
Units still in process (1/3 labor and overhead) 10,500
Costin...
Units lost in process 5,000 55,000
------- ====== Process Costing System -
Exercises and Problems:
Cost Charged to the Department: Total Cost Unit Cost
Cost from preceding department: Process Costing System -
Transferred in during the month $99,000 $1.80 Case Study:
-------- ------ Process Costing System
Cost added by the department: Addition of Materials,
Aver...
Labor [39,500 + (1/3 × 10,500) = 43,000 units] $27,520 $0.64
Factory overhead $15,480 $0.36 Addition of Materials -
-------- ------ Increase in Unit Cost:
Total cost added $43,000 $1.00
► Aug 06 (42)
Adjustment for lost units $0.18*
-------- ------
Total cost to be accounted for $142,000 $2.98
ABOUT ME
======= =====
shoaib malik
Cost Accounted for as Follows:

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9/30/2018 Cost Accounting: Process Costing System - Exercises and Problems:

Transferred to next department (39,500 × $2.98) $117,710 I AM Mr.MUHAMMAD HSOAIB

Work in process - ending inventory: FROM DHULLI TALAGANG
Cost from preceding department (10,500 × $1.98) $20,790 View my complete profile
Labor (10,500 × 1/3 × $0.64) 2,240
Factory overhead (10,500 × 1/3 × $0.36) 1,260 24,290
-------- -------
Total cost accounted for $142,000
======

*Adjustment for lost units:

Formula for Calculation:
(Cost from preceding departments / Units from preceding departments - Lost
units) - Unit cost from preceding department
(99,000 / 50,000) - 1.80 = $0.18
OR
(5,000 × 1.80) = $9,000 / 50,000 = $0.18

3. COST OF PRODUCTION REPORT:

Brooks Inc. uses process costing. The costs for Department 2 for April were:

Cost from preceding department $20,000

Cost added by department:
Materials $21,816
Labor 7,776
Factory overhead (FOH) 4,104 33,696
--------

The following information was obtained from the department's quantity

schedule:

Units received 5,000

Units transferred out 4,000
Units still in process 1,000
The degree of completion of the work in process as to costs originating in
department 2 was: 50% of units were 40% complete; 20% were 30%
complete; and the balance were 20% complete.
Required: The cost of production report for Department 2 for April.

SOLUTION:
Brooks Inc.
Department 2
Cost of Production Report
For the month of April, 19|____

Quantity Schedule:
Units received from preceding department 5,000
======
Units transferred to next department 4,000
Units still in process (32 labor and overhead) 1,000 5,000
------- ======
Cost Charged to the Department: Total Cost Unit Cost
Cost from preceding department:
Transferred in during the month $20,000 $4.00
-------- ------
Cost added by the department:
Materials $21,816 $5.05
Labor [39,500 + (1/3 × 10,500) = 43,000 units] $7,776 $1.80
Factory overhead $4,104 $0.95
-------- ------
Total cost added $33,696 $7.80
-------- ------

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9/30/2018 Cost Accounting: Process Costing System - Exercises and Problems:

Total cost to be accounted for $53,696 $11.80

======= =====
Cost Accounted for as Follows:
Transferred to next department (4,000 × $11.80) $47,200
Work in process - ending inventory:
Cost from preceding department (1000 × $4.00) $4,000
Materials (1,000 × 0.32 × $5.05) 1,616
Labor (1,000 × 0.32 × $1.80) 576
Factory overhead (10,500 × 0.32 × $0.95) 304 6,496
-------- -------
Total cost accounted for $53,696
======

Additional Computations
Equivalent units of production:
Materials, labor, and factory overhead = 4,000 + (1,000 32%) = 4,320 units

Units in Process Equivalent

50% were 40% complete 0.20
20% were 30% complete 0.06
30% were 20% complete 0.06
--------
Total 0.32
=====
OR
50% of 1,000 units × 40% = 200 units
20% of 1,000 units × 30% = 60 units
30% of 1,000 units × 20% = 60 units
Total =320 units

4. EQUIVALENT UNITS OF PRODUCTION:

During April, 20,000 units were transferred in from department A at a cost of
$39,000. Materials cost of $6,500 and conversion cost of $9,000 were added in
department B. On April 30, department B had 5,000 units of work in process
60% complete as to conversion as costs. Materials are added in the beginning
of the process in department B.
Required:

1. Equivalent units of production calculation.

2. The cost per equivalent unit for conversion costs.

SOLUTION:
(1) Quantity Schedule:
Units received from preceding department A 20,000
======
Units transferred to finished goods 15,000
Units still in process 5,000 20,000
-------- ======
Equivalent Production:
Transferred in from
Department A Materials Conversion
Transferred to finished goods 15,000 15,000 15,000
Ending inventory 5,000 5,000 3,000
------- -------- -------
20,000 20,000 20,000
====== ====== ======
(2) cost per equivalent unit for conversion costs:
$9,000 / 18,000 = $0.50 per unit

5. COSTING OF UNITS TRANSFERRED OUT; ABNORMAL LOSS

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9/30/2018 Cost Accounting: Process Costing System - Exercises and Problems:

During February, the Assembly department received 60,000 units from Cutting
department at a unit cost of $3.54. Costs added in the Assembly department
were: materials, $41,650; labor, $101,700; and factory overhead. $56,500.
There was no beginning inventory. Of the 60,000 units received, 50,000 were
transferred out; 9,000 units were in process at the end of the month (all
materials, 2/3 converted); 1,000 lost units were 1/2 complete as to materials
and conversion costs. The entire loss is considered abnormal and is to be
charged to factory overhead.
Required: Cost of production report.

SOLUTION:

ASSEMBLY DEPARTMENT
COST OF PRODUCTION REPORT
FOR THE MONTH OF APRIL, 19|____

Quantity Schedule:
Units received from preceding department 60,000
======
Units transferred to next department 50,000
Units still in process (All materials - 2/3 labor and
9,000
overhead)
Units lost in process (Abnormal loss - 1/2 materials,
labor, and overhead) 1,000 60,000
------- ======
Cost Charged to the Department: Total Cost Unit Cost
Cost from preceding department:
Transferred in during the month (60,000 units) $212,400 $3.54
-------- ------
Cost added by the department:
Materials $41,650 $1.70
Labor $101,700 $1.80
Factory overhead $56,500 $1.00
-------- ------
Total cost added $199,850 $3.50
-------- ------
Total cost to be accounted for $412,250 $7.04
======= =====
Cost Accounted for as Follows:
Transferred to next department (50,000 × $7.04) $352,000
Transferred to Factory Overhead:
From preceding department (1,000 × $3.54) $3,540
Materials (1,000 × 1/2 × $0.70) 350
Labor (1,000 × 1/2 × $1.80) 900
Factory overhead (1,000 × 1/2 × $1.00) 500 5,290
--------
Work in process - ending inventory:
Cost from preceding department (9000 × $3.54) $31,860
Materials (9,000 × 0.70) 6,300
Labor (9,000 × 2/3 × 1.80) 10,800
Factory overhead (9,000 × 2/3 × 1.00) 6,000 54,960
-------- -------
Total cost accounted for $412,250
======

Additional Computations
Equivalent Production:
Materials = 50,000 + 9,000 + 1,000/2 lost units = 59,500 units
Labor and factory overhead = 50,000 + (9,000 × 2/3) + 1,000/2 lost units =
56,500
Unit Cost:
Materials = $41,650 / 59,500 = $0.70 per unit

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9/30/2018 Cost Accounting: Process Costing System - Exercises and Problems:

Labor = $101,700 / 56,500 = $1.80 per unit

Factory overhead = $56,500 / 56,500 = $1.00 per unit

6. COST OF PRODUCTION REPORT; NORMAL AND ABNORMAL LOSS:

The Sterling Company uses process costing. In department B, conversion costs
are incurred uniformly throughout the process. Materials are added at the end
of the process, following inspection. Normal spoilage is expected to be 5% of
good output.
The following information related to department B for January:

Units Dollars
Received from department A 12,000 $84,000
Transferred to finished goods 9,000
Ending inventory (70% complete) 2,000
Cost incurred:
Materials 18,000
Labor and factory overhead 45,600

Required: Cost of Production report for department B.

SOLUTION:
THE STERLING COMPANY
DEPARTMENT B
COST OF PRODUCTION REPORT
FOR THE MONTH OF JANUARY
Quantity Schedule:
Units received from preceding department 12,000
======
Units transferred to finished goods 9,000
Units still in process 2,000
Units lost in process (Normal Spoilage 9000 × 5%) 450
Units lost in process (Abnormal Spoilage 1,000 - 450) 550 12,000
------- ======
Cost Charged to the Department: Total Cost Unit Cost
Cost from preceding department:
Transferred in during the month (12,000 units) $84,000 $7.00
-------- ------
Cost added by the department:
Materials $18,000 $2.00
Labor and factory 0verhead $45,600 $4.00
-------- ------
Total cost added $63,600 $6.00
-------- ------
Total cost to be accounted for $147,600 $13.00
======= =====
Cost Accounted for as Follows:
Transferred to finished goods [(9,000 × $13) + (450* ×
$121,950
$11)]
Transferred to Factory Overhead (550** × $11) 6,050
Work in process - ending inventory:
Cost from preceding department (2000 × $7.00) $14,000
Labor and factory overhead (2,000 × 70% × $4) 5,600 19,600
-------- -------
Total cost accounted for $147,600
======
*Normal spoilage
**Abnormal spoilage
Additional Computations
Equivalent Production:
Materials = 9,000 units
Labor and factory overhead = 9,000 + (2,000 × 70%) + 450 + 550
Unit Costs:
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9/30/2018 Cost Accounting: Process Costing System - Exercises and Problems:

Materials = $18,000 / 9,000 = $2.00 per unit

Labor and factory overhead = $45,600 / 11,400 = $4.00 per unit

7. COST OF PRODUCTION REPORT; SPOILED UNITS - NORMAL AND ABNORMAL:

Hettinger Inc., uses process costing system in its two producing departments.
In department 2, inspection takes place at the 96% stage of completion, after
which materials are added to good units. A spoilage rate of 3% of good output
is considered normal.
Department 2 records for April shows:

Received from department 1 30,000 units

cost $135,000
Materials $12,500
Conversion cost (labor + factory overhead) $139,340
Transferred to finished goods 25,000 units
Ending work in process inventory (50% complete) 4,200 units
Required: Cost of production report.

SOLUTION:
THE STERLING COMPANY
DEPARTMENT B
COST OF PRODUCTION REPORT
FOR THE MONTH OF JANUARY
Quantity Schedule:
Units received from preceding department 30,000
======
Units transferred to finished goods 25,000
Units still in process (50% complete) 4,200
Units lost in process (Normal Spoilage 25,000 × 3%) 750
Units lost in process (Abnormal Spoilage 800 - 750) 50 30,000
------- ======
Cost Charged to the Department: Total Cost Unit Cost
Cost from preceding department:
Transferred in during the month (30,000 units) $135,000 $4.50
-------- ------
Cost added by the department:
Materials $12,500 $0.50
Labor and factory 0verhead (Conversion cost) $139,340 $5.00
-------- ------
Total cost added $151,840 $5.50
-------- ------
Total cost to be accounted for $286,840 $10.00
======= =====
Cost Accounted for as Follows:
Transferred to finished goods:
Cost of completed units (25,000 × $10.00) $250,000
Normal spoilage - all related to units transferred to
finished goods:
Cost from preceding department (750 × $4.50) 3,375
Conversion cost (720 × $5.00) 3,600 $256,975
--------
Transferred to Factory Overhead - Abnormal spoilage:
Cost from preceding department (50 × $4.50) $225
Conversion cost (48 × $5.00) 240 465
--------
Work in process - ending inventory:
Cost from preceding department (4,200 × $4.50) $18,900
Labor and factory overhead (2,100 × $5) 10,500 29,400
-------- -------
Total cost accounted for $286,840
======

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9/30/2018 Cost Accounting: Process Costing System - Exercises and Problems:

Additional Computations
Equivalent Production:
Materials = 25,000 units
Labor and factory overhead = 25,000 + (42,00 × 50%) + (750 × 96%) + (50
× 96%)
= 27,888 units
Unit Costs:
Materials = $12,500 / 25,000 = $.50 per unit
Labor and factory overhead = $139,340 / 27,888 = $5.00 per unit

8.COMPUTATION OF EQUIVALENT PRODUCTION:

Pietra-Gonatas, Inc. uses process costing to account for the costs of its only
product, product D. Production takes place in three departments; Fabrication,
Assembly, and Packaging.
At the end of the fiscal year, June 30, the following inventory of product D is on
hand:

No unused raw materials or packaging materials.

Fabrication department: 300 units, 1/3 complete as to raw materials
and 1/2 complete as to direct labor
Assembly department: 1,000 units, 2/5 complete as to direct labor.
Packaging department: 100 units, 3/4 complete as to packaging
materials and 1/4 complete as to direct labor.
Shipping for finished goods are: 400 units.

Required:

1. The number of equivalent units of raw materials in all inventories at June

30.
2. The number of equivalent units of the fabrication department's direct
labor in all inventories at June 30
3. The number of equivalent units of packaging materials in all inventories at
June 30.

SOLUTION:
(1)
Equivalent units of raw materials
in all inventories, June 30, 19__
Fabrication department (300 × 1/3) 100
Assembly department 1,000
Packaging department 100
Shipping area 400
--------
1,600
=======
(2)
Equivalent units of Fabrication department's direct labor in
all inventories, Jun 30, 19___
Fabrication department (300 × 1/3) 150
Assembly department 1,000
Packaging department 100
Shipping area 400
---------
1,650
=======

(3)
Equivalent units of packaging materials in all inventories,
June 30, 19___
Packaging department (300 × 4/3) 75
Shipping area 400
-------

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9/30/2018 Cost Accounting: Process Costing System - Exercises and Problems:

475
======

1.

Posted by shoaib malik at 2:23 AM

Labels: Process Costing System - Exercises and Problems:

3 comments:

prinxx goraya October 26, 2014 at 1:40 PM

In the question 6 while calculating the cost of units transfered to finished goods
how have you calclulated $11?
Reply

Ahsan Khan March 15, 2017 at 2:11 PM

quest # 2 WIP is 1/2

in solution 1/3 how ?

Reply

Unknown December 9, 2017 at 5:56 AM

In 1st department adjustment of loss is not required either it a normal loss at
beginning and ending or abnormal loss?
Reply

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