Chapter 17 and 18 Process Costing and Spoilage Cost

Process-costing is a system where the unit cost of a product or service is

obtained by assigning total costs to many identical or similar units.

Each unit receives the same or similar amounts of direct materials

costs, direct labor costs, and manufacturing overhead.

Unit costs are computed by dividing total costs incurred by the number
of units of output from the production process.

Similarities and Differences Between Job Order Cost and Process Cost Systems

1Page Dr. Mahmoud Nassar /ASU

Process-Costing Assumptions

 Direct Materials are added at the beginning of the production

process, or at the start of work in a subsequent department down
the assembly line

 Conversion Costs are added equally along the production process

2Page Dr. Mahmoud Nassar /ASU

First Case:

Process costing with zero beginning and zero ending work-in-process

inventories of SG-40 (all units are started and fully completed within the
accounting period).

Example 1: process costing with zero beginning and zero ending work-in-
process inventories.

Data for the Assembly department for January 2009 are:

Physical* units for January 2009

Work in process, beginning inventory (January 1) 0

Started during January 400 units
Completed and transferred out during January 400 units
Work in process, ending inventories (January 31) 0 units

*Note: physical units refer to the number of output units, whether

complete or incomplete. In our case all 400 physical units started were
completed.

Total costs for January 2009

Direct material costs added during January 32000JD

Conversion costs added during January 24000JD
Total Assembly department costs added during January 56000JD

Required:

Compute equivalent units?

Solution:

Direct material cost per unit (32000 / 400 units) 80JD

Conversion cost per unit (24000 / 400 units) 60JD
Assembly department cost per unit 140JD

Or 56000 / 400 = 140JD per unit.

3Page Dr. Mahmoud Nassar /ASU

Second Case:

Process costing with zero beginning but some ending work-in-process

inventory.

Example 2: process costing with zero beginning but some ending work-
in-process inventories.

Data for the Assembly department for February 2009 are:

Physical* units for February 2009

Work in process, beginning inventory (February 1) 0

Started during January 400 units
Completed and transferred out during February 175 units
Work in process, ending inventories (February 28) 225 units

Degree of completion of ending work in process

100% from direct materials and 60% conversion costs

Total costs for February 2009

Direct material costs added during February 32000JD

Conversion costs added during February 18600JD
Total Assembly department costs added during February 50600JD

Required:

Compute equivalent units?

Five-Step Process-Costing Allocation

1. Summarize the flow of physical units of output

2. Compute output in terms of equivalent units
3. Compute cost per equivalent unit
4. Summarize total costs to account for
5. Assign total costs to units completed and to units in ending Work-
in-Process

4Page Dr. Mahmoud Nassar /ASU

Solution:

Step one: Summarize the flow of physical units of output

Flow of production physical units

Work in process, beginning 0 units
Started during current period 400 units
To account for 400 units

Completed and transferred out during current period 175 units

Work in process ending 225 units
To account for 400 units

Step two: Compute output in terms of equivalent units

Equivalent units Direct Materials Conversion Costs

Completed and transferred out (175) 175 175
Work in process ending (225) 225 135

Work done in current period 400units 310units

Step three: Compute cost per equivalent unit

Total Production Costs DM CC
Cost added during the Month 50600 32000 18600

Total Cost to account for 50600JD 32000JD 18600JD

Step four: Summarize total costs to account for

Cost added in current period 50600 32000 18600

Divide by
Equivalent units of work done 400 310
Cost per equivalent unit 140 80JD 60JD

Step five: Assign total costs to units completed and to units in ending
Work-in-Process

Assignment of costs Total DM CC

Completed and transferred out (175) 24500 JD (175*80) (175*60)
Work in process ending (225) 26100 JD (225*80) (135*60)
Total cost accounting for 50600JD 32000JD 18600JD

5Page Dr. Mahmoud Nassar /ASU

Journal Entries

To record direct materials purchased and used in production

From Work in process 32000

To Account Payable Control 32000

To record conversion cost

From Work in process 18600

To various account 18600
(Wages control, Accumulated dep)

To record cost of goods completed and transferred from assembly to

testing

From Work in process (Testing) 24500

To Work in process (Assembly) 24500

6Page Dr. Mahmoud Nassar /ASU

Third Case: (Weighted-Average Method)

Process costing with some beginning and some ending work-in-process

inventory.

Example 3: process costing with some beginning and some ending work-
in-process inventories.

Data for the Assembly department for March 2009 are:

Physical* units for March 2009

Work in process, beginning inventory (March 1) 225 units

Started during March 275 units
Completed and transferred out during March 400 units
Work in process, ending inventories (March 31) 100 units

Degree of completion of beginning work in process

100% from direct materials and 60% conversion costs

Degree of completion of ending work in process

100% from direct materials and 50% conversion costs

Total costs for March 2009

Work in process beginning (18000 DM and 8100 CC) 26100JD

Direct material costs added during March 19800JD
Conversion costs added during March 16380JD
Total Assembly department costs added during March 62280JD

Required:

Compute equivalent units?

7Page Dr. Mahmoud Nassar /ASU

Solution:

Step one: Summarize the flow of physical units of output

Flow of production physical units

Work in process, beginning 225 units
Started during current period 275 units
To account for 500 units

Completed and transferred out during current period 400 units

Work in process ending 100 units
To account for 500 units

Step two: Compute output in terms of equivalent units

Equivalent units Direct Materials Conversion Costs

Completed and transferred out (400) 400 400
Work in process ending (100) 100 50

Work done in current period 500units 450units

Step three: Compute cost per equivalent unit

Total Production Costs DM CC

Work in process, beginning 26100 18000 8100
Cost added during the Month 36180 19800 16380

Total Cost to account for 62280JD 37800JD 24480JD

Step four: Summarize total costs to account for

Cost incurred in date 37800 24480
Divide by
Equivalent units of work done 500 450
Cost per equivalent unit 130 75.60JD 54.40JD

Step five: Assign total costs to units completed and to units in ending
Work-in-Process

Assignment of costs Total DM CC

Completed and transferred out (400) 52000JD (400*75.6) (400*54.4)
Work in process ending (100) 10280JD (100*75.6) (50*54.4)
Total cost accounting for 62280JD 378000JD 24480JD
8Page Dr. Mahmoud Nassar /ASU
Journal Entries

To record direct materials purchased and used in production

From Work in process 19800

To Account Payable Control 19800

To record conversion cost

From Work in process 16380

To various account 16380
(Wages control, Accumulated dep)

To record cost of goods completed and transferred from assembly to

testing

From Work in process (Testing) 52000

To Work in process (Assembly) 52000

9Page Dr. Mahmoud Nassar /ASU

Third Case: (First-in-First-out FIFO)

Process costing with some beginning and some ending work-in-process

inventory.

Example 3: process costing with some beginning and some ending work-
in-process inventories.

Data for the Assembly department for March 2009 are:

Physical* units for March 2009

Work in process, beginning inventory (March 1) 225 units

Started during March 275 units
Completed and transferred out during March 400 units
Work in process, ending inventories (March 31) 100 units

Degree of completion of beginning work in process

100% from direct materials and 60% conversion costs

Degree of completion of ending work in process

100% from direct materials and 50% conversion costs

Total costs for March 2009

Work in process beginning (18000 DM and 8100 CC) 26100JD

Direct material costs added during March 19800JD
Conversion costs added during March 16380JD
Total Assembly department costs added during March 62280JD

Required:

Compute equivalent units?

10Page Dr. Mahmoud Nassar /ASU

Solution:

Step one: Summarize the flow of physical units of output

Flow of production physical units

Work in process, beginning 225 units
Started during current period 275 units
To account for 500 units

Work in process, Beginning 225 units

Completed and transferred out during current period 175 units
Work in process ending 100 units
To account for 500 units

Step two: Compute output in terms of equivalent units

Equivalent units Direct Materials Conversion Costs

Work in process, Beginning (225) 0 90
Completed and transferred out (175) 175 175
Work in process ending (100) 100 50

Work done in current period 275units 315units

Step three: Compute cost per equivalent unit

Total Production Costs DM CC

Work in process, beginning 26100 18000 8100
Cost added during the Month 36180 19800 16380

Total Cost to account for 62280JD 37800JD 24480JD

Step four: Summarize total costs to account for

Cost incurred in date* 19800 16380

Divide by
Equivalent units of work done 275 315
Cost per equivalent unit 124 72JD 52JD

*Note: Under the FIFO method, equivalent units are calculated as the equivalent units
of work done in the current period only.

11Page Dr. Mahmoud Nassar /ASU

Step five: Assign total costs to units completed and to units in ending
Work-in-Process

Assignment of costs Total DM CC

Completed and transferred out (400)

Work in process beginning (100) 26100JD 18000 8100

Costs added to beginning WIP 4680JD (0 * 72) (90 * 52)
Total Costs from beginning WIP 30780

Started and Completed (175) 21700 (175*72) (175*52)

Total costs of units completed and transferred out

(30780 + 21700) 52480

Work in process, ending (100) 9800 (100*72) (50*52)

Total cost accounting for 62280JD 378000JD 24480JD

Journal Entries

To record direct materials purchased and used in production

From Work in process 19800

To Account Payable Control 19800

To record conversion cost

From Work in process 16380

To various account 16380
(Wages control, Accumulated dep)

To record cost of goods completed and transferred from assembly to

testing

From Work in process (Testing) 52000

To Work in process (Assembly) 52000

12Page Dr. Mahmoud Nassar /ASU

Summary (FIFO)

Beginning work in process 26100

Cost added in current period 36180

Total 62280

Costs accounted for calculated on FIFO basis

Completed and transferred out beginning WIP 26100

Used to complete beginning WIP 4680
Started and completed 21700
Completed and transferred out 52480

Ending WIP 9800

Total costs accounted for (52480 + 9800) = 62280JD

Comparison of Weighted-Average and FIFO methods

WA FIFO Difference
Costs of units completed and transferred out 52000 52480 +480
WIP ending 10280 9800 -480

Total costs accounted for 62280 62280

13Page Dr. Mahmoud Nassar /ASU

Transferred in costs in process costing

Fourth Case: (Weighted-Average Method)

Transferred in cost and weighted average method

Example 4:

Data for the Testing department for March 2009 are:

Physical* units for March 2009

Work in process, beginning inventory (March 1) 240 units

Transferred in during March 400 units
Completed and transferred out during March 440 units
Work in process, ending inventories (March 31) 200 units

Degree of completion of beginning work in process

100% from transferred costs, 0% from direct materials and 62.5% from
conversion costs

Degree of completion of ending work in process

100% from transferred costs, 0% from direct materials and 80%
conversion costs

Total costs for March 2009

Work in process beginning (transferred 33600, Materials 0, CC 18000)
Total cost added during March (DM 13200, CC 48600)
Transferred in Weighted average (52000)

Required:

Compute equivalent units?

14Page Dr. Mahmoud Nassar /ASU

Solution:

Step one: Summarize the flow of physical units of output

Flow of production physical units

Work in process, beginning 240 units
Transferred in during current period 400 units
To account for 500 units

Completed and transferred out during current period 440 units

Work in process ending 200 units
To account for 640 units

Step two: Compute output in terms of equivalent units

Equivalent units Transferred DM CC

Completed and transferred out (440) 440 440 440
Work in process ending (200) 200 0 160

Work done in current period 640units 440units 600units

Step three: Compute cost per equivalent unit

Total Transferred DM CC
Work in process, beginning 51600 33600 0 18000
Cost added during the Month 113800 52000 13200 48600

Total Cost to account for 165400JD 85600JD 13200JD 66600JD

Step four: Summarize total costs to account for

Cost incurred in date 85600 13200 66600

Divide by
Equivalent units of work done 640 440 600
Cost per equivalent unit 133.75JD 30JD 111JD

Step five: Assign total costs to units completed and to units in ending
Work-in-Process

Assignment of costs Total Transferred DM CC

Completed and transferred out (440) 120890JD (440*133.75) (440*30) (440*111)
Work in process ending (200) 44510JD (200*133.75) (0*30) (160*111)
Total cost accounting for 165400JD 85600JD 13200JD 66600JD
15Page Dr. Mahmoud Nassar /ASU
Journal Entries

The journal entry for the transfer from Testing to Finished Goods

Finished Goods Control 120890

Work in process-testing 120890

16Page Dr. Mahmoud Nassar /ASU

Transferred in costs in process costing

Fifth Case: (FIFO)

Transferred in cost and FIFO method

Example 5:

Data for the Testing department for March 2009 are:

Physical* units for March 2009

Work in process, beginning inventory (March 1) 240 units

Transferred in during March 400 units
Completed and transferred out during March 440 units
Work in process, ending inventories (March 31) 200 units

Degree of completion of beginning work in process

100% from transferred costs, 0% from direct materials and 62.5% from
conversion costs

Degree of completion of ending work in process

100% from transferred costs, 0% from direct materials and 80%
conversion costs

Total costs for March 2009

Work in process beginning (transferred 33600, Materials 0, CC 18000)
Total cost added during March (DM 13200, CC 48600)
Transferred in Weighted average (52480)

Required:

Compute equivalent units?

17Page Dr. Mahmoud Nassar /ASU

Solution:

Step one: Summarize the flow of physical units of output

Flow of production physical units

Work in process, beginning 240 units
Transferred in during current period 400 units
To account for 500 units

Completed and transferred out during current period:

From beginning WIP 240 units
Started and completed 200 units
Work in process ending 200 units
To account for 640 units

Step two: Compute output in terms of equivalent units

Equivalent units Transferred DM CC

From beginning WIP (240) 0 240 90
Completed and transferred out (200) 200 200 200
Work in process ending (200) 200 0 160

Work done in current period 400units 440units 450units

Step three: Compute cost per equivalent unit

Total Transferred DM CC
Work in process, beginning 51600 33600 0 18000
Cost added during the Month 113800 52480 13200 48600

Total Cost to account for 165880JD 86080JD 13200JD 66600JD

Step four: Summarize total costs to account for

Cost incurred in date 52480 13200 48600

Divide by
Equivalent units of work done 400 440 450
Cost per equivalent unit 131.2JD 30JD 108JD

18Page Dr. Mahmoud Nassar /ASU

Step five: Assign total costs to units completed and to units in ending
Work-in-Process

Assignment of costs Total Transferred DM CC

Completed and transferred out (440)
Work in process, beginning 51600 33600 0 18000
Costs added to beginning WIP 16920 (0^131.2) (240*30) (90*108)
Total from beginning inventory 68520

Started and completed (200) 53840 (200*131.2) (200*30) (200*108)

Total costs of units completed (68520+53840)
122360

WIP ending (200) 43520 (200*131.2) (0*30) (160*108)

Total costs accounted for 165880 86080 13200 66600

Journal Entry

The journal entry for the transfer from Testing to Finished Goods

Finished Goods Control 122360

Work in process-testing 122360

19Page Dr. Mahmoud Nassar /ASU

Extra Example

Consider the following data for the assembly division of MDMN, Inc;

Physical units DM CC
Beginning WIP, 1 of May 80 493360 91040
Started in May 500
Completed during May 2009 460
Ending WIP 31 of May 120
Total costs added during May 2009 3220000 1392000

Assuming that
Beginning WIP: Degree of completion: DM 90% CC 40%
Ending WIP: degree of completion DM 60% CC 30%

Required
1. Summarize total costs to account for, calculate cost per equivalent
unit for direct materials and conversion costs, and assign total costs
to units completed (and transferred out) and to units in ending work
in process. (Assume the company implements weighted average
method).

2. Summarize total costs to account for, calculate cost per equivalent

unit for direct materials and conversion costs, and assign total costs
to units completed (and transferred out) and to units in ending work
in process. (Assume the company implements weighted average
method).

20Page Dr. Mahmoud Nassar /ASU

Solution: First with Weighted Average Method
Step one: Summarize the flow of physical units of output

Flow of production physical units

Work in process, beginning 80 units
Started during current period 500 units
To account for 580 units

Completed and transferred out during current period 460 units

Work in process ending 120 units
To account for 580 units

Step two: Compute output in terms of equivalent units

Equivalent units Direct Materials Conversion Costs

Completed and transferred out (460) 460 460
Work in process ending (120) 72 36

Work done in current period 532units 496units

Step three: Compute cost per equivalent unit

Total Production Costs DM CC

Work in process, beginning 58440 493360 91040
Cost added during the Month 4612000 3220000 1392000

Total Cost to account for 5196400JD 3713360JD 1483040JD

Step four: Summarize total costs to account for

Cost incurred in date 3713360 1483040

Divide by
Equivalent units of work done 532 496
Cost per equivalent unit 6980JD 2990JD

Step five: Assign total costs to units completed and to units in ending
Work-in-Process

Assignment of costs Total DM CC

Completed and transferred out (460) 4586200 (460*6980) (460*2990)
Work in process ending (120) 610200 (72*6980) (36*2990)
Total cost accounting for 5196400JD 3713360JD 1483040JD
21Page Dr. Mahmoud Nassar /ASU
Solution: Second with FIFO Method

Step one: Summarize the flow of physical units of output

Flow of production physical units

Work in process, beginning 80 units
Started during current period 500 units
To account for 580 units

Work in process, Beginning 80 units

Completed and transferred out during current period 380 units
Work in process ending 120 units
To account for 580 units

Step two: Compute output in terms of equivalent units

Equivalent units Direct Materials Conversion Costs

Work in process, Beginning (80) 8 48
Completed and transferred out (380) 380 380
Work in process ending (120) 72 36

Work done in current period 460units 464units

Step three: Compute cost per equivalent unit

Total Production Costs DM CC

Work in process, beginning 584400 493360 91040
Cost added during the Month 4612000 3220000 1392000

Total Cost to account for 5196400JD 3713360JD 1483040JD

Step four: Summarize total costs to account for

Cost incurred in date* 3220000 1392000

Divide by
Equivalent units of work done 460 464
Cost per equivalent unit 7000JD 3000JD

*Note: Under the FIFO method, equivalent units are calculated as the equivalent units
of work done in the current period only.

22Page Dr. Mahmoud Nassar /ASU

Step five: Assign total costs to units completed and to units in ending
Work-in-Process

Assignment of costs Total DM CC

Completed and transferred out (460)

Work in process beginning (80) 584400JD 493360 91040

Costs added to beginning WIP 200000JD (8*7000) (48*3000)
Total Costs from beginning WIP 784400

Started and Completed (380) 3800000 (380*7000) (380*3000)

Total costs of units completed and transferred out

(784400 + 3800000) 4584400

Work in process, ending (120) 612000 (72*7000) (36*3000)

Total cost accounting for 5196400JD 3713360JD 1483040JD

23Page Dr. Mahmoud Nassar /ASU

 Chapter 18: Spoilage, Rework, and Scrap

Spoilage (Normal and Abnormal)

Example:
Manufacturing cost per unit 615000 / 25000= 30JD
Manufacturing costs of good units alone, 20000 units * 30JD= 60000
Normal spoilage costs, 400 units * 30JD= 12000

Manufacturing costs of good units completed (includes normal spoilage) 612000

Manufacturing cost per good unit= 612000 / 20000= 30.6

Abnormal spoilage costs= 100 units * 30JD= 3000

Count All Spoilage

WIP, beginning inventory 1 of May 0

Started during May 10000
Good units completed and transferred out 5000
Units spoiled (all normal spoilage) 1000
WIP ending inventory 31 of May 4000

Degree of completion of ending WIP from DM 100%

DM of completion of ending WIP 270000

Solution:

Costs to account for 270000

/
Divide by equivalent units of output 10000
Cost per equivalent unit of output 27

Assignment of costs:

Good units competed (5000 *27 per unit) 135000

Add normal spoilage (1000* 27per unit) 27000
Total costs of good unit completed and transferred out 162000

WIP, ending (4000*27per unit) 108000

Costs accounted for 270000
24Page Dr. Mahmoud Nassar /ASU
Case one: (Weighted-Average Method with Spoilage)

Example 1
Physical units DM CC Total

WIP, beginning inventory (1 of July) 1500 12000 9000 21000

Degree of completion of beginning WIP 100% 60%

Started during July 8500

Good units completed and transferred out 7000
WIP, ending inventory (31 of July) 2000

Degree of completion of ending WIP 100% 50%

Total costs added during July 76500 89100 165600

Normal spoilage as a percentage of good units 10%

Degree of completion of normal spoilage 100% 100%

Degree of completion of abnormal spoilage 100% 100%

Solution:

Identify the number of units of both normal and abnormal spoilage

Total spoilage= (units in beginning WIP + units started)

-
(Good units completed and transferred out + units in ending WIP)

= (1500 + 8500) – (7000 +2000)

= 10000 - 9000
= 1000 units

Normal spoilage is 10% of good output

Therefore, Normal spoilage = 10% of the 7000 units of good output= 700

Abnormal spoilage = total spoilage – Normal spoilage

= 1000units - 700units
= 300 units

25Page Dr. Mahmoud Nassar /ASU

Solution: (weighted-Average Method)

Step one: Summarize the flow of physical units of output

Flow of production physical units

Work in process, beginning 1500 units
Started during current period 8500 units
To account for 10000 units

Completed and transferred out during current period 7000 units

Normal Spoilage 700 units
Abnormal spoilage 300 units
Work in process ending 2000 units
To account for 10000 units

Step two: Compute output in terms of equivalent units

Equivalent units DM CC
Completed and transferred out (7000) 7000 7000
Normal Spoilage (700) 700 700
Abnormal spoilage (300) 300 300
Work in process ending (2000) 2000 1000

Work done in current period 10000units 9000units

Step three: Compute cost per equivalent unit

Total DM CC
Work in process, beginning 21000 12000 9000
Cost added during the Month 165600 76500 89100

Total Cost to account for 186600JD 88500JD 98100JD

Step four: Summarize total costs to account for

Cost incurred in date 186600 88500 98100

Divide by
Equivalent units of work done 10000 9000
Cost per equivalent unit 8.85JD 10.9JD

26Page Dr. Mahmoud Nassar /ASU

Step five: Assign total costs to units completed and to units in ending
Work-in-Process

Assignment of costs Total DM CC

Completed and transferred out (7000)
Costs before adding the normal spoilage 138250JD (7000*8.85) (7000*10.9)
Normal spoilage (700) 13825JD (700*8.85) (700*10.9)
Total costs of good units completed and transferred out
(138250 + 13825) 152075JD
Abnormal spoilage (300) 5925JD (300*8.85) (300*10.9)
Work in process ending (2000) 28600JD (2000*8.85) (1000*10.9)
Total cost accounting for 186600JD 88500JD 98100JD

Journal Entries

The journal entry for the transfer from Testing to Finished Goods

From Finished Goods 152075

To Work in process 152075

From Loss from abnormal spoilage 5925

To work in process 5925

To record abnormal spoilage detected in current period

27Page Dr. Mahmoud Nassar /ASU

Solution: (FIFO)

Step one: Summarize the flow of physical units of output

Flow of production physical units

Work in process, beginning 1500 units
Started during current period 8500 units
To account for 10000 units

Work in process, Beginning 1500 units

Completed and transferred out during current period 5500 units
Normal spoilage 700 units
Abnormal spoilage 300 units
Work in process ending 2000 units
To account for 10000 units

Step two: Compute output in terms of equivalent units

Equivalent units Direct Materials Conversion Costs

Work in process, Beginning (1500) 0 600
Completed and transferred out (5500) 5500 5500
Normal spoilage (700) 700 700
Abnormal spoilage (300) 300 300
Work in process ending (2000) 2000 1000
Work done in current period 8500units 8100 units

Step three: Compute cost per equivalent unit

Total Production Costs DM CC
Work in process, beginning 21000 12000 9000
Cost added during the Month 165600 76500 89100

Total Cost to account for 186600JD 88500JD 98100JD

Step four: Summarize total costs to account for

Cost incurred in date* 76500 89100

Divide by
Equivalent units of work done 8500 8100
Cost per equivalent unit 9JD 11JD

*Note: Under the FIFO method, equivalent units are calculated as the equivalent units
of work done in the current period only.

28Page Dr. Mahmoud Nassar /ASU

Step five: Assign total costs to units completed and to units in ending
Work-in-Process

Assignment of costs Total DM CC

Completed and transferred out (7000)

Work in process beginning (1500) 21000JD 12000 9000

Costs added to beginning WIP 6600JD (0 * 9) (600 * 11)
Total Costs from beginning WIP 27600
Started and Completed before Normal spoilage (5500)
110000 (5500*9) (5500*11)
Normal spoilage (700) 14000 (700*9) (700*11)
Total costs of units completed and transferred out
(27600 + 110000 + 14000) 151600
Abnormal spoilage (300) 6000 (300*9) (300*11)
Work in process, ending (2000) 29000 (2000*9) (1000*11)

Total cost accounting for 186600JD 88500JD 98100JD

29Page Dr. Mahmoud Nassar /ASU

Multiple Choice Questions

Use the following information to answer questions 1 and 2:

1. If the equivalent units of production under weighted average costing were

40,000 and 50,000 for materials and conversion costs, respectively, what are the
costs per equivalent unit?

A) 1.15 ; 1.56 JD B).1.76 ; 1.94 JD C) 2.30 ; 2.48 JD D) 3.45 ; 4.04 JD

2. If the equivalent units of production under FIFO costing were 40,000 and 50,000
for materials and conversion costs, respectively, what are the costs per equivalent
unit?

A) 1.15 ; 1.56 JD B) 1.76 ; 1.94 JD C) 2.30 ; 2.48 JD D) 3.45 ; 4.04 JD

30Page Dr. Mahmoud Nassar /ASU

Use the following information to answer questions 3 and 4:
Apex Corporation experienced the following during April:
Beginning WIP inventory 7,500 units, 40% of labor added this period
Units started this period 64,000 units
Ending WIP inventory 5,000 units, 60% of labor added this period
Direct materials are added at the beginning of the process and direct labor is added
uniformly throughout the process.

3. The equivalent units for direct materials and direct labor under a weighted average
cost are:

A) 66,500 ; 66,500 B) 66,500 ; 72,000 C) 71,500 ; 69,500 D) 64,000 ; 74,000

4. The equivalent units for direct materials and direct labor under a FIFO cost are:

A) 66,500 ; 66,500 B) 66,500 ; 72,000 C) 71,500 ; 78,500 D) 64,000 ; 65,000

31Page Dr. Mahmoud Nassar /ASU

Use the following information to answer questions 5 – 9:
The Superior Company manufactures paint and uses a process costing system. During
February, Superior started 80,000 gallons of paint. During the month the company
completed 92,000 gallons and transferred them to the mixing department. Superior
had 38,000 gallons in beginning inventory and 26,000 gallons in ending inventory.
Material is added at the beginning of the process and conversion costs are added
evenly throughout the process. Beginning WIP was 30% complete as to conversion
costs and ending WIP was 20% complete as to conversion costs. The company uses a
FIFO costing. The cost data for February follow:

5. How many gallons were started and completed this period?

A) 42,000 gallons B) 48,000 gallons C) 54,000 gallons D) 66,000 gallons

6. What were the equivalent units for conversion costs during February?

A) 72,600 gallons B) 85,800 gallons C) 88,600 gallons D) 92,900 gallons

7. What was the cost of direct materials in ending WIP inventory?

A) 37,560 JD B) 42,600 JD C) 45,550 JD D) 48,750 JD

32Page Dr. Mahmoud Nassar /ASU

8 . The amount of conversion cost in ending WIP inventory was:

A) 20,800 JD B) 31,200 JD C) 34,400 JD D) 35,100 JD

. The cost of goods transferred out was:

A) 450,000 JD B) 479,350 JD C) 489,850 JD D) 502,300 JD

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Case 1
Edwards Inc. uses the FIFO method in its process costing system. The following data
concern the operations of the company's first processing department for a recent
month.
Work in process, beginning:
Units in process 100
Stage of completion with respect to materials 50%
Stage of completion with respect to conversion 90%
Costs in the beginning inventory:
Materials cost $260
Conversion cost $3,366
Units started into production during the month 20,000
Units completed and transferred out 19,800
Costs added to production during the month:
Materials cost $99,650
Conversion cost $745,329
Work in process, ending:
Units in process 300
Stage of completion with respect to materials 60%
Stage of completion with respect to conversion 20%

Required: Using the FIFO method:

a. Determine the equivalent units of production for materials and conversion costs.
b. Determine the cost per equivalent unit for materials and conversion costs.
c. Determine the cost of units transferred out of the department during the month.
d. Determine the cost of ending work in process inventory in the department.

34Page Dr. Mahmoud Nassar /ASU

Case 2
Cagna Inc. uses the weighted-average method in its process costing system. The
following data concern the operations of the company's first processing department
for a recent month.
Work in process, beginning:
Units in process 700
Stage of completion with respect to materials 90%
Stage of completion with respect to conversion 10%
Units started into production during the month 15,000
Work in process, ending:
Units in process 500
Stage of completion with respect to materials 50%
Stage of completion with respect to conversion 40%

Required:
a. Determine the equivalent units of production for materials and conversion costs.
b. Determine the cost per equivalent unit for materials and conversion costs.

35Page Dr. Mahmoud Nassar /ASU

Case 3

Ayres Inc. uses the weighted-average method in its process costing system. The
following data concern the operations of the company's first processing department
for a recent month.
Work in process, beginning:
Units in process 300
Stage of completion with respect to materials 60%
Stage of completion with respect to conversion 60%
Costs in the beginning inventory:
Materials cost $1,314
Conversion cost $6,102
Units started into production during the month 22,000
Units completed and transferred out 21,800
Costs added to production during the month:
Materials cost $164,436
Conversion cost $728,058
Work in process, ending:
Units in process 500
Stage of completion with respect to materials 60%
Stage of completion with respect to conversion 10%

Required:
Prepare a production report for the department using the weighted-average method.

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Case 4

Use the following to answer questions 1-2:

The information below was obtained from the records of Bapst Company for the
month of May. The company uses the FIFO method in its process costing system.

Units Labor and Overhead % Complete

Work in process inventory, May 1 3,000 30%
Started into production 20,000
Work in process inventory, May 31 4,000 40%

All materials are added at the beginning of the manufacturing process.

The equivalent units for material for the month are:

1) 21,600 units B) 22,500 units C) 16,000 units D) 20,000 units

The equivalent units for labor and overhead for the month are:
2) 17,600 units B) 18,500 units C) 19,700 units D) 21,600 units

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Use the following to answer questions 1-7:
Mullins Corporation uses the FIFO method in its process costing system. Data
concerning the first processing department for the most recent month are listed below:
Beginning work in process inventory:

Units in beginning work in process inventory 700

Materials costs $11,500
Conversion costs $22,200
Percentage complete with respect to materials 75%
Percentage complete with respect to conversion 65%
Units started into production during the month 8,600
Units transferred to the next department during the month 7,800
Materials costs added during the month $159,300
Conversion costs added during the month $348,500
Ending work in process inventory:
Units in ending work in process inventory 1,500
Percentage complete with respect to materials 65%
Percentage complete with respect to conversion 50%

1. What are the equivalent units for materials for the month in the first processing
department?
A) 975 B) 8,250 C) 9,300 D) 7,100

2. What are the equivalent units for conversion costs for the month in the first
processing department?
A) 8,095 B) 7,100 C) 9,300 D) 750

3. The cost per equivalent unit for materials for the month in the first processing
department is closest to:
A) $20.42 B) $21.90 C) $19.31 D) $17.13

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4. The cost per equivalent unit for conversion costs for the first department for the
month is closest to:
A) $48.79 B) $45.20 C) $44.68 D) $43.05

5. cost per equivalent whole unit for the month in the first processing department is
closest to:
A) $62.36 B) $76.27 C) $66.10 D) $58.23

6. The total cost transferred from the first processing department to the next
processing department during the month is closest to:
A) $490,382 B) $579,948 C) $507,800 D) $541,500

7. The cost of ending work in process inventory in the first processing department
according to the company's cost system is closest to:
A) $51,114 B) $46,770 C) $93,540 D) $60,801

39Page Dr. Mahmoud Nassar /ASU