Costacctg13 Sm Ch17

17-

CHAPTERCHAPTERCHAPTER

CHAPTER

171717

17

PROCESSPROCESSPROCESS

PROCESS

COSTINGCOSTINGCOSTING

COSTING

17-117-117-1

17-1

Industries using process costing in their manufacturing area include chemical processing,oil refining, pharmaceuticals, plastics, brick and tile manufacturing, semiconductor chips,beverages, and breakfast cereals.

17-217-217-2

17-2

Process costing systems separate costs into cost categories according to the timing ofwhen costs are introduced into the process. Often, only two cost classifications, direct materialsand conversion costs, are necessary. Direct materials are frequently added at one point in time,often the start or the end of the process, and all conversion costs are added at about the same time,but in a pattern different from direct materials costs.

17-317-317-3

17-3

Equivalent units is a derived amount of output units that takes the quantity of each input(factor of production) in units completed or in incomplete units in work in process, and convertsthe quantity of input into the amount of completed output units that could be made with thatquantity of input. Each equivalent unit is comprised of the physical quantities of direct materialsor conversion costs inputs necessary to produce output of one fully completed unit. Equivalentunit measures are necessary since all physical units are not completed to the same extent at thesame time.

17-417-417-4

17-4

The accuracy of the estimates of completion depends on the care and skill of theestimator and the nature of the process. Semiconductor chips may differ substantially in thefinishing necessary to obtain a final product. The amount of work necessary to finish a productmay not always be easy to ascertain in advance.

17-517-517-5

17-5

The five key steps in process costing follow:Step 1: Summarize the flow of physical units of output.Step 2: Compute output in terms of equivalent units.Step 3: Summarize total costs to account for.Step 4: Compute cost per equivalent unit.Step 5: Assign total costs to units completed and to units in ending work in process.

17-617-617-6

17-6

Three inventory methods associated with process costing are: Weighted average. First-in, first-out. Standard costing.

17-717-717-7

17-7

The weighted-average process-costing method calculates the equivalent-unit cost of allthe work done to date (regardless of the accounting period in which it was done), assigns thiscost to equivalent units completed and transferred out of the process, and to equivalent units inending work-in-process inventory.

17-

17-817-817-8

17-8

FIFO computations are distinctive because they assign the cost of the previousaccounting period’s equivalent units in beginning work-in-process inventory to the first unitscompleted and transferred out of the process and assigns the cost of equivalent units worked onduring the current period first to complete beginning inventory, next to start and complete newunits, and finally to units in ending work-in-process inventory. In contrast, the weighted-averagemethod costs units completed and transferred out and in ending work in process at the sameaverage cost.

17-917-917-9

17-9

FIFO should be called a modified or departmental FIFO method because the goodstransferred in during a given period usually bear a single average unit cost (rather than a distinctFIFO cost for each unit transferred in) as a matter of convenience.

17-1017-1017-10

17-10

A major advantage of FIFO is that managers can judge the performance in the currentperiod independently from the performance in the preceding period.

17-1117-1117-11

17-11

The journal entries in process costing are basically similar to those made in job-costingsystems. The main difference is that, in process costing, there is often more than one work-in-process account––one for each process.

17-1217-1217-12

17-12

Standard-cost procedures are particularly appropriate to process-costing systems wherethere are various combinations of materials and operations used to make a wide variety of similarproducts as in the textiles, paints, and ceramics industries. Standard-cost procedures also avoidthe intricacies involved in detailed tracking with weighted-average or FIFO methods when thereare frequent price variations over time.

17-1317-1317-13

17-13

There are two reasons why the accountant should distinguish between transferred-incosts and additional direct materials costs for a particular department:

(a) All direct materials may not be added at the beginning of the department process.(b) The control methods and responsibilities may be different for transferred-in items and

materials added in the department.

17-1417-1417-14

17-14

No. Transferred-in costs or previous department costs are costs incurred in a previousdepartment that have been charged to a subsequent department. These costs may be costsincurred in that previous department during this accounting period or a preceding accountingperiod.

17-1517-1517-15

17-15

Materials are only one cost item. Other items (often included in a conversion costs pool)include labor, energy, and maintenance. If the costs of these items vary over time, this variabilitycan cause a difference in cost of goods sold and inventory amounts when the weighted-averageor FIFO methods are used.

A second factor is the amount of inventory on hand at the beginning or end of anaccounting period. The smaller the amount of production held in beginning or ending inventoryrelative to the total number of units transferred out, the smaller the effect on operating income,cost of goods sold, or inventory amounts from the use of weighted-average or FIFO methods.

17-

17-1617-1617-16

17-16

(25 min.) EquivalentEquivalentEquivalent

Equivalent

units,units,units,

units,

zerozerozero

zero

beginningbeginningbeginning

beginning

inventory.inventory.inventory.

inventory.

1. Direct materials cost per unit ($750,000 ÷ 10,000) $ 75.00Conversion cost per unit ($798,000 ÷ 10,000) 79.80Assembly Department cost per unit $154.80

2a. Solution Exhibit 17-16A calculates the equivalent units of direct materials and conversioncosts in the Assembly Department of Nihon, Inc. in February 2009.

Solution Exhibit 17-16B computes equivalent unit costs.

2b. Direct materials cost per unit $ 75Conversion cost per unit 84Assembly Department cost per unit $159

3. The difference in the Assembly Department cost per unit calculated in requirements 1 and2 arises because the costs incurred in January and February are the same but fewer equivalentunits of work are done in February relative to January. In January, all 10,000 units introduced arefully completed resulting in 10,000 equivalent units of work done with respect to direct materialsand conversion costs. In February, of the 10,000 units introduced, 10,000 equivalent units ofwork is done with respect to direct materials but only 9,500 equivalent units of work is done withrespect to conversion costs. The Assembly Department cost per unit is, therefore, higher.

SOLUTIONSOLUTIONSOLUTION

SOLUTION

EXHIBITEXHIBITEXHIBIT

EXHIBIT

17-16A17-16A17-16A

17-16A

Steps 1 and 2: Summarize Output in Physical Units and Compute Output in Equivalent Units;Assembly Department of Nihon, Inc. for February 2009.

Work in process, beginning (given) 0Started during current period (given) 10,000To account for 10,000Completed and transferred out

during current period 9,000 9,000 9,000Work in process, ending* (given) 1,000

1,000 100%; 1,000 50% 1,000 500Accounted for 10,000Work done in current period 10,000 9,500

*Degree of completion in this department: direct materials, 100%; conversion costs, 50%.

(Step(Step(Step

(Step

2)2)2)

2)

(Step(Step(Step

(Step

1)1)1)

1)

EquivalentEquivalentEquivalent

Equivalent

UnitsUnitsUnits

Units

PhysicalPhysicalPhysical

Physical

DirectDirectDirect

Direct

ConversionConversionConversion

Conversion

FlowFlowFlow

Flow

ofofof

of

ProductionProductionProduction

Production

UnitsUnitsUnits

Units

MaterialsMaterialsMaterials

Materials

CostsCostsCosts

Costs

17-


SOLUTION


EXHIBIT

17-16B17-16B17-16B

17-16B

Compute Cost per Equivalent Unit,Assembly Department of Nihon, Inc. for February 2009.

17-1717-1717-17

17-17

(20 min.) JournalJournalJournal

Journal

entriesentriesentries

entries

(continuation(continuation(continuation

(continuation

ofofof

of

17-16).17-16).17-16).

17-16).

1. Work in Process––Assembly 750,000Accounts Payable 750,000

To record $750,000 of direct materialspurchased and used in production duringFebruary 2009

2. Work in Process––Assembly 798,000Various accounts 798,000

To record $798,000 of conversion costsfor February 2009; examples include energy,manufacturing supplies, all manufacturinglabor, and plant depreciation

3. Work in Process––Testing 1,431,000Work in Process––Assembly 1,431,000

To record 9,000 units completed andtransferred from Assembly to Testingduring February 2009 at$159 9,000 units = $1,431,000

Postings to the Work in Process––Assembly account follow.

WorkWorkWork

Work

ininin

in

ProcessProcessProcess

Process

––––––

––

AssemblyAssemblyAssembly

Assembly

DepartmentDepartmentDepartment

Department

Beginning inventory, Feb. 1 0 3. Transferred out to1. Direct materials 750,000 Work in Process––Testing 1,431,0002. Conversion costs 798,000

Ending inventory, Feb. 28 117,000

TotalTotalTotal

Total


Production

CostsCostsCosts

Costs

DirectDirectDirect

Direct


Materials


Conversion

CostsCostsCosts

Costs

(StepStepStep

Step

333

3

) Costs added during February $1,548,000 $750,000 $798,000Divide by equivalent units of work done

in current period (Solution Exhibit 17-l6A) 10,000 9,500Cost per equivalent unit $ 75 $ 84

17-

17-1817-1817-18

17-18

(25 min.) ZeroZeroZero

Zero

beginningbeginningbeginning

beginning

inventory,inventory,inventory,

inventory,

materialsmaterialsmaterials

materials

introducedintroducedintroduced

introduced

ininin

in

middlemiddlemiddle

middle

ofofof

of

process.process.process.

process.

1. Solution Exhibit 17-18A shows equivalent units of work done in the current period ofChemical P, 50,000; Chemical Q, 35,000; Conversion costs, 45,000.

2. Solution Exhibit 17-18B summarizes the total Mixing Department costs for July 2009,calculates cost per equivalent unit of work done in the current period for Chemical P, ChemicalQ, and Conversion costs, and assigns these costs to units completed (and transferred out) and tounits in ending work in process.


SOLUTION


EXHIBIT

17-18A17-18A17-18A

17-18A

Steps 1 and 2: Summarize Output in Physical Units and Compute Output in Equivalent Units;Mixing Department of Roary Chemicals for July 2009.

Work in process, beginning (given) 0Started during current period (given) 50,000To account for 50,000Completed and transferred out

during current period 35,000 35,000 35,000 35,000Work in process, ending* (given) 15,000

15,000 100%; 15,000 0%;15,000 66 2/3% 15,000 0 10,000

Accounted for 50,000Work done in current period only 50,000 35,000 45,000

*Degree of completion in this department: Chemical P, 100%; Chemical Q, 0%; conversion costs, 66 2/3%.

(Step(Step(Step

(Step

1)1)1)

1)

(Step(Step(Step

(Step

2)2)2)

2)


Equivalent

UnitsUnitsUnits

Units


Physical


Conversion

FlowFlowFlow

Flow

ofofof

of


Production

UnitsUnitsUnits

Units

ChemicalChemicalChemical

Chemical

PPP

P


Chemical

QQQ

Q

CostsCostsCosts

Costs

17-


SOLUTION


EXHIBIT

17-18B17-18B17-18B

17-18B

Steps 3, 4, and 5: Summarize Total Costs to Account For, Compute Cost per Equivalent Unit,and Assign Total Costs to Units Completed and to Units in Ending Work in Process;Mixing Department of Roary Chemicals for July 2009.

*Equivalent units completed and transferred out from Solution Exhibit 17-18A, Step 2.†Equivalent units in ending work in process from Solution Exhibit 17-18A, Step 2.

17-1917-1917-19

17-19

(15 min.) Weighted-averageWeighted-averageWeighted-average

Weighted-average

method,method,method,

method,

equivalentequivalentequivalent

equivalent

units.units.units.

units.

Under the weighted-average method, equivalent units are calculated as the equivalent units ofwork done to date. Solution Exhibit 17-19 shows equivalent units of work done to date for theAssembly Division of Fenton Watches, Inc., for direct materials and conversion costs.


SOLUTION


EXHIBIT

17-1917-1917-19

17-19

Steps 1 and 2: Summarize Output in Physical Units and Compute Output in Equivalent Units;Weighted-Average Method of Process Costing, Assembly Division of Fenton Watches, Inc., forMay 2009.

(Step(Step(Step

(Step

2)2)2)

2)

(Step(Step(Step

(Step

1)1)1)

1)


Equivalent

UnitsUnitsUnits

Units


Physical

DirectDirectDirect

Direct


Conversion

FlowFlowFlow

Flow

ofofof

of


Production

UnitsUnitsUnits

Units


Materials

CostsCostsCosts

Costs

Work in process beginning (given) 80Started during current period (given) 500To account for 580Completed and transferred out during current period 460 460 460Work in process, ending* (120 60%; 120 30%) 120 72 36Accounted for 580 ___ ___Work done to date 532 496


TotalTotalTotal

Total


Production

CostsCostsCosts

Costs


Chemical

PPP

P


Chemical

QQQ

Q


Conversion

CostsCostsCosts

Costs

(StepStepStep

Step

333

3

) Costs added during July $455,000 $250,000 $70,000 $135,000Total costs to account for $455,000 $250,000 $70,000 $135,000

(Step(Step(Step

(Step

4)4)4)

4)

Costs added in current period $250,000 $70,000 $135,000Divide by equivalent units of workdone in current period(Solution Exhibit 17-l8A) 50,000 35,000 45,000Cost per equivalent unit $ 5 $ 2 $ 3

(Step(Step(Step

(Step

5)5)5)

5)

Assignment of costs:Completed and transferred out(35,000 units) $350,000 (35,000* $5) + (35,000* $2) + (35,000* $3)Work in process, ending(15,000 units) 105,000 (15,000† $5) + (0† $2) + (10,000† $3)Total costs accounted for $455,000 $250,000 + $70,000 + $135,000

17-

17-2017-2017-20

17-20


Weighted-average


method,

assigningassigningassigning

assigning

costscostscosts

costs


(continuation

ofofof

of

17-19).17-19).17-19).

17-19).

Solution Exhibit 17-20 summarizes total costs to account for, calculates cost per equivalent unitof work done to date in the Assembly Division of Fenton Watches, Inc., and assigns costs tounits completed and to units in ending work-in-process inventory.


SOLUTION


EXHIBIT

17-2017-2017-20

17-20

Steps 3, 4, and 5: Summarize Total Costs to Account For, Compute Cost per Equivalent Unit,and Assign Total Costs to Units Completed and to Units in Ending Work in Process;Weighted-Average Method of Process Costing, Assembly Division of Fenton Watches, Inc., forMay 2009.

*Equivalent units completed and transferred out from Solution Exhibit 17-19, Step 2.† Equivalent units in work in process, ending from Solution Exhibit 17-19, Step 2.

TotalTotalTotal

Total


Production

CostsCostsCosts

Costs

DirectDirectDirect

Direct


Materials


Conversion

CostsCostsCosts

Costs

(Step(Step(Step

(Step

333

3

) Work in process, beginning (given) $ 584,400 $ 493,360 $ 91,040Costs added in current period (given) 4,612,000 3,220,000 1,392,000Total costs to account for $5,196,400 $3,713,360 $1,483,040

(StepStepStep

Step

444

4

) Costs incurred to date $3,713,360 $1,483,040Divide by equivalent units of work done to date(Solution Exhibit 17-19) 532 496Cost per equivalent unit of work done to date $ 6,980 $ 2,990

(StepStepStep

Step

555

5

) Assignment of costs:Completed and transferred out (460 units) $4,586,200 (460* $6,980) + (460* $2,990)Work in process, ending (120 units) 610,200 (72† $6,980) + (36† $2,990)

Total costs accounted for $5,196,400 $3,713,360 + $1,483,040

17-

17-2117-2117-21

17-21

(15 min.) FIFOFIFOFIFO

FIFO


method,

equivalentequivalentequivalent

equivalent

units.units.units.

units.

Under the FIFO method, equivalent units are calculated as the equivalent units of work done inthe current period only. Solution Exhibit 17-21 shows equivalent units of work done in May2009 in the Assembly Division of Fenton Watches, Inc., for direct materials and conversion costs.


SOLUTION


EXHIBIT

17-2117-2117-21

17-21

Steps 1 and 2: Summarize Output in Physical Units and Compute Output in Equivalent Units;FIFO Method of Process Costing, Assembly Division of Fenton Watches, Inc., for May 2009.

§Degree of completion in this department: direct materials, 90%; conversion costs, 40%.†460 physical units completed and transferred out minus 80 physical units completed and transferred out from

beginning work-in-process inventory.*Degree of completion in this department: direct materials, 60%; conversion costs, 30%.

(Step(Step(Step

(Step

1)1)1)

1)

(Step(Step(Step

(Step

2)2)2)

2)


Equivalent

UnitsUnitsUnits

Units

FlowFlowFlow

Flow

ofofof

of


Production


Physical

UnitsUnitsUnits

Units

DirectDirectDirect

Direct


Materials


Conversion

CostsCostsCosts

Costs

Work in process, beginning (given)Started during current period (given)To account for

80500580

(work done before current period)

Completed and transferred out during currentperiod:

From beginning work in process§

80 (100% 90%); 80 (100% 40%) 80

8 48Started and completed

380 100%, 380 100% 380†

380 380Work in process, ending* (given)

120 60%; 120 30% 120

___ 72 36Accounted for 580Work done in current period only 460 464

17-

17-2217-2217-22

17-22


FIFO


method,


assigning

costscostscosts

costs


(continuation

ofofof

of

17-21).17-21).17-21).

17-21).

Solution Exhibit 17-22 summarizes total costs to account for, calculates cost per equivalent unitof work done in May 2009 in the Assembly Division of Fenton Watches, Inc., and assigns totalcosts to units completed and to units in ending work-in-process inventory.


SOLUTION


EXHIBIT

17-2217-2217-22

17-22

Steps 3, 4, and 5: Summarize Total Costs to Account For, Compute Cost per Equivalent Unit,and Assign Total Costs to Units Completed and to Units in Ending Work in Process;FIFO Method of Process Costing, Assembly Division of Fenton Watches, Inc., for May 2009.

*Equivalent units used to complete beginning work in process from Solution Exhibit 17-21, Step 2.†††

†

Equivalent units started and completed from Solution Exhibit 17-21, Step 2.#Equivalent units in work in process, ending from Solution Exhibit 17-21, Step 2.

TotalTotalTotal

Total


Production

CostsCostsCosts

Costs

DirectDirectDirect

Direct


Materials


Conversion

CostsCostsCosts

Costs

(StepStepStep

Step

333

3

) Work in process, beginning (given) $ 584,400 $ 493,360 $ 91,040Costs added in current period (given) 4,612,000 3,220,000 1,392,000Total costs to account for $5,196,400

$3,713,360$1,483,040

(StepStepStep

Step

444

4

) Costs added in current period $3,220,000 $1,392,000Divide by equivalent units of work done in

current period (Solution Exhibit 17-21) 460 464

Cost per equiv. unit of work done in current period $ 7,000 $ 3,000

(StepStepStep

Step

555

5

) Assignment of costs:Completed and transferred out (460 units):

Work in process, beginning (80 units)Costs added to beginning work in process

in current period

$ 584,400

200,000

$493,360 + $91,040

(8* $7,000) + (48* $3,000)Total from beginning inventory

Started and completed (380 units)Total costs of units completed and

transferred outWork in process, ending (120 units)Total costs accounted for

784,4003,800,000

4,584,400612,000

$5,196,400

(380† $7,000) + (380† $3,000)

(72# $7,000) + (36# $3,000)$3,713,360 + $1,483,040

17-

17-2317-2317-23

17-23

(20-25 min.) Standard-costingStandard-costingStandard-costing

Standard-costing


method,


assigning

costs.costs.costs.

costs.

1.


SOLUTION


EXHIBIT

17-23A17-23A17-23A

17-23A

Steps 1 and 2: Summarize Output in Physical Units and Compute Output in Equivalent Units;Standard Costing Method of Process Costing for Bucky’s Boxes for July 2010

§Degree of completion in this department: direct materials, 100%; conversion costs, 25%.†512,000 physical units completed and transferred out minus 185,000 physical units completed and transferred out

from beginning work-in-process inventory.*Degree of completion in this department: direct materials, 100%; conversion costs, 80%.

(Step(Step(Step

(Step

1)1)1)

1)

(Step(Step(Step

(Step

2)2)2)

2)


Equivalent

UnitsUnitsUnits

Units

FlowFlowFlow

Flow

ofofof

of


Production


Physical

UnitsUnitsUnits

Units

DirectDirectDirect

Direct


Materials


Conversion

CostsCostsCosts

Costs


185,000465,000650,000


Completed and transferred out during current period:From beginning work in process§

185,000 (100% 100%); 185,000 (100% – 25%)185,000

0 138,750Started and completed

327,000 100%, 327,000 100% 327,000†

327,000 327,000Work in process, ending* (given)

138,000 100%; 138,000 80% 138,000_______ 138,000 110,400

Accounted for 650,000 _______ _______Work done in current period only 465,000 576,150

17-

2.


SOLUTION


EXHIBIT

17-23B17-23B17-23B

17-23B

Steps 3, 4, and 5: Summarize Total Costs to Account For, Compute Cost per Equivalent Unit,and Assign Total Costs to Units Completed and to Units in Ending Work in Process;Standard Costing Method of Process Costing for Bucky’s Boxes for July 2010

*Equivalent units to complete beginning work in process from Solution Exhibit 17-23A, Step 2.

†Equivalent units started and completed from Solution Exhibit 17-23A, Step 2.

#Equivalent units in ending work in process from Solution Exhibit 17-23A, Step 2.

TotalTotalTotal

Total


Production

CostsCostsCosts

Costs

DirectDirectDirect

Direct


Materials


Conversion

CostsCostsCosts

Costs

(Step(Step(Step

(Step

333

3

) Work in process, beginning (given) $ 337,625 $240,500 + $ 97,125Costs added in current period at standard costs 1,814,415 (465,000 $1.30) + (576,150 $2.10)

Total costs to account for $2,152,040 $845,000 + $1,307,040

(Step(Step(Step

(Step

4)4)4)

4)

Standard cost per equivalent unit (given) $ 1.30 $ 2.10

(Step(Step(Step

(Step

555

5

) Assignment of costs at standard costs:Completed and transferred out (512,000 units):

Work in process, beginning (185,000 units)Costs added to beg. work in process in current period

Total from beginning inventory

$ 337,625291,375

629,000

$240,500 + $97,125(0* $1.30) + (138,750* $2.10)

Started and completed (327,000 units)Total costs of units transferred out

1,111,8001,740,800

(327,000† $1.30) + (327,000† $2.10)

Work in process, ending (138,000 units) 411,240 (138,000# $1.30) + (110,400# $2.10)Total costs accounted for $2,152,040 $845,000 + $1,307,040

Summary of variances for current performance:Costs added in current period at standard costs (see Step 3 above)Actual costs incurred (given)Variance

$604,500607,500

$ 3,000 U

$1,209,9151,207,415

$ 2,500 F

17-

17-2417-2417-24

17-24


Weighted-average


method,


assigning

costs.costs.costs.

costs.

1. & 2.

Solution Exhibit 17-24A shows equivalent units of work done to date for Bio Doc Corporationfor direct materials and conversion costs.

Solution Exhibit 17-24B summarizes total costs to account for, calculates the cost per equivalentunit of work done to date for direct materials and conversion costs, and assigns these costs tounits completed and transferred out and to units in ending work-in-process inventory.


SOLUTION


EXHIBIT

17-24A17-24A17-24A

17-24A

Steps 1 and 2: Summarize Output in Physical Units and Compute Output in Equivalent Units;Weighted-Average Method of Process Costing, Bio Doc Corporation for July 2008.

Work in process, beginning (given) 12,500Started during current period (given) 50,000To account for 62,500Completed and transferred out

during current period 42,500 42,500 42,500Work in process, ending* (given) 20,000

20,000 100%; 20,000 50% 20,000 10,000Accounted for 62,500Work done to date 62,500 52,500

*Degree of completion: direct materials, 100%; conversion costs, 50%.

(Step(Step(Step

(Step

2)2)2)

2)

(Step(Step(Step

(Step

1)1)1)

1)


Equivalent

UnitsUnitsUnits

Units


Physical

DirectDirectDirect

Direct


Conversion

FlowFlowFlow

Flow

ofofof

of


Production

UnitsUnitsUnits

Units


Materials

CostsCostsCosts

Costs

17-


SOLUTION


EXHIBIT

17-24B17-24B17-24B

17-24B

Steps 3, 4, and 5: Summarize Total Costs to Account For, Compute Cost per Equivalent Unit,and Assign Total Costs to Units Completed and to Units in Ending Work in Process;Weighted-Average Method of Process Costing, Bio Doc Corporation for July 2008.

*Equivalent units completed and transferred out (given).†Equivalent units in ending work in process (given).

TotalTotalTotal

Total


Production

CostsCostsCosts

Costs

DirectDirectDirect

Direct


Materials


Conversion

CostsCostsCosts

Costs

(Step(Step(Step

(Step

333

3

) Work in process, beginning (given) $162,500 $ 75,000 $ 87,500Costs added in current period (given) 813 ,750 350,000 463,750Total costs to account for $976,250 $425,000 $551,250

(StepStepStep

Step

444

4

) Costs incurred to date $425,000 $551,250Divide by equivalent units of work done to

date (Solution Exhibit 17-24A) 62,500 52,500Cost per equivalent unit of work done to date $ 6.80 $ 10.50

(StepStepStep

Step

555

5

) Assignment of costs:Completed and transferred out (42,500 units) $735,250 (42,500* $6.80) + (42,500* $10.50)Work in process, ending (20,000 units) 241,000 (20,000† $6.80) + (10,000† $10.50)Total costs accounted for $976,250 $425,000 + $551,250

17-

17-2517-2517-25

17-25


FIFO


method,


assigning

costs.costs.costs.

costs.

1. & 2. Solution Exhibit 17-25A calculates the equivalent units of work done in the currentperiod. Solution Exhibit 17-25B summarizes total costs to account for, calculates the cost perequivalent unit of work done in the current period for direct materials and conversion costs, andassigns these costs to units completed and transferred out and to units in ending work-in-processinventory.


SOLUTION


EXHIBIT

17-25A17-25A17-25A

17-25A

Steps 1 and 2: Summarize Output in Physical Units and Compute Output in Equivalent Units;FIFO Method of Process Costing, Bio Doc Corporation for July 2008.

§Degree of completion in this department: direct materials, 100%; conversion costs, 70%.†42,500 physical units completed and transferred out minus 12,500 physical units completed and transferred out

from beginning work-in-process inventory.*Degree of completion in this department: direct materials, 100%; conversion costs, 50%.

(Step(Step(Step

(Step

1)1)1)

1)

(Step(Step(Step

(Step

2)2)2)

2)


Equivalent

UnitsUnitsUnits

Units

FlowFlowFlow

Flow

ofofof

of


Production


Physical

UnitsUnitsUnits

Units

DirectDirectDirect

Direct


Materials


Conversion

CostsCostsCosts

Costs


12,50050,00062,500



12,500 (100% 100%); 12,500 (100% – 70%)12,500


30,000 100%, 30,000 100% 30,000†


20,000 100%; 20,000 50% 20,000

20,000 10,000Accounted for 62,500Work done in current period only 50,000 43,750

17-


SOLUTION


EXHIBIT

17-25B17-25B17-25B

17-25B

Steps 3, 4, and 5: Summarize Total Costs to Account For, Compute Cost per Equivalent Unit, and Assign Total Costs to UnitsCompleted and to Units in Ending Work in Process;FIFO Method of Process Costing, Bio Doc Corporation for July 2008.

*Equivalent units used to complete beginning work in process from Solution Exhibit 17-25A, Step 2.†††

†

Equivalent units started and completed from Solution Exhibit 17-25A, Step 2.#Equivalent units in ending work in process from Solution Exhibit 17-25A, Step 2.

TotalTotalTotal

Total


Production

CostsCostsCosts

Costs

DirectDirectDirect

Direct


Materials


Conversion

CostsCostsCosts

Costs

(StepStepStep

Step

333

3

) Work in process, beginning (given) $162,500 $ 75,000 $ 87,500Costs added in current period (given) 813,750 350,000 463,750

Total costs to account for $976,250 $425,000 $551,250

(StepStepStep

Step

444

4

) Costs added in current period $350,000 $463,750

Divide by equivalent units of work done incurrent period (Solution Exhibit 17-25A) 50,000 43,750

Cost per equivalent unit of work done in current period $ 7 $ 10.60(StepStepStep

Step

555

5

) Assignment of costs:Completed and transferred out (42,500 units):

Work in process, beginning (12,500 units)Cost added to beginning work in process in current period

$162,50039,750

$75,000 + $87,500(0* $7) + (3,750* $10.60)

Total from beginning inventoryStarted and completed (30,000 units)

Total costs of units completed and transferred outWork in process, ending (20,000 units)

202,250528,000730,250246,000

(30,000† $7) + (30,000† $10.60)

(20,000# $7) + (10,000# $10.60)

Total costs accounted for $976,250 $425,000 + $551,250

17-

17-2617-2617-26

17-26

(30 min.) Standard-costingStandard-costingStandard-costing

Standard-costing


method,


assigning

costs.costs.costs.

costs.

1. The calculations of equivalent units for direct materials and conversion costs are identicalto the calculations of equivalent units under the FIFO method. Solution Exhibit 17-25A showsthe equivalent unit calculations for standard costing and computes the equivalent units of workdone in July 2008. Solution Exhibit 17-26 uses the standard costs (direct materials, $6.60;conversion costs, $10.40) to summarize total costs to account for, and to assign these costs tounits completed and transferred out and to units in ending work-in-process inventory.

2. Solution Exhibit 17-26 shows the direct materials and conversion costs variances for

Direct materials $20,000 UConversion costs $8,750 U


SOLUTION


EXHIBIT

17-2617-2617-26

17-26

Steps 3, 4, and 5: Summarize Total Costs to Account For, Compute Cost per Equivalent Unit,and Assign Total Costs to Units Completed and to Units in Ending Work in Process;Standard Costing Method of Process Costing, Bio Doc Corporation for July 2008.

*Equivalent units to complete beginning work in process from Solution Exhibit 17-25A, Step 2.†Equivalent units started and completed from Solution Exhibit 17-25A, Step 2.#Equivalent units in ending work in process from Solution Exhibit 17-25A, Step 2.

TotalTotalTotal

Total


Production

CostsCostsCosts

Costs

DirectDirectDirect

Direct


Materials


Conversion

CostsCostsCosts

Costs

(Step(Step(Step

(Step

333

3

) Work in process, beginning (given) $173,500 (12,500 $6.60) + (8,750 $10.40)Costs added in current period at standard costs 785,000 (50,000 $6.60) + (43,750 $10.40)

Total costs to account for $958,500 $412,500 + $546,000

(StepStepStep

Step

4)4)4)

4)

Standard cost per equivalent unit (given) $ 6.60 $ 10.40(Step(Step(Step

(Step

555

5




$173,50039,000

212,500

(12,500 $6.60) + (8,750 $10.40)(0* $6.60) + (3,750* $10.40)


510,000722,500

(30,000† $6.60) + (30,000† $10.40)

Work in process, ending (20,000 units) 236,000 (20,000# $6.60) + (10,000# $10.40)Total costs accounted for $958,500 $412,500 + $546,000


$330,000350,000

$ 20,000 U

$455,000463,750

$ 8,750 U

17-

17-2717-2717-27

17-27

(35–40 min.) Transferred-inTransferred-inTransferred-in

Transferred-in

costs,costs,costs,

costs,

weighted-averageweighted-averageweighted-average

weighted-average

method.method.method.

method.

1, 2. & 3. Solution Exhibit 17-27A calculates the equivalent units of work done to date.Solution Exhibit 17-27B summarizes total costs to account for, calculates the cost per equivalentunit of work done to date for transferred-in costs, direct materials, and conversion costs, andassigns these costs to units completed and transferred out and to units in ending work-in-processinventory.


SOLUTION


EXHIBIT

17-27A17-27A17-27A

17-27A

Steps 1 and 2: Summarize Output in Physical Units and Compute Output in Equivalent UnitsWeighted-Average Method of Process Costing;Finishing Department of Asaya Clothing for June 2009.

Work in process, beginning (given) 75Transferred in during current period (given) 135To account for 210Completed and transferred outduring current period 150 150 150 150

Work in process, ending* (given) 6060 100%; 60 0%; 60 75% 60 0 45

Accounted for 210Work done to date 210 150 195

*Degree of completion in this department: transferred-in costs, 100%; direct materials, 0%; conversion costs, 75%.

(Step(Step(Step

(Step

1)1)1)

1)

(Step(Step(Step

(Step

2)2)2)

2)


Equivalent

UnitsUnitsUnits

Units

FlowFlowFlow

Flow

ofofof

of


Production


Physical

UnitsUnitsUnits

Units

Transferred-Transferred-Transferred-

Transferred-

ininin

in

CostsCostsCosts

Costs

DirectDirectDirect

Direct


Materials

ConverConverConver

Conver

sionsionsion

sion

CostsCostsCosts

Costs

17-


SOLUTION


EXHIBIT

17-27B17-27B17-27B

17-27B

Steps 3, 4, and 5: Summarize Total Costs to Account For, Compute Cost per Equivalent Unit, and Assign Total Costs to UnitsCompleted and to Units in Ending Work in Process;Weighted-Average Method of Process Costing,Finishing Department of Asaya Clothing for June 2009.

TotalTotalTotal

Total


Production

CostsCostsCosts

Costs

Transferred-inTransferred-inTransferred-in

Transferred-in

CostsCostsCosts

Costs

DirectDirectDirect

Direct


Materials


Conversion

CostsCostsCosts

Costs

(Step(Step(Step

(Step

3)3)3)

3)

Work in process, beginning (given) $105,000 $ 75,000 $ 0 $ 30,000Costs added in current period (given) 258,000 142,500 37,500 78,000Total costs to account for $363,000 $ 217,500 $37,500 $108,000

(Step(Step(Step

(Step

4)4)4)

4)

Costs incurred to date $ 217,500 $37,500 $108,000Divide by equivalent units of work done to date(Solution Exhibit 17-27A) ÷ 210 ÷ 150 ÷ 195Cost per equivalent unit of work done to date $1,035.71 $ 250 $ 553.85

(Step(Step(Step

(Step

5)5)5)

5)

Assignment of costs:Completed and transferred out (150 units) $275,934 (150 a $1,035.71) + (150 a $250) + (150a $553.85)Work in process, ending (60 units): 87,066 (60b $1,035.71) + (0b $250) + (45b $553.85)Total costs accounted for $363,000 $ 217,500 + $37,500 + $108,000

a Equivalent units completed and transferred out from Sol. Exhibit 17-27, step 2.b Equivalent units in ending work in process from Sol. Exhibit 17-27A, step 2.

17-

17-2817-2817-28

17-28

(35–40 min.) Transferred-inTransferred-inTransferred-in

Transferred-in

costs,costs,costs,

costs,

FIFOFIFOFIFO

FIFO


method.

Solution Exhibit 17-28A calculates the equivalent units of work done in the current period (fortransferred-in costs, direct-materials, and conversion costs) to complete beginning work-in-process inventory, to start and complete new units, and to produce ending work in process.Solution Exhibit 17-28B summarizes total costs to account for, calculates the cost per equivalentunit of work done in the current period for transferred-in costs, direct materials, and conversioncosts, and assigns these costs to units completed and transferred out and to units in ending work-in-process inventory.


SOLUTION


EXHIBIT

17-28A17-28A17-28A

17-28A

Steps 1 and 2: Summarize Output in Physical Units and Compute Output in Equivalent UnitsFIFO Method of Process Costing;Finishing Department of Asaya Clothing for June 2009.

(Step(Step(Step

(Step

1)1)1)

1)

(Step(Step(Step

(Step

2)2)2)

2)


Equivalent

UnitsUnitsUnits

Units

FlowFlowFlow

Flow

ofofof

of


Production


Physical

UnitsUnitsUnits

Units


Transferred-in

CostsCostsCosts

Costs

DirectDirectDirect

Direct


Materials


Conversion

CostsCostsCosts

Costs

Work in process, beginning (given) 75 (work done before current period)Transferred-in during current period (given) 135To account for 210Completed and transferred out during current period:

From beginning work in processa 75[75 (100% – 100%); 75 (100% – 0%); 75 (100% – 60%)] 0 75 30

Started and completed 75b

(75 100%; 75 100%; 75 100%) 75 75 75

Work in process, endingc (given) 60(60 100%; 60 0%; 60 75%)

___ 60 0 45Accounted for 210 ___ ___ ___Work done in current period only 135 150 150

aDegree of completion in this department: Transferred-in costs, 100%; direct materials, 0%; conversion costs, 60%.b150 physical units completed and transferred out minus 75 physical units completed and transferred out from beginningwork-in-process inventory.

cDegree of completion in this department: transferred-in costs, 100%; direct materials, 0%; conversion costs, 75%.

17-


SOLUTION


EXHIBIT

17-28B17-28B17-28B

17-28B

Steps 3, 4, and 5: Summarize Total Costs to Account For, Compute Cost per Equivalent Unit, and Assign Total Costs to UnitsCompleted and to Units in Ending Work in Process;FIFO Method of Process Costing,Finishing Department of Asaya Clothing for June 2009.

TotalTotalTotal

Total


Production

CostsCostsCosts

Costs


Transferred-in

CostsCostsCosts

Costs

DirectDirectDirect

Direct


Materials


Conversion

CostsCostsCosts

Costs

(Step(Step(Step

(Step

3)3)3)

3)

Work in process, beginning (given) $ 90,000 $ 60,000 $ 0 $ 30,000Costs added in current period (given) 246,300 130,800 37,500 78,000Total costs to account for $336,300 $190,800 $37,500 $108,000

(Step(Step(Step

(Step

4)4)4)

4)

Costs added in current period $130,800 $37,500 $ 78,000Divide by equivalent units of work done in current period(Solution Exhibit 17-28A) ÷ 135 ÷ 150 ÷ 150Cost per equivalent unit of work done in current period $ 968.89 $ 250 $ 520

(Step(Step(Step

(Step

5)5)5)

5)

Assignment of costs:Completed and transferred out (150 units)

Work in process, beginning (75 units) $ 90,000 $ 60,000 $ 0 $ 30,000Costs added to beginning work in process in current period 34,350 (0a $968.89) + (75a $250) + (30 a $520)

Total from beginning inventory 124,350Started and completed (75 units) 130,416 (75b $968.89) + (75b $250) + (75b $520)

Total costs of units completed and transferred out 254,766Work in process, ending (60 units): 81,534 (60c $968.89) + (0c $250) + (45c $520)Total costs accounted for $336,300 $190,800 + $37,500 + $108,000

a Equivalent units used to complete beginning work in process from Solution Exhibit 17-28A, step 2.b Equivalent units started and completed from Solution Exhibit 17-28A, step 2.c Equivalent units in ending work in process from Solution Exhibit 17-28A, step 2.

17-

17-2917-2917-29

17-29

(15-20 min.) Standard-costingStandard-costingStandard-costing

Standard-costing


method.

1. Since there was no additional work needed on the beginning inventory with respect tomaterials, the initial mulch must have been 100% complete with respect to materials. Forconversion costs, the work done to complete the opening inventory was 434,250 ÷965,000 = 45%. Therefore, the unfinished mulch in opening inventory must have been55% complete with respect to conversion costs.

2. It is clear that the ending WIP is also 100% complete with respect to direct materials(1,817,000 ÷ 1,817,000), and it is 60% (= 1,090,200 ÷ 1,817,000) complete with regardto conversion costs.

3. We can first obtain the total standard costs per unit. The number of units started andcompleted during August is 845,000, and a total cost of $6,717,750 is attached to them.The per unit standard cost is therefore ($6,717,750 ÷ 845,000) = $7.95. If x and yrepresent the per unit cost for direct materials and conversion costs, respectively, wetherefore know that:

x + y = 7.95

We also know that the ending inventory is costed at $12,192,070 and contains1,817,000 equivalent units of materials and 1,090,200 equivalentunits of conversion costs. This provides a second equation:

1,817,000 x + 1,090,200 y = 12,192,070.

Solving these equations reveals that the direct materials cost per unit, x, is $4.85,while the conversion cost per unit, y, is $3.10.

4. Finally, the opening WIP contained 965,000 equivalent units of materials and (965,000-434,250) = 530,750 equivalent units of conversion costs. Applying the standard costscomputed in step (3), the cost of the opening inventory must have been:

965,000 × $4.85 + 530,750 × $3.10 = $6,325,575.

17-

17-3017-3017-30

17-30


Weighted-average


method.

1. Since direct materials are added at the beginning of the assembly process, the units in thisdepartment must be 100% complete with respect to direct materials. Solution Exhibit 17-30Ashows equivalent units of work done to date:

Direct materials 25,000 equivalent unitsConversion costs 24,250 equivalent units

2. & 3. Solution Exhibit 17-30B summarizes the total Assembly Department costs for October2009, calculates cost per equivalent unit of work done to date,,,

,

and assigns these costs to unitscompleted (and transferred out) and to units in ending work in process using the weighted-average method.


SOLUTION


EXHIBIT

17-30A17-30A17-30A

17-30A

Steps 1 and 2: Summarize Output in Physical Units and Compute Output in Equivalent Units;Weighted-Average Method of Process Costing, Assembly Department of Larsen Company, forOctober 2009.

(Step(Step(Step

(Step

1)1)1)

1)

(Step(Step(Step

(Step

2)2)2)

2)


Equivalent

UnitsUnitsUnits

Units


Physical

DirectDirectDirect

Direct


Conversion

FlowFlowFlow

Flow

ofofof

of


Production

UnitsUnitsUnits

Units


Materials

CostsCostsCosts

Costs

Work in process, beginning (given) 5,000Started during current period (given) 20,000To account for 25,000Completed and transferred outduring current period 22,500 22,500 22,500

Work in process, ending* (given) 2,5002,500 100%; 2,500 70% 2,500 1,750

Accounted for 25,000Work done to date 25,000 24,250*Degree of completion in this department: direct materials, 100%; conversion costs, 70%.

17-


SOLUTION


EXHIBIT

17-30B17-30B17-30B

17-30B

Steps 3, 4, and 5: Summarize Total Costs to Account For, Compute Cost per Equivalent Unit,and Assign Total Costs to Units Completed and to Units in Ending Work in Process;Weighted-Average Method of Process Costing, Assembly Department of Larsen Company,for October 2009.

*Equivalent units completed and transferred out from Solution Exhibit 17-30A, Step 2.†Equivalent units in work in process, ending from Solution Exhibit 17-30A, Step 2.

111

1

7-317-317-31

7-31

(10 min.) JournalJournalJournal

Journal


entries


(continuation

ofofof

of

17-30).17-30).17-30).

17-30).

1. Work in Process––Assembly Department 4,500,000Accounts Payable 4,500,000

Direct materials purchased and used inproduction in October.

2. Work in Process––Assembly Department 2,337,500Various accounts 2,337,500

Conversion costs incurred in October.

3. Work in Process––Testing Department 7,717,500Work in Process––Assembly Department 7,717,500

Cost of goods completed and transferred outin October from the Assembly Department to the Testing Department.

TotalTotalTotal

Total


Production

CostsCostsCosts

Costs

DirectDirectDirect

Direct


Materials


Conversion

CostsCostsCosts

Costs

(Step(Step(Step

(Step

333

3

) Work in process, beginning (given) $1,652,750 $1,250,000 $ 402,750Costs added in current period (given) 6,837,500 4,500,000 2,337,500Total costs to account for $8,490,250 $5,750,000 $2,740,250

(StepStepStep

Step

444

4

) Costs incurred to date $5,750,000 $2,740,250Divide by equivalent units of work done to date(Solution Exhibit 17-30A) 25,000 24,250Cost per equivalent unit of work done to date $ 230 $ 113

(StepStepStep

Step

555

5

) Assignment of costs:Completed and transferred out (22,500 units) $7,717,500 (22,500* $230) + (22,500* $113)Work in process, ending (2,500 units) 772,750 (2,500† $230) + (1,750† $113)Total costs accounted for $8,490,250 $6,150,000 + $2,619,000

WorkWorkWork

Work

ininin

in


Process

––––––

––


Assembly


Department

Beginning inventory, October 1 1,652,7501. Direct materials 4,500,0002. Conversion costs 2,337,500

3. Transferred out toWork in Process–Testing 7,717,500

Ending Inventory, October 31 772,750

17-

17-3217-3217-32

17-32


FIFO

methodmethodmethod

method


(continuation

ofofof

of

17-30).17-30).17-30).

17-30).

1. The equivalent units of work done in the current period in the Assembly Department inOctober 2009 for direct materials and conversion costs are shown in Solution Exhibit 17-32A.

2. The cost per equivalent unit of work done in the current period in the AssemblyDepartment in October 2009 for direct materials and conversion costs is calculated in SolutionExhibit 17-32B.

3. Solution Exhibit 17-32B summarizes the total Assembly Department costs for October2009, and assigns these costs to units completed (and transferred out) and units in ending work inprocess under the FIFO method.

The cost per equivalent unit of beginning inventory and of work done in the currentperiod differ:

*from Solution Exhibit 17-30B**from Solution Exhibit 17-32B

The cost per equivalent unit differs between the two methods because each method uses differentcosts as the numerator of the calculation. FIFO uses only the costs added during the currentperiod whereas weighted-average uses the costs from the beginning work-in-process as well ascosts added during the current period. Both methods also use different equivalent units in thedenominator.

The following table summarizes the costs assigned to units completed and those still inprocess under the weighted-average and FIFO process-costing methods for our example.

BeginningBeginningBeginning

Beginning

InventoryInventoryInventory

Inventory

WorkWorkWork

Work

DoneDoneDone

Done

ininin

in

CurrentCurrentCurrent

Current

PeriodPeriodPeriod

Period

Direct materialsConversion costsTotal cost per unit

$250.00 ($1,250,000 5,000 equiv. units)134.25 ($ 402,750 3,000 equiv. units)

$384.25

$225.00110.00

$335.00

DirectDirectDirect

Direct


Materials


Conversion

CostsCostsCosts

Costs

Cost per equivalent unit (weighted-average) $230* $113*

Cost per equivalent unit (FIFO) $225** $110**

WeightedWeightedWeighted

Weighted

AverageAverageAverage

Average

(Solution(Solution(Solution

(Solution

ExhibitExhibitExhibit

Exhibit

17-30B)17-30B)17-30B)

17-30B)

FIFOFIFOFIFO

FIFO


(Solution


Exhibit

17-32B)17-32B)17-32B)

17-32B)

DifferenceDifferenceDifference

Difference

Cost of units completed and transferred outWork in process, endingTotal costs accounted for

$7,717,500772,750

$8,490,250

$7,735,250755,000

$8,490,250

+ $17,750 $17,750

17-

The FIFO ending inventory is lower than the weighted-average ending inventory by$17,750. This is because FIFO assumes that all the higher-cost prior-period units in work inprocess are the first to be completed and transferred out while ending work in process consists ofonly the lower-cost current-period units. The weighted-average method, however, smoothes outcost per equivalent unit by assuming that more of the lower-cost units are completed andtransferred out, while some of the higher-cost units in beginning work in process are placed inending work in process. So, in this case, the weighted-average method results in a lower cost ofunits completed and transferred out and a higher ending work-in-process inventory relative to theFIFO method.


SOLUTION


EXHIBIT

17-32A17-32A17-32A

17-32A

Steps 1 and 2: Summarize Output in Physical Units and Compute Output in Equivalent Units;FIFO Method of Process Costing,Assembly Department of Larsen Company for October 2009.

§Degree of completion in this department: direct materials, 100%; conversion costs, 60%.†22,500 physical units completed and transferred out minus 5,000 physical units completed and transferred out from

beginning work-in-process inventory.*Degree of completion in this department: direct materials, 100%; conversion costs, 70%.

(Step(Step(Step

(Step

1)1)1)

1)

(Step(Step(Step

(Step

2)2)2)

2)


Equivalent

UnitsUnitsUnits

Units

FlowFlowFlow

Flow

ofofof

of


Production


Physical

UnitsUnitsUnits

Units

DirectDirectDirect

Direct


Materials


Conversion

CostsCostsCosts

Costs


5,000

20,000

25,000




5,000 (100% 100%); 5,000 (100% 60%) 5,000 0 2,000Started and completed17,500 100%, 17,500 100% 17,000† 17,500 17,500

Work in process, ending* (given)2,500 100%; 2,500 70%

2,500_____ 2,500 1,750

Accounted for 25,000______

Work done in current period only 20,000 21,250

17-


SOLUTION


EXHIBIT

17-32B17-32B17-32B

17-32B

Steps 3, 4, and 5: Summarize Total Costs to Account For, Compute Cost per Equivalent Unit, and Assign Total Costs toUnits Completed and to Units in Ending Work in Process;FIFO Method of Process Costing, Assembly Department of Larsen Company for October 2009.


†


TotalTotalTotal

Total


Production

CostsCostsCosts

Costs

DirectDirectDirect

Direct


Materials


Conversion

CostsCostsCosts

Costs

(StepStepStep

Step

333

3

) Work in process, beginning (given) $1,652,750 $1,250,000 $ 402,750Costs added in current period (given) 6,837,500 4,500,000 2,337,500Total costs to account for $8,490,250 $5,750,000 $2,740,250

(StepStepStep

Step

444

4

) Costs added in current period $4,500,000 $2,337,500Divide by equivalent units of work done in

current period (Solution Exhibit 17-32A) 20,000 21,250Cost per equivalent unit of work done in current period $ 225 $ 110

(StepStepStep

Step

555

5

) Assignment of costs:Completed and transferred out (22,500 units):


$1,652,750220,000

$1,250,000 + $ 402,750(0* $225) + (2,000* $110)


Total costs of units completed & transferred outWork in process, ending (2,500 units)Total costs accounted for

1,872,7505,862,5007,735,250

755,000$8,490,250

(17,500† $225) + (17,500† $110)

(2,500# $225) + (1,750# $110)$5,750,000 + $2,740,250

17-

17-3317-3317-33

17-33

(30 min.) Transferred-inTransferred-inTransferred-in

Transferred-in

costs,costs,costs,

costs,


weighted-average

methodmethodmethod

method

(related(related(related

(related

tototo

to

17-3017-3017-30

17-30

tototo

to

17-32).17-32).17-32).

17-32).

1. Transferred-in costs are 100% complete, and direct materials are 0% complete in bothbeginning and ending work-in-process inventory. The reason is that transferred-in costs arealways 100% complete as soon as they are transferred in from the Assembly Department to theTesting Department. Direct materials in beginning or ending work in process for the TestingDepartment are 0% complete because direct materials are added only when the testing process is90% complete and the units in beginning and ending work in process are only 70% and 60%complete, respectively.

2. Solution Exhibit 17-33A computes the equivalent units of work done to date in theTesting Department for transferred-in costs, direct materials, and conversion costs.

3. Solution Exhibit 17-33B summarizes total Testing Department costs for October 2009,calculates the cost per equivalent unit of work done to date in the Testing Department fortransferred-in costs, direct materials, and conversion costs, and assigns these costs to unitscompleted and transferred out and to units in ending work in process using the weighted-averagemethod.

4. Journal entries:a. Work in Process––Testing Department 7,717,500

Work in Process––Assembly Department 7,717,500Cost of goods completed and transferred out

during October from the AssemblyDepartment to the Testing Department

b. Finished Goods 23,459,600Work in Process––Testing Department 23,459,600

Cost of goods completed and transferred outduring October from the Testing Departmentto Finished Goods inventory

17-


SOLUTION


EXHIBIT

17-33A17-33A17-33A

17-33A

Steps 1 and 2: Summarize Output in Physical Units and Compute Output in Equivalent Units;Weighted-Average Method of Process Costing,Testing Department of Larsen Company for October 2009.

Work in process, beginning (given) 7,500Transferred in during current period (given) 22,500To account for 30,000Completed and transferred outduring current period 26,300 26,300 26,300 26,300

Work in process, ending* (given) 3,7003,700 100%; 3,700 0%; 3,700 60% 3,700 0 2,220

Accounted for 30,000

Work done to date 30,000 26,300 28,520


(Step(Step(Step

(Step

1)1)1)

1)

(Step(Step(Step

(Step

2)2)2)

2)


Equivalent

UnitsUnitsUnits

Units

FlowFlowFlow

Flow

ofofof

of


Production


Physical

UnitsUnitsUnits

Units


Transferred-

ininin

in

CostsCostsCosts

Costs

DirectDirectDirect

Direct


Materials

ConversioConversioConversio

Conversio

nnn

n

CostsCostsCosts

Costs

17-


SOLUTION


EXHIBIT

17-33B17-33B17-33B

17-33B

Steps 3, 4, and 5: Summarize Total Costs to Account For, Compute Cost per Equivalent Unit, and Assign Total Costs to Units Completedand to Units in Ending Work in Process;Weighted-Average Method of Process Costing,Testing Department of Larsen Company for October 2009.


TotalTotalTotal

Total


Production

CostsCostsCosts

Costs

TransferredTransferredTransferred

Transferred

-in-in-in

-in

CostsCostsCosts

Costs

DirectDirectDirect

Direct


Materials


Conversion

CostsCostsCosts

Costs

(StepStepStep

Step

333

3

)Work in process, beginning (given) $ 3,767,960 $ 2,932,500 $ 0 $ 835,460Costs added in current period (given) 21,378,100 7,717,500 9,704,700 3,955,900Total costs to account for $25,146,060 $10,650,000 $9,704,700 $4,791,360

(StepStepStep

Step

444

4

) Costs incurred to date $10,650,000 $9,704,700 $4,791,360Divide by equivalent units of work done to date(Solution Exhibit 17-33A) 30,000 26,300 28,520Equivalent unit costs of work done to date $ 355 $ 369 $ 168

(StepStepStep

Step

555

5

)Assignment of costs:Completed and transferred out (26,300 units) $23,459,600 (26,300* $355) + (26,300* $369) + (26,300* $168)Work in process, ending (3,700 units) 1,686,460 (3,700† $355) + (0† $369) + (2,220† $168)

Total costs accounted for $25,146,060 $10,429,500 + $9,704,700 + $4,791,360

17-

17-3417-3417-34

17-34


Transferred-in

costs,costs,costs,

costs,

FIFOFIFOFIFO

FIFO

methodmethodmethod

method


(continuation

ofofof

of

17-33).17-33).17-33).

17-33).

1. As explained in Problem 17-33, requirement 1, transferred-in costs are 100% completeand direct materials are 0% complete in both beginning and ending work-in-process inventory.

2. The equivalent units of work done in October 2009 in the Testing Department fortransferred-in costs, direct materials, and conversion costs are calculated in Solution Exhibit 17-34A.

3. Solution Exhibit 17-34B summarizes total Testing Department costs for October 2009,calculates the cost per equivalent unit of work done in October 2009 in the Testing Departmentfor transferred-in costs, direct materials, and conversion costs, and assigns these costs to unitscompleted and transferred out and to units in ending work in process using the FIFO method.

4. Journal entries:a. Work in Process––Testing Department 7,735,250

Work in Process––Assembly Department 7,735,250Cost of goods completed and transferred out

during October from the Assembly Dept. tothe Testing Dept.

b. Finished Goods 23,463,766Work in Process––Testing Department 23,463,766

Cost of goods completed and transferred outduring October from the Testing Departmentto Finished Goods inventory.

17-


SOLUTION


EXHIBIT

17-34A17-34A17-34A

17-34A

Steps 1 and 2: Summarize Output in Physical Units and Compute Output in Equivalent Units;FIFO Method of Process Costing,Testing Department of Larsen Company for October 2009.

§ Degree of completion in this department: Transferred-in costs, 100%; direct materials, 0%; conversion costs, 70%.†26,300 physical units completed and transferred out minus 7,500 physical units completed and transferred out from

beginning work-in-process inventory.*Degree of completion in this department: transferred-in costs, 100%; direct materials, 0%; conversion costs, 60%.

(Step(Step(Step

(Step

1)1)1)

1)

(Step(Step(Step

(Step

2)2)2)

2)


Equivalent

UnitsUnitsUnits

Units

FlowFlowFlow

Flow

ofofof

of


Production


Physical

UnitsUnitsUnits

Units


Transferred-

ininin

in

CostsCostsCosts

Costs

DirectDirectDirect

Direct


Materials


Conversion

CostsCostsCosts

Costs

Work in process, beginning (given)Transferred-in during current period (given)To account for

7,50022,50030,000




7,500 (100% 100%); 7,500 (100% 0%); 7,500 (100% 70%)

7,500

0 7,500 2,250Started and completed

18,800 100%; 18,800 100%; 18,800 100% 18,800†

18,800 18,800 18,800Work in process, ending* (given)3,700 100%; 3,700 0%; 3,700 60%

3,700______ 3,700 0 2,220

Accounted for 30,000 _____ ______

Work done in current period only 22,500 26,300 23,270

17-


SOLUTION


EXHIBIT

17-34B17-34B17-34B

17-34B

Steps 3, 4, and 5: Summarize Total Costs to Account For, Compute Cost per Equivalent Unit, and Assign Total Costs toUnits Completed and to Units in Ending Work in Process;FIFO Method of Process Costing,Testing Department of Larsen Company for October 2009.

*Equivalent units used to complete beginning work in process from Solution Exhibit 17-34A, Step 2.†Equivalent units started and completed from Solution Exhibit 17-34A, Step 2.#Equivalent units in ending work in process from Solution Exhibit 17-34A, Step 2.

TotalTotalTotal

Total


Production

CostsCostsCosts

Costs


Transferred-in

CostsCostsCosts

Costs

DirectDirectDirect

Direct


Materials


Conversion

CostsCostsCosts

Costs

(StepStepStep

Step

333

3

) Work in process, beginning (given) $ 3,717,335 $ 2,881,875 $ 0 $ 835,460Costs added in current period (given) 21,395,850 7,735,250 9,704,700 3,955,900Total costs to account for $25,113,185 $10,617,125 $9,704,700 $4,791,360

(StepStepStep

Step

444

4

) Costs added in current period $ 7,735,250 $9,704,700 $3,955,900Divide by equivalent units of work done in

current period (Solution Exhibit 17-34A) 22,500 26,300 23,270Cost per equiv. unit of work done in current period $ 343.79 $ 369.00 $ 170.00

(StepStepStep

Step

555

5

) Assignment of costs:Completed and transferred out (26,300units):Work in process, beginning (7,500 units)

Costs added to beg. work in processin current period

$ 3,717,3353,150,000

$2,881,875 + $0 + $835,460(0* $343.79) + (7,500* $369.00) + (2,250* $170.00)


Total costs of units completed &transferred out

Work in process, ending (3,700 units)

6,867,33516,596,43123,463,7661,649,419

(18,800† $343.79)+(18,800† $369.00)+(18,800†$170.00)

(3,700# $343.79) + (0# $369.00) + (2,220# $170.00)Total costs accounted for $25,113,185 $10,617,125 + $9,704,700 + $4,791,360

17-

17-3517-3517-35

17-35


Weighted-average


method.

Solution Exhibit 17-35A shows equivalent units of work done to date of:

Direct materials 625 equivalent unitsConversion costs 525 equivalent units

Note that direct materials are added when the Assembly Department process is 10%complete. Both the beginning and ending work in process are more than 10% complete andhence are 100% complete with respect to direct materials.

Solution Exhibit 17-35B summarizes the total Assembly Department costs for April 2009,calculates cost per equivalent unit of work done to date for direct materials and conversion costs,and assigns these costs to units completed (and transferred out), and to units in ending work inprocess using the weighted-average method.


SOLUTION


EXHIBIT

17-35A17-35A17-35A

17-35A

Steps 1 and 2: Summarize Output in Physical Units and Compute Output in Equivalent Units;Weighted-Average Method of Process Costing, Assembly Department of Porter Handcraft forApril 2009.

(Step(Step(Step

(Step

1)1)1)

1)

(Step(Step(Step

(Step

2)2)2)

2)


Equivalent

UnitsUnitsUnits

Units


Physical

DirectDirectDirect

Direct


Conversion

FlowFlowFlow

Flow

ofofof

of


Production

UnitsUnitsUnits

Units


Materials

CostsCostsCosts

Costs

Work in process, beginning (given) 75Started during current period (given) 550To account for 625Completed and transferred out

during current period 500 500 500Work in process, ending* (given) 125

125 100%; 125 20% 125 25Accounted for 625Work done to date 625 525


17-


SOLUTION


EXHIBIT

17-35B17-35B17-35B

17-35B

Steps 3, 4, and 5: Summarize Total Costs to Account For, Compute Cost per Equivalent Unit,and Assign Total Costs to Units Completed and to Units in Ending Work in Process;Weighted-Average Method of Process Costing, Assembly Department of Porter, April 2009.


TotalTotalTotal

Total


Production

CostsCostsCosts

Costs

DirectDirectDirect

Direct


Materials


Conversion

CostsCostsCosts

Costs

(Step(Step(Step

(Step

333

3

) Work in process, beginning (given) $ 1,910 $ 1,775 $ 135Costs added in current period (given) 28,490 17,600 10,890Total costs to account for $30,400 $19,375 $11,025

(StepStepStep

Step

444

4

) Costs incurred to date $19,375 $11,025Divide by equivalent units of work done to

date (Solution Exhibit 17-35A) 625 525Cost per equivalent unit of work done to date $ 31 $ 21

(StepStepStep

Step

555

5

) Assignment of costs:Completed and transferred out (500 units) $26,000 (500* $31) + (500* $21)Work in process, ending (125 units) 4,400 (125† $31) + (25† $21)

Total costs accounted for $30,400 $19,375 + $11,025

17-

17-3617-3617-36

17-36

(5–10 min.) JournalJournalJournal

Journal


entries


(continuation

ofofof

of

17-35).17-35).17-35).

17-35).

1. Work in Process–– Assembly Department 17,600Accounts Payable 17,600

To record direct materials purchased andused in production during April

2. Work in Process–– Assembly Department 10,890Various Accounts 10,890

To record Assembly Department conversioncosts for April

3. Work in Process––Finishing Department 26,000Work in Process–– Assembly Department 26,000

To record cost of goods completed and transferredout in April from the Assembly Departmentto the Finishing Department

WorkWorkWork

Work

ininin

in


Process

––––––

––


Assembly


Department

Beginning inventory, April 1 1,910 3. Transferred out to1. Direct materials 17,600 Work in Process––Finishing 26,0002. Conversion costs 10,890Ending inventory, April 30 4,400

17-

17-3717-3717-37

17-37


FIFO

methodmethodmethod

method


(continuation

ofofof

of

17-35).17-35).17-35).

17-35).

The equivalent units of work done in April 2009 in the Assembly Department for direct materialsand conversion costs are shown in Solution Exhibit 17-37A.

Solution Exhibit 17-37B summarizes the total Assembly Department costs for April 2009,calculates the cost per equivalent unit of work done in April 2009 in the Assembly Departmentfor direct materials and conversion costs, and assigns these costs to units completed (andtransferred out) and to units in ending work in process under the FIFO method.

The equivalent units of work done in beginning inventory is: direct materials, 75 100% =75; and conversion costs 75 40% = 30. The cost per equivalent unit of beginning inventory andof work done in the current period are:

The following table summarizes the costs assigned to units completed and those still inprocess under the weighted-average and FIFO process-costing methods for our example.

The FIFO ending inventory is higher than the weighted-average ending inventory by $150.This is because FIFO assumes that all the lower-cost prior-period units in work in process are thefirst to be completed and transferred out while ending work in process consists of only thehigher-cost current-period units. The weighted-average method, however, smoothes out cost perequivalent unit by assuming that more of the higher-cost units are completed and transferred out,while some of the lower-cost units in beginning work in process are placed in ending work inprocess. Hence, in this case, the weighted-average method results in a higher cost of unitscompleted and transferred out and a lower ending work-in-process inventory relative to the FIFOmethod.


Beginning


Inventory

WorkWorkWork

Work

DoneDoneDone

Done

ininin

in


Current

PeriodPeriodPeriod

Period

(Calculated(Calculated(Calculated

(Calculated

UnderUnderUnder

Under

FIFOFIFOFIFO

FIFO

Method)Method)Method)

Method)

Direct materialsConversion costs

$23.67 ($1,775 75)$4.50 ($135 30)

$32$22


Weighted


Average


(Solution


Exhibit

17-35B)17-35B)17-35B)

17-35B)

FIFOFIFOFIFO

FIFO


(Solution


Exhibit

17-37B)17-37B)17-37B)

17-37B)


Difference


$26,0004,400

$30,400

$25,8504,550

$30,400

–$150+$150

17-


SOLUTION


EXHIBIT

17-37A17-37A17-37A

17-37A

Steps 1 and 2: Summarize Output in Physical Units and Compute Output in Equivalent Units;FIFO Method of Process Costing, Assembly Department of Porter Handcraft for April 2009.

§Degree of completion in this department: direct materials, 100%; conversion costs, 40%.†500 physical units completed and transferred out minus 75 physical units completed and transferred out from

beginning work-in-process inventory.*Degree of completion in this department: direct materials, 100%; conversion costs, 20%.SOLUTIONSOLUTIONSOLUTION

SOLUTION


EXHIBIT

17-37B17-37B17-37B

17-37B

Steps 3, 4, and 5: Summarize Total Costs to Account For, Compute Cost per Equivalent Unit,and Assign Total Costs to Units Completed and to Units in Ending Work in Process;FIFO Method of Process Costing, Assembly Department of Porter Handcraft for April 2009.


†


(Step(Step(Step

(Step

1)1)1)

1)

(Step(Step(Step

(Step

2)2)2)

2)


Equivalent

UnitsUnitsUnits

Units

FlowFlowFlow

Flow

ofofof

of


Production


Physical

UnitsUnitsUnits

Units

DirectDirectDirect

Direct


Materials


Conversion

CostsCostsCosts

Costs


75550625



75 (100% 100%); 75 (100% 40%) 75

0 45Started and completed

425 100%; 425 100% 425†

425 425Work in process, ending* (given)

125 100%; 125 20% 125

125 25Accounted for 625Work done in current period only 550 495

TotalTotalTotal

Total


Production

CostsCostsCosts

Costs

DirectDirectDirect

Direct


Materials


Conversion

CostsCostsCosts

Costs

(StepStepStep

Step

333

3

) Work in process, beginning (given) $ 1,910 $ 1,775 $ 135Costs added in current period (given) 28,490 17,600 10,890Total costs to account for $30,400 $19,375 $11,025

(StepStepStep

Step

444

4

) Costs added in current period $17,600 $10,890Divide by equivalent units of work done in

current period (Exhibit 17-37A) 550 495Cost per equivalent unit of work done in current

period $ 32 $ 22(StepStepStep

Step

555

5

) Assignment of costs:Completed and transferred out (500 units):

Work in process, beginning (75 units)Costs added to begin. work in process incurrent period

$ 1,910

990

$1,775 + $135

(0* $32) + (45* $22)Total from beginning inventory

Started and completed (425 units)Total costs of units completed & tsfd. out

Work in process, ending (125 units)Total costs accounted for

2,90022,95025,850

4,550$30,400

(425† $32) + (425† $22)

(125# $32) + (25# $22)$19,375 + $11,025

17-

17-3817-3817-38

17-38


Transferred-in

costs,costs,costs,

costs,

weightedweightedweighted

weighted

average.average.average.

average.

1. Solution Exhibit 17-38A computes the equivalent units of work done to date in theBinding Department for transferred-in costs, direct materials, and conversion costs.

Solution Exhibit 17-38B summarizes total Binding Department costs for April 2009,calculates the cost per equivalent unit of work done to date in the Binding Department fortransferred-in costs, direct materials, and conversion costs, and assigns these costs to unitscompleted and transferred out and to units in ending work in process using the weighted-averagemethod.

2. Journal entries:a. Work in Process–– Binding Department 144,000

Work in Process––Printing Department 144,000Cost of goods completed and transferred out

during April from the Printing Departmentto the Binding Department

b. Finished Goods 249,012Work in Process–– Binding Department 249,012

Cost of goods completed and transferred outduring April from the Binding Departmentto Finished Goods inventory


SOLUTION


EXHIBIT

17-38A17-38A17-38A

17-38A

Steps 1 and 2: Summarize Output in Physical Units and Compute Output in Equivalent Units;Weighted-Average Method of Process Costing,Binding Department of Publish, Inc. for April 2009.

(Step(Step(Step

(Step

1)1)1)

1)

(Step(Step(Step

(Step

2)2)2)

2)


Equivalent

UnitsUnitsUnits

Units

FlowFlowFlow

Flow

ofofof

of


Production


Physical

UnitsUnitsUnits

Units


Transferred-

ininin

in

CostsCostsCosts

Costs

DirectDirectDirect

Direct


Materials


Conversion

CostsCostsCosts

Costs

Work in process, beginning (given) 900Transferred-in during current period (given) 2,700To account for 3,600Completed and transferred out during current period: 3,000 3,000 3,000 3,000Work in process, endinga (given) 600

(600 100%; 600 0%; 600 60%) 600 0 360Accounted for 3,600Work done to date 3,600 3,000 3,360

aDegree of completion in this department: transferred-in costs, 100%; direct materials, 0%; conversion costs, 60%.

17-


SOLUTION


EXHIBIT

17-38B17-38B17-38B

17-38B

Steps 3, 4, and 5: Summarize Total Costs to Account For, Compute Cost per Equivalent Unit, and Assign Total Costs toUnits Completed and to Units in Ending Work in Process;Weighted-Average Method of Process Costing,Binding Department of Publish, Inc. for April 2009.

TotalTotalTotal

Total


Production

CostsCostsCosts

Costs


Transferred-in

CostsCostsCosts

Costs

DirectDirectDirect

Direct


Materials


Conversion

CostsCostsCosts

Costs

(Step(Step(Step

(Step

3)3)3)

3)

Work in process, beginning (given) $ 47,775 $ 32,775 $ 0 $15,000Costs added in current period (given) 239,700 144,000 26,700 69,000Total costs to account for $287,475 $176,775 $26,700 $84,000

(Step(Step(Step

(Step

4)4)4)

4)

Costs incurred to date $176,775 $26,700 $84,000Divide by equivalent units of work done to date(Solution Exhibit 17-38A) ÷ 3,600 ÷ 3,000 ÷ 3,360Cost per equivalent unit of work done to date $ 49.104 $ 8.90 $ 25

(Step(Step(Step

(Step

5)5)5)

5)

Assignment of costs:Completed and transferred out (3,000 units) $249,012 (3,000a × $49.104) + (3,000a × $8.90) + (3,000a × $25)Work in process, ending (600 units): 38,463 (600b × $49.104) + (0b × $8.90) + (360b × $25)

Total costs accounted for $287,475 $176,775 + $26,700 + $84,000

a Equivalent units completed and transferred out from Sol. Exhibit 17-38A, step 2.b Equivalent units in ending work in process from Sol. Exhibit 17-38A, step 2.

17-

17-3917-3917-39

17-39


Transferred-in

costs,costs,costs,

costs,

FIFOFIFOFIFO

FIFO

methodmethodmethod

method


(continuation

ofofof

of

17-38).17-38).17-38).

17-38).

1. Solution Exhibit 17-39A calculates the equivalent units of work done in April 2009 in theBinding Department for transferred-in costs, direct materials, and conversion costs.

Solution Exhibit 17-39B summarizes total Binding Department costs for April 2009,calculates the cost per equivalent unit of work done in April 2009 in the Binding Department fortransferred-in costs, direct materials, and conversion costs, and assigns these costs to unitscompleted and transferred out and to units in ending work in process using the FIFO method.

Journal entries:a. Work in Process–– Binding Department 141,750

Work in Process––Printing Department 141,750Cost of goods completed and transferred out

during April from the Printing Department tothe Binding Department.

b. Finished Goods 240,525Work in Process–– Binding Department 240,525

Cost of goods completed and transferred outduring April from the Binding Departmentto Finished Goods inventory.

2. The equivalent units of work done in beginning inventory is: Transferred-in costs, 900 100% = 900; direct materials, 900 0% = 0; and conversion costs, 900 40% = 360. The costper equivalent unit of beginning inventory and of work done in the current period are:

The following table summarizes the costs assigned to units completed and those still inprocess under the weighted-average and FIFO process-costing methods for the BindingDepartment.


Beginning


Inventory

WorkWorkWork

Work

DoneDoneDone

Done

ininin

in


Current

PeriodPeriodPeriod

Period

Transferred-in costs (weighted average)Transferred-in costs (FIFO)Direct materialsConversion costs

$36.42 ($32,775 900)$30.95 ($27,855 900)—$41.67 ($15,000 360)

$53.33 ($144,000 2,700)$52.50 ($141,750 2,700)

$ 8.90$23.00


Weighted


Average


(Solution


Exhibit

17-38B)17-38B)17-38B)

17-38B)

FIFOFIFOFIFO

FIFO


(Solution


Exhibit

17-39B)17-39B)17-39B)

17-39B)


Difference


$249,01238,463

$287,475

$240,52539,780

$280,305

–$8,487+$1,317

17-

The FIFO ending inventory is higher than the weighted-average ending inventory by$1,317. This is because FIFO assumes that all the lower-cost prior-period units in work inprocess (resulting from the lower transferred-in costs in beginning inventory) are the first to becompleted and transferred out while ending work in process consists of only the higher-costcurrent-period units. The weighted-average method, however, smoothes out cost per equivalentunit by assuming that more of the higher-cost units are completed and transferred out, whilesome of the lower-cost units in beginning work in process are placed in ending work in process.Hence, in this case, the weighted-average method results in a higher cost of units completed andtransferred out and a lower ending work-in-process inventory relative to FIFO. Note that thedifference in cost of units completed and transferred out (–$8,487) does not fully offset thedifference in ending work-in-process inventory (+$1,317). This is because the FIFO andweighted-average methods result in different values for transferred-in costs with respect to bothbeginning inventory and costs transferred in during the period.


SOLUTION


EXHIBIT

17-39A17-39A17-39A

17-39A

Steps 1 and 2: Summarize Output in Physical Units and Compute Output in Equivalent Units;FIFO Method of Process Costing,Binding Department of Publish, Inc. for April 2009.

(Step(Step(Step

(Step

1)1)1)

1)

(Step(Step(Step

(Step

2)2)2)

2)


Equivalent

UnitsUnitsUnits

Units

FlowFlowFlow

Flow

ofofof

of


Production


Physical

UnitsUnitsUnits

Units


Transferred-in

CostsCostsCosts

Costs

DirectDirectDirect

Direct


Materials


Conversion

CostsCostsCosts

Costs

Work in process, beginning (given) 900 (work done before current period)Transferred-in during current period (given) 2,700To account for 3,600Completed and transferred out during current period:

From beginning work in processa 900[900 (100% – 100%); 900 (100% – 0%); 900 (100% – 40%)] 0 900 540

Started and completed 2,100b

(2,100 100%; 2,100 100%; 2,100 100%) 2,100 2,100 2,100Work in process, endingc (given) 600

(600 100%; 600 x 0%; 600 60%) ____ 600 0 360Accounted for 3,600 ____ ____ ____Work done in current period only 2,700 3,000 3,000

a Degree of completion in this department: Transferred-in costs, 100%; direct materials, 0%; conversion costs, 40%.b 3,000 physical units completed and transferred out minus 900 physical units completed and transferred out from beginningwork-in-process inventory.

c Degree of completion in this department: transferred-in costs, 100%; direct materials, 0%; conversion costs, 60%.

17-


SOLUTION


EXHIBIT

17-39B17-39B17-39B

17-39B

Steps 3, 4, and 5: Summarize Total Costs to Account For, Compute Cost per Equivalent Unit, and Assign Total Costs to UnitsCompleted and to Units in Ending Work in Process;FIFO Method of Process Costing,Binding Department of Publish, Inc. for April 2009.

TotalTotalTotal

Total


Production

CostsCostsCosts

Costs


Transferred-in

CostsCostsCosts

Costs

DirectDirectDirect

Direct


Materials


Conversion

CostsCostsCosts

Costs

(Step(Step(Step

(Step

3)3)3)

3)

Work in process, beginning (given) $ 42,855 $ 27,855 $ 0 $15,000Costs added in current period (given) 237,450 141,750 26,700 69,000Total costs to account for $280,305 $169,605 $26,700 $84,000

(Step(Step(Step

(Step

4)4)4)

4)

Costs added in current period $141,750 $26,700 $69,000Divide by equivalent units of work done in current period (Sol.Exhibit 17-39A) ÷ 2,700 ÷ 3,000 ÷ 3,000Cost per equivalent unit of work done in current period $ 52.50 $ 8.90 $ 23.00

(Step(Step(Step

(Step

5)5)5)

5)

Assignment of costs:Completed and transferred out (3,000 units)

Work in process, beginning (900 units) $ 42,855 $27,855 + $0 + $15,000Costs added to beginning work in process in current period 20,430 (0a × $52.50) + (900a × $8.90) + (540a × $23)

Total from beginning inventory 63,285Started and completed (2,100 units) 177,240 (2,100b × $52.50) + (2,100b × $8.90) + (2,100b × $23)

Total costs of units completed and transferred out 240,525Work in process, ending (600 units): 39,780 (600c × $52.50) + (0c × $8.90) + (360c × $23)Total costs accounted for $280,305 $169,605 + $26,700 + $84,000

a Equivalent units used to complete beginning work in process from Solution Exhibit 17-39A, step 2.b Equivalent units started and completed from Solution Exhibit 17-39A, step 2.c Equivalent units in ending work in process from Solution Exhibit 17-39A, step 2.

17-

17-4017-4017-40

17-40


Transferred-in

costs,costs,costs,

costs,


weighted-average

andandand

and

FIFOFIFOFIFO

FIFO

methods.methods.methods.

methods.

1. Solution Exhibit 17-40A computes the equivalent units of work done to date in theDrying and Packaging Department for transferred-in costs, direct materials, and conversion costs.Solution Exhibit 17-40B summarizes total Drying and Packaging Department costs for week 37,calculates the cost per equivalent unit of work done to date in the Drying and PackagingDepartment for transferred-in costs, direct materials, and conversion costs, and assigns thesecosts to units completed and transferred out and to units in ending work in process using theweighted-average method.

2. Solution Exhibit 17-40C computes the equivalent units of work done in week 37 in theDrying and Packaging Department for transferred-in costs, direct materials, and conversion costs.Solution Exhibit 17-40D summarizes total Drying and Packaging Department costs for week 37,calculates the cost per equivalent unit of work done in week 37 in the Drying and PackagingDepartment for transferred-in costs, direct materials, and conversion costs, and assigns thesecosts to units completed and transferred out and to units in ending work in process using theFIFO method.


SOLUTION


EXHIBIT

17-40A17-40A17-40A

17-40A

Steps 1 and 2: Summarize Output in Physical Units and Compute Output in Equivalent Units;Weighted-Average Method of Process Costing,Drying and Packaging Department of Frito-Lay Inc. for Week 37.

Work in process, beginning (given) 1,250Transferred in during current period (given) 5,000To account for 6,250Completed and transferred outduring current period 5,250 5,250 5,250 5,250

Work in process, ending* (given) 1,0001,000 100%; 1,000 0%; 1,000 40% 1,000 0 400

Accounted for 6,250Work done to date 6,250 5,250 5,650


(Step(Step(Step

(Step

1)1)1)

1)

(Step(Step(Step

(Step

2)2)2)

2)


Equivalent

UnitsUnitsUnits

Units

FlowFlowFlow

Flow

ofofof

of


Production


Physical

UnitsUnitsUnits

Units


Transferred-

ininin

in

CostsCostsCosts

Costs

DirectDirectDirect

Direct


Materials

ConversioConversioConversio

Conversio

nnn

n

CostsCostsCosts

Costs

17-


SOLUTION


EXHIBIT

17-40B17-40B17-40B

17-40B

Steps 3, 4, and 5: Summarize Total Costs to Account For, Compute Cost per Equivalent Unit, and Assign TotalCosts to Units Completed and to Units in Ending Work in Process;Weighted-Average Method of Process Costing,Drying and Packaging Department of Frito-Lay Inc. for Week 37.


TotalTotalTotal

Total


Production

CostsCostsCosts

Costs


Transferred

-in-in-in

-in

CostsCostsCosts

Costs

DirectDirectDirect

Direct


Materials


Conversion

CostsCostsCosts

Costs

(Step(Step(Step

(Step

3)3)3)

3)


(Step(Step(Step

(Step

4)4)4)

4)

Costs incurred to date $125,000 $25,200 $47,460Divide by equivalent units of work done

to date (Solution Exhibit 17-40A) 6,250 5,250 5,650Equivalent unit costs of work done to date $ 20 $ 4.80 $ 8.40

(Step(Step(Step

(Step

5)5)5)

5)

Assignment of costs:Completed and transferred out (5,250 units) $174,300 (5,250* $20) + (5,250* $4.80) + (5,250* $8.40)Work in process, ending (1,000 units) 23,360 (1,000† $20) + (0† $4.80) + (400† $8.40)Total costs accounted for $197,660 $125,000 + $25,200 + $47,460

17-


SOLUTION


EXHIBIT

17-40C17-40C17-40C

17-40C

Steps 1 and 2: Summarize Output in Physical Units and Compute Output in Equivalent Units;FIFO Method of Process Costing,Drying and Packaging Department of Frito-Lay Inc. for Week 37.

§Degree of completion in this department: Transferred-in costs, 100%; direct materials, 0%; conversion costs, 80%.†5,250 physical units completed and transferred out minus 1,250 physical units completed and transferred out from

beginning work-in-process inventory.*Degree of completion in this department: transferred-in costs, 100%; direct materials, 0%; conversion costs, 40%.

(Step(Step(Step

(Step

1)1)1)

1)

(Step(Step(Step

(Step

2)2)2)

2)


Equivalent

UnitsUnitsUnits

Units

FlowFlowFlow

Flow

ofofof

of


Production


Physical

UnitsUnitsUnits

Units


Transferred-

ininin

in

CostsCostsCosts

Costs

DirectDirectDirect

Direct


Materials


Conversion

CostsCostsCosts

Costs

Work in process, beginning (given)Transferred-in during current period (given)To account for

1,2505,0006,250



1,250 (100% 100%); 1,250 (100% 0%); 1,250 (100% 80%)

1,250

0 1,250 250Started and completed4,000 100%; 4,000 100%; 4,000 100%

4,000†

4,000 4,000 4,000Work in process, ending* (given)

1,000 100%; 1,000 0%; 1,000 40% 1,000

1,000 0 400Accounted for 6,250Work done in current period only 5,000 5,250 4,650

17-


SOLUTION


EXHIBIT

17-40D17-40D17-40D

17-40D

Steps 3, 4, and 5: Summarize Total Costs to Account For, Compute Cost per Equivalent Unit, and Assign Total Coststo Units Completed and to Units in Ending Work in Process;FIFO Method of Process Costing,Drying and Packaging Department of Frito-Lay Inc. for Week 37.

*Equivalent units used to complete beginning work in process from Solution Exhibit 17-40C, Step 2.†Equivalent units started and completed from Solution Exhibit 17-40C, Step 2.#Equivalent units in ending work in process from Solution Exhibit 17-40C, Step 2.

TotalTotalTotal

Total


Production

CostsCostsCosts

Costs


Transferred

-in-in-in

-in

CostsCostsCosts

Costs

DirectDirectDirect

Direct


Materials


Conversion

CostsCostsCosts

Costs

(Step(Step(Step

(Step

3)3)3)

3)


(Step(Step(Step

(Step

4)4)4)

4)

Costs added in current period $ 94,000 $25,200 $38,400Divide by equivalent units of work done in current period(Solution Exhibit 17-40C) 5,000 5,250 4,650Cost per equivalent unit of work done in current period $ 18.80 $ 4.80 $ 8.258

(Step(Step(Step

(Step

5)5)5)

5)

Assignment of costs:Completed and transferred out (5,250 units):


$ 37,9808,065

$28,920 + $0 + $9,060(0* $18.80) + (1,250* $4.80) + (250* $8.258)


Total costs of units completed & transferred outWork in process, ending (1,000 units)Total costs accounted for

46,045127,432173,47722,103

$195,580

(4,000† $18.80) + (4,000† $4.80) + (4,000† $8.258)

(1,000# $18.80) + (0# $4.80) + (400# $8.258)$122,920 + $25,200 $47,460

(Step(Step(Step

(Step

3)3)3)

3)

17-

17-4117-4117-41

17-41

(30-35 min.) Weighted-averageWeighted-averageWeighted-average

Weighted-average

andandand

and

standard-costingstandard-costingstandard-costing

standard-costing


method.

1. Solution Exhibit 17-41A computes the equivalent units of work done in November 2010by Paquita’s Pearls Company for direct materials and conversion costs.

2. and 3. Solution Exhibit 17-41B summarizes total costs of the Paquita’s Pearls Companyfor November 30, 2010 and, using the standard cost per equivalent unit for direct materials andconversion costs, assigns these costs to units completed and transferred out and to units in endingwork in process. The exhibit also summarizes the cost variances for direct materials andconversion costs for November 2010.


SOLUTION


EXHIBIT

17-417-417-4

17-4

1A1A1A

1A

Steps 1 and 2: Summarize Output in Physical Units and Compute Output in Equivalent Units;Standard Costing Method of Process Costing,Paquita’s Pearls Company for the month ended November 30, 2010.

§Degree of completion in this department: direct materials, 100%; conversion costs, 75%.

†125,000 physical units completed and transferred out minus 25,000 physical units completed and transferred outfrom beginning work-in-process inventory.


(Step(Step(Step

(Step

1)1)1)

1)

(Step(Step(Step

(Step

2)2)2)

2)


Equivalent

UnitsUnitsUnits

Units

FlowFlowFlow

Flow

ofofof

of


Production


Physical

UnitsUnitsUnits

Units

DirectDirectDirect

Direct


Materials


Conversion

CostsCostsCosts

Costs


25,000126,250151,250



25,000 (100% 100%); 25,000 (100% – 75%)25,000


100,000 100%, 100,000 100% 100,000†


26,250 100%; 26,250 50% 26,250

_______ 26,250 13,125Accounted for 151,250 _______ _______Work done in current period only 126,250 119,375

17-


SOLUTION


EXHIBIT

17-417-417-4

17-4

1B1B1B

1B

Steps 3, 4, and 5: Summarize Total Costs to Account For, Compute Cost perEquivalent Unit, and Assign Total Costs to Units Completed and to Units inEnding Work in Process;Standard-Costing Method of Process Costing,Paquita’s Pearls Company for the month ended November 30, 2010.

*Equivalent units to complete beginning work in process from Solution Exhibit 17-41A, Step 2.

†Equivalent units started and completed from Solution Exhibit 17-41A, Step 2.

#Equivalent units in ending work in process from Solution Exhibit 17-41A, Step 2.

TotalTotalTotal

Total


Production

CostsCostsCosts

Costs

DirectDirectDirect

Direct


Materials


Conversion

CostsCostsCosts

Costs

(Step(Step(Step

(Step

333

3

) Work in process, beginning (given) $ 250,000 $ 62,500 + $ 187,500Costs added in current period at standard costs 1,509,375 (126,250 2.50) + (119,375 $10.00)

Total costs to account for $1,759,375 $378,125 + $1,381,250

(Step(Step(Step

(Step

4)4)4)

4)

Standard cost per equivalent unit (given) $ 2.50 $ 10.00(Step(Step(Step

(Step

555

5




$ 250,00062,500

312,500

$62,500 + $187,500(0* $2.50) + (6,250* $10.00)


1,250,0001,562,500

(100,000† $2.50) + (100,000† $10.00)

Work in process, ending (26,250 units) 196,875 (26,250# $2.50) + (13,125# $10.00)Total costs accounted for $1,759,375 $378,125 + $1,381,250


$315,625327,500

$ 11,875 U

$1,193,7501,207,415

$ 13,665 U

17-

17-4217-4217-42

17-42

(25-30 min.) OperationOperationOperation

Operation

costingcostingcosting

costing

1. To obtain the overhead rates, divide the budgeted cost of each operation by the pairs of shoesthat are expected to go through that operation.

2.

The direct materials costs per unit vary based on the type of shoe ($390,000 ÷ 30,000 = $13 forthe Basic, and $63,000 ÷ 2,250 = $28 for the Elaborate). Conversion costs are charged using therates computed in part (1), taking into account the specific operations that each type of shoeactually goes through.

3. Work order 10399 (Basic shoes): Work order 10400 (Elaborate shoes):

Total cost $21,850 Total cost: $5,880Divided by number of Divided by number of

pairs of shoes: ÷ 1,000 pairs of shoes: ÷ 150Cost per pair of plain shoes: $ 21.85 Cost per pair of fancy shoes: $39.20

BudgetedBudgetedBudgeted

Budgeted


Conversion

CostCostCost

Cost

BudgetedBudgetedBudgeted

Budgeted

PairsPairsPairs

Pairs

ofofof

of

ShoesShoesShoes

Shoes


Conversion

CostCostCost

Cost

perperper

per

PairPairPair

Pair

ofofof

of

ShoesShoesShoes

Shoes

Operation 1 $145,125 32,250 $4.50Operation 2 58,050 32,250 1.80Operation 3 4,275 2,250 1.90Operation 4 67,725 32,250 2.10Operation 5 13,500 30,000 0.45Operation 6 2,025 2,250 0.90

WorkWorkWork

Work

OrderOrderOrder

Order

WorkWorkWork

Work

OrderOrderOrder

Order

103991039910399

10399

104001040010400

10400

Shoe type: Basic ElaborateQuantity: 1,000 150Direct Materials $13,000 $4,200Operation 1 4,500 675Operation 2 1,800 270Operation 3 0 285Operation 4 2,100 315Operation 5 450 0Operation 6 0 135Total $21,850 $5,880

Documents

Costacctg13 Sm Ch17