Process costing
Work in process
i
. Britney Company has unit costs of P10 for materials and P30 for conversion costs. If there are 2,500 units in ending work in process, 40% complete as to
conversion costs, and fully complete as to materials cost, the total cost assignable to the ending work in process inventory is
A. P 45,000 C. P 75,000
B. P 55,000 D. P100,000
Answer: B
Materials cost (2,500 x P10) P25,000
Conversion cost (2,500 x 0.4 x P30) 30,000
Total costs of Work in Process P55,000
Overhead component
ii
. In the Star Company, the predetermined overhead rate is 80% of direct labor cost. During the month, P210,000 of factory labor costs are incurred, of which
P180,000 is direct labor and P30,000 is indirect labor. Actual overhead incurred was P200,000. The amount of overhead debited to Work in Process
Inventory should be
A. P120,000 C. P168,000
B. P144,000 D. P160,000
Answer: B
The amount of overhead applied to production should be 80 percent of direct labor cost (P180,000 x 0.80) = P144,000
Equivalent unit of production
iii
. The Assembling Department’s output during the period consists of 20,000 units completed and transferred out, and 5,000 units in ending work in process 60%
complete as to materials and conversion costs. Beginning inventory is 1,000 units, 40% complete as to materials and conversion costs. The equivalent units
of production are
A. 22,600 C. 24,000
B. 23,000 D. 25,000
Answer: B
Completed units 20,000
Work in process, End (5,000 x 0.6) 3,000
Total equivalent units, average 23,000
iv
. The Amor Company has 2,000 units in beginning work in process, 20% complete as to conversion costs, 23,000 units transferred out to finished goods, and
3,000 units in ending work in process one-third complete as to conversion costs. The beginning and ending inventory is fully complete as to materials costs.
Equivalent units for materials and conversion costs are
A. 22,000 and 24,000 C. 24,000 and 26,000
B. 26,000 and 24,000 D. 26,000 and 26,000
Answer: B
Units completed and transferred out 23,000
Work in Process, End 3,000
Materials Conversion Costs
% of Completion EUP % of Completion EUP
Completed units 100 23,000 100.00 23,000
WIP - End 100 3,000 33.33 1,000
Weighted-Average EUP 26,000 24,000
v
. Dodge Company has a mixing department and a refining department. Its process-costing system in the mixing department has two direct materials cost
categories (material J and material P) and one conversion costs pool. The company uses First-in, First out cost flow method. The following data pertain to the
mixing department for November 2006
Units
Work in process, November 1: 50 percent completed 15,000
Work in process, November 30, 70 percent completed 25,000
Units started 60,000
Completed and transferred 50,000
Costs
Work-in-process, November 1 P218,000
Material J 720,000
Material P 750,000
Conversion Costs 300,000
Material J is introduced at the start of operations in the Mixing department, and Material P is added when the product is three-fourths completed in the mixing
department. Conversion costs are added uniformly during the process.
The respective equivalent units for Material J and Material P in the mixing department for November 2006, are
A. Both 50,000 units C. 75,000 units and 60,000 units
B. 60,000 units and 50,000 units D. 60,000 units and 75,000 units
. Answer: B
Computation of equivalent units
Material J Material P
Work-in-process, Nov. 1 - 15,000
Units started and completed 35,000 35,000
Work-in-process, Nov. 30 25,000 -
EUP 60,000 50,000
vi
.
The cost of goods completed and transferred out to the Refining department was
A. P1,930,750 C. P1,600,500
B. P1,350,000 D. P1,550,500
Answer: C
Work in process-beginning
Cost, Nov. 1 P218,000
Cost, November
Material P (15,000 x P5) 225,000
Conversion 7,500 x P5 37,500 262, 500 P 480,500
Started, completed 35,000 P32
1,120,000
Cost of goods transferred out
P1.600,500
Unit Costs
Material J 720,000/60,000 P12
Material P 750,000/50,000 15
Conversion costs 300,000/60,000 5
Total P32
vii
. The Amor Company’s accounting records reflected the following data for April 2003. The company accounts its production using First-in, First-out cost flow
method:
Work in process, March 31,2003, 60% completed as to
materials and conversion costs ? units
Work in process, April 30, 2003, 30% completed as to
materials and conversion costs 24,000 units
Equivalent units of production for April 2003 64,000
Units started and completed in April 50,000
How many units were in the beginning work-in-process?
A. 6,800 C. 17,000
B. 11,333 D. 24,000
Answer: C
Equivalent units for April 64,000
Less: EU – started and completed during:
April 50,000
Work-in-process, end
(24,000 x 3) 7,200 57,200
Equivalent units - work-in-process end Mar 31 6,800
Number of units in process as of
March 31 6,800 40 17,000
viii
. Had the company used the weighted-average method of accounting for its production, the equivalent units should be
A. 74,200 C. 81,000
B. 57,200 D. 53,800
Answer: A
Equivalent units – FIFO 64,000
Add equivalent units in March 31 (17,000 x .6) 10,200
Weighted Average EUP 74,200
Units to be accounted for
ix
. In the Newman Company, there are zero units in beginning work in process, 7,000 units started into production, and 500 units in ending work in process 20%
completed. The physical units to be accounted for are
A. 7,000 C. 7,600
B. 7,360 D. 7,340
Answer: A
The number of units to be accounted should be the sum of the units in beginning work in process and the number of units that have been started during the
period
Cost of Finished Goods Transferred
x
. For the month of May, the Production Control Department of La Mesa, Inc. reported the following production data for Finishing Department (second
department):
Transferred-in from Assembly Department 75,000
Transferred-out to Packaging Department 59,250
In-process end of May (with 1/3 labor and factory overhead) 15,750
All materials were put into process in Assembly Department. The Cost Accounting Department collected these figures for Finishing Department.
Unit cost for unit transferred-in from Assembly Department P 2.70
Labor cost in Finishing Department 41,280.00
Applied factory overhead 112.5% of labor cost
How much was the cost of Finished goods transferred out to the Packaging Department?
A, P240,555 C. P260,580
B. P 80,580 D. P159,975
Answer: A
EUP:
Transferred out to Packaging Dept. 59,250
In process, end 15,750 x 1/3 5,250
Total 64,500
Unit Cost:
Transferred in 2.70
Labor and overhead 87,720/64,500 1.36
Total 4.06
Cost of finished goods transferred out 59,250 x 4.06 P240,555
Comprehensive
Use the following data to answer question Nos. 18 through 20.
Mergy Company uses process costing in accounting for its production department, which uses two raw materials. Material Alpha is placed at the beginning of the
process. Inspection is at the 85% completion stage. Material Bravo is then added to the good units. Normal spoilage units amount to 5% of good output. The
company records contain the following information for April:
Started during the period 20,000 units
Material Alpha P26,800
Material Beta P22,500
Direct labor cost P75,160
Factory overhead P93,950
Transferred to finished goods 14,000
Work in process (95% complete), April 30 4,000
xi
. How much were Material cost per equivalent unit for Alpha and Beta, respectively?
A. P1.40; P1.36 C. P1.34; P1.06
B. P1.40; P1.06 D. P1.34; P1.25
. Answer: D
Equivalent units
Alpha Beta
Transferred to F.G. 14,000 14,000
End Process 4,000 4,000
Normal lost units 900 0
Abnormal lost unit 1,100 0
Total 20,000 18,000
Unit cost
Alpha P26,800 20,000 = P1.34
Beta P22,500 18,000 = P1.25
xii
. The equivalent units of production for Material Alpha and Beta are
Alpha Beta
A. 18,000 14,000
B. 18,000 18,000
C. 20,000 18,000
D. 20,000 14,000
Answer: C
Equivalent units Alpha Beta
Transferred to F.G. 14,000 14,000
End Process 4,000 4,000
Normal lost units 900
Abnormal lost unit 1,100 ______
Total 20,000 18,000
xiii
. The number of normal and abnormal lost units are:
Normal Abnormal
A. 700 1,400
B. 1,400 700
C. 900 1,100
D. 1,100 900
Answer: C
Total lost units (20,000 – 18,000) 2,000
Total lost units 5% x 18,000 900
Abnormal lost units 1,100
Material cost
Unit material cost
xiv
. Catridge Company has no beginning work in process; 9,000 units are transferred out and 3,000 units in ending work in process are one-third finished as to
conversion costs and fully complete as to materials cost. If total materials cost is P60,000, the unit materials cost is
A. P5.00 C. P5.45
B. P6.00 D. P5.35
. Answer: A
Completed and transferred out 9,000
Units in work-in-process, End (3,000 x 100%) 3,000
Equivalents units of production - Materials 12,000
Materials cost per EUP (P60,000 ÷ 12,000) P5.00
Lost units
xv
. Lapid Company uses process costing. All materials are added at the beginning of the process. The product is inspected when it is 90 percent converted, and
spoilage is identified only at that point. Normal spoilage is expected to be 5% of good output.
The following are extracted from the production records of Lapid Company for May 2003:
Units put into process 21,000
Units transferred to finished goods 14,000
In-process, May 31, 75% complete 6,000
How many are considered abnormal lost units?
A. Zero C. 15
B. 300 D. 850
. Answer: B
Total lost units (21,000 – 20,000) 1,000
Less normal lost units 5% of 14,000 700
Abnormal lost unit 300
St
i
.Answer: B
Materials cost (2,500 x P10) P25,000
Conversion cost (2,500 x 0.4 x P30) 30,000
Total costs of Work in Process P55,000
ii
.Answer: B
The amount of overhead applied to production should be 80 percent of direct labor cost (P180,000 x 0.80) =
P144,000
iii
.Answer: B
Completed units 20,000
Work in process, End (5,000 x 0.6) 3,000
Total equivalent units, average 23,000
iv
.Answer: B
Units completed and transferred out 23,000
Work in Process, End 3,000
Materials Conversion Costs
% of Completion EUP % of Completion EUP
Completed units 100 23,000 100.00 23,000
WIP - End 100 3,000 33.33 1,000
Weighted-Average EUP 26,000 24,000
v
.Answer: B
Computation of equivalent units
Material J Material P
Work-in-process, Nov. 1 - 15,000
Units started and completed 35,000 35,000
Work-in-process, Nov. 30 25,000 -
EUP 60,000 50,000
vi
.Answer: C
Work in process-beginning
Cost, Nov. 1 P218,000
Cost, November
Material P (15,000 x P5) 225,000
Conversion 7,500 x P5 37,500 262, 500 P 480,500
Started, completed 35,000 P32
1,120,000
Cost of goods transferred out
P1.600,500
Unit Costs
Material J 720,000/60,000 P12
Material P 750,000/50,000 15
Conversion costs 300,000/60,000 5
Total P32
vii
.Answer: C
Equivalent units for April 64,000
Less: EU – started and completed during:
April 50,000
viii
.Answer: A
Equivalent units – FIFO 64,000
Add equivalent units in March 31 (17,000 x .6) 10,200
Weighted Average EUP 74,200
ix
.Answer: A
The number of units to be accounted should be the sum of the units in beginning work in process and the number of
units that have been started during the period
x
.Answer: A
EUP:
Transferred out to Packaging Dept. 59,250
In process, end 15,750 x 1/3 5,250
Total 64,500
Unit Cost:
Transferred in 2.70
Labor and overhead 87,720/64,500 1.36
Total 4.06
Cost of finished goods transferred out 59,250 x 4.06 P240,555
xi
.Answer: D
Equivalent units
Alpha Beta
Transferred to F.G. 14,000 14,000
End Process 4,000 4,000
Normal lost units 900 0
Abnormal lost unit 1,100 0
Total 20,000 18,000
Unit cost
Alpha P26,800 20,000 = P1.34
Beta P22,500 18,000 = P1.25
xii
.Answer: C
Equivalent units Alpha Beta
Transferred to F.G. 14,000 14,000
End Process 4,000 4,000
Normal lost units 900
Abnormal lost unit 1,100 ______
Total 20,000 18,000
xiii
.Answer: C
Total lost units (20,000 – 18,000) 2,000
Total lost units 5% x 18,000 900
Abnormal lost units 1,100
xiv
.Answer: A
Completed and transferred out 9,000
Units in work-in-process, End (3,000 x 100%) 3,000
Equivalents units of production - Materials 12,000
Materials cost per EUP (P60,000 ÷ 12,000) P5.00
xv
.Answer: B
Total lost units (21,000 – 20,000) 1,000
Less normal lost units 5% of 14,000 700
Abnormal lost unit 300
