Units to Account For
1. A plant that uses process costing has 8,000 units in beginning work in process, 15,000 more started, and 5,000 units in the ending work in process.
Using this information, answer the following questions on a separate sheet of paper. Label each answer carefully and show all of your work.
a. How many units are there to account for?
b. How many units are transferred using the average cost method?
c. How many units are transferred using the first-in, first-out method?
d. How many units were both started and completed during the period?
a)
Units to account for
Units in beginning inventory8,000
Units started15,000
Total units to account for23,000
b)
Units transferred = units to account for – units in ending inventory
= 23,000-5,000 = 18,000 units
c)
Units transferred remain the same at 18,000 units
d)
Units transferred are 18,000
Units from beginning inventory = 8,000
Units started and completed = 18,000-8,000=10,000
2. The Spangle Company uses the process cost system and average costing. The following prediction data are for the month of July:
Prepare a cost of production summary for the month.
Production Costs
Work in process, beginning of month
Materials $2,500
Labor 1,200
Factory overhead 1,100 $4,800
Costs incurred during the month
Materials $13,500
Labor 9,200
Factory overhead 8,500 31,200
$36,000
Production Report Units
In process, beginning of month 500
Finished and transferred during month 3,800
Work in process, end of month 400
Stage of completion 50%
For the Month of
Quantity Schedule
Quantities / Physical Units / Equivalent Units
Material / Labor / Overhead
Units to be accounted for
Work in Process, Beginning / 500
Started into Production / 3,700
Total Units / 4,200
Units Accounted for
Transferred Out / 3,800 / 3,800 / 3,800 / 3,800
WIP, Ending / 400 / 200 / 200 / 200
Total Units / 4,200 / 4,000 / 4,000 / 4,000
Cost per Equivalent Unit
Unit Costs / Material / Labor / Overhead / Total
WIP / 2,500 / 1,200 / 1,100 / 4,800
Costs in Month / 13,500 / 9,200 / 8,500 / 31,200
Total Cost / 16,000 / 10,400 / 9,600 / 36,000
Equivalent Units / 4,000 / 4,000 / 4,000
Unit Costs / 4.00 / 2.60 / 2.40 / 9.00
Cost Reconciliation Schedule
Costs to be accounted for
WIP, Beginning / 4,800
Started into Production / 31,200
Total Costs / 36,000
Costs Accounted for
Transferred out / 34,200
Work in process, Ending
Material / 800
Labor / 520
Overhead / 480
Total WIP / 1,800
Total costs / 36,000
3. The following data is for a production company:
Beginning inventory 1,000 units, three-fourths completed
Finished and transferred 16,000 units
Work in process, end of month 2,000 units, one-half completed
Assume that materials, labor, and factory overhead are added evenly throughout the process.
On a separate sheet of paper, complete the following problems. Label each answer carefully
and show all your work.
a. Using the average cost method, compute the equivalent production.
b. Using the first-in, first-out method, compute the equivalent production.
c. During the month, Department B received 10,000 units from Department A with a unit cost of $10; 2,000 of these units were lost during production in Department B.
Determine the adjusted cost of these units.
d. During the month, Department 2 received 8,000 from Department 1 with a unit cost of $15. Department 2 added materials that increased the number of units by 50%.
Determine the adjusted cost of these units.
a)
Quantities / Physical Units / Equivalent Units
Material / Labor / Overhead
Units to be accounted for
Work in Process, Beginning / 1,000
Started into Production / 17,000
Total Units / 18,000
Units Accounted for
Transferred Out / 16,000 / 16,000 / 16,000 / 16,000
WIP, Ending / 2,000 / 1,000 / 1,000 / 1,000
Total Units / 18,000 / 17,000 / 17,000 / 17,000
b)
Quantity ScheduleUnits to be Accounted for
Beginning Work in Process / 1,000
Started into Production / 17,000
Total Units in Production / 18,000
Units Accounted for
Material / Labor / Overhead
Transferred Out
From Beginning WIP / 1,000 / 250 / 250 / 250
Started and Completed / 15,000 / 15,000 / 15,000 / 15,000
Ending WIP / 2,000 / 1,000 / 1,000 / 1,000
Equivalent Units / 18,000 / 16,250 / 16,250 / 16,250
c)
Total cost = 10,000 units X $10 = $100,000
Units available = 10,000-2,000=8,000
Adjusted cost = 100,000/8,000 = $12.5 per unit
d)
Cost received = 8,000X15 = $120,000
Units in Department 2 = 8,000 X1.5 = 12,000
Adjusted cost = 120,000/12,000=$10 per unit
4. Cost of production summary, three departments; change in unit cost from prior department; departmental cost work sheet; journal entries; manufacturing statement
Taguchi Manufacturing Co. uses the process cost system. The following information for the month of December was obtained from the company’s books and from the production reports submitted by the department heads:
Production ReportMixingBlendingBottling
Units in process, beginning of period2 ,5001,5003,000
Started in process during month12,500--
Received from prior department- 13,000 10,000
Finished and transferred13,000 10,000 11,000
Finished and on hand&nbs p;- 500 -
Units in process, end of period 2,0004,0002,000
Stage of completion& nbsp;¼4/5½
Production Costs
Work in progress, beginning of period:
Cost in Mixing…………………………………. $3,075 $6,150
Materials………………………………… $1,470
Labor……………………………………….650
Factory Overhead……………………565
Cost in Blending………………………………..$3,660
Materials………………………………….240
Labor………………………………………..905
Factory Overhead……………………..750
Cost in Bottling………………………………….
Materials………………………………….. 900
Labor…………………………………………3,100
Factory Overhead……………………..3,080
Costs incurred during month:
Materials…………………………………..&nb sp;15,0002,5001,500
Labor…………………………………………4,750& nbsp;8,0006,500
Factory Overhead……………………..5,2406,1007,000
Total…………………………………… $27,675 $21,570$31,890
Required:
1. Prepare cost of production summaries for the Mixing, Blending and Bottling Departments.
2. Prepare a departmental cost work sheet.
3. Draft the journal entries required to record the month’s operations.
4. Prepare a statement of cost of goods manufactured for December.
1.
Taguchi Manufacturing Co.
Cost of Production Summary—Mixing
For the Month Ended December 31, 20--
Cost of work in process, beginning of month:
Materials...... $1,470
Labor...... 650
Factory overhead...... 565$2,685
Cost of production for month:
Materials...... $15,000
Labor...... 4,750
Factory overhead...... 5,24024,990
Total costs to be accounted for...... $27,675
Unit output for month:
Finished and transferred to Blending during month...... 13,000
Equivalent units of work in process, end of month
(2,000 units, one-fourth completed)...... 500
Total equivalent production...... 13,500
Unit cost for month:
Materials ($1,470 + $15,000) 13,500...... $1.22
Labor ($650 + $4,750) 13,500...... 40
Factory overhead ($565 + $5,240) 13,500...... 43
Total...... $2.05
Inventory costs:
Costs of goods finished and transferred to Blending
during month (13,000 × $2.05)...... $26,650
Cost of work in process, end of month:
Materials (2,000 × 1/4 × $1.22)...... $610
Labor (2,000 × 1/4 × $0.40)...... 200
Factory overhead (2,000 × 1/4 × $0.43)...... 2151,025
Total production costs accounted for...... $27,675
Taguchi Manufacturing Co.
Cost of Production Summary—Blending
For the Month Ended December 31, 20--
Cost of work in process, beginning of month:
Cost in Mixing...... $3,075
Cost in Blending:
Materials...... $240
Labor...... 905
Factory overhead...... 7501,895$4,970
Cost of goods received from Mixing during month...... 26,650
Cost of production for month:
Materials...... $2,500
Labor...... 8,000
Factory overhead...... 6,10016,600
Total costs to be accounted for...... $48,220
Unit output for month:
Finished and transferred to Bottling during month...... 10,000
Finished and on hand...... 500
Equivalent units of work in process, end of month
(4,000 units, four-fifths completed)...... 3,200
Total equivalent production...... 13,700
Unit cost for month:
Materials ($240 + $2,500) 13,700...... $0.20
Labor ($905 + $8,000) 13,700...... 65
Factory overhead ($750 + $6,100) 13,700...... 50
Total...... $1.35
Inventory costs:
Costs of goods finished and transferred to Bottling
during month:
Cost in Mixing(10,000 × $2.05)...... $20,500
Cost in Blending(10,000 × 1.35)...... 13,500
(10,000 × $3.40)...... $34,000
Cost of goods finished and on hand:
Cost in Mixing(500 × $2.05)...... $1,025
Cost in Blending(500 × 1.35)...... 675
(500 × $3.40)...... 1,700
Cost of work in process, end of month:
Cost in Mixing (4,000 × $2.05)...... $8,200
Cost in Blending:
Materials (4,000 × 4/5 × $0.20)...... $640
Labor (4,000 × 4/5 × $0.65)...... 2,080
Factory overhead (4,000 × 4/5 × $0.50)....1,6004,32012,520
Total production costs accounted for...... $48,220
Taguchi Manufacturing Co.
Cost of Production Summary—Bottling
For the Month Ended December 31, 20--
Cost of work in process, beginning of month:
Cost in Mixing...... $6,150
Cost in Blending...... 3,660
$9,810
Cost in Bottling:
Materials...... $900
Labor...... 3,100
Factory overhead...... 3,0807,080$16,890
Cost of goods received from Blending...... 34,000
Cost of production for month:
Materials...... $1,500
Labor...... 6,500
Factory overhead...... 7,00015,000
Total costs to be accounted for...... $65,890
Unit output for month:
Finished and transferred to finished goods...... 11,000
Equivalent units of work in process, end of month
(2,000 units, one-half completed)...... 1,000
Total equivalent production...... 12,000
Unit cost for month:
Cost from preceding department:*
Beginning inventory (3,000)...... $9,810
Goods received during month (10,000).....34,000
Average unit cost for goods(13,000).....$43,810$3.37
Cost in Bottling:
Materials ($900 + $1,500) 12,000...... $0.20
Labor ($3,100 + $6,500) 12,000...... 80
Factory overhead ($3,080 + $7,000) 12,000...... 84
Total...... $1.84
Inventory costs:
Costs of goods finished and transferred:
Cost in Mixing and Blending(11,000 × $3.37)$ 37,070
Cost in Bottling(11,000 × 1.84) 20,240
(11,000 × $5.21)$ 57,310
Cost in work in process, end of month:
Cost in Mixing and Blending (2,000 × $3.37)...... $6,740
Cost in Bottling:
Materials (2,000 × 1/2 × $0.20)...... $200
Labor (2,000 × 1/2 × $0.80)...... 800
Factory overhead (2,000 × 1/2 × $0.84)....8401,8408,580
Total production costs accounted for...... $65,890
*Alternative calculation.
Detailed calculation of the average unit costs from other departments as follows:
Cost from
UnitsMixingBlending
Units in process, beginning of month...... 3,000$6,150$3,660
Units received during month...... 10,00020,50013,500
Total...... 13,000$26,650$17,160
Unit cost...... $2.05$1.32
2.
Taguchi Manufacturing Co.
Departmental Cost Work Sheet
For the Month Ended December 31, 20--
Analysis / Costper Unit Transf. / Units Received in Dept. / Units Transf. or on Hand / Amount Charged to Dept. / Amount Credited to Dept.
Mixing:
Opening inventory in
process...... / 2,500 / $2,685
Started in process.. / 12,500
Costs for month:
Materials...... / $1.22 / 15,000
Labor...... / .40 / 4,750
Factory Overhead / .43 / 5,240
Finished and trans-
ferred to Blending / $2.05 / 13,000 / $26,650
Closing work in
process...... / 2,000 / 1,025
Total...... / 15,000 / 15,000 / $27,675 / $27,675
Blending:
Opening inventory in
process...... / 1,500 / $4,970
Received during
month from Mixing… / 13,000 / 26,650
Costs added during
month:
Materials...... / 0.20 / 2,500
Labor...... / 0.65 / 8,000
Factory overhead / 0.50 / 6,100
Finished and trans-
ferred to Bottling / $3.40 / 10,000 / $34,000
Completed and on
hand...... / 500 / 1,700
Closing work in
process...... / 4,000 / 12,520
Total...... / 14,500 / 14,500 / $48,220 / $48,220
Analysis / Cost
per Unit Transf. / Units Received in Dept. / Units Transf. or on Hand / Amount Charged to Dept. / Amount Credited to Dept.
Bottling:
Opening inventory in
process...... / 3,000 / $16,890
Received during
month from Blending / 10,000 / 34,000
Costs added during
month:
Materials...... / 0.20 / 1,500
Labor...... / 0.80 / 6,500
Factory overhead / 0.84 / 7,000
Finished and trans-
ferred to stock.. / $5.24 / 11,000 / $57,310
Closing work in
process...... / 2,000 / 8,580
Adjusting due to
averaging costs
from prior
department.... / (.03)
Total...... / $ 5.21 / 13,000 / 13,000 / $65,890 / $65,890
Summary:
Materials:
Mixing...... $15,000
Blending...... 2,500
Bottling...... 1,500$19,000
Labor:
Mixing...... $4,750
Blending...... 8,000
Bottling...... 6,50019,250
Factory overhead:
Mixing...... $5,240
Blending...... 6,100
Bottling...... 7,00018,340
Total production costs for December...... $56,590
Add work in process, beginning of month:
Mixing...... $2,685
Blending...... 4,970
Bottling...... 16,89024,545
Total...... $81,135
Deduct work in process, end of month:
Mixing...... $1,025
Blending...... 14,220
Bottling...... 8,58023,825
Cost of production, goods fully manufactured during
December...... $57,310
3. Work in Process—Mixing...... 15,000
Work in Process—Blending...... 2,500
Work in Process—Bottling...... 1,500
Materials...... 19,000
Work in Process—Mixing...... 4,750
Work in Process—Blending...... 8,000
Work in Process—Bottling...... 6,500
Payroll...... 19,250
Work in Process—Mixing...... 5,240
Work in Process—Blending...... 6,100
Work in Process—Bottling...... 7,000
Factory Overhead...... 18,340
Work in Process—Blending...... 26,650
Work in Process—Mixing...... 26,650
Work in Process—Bottling...... 34,000
Work in Process—Blending...... 34,000
Finished Goods...... 57,310
Work in Process—Bottling...... 57,310
4.
Taguchi Manufacturing Co.
Statement of Cost of Goods Manufactured
For the Month Ended December 31, 20--
Materials...... $19,000
Labor...... 19,250
Factory overhead...... 18,340
Total...... $56,590
Add work in process inventories, December 1...... 24,545
Total...... $81,135
Less work in process inventories, December 31...... 23,825
Cost of goods manufactured during the month...... $57,310
5. Average and FIFO cost methods; losses at the beginning and end of processing.
Mt. Orab Manufacturing Co uses a process cost system. Its manufacturing operation is carried on in two departments:
Machining and Finishing. The Machining Department uses the average cost method and the Finishing Department uses the FIFO cost method. Materials are added in both departments at the beginning of the operations, but the added materials do not increase the number of units being processed. Units are lost in Machining Department throughout the production process and inspection occurs at the end of the process. The lost units have no scrap value and are considered to be a normal loss.
Production statistics for July show the following data:
;MachiningFinishing
Units in process, July 1 (all material 40% of labor & overhead) …………..………….20,000
Units in process, July 1 (all material 80% of labor & overhead) …………..…………. 40,000
Units started in production ………………………………………………………………….140,000
Units completed & transferred ……………………………………………………………100,000
Units transferred from Machining ……………………………………………………….100,000
Units completed & transferred to finished goods ………………………………..100,000
Units in process, July 31 (all material 60% of labor & overhead)…………..…………40,000
Units in process, July 31 (all material 40% of labor & overhead)…………..………… 40,000
Units lost in production ……………………………………………………………………….. 20,000
Production Costs&nb sp;MachiningFinishing
Work in progress, July 1:
Materials ……………………………………………………………………………….. $40,000$110,000
Labor ………………………………………………………………………………………24,00060,000
Factory overhead ……………………………………………………………………8,00040,000
Costs in Machining Department …………………………………………….. 240,000
Costs incurred during month:
Materials ……………………………………………………………………………….. 280,000240,000
Labor ……………………………………………………………………………………… 180,000160,000
Factory overhead ……………………………………………………………………60,00080,000
Required:
Prepare a cost of production summary for each department. (Round to three decimal places)
Mt. Orab Manufacturing Company
Cost of Production Summary—Finishing Department
For the Month Ended July 31, 20--
Cost of work in process, beginning of month:
Cost in Machining Department...... $240,000
Cost in Finishing Department:
Materials...... $110,000
Labor...... 60,000
Factory overhead...... 40,000210,000$450,000
Cost of goods received from Machining during month...... 447,900
Cost of production for month:
Materials...... $240,000
Labor...... 160,000
Factory overhead...... 80,000480,000
Total costs to be accounted for...... $1,377,900*
Unit output for month:
Materials:
To complete beginning units in process...... –0–
Units started and fully manufactured
during month (100,000 - 40,000)...... 60,000
Ending units in process (40,000, all material)...... 40,000
Total equivalent production...... 100,000
Labor and factory overhead:
To complete beginning units in process
(40,000, 20% to complete)...... 8,000
Units started and fully manufactured during month..60,000
Ending units in process (40,000, 40% completed)....16,000
Total equivalent production...... 84,000
Unit cost for month:
Materials ($240,000 100,000)...... $2.400
Labor ($160,000 84,000)...... 1.905
Factory overhead ($80,000 84,000)...... 0.952
Total...... $5.257
Inventory costs:
Cost of goods finished and transferred to finished goods during month:
Beginning units in process:
Prior month's cost...... $450,000
Current cost to complete:
Labor (40,000 × 20% × $1.905)...... 15,240
Overhead (40,000 × 20% × $0.952)...... 7,616$472,856
Units started and finished during month:
Cost in prior dept. (60,000 × $4.479)...... $268,740
Cost in Finishing Dept. (60,000 × $5.257)...... 315,420
Total cost transferred (60,000 × $9.736)...... 584,160
Cost of work in process, end of month:
Cost in prior dept. (40,000 units × $4.479)...... $179,160
Materials (40,000 units × $2.400)...... 96,000
Labor (40,000 units × 40% × $1.905)...... 30,480
Factory overhead (40,000 units × 40% × $0.952).....15,232320,872
Total production costs accounted for $1,377,888*
*Rounding Difference
6.
Allocation of joint costs
Clark Manufacturing Co buys crypton for $0.80 a gallon. At the end of processing in Department 1, crypton splits off into products A, B, and C. Product A is sold at the split-off point with no further processing. Products B and C require further processing before they can be sold. Product B s processed in Department 2, and Product C is processed in Department 3. Following is a summary of costs and other related data for the year ended December 31:
Dept. 1Dept. 2Dept. 3
Cost of crypton …………………………………..$76,000--
Direct labor …………………………………………14,000$51,000$65,000
Factory overhead ………………………………..10,000 26,500 49,000
Total …………………………………………………….&n bsp;$100,000$77,500$114,000
Product AProduct BProduct C
Gallons sold ……………………………………...... 20,000 30,000 45,500
Gallons on hand at December 31 ………….. 10,000 - 15,000
Sales in dollars ……………………………………….$30,000 $96,000$141,750
No inventories were on hand at the beginning of the year, and no crypton was on hand at the end of the year. All gallons
on hand at the end of the year were complete as to processing. Clark uses the relative sales value method of allocating joint costs.
Required:
1. Calculate the allocation of joint costs.
2. Calculate the total cost per unit for each production.
1.
Unit / Ultimate / Less Cost / Sales / Percent / AllocationUnits / Selling / Sales / After / Value at / of Sales / Of Joint
Product / Produced(a) / Price(b) / Value / Split-Off / Split-Off / Value / Costs
A / 30,000 / $1.50* / $45,000 / –0– / $45,000 / 32.5% / $32,500
B / 30,000 / 3.20** / 96,000 / $77,500 / 18,500 / 13.4 / 13,400
C / 60,000 / 3.15*** / 189,000 / 114,000 / 75,000 / 54.1 / 54,100
Total / $ 330,000 / $ 191,500 / $138,500 / 100.0% / $ 100,000
* $30,000/20,000 gals.
** $96,000/30,000 gals.
***$141,750/45,000 gals.
A / B / CBeginning inventory...... / –0– / –0– / –0–
Sold during year...... / 20,000 / 30,000 / 45,000
On-hand, end-of-year...... / 10,000 / –0– / 15,000
Produced during year...... / 30,000 / 30,000 / 60,000
2.Unit cost of Product A = $32,500 / 30,000 gals. = $1.08 gal.
Unit Cost of Product B =$51,000 Direct labor + $26,500 Factory overhead + $13,400 Joint costs = $90,900 / 30,000 gals. = $3.03 / gal.
Unit cost of Product C = $65,000 Direct labor + 49,000 Factory overhead + 54,100 Joint costs = $168,100 / 60,000 gals. = $2.80 / gal.