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PROCESS COSTING
TUTORIAL SHEET
Describe the differences between process costing and job costing,
Provide examples of industries that use
process costing.
Why is cost accumulation easier with a process costing system compared with a job costing system?
Distinguish between normal and abnormal losses and explain how their accounting treatment differs.
What are equivalent units? Why are they needed with a process costing system?
Why is it necessarily to treat 'previous process cost' as a separate element of cost in a process costing system?
How is the equivalent unit cost calculation affected when materials are added at the beginning or at a later stage of
the process rather than uniformly throughout the process?
Describe how the weighted average and FIFO methods differ in assigning costs to units completed and closing
work in progress,
Under what conditions will the weighted average and FIFO methods give similar results?
When a process costing system is used, explain how cost information requirements differ for inventory
valuation/profit measurement, decision-making and
performance reporting for cost control.
Explain the distinguishing features of a batch/operating costing system,
What are the implications for the accounting treatment of normal and abnormal losses if losses are assumed to be
detected
(a) at the end of the process, and
(b) before the end of the process?
In the context of process costing, define:
(i) Equivalent units (ii) Normal loss (iii) Abnormal loss (iv) Joint products (v) By-products

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contd

Costs incurred in a process totalled $216,720 for a period. 24,000 units of finished product were
manufactured including 1,200 units which were rejected on inspection and disposed of. The level of
rejects in the period was normal. Rejects are sold for $$200 per unit.
What was the cost per unit for the process?
A
$893 B. $903 C. $940 D. $951
The following information relates to a production process for a period:
Input costs
$194,860
Completed output
11,400 units
Closing work-in-progress
1,200 units (60% complete)
There were no process losses or opening work-in-progress.
What was the cost per unit for the process?
A
$1547 B. $1608 C. $1640 D$1709
Costs incurred in a process totalled $61,600 for a period. 22,000 units of finished product were
manufactured, of which 440 units were rejected. This is the normal level of rejects for the process.
Rejected units are sold for $180 per unit.
What was the cost per unit of good output (to the nearest cent)?
A
$276 B. $280 C. $282 D. $286
A process requires the input of a single raw material at the start of the process. There are no process
losses. 10,000 units of the material were input to the process in a period. At the end of the period,
processing was only 75% complete on 800 units of the material. There was no work-in-progress at the
beginning of the period.
What were the equivalent units of production?
Raw material
Conversion costs
A

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9,400

9,400

B
9,800
9,800
C
10,000
9,400
D
10,000
9,800
Beginning work in process was 1,200 units, 2,800 additional units were put into production, and ending
work in process was 500 units. How many units were completed?
A
500 B. 3,000 C. 3,500 D. 3,300
The appropriate journal entry to transfer the cost of completed units from the Work in Process account

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would involve a credit to Work in Process and a debit to which of the following accounts?
A
Income Summary B. Raw Materials Inventory C. Finished Goods D. Manufacturing Summary
Mills Manufacturing computed the physical flow of completed units for the month of January 1, 20X1,
as follows:
Units completed:
From work in process on January 1,
15,000
20X1
From January production
45,000
60,000
In addition to the above, units in ending work in process at January 31, 20X1, were 12,000. Materials
are added at the beginning of the process. The work in process at January 1, 20X1, was 80% complete
as to conversion costs and the work in process at January 31, 20X1, was 60% complete as to conversion
costs. What are the equivalent units of materials and conversion for the month of January 20X1,
assuming a FIFO application of the process costing method?
A
57,000
55,200 B. 57,000
57,000 C. 72,000
67,200 D. 72,000 72,000

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Christopher Company uses the weighted-average method in its process costing system. The following
data were taken from the company's accounting records:
Beginning work in process inventory (100%
complete as to materials; 30% complete as to
conversion)
Started in process during the period
Ending work in process inventory (100%
complete as to materials; 60% complete as to
conversion)

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60,000 units
180,000 units
40,000 units

The equivalent units of production for conversion costs were:

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224,000 units. B. 222,000 units. C. 204,000 units. D. 200,000 units.
Lather Ltd operates a single process to manufacture soap.
The following figures relate to a recent period.
Input Material 20,000 kilos at $5 per kilo
Labour 16,000 hours at $6.25 per hour
Overhead 16,000 hours at $3 per hour
There is an expected loss of 5% of input weight, which can be sold for $1.2 per kilo.
The actual output for the period was 18,800 kilos and the closing work in progress was 1,000 kilos, which was
complete as to material and 50% complete as to labour and overhead.
Prepare, showing all relevant workings:
(i) The main process account (6 marks)
(ii) The normal loss account (4 marks)
(iii) The abnormal gain account. (6 marks)
Buck Ltd manufactures a product by passing a raw material through processes 1 and 2.
Details for a recent period are:
Process 1
Input material 10,000 kilos at
$3 per kilo
Labour and overhead
$17,800
Expected loss is
10% of input
Scrap value of losses
$0.3 per kilo
Actual output transferred to process 2
8,600 kilos
Closing work in progress
200 kilos
Closing work in progress is complete as to material, 50% complete as to other costs
Process 2
Transfer from process 1
8,600 kilos
Labour and overhead
$26,740
Expected loss is
10% of inpu
Scrap value of losses
$4.4 per kilo
Transfer to finished stock
7,900 kilos
Closing work in progress
200 kilos
Closing work in progress is complete as to material, 50% complete as to other costs

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23 Nitro Limited manufactures a product by processing raw material through two processes.
The output of Process Y is passed to Process Z where further material is added to the mix.
You have been provided with the following information, which relates to Process Z for May
of 2005:
Opening work-in-process:
7,800 units at a value of $208,455
Transfer of materials from Process Y:
$113,100 100% complete
Added materials:
$38,259 90% complete
Conversion costs:
$57,096 60% complete.
$208,455
Costs incurred during May 2005:
Transfer of materials from Process Y:
$343,650
Added materials:
$128,511
Conversion cost:
$294,264
$766,425
During May 2005, 27,000 units were transferred to finished stock.
Closing work-in-process:
4,500 units were in process at 31 st May 2005 of which materials transferred from process Y was 100%
complete, added materials 80% complete, and the conversion cost 40% complete.
Required:
(a) Using the first-in, first-out (FIFO) method of pricing for valuing opening work-in process, calculate the
equivalent cost per unit for each element of cost. (10 marks)
(b) Prepare the Process Z account for May 2005. (14 marks)
24. Taylor manufacturing uses a process cost system to manufacture Polo shirts for the tourism industry. The following
information pertains to the operations for the month of June 2008.
Units
Beginning work-in-process inventory, June 1
16,000
Started in production during June
100,000
Completed production during June
92,000
Ending work-in-process inventory, June 30
24,000
The beginning inventory was 60 percent complete for materials and 20 percent complete for conversion costs. The
ending inventory was 90 percent complete for materials and 40 percent complete for conversion costs.
Costs pertaining to the month of June are as follows:
Beginning inventory costs are:
Materials
$54,560
Direct Labour
$20,320
Factory Overhead
$15,240.
Costs incurred during June are:
Materials used
$468,000
Direct Labour
$182,880
Factory Overhead
$391,160
Required:
a) Using the first-in, first-out (FIFO) method, determine the equivalent units of production for materials (hint:
number of units
[8 marks]
b) Using the Weighted average method, determine the equivalent units of production for conversion costs (hint:
number of units).
[4 marks]
c) Using the first-in, first-out (FIFO) method, determine the cost per unit for conversion costs.
[10 marks]
d) Using the Weighted average method, determine the cost per unit for materials. [8 marks]