Illustrative 2: First or Single Department

ABC Manufacturing Company has the following manufacturing data for February:

Beginning units (20% DL, 40% FOH) 10,000 units

Started units 80,000 units
Ending units (70% DL, 80% FOH) 30,000 units
Beginning work-in process:
Direct materials P 40,000
Direct labor P 30,000
Factory overhead P 60,000
Total P 1300Q
Added this period:
Direct materials P 500,000
Direct labor P 800,000
Factory overhead P 900,000
Total P 2.200.000 .

Required: Determine the following:

1. Equivalent units of direct materials assuming:

WA Method FIFO Method

Materials added at the start
Materials added gradually in proportion to DL
Materials added at 60% DL completion
Materials added at the end

2. Equivalent units of conversion cost

WA Method FIFO Method

Direct labor
Factory overhead

3. Cost per equivalent units of production for each element of cost (assume materials are added at the
start of process)

WA Method FIFO Method

Direct materials
Direct labor
Factory overhead

4. Unit cost of units finished

5. Allocation of total manufacturing costs placed into process

WA Method FIFO Method

Finished goods

Work-in-process, end

Illustrative 3: Subsequent Department

Pep Cola produces a soft drink in three departments, Syrup, Carbonation and Bottling. Syrup, which gives
the drink its flavor, is produced in the first department. The syrup is then transferred to the second
department, where carbonated water is added to give the drink its fizz. After carbonated water has been
added, the liquid drink is bottled. Data related to the Carbonation Department during June are:

Units in beginning inventory 1,000

Units received from the Syrup Department this period 2,000

Units added to process in the Carbonation Department this period 6,000

Units transferred to bottling department this period 7,800

Units in ending inventory (100% material, 25% labor and overhead) 1,200

Beginning Added this

Cost charged to the department: inventory period

Cost from the preceding department P 1,120 P 9,680

Materials 190 1,610

Direct labor 60 1,560

Factory overhead 120 3,120

Required: Prepare all necessary journal entries for the Carbonation Department.

Illustrative 4: FIFO Refinement

The Barkley, Inc. processes its products in two departments: Department A and Department B.
Inventories, costs and production data for February are as follows:

Department A Department

QUANTITY

Beginning in-process units 6,000 5,000

Work to finish or to be done 1/3 2/5
Started in Process 44,000 -
Transferred out 40,000 37,000
Ending in-process units ? ?
Stage of completion 3/5 7/8

COST
Beginning in-process units P 5,200 P 10,685
Added this month:
Materials 19,800 34,799
Labor 14,200 27,470
Overhead 2,600 18,450

Conversion costs are applied evenly in all departments. Materials are applied as follows:

Department A — all at the start of the process

. Department B — 30% at the start of process, 40% when processing is half complete and 30% at end of
the process.

Required: Using FIFO Method, determine the following

1. Total cost of units that was transferred out in Department A
2. Total cost of ending in-process units in Department A
3. Total cost of units transferred out to store room from Department B
4. Total cost of ending in-process units in Department B

Illustrative 5: WA Refinement
Session reports the following production data for the month of June 2008:

I II
Quantity schedule:
In process, beginning (stage of completion) (2/3) 15,000 (1/3) 9,000
Transferred out to next department 30,000 ?

In process, end (additional work to complete) (3/5) 5,000 (1/8) 8,000

Cost analysis:
Cost last month
Cost from preceding department P 8,910
Cost of this department:
Material P 8,390 P 4,464
Labor 3,315 1,998
Overhead . 1,050 1,332
Cost added this month
Material P 10,860 P 30,636
Labor 7,181 23,310
Overhead 2,534 15,540

In Department I, all materials at the start of process while labor and overhead are applied evenly to the
process. In Department lI, 50% of the materials are added at the start of the process and the
balance is added when the process is % completed. Conversion costs are applied uniformly to the
process.

Required: Using average costing method, determine the following:

1. Total cost of units transferred out in Department I __________
2. Total cost of units in process at the end in Department I __________
3. Total cost of units transferred out in Department II __________
4. Total cost of units in process at the end in Department Il _________
Illustrative 6

Petroleum, Inc. manufactures a product in two departments. Units of the product are started in
the Cracking Department and then transferred to the Refining Department, where they are completed.
Because of the intense heat applied in the Cracking Department, some of the
production volume is lost to evaporation. Data related to May operations in the Cracking
Department are:

Units in beginning inventory 5,000 units

Units started in process this period 55,000 units
Units transferred to the Refining Department this period 49,000 units
Units in ending inventory (100% material, 70% conversion cost) 6,000 Units

Beginning Added this

Cost charged to the department: inventory period
Material P 1,900 P 20,100
Conversion cost 360 7,620

Required: Prepare all necessary journal entries for the Cracking Department.

Illustrative 7
Waste Company has the following data for March. Any loss unit is deemed abnormal loss.

Beginning units (60% converted) 10,000 Transferred out 60,000

Started into process 80,000 Ending units(30% converted) 20,000
Required: Complete the following table using the following cost flow assumption:

INSPECTION POINT ---> 50% of processing End of processing

WA Method FIFO Method WA Method FIFO Method

A. EUP of direct materials, if
1. added at the start
2. addedat50% of processing
3. Added at the end
4. added gradually
B. EUP of conversion cost
*All loss units are traceable to currently started units.

Illustrative 2

ABC manufactures a certain products. Units are started in the Cutting Department and then
transferred to Finishing Department where they are completed. Units are inspected at the end of
the production process in the Finishing Department. Spoiled units are inventoried at their
recoverable value of Pl0 each and the unrecoverable value of spoilage is deemed a normal loss
and is charged to Factory Overhead Control.

At the end of June, 500 units were still in processed in the Finishing Department, 80% complete
as to material and 60% complete as to conversion cost. During July, 4,500 units were transferred
from the Cutting Department to the Finishing Department and 3,800 were transferred to finished
goods inventory. At the end of July, the Finishing Department still had 800 units in process, 40%
complete as to materials and 20% complete as to conversion cost. Cost data related to July
operations in the Finishing Department are:

Beginning Added this

Inventory period

Cost charged to the department:

Cost from preceding department p 5,500 p 54,500

Materials 1,950 20,650
Labor 1,180 16,260
Factory overhead 1,770 24,390

Required: Assuming WA method, prepare all necessary journal entries for the Finishing Department.

Illustrative 8
DEF manufactures a certain products ¡n two departments. Units are started in the Tooling
Department where they are cut and shaped and are transferred to the Finishing Department
where they are ground and polished. Materials are added at the start of the process in the
Tooling Department. Units are inspected at 90-percent of processing. Costs related to the Tooling
Department are:

Beginning Added this

Cost charged to the department: inventory period

Materials P 1,600 P 9,750
Labor 290 2,320
Factory overhead 950 9,200

At the end of February, the Tooling Department had 2,000 still in process, 70% complete as to

labor and 60% complete as to overhead. At the end of March, 3,000 units were still in process in

the Tooling Department, 50% complete as to labor and 40% complete as to overhead. During

March, 13,000 units were started in the Tooling Department, and 7,000 units were completed

and transferred to Finishing Department. Loss units up to 50% of good units are deemed normal.

Required: Assuming FIFO method, prepare all necessary journal entry for the Tooling Department

MC:

Department Il of Charity Manufacturing Company presents the following production data for the month
of May, 2008:

Opening inventory, 3/8 completed 4,000 units

Started in process 13,000 units
Transferred 9,000 units

Closing inventory, 1/2 completed 4,000 units

3/4 completed 4,000 units

What are the equivalent units of production for the month of May, 2008?
 FIFO Method Average Method FIFO Method Average Method

A. 500 units 13,000 units C. 12,500 units 14,000 units

B. 17,000 units 12,500 units D. 15,000 units 14,000 units

The following data for the month of September were taken from the cost records of Department I of
Pro-life Products which uses process costing system:

Opening inventory of work-in-process:

Units — 500 (with all materials added and 50% of

labor and overhead)
Cost— Materials P 2,400
Labor 1,500
Factory overhead 760

Put into production:

Units - 5,000 P 25,100
Labor 19,380
Factory overhead 14,900

Completed and transferred —4,800 units

Ending inventory of work-in-process:
Units —700 (with all materials, and 60% of labor and overhead)

The cost per equivalent unit, order (rounded to nearest centavo):

FIFO Average FIFO Average

A. P11.92 P11.92 C. P12.00 P12.00

B. P12.00 P11.92 D. P11.92 P12.00

The following data relates to Department 1 of Single Manufacturing Company:

Work-in-process, October 1:
Cost in Department 1 P11,380
Cost in Department 2
Materials None
Labor P500
Factory overhead 50
Cost in Department 2 in October:
Materials None
Labor P13,000
Factory overhead 450
Unit in process, October 1, 60% completed
as to conversion cost 500

Units received from Department 1 in October at P2.60 per unit 6,700

Units completed and transferred to Department 3 in October 6,800
Units in process, October 31, half completed

as to conversion cost 400

Compute the conversion costs per equivalent unit (rounded to nearest centavo)
FIFO Average FIFO Average
A. P2.00 P2.00 C. P2.01 P2.00

B. P2.01 P2.01 D. P2.00 P2.01

4. The Glorious Corporation manufactures only one product in which the raw material must pass
through Processes A, B and C, in that order, before completion.

Inventories of Process C and of Finished Goods on Oct. 1 were as follows:

- Process C — 1,200 units, 2/3 completed P4,200

- Finished goods — 1,000 units at P3.00 per unit

During October the following transactions were completed:

- 2,000 units with a value of P5,000 were transferred from Process B.

- Direct labor applied to Process C during October was P3,100

- Overhead costs for October applied to Process C were P3,200

Inventories on October 31 are as follows:

- Process C—600 units 1/2 completed
- Finished goods — 1,300 units

Using FIFO method, the value of Process C inventory in process for October 31 is:

A. P4,200 B. P3,500 C. P5,400 D. P2,400

5. Information concerning Department B of Serene Co. is as follows:

Units Cost Transfer In Materials Conversion

Total Cost
Beg. work in process 5,000 P 6,300 P 2,900 P 3,400 P 6,300
Units transferred in 35,000 58,000 17,500 25,500 15,000
58,000
40,000 P64,300 P20,400 P25500 P18.400
P64.300
Units completed 37,000 .
Ending work in process 3.000

Conversion costs were 20% complete as to the beginning work in process and 40% complete as to the
ending work in process. All materials are added at the end of the process. Serene Co. uses the weighted
average method. The portion of the total cost of ending work-in-process attributable to transferred-in
cost is:

A. P0 B. P1,500 C. P1,530 D. P1,650

6. Elsa Inc. instituted a new process in October. During this month, 20,000 units were started in
Department A. Of the units started, 2,000 were lost in the process, 14,000 units were transferred
to Department B, and 4,000 remained in work in process at October 31. The work in process at
October 31 was 100% complete as to material costs and 50% complete as to conversion costs.
Material costs of P54,000 and conversion costs of P80,000 was charged to Department A in
October. What were the total costs transferred to Department B?

A. P93,800 B. P112,000 C. P105,000 D. P144,200

7. Following data for September were taken from the cost records of the Mixing Department, Fair
Manufacturing Company which uses the average costing method:

Work in process, August 31

(all material, 50% converted) 1,000 units
Put into process during the month 10,000 units
Work in process, September 30
(all material, 60% converted) 1,400 units

Costs
Work in process, August 31:
Materials P24,000
Labor 15,000
Factory overhead 7,600 .
Put into process during the month
Material P251,000
Labor 193,800
Factory overhead 149,000

The total cost of the units completed and transferred to the next department was:

A. P576,000 B. P605,400 C. P640,400 D. P693,800

8. In the immediately preceding problem, compute the total cost of the September 30 work-in
process:

A. P29,400 B. P46,600 C. P64,400 D. P103,800

9. Sonic Inc. manufactures a highly sensitive smoke alarm. The company uses the FIFO method for
process costing and for costing goods sold. In costing finished goods, the unit cost for units
completed for work in process inventory at the beginning is kept separate from the unit cost of
smoke alarm started and completed during the month.

The total manufacturing costs for the month of June is P264,000 and 2,750 units are completed
during the month. The inventories at the beginning of June are as follows:

Smoke alarm in process .

(estimated 80% completed) 1,250 units P128,000
Smoke alarm on hand (completed) 600 units 76,800

The inventories at the end of June are:

Smoke alarms in process (50% complete) 500 units
Smoke alarms on hand (complete) 700 units

Compute the cost assigned to:

Work-in-Process, Finished Goods, Work-in-Process, Finished Goods,
End End End End
A. P33,000 P79,200 C. P 33,200 P 79,200
B. P33,000 92,400 D. P 64,400 P 66,000

10. Ablan Co. produces a special kind of insecticides. Materials are added at the end of production of
Mixing Department. For the month of March, 2008, the following data were gathered:
No. of Units
Work-in-process March 1, 40% complete as to
conversion costs 40,000
Started in process during the month 100,000
Transferred to the Molding Department 85,000
Lost units in processing 10,000
Work-in-process, March 31, 60% complete as to
conversion costs 45,000

The costs corresponding to the lost units were absorbed by the remaining units. What are the
equivalent units for the materials unit cost calculation?

FIFO Average FlFO Average

a. 130,000 130,000 c. 140,000 140,000
b. 85,000 85,000 d. 85,000 130,000

11. Argentum Company operates three producing departments — Cutting, Sewing and Finishing. In
February, Sewing Department transferred 6,200 units to Finishing Department, and had 400 units in
process at the end of the month. Sewing Department work-in-process inventories as of January 31, were
1,200 units. These units were still (1/4) one-fourth incomplete as of that date, with a cost of P13,312.
The units started in Sewing Department in February were received from the preceding department at a
cost of P47,595.60.

During February, Sewing Department incurred the following costs:

Materials P 11,772.00
Labor 15,660.00
Factory overhead 2,268.00

As of February 28, Sewing Department has done one quarter of the work required to complete
the process inventories. Compute the cost of the:

Units transferred Work-in-process

a. P86,532.00 P3,525.60
b. P84,882.00 P4,075.60
c. P71,750.00 P 3,525.60
d. P86,532.00 P4,075.60

12. The Maginoo Company manufactures a single product in a continuous process in two
departments. Cost and production statistics for the month of March, 2008 are shown below:

Assembling Finishing
Costs: Department Department
Work in process, March 1 P 9,750 P18,000
Materials 64,000 -
Labor 47,250 85,800
Factory overhead 31,500 47,200
Quantity:
Units in process, March 1
(all materials: half-converted) 3,000 4,000
Units started in process 33,000 -
Units received from preceding department 30,000
Units completed and transferred 30,000 25,000
Units in process, March 31
(all materials: 60% converted) 5,000 6,000
Lost during the process 1,000 3,000

Compute the total costs transferred in:

Assembling Finishing Assembling Finishing
Department Department Department Department
A. P135,000 P250,000 C. P135,000 P238,000
B. P152,500 P286,000 D. P121,500 P210,000