ADVANCE FINANCIAL ACCOUNTING AND REPORTING PAUL ANTHONY DE JESUS

PROCESS COSTING

Problem 1. RJ Inc. is a company manufacturing a product known as “COLOREE” which undergoes a

uniform process prior to its completion. For the year ended December 31, 2020, the following data are
provided by the company:

a. The work-in-process inventory on January 1, 2020 is 10,000 units which are 80% incomplete as
regards to conversion cost while the work-in-process inventory on December 31, 2020 is 60%
complete as regards to conversion cost.
b. The total units started during the year amounted to 90,000 units while the total units
manufactured during the year amounted to 70,000 units.
c. There is no spoilage during the period.
d. It is the company’s policy to apply direct labor and factory overhead evenly throughout the period
while 2/5 of direct materials are added at the start of the process while the remaining direct
materials are added at the end of the process.
e. The cost of January 1, 2020 work-in-process inventory consists of P100,000-direct material,
P200,000-direct labor and P300,000-factory overhead.
f. The total manufacturing cost for the year consisted of P2M-direct material, P5M-direct labor and
P3M-factory head.

1. Under the Weighted Average process costing system, what is the cost per equivalent unit of
production of Direct Material and Conversion Cost, respectively?
a. 25.61 and 96.59
b. 24.39 and 90.91
c. 21 and 85
d. 23.86 and 103.66

2. Under the FIFO process costing system, what is the cost per equivalent unit of production of
Direct Material and Conversion Cost, respectively?
a. 26.92 and 98.83
b. 25.64 and 93.02
c. 27.78 and 100.00
d. 29.17 and 106.25

Problem 2. Cena company employs Weighted Average process costing system in the assembly department
and FIFO process costing system in the finishing department concerning its only product which
undergoes production in assembly department and finishing department. The following data for the year
ended December 31, 2020 are provided:

ASSEMBLY DEPARTMENT
Units
January 1, 2020 100,000 units – 40% completed
as to conversion cost
December 31, 2020 150,000 units – 80% completed
as to conversion cost
Units started during the year 400,000 units
Cost
Cost of Direct material – P3M
Cost of Direct labor – P5M
Cost of Factory Overhead – P2M
?
DM cost added during 2020 –
P12M
DL cost added during 2020 –
P15M
FOH cost added during 2020 –
P13M

FINISHING DEPARTMENT
Units Cost
January 1, 2020 50,000 units – 70% incomplete Cost of Transferred in – P10M
conversion cost Cost of Direct material – P6M
Cost of Direct labor – P1M
Cost of Factory Overhead – P3M
December 31, 2020 30,000 units – 10% incomplete ?
as to conversion cost
Units started during the year DM cost added during 2020 –
P30M
DL cost added during 2020 –
P40M
FOH cost added during 2020 –
P10M
Additional information for the year:
a. It is the company’s policy to add conversion cost evenly throughout the period in the two
departments.
b. It is the company’s policy to add all direct materials in the assembly department at the start of
the process while all direct materials in the finishing department are added at the end of the
process.
c. There is no spoilage in both departments.

1. In the assembly department, what is the cost of goods manufactured or cost assigned to units
completed for the year ended December 31, 2020?
a. 36,564,500b. 26,117,500 c. 36,451,200 d. 35,523,800

2. In the assembly department, what is the cost assigned to December 31, 2020 work-in-process
inventory?
a. 13,436,400 b. 11,236,600 c. 13,548,800 d. 14,476,200

3. In the finishing department, what is the cost of goods manufactured or cost assigned to units
completed for the year ended December 31, 2020?
a. 129,895,950 b. 125,716,750 c. 131,285,400 d. 128,452,100

4. In the finishing department, what is the cost assigned to December 31, 2020 work-in-process
inventory?
a. 6,668,130 b. 6,276,330 c. 6,401,800 d. 9,235,100

Problem 3. DUB Nation Company employs process costing system regarding its 3-point enhancer product.
The following data are provided for the year ended December 31, 2020:

a. It is the company’s policy to add conversion cost evenly throughout the period while 4/5 of the
direct materials are added at the start of the process while the remaining direct materials are
added at the end of the process.
b. 10% of units started are normally spoiled which all come from the units started.
c. The January 1, 2020 work-in-process inventory consists of 20,000 units with the
following costs: 400,000-direct material, 500,000-direct labor and 100,000-factory overhead.
The beginning inventory is 72% complete as to conversion cost.
d. The total manufacturing costs added during the year consists of P1M-direct material, 1,200,000-
direct labor and 300,000-factory overhead.
e. The units started during the year totaled 80,000 units while the units completed totaled 60,000
units.
f. The December 31, 2020 work-in-process inventory consists of 10,000 units which is 20%
incomplete as to conversion cost.
g. The inspection point occurs when the percentage of completion is 75% as to conversion cost.

1. Under the Weighted Average process costing system, what is the cost per equivalent unit for
direct material and conversion cost, respectively?
a. 10.87 and 16.71
b. 14.89 and 24.85
c. 15.22 and 23.20
d. 14.29 and 22.83

2. Under the FIFO process costing system, what is the cost per equivalent unit for direct material
and conversion cost, respectively?
a. 13.16 and 19.71
b. 18.42 and 26.92
c. 12.20 and 17.54
d. 14.27 and 21.35

Problem 4. Glenda Manufacturing Company applies process costing in the manufacture of its sole
product, “Pharmanex”.

o Manufacturing starts in Department 1 where materials are all added at the start of processing.
The good units are then transferred to Department 2 where all the incremental materials needed
for its completion are added after final inspection.

o In Department 1, units are inspected at the end of processing while in Department 2, inspection
takes place when the units are 90% completed.

o Department 1 uses FIFO costing while Department 2 uses the weighted average costing.
The production data for the month of August show the following:

Department 1 Department 2
UNITS

Beginning work in process, August 1 20,000 10,000

Work to be done 80% 20%
Ending work in process, August 31 30,000 17,500
Work completed 2/3 5/7
Started in process during August 150,000
Normal spoilage (4% of units started in process) 2,500
Abnormal spoilage (1/4 of normal spoilage) 1,250

COST

Work in Process, August 1:

Transferred in - 285,450

Materials 135,000 214,875

Conversion costs 97,500 280,725

Current costs:

Transferred in - ?

Materials 1,980,000 840,000

Conversion costs 3,088,800 1,282,500

1. What is the total costs transferred to Department 2 and the amount of work in-process, end in
Department 1, respectively?
a. 4,227,300; 792,000
b. 4,459,800; 792,000
c. 4,261,800; 396,000
d. 4,459,800; 549,300

2. What is the total costs transferred to the Storeroom and the amount of work in-process, end in
Department 2, respectively?
a. 6,583,650; 725,250
b. 6,474,750; 582,750
c. 6,474,750; 725,250
d. 6,583,650; 582,750

Problem 5. Rudy Company employs process cost system, using FIFO method. A unit of product passes
through two departments: Assembly and Finishing before it is complete. Information regarding Assembly
Department follow:

Work in-process, Aug 1 10,000 units

Spoiled units 7,500
Started in Production 65,000
Transferred out 60,000

Raw materials are added at the beginning of processing in the Assembly department without changing the
number of units being processed. Work in Process on August 1 was 90% complete as to conversion while
80% converted on August 31. The company usually experienced a 5% loss based on the completed units.
Cost data for the month of August follow:

Materials Labor Overhead

Work in-process beginning 81,000 66,000 71,250
Current cost 279,000 220,500 286,875

What is the total cost of units transferred-out and total cost of work in process, end?
a. 870,600; 79,395
b. 870,600; 83,250
c. 864,000; 83,250
d. 864,000; 79,395

JOINT AND BY-PRODUCT

1. MIX Inc. is conducting a joint process which results to three products. The following production data
were provided by MIX Inc. for the current period:

Product Name Units Produced Selling price per unit at split off point
Ace 10,000 P40
Bat 15,000 P20
Can 25,000 P12

Additional data for the period were provided:

 All the ace items were sold for a gross profit of P100,000.
 The joint costs were allocated using physical method.

1. What is the gross profit/(loss) if all the Bat items are sold in current year?
a. 200,000
b. (150,000)
c. (100,000)
d. 50,000

2. Assuming the joint costs are fixed, what is the joint cost allocated to Can Items using the relative
sales value method?
a. 250,000
b. 450,000
c. 750,000
d. 300,000

2. COMBI Inc. manufactures three joint products. The following production data were provided by
COMBI Inc. for the current period:

Product Name Units Produced Additional Processing Final Selling Price

Cost after Split Off
Xen 1,000 P20,000 P50
Yen 2,000 10,000 10
Zen 3,000 30,000 30

Joint product costs for the current period were as follows:

Raw materials P10,000
Direct labor 15,000
Factory overhead 25,000

The company uses the net realizable value method for allocating joint costs.
1. What is the Gross profit/(loss) on the sale of all Xen products?
a. 30,000
b. 21,667
c. 15,000
d. 5,000

2. What is the total gross profit/(loss) on the sale of all the joint products?
a. 40,000
b. 60,000
c. 50,000
d. 30,000

3. BLEND Inc. manufactures three joint products and allocates joint costs at its relative sales value at
split-off point. The following joint product costs were incurred for the current period:
Raw materials 180,000
Direct labor 120,000
Factory overhead 200,000

The following production data were provided by BLEND Inc. for the current period:

Product Name Units Produced Selling price Additional Final Selling

at split off point Processing Cost Price
Uno 10,000 P20.00 P50,000 P24
Dos 20,000 15.00 60,000 18
 Tres 40,000 12.50 100,000 16

What is the total gross profit/(loss) for the current period if BLEND Inc. will correctly process further
the proper items?
a. 540,000
b. 530,000
c. 500,000
d. 510,000
4. CONSO Inc. manufactures joint products ALT and TAB, and a by-product DEL. Costs are assigned to
the joint products by the net realizable value or final market value method which considers further
processing costs in subsequent operations. It is the policy of CONSO Inc. to account for its by-
product by market value or reversal cost method or deduction of net realizable value of by-product
from the joint manufacturing costs of main products. The total manufacturing costs for 100,000 units
were P1,520,000 during the year. Production and costs data follow:

ALT TAB DEL

Units produced 60,000 30,000 10,000

Sales price per unit P70 P25 P10
Further processing cost per unit 20 5 3
Selling and admin expense per unit 5

1. What is the value of DEL to be deducted from the joint manufacturing costs?
a. P100,000
b. P70,000
c. P50,000
d. P20,000

2. What is the gross profit of ALT for the year?

a. 1,500,000
b. 1,600,000
c. 1,400,000
d. 1,750,000

3. What is the gross profit of TAB for the year?

a. 600,000
b. 500,000
c. 700,000
d. 350,000

5. MERGE Inc. manufactures ZEN product from a process that yields a by-product called YAN. The by-
product requires additional processing cost of P30,000. The by-product will require selling and
administrative expenses totaling P20,000. It is MERGE’s accounting policy to charge the joint costs to
the main product only. Information concerning a batch produced during the year ended December
31, 2020 follows:

Product Units Produced Market Value at Split Off Units Sold

ZEN 100,000 P50 60,000

YAN 8,000 P10 8,000

The joint costs incurred up to split-off point are:

Direct materials P2,000,000

Direct labor 800,000
Factory overhead 200,000

The selling and administrative expense of MERGE Inc. for the year ended December 31,2020 is
P1,000,000 exclusive of that for the by-product.

1. What is the gross profit for the year if the net revenue from by-product is presented as other
income?
a. 1,200,000
b. 1,230,000
c. 1,218,000
d. 1,118,000

2. What is the gross profit for the year if the net revenue from by-product is presented as additional
sales revenue?
a. 1,230,000
b. 1,200,000
c. 1,218,000
d. 1,118,000
 3. What is the net income for the year if the net revenue from by-product is presented as deduction
from the cost of goods sold?
a. 200,000
b. 218,000
c. 230,000
d. 118,000

4. What is the net income for the year if the net revenue from by-product is presented as deduction
from the total manufacturing cost of the main product?
a. 218,000
b. 200,000
c. 230,000
d. 118,000

STANDARD COSTING
1. HQ Inc. uses standard costing for the accounting of its product. The budget officer provided the
following standard data imposed by the top-level management concerning the direct materials:

 Standard direct material is 3 per unit of the product.

 Standard price is P5 per unit of direct material

During the year, the company acquired on account 1,000 units of direct material at a total cost of
P4,000. It also manufactured 150 products using 750 direct materials.

The journal entry to record the material purchase variance will include
a. Debit to raw materials at P4,000
b. Credit to accounts payable at P3,750
c. Debit to material price variance at P750
d. Credit to material price variance at P1,000

2. Using the same data in number 1, the journal entry to record the material usage variance will include
a. Debit to work in process at P1,800
b. Credit to raw materials at P3,000
c. Debit to material usage variance at P1,500
d. Credit to material usage variance at P1,200

3. ISO Inc. is employing standard costing for its product. For the year ended December 31, 2020, it
provided the following data:

 During the year, the company acquired 1,500 units of direct materials at a total cost of P15,000.
 The journal entry to record the material variance during the year includes a credit to material
usage variance in the amount of P700.
 The standard direct material is 5 per product.
 The company manufactured 200 units of product using 900 direct materials.

The journal entry to record the material price variance will include a
a. Debit to material price variance of P4,500
b. Debit to material price variance of P2,700
c. Credit to material price variance of P10,500
d. Credit to material price variance of P6,300

4. Q-Prod Inc. has provided the following standard direct labor cost for its product:

 Standard direct labor is 2 hours per unit of the product.

 Standard rate is P15 per direct labor hours.

During the year, the company produced 1,000 units of the product through 1,800 direct labor hours
at a total labor cost of P36,000.

The journal entry to record the labor variances will include will include
a. Debit to direct labor rate variance of P9,000.
b. Debit to direct labor efficiency variance of P3,000
c. Credit to salaries payable of P30,000
d. Debit to work in process of P36,000

5. LQ-Man Inc. has debited direct labor efficiency variance in the amount of P3,000 in the journal entry
to record the variance. During the year, it manufactured 3,200 units of product using 6,600 direct
labor hours at a total cost of P79,200. Each unit of product requires 2 standard direct labor hours.

What is the debit/credit to direct labor rate variance at the time of recording?

a. P19,800 credit
b. P6,400 debit
c. P16,800 credit
d. P3,000 debit