Matz, Chapter # 7, Exercise # 7, Page # 167

Weighted Average Method

Data:
1 5,000 units in process at start, ( Labour 500, FOH 50 )
2 70,000 units received from preceding department at 2.641 per unit
3 Cost incurred during period:
Labour 14,200
FOH 3,450

4 68,000 units completed during period

5 60,000 units transferred to next department
6 8,000 units finished & in hand at the end of the period
7 4,000 units in process at end & 50% completed/ converted
Cost of normal loss is to be absorbed by all finish & unfinish production

Solution :

Process account
Units Rate Cost Units

Balance b/f 5,000 13,680 Transferred 60,000

Received 70,000 2.64 184,870 On Hand 8,000

Cost incurred: Lost 3,000

Material -
Labour 14,200 Balance c/d 4,000
FOH 3,450

75,000 216,200 75,000

Calculation of Equivalent Production Units:

Conversion

Units completed and transferred out 60,000

Add: Units on Hand (completed) 8,000
Add: Work in process (at end) ( 4,000 units x 50 % ) 2,000
EPU 70,000

Calculation of per unit cost:

 Cost Units (EPU) Rate

Per unit cost from Dep 1:

Units received from previous dept 184,870 70,000
Cost incured on Work in process (at start) 13,130 5,000
TOTAL 198,000 75,000 2.64

Labour cost incurred:

On work in process at start 500
During current period 14,200
Total material 14,700 70,000 0.21

FOH cost incurred:

On work in process at start 50
During current period 3,450
Total Conversion 3,500 70,000 0.05

TOTAL PER UNIT COST 2.90

Cost of Normal Loss : ( we assume that inspection take place in start of process )

3,000 units lost (normal) ( 3,000 units x 2.64 ) 7920

7,920 = 0.11 ( per unit cost contribution to good units )

72,000

Cost of Work in Process (at end)

Preceding dep cost (4,000 units x 2.64) 10,560

Labour cost (4,000 units x 1/2 x 0.21) 420
FOH (4,000 units x 1/2 x 0.05) 100
Share of Normal loss (4,000 units x 0.11) 440
Cost of Work in Process (at end) 11,520

Cost of units transferred to next department:

( 60,000 units x 2.90 ) 174,000

Add: Share of Normal Loss ( 60,000 units x 0.11 ) 6,600
Total Cost of 60,000 units completed 180,600

Cost of Finish goods on hand at end:

( 8,000 units x 2.90 ) 23,200

Add: Share of Normal Loss ( 8,000 units x 0.11 ) 880
Total Cost of 8,000 units completed 24,080
Rate Cost

3.01 180,600

3.01 24,080

11,520

216,200
bution to good units )
Chapter # 7, Exercise # 8, Page # 167

FIFO Method

Data:
1 12,400 units transferred to next department
2 500 units lost
3 800 units in process at end, 1/4th completed
4 2,400 units in process at start, Cost 6,656, 3/4th completed

5 Cost incurred during period:

Material 5,886
Labour 7,830
FOH 1,134

6 Cost received from preceding department 23,797.80

Solution :

Unit received from preceding department Units

Units transferred 12,400

Units Lost 500
Units in Ending process 800
Total units in process 13,700
Less: beginning process units (2,400)
Units received from preceding department 11,300

Process Account
Units Rate Cost Units

Balance b/f 2,400 6,656 Transferred 12,400

Received 11,300 2.11 23797.80 Lost 500

Cost incurred: Balance c/d 800

Material 5,886
Labour 7,830
FOH 1,134

13,700 45,304 13,700

Calculation of Equivalent Production Units:

 Material Conversion

Units completed and transferred out 12,400 12,400

Less: Work in Process (at start) (2,400) (2,400)
Units started and completed during the period 10,000 10,000
Add: Work in process (at start) - work this period 600 600
Add: Work in process (at end) - work this period 200 200
EPU 10,800 10,800

Calculation of per unit cost:

Cost Units Rate
Cost received from preceding dep 23797.8 11,300 2.1060
Material cost incurred 5,886 10,800 0.5450
Labour cost incurred 7,830 10,800 0.7250
FOH cost incurred 1,134 10,800 0.1050

PER UNIT COST 3.48

Add: Adjustment for lost units 0.1
Total Unit Cost 3.58

Cost of Normal Loss : ( we assume that inspection take place in start of process )

Cost of Normal loss ( 500 units x 2.1060 ) 1053

1,053 = 0.0975 (per unit cost contibution to good units)

11,300 - 500

Cost of Work in Process (at end)

Preceding dep cost ( 800 units x {2.1060 + 0.0975} ) 1762.8

Material cost (800 units x 1/4 x 0.5450) 109
Labour cost (800 units x 1/4 x 0.7250) 145
FOH (800 units x 1/4 x 0.1050) 21

Cost of Work in Process (at end) 2037.8

Cost of Finished goods:

a) From beginning inventory (2,400 units)

Cost incured till start 6,656
add: Further cost incurred to complete 100%:
Material (2,400 units x 1/4 x 0.5450) 327
Labour (2,400 units x 1/4 x 0.7250) 435
FOH (2,400 units x 1/4 x 0.1050) 63 825

Total cost of 2,400 units (completed)

b) From Current Production (10,000 units)

Cost incurred ( 10,000 units x 3.5785 )
COST OF FINISHED GOODS
Rate Cost

3.4892 43,266

2037.8

45,304
Conversion

( 2,400 units x 3/4th )

( 800 units x 1/4 th )

bution to good units)

 7,481

35,785
43,266
Chapter # 7, Problem # 7-2, Page # 169

Process Account ( Department 1 )

Units Rate Cost Units

Balance b/f 3,000 2,647 Transferred 50,000

Input 61,000 - On Hand 5,000

Cost incurred: Lost 1,000

Material 12,481
Labour 16,273 Balance c/d 8,000
FOH 18,409

64,000 49,810 64,000

Calculation of Equivalent Production Units:

Material

Units completed and transferred out 50,000

Add: Units on Hand (completed) 5,000
Add: Work in process (at end) 8,000
EPU 63,000

Calculation of per unit cost:

Cost Units (EPU) Rate

Material cost incurred:

On work in process at start 749
During current period 12,481
TOTAL 13,230 63,000 0.21

Labour cost incurred:

On work in process at start 837
During current period 16,273
Total material 17,110 59,000 0.29

FOH cost incurred:

On work in process at start 1,061
During current period 18,409
 Total Conversion 19,470 59,000 0.33

TOTAL PER UNIT COST 0.83

Cost of Work in Process (at end)

Material cost (8,000 units x 100% x 0.21) 1,680

Labour cost (8,000 units x 50% x 0.29) 1,160
FOH (8,000 units x 50% x 0.33) 1,320

Cost of Work in Process (at end) 4,160

Cost of units transferred to next department:

Total Cost of 60,000 units completed:

( 50,000 units x 0.83 ) 41,500
41,500

Cost of Finish goods in hand at end:

Total Cost of 8,000 units completed

( 5,000 units x 0.83 ) 4,150
4,150

Process Account ( Department 2 )

Units Rate Cost Units

Balance b/f 2,000 2,564 Transferred 45,000

Received 50,000 0.83 41,500

Lost 2,000
Cost incurred:
Material 3,092 Balance c/d 5,000
Labour 4,045
FOH 4,579

52,000 55,780 52,000

Calculation of Equivalent Production Units:
Material

Units completed and transferred out 45,000

Add: Work in process (at end) 5,000
EPU 50,000

Calculation of per unit cost:

Cost Units (EPU) Rate

Per unit cost from Dep 1:

Units received from previous dept 41,500 50,000
Cost incured on Work in process (at start) 1,600 2,000
TOTAL 43,100 52,000 0.829

Material cost incurred:

On work in process at start 158
During current period 3,092
TOTAL 3,250 50,000 0.07

Labour cost incurred:

On work in process at start 325
During current period 4,045
Total material 4,370 46,000 0.1

FOH cost incurred:

On work in process at start 481
During current period 4,579
Total Conversion 5,060 46,000 0.11

Per unit cost 1.099

Adjustment for lost unit 0.033
Total Per Unit Cost 1.132

Cost of Normal Loss : ( we assume that inspection take place in start of process )

Cost of Normal loss ( 2,000 units x 0.83 ) 1,660

1,660 = 0.033 (per unit cost contibution to good units)

45,000 + 5000
 Cost of Work in Process (at end)

Preceding dep cost ( 5,000 units x {0.033 + 0.829} ) 4,310

Material cost (5,000 units x 100% x 0.065) 325
Labour cost (5,000 units x 20% x 0.095) 95
FOH (5,000 units x 20% x 0.11) 110

Cost of Work in Process (at end) 4,840

Cost of units transferred to next department:

Total Cost of 45,000 units completed:

( 45,000 units x 1.132 ) 50,940
50,940

Process Account ( Department 3 )

Units Rate Cost Units

Balance b/f 2,000 17,145 Transferred 55,000

Additional Input 15,000

Received 45,000 1.13 50,940 Lost 1,000

Cost incurred: Balance c/d 6,000

Material 8,400
Labour 15,236
FOH 22,854

62,000 114,575 62,000

Calculation of Equivalent Production Units:

Material Conversion

Units completed and transferred out 55,000 55,000

Less: Work in Process (at start) (2,000) (2,000)
Units started and completed during the period 53,000 53,000
Add: Work in process (at start) - work this period - 1,600
Add: Work in process (at end) - work this period 6,000 3,000
Add: Unit Lost 1,000 1,000
 EPU 60,000 58,600

Calculation of per unit cost:

Cost Units Rate
Cost received from preceding dep 50,940 45,000 1.13
Material cost incurred 8,400 60,000 0.14
Labour cost incurred 15,236 58,600 0.26
FOH cost incurred 22,854 58,600 0.39

Unit Cost 0.79

Adjusted unit cost transferred in 0.85
Total Unit Cost 1.64

Adjustment for unit cost of preceding department:

50940 = 0.85
45000 + 15000

Cost of Work in Process (at end)

Preceding Dep cost ( 6,000 units x 0.849 ) 5094

Material cost (6,000 units x 100% x 0.14) 840
Labour cost (6,000 units x 50% x 0.26) 780
FOH (6,000 units x 50% x 0.39) 1170

Cost of Work in Process (at end) 7884

Cost of Finished goods:

a) From beginning inventory (2,000 units)

Cost incured till start 17,145
add: Further cost incurred to complete 100%:
Material (2,000 units x 0% x 0.14) -
Labour (2,000 units x 80% x 0.26) 416
FOH (2,000 units x 80% x 0.39) 624 1,040

Total cost of 2,000 units (completed)

b) From Current Production (53,000 units)

Cost incurred ( 53,000 units x 1.639 )
Total Cost of 55,000 units
Add: Share of Normal Loss:

Cost of 1,000 units lost ( 1,000 x 100% x 1.639 )

Total Cost of Finish Goods
Rate Cost

0.83 41,500

0.83 4,150

4,160

49,810

Conversion

50,000
5,000
4,000
59,000
Rate Cost

1.132 50,940

4,840

55,780
 Conversion

45,000
1,000
46,000

ibution to good units)

Rate Cost

1.940 106,691

7884

114,575

( 2,000 units x 80% )

( 6,000 units x 50% )
 18,185

86,867
105,052
 1639
106,691