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Process Costing System - Exercises and Problems:
Learning Objective:
Prepare the format of cost of production report.
Calculate equivalent units of production.
What is the treatment of normal and abnormal loss in process costing system?
How the timing of normal and abnormal loss is considered in a cost of production
report?
$16320
43,415
Labor
56,100
58,575
The quantity schedule shows 12,000 units were received during the month from
Department 1; 7,000 units were transferred to finished goods; and 5,000 units in
process at the end of June were 50% complete as to materials cost and 25%
complete as to conversion cost.
Required: Prepare Cost of production report.
Solution:
Department 2
Cost of Production Report
For the Month of June, 19___
Quantity Schedule:
Units received from department 1
12,000
7,000
5,000
Total cost
Unit cost
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$16,320
$1.36
-------
------
Materials
$43,415
$4.57
Labor
56,100
6.80
Factory overhead
58,575
7.10
-------
-------
$158,090
$18.47
--------
-------
$174,410
$19.83
======= =====
Cost Accounted for as Follows:
$138,810
$6,800
11,425
8,500
8,875
--------
35,600
--------
$174,410
=======
Additional computations:
Equivalent production:
Materials = 7,000 + (5,000 50%) = 9,500 units
Labor and factory overhead = 7,000 + (5,000 25%) = 8,250 units
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55,000 liters
39,500liters
10,500 liters
All materials were put into process in Department 1. The cost department collected
following figures for department 2:
Unit cost for units transferred in from department 1
$1.80
$27,520
$15480
55,000
======
39,500
10,500
5,000
55,000
-------
======
Total Cost
Unit Cost
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Cost from preceding department:
Transferred in during the month
$99,000
$1.80
--------
------
$27,520
$0.64
Factory overhead
$15,480
$0.36
--------
------
$43,000
$1.00
$0.18*
--------
------
$142,000
$2.98
======= =====
Cost Accounted for as Follows:
Transferred to next department
$117,710
(39,500 $2.98)
(10,500 $1.98)
$20,790
2,240
1,260
24,290
--------
-------
$142,000
======
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(5,000 1.80) = $9,000 / 50,000 = $0.18
$20,000
$21,816
Labor
7,776
4,104
33,696
--------
The following information was obtained from the department's quantity schedule:
Units received
5,000
4,000
1,000
Solution:
Brooks Inc.
Department 2
Cost of Production Report
For the month of April, 19|____
Quantity Schedule:
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Units received from preceding department
5,000
======
4,000
1,000
5,000
-------
======
Total Cost
Unit Cost
$20,000
$4.00
--------
------
Materials
$21,816
$5.05
$7,776
$1.80
Factory overhead
$4,104
$0.95
--------
------
$33,696
$7.80
--------
------
$53,696
$11.80
======= =====
Cost Accounted for as Follows:
Transferred to next department
$47,200
(4,000 $11.80)
(1000 $4.00)
$4,000
1,616
576
304
6,496
--------
-------
$53,696
======
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Additional Computations
Equivalent units of production:
Materials, labor, and factory overhead = 4,000 + (1,000 32%) = 4,320 units
Units in Process
Equivalent
0.20
0.06
0.06
--------
Total
0.32
=====
OR
50% of 1,000 units 40% = 200 units
20% of 1,000 units 30% = 60 units
30% of 1,000 units 20% = 60 units
Total
=320 units
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(1) Quantity Schedule:
Units received from preceding department A
20,000
======
15,000
5,000
20,000
--------
======
Equivalent Production:
Transferred in
fromDepartment
Materials
A
Conversion
15,000
15,000
Ending inventory
5,000
5,000
3,000
-------
--------
-------
20,000
20,000
20,000
======
======
======
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Cost of Production Report
For the month of April, 19|____
Quantity Schedule:
Units received from preceding department
60,000
======
50,000
Units still in process (All materials - 2/3 labor and overhead) 9,000
Units lost in process (Abnormal loss - 1/2 materials, labor,
and overhead)
1,000
60,000
-------
======
Total Cost
Unit Cost
$212,400
$3.54
--------
------
Materials
$41,650
$1.70
Labor
$101,700
$1.80
Factory overhead
$56,500
$1.00
--------
------
$199,850
$3.50
--------
------
$412,250
$7.04
(60,000 units)
======= =====
Cost Accounted for as Follows:
Transferred to next department
$352,000
(50,000 $7.04)
(1,000 $3.54)
$3,540
350
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Labor (1,000 1/2 $1.80)
900
Factory overhead
500
5,290
(9000 $3.54)
(9,000 0.70)
$31,860
6,300
10,800
Factory overhead
6,000
54,960
--------
-------
$412,250
======
Additional Computations
Equivalent Production:
Materials = 50,000 + 9,000 + 1,000/2 lost units = 59,500 units
Labor and factory overhead = 50,000 + (9,000 2/3) + 1,000/2 lost units = 56,500
Unit Cost:
Materials = $41,650 / 59,500 = $0.70 per unit
Labor = $101,700 / 56,500 = $1.80 per unit
Factory overhead = $56,500 / 56,500 = $1.00 per unit
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Units
Dollars
12,000
$84,000
9,000
2,000
Cost incurred:
Materials
18,000
45,600
12,000
======
9,000
2,000
450
550
12,000
-------
======
Total Cost
Unit Cost
$84,000
$7.00
--------
------
$18,000
$2.00
(12,000 units)
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Labor and factory 0verhead
$45,600
$4.00
--------
------
$63,600
$6.00
--------
------
$147,600
$13.00
======= =====
Cost Accounted for as Follows:
Transferred to finished goods
$121,950
6,050
(550** $11)
(2000 $7.00)
$14,000
5,600
19,600
--------
-------
$147,600
======
*Normal spoilage
**Abnormal spoilage
Additional Computations
Equivalent Production:
Materials = 9,000 units
Labor and factory overhead = 9,000 + (2,000 70%) + 450 + 550
Unit Costs:
Materials = $18,000 / 9,000 = $2.00 per unit
Labor and factory overhead = $45,600 / 11,400 = $4.00 per unit
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materials are added to good units. A spoilage rate of 3% of good output is
considered normal.
Department 2 records for April shows:
Received from department 1
30,000 units
cost
$135,000
Materials
$12,500
$139,340
25,000 units
4,200 units
30,000
======
25,000
4,200
(50% complete)
750
50
30,000
-------
======
Total Cost
Unit Cost
$135,000
$4.50
--------
------
(30,000 units)
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Materials
Labor and factory 0verhead
(Conversion cost)
$12,500
$0.50
$139,340
$5.00
--------
------
$151,840
$5.50
--------
------
$286,840
$10.00
======= =====
Cost Accounted for as Follows:
Transferred to finished goods:
Cost of completed units
(25,000 $10.00)
$250,000
(750 $4.50)
3,375
3,600
(720 $5.00)
$256,975
- Abnormal spoilage:
(50 $4.50)
$225
240
465
(4,200 $4.50)
(2,100 $5)
$18,900
10,500
29,400
--------
------$286,840
======
Additional Computations
Equivalent Production:
Materials = 25,000 units
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Labor and factory overhead = 25,000 + (42,00 50%) + (750 96%) + (50
96%)
= 27,888 units
Unit Costs:
Materials = $12,500 / 25,000 = $.50 per unit
Labor and factory overhead = $139,340 / 27,888 = $5.00 per unit
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Fabrication department
(300 1/3)
100
Assembly department
1,000
Packaging department
100
Shipping area
400
-------1,600
=======
(2)
Equivalent units of Fabrication department's direct labor in all
inventories, Jun 30, 19___
Fabrication department
(300 1/3)
150
Assembly department
1,000
Packaging department
100
Shipping area
400
--------1,650
=======
(3)
Equivalent units of packaging materials in all inventories, June
30, 19___
Packaging department
Shipping area
(300 4/3)
75
400
------475
======