Ch6 Raiborn SM PDF

136 Chapter 6
CHAPTER 6
PROCESS COSTING
QUESTIONS
1. A company that produces homogeneous goods in mass quantities is likely to
use a process costing system. The company can either have a single department or
multiple departments.
Job order costing and process costing are similar in that they are both methods of
assigning costs to products. Also, the methods use similar product accounts (raw
materials, work in process, finished goods, cost of goods sold) to capture the costs
associated with production and use similar cost pools (direct material, direct labor,
and overhead).
Job order costing and process costing differ in the way in which costs are gathered. In
a job order costing system, costs are accumulated by department and by job; in a
process costing system, costs are accumulated by production departments for the
products that flow through those departments. In process costing, production must
be determined on the basis of equivalent units to properly allocate the costs
associated with each cost component to the work that was completed during the
period and to the work that is still in process at the end of the period. Equivalent
units of production are unnecessary in job order costing.
2. The only difference between weighted average and FIFO equivalent units of
production is in the treatment of the work that was completed on beginning
inventory in the prior period. Under weighted average, the work performed on
beginning inventory in the prior period is combined with the work performed
during the current period. Under FIFO, the work performed on beginning
inventory during the prior period is held out separately and not commingled with
the work performed during the current period.
The FIFO method more accurately portrays the actual physical flow of units
through the manufacturing process because it is most likely that the units in
beginning inventory will be the first units to be completed during the current
period—thus a firstin, firstout flow.
3. An equivalent unit of production is an accounting computation that puts

partially completed and wholly completed units on a comparable basis. Without
use of equivalent units, partially completed and fully completed units would be
combined as if they were homogeneous measures of output, resulting in
meaningless data since fully and partially completed units are different outputs.
4. One EUP calculation is generally not sufficient because each component may be
at a different percentage of completion within a production department. However, if
components are at the same percentage of completion, one EUP calculation can be
made. For example, if OH is applied on the basis of direct labor, a single
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137 Chapter 6
“conversion” cost component calculation can be made. Or, if several direct materials
are added at the beginning of the process, they may be combined as a single cost
component.
5. The units started and completed in a period are calculated as the total units
completed during the period minus the units that were in the beginning inventory.
This figure can be used in both the weighted average and FIFO methods as shown
in the chapter. There are, however, other methods of computing EUP in which the
units started and completed are not shown separately.
This calculation is necessary for the FIFO method because work in the prior
period cannot be commingled with work performed in the current period. This
calculation is not necessary for the weighted average method because work
performed on the current period’s beginning inventory in the prior period need not
be separated from work performed to complete the beginning inventory in the
current period.
6. The term transferredout cost is the cost amount that is sent from WIP
Inventory to either the next WIP department or to FG Inventory. Under the WA
method, the units transferred are not distinguished by when they were begun
(whether in the previous or the current period); thus, all transferred out units have
the same perunit cost and only one computation is necessary. Under the FIFO
method, the units that were in the beginning WIP Inventory are considered
separately from those that were begun in the current period. Thus, the beginning
WIP costs must attach to those specific units, which must then be completed at
current period costs for direct material, direct labor, and overhead. After
determination of the total cost to manufacture the beginning WIP Inventory units,
the next computation reflects the units that were started and completed in the
current period, which only includes current period costs.
7. Under either the weighted average or FIFO method, costs are assigned
to ending inventory by multiplying the cost per EUP for each cost component
times the EUP calculated for that component. The costs for these components are
then totaled.
8. The only difference between process costing in a multidepartment

environment and a single department environment is that there will be a cost
component labeled “Transferred In.” The costs of previous departments must follow
the flow of goods into successor departments to determine the full cost of production.
9. The cost per unit transferred out of the first department will always be
equal to the cost per unit transferred in to the second department unless there is a
change in the unit measurement in the second department. For example, the first
department might use pounds of cereal, but the second department might measure
units in 24oz. boxes of cereal. Thus, if the cost per pound of cereal transferred out
were $2, the cereal cost per box transferred in would be ($2 per pound × 1.5 pounds)
or $3.
10. A hybrid costing system is one in which process costing is used to

Chapter 6 138
account for certain product costs and job order costing is used to account for other
product costs. Hybrid costing is common in environments that have, for example,
material costs that vary substantially from one production run to another (gold versus
copper), but require all products to flow through the same physical conversion
processes. In this example, the material would be accounted for on a job order basis
and the conversion would be accounted for using process costing.
11. Under a standard costing system, the Raw Material, Work in Process,
and Finished Goods Inventory accounts are accounted for at standard costs.
Actual costs of each process or each department are also captured in a standard
costing system, and variances can be computed as differences between the
standard and actual amounts for each cost component. The variances provide
information to management about the efficiency of operations because they reflect
differences between expected (standard) and actual costs.
12. The “method of neglect” is used to treat the cost of normal spoilage in
a process costing system. Under this method, the spoiled units are simply ignored
in the cost of production report because it is assumed that there will always be a
given level (or less) of spoilage and that such a level cannot be eliminated. By
using the method, the good production absorbs the cost of the spoiled production.
13. Normal loss refers to an expected reduction in production quantity

based on the company’s production technology and production practices.
Abnormal loss refers to a quantity of loss above the normal loss quantity.
A normal loss creates an expected production cost, and using the “method of

neglect,” that cost is inventoriable as part of the cost of good production. The
method of neglect ignores the spoiled units in the EUP schedule and, as such,
assigns costs to good units. The cost of spoiled units found at an inspection point
will be assigned to all units that have passed the inspection point. The method of
neglect raises the cost per equivalent unit because no costs are assigned to the
spoiled units.
Abnormal spoilage cost is not expected, and thus, it is not inventoriable.

Abnormal losses would more likely be preventable than normal losses because
abnormal losses are less likely to be caused by factors that are inherent in the
materials or production methods. For example, a known amount of material loss
(waste) is to be expected if lower quality materials are utilized. However, any loss
beyond the expected amount would likely be caused by other factors that are
subject to management control, e.g., production errors.
139 Chapter 6
EXERCISES
14. Each student will have a different answer. No solution provided.
15. a. 24,000 + 600,000 = 624,000 pounds
b. & c. Beginning WIP Inventory 24,000
Started 600,000
To account for 624,000
Completed (608,000)
Ending WIP Inventory 16,000
Units started and completed = 608,000 – 24,000 = 584,000
Units DM CC
Beginning WIP Inventory 24,000 24,000 24,000
Started & completed 584,000 584,000 584,000
Ending WIP Inventory (65%) 16,000
16,000
10,400

EUP 624,000 624,000 618,400
16. a. & b. Beginning WIP Beginning WIP
Inventory (30%) 70,000 Inventory 70,000
Started 445,300 Started and completed 357,500
To account for 515,300 Ending WIP Inventory
87,800
Accounted for 515,300
Units DM CC
87,800
30,730

EUP 515,300 515,300 458,230
17. a. Units CC
Beginning WIP Inventory (40%) 10,000
Started 350,000
Units to account for 360,000
Beginning WIP Inventory 10,000 10,000

Started and completed 334,000 334,000
Transferred out 344,000

11,200
Units accounted for 360,000 355,200
b. Units CC
Started 480,000
Chapter 6 140
20,800

c. Units CC
Started 405,000

Ending WIP Inventory (90%) 4,200 3,780
d. Units CC
Started 359,100

8,235
18. a. Work to be performed = 100% – 45% = 55% for conversion costs only
b. & c. Beginning WIP Inventory 24,000
Started 600,000
Accountable for 624,000
Completed (608,000)
Units started and completed = 608,000 – 24,000 = 584,000
Units DM CC
Beginning WIP Inventory (55%) 24,000 0 13,200
Ending WIP Inventory (65%)
16,000 16,000

10,400
EUP 624,000 600,000 607,600
19. a. & b. Beginning WIP Beginning WIP
Inventory 70,000 Inventory 70,000
To account for 515,300 Ending WIP Inventory 87,800

Units DM CC
Beginning WIP Inventory (70%) 70,000 0 49,000
141 Chapter 6

87,800
30,730
EUP 515,300 445,300 437,230
20. a. Units CC

Started 350,000
Beginning WIP Inventory (60%) 10,000 6,000

11,200

b. Units CC

Started 480,000

20,800

c. Units CC

Started 405,000

Ending WIP Inventory (90%) 4,200 3,780
d. Units CC
Started 359,100

8,235
Chapter 6 142
21. a. Beginning WIP Inventory Beginning WIP
(100%; 60%; 75%) 15,000 Inventory 15,000
To account for 635,000 Ending WIP Inventory
(100%; 35%; 60%) 25,400

Units DM DL OH

Beginning WIP Inventory 15,000 15,000 15,000 15,000
Started & completed 594,600 594,600 594,600 594,600
25,400
8,890 15,240

Equivalent units 635,000 635,000 618,490 624,840
b. Units DM DL OH

Beginning WIP Inventory 15,000 0 6,000 3,750
Ending WIP Inventory
25,400
25,400 8,890
15,240
Equivalent units 635,000 620,000 609,490 613,590
c. Equivalent units (WA) 635,000 618,490 624,840

EUP in beginning WIP
Inventory (15,000) (9,000) (11,250)
Equivalent units (FIFO) 620,000 609,490 613,590
22. a. Beginning WIP Inventory 180,000
Tons started 3,400,000
Total tons to account for 3,580,000
b. Total tons to account for 3,580,000
Tons in ending WIP Inventory (165,000)

Tons transferred out 3,415,000
Tons in beginning WIP Inventory (180,000)

Tons started & completed (tons) 3,235,000
c. Material Conversion

Started & completed 3,235,000 3,235,000
Ending WIP Inventory (100%, 40%)
165,000
66,000
WA EUP 3,580,000 3,481,000

d. Material Conversion
Beginning WIP Inventory (0%, 35%) 0 63,000
Started & completed 3,235,000 3,235,000
Ending WIP Inventory (100%, 40%) 165,000
66,000
FIFO EUP 3,400,000 3,364,000
e. DM CC
WA EUP 3,580,000 3,481,000
143 Chapter 6
Equivalent units in BI
(180,000) (117,000)

FIFO EUP 3,400,000 3,364,000
23. a. Beginning Inventory 21,600
Units started 561,000
b. Units to account for 582,600
Units in BI (21,600)
Units in EI (13,700)
Units started & completed 547,300
c. DM DL OH
BI 21,600 21,600 21,600
EI (75%, 25%, 10%)
10,275 3,425 1,370
EUP (WA) 579,175 572,325 570,270
d. DM DL OH
BI (15%, 40%, 55%) 3,240 8,640 11,880
EI (75%, 25%, 10%) 10,275
3,425 1,370
EUP (FIFO) 560,815 559,365 560,550
e. DM DL OH
EUP (WA) 579,175 572,325 570,270
Equivalent units in BI (18,360) (12,960)
(9,720)
EUP (FIFO) 560,815 559,365 560,550
24. a. DL cost = Conversion cost – OH cost = $189,648 – $85,200 = $104,448
b. DM DL Overhead
Beginning WIP Inventory $ 26,232 $ 19,504 $ 20,640
Current period 158,688
104,448
85,200
Total costs $184,920 $123,952 $105,840
Divided by EUP ÷ 53,600 ÷ 48,800 ÷ 42,000
Cost per EUP $3.45 $2.54 $2.52
25. DM DL Overhead

WA EUP 53,600 48,800 42,000
Beginning WIP EUP
(7,200)
(8,000)
(7,920)
FIFO EUP
46,400 40,800 34,080

Current period cost $158,688 $104,448 $85,200
Divided by EUP ÷ 46,400 ÷ 40,800 ÷ 34,080
Cost per EUP $3.42 $2.56 $2.50
26. a. DM DL OH Total

Beginning WIP $ 19,600 $ 6,320 $ 10,020 $ 35,940
Current period 54,000 34,720
84,480 173,200

Chapter 6 144
Total $ 73,600 $41,040 $ 94,500 $209,140
b. Total costs $ 73,600 $ 41,040 $ 94,500 $209,140

WA EUP ÷ 160,000 ÷ 152,000 ÷ 150,000
Cost per EUP $0.46 $0.27 $0.63 $1.36
c. Current costs $ 54,000 $ 34,720 $ 84,480 $173,200

FIFO EUP ÷ 120,000 ÷ 124,000 ÷ 132,000
Cost per EUP $0.45 $0.28 $0.64 $1.37
d. WA EUP 160,000 152,000 150,000

FIFO EUP 120,000 124,000 132,000
Beg. WIP EUP 40,000 28,000 18,000
Percent complete 100% 70% 45%
27. Units Units

Beginning WIP Beginning WIP
Units started 81,500 Started & completed 76,900
Units to account for 91,300 Ending WIP Inventory 4,600

Other
Canisters Materials DL OH
Beginning WIP
Inventory 9,800 9,800 9,800 9,800
EI 4,600 1,840
920 460
EUP 91,300 88,540 87,620 87,160
Costs: Other
Canisters Materials DL OH Total
Beginning WIP $ 6,535 $ 6,174 $ 5,594 $ 1,070 $ 19,373
86,793
82,026
160,176
390,935

Total cost $68,475 $92,967 $87,620 $161,246 $410,308
Divided by EUP ÷ 91,300 ÷ 88,540 ÷ 87,620 ÷ 87,160
Cost per EUP $0.75 $1.05 $1.00 $1.85 $4.65
28. a. Units
Beginning WIP Inventory 400
Units started 3,800
Total units completed 3,900
Ending WIP Inventory 300
Units accounted for 4,200
145 Chapter 6
Material Conversion
Beginning WIP Inventory 400 400
Units started & completed 3,500 3,500
Ending WIP Inventory 120 180
EUP 4,020 4,080
b. Material Conversion Total

Beginning WIP $ 4,349 $ 4,658 $ 9,007
Current costs 60,775
46,750
107,525

Total cost $65,124 $51,408 $116,532
Divided by EUP (WA) ÷ 4,020 ÷ 4,080
Cost per EUP $16.20 $12.60 $28.80
29. Units Units

Units started 81,500 Started & completed 76,900

Other
Canisters Materials DL OH
Beginning WIP
Inventory 0 3,920 5,880 7,840
EI 4,600
1,840
920 460
EUP 81,500 82,660 83,700 85,200
Costs: Other
Canisters Materials DL OH Total
Current period $61,940 $86,793 $82,026 $160,176 $390,935
Divided by EUP ÷ 81,500 ÷ 82,660 ÷ 83,700 ÷ 85,200
Cost per EUP $0.76 $1.05 $0.98 $1.88 $4.67
30. a. Units
Units started 3,800
Total units completed 3,900
300
Material Conversion
Chapter 6 146
Beginning WIP Inventory 120 60
Units started & completed 3,500 3,500
EUP 3,740 3,740
b. Material Conversion Total

Current costs $60,775 $46,750 $107,525
Divided by EUP (FIFO) ÷ 3,740 ÷ 3,740
Cost per EUP $16.25 $12.50 $28.75
31. a. 390,000 × ($7.50 + $9.00 + $10.20) = 390,000 × $26.70 = $10,413,000
b. DM: $7.50 × (55,500 × 100%) $416,250
DL: $9.00 × (55,500 × 30%) 149,850
OH: $10.20 × (55,500 × 25%) 141,525

Total of ending inventory $707,625
147 Chapter 6
c. Cost of goods transferred out $10,413,000
Ending WIP 707,625
Total cost to account for $11,120,625
32. a. BI cost $ 458,482.00
Cost to complete:
DM (42,600 × 20% × $10.74) $ 91,504.80
DL (42,600 × 55% × $13.88) 325,208.40
OH (42,600 × 70% × $24.80) 739,536.00 1,156,249.20

Total cost of BI transferred $1,614,731.20
b. Goods started and completed = 1,570,000 – 42,600 = 1,527,400
Total FIFO cost per EUP = $10.74 + $13.88 + $24.80 = $49.42
Total cost of BI transferred $ 1,614,731.20
Cost of goods S&C (1,527,400 × $49.42) 75,484,108.00
Total cost of goods transferred $ 77,098,839.20
c. Cost of ending inventory:
DM (28,400 × 35% × $10.74) $106,755.60
DL (28,400 × 15% × $13.88) 59,128.80
OH (28,400 × 25% × $24.80) 176,080.00

Total cost of EI $341,964.40
d. Total cost to account for
Cost of goods transferred $77,098,839.20
Cost of ending inventory
341,964.40
Total cost to account for $77,440,080.60
33. a. Because direct material (other than packaging) is 100 percent complete at the
start of production, the number of EUP shown for direct material is also the
number of units in BI.
Material (54,000 ÷ 54,000) = 100%
Packaging (0 ÷ 54,000) = 0%
Labor (16,200 ÷ 54,000) = 30%
Overhead (18,900 ÷ 54,000) = 35%
b. Beginning WIP Inventory:
DM (other than packaging) $789,040
DL 91,862
Overhead 145,908
$1,026,810
Complete beginning WIP Inventory:
Packaging (54,000 × 100% × $3.00) $162,000
DL (54,000 × 70% × $10.84) 409,752
Overhead (54,000 × 65% × $7.68) 269,568
841,320
Chapter 6 148
c. # of units S&C = Units completed – Units in BI
# of units S&C = 370,000 – 54,000 = 316,000
Cost of units S&C = 316,000 × ($29.50 + $3.00 + $10.84 + $7.68) = 316,000 ×
$51.02 = $16,122,320
d. DM (other than packaging) (12,000 × 100% × $29.50) $354,000
Labor (12,000 × 30% × $10.84) 39,024
Overhead (12,000 × 55% × $7.68) 50,688
Total $443,712
34. a. Beginning WIP 1,000
Started 8,400
Units Material Conversion

Beginning WIP 1,000 1,000 1,000
Ending WIP 300 240 210
Units accounted for 9,400 9,340 9,310
Total Material Conversion

Beginning WIP $ 5,006.30 $ 4,133.20 $ 873.10
Current period 86,354.00
62,928.00
23,426.00

Total costs $91,360.30 $67,061.20 $24,299.10
EUP ÷ 9,340 ÷ 9,310
Cost per EUP $9.79 $7.18 $2.61
b. Cost transferred out = 9,100 × $9.79 = $89,089
c. Ending WIP
DM (240 × $7.18) $1,723.20
CC (210 × $2.61) 548.10
Total $2,271.30
d. Units Material Conversion

Complete BI (40%, 70%) 1,000 400 700
Ending WIP 300
240 210

Beginning WIP $ 5,006.30
Current Period 86,354.00
$62,928.00 $23,426.00
Total costs $91,360.30
EUP ÷ 8,740 ÷ 9,010
Cost per EUP $9.80 $7.20 $2.60
149 Chapter 6
e. Transferred out:
Costs in BI $5,006.30
Cost to complete BI
DM (400 × $7.20) 2,880.00
CC (700 × $2.60) 1,820.00
$ 9,706.30
Started & completed (8,100 × $9.80) 79,380.00

Total cost transferred $89,086.30
f. Ending WIP
DM (240 × $7.20) $1,728
CC (210 × $2.60) 546
Total $2,274
g. WIP Inventory 62,928
RM Inventory 62,928
WIP Inventory 13,070
Wages Payable (or Cash) 13,070
Factory Overhead Control 10,356
FG Inventory 89,089
35. a. Ending WIP Inventory EUP Cost per EUP Total Cost

Transferred in (4,000 × 100%) 4,000 $10 $40,000
Material (4,000 × 0%) 0 2 0
Conversion (4,000 × 80%) 3,200 6 19,200

Total cost $18 $59,200
b. Transferred out: 25,000 × ($10 + $2 + $6) = 25,000 × $18 = $450,000
c. Finished Goods Inventory 450,000
WIP Inventory––Casing Dept. 450,000
36. a. Beginning WIP Beginning WIP
Transferred in 80,000 Started & completed 74,000

Units Trans. In Material Conversion

6,000
0 4,800

Chapter 6 150
EUP (WA) 85,000 85,000 79,000 83,800
b. Costs Total Trans. In Material Conversion

Beginning WIP Inventory $ 8,643 $ 7,550 $ 0 $ 1,093
80,000
10,270
13,991

Total cost to account for $112,904 $87,550 $10,270 $15,084
Divided by EUP ÷ 85,000 ÷ 79,000 ÷ 83,800
Cost per EUP $1.34 $1.03 $0.13 $0.18
c. 79,000 × $1.34 = $105,860
d. Transferred in (6,000 × $1.03) $6,180
Conversion (4,800 × $0.18)
864
Total ending WIP cost $7,044
37. a. Beginning WIP Beginning WIP
Transferred in 80,000 Started & completed 74,000

Units Tran. In Material Conversion

Complete BI 5,000 0 5,000 3,500
6,000
0 4,800

EUP (WA) 85,000 80,000 79,000 82,300
b. Costs Total Trans. In Material Conversion

Beginning WIP
Inventory $ 8,643
$80,000 $10,270 $13,991
Total cost to account for $112,904
Divided by EUP ÷ 80,000 ÷ 79,000 ÷ 82,300
Cost per EUP $1.30 $1.00 $0.13 $0.17
c. Beginning WIP costs $8,643
Cost to complete:
DM (5,000  $0.13) 650
CC (3,500  $0.17) 595 $ 9,888
Started and completed (74,000  $1.30) 96,200
Cost transferred out $106,088
d. Transferred in (6,000  $1.00) $6,000
Conversion (4,800  $0.17)
816
Total ending WIP cost $6,816
151 Chapter 6
38. a. Fabrication:
Started 40,000 Started & completed 33,200


6,800
4,080

EUP (WA) 45,000 45,000 42,280
Units started in Assembly = Units transferred out of Fabrication = 5,000 +
33,200 = 38,200
Assembly:
Started 38,200 Started & completed 32,100


6,100

0 915
EUP (WA) 40,200 40,200 34,100 35,015
b. Fabrication:
Beginning WIP
Inventory 5,000 0 3,750
6,800
4,080

EUP (FIFO) 45,000 40,000 41,030
Assembly:
6,100
0 915
EUP (FIFO) 40,200 38,200 34,100 34,315
39. a. Beginning WIP Inventory 0 Started & completed 2,400

Started 2,500 Ending WIP Inventory 100
Total 2,500 Units accounted for 2,500
Chapter 6 152
Material Labor Overhead

Started and completed 2,400 2,400 2,400
Ending WIP Inventory 100 25 35
EUP 2,500 2,425 2,435
Cost of goods transferred out:
Direct material:
Dacron (250 × $10) $ 2,500
Denim (480 × $8) 3,840
Cotton (1,670 × $12) 20,040 $26,380
Direct labor (2,400 × $9) 21,600
Overhead (2,400 × $6) 14,400

Total $62,380
b. Cost of ending WIP Inventory:
Direct material:
Dacron (50 × $10) $500
Denim (20 × $8) 160
Cotton (30 × $12) 360
$1,020
Direct labor (25 × $9) 225
Overhead (35 × $6)
210
Total $1,455
40. a. Beginning WIP Inventory 0 Started & completed 105

Started 130 Ending WIP Inventory 25

Total 130 Units accounted for 130
Material Conversion
Started and completed 105 105
Ending WIP Inventory 25
15

EUP 130 120
Cost of goods completed:
Direct material:
Glass (65 × $24) $1,560
Metal (12 × $15) 180
Natural (28 × $7) 196 $1,936
Conversion (105 × $23) 2,415

Total $4,351
b. Cost of ending WIP Inventory:
Direct material:
153 Chapter 6
Glass (5 × $24) $120
Metal (13 × $15) 195
Natural (7 × $7)
49 $364
Conversion (25 × 60% × $23) 345

Total $709
41. a. Beginning WIP Inventory 12,000
Started 310,000
Beginning WIP Inventory 12,000
Started & completed 302,000
Ingred. Packaging Conversion

Beginning WIP Inventory 0 12,000 3,600
0
4,800
EUP 310,000 314,000 310,400
b. Standard cost of goods completed: 314,000 × $0.67 = $210,380
c. Cost of ending WIP Inventory:
Ingredients (8,000 × $0.25) $2,000
Conversion (4,800 × $0.37)
1,776
Total $3,776
42. a. DM (180,000 × 100% × $0.10) $18,000
CC (180,000 × 45% × $0.11)
8,910
Total cost in BI $26,910
b. DM (144,000 × 100% × $0.10) $14,400
CC (144,000 × 65% × $0.11)
10,296
Total cost in EI $24,696
c. Beginning WIP Inventory 180,000
Started 1,300,000
Units to account for 1,480,000
Total units to account for 1,480,000
Ending WIP Inventory (144,000)
Units transferred out 1,336,000
Cost transferred out = 1,336,000 × $0.21 = $280,560
d. Material Labor OH

To complete BI (units) 0 99,000 99,000
Started & completed 1,156,000 1,156,000 1,156,000
Ending inventory 144,000
93,600 93,600
Chapter 6 154
Equivalent units (FIFO) 1,300,000 1,348,600 1,348,600

Multiply by unit cost × 0.10
× 0.02 × 0.09
Standard cost of period $ 130,000 $ 26,972 $ 121,374
Actual cost of period
(184,000)
(27,126)
(118,500)
Variance $ (54,000) U $ (154) U $ 2,874 F
e. Work in Process Inventory 130,000
Material Variance 54,000
Raw Material Inventory 184,000
Work in Process Inventory 26,972
Labor Variance 154
Wages Payable (or Cash) 27,126
Work in Process Inventory 121,374
Manufacturing Overhead 118,500
Overapplied Overhead 2,874
43. a & b. Units Material Conversion

Beginning inventory (60%; 70%) 16,000
Gallons started 360,000
Gallons to account for 376,000
Beginning inventory completed 16,000 6,400 4,800

Gallons started and completed 349,200 349,200 349,200
Total gallons transferred 365,200
Ending inventory (40%; 20%) 8,000 3,200 1,600
Normal spoilage*
2,800 0
0
Gallons accounted for (FIFO EUP) 376,000 358,800 355,600
*All spoilage is normal; the 2,800 gallons is less than 0.02 × 360,000.
44. Normal spoilage allowed = 120,000 pounds × 0.08 = 9,600 pounds

Beginning inventory 36,000
Pounds started 120,000
Pounds to account for 156,000
Beginning WIP Inventory 36,000 0 19,800

Ending WIP Inventory 21,600 21,600 3,240
Normal spoilage 8,400 0 0
Pounds accounted for (FIFO) 156,000 111,600 113,040

Beginning inventory cost $24,800
Current costs
72,972 $ 39,060 $ 33,912
Total costs $97,772
Divided by EUP ÷ 111,600 ÷ 113,040
155 Chapter 6
Cost per EUP $0.65 $0.35 $0.30
Cost Assignment
Transferred out:
Beginning WIP Inventory cost $24,800
Conversion cost to complete (19,800 × $0.30) 5,940
Total cost of beginning inventory $30,740
Started & completed (90,000 × $0.65) 58,500
$89,240
Ending WIP Inventory:
Material (21,600 × $0.35) $ 7,560
Conversion (3,240 × $0.30) 972
8,532
Total cost accounted for $97,772
45. a. Units to account for = 20,000 + 120,000 = 140,000 units
Chapter 6 156
b. Units to account for 140,000
Units completed (116,400)
Units in ending WIP Inventory (16,000)

Spoiled units 7,600
Normal loss = 120,000 × 0.03 = 3,600 units
Abnormal loss = 7,600 – 3,600 = 4,000 units
c. Units Material Conversion

Transferred out 116,400 116,400 116,400

Ending inventory 16,000 16,000 3,200
Abnormal spoilage 4,000 4,000
4,000
The normal spoilage is considered continuous because it is shrinkage.
d. Using the “method of neglect,” the cost of normal spoilage is

automatically spread among all of the remaining units produced (including the
abnormal spoilage).
e. Cost of abnormal spoilage is written off as a period cost (loss).
46. a. Units Material Conversion

Pounds started 425,000
BI completed 40,000 0 6,000

Started & completed* 405,000 405,000 405,000
Ending inventory 10,000 10,000 2,500
Abnormal spoilage 8,000 8,000
5,600
EUP (FIFO) 465,000 423,000 419,100
*Amount necessary to balance the calculation.
The normal spoilage is treated under the method of neglect.

b. Ending inventory:
Material (10,000 × $0.08) $ 800
Conversion (2,500 × $0.15)
375
Total cost $1,175
c. Abnormal spoilage:
157 Chapter 6
Material (8,000 × $0.08) $ 640
Conversion (5,600 × $0.15)
840
Total cost (treated as a loss) $1,480
Chapter 6 158
PROBLEMS
Units started 1,000,000
Units to account for 1,200,000

Units accounted for 1,200,000 1,200,000 1,110,000
b. BI conversion cost = $671,875 × 1.6 = $1,075,000
Current period conversion cost = $3,976,250 × 1.6 = $6,362,000
Cost in BI $ 2,275,000 $1,200,000 $1,075,000
Current cost 14,162,000
7,800,000
6,362,000

Total cost to account for $16,437,000 $9,000,000 $7,437,000
Divided by EUP ÷ 1,200,000 ÷ 1,110,000
Cost per EUP $14.20 $7.50 $6.70
c. Transferred out (900,000 × $14.20) $12,780,000
Ending inventory:
Material (300,000 × $7.50) $2,250,000
Conversion (210,000 × $6.70) 1,407,000
3,657,000
Total cost accounted for $16,437,000
48. a. (1) Material Labor Overhead

BI units 100,000 100,000 100,000
Units started & completed 1,100,000 1,100,000 1,100,000
EI unit 400,000 240,000 240,000
EUP 1,600,000 1,440,000 1,440,000
(2) Total Material Labor Overhead

BI $ 1,115,500 $ 750,000 $ 215,000 $ 150,500
Current 12,628,500
5,650,000
4,105,000
2,873,500

Total $13,744,000 $6,400,000 $4,320,000 $3,024,000
Divided by EUP ÷ 1,600,000 ÷ 1,440,000 ÷ 1,440,000
Cost per EUP $9.10 $4.00 $3.00 $2.10
(3) Beginning FG Inventory $ 0
CGM (1,200,000 × $9.10) 10,920,000

Goods available for sale $10,920,000
Ending FG Inventory (124,000)
CGS $10,796,000
b. Finished Goods Inventory 10,920,000
Work in Process Inventory 10,920,000
159 Chapter 6
Cost of Goods Sold 10,796,000
Finished Goods Inventory 10,796,000
49. a. Gallons transferred out 242,000
Gallons in ending WIP 23,500

Total gallons to account for 265,500
Gallons in beginning WIP (36,000)
b. Material Labor Overhead

3,525 2,350
WA EUP 265,500 245,525 244,350

BI costs $ 183,510 $ 98,526 $ 78,273
Current costs 1,136,025
451,450 723,195

Total cost $1,319,535 $ 549,976 $801,468
EUP–FIFO ÷ 265,500 ÷ 245,525 ÷ 244,350
Cost per EUP $4.97 $2.24 $3.28
Total cost to account for = $1,319,535 + $549,976 + $801,468 = $2,670,979
Transferred out = 242,000 × ($4.97 + $2.24 + $3.28) = 242,000 × $10.49 =
$2,538,580
c. DM (23,500 × $4.97) $116,795
DL (3,525 × $2.24) 7,896
OH (2,350 × $3.28) 7,708
Total EI $132,399
50. a. Delacroix Co.

Cost of Production Report
For the Month of March 2013
Production Data
Units Material Labor Overhead
Beginning Inventory 800
Beginning WIP Inventory 800 800 800 800

360
320
Units accounted for 12,200 12,080 12,160 12,120
Cost Data
Total Material Labor Overhead
Beginning WIP Inventory $ 21,138 $ 6,748 $ 8,680 $ 5,710
Chapter 6 160
259,012
58,200
188,210

Total cost to account for $526,560 $265,760 $66,880 $193,920
Divided by EUP ÷ 12,080 ÷ 12,160 ÷ 12,120
Cost per EUP $43.50 $22.00 $5.50 $16.00
Cost Assignment
Transferred out (11,800 units × $43.50) $513,300
Ending Inventory:
Material (280 × $22) $6,160
Labor (360 × $5.50) 1,980
Overhead (320 × $16) 5,120
13,260
b. Raw Material Inventory XXX
Accounts Payable (for RM purchases) XXX
Raw Material Inventory 259,012
Wages Payable 58,200
Factory Overhead Control 188,210
Factory Overhead Control XXX
Various accounts (for actual OH) XXX
Finished Goods Inventory 513,300
Cost of Goods Sold (for the cost of sales) XXX
Finished Goods Inventory XXX
c. Raw Material Inventory WIP Inventory
Beg. XXX Issued 259,012 Beg. 21,138 CGM 513,300
Purch. XXX DM 259,012
DL 58,200
OH 188,210
End. XXX End. 13,260
Wages Payable FG Inventory
DL 58,200 Beg. XXX CGS XXX
CGM 513,300
End. XXX
Factory Overhead Control Accounts Payable
Actual XXX Applied 188,210 RM Purch. XXX
161 Chapter 6
Cost of Goods Sold
CGS XXX


16,000
12,800

b. Total Material Conversion

Beginning WIP cost $ 53,580
Current cost 1,055,808
$778,272 $277,536
Divided by EUP ÷ 321,600 ÷ 330,400
Cost per EUP $3.26 $2.42 $0.84
c. Beginning WIP Inventory $53,580
Complete WIP
CC (12,000 × $0.84) 10,080
$ 63,660
Started & completed
(305,600 × $3.26) 996,256
Cost transferred out $1,059,916
d. DM (16,000 × $2.42) $38,720
CC (12,800 × $0.84) 10,752

Total cost of ending WIP Inventory $49,472
52. a. Gallons transferred out 242,000
Gallons in ending WIP
23,500
Total gallons to account for 265,500
Gallons in beginning WIP (36,000)
b. Material Labor Overhead

Beginning WIP Inventory 0 16,200 10,800
3,525 2,350
EUP––FIFO 229,500 225,725 219,150
Chapter 6 162
Current costs $1,136,025 $451,450 $723,195

EUP––FIFO ÷ 229,500 ÷ 225,725 ÷ 219,150
Cost per EUP $4.95 $2.00 $3.30
Beginning WIP ($183,510 + $98,526 + $78,273) $360,309
Complete beginning WIP Inventory
DL (16,200 × $2.00) $32,400
CC (10,800 × $3.30) 35,640

68,040
Total cost of BI transferred $428,349
c. Total cost per EUP = $4.95 + $2.00 + $3.30 = $10.25
Total cost of BI transferred $ 428,349
Started & completed (206,000 × $10.25) 2,111,500

Total cost of goods completed $2,539,849
d. $2,539,849 ÷ 242,000 = $10.50 (rounded)
e. DM (23,500 × $4.95) $116,325
DL (3,525 × $2.00) 7,050
OH (2,350 × $3.30) 7,755
Total EI $131,130
53. a. Delacroix Co.
For the Month of March 2013
Production Data: Units Material Labor Overhead

Beginning inventory 800

Ending inventory 400 280
360
320
Cost Data: Total Material Labor Overhead

Cost in BI $ 21,138
$259,012 $58,200 $188,210
Divided by EUP ÷ 11,720 ÷ 11,640 ÷ 11,800
Cost per EUP $43.05 $22.10 $5.00 $15.95
Cost Assignment
Transferred out:
Beginning WIP Inventory $21,138
Cost to complete:
Material (440 × $22.10) 9,724
Labor (280 × $5.00) 1,400
163 Chapter 6
Overhead (480 × $15.95) 7,656 $ 39,918

Material (280 × $22.10) $ 6,188
Labor (360 × $5.00) 1,800
Overhead (320 × $15.95) 5,104
13,092

b. WA and FIFO process costing differ because of how the work performed in the
prior period on beginning WIP Inventory is treated. WA includes such work in
the determination of equivalent units of production, whereas FIFO does not. In
addition, because WA includes the beginning inventory work in EUP, this
method also includes the cost of beginning inventory in the determination of
cost per EUP (whereas FIFO excludes it). These two items cause the cost per
EUP to differ and, thus, the cost of the goods transferred out as well as the cost
of ending inventory.
54. a. Phunky Phingers
Cost of Production Report (WA Method)
For the Month of November 2013
Production Data: Units

Units Material Labor OH

20,000
8,000
16,000
Cost Data:
Total Material Labor OH
Beginning WIP Inventory $ 19,564 $ 13,020 $ 1,908 $ 4,636
90,000 45,792
70,824

Cost to account for $ 226,180 $103,020 $47,700 $75,460
Divided by EUP ÷ 102,000 ÷ 90,000 ÷ 98,000
Cost per EUP $2.31 $1.01 $0.53 $0.77
Cost Assignment:
Transferred out (82,000 × $2.31) $189,420
Ending inventory:
Material (20,000 × $1.01) $20,200
Direct labor (8,000 × $0.53) 4,240
Overhead (16,000 × $0.77) 12,320
36,760
b. Phunky Phingers
Cost of Production Report (FIFO Method)
Chapter 6 164
For the Month of November 2013
Production Data:
Units

Units Material Labor Overhead

20,000 8,000
16,000
Cost Data:
Total Material Labor Overhead
Beginning WIP Inventory $ 19,564
Current costs
206,616 $90,000 $45,792 $70,824
Cost to account for $226,180
Divided by EUP ÷ 90,000 ÷ 86,400 ÷ 90,800
Cost per EUP $2.31 $1.00 $0.53 $0.78
Cost Assignment:
Transferred out:
Complete beginning WIP
DL (8,400 × $0.53) 4,452
OH (4,800 × $0.78)
3,744 $ 27,760
Material (20,000 × $1.00) $20,000
Direct labor (8,000 × $0.53) 4,240
Overhead (16,000 × $0.78)
12,480 36,720
55. a. Springtime Paints
For Month Ended May 31, XXXX
Production data: Units
DIRECT MATERIALS
Units Chemicals Cans Conversion
Beginning WIP
165 Chapter 6
Inventory 4,000 4,000 4,000 4,000

5,000
0 4,000

Cost data: DIRECT MATERIALS
Total Chemicals Cans Conversion
Beginning inventory $ 51,900 $ 45,100 $ 0 $ 6,800
228,900
7,000 46,000

Cost to account for $333,800 $274,000 $ 7,000 $52,800
Divided by EUP ÷ 25,000 ÷ 20,000 ÷ 24,000
Cost per equivalent unit $13.51 $10.96 $0.35 $2.20
Cost assignment:
Transferred out ($13.51 × 20,000) $270,200
Ending WIP
Chemicals (5,000 × $10.96) $54,800
Conversion (4,000 × $2.20) 8,800
63,600
b. Springtime Paints
For Month Ended May 31, XXXX
Production data: Units
Beginning WIP
Inventory 4,000
DIRECT MATERIALS
Units Chemicals Cans Conversion
Beginning WIP
Inventory 4,000 4,000 3,000
5,000

0 4,000

Cost data:
DIRECT MATERIALS
Total Chemicals Cans Conversion
Beginning inventory $ 51,900
$228,900 $ 7,000 $46,000
Cost to account for $333,800
Chapter 6 166
Divided by EUP ÷ 21,000 ÷ 20,000 ÷ 23,000

Cost per equivalent unit $13.25 $10.90 $0.35 $2.00
Cost assignment:
Transferred out
Complete beginning WIP
Cans (4,000 × $0.35) 1,400
Conversion (3,000 × $2.00)
6,000
Total cost of BI transferred $ 59,300
Started & completed (16,000 × $13.25) 212,000 $271,300
Chemicals (5,000 × $10.90) $ 54,500
Conversion (4,000 × $2.00) 8,000
62,500
c. The WA calculations are easier to make, but this method tends to obscure
current period costs because the cost per EUP includes both current costs and
prior costs that were in beginning inventory. This method is most appropriate
when conversion costs, inventory levels, and raw material prices are stable.
The FIFO method is based on current period work only. This method is most
appropriate when conversion costs, inventory levels, or raw material prices
fluctuate. This method should also be appropriate when accuracy in current
equivalent unit costs is important or when a standard cost system is used.
(CMA adapted)
56. Octavia Corp. Curing Dept.
For the Month Ended May 31, 2013
Production Data:
Units TI DM DL OH
Beginning WIP
Inventory 8,000
Beginning WIP
Inventory 8,000 8,000 8,000 8,000 8,000
Started & completed 36,000 36,000 36,000 36,000 36,000
Ending WIP
Inventory 4,000

4,000
2,800 2,000

1,600
Units accounted for 48,000 48,000 46,800 46,000 45,600
Cost Data:
Total TI DM DL OH
Beginning WIP
Inventory $ 278,872 $ 200,160 $ 42,504 $ 31,360 $ 4,848
1,620,000
333,300
517,880
267,840
167 Chapter 6
Cost to account
for $3,017,892 $1,820,160 $375,804 $549,240 $272,688
Divided by
EUP ÷ 48,000 ÷ 46,800 ÷ 46,000 ÷ 45,600
Cost per EUP $63,87 $37.92 $8.03 $11.94 $5.98
Cost Assignment:
Transferred out (44,000 × $63.87) $2,810,280
TI (4,000 × $37.92) $151,680
DM (2,800 × $8.03) 22,484
DL (2,000 × $11.94) 23,880
OH (1,600 × $5.98) 9,568 207,612
(CMA adapted)
Chapter 6 168
57. Octavia Corp. Curing Dept.
Production Data:
Units TI DM DL OH
Beginning WIP
Inventory 8,000
Beginning WIP
Inventory 8,000 0 1,600 4,800 5,600
Started &
completed 36,000 36,000 36,000 36,000 36,000
Ending WIP
Inventory 4,000
4,000
2,800
2,000
1,600

Cost Data:
Total TI DM DL OH
Beginning WIP
Inventory $ 278,872
$1,620,000 $333,300 $517,880 $267,840
Cost to account
for $3,017,892
Divided by
EUP ÷ 40,000 ÷ 40,400 ÷ 42,800 ÷ 43,200
Cost per EUP $67.05 $40.50 $8.25 $12.10 $6.20
Cost Assignment:
Transferred out:
Complete beginning inventory:
DM (1,600 × $8.25) $ 13,200
DL (4,800 × $12.10) 58,080
OH (5,600 × $6.20) 34,720
106,000
Started & completed (36,000 × $67.05) 2,413,800

Total cost of transferred out $2,798,672
TI (4,000 × $40.50) $162,000
DM (2,800 × $8.25) 23,100
DL (2,000 × $12.10) 24,200
OH (1,600 × $6.20) 9,920 219,220
(CMA adapted)
169 Chapter 6
58. a. Always Christmas
Cutting Dept.
For the Month Ended October 31, 2013
Production Data:
Units
Beginning WIP
Inventory 8,000

Beginning WIP
Inventory 8,000 8,000 8,000

3,600 2,520

Cost Data:
Beginning WIP
Inventory $ 373,000 $ 293,000 $ 80,000

1,379,000 1,293,440

Divided by EUP ÷ 44,000 ÷ 42,920
Cost per EUP $70 $38 $32
Cost Assignment:
Transferred out (40,400 × $70) $2,828,000
Ending inventory:
Material (3,600 × $38) $136,800
Conversion (2,520 × $32) 80,640 217,440
b. Always Christmas Boxing Dept.
For the Month Ended October 31, 2013
Production Data: Units Trans. In Material Conversion

Beginning WIP
Inventory 2,500
Beginning WIP
Inventory 2,500 2,500 2,500 2,500
Chapter 6 170

1,200
0
840
171 Chapter 6
Cost Data:
Total Trans. In Material Conversion
Cost in BI $ 173,413 $ 166,420 $ 0 $ 6,993
2,828,000
383,640
246,120

Total to acct. for $3,631,173 $2,994,420 $383,640 $253,113
Divided by EUP ÷ 42,900 ÷ 41,700 ÷ 42,540
Cost per EUP $84.95 $69.80 $9.20 $5.95
Cost Assignment:
Transferred out (41,700 × $84.95) $3,542,415
Ending inventory:
Transferred in (1,200 × $69.80) $83,760
Conversion (840 × $5.95) 4,998 88,758
59. a. Striping Dept.:
Beginning inventory $ 20,000
Current costs:
DM 90,000
DL 80,000
OH ($80,000 × 0.8) 64,000
Total $254,000
Less ending inventory
(17,000)
Costs transferred to Adhesion $237,000
b. Adhesion Dept.: (let CC = conversion costs)
BI + TI + DM + CC – TO = EI
$70,000 + $237,000 + $22,600 + CC – $480,000 = $20,600
CC – $150,400 = $20,600
CC = $171,000
DL + OH = CC
DL + 0.8DL = CC
1.8DL = $171,000
DL = $95,000
OH = $95,000 × 0.80 = $76,000
c. CGM is equal to the cost of goods transferred into FG Inventory ($880,000).
OH = 0.8DL $90,000 = 0.8DL
DL = $112,500
BI + TI + DM + DL + OH – CGM = $40,000
$150,000 + $480,000 + DM + $112,500 + $90,000 – $880,000 = $40,000
DM – $47,500 = $40,000
DM = $87,500
d. WIP Inventory—Adhesion 237,000
WIP Inventory—Striping 237,000
WIP Inventory—Packaging 480,000
WIP Inventory—Adhesion 480,000
Chapter 6 172
WIP Inventory—Packaging 880,000
Cost of Goods Sold 720,000
60. a. Cutting Department:
Units started 4,800
Beginning WIP Inventory 1,300 260 325

Ending WIP Inventory 1,100 440 220
EUP 6,100 4,400 4,245
Coating Department:
Units started 5,000

Ending WIP Inventory 1,400 1,400 0 560
EUP 5,900 5,000 4,500 4,520
b. Cutting Department:
$35,200 $21,225
Divided by EUP ÷ 4,400 ÷ 4,245
Cost per EUP $13 $8 $5
c. Cost transferred out of Cutting (FIFO):
Cost of BI $16,065
Cost to complete BI
Material (260 × $8) $ 2,080
Conversion (325 × $5) 1,625
S&C (3,700 × $13) 48,100 51,805

Total cost of goods transferred $67,870
Ending WIP:
DM (440 × $8) $ 3,520
CC (220 × $5) 1,100 4,620
Total $72,490
173 Chapter 6
d. Coating Department:
Total Trans. In Material Conversion
Cost in BI $13,514
$67,870 $4,950 $11,300
Total $97,634
Divided by EUP ÷ 5,000 ÷ 4,500 ÷ 4,520
Cost per EUP $17.17 $13.57* $1.10 $2.50
*Rounded
e. Cost Assignment:
Transferred out
Beginning inventory cost $13,514
Cost to complete:
Material (900 × $1.10) 990
Conversion (360 × $2.50)
900 $15,404
Units S&C (3,600 × $17.17) 61,812

Total cost transferred out $77,216
Ending inventory:
Transferred in (1,400 × $13.57) $18,998
1,400
20,398
Cost accounted for (off due to rounding) $97,614
61. a. Extrusion Form Trim Finish

Units produced 16,000 11,000 5,000 2,000
Material costs $192,000 $ 44,000 $ 15,000 $12,000
Unit cost $ 12.00 $ 4.00 $ 3.00 $ 6.00
Conversion cost $392,000 $132,000 $ 69,000 $42,000
Unit cost $ 24.50 $ 12.00 $ 13.80 $ 21.00
Plastic Standard Deluxe Executive

Unit costs: Sheets Model Model Model
Extrusion material $ 12.00 $ 12.00 $ 12.00 $ 12.00
Form material –– 4.00 4.00 4.00
Trim material –– –– 3.00 3.00
Finish material –– –– –– 6.00
Extrusion conversion 24.50 24.50 24.50 24.50
Form conversion –– 12.00 12.00 12.00
Trim conversion –– –– 13.80 13.80
Finish conversion –– –– –– 21.00
Total unit cost $ 36.50 $ 52.50 $ 69.30 $ 96.30
Times units produced × 5,000 × 6,000
× 3,000
× 2,000
Total product cost $182,500 $315,000 $207,900 $192,600
Chapter 6 174
b. EQUIVALENT UNITS
Material Conversion
Entering trim operation: % Qty. % Qty.
2,000 Deluxe units 100 2,000 100 2,000
1,000 Deluxe units 100 1,000 60 600
2,000 Executive units 100 2,000 100 2,000
Total equivalent units 5,000 4,600
Deluxe model WIP costs: Unit Cost Total Costs
Extrusion material $12.00 $12,000
Form material 4.00 4,000
Trim material (100%) 3.00 3,000
Extrusion conversion 24.50 24,500
Form conversion 12.00 12,000
Trim conversion (60%)
9.00*
9,000*
Work in process costs $64.50 $64,500
*Conversion cost = ($30,000 + $39,000) ÷ 4,600 = $15 per equivalent unit.
(CMA adapted)
62. a. Components in produced inventory:

DM Logos

Streamers Handles
Plain 60,000
W/logos & streamers 418,000 418,000 418,000
W/logos, streamers, & handles 25,000 25,000 25,000
25,000
W/streamers 15,200 15,200
W/streamers & handles 2,800 2,800
2,800
W/handles 5,000
5,000
Total components 526,000 443,000 461,000 32,800
Ending WIP Inventory (all 9,000 units had the direct material):
Plain = 9,000 × 0.70 = 6,300
With logo = 9,000 × 0.25 = 2,250
With streamers = 9,000 × 0.05 = 450
Units
BI 15,000
Started 520,000
Units DM Logos Streamers Handles
BI 15,000
Started and completed 511,000
Completed 526,000 526,000 443,000 461,000 32,800
EI 9,000 9,000 2,250 450 0
Units accounted for 535,000 535,000 445,250 461,450 32,800
175 Chapter 6
BI cost $ 17,285 $ 13,250 $ 4,035 $ 0 $ 0

Current period 888,274 468,250 298,735 119,977
1,312
Total DM cost $905,559 $481,500 $302,770 $119,977 $ 1,312
EUP ÷ 535,000 ÷ 445,250 ÷461,450
32,800
Material cost per EUP $0.90 $0 .68 $0.26 $0.04
Conversion Units EUP

BI 15,000
Started and completed 511,000
Completed 526,000 526,000
EI (95% complete) 9,000 8,550
Conversion costs = $5,703 + $282,954 = $288,657
Conversion cost per EUP = $288,657 ÷ 534,550 = $0.54
Total cost to account for = $905,559 + $288,657 = $1,194,216
Cost of ending WIP towels:
Plain towels
DM (6,300 × $0.90) $5,670.00
CC (6,300 × 0.95 × $0.54) 3,231
.90 $ 8,901.90
Towels with logos
DM [2,250 × ($0.90 + $0.68)] $3,555.00
CC (2,250 × 0.95 × $0.54) 1,154 .25 4,709.25
Towels with streamers
DM [450 × ($0.90 + $0.26)] $ 522.00
CC (450 × 0.95 × $0.54) 230 .85 752 .85
Total cost of ending WIP Inventory $14,364 .00
b. Production Sales Ending Inv.
Plain 60,000 58,000 2,000
W/logos & streamers 418,000 417,500 500
W/logos, streamers, & handles 25,000 24,800 200
W/streamers 15,200 15,175 25
W/streamers & handles 2,800 2,730 70
W/handles 5,000 4,350 650
Plain 2,000 × ($0.90 + $0.54) $2,880.00

W/logos & streamers 500 × ($1.84 + $0.54) 1,190.00
W/logos, streamers, & handles 200 × ($1.88 + $0.54) 484.00
W/streamers 25 × ($1.16 + $0.54) 42.50
W/streamers & handles 70 × ($1.20 + $0.54) 121.80
W/handles 650 × ($0.94 + $0.54) 962 .00
Total cost of ending FG Inventory $5,680 .30
Chapter 6 176
c. Plain 58,000 × ($0.90 + $0.54) $ 83,520.00
W/logos & streamers 417,500 × ($1.84 + $0.54) 993,650.00
W/logos, streamers, & handles 24,800 × ($1.88 + $0.54) 60,016.00
W/streamers 15,175 × ($1.16 + $0.54) 25,797.50
W/streamers & handles 2,730 × ($1.20 + $0.54) 4,750.20
W/handles 4,350 × ($0.94 + $0.54) 6,438 .00
$1,174,171 .70
Cost of ending WIP Inventory $ 14,364.00
Cost of ending FG Inventory 5,680.30
Cost of goods sold 1,174,171 .70
Total cost accounted for $1,194,216 .00
d. The conversion cost for all towels should not be the same amount. Each of the
different addons creates additional costs for labor and overhead. As such,
Randazzo should be dividing these costs into different cost pools and assigning
them based on alternative bases. Activitybased costing would be useful in this
company.

Beginning inventory completed 10,000 0 3,000

Units started & completed 140,000 140,000 140,000
Units completed 150,000
40,000
24,000

EUP 190,000 180,000 167,000
b. Donbrowski Co.
For the Month of May 2013
Production Data:
Beginning inventory completed 10,000 0 3,000
Units started & completed 140,000 140,000 140,000
40,000
24,000

EUP 190,000 180,000 167,000
Cost Data (all at standard):
BI: DM (10,000 × $5.50) $ 55,000 $ 55,000
CC (7,000 × $12.50) 87,500 $ 87,500
Current costs:
177 Chapter 6
DM (180,000 × $5.50) 990,000 990,000

CC (167,000 × $12.50) 2,087,500

2,087,500

Cost Assignment
Transferred out (150,000 × $18) $2,700,000
Ending inventory:
Material (40,000 × $5.50) $220,000
Conversion (24,000 × $12.50) 300,000
520,000
Total costs assigned $3,220,000
c. Total variance = Total actual cost – Total standard cost = $3,137,000 ‒
$3,077,500 = $59,500 unfavorable
Material:
Current actual cost $1,001,000
Standard cost (180,000 × $5.50)
(990,000)
Direct material variance $ 11,000 U
Conversion:
Current actual cost $ 2,136,000
Standard cost (167,000 × $12.50) (2,087,500)
Conversion cost variance $ 48,500 U
Cost of Goods Sold 59,500
Direct Material Variance 11,000
Conversion Cost Variance 48,500
64. a. Units Material Labor Overhead

BI 14,800
BI completed 14,800 0 8,880 4,440

Units S&C 380,700 380,700 380,700 380,700
Units completed 395,500
EI 4,300 4,300
2,580
3,655
EUP 399,800 385,000 392,160 388,795
b. Total BI cost:
DM (14,800 × $8.25) $122,100
DL (5,920 × $1.60) 9,472
OH (10,360 × $4.90) 50,764
Total cost of BI $182,336
c. Cost transferred out = 395,500 × $14.75 = $5,833,625
Cost in EI:
Chapter 6 178
DM (4,300 × $8.25) $35,475.00
DL (2,580 × $1.60) 4,128.00
OH (3,655 × $4.90) 17,909
.50
Total cost of BI $57,512 .50
d. Standard DM cost = 385,000 × $8.25 = $3,176,250.00
Standard DL cost = 392,160 × $1.60 = $627,456.00
Standard OH cost = 388,795 × $4.90 = $1,905,095.50
DM DL OH
Current period costs $ 3,201,032.00 $ 625,510.00 $ 1,904,390.00
Standard costs (3,176,250.00) (627,456
.00) (1,905,095
.50)
Variance $ 24,782.00 U $ 1,946.00 F $ 705.50 F
65. a. Beginning pounds 2,000
Started 250,000
Pounds transferred (238,200)
Pounds in EI (6,000)
Pounds of shrinkage 7,800
b. Normal shrinkage = 250,000 × 0.01 = 2,500 pounds
For accounting purposes, normal shrinkage is simply ignored, which means its
costs will be spread over all good units produced.
c. Abnormal shrinkage = 7,800 – 2,500 = 5,300 pounds
The cost of abnormal shrinkage is treated as a loss of the period.
d. Total Material Conversion

Started 250,000

Normal loss 2,500
Abnormal loss 5,300 5,300 5,300
EUP (WA) 252,000 249,500 245,300
e. Total Material Conversion

Beginning WIP costs $ 1,957 $ 1,807 $ 150
240,208
24,380
Total costs $266,545 $242,015 $ 24,530
Divide by EUP ÷ 249,500 ÷ 245,300
Cost per EUP $1.07 $0.97 $0.10
Transferred out (238,200  $1.07) $254,874
179 Chapter 6
Ending inventory:
Material (6,000  $0.97) $5,820
Conversion (1,800  $0.10) 180 6,000
Abnormal spoilage (5,300  $1.07) 5,671
f. The easiest way to reduce shrinkage loss is to buy higher quality turkey at a
higher input cost per pound. The higher quality would have a lower fat content
and would shrink less. Because of the reduced shrinkage, conversion cost per
pound of finished product might decline, and the company would probably be
able to sell its product at a higher price.
g. The approximate cost of April turkey was $1.13 per pound ($1,807 BI cost of
turkey ÷ 1,600 EUP pounds in BI), while the average cost per pound in May
was approximately $0.97 per pound. It is highly likely that buying the lower
priced ground turkey was the cause of the abnormally high spoilage rate. The
information on the cost differences between April and May is not clear when
using weighted average process costing.
66. a. Gary’s Tools Grinding Department
For the Month Ended August 31, 2013
Units
Beginning WIP
Inventory 1,000
Transferred in 50,800
Units to account
for 51,800
Units Trans. In DM DL OH

Beg. WIP
Inventory 1,000 1,000 1,000 1,000 1,000
Started &
completed 48,000 48,000 48,000 48,000 48,000
Ending WIP
Inventory 1,800 1,800 0 720 1,170
Normal spoilage 650 650 0 650 650
Abnormal spoilage 350 350 0 350 350
EUP (WA) 51,800 51,800 49,000 50,720 51,170
Total Trans. In DM DL OH

Beg. WIP
Chapter 6 180
Inventory $ 7,355 $ 6,050 $ 0 $ 325 $ 980

149,350
12,250
23,767
50,190

Total costs $242,912 $155,400 $12,250 $24,092 $51,170
Divided by EUP ÷ 51,800 ÷ 49,000 ÷ 50,720 ÷ 51,170
Cost per EUP $4.725 $3.00 $0.25 $0.475 $1.00
Cost Assignment:
Transferred out:
Good units (49,000 × $4.725) $231,525
Normal spoilage (650 × $4.475) 2,909 $234,434
Ending inventory:
Transferred in (1,800 × $3.00) $ 5,400
Labor (720 × $0.475) 342
Overhead (1,170 × $1.00) 1,170 6,912
Abnormal spoilage (350 × $4.475) 1,566
Total costs accounted for $242,912
b. Loss on Abnormal Spoilage 1,566
Work in Process Inventory—Grinding 1,566
67. a. Beginning inventory 3,000
Transferred in 45,000
Bikes lost 4,000

(1) Bikes passing through Assembly 48,000

Minus bikes in EI (have not reached the
inspection point, so there is no way
to determine acceptability) (4,000)
Bikes reaching the inspection point 44,000
Normal defective rate × 0.05
Normal number of defective bikes
2,200
(2) Total bikes lost 4,000

Normal number of defective bikes (2,200)
Abnormal number of defective bikes
1,800
b. Units Trans. In Material Conversion

Transferred out 40,000 40,000 40,000 40,000
Ending WIP
Inventory 4,000 4,000 2,000 800
Normal loss 2,200 2,200 2,200 2,200
Abnormal loss 1,800
1,800
1,800
1,800

EUP (WA) 48,000 48,000 46,000 44,800
c. Total Trans. In Material Conversion

181 Chapter 6
Beginning WIP $ 102,790 $ 82,200 $ 6,660 $ 13,930

1,237,800
96,840
241,430
Total cost $1,678,860 $1,320,000 $103,500 $255,360
Divided by EUP ÷ 48,000 ÷ 46,000 ÷ 44,800
Cost per EUP $35.45 $27.50 $2.25 $5.70
d. (1) Normal defective bikes: 2,200 × $35.45 = $77,990
(2) Abnormal defective bikes: 1,800 × $35.45 = $63,810
(3) Good bikes completed: 40,000 × $35.45 = $1,418,000
(4) Ending WIP Inventory
Transferred in (4,000 × $27.50) $110,000
Material (2,000 × $2.25) 4,500
4,560
Total $119,060
e. Total cost transferred = Cost of good bikes + Normal spoilage cost =

$1,418,000 + $77,990 = $1,495,990 (or an average cost per bike of $37.40)
f. Normal spoilage cost is an expected cost of producing good units. As such, it is
not an extra cost but thought to be inherent in producing good units. Normal
spoilage may occur because of material or labor quality, machine malfunctions,
or human error. Management should do costbenefit studies to determine if it is
economically sensible to reduce spoilage. Three questions should be addressed:
(1) What does the spoilage actually cost? (2) Why does it occur? (3) How can it
be controlled?
(CMA adapted)
68. Maximum normal spoilage = 70,000 × 0.03 = 2,100 units
LaToya Company


Normal spoilage 2,100 2,100 2,100
Abnormal spoilage 400 400
400

Chapter 6 182
Beginning WIP Inventory $ 7,632 $ 6,400 $ 1,232

74,400

31,768
Cost to account for $113,800 $80,800 $33,000
Divided by EUP ÷ 80,000 ÷ 75,000
Cost per EUP $1.45 $1.01 $0.44
Cost Assignment:
Units completed (70,000 × $1.45) $101,500
Normal spoilage:*
Direct material (2,100 × $1.01) $2,121
Conversion (2,100 × $0.44) 924 3,045 $104,545
Ending inventory:
Direct material (7,500 × $1.01) $ 7,575
Conversion (2,500 × $0.44) 1,100 8,675
Abnormal spoilage:*
Direct material (400 × $1.01) $ 404
Conversion (400 × $0.44) 176 580
*Spoilage was found at the end of the production process when units are fully complete;
thus, computations could have been made at the full cost of $1.45 per unit. Had the
spoilage been found earlier, the DM and conversion would not have been at the same
stage of production and separate calculations would have been needed.
69. Maximum normal spoilage = 70,000 × 0.03 = 2,100 units
LaToya Company


Normal spoilage 2,100 2,100 630
Abnormal spoilage 400 400 120
183 Chapter 6

$74,400 $31,768
Divided by EUP ÷ 74,400 ÷ 70,450
Cost per EUP $1.45 $1.00 $0.45*
*Rounded
Cost Assignment:
Transferred out:
Beginning WIP Inventory cost $ 7,632.00
Cost to complete
Conversion (2,800 × $0.45) 1,260.00
Total cost of BI $ 8,892.00
Started & completed (64,400 × $1.45) 93,380.00
Normal spoilage:*
Direct material (2,100 × $1.00) $2,100.00
Conversion (630 × $0.45) 283.50 2,383.50
Total cost transferred out $104,655.50
Direct material (7,500 × $1.00) $7,500.00
Conversion (2,500 × $0.45) 1,125.00
8,625.00
Abnormal spoilage:
Direct material (400 × $1.00) $ 400.00
Conversion (120 × $0.45) 54.00 454.00
Total cost accounted for (off due to rounding) $113,734.50

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136 Chapter 6

3. An equivalent unit of production is an accounting computation that puts

8. The only difference between process costing in a multidepartment

10. A hybrid costing system is one in which process costing is used to

13. Normal loss refers to an expected reduction in production quantity

A normal loss creates an expected production cost, and using the “method of

Abnormal spoilage cost is not expected, and thus, it is not inventoriable.

Beginning WIP Inventory 10,000 10,000

Beginning WIP Inventory 15,000 15,000

Beginning WIP Inventory 10,800 10,800

Started & completed 357,500 357,500 357,500

20. a. Units CC

Beginning WIP Inventory (60%) 10,000 6,000

b. Units CC

Beginning WIP Inventory (70%) 40,000 28,000

c. Units CC

Beginning WIP Inventory (45%) 15,000 6,750

Beginning WIP Inventory (65%) 10,800 7,020

Units DM DL OH

b. Units DM DL OH

c. Equivalent units (WA) 635,000 618,490 624,840

c. Material Conversion

25. DM DL Overhead

26. a. DM DL OH Total

Total $ 73,600 $41,040 $ 94,500 $209,140

b. Total costs $ 73,600 $ 41,040 $ 94,500 $209,140

c. Current costs $ 54,000 $ 34,720 $ 84,480 $173,200

d. WA EUP 160,000 152,000 150,000

Percent complete 100% 70% 45%

27. Units Units

b. Material Conversion Total

29. Units Units

b. Material Conversion Total

Units Material Conversion

Total Material Conversion

d. Units Material Conversion

Total Material Conversion

35. a. Ending WIP Inventory EUP Cost per EUP Total Cost

Units Trans. In Material Conversion

EUP (WA) 85,000 85,000 79,000 83,800

b. Costs Total Trans. In Material Conversion

Units Tran. In Material Conversion

b. Costs Total Trans. In Material Conversion

Units Material Conversion

Units Trans. In Material Conversion

39. a. Beginning WIP Inventory 0 Started & completed 2,400

Material Labor Overhead

40. a. Beginning WIP Inventory 0 Started & completed 105

Ingred. Packaging Conversion

d. Material Labor OH

Equivalent units (FIFO) 1,300,000 1,348,600 1,348,600

43. a & b. Units Material Conversion

Beginning inventory completed 16,000 6,400 4,800

Units Material Conversion

Beginning WIP Inventory 36,000 0 19,800

Total Material Conversion

Cost per EUP $0.65 $0.35 $0.30

c. Units Material Conversion

Transferred out 116,400 116,400 116,400

The normal spoilage is considered continuous because it is shrinkage.

d. Using the “method of neglect,” the cost of normal spoilage is

46. a. Units Material Conversion

BI completed 40,000 0 6,000